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goods in the ordinary course of business and bonds and seven years after the executor had a man employed to collect money. He shows become insolvent and left the state, after distinctly and clearly that the case of Chap- | having previously given a new bond as execuman v. Forsyth, supra, does not apply to the tor, Clark and Holland, as sureties on that act of 1867. So far as I can find, Fulton v. bond, brought an equity suit against Neal and Hammond has never been questioned. others and charged the executor with a dey
But, notwithstanding the line of cases of astavit in selling the bonds to Neal, and that which In re Kimbal is one, a somewhat differ Neal, in view of the circumstances under ent construction was finally put upon the act which he received the bonds, became a parof 1867, and a different line of decisions was ticipant in that devastavit. Neal had been adopted which culminated in Hennequin v. discharged in bankruptcy in the meantime Clews, 111 U. S. 676, 4 Sup. Ct. 576, 28 L. Ed. and pleaded his discharge in the suit. The 565. Hennequin was a French merchant do Virginia court held him liable on the devasing business under a letter of credit on Lon tavit, and refused him the benefit of his disdon issued by Clews & Co., New York bank charge in bankruptcy, which discharge coners. Hennequin's practice was to draw upon tained the same exception as that found in the strength of his letter of credit on Clews the one dealt with here. He was held liable & Co, on time, and before the draft matured in the Virginia courts on the ground that he to put Clews & Co, in money to meet it. The had been guilty of fraud or embezzlement un. transaction amounted to an acceptance in ad der the act of 1867. The force of the words vance by Clews & Co. of Hennequin's bills of "acting in a fiduciary capacity” were not at exchange, but no debt arose from Hennequin all involved. The Supreme Court of the to Clews & Co. until the latter was obliged to United States beld him entitled to the benefit pay the draft.
In point of fact, no debt of the discharge on the distinct ground that ever did arise, because Hennequin always the debt was not "created by the fraud or provided funds in advance. But, in order to embezzlement” of the bankrupt. With great secure Clews & Co. according to mercantile respect I am unable to see how that decision custom, Hennequin deposited with Clews & can be said to directly support the decision in Co. certain collateral securities in the shape | Hennequin v. Clews, except to discharge of negotiable bonds. In that state of things Clews from the charge of fraud or embezzleClews, being pressed for money, pledged or ment. Hennequin v. Clews was followed by disposed of the collateral deposited with him, Palmer v. Hussey (1886) 119 U. S. 96, 7 Sup. and then failed, and got a discharge in bank Ct. 158, 30 L. Ed. 362. There the plaintiff ruptcy. The Court of Appeals of New York had loaned to Hussey a large quantity of (Hennequin v. Clews, 77 N. Y. 427, 33 Am. United States bonds under a written contract Rep. 641) indirectly, and the Supreme Court by which Hussey agreed to hold the bonds of the United States (Hennequin v. Clews, subject to the plaintiff's order, collect and 111 U. S. 676, 4 Sup. Ct. 576, 28 L. Ed. 565)
pay him the coupons free of charge, and "aldirectly, held that his discharge in bankrupt low him 2 per cent. per annum interest on cy released that particular debt. Justice
the par value of the bonds." The acceptance Bradley, speaking for the latter court, held of that contract by the plaintiff from Hussey that the question was covered by the previous amounted to an implied permission to Hussey case of Neal v. Clark, 95 U. S. 704, 24 L. Ed.
to make use of the bonds in his business, 586. In dealing with the question, however, presumably by borrowing money on them; the learned justice, at page 680, gives a long for how otherwise was be able to pay inlist of cases in which the federal and state terest for their use? And, if he was permitcourts had taken a contrary view, including ted to use them by borrowing money on them, therein the cases decided by Judge Blatchford
they were, of course, at the ordinary risk of and Justice Nelson, supra, and a case in Mis mercantile transactions. The case cannot be souri and several others, citing only two cases distinguished from any ordinary loan of in accord with the decision which the court money. was pronouncing. But at page 682 et seq. Another case was Noble v. Hammond (1888) he shows that the English authorities deal 129 U. S. 65, 9 Sup. Ct. 235, 32 L. Ed. 621. ing with nearly or quite similar language were There Hammond had a claim against a raildecidedly the other way. He does not cite the
road company, and, for his own convenience, case of Fulton v. Hammond, supra, decided drew an order on the company in favor of by Judge Pardee. The case of Neal v. Clark, Noble, who was engaged in business, for the supra, referred to by Justice Bradley in Hen amount, and handed it to him for the purpose nequin v. Clews, was this: The executor of of collection. Noble asked Hammond what an estate sold some of its assets to Neal at he was to do with the money when collected, somewhat of a sacrifice. The executor was and was told by Hammond to keep the monthen a man of large property and undoubted ey until called for. That was Hammond's solvency Neal made no inquiry as to the account of it. Noble's account was that he condition of the estate, and the executor gave was to keep and use the money until called him as a reason for selling the securities that for. In any point of view it was plain that the estate was in debt to him for moneys ad Noble expected Hammond to keep the money vanced. Ten years after Neal purchased the as an ordinary deposit as a bank would keep
it. Hammond was a business man using con priation must have been conscix usly done. siderable sums of money, in perfectly good The party must have known and felt at the standing, and having no reason to suppose time that he was misappropriating the monthat he was liable to financial trouble, and, ey. The only case in the Supreme Court of while in that condition, collected $1,000 from the United States to which my attention has the railroad and mixed it with his own funds. been called construing this part of the act Shortly afterwards, through an unanticipated of 1898 is Crawford v. Burke (1904) 195 U. business loss, he was compelled to go through S. 176, 25 Sup. Ct. 9, 49 L. Ed. 147. That bankruptcy. It was found as a fact that was a suit much like Hennequin v. Clews. there was no evidence tending to show actual The bankrupt was a broker, who, as a part fraud or any fraudulent intent in defendant's of his business, bought, held, and carried mingling the money with his own. The Su stocks on a margin for his clients, and in the preme Court held that he was discharged by ordinary course of his business bought stocks those proceedings. There it was plain that and carried for Burke. The transactions the transaction amounted to a loan by Ham between them were the ordinary gambling mond to Noble. A still later case is Upshur transactions in stocks carried on a margin. v. Briscoe (1890) 138 U. S. 365, 11 Sup. Ct. While so doing, the bankrupt sold out his 313, 34 L. Ed. 931. In that case one Andrews principal's stock without bis knowledge. made a present to his daughter Annie of $10,- Pending a suit in trover to recover damages 000, and placed the money in the hands of for converting the stocks so sold, the broker Briscoe, accompanied with a written contract obtained his discharge in bankruptcy, and which amounted to a special settlement of pleaded it puis darrein continuance. It was the money upon his daughter and her heirs, held by the Supreme Court of Illinois that and at the same time to an absolute covenant the discharge was no bar. On error to the on the part of Briscoe sooner or later to pay Supreme Court of the United States, that the whole sum of money, with interest. Bris court held that the fiduciary capacity did coe thereby became an absolute debtor and at not exist. The distinction between that case liberty to treat the money as his own. It and the present is clear. was not contemplated or provided for that he It remains to consider some cases in our should hold the money as trustee and invest own state. Among them are Gibson v. Gorit for the benefit of the cestui que trust. The ham, 44 N. J. Law. 325. There the question transaction amounted to an absolute obliga arose as to the effect of a discharge in banktion on Briscoe's part. Under those circum ruptcy under the act of 1867 upon a judg. stances the court held that the discharge in ment recovered in assumpsit. The debt bankruptcy barred a claim against him person arose out of two payments by the plaintiff ally, but the court enforced it against an estate in the judgment to the defendant in the which he had transferred to his wife fraud judgment of the advance money or deposit ulently in anticipation of bankruptcy. This on a purchase of lands which the defendant was on its face a “technical trust," and hence had for sale as an agent. The money was was within some of the definitions given by paid to him in the ordinary course of busithe judges in construing the language here in
The sale in one instance was never question. They said the words "fiduciary completed on account of some supposed capacity" referred to a "technical trust.” defect in the title, but the deposit was held But the court in Upshur v. Briscoe did not by the agent for a long time in hopes that rely on the form of the affair, but on the ac the title would be completed. In the other tual substance, and distinctly relied on the case the advance payment was withheld fact that an absolute debt by Briscoe was under a claim of commissions. Both sales created by the instrument.
fell through. It was held that neither of We come now to the act of 1898. The the sums was received in a fiduciary capacilanguage of that portion of the act here in ty, but were paid in the ordinary course of question is variant from the act of 1867 business in which the parties were engaged, above cited, and is as follows: “Except such and it was only by reason of what was as were created by his fraud, embezzlement, claimed to be the defect in the title in the misappropriation or defalcation while acting one case and a misunderstanding as to price as an officer or in any fiduciary capacity.” in the other that the plaintiff was entitled The act of 1867 speaks of a debt created to recover at all. Another case is Smith & by the fraud or embezzlement of the bank Wallace Company v. Lambert, 69 N. J. Law, rupt, or by his defalcation as a public officer, 487, 55 Atl. 88. That case was on demurrer or while acting in any fiduciary capacity. to a replication to a plea of discharge in Here the word “misappropriation” is added. bankruptcy, which set up simply that the The meaning of that word as given in the cause of action was excepted from the opdictionaries is "wrong appropriation” (Web eration of a discharge in bankruptcy be. ster), and, according to the Encyclopedic cause it was created by fraud. It was held Dictionary, “to appropriate wrongly or that the replication was bad. The question wrongfully; to turn or put to a wrong pur here involved was not there involved or dispose; the act of misappropriating or turning
cussed. The latest case is Reeves V. Mcto a wrong purpose.” I can well perceive Cracken, 69 N. J. Eq. 203, 60 Atl. 332. The that, as used in this statute, the misappro bill in that case was filed for an account of
moneys received by McCracken to the use of , sponsibility of his factor. The courts held the complainant in the sale of lands conveyed that it was and is contrary to public policy, by the complainant to the defendant in as manifested in the bankrupt law, to extrust for complainant. The fact was that cept such a large class of unfortunate credite it had been so conveyed by complainant to ors from its benefits. This consideration covdefendant in fraud of complainant's credi ers the case in 2 How. (U. S.) 202, 11 L. Ed. tors, and that no written declaration of 236, cited hereinbefore, and all cases of that trust had been made. It was held that the character. The same consideration applies money could not be held to have been re in a less striking degree to the case of Henceived in a fiduciary capacity, because there nequin v. Clews. There, as we all know, Mr. could be no trust in the case, first, because Clews, like all bankers engaged in the busino trust was declared in writing; and, sec ness of issuing letters of credit, had numerond, because the fact that the conveyance ous letters of credit outstanding in various as between the parties was valid and bind parts of this country and Europe. He could ing, and the complainant could never have not at any moment know how many drafts recovered back the land from the defendant had been drawn against him upon which he on the ground of a lack of consideration for was liable. He could only know the exthe conveyance, but was absolutely bound by tent of his possible liability at any moment. it because made to defraud creditors. The He did know that his failure to meet one learned Vice Chancellor does, indeed, cite of those drafts would create great disturand comment upon many of the cases I bave bance in mercantile circles, and he was justialready cited, and relies upon them to show fied by mercantile customs in going to exthat only a technical trust, so called, is treme lengths in saving himself from a dewithin the meaning of the words "fiduciary fault in accepting and paying any such draft, capacity" as used in the seventeenth section and that it was to the interest of the holders of the bankrupt act. But with great re of his letters of credit, especially of those spect I do not think that that question was who had drawn against him,, that his insolinvolved in the case before him, and, further, vency should be averted. Among those who I am of the opinion that the case is clearly may have drawn upon him was Hennequin. distinguishable from the present.
Under these circumstances it is by no means The complainant herein appeared before a stretch to say that mercantile usage justi. the judge in bankruptcy, and objected to the fied him in devoting all these collaterals discharge of the defendant on the ground of which he held as security from the holders fraud in the creation of the debt, and the of his letters of credit to protect himself and learned judge was unable to find any fraud his customers, if practicable, from the consein the case as presented to him, which was quences of failure to protect the drafts drawn simply the pleadings in the suit in equity by the holders of the letters. The situation which resulted in the decree. I do not find brings him without the policy of the law. from his opinion that he discussed the ques Coming now to the case in hand, I find the tion of fiduciary capacity. The question present case not within the principle upon whether the claim is excepted from the dis which those cases were founded, nor within charge is one for the forum where it is
the facts involved in those cases. It had pleaded to determine, and hence is entirely nothing of a mercantile character. The dewithin the jurisdiction of this court, as held fendant was not engaged in any business in Marshall Paper Co. v. Train, 102 Fed. 872, which required the use of money. He had 43 C. C. A. 38.
no bank account, and opened one in his own I have already referred to the reasoning | individual name with the very money handed by which the courts have held that the ordi to him by complainant's intestate, and im. nary relation between factor and principal | mediately after the intestate's death drew it was not fiduciary within the meanin of that out of bank for his personal use. think word here involved. It is that those trans the case is clearly within the case of White actions are mercantile transactions in which
v. Platt, supra, and is within the definition the principal must have known that his of the words “fiduciary capacity" found in factor would, in the ordinary course of busi the headnote to Clark v. Iselin, supra, and ness, mingle the money received from the it is also within the case of Fulton v. Hamsale of his goods with his own, and that the mond, decided by Judge Pardee in the federal ordinary relation of debtor and creditor arose court and cited above. It is also within the out of those transactions, and that it was ruling of the Supreme Court of South Dakota not the duty of the factor to earmark or seg. in Shipley v. Platts (1903) 97 N. W. 1, 17 S. regate the proceeds of the sale of his princi. D. 357. There the plaintiff, the proprietor pal's goods and remit at once. In fact, the of a laundry, employed the defendant as a ordinary course of business in such cases distributor and collector of laundry material renders such restrictive dealing impracticable. and to collect from the patrons of the laundry The principal often obtains from the factor their current dues and return the same to money in advance upon his goods, and the the plaintiff, less the defendant's commisgoods are not sold ordinarily in a lump, nor sions. In an action to recover the moneys so is the payment received in a single lump. collected and not paid over, defendant set The principal relies upon the personal re up his discharge in bankruptcy, and the court,
relying mainly on White v. Platt, In re Kim maintained in this court. That this is the bal, Fulton v. Hammond, and other cases in true statement of the relations between the the same line, held the discharge no bar. It parties cannot be doubted. In Lewin on is true the court did not refer to the cases I Trusts (8th Ed., reprint by Flint, 1888) p. 377, have reviewed decided by the Supreme Court this relation of partners to each other is disof the United States. As applicable to the tinctly recognized, and, while it has been held whole position here, I refer to the case of that that relation does not go so far as to preBurdick v. Garrick, decided in the Vice Chan vent the application of the statute of limitacellor's Court by Vice Chancellor Stuart, and tions, it seems quite clear that the relation affirmed on appeal by Lord Chancellor Hath between the personal representatives of the erly and Sir G. M. Giffard, Lord Justices. deceased partner and the surviving partner L. R. 5 Ch. App. 233 (1870). There the contest is quite distinct from that between a prinwas over a sum of money held by an agent cipal and his factor or agent in the ordinary acting under a power of attorney to sell
mercantile relation out of which an action of lands with power to invest the proceeds for assumpsit at law will arise, and the univerthe benefit of the principal, in the agent's sal rule is that resort must be had to a court own or any one's else name. The agent never of equity. It is true that the doctrine that did invest the money, but deposited it in a the surviving partner holds the property of bank to the credit of a firm of which he was the partnership in trust for the personal repa member, and it was held that the agent resentatives of the deceased partner has been could not set up the statute of limitations, repudiated and the contrary held in cases and that the bill in equity was a proper where the rights of third parties or the remedy. The judges distinguished Foley v.
statute of limitations was involved. The Hill, 2 H. of L. 35, where it was held that the leading case on that subject is Knox v. Gye relation between an ordinary depositor in a (1872) 5 Eng. & Ir. Ap. Cases, 656. There bank was not that of trustee and cestui que the sole question was the operation of the trust, but of debtor and creditor. That case
statute of limitations. Lord Westbury uses has the same characteristic as that of White the following language: “Another source of v. Platt, Fulton v. Hammond, and Shipley v. error in this matter is the looseness with Platts, above cited, namely, that the money
which the word 'trustee' is frequently used. or property was placed in the hands of the The surviving partner is often called a 'trusdefendant for a specific purpose which made
tee,' but the term is used inaccurately. He is him a trustee and his situation that of a fidu not a trustee, either expressly or by implicaciary. But, whatever may have been the tion. On the death of a partner the law concharacter in which the defendant herein re fers on his representatives certain rights as ceived the money in the first instance, there against the surviving partner, and imposes can be no doubt as to the character in which upon the latter correspondent obligations. The he held it at and after the death of the in surviving partner may be called, so far as testate. That death dissolved the partner
thiese obligations extend, a trustee for the ship at once, and the defendant's legal title deceased partner; but, when these obligato the money became absolute; but he held tions have been fulfilled, or are discharged, that legal title strictly in trust for the com or terminate by law, the supposed trust is at plainant's intestate. No business had ever an end." Against this mere dictum Lord been done under the partnership, so that he Hatherly, at page 678, vigorously protests. had no title on a settlement of the partner The other law lords, Lord Chelmsford and ship affairs to any part of it. Feeling the Lord Colonsay, agreed that the statute of limiforce of this, he set up in his answer to this tation applied, without discussing the quesaction an absolute title in the whole sum un tions of the fiduciary relations between the der what he alleged to be the contract be parties or relying on it. All agreed that the tween the parties, mely, that he was to bill in chancery was th proper remedy. have that money, not as a contribution to Lord Westbury did, Indeed, hint that the old the partnership funds, but as compensation action at law for an account would lie, Mr. to himself personally for giving up his pres Clement Bates, in his treatise on the Law of ent position as salesman. I found that issue | Partnership (volume 2, 88 718, 719), reviews against him expressly, and I found impliedly the language in Knox v. Gye with ability, that, as the partnership business had been ar and cites cases in support of bis criticism. rested and the partnership dissolved by the Whatever may be the proper language to death of intestate before anything had been apply to and describe the relation existing done under it, the complainant was entitled between the complainant's intestate and the to the whole fund.
defendant, it is quite clear that the obligaI have said that on the death of the in tions arising out of the circumstances under testate the partnership was at once dissolved, which the defendant became indebted to the and the absolute legal title to the money be complainant's intestate were not in the ordicame vested in the defendant, and that he nary course of mercantile business, and did held it in trust for the partnership, which in not give rise to the right to sue and recover this case amounted to holding it in trust for in an ordinary action at law, because it was the complainant's intestate. It was on this within the province of the defendant to set ground that the action was brought and up and prove that the fund had become in
volved and depleted by legitimate use in the remitted to his remedy by insolvent proceedpartnership venture to which it was contrib ings, in this court he will not be deprived of uted as capital before that partnership was his liberty if it appears in advance that he is dissolved by death; hence the complainant's unable to respond and obey the order of the proper remedy was a bill in this court for an court. This view is entirely in accord with accounting, precisely as if such a state of that of the Court of Errors and Appeals in facts as I have indicated had existed.
Grand Lodge Knights of Pythias v. Jansen et Now, if we go back and review the opinions al., 62 N. J. Eq. 737, 48 Atl. 526. The foundain the cases I have cited, we will find that tion of the decree in that case, as shown by this distinction in the proper remedies is ad the opinion in the original cause (56 N. J. Eq. verted to, and in a measure relied upon, in 63, 38 Atl. 341), was, briefly, as follows: Jan. determining whether the debt is or not barred sen and others were members of Germania by the discharge. It is hardly necessary to
Lodge No. 50 of the Knights of Pythias, and advance arguments to show that, the trust became dissatisfied with some of the conduct relation being established, the use of the fund of the Grand Lodge, and, being aware that for his individual benefit was a misappropri any failure to obey and observe the laws of ation within the meaning of that word in the the Grand Lodge would result in a forfeiture act. For these reasons I am of the opinion to the Grand Lodge of all the funds of the that the defendant's debt, manifested by the inferior lodge, amounting to hundreds of doldecree, is not discharged by the decree of the lars, deliberately set to work and, in defiance bankrupt court.
of an interlocutory order of this court, disThe next defense set up by the defendant tributed the money among themselves. The is his inability to pay. For this he relies
result was that later on a final remedial deupon his ex parte affidavit read at the hear cree was made against all of them who acing, in which he says he has a wife and one
tively engaged in the scheme, and they were child, and receives $30 per week, or $1,560
directed to pay the money to the Grand per year, salary, and therefore he cannot Lodge. Failing so to do, proceedings in atpay anything. The same excuse was set up
tachment were taken against them on two in answer to proceedings similar to these in
grounds: First, for punitive purposes, in disstituted after decree and before bankruptcy
obeying the interim restraining order of the proceedings were taken. Then, as now, the
court; second, remedial to the Grand Lodge defendant relied upon his ex parte affidavit.
for not paying over the money in obedience
to the final decree. The real basis of the Of course, the complainant is entitled to have
final decree was the wrong appropriation of the defendant subjected to examination. In the former case the proceedings were drop
the money in their hands after they had been
enjoined by this court. On those contempt ped or suspended on a verbal undertaking, at
proceedings Jansen and others were adjudged my suggestion, that the defendant should pay $5 per week, which he did for two weeks
guilty of contempt, and committed to the cus
tody of the sheriff. An appeal was taken and then took bankruptcy proceedings. In
from that order. The matter was argued both the present case I think it will be no hard
above and below by able counsel. Neither in ship on the defendant to contract his living
the court below, nor on appeal, was the expenses to the extent of $5 per week. This
point taken that proceedings against the body is a mere suggestion to save expense and need
were not proper or lawful, but the order below not be accepted by either party, but each may
was reversed on the single ground that it fall back on the regular practice of an oral examination. The case is clearly one justify.
appeared by the affidavits already in the case
that the defendants were unable to pay the ing the extraordinary process of the court.
money, and therefore the imprisonment The obligation which is the foundation of
should not be imposed. this suit arose as soon as the intestate died. It was then the duty of the defendant to preserve the fund so that he could account for and pay it over to the personal representa
(72 N. J. Eq. 492) tives of the deceased when appointed and
STANDARD OIL CO. V. BUCHI et ux. duly accredited. The, equitable wrong com (Court of Chancery of New Jersey. April 17, mitted by the defendant was the misappro
1907.) priation of that fund by treating it as his 1. EASEMENTS-EXTENT OF RIGHT-REVOCAown and applying it to his personal use.
TION. If the complainant's right had been a legal A deed whereby, for a cash consideration one, enforceable in a court of law, it would
named and the payment of damages to be as
certained by disinterested persons on oath, one have warranted process against the body. grants the right to lay pipes for the transportaAs, however, his right was an equitable one, tion of petroleum, together with all the rights and enforceable in this court, he is entitled to
and privileges necessary to the enjoyment of
the grant and the removal of the pipes, the the corresponding remedy of this court, sub pipes to be laid within 10 feet of the line of ject, however, to this exception: That while the grantor's property, does not convey a mere in a court of law the process against the body
easement in gross nor a license which may be
revoked at the will of the grantor, and it is would be issued without regard to the de
not revoked by its assignment to a third perfendant's personal ability to pay, and he be son