Case ID: mass_25/html/0267-01.html
Source: Caselaw Access Project
Author: {"author": "Parker C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Benjamin Adams et al. versus Thomas Cordis, Trustee of Samuel Williams.
    When a foreign creditor sues for his debt in this State, he will recover (except in the case of a bill of exchange) at the par of exchange.
    So if the debtor here is summoned upon the trustee process, he will be charged at the par of exchange. .
    Where one summoned as trustee is indebted to the principal defendant on a demand drawing interest, and he continues, after the service of the writ upon him, to use the money due, he is chargeable with interest up to the time when the money is demanded of him upon the execution against the fund in his hands ; but where interest would be recoverable by the principal defendant, only as damages for breach of contract, it will not accrue during the pendency of the trustee process.
    One summoned and charged as trustee is not entitled to retain a part of the fund in his hands, for the payment of fees of his counsel.
    Where property in the hands of the trustee is claimed by an assignee of the prin* cipa! defendant, the trustee is not obliged to disclose the assignment and contest the right of the attaching creditor, without an offer of indemnity against the expenses of the suit. Semble.
    
    Scire Facias By the answers of Cordis filed in the original action, if appears, that at the time of the service of the original writ upon him as trustee, in 1825, he had an open account with Williams, who was a banker in London, England, upon which he admits he was indebted to Williams in the sum of 6731. 8s. 4d. sterling, equal, at the par of exchange, to 2992 dollars and 96 cents. To a question, whether, if he had been called upon by Williams, previously to the service of the original writ, for the balance then due, he was not bound to pay Williams at London by remitting to him bills of exchange at the rate of exchange at the time, Cordis makes answer, that he has sometimes made payments in shipments and occasionally remitted bills ; but that he never made any particular agreement with Williams upon the subject. He also states, that an interest account was kept between himself and Williams, and that conformably to their usual mode of dealing, he should have paid Williams interest at the rate of five per cent, if the business and payment had not been interrupted by Williams’s failure and by the service of the trustee process on the respondent. He further states, that he has not held a specific amount in his hands for the sole purpose of paying the balance due to Williams, but that he has been always ready to pay the amount due, whenever he should be called upon by any person authorized to receive it ; that he has always, since the service of the original writ, had a balance remaining dead at the bank, and often to an amount as large as the balance due to Williams ; and that he could have hired money at even less than five per cent per annum.
    It was agreed that the rate of exchange, at the time of the service of the original writ, was above par, and has continued to be above par ever since.
    Cordis was adjudged trustee upon the original process; and upon an execution issued against Williams and his trustee, in August, 1828, Cordis, on the 5th of September following, paid 2798 dollars and 41 cents, which sum was indorsed on the execution in part satisfaction ; and he refused to disclose or expose any other goods, effects or credits of Williams.
    The respondent retained, of the amount due to Williams, the sum of 194 dollars and 55 cents, for his expenses, fees of counsel for advice, draughting answers, &c. in the original process in this case, and other suits instituted against him as trustee of Williams.
    The case was argued at the bar, by Bassett, for the plaintiff,
    and Smith and Sewall, for the trustee. The case of Charles Saunders against Williams, as principal defendant, and John Forrester, as his trustee, involving the same questions, was argued at the same time by Saltonstall, for the plaintiff and J. Pickemng, for the trustee. The counsel for the trustee having been stopped by the Court on the points relating to interest and counsel fees, and the Court having subsequently expressed an opinion adverse to them on those points, they were permitted to furnish an argument in writing, and the Court thereupon revised their opinion.
    For the plaintiff it was contended, 1. that the trustee was to be charged with the rate of exchange. The money was advanced by Williams in pounds sterling, upon a contract that Cordis should replace it in London ; and, but for this process, Cordis would have remitted the amount in bills at the rate of exchange current at the time of purchasing the bills. If he pays the debt here, justice requires that for each pound sterling, he should pay so many dollars and cents as will replace that amount in London. Had the rate of exchange been ten per cent below par, instead of ten per cent above par, at the time when the debt was arrested in his hands by this process, would the Court have compelled him to pay at the par of exchange, thus subjecting him to a loss of ten per cent ? M‘Vickar’s Considerations &c. on Protested Bills of Exchange, 52; Bayley on Bills, (Phillips & Sewall’s edit.) 29, 237, 239 ; Smith v. Shaw, 2 Wash. Circ. Ct. R. 168 Lanusse v. Rarkti, 3 Wheaton, 146; United States v. Barker, 1 Paine, 179; Hendricks v. Franklin, 4 Johns. R. 119; Graves v. Dash, 12 Johns. R. 17; The Zephyr, 3 Mason, 341; Cropper v. Nelson, 3 Wash. Circ. Ct. R. 125; Code de Commerce, liv. 1, tit. 8, Art. 143, note; Atkinson v. Braybrooke, 4 Campb. 380.
    2. The trustee having mingled the money due to Williams, with his own funds, and having used it in trade, is justly chargeable with interest as an incident to the debt. Pease v. Parker, 3 Gaines’s R. 266; Lynch v. De Viar, 3 Johns. Cas. 303; Wood v. Robbins, 11 Mass. R. 504; Reid v. Rensselaer Glass Factory, 3 Cowen, 404; Liotard v. Graves, 3 Caines’s R. 226; Gibbs v. Bryant, 1 Pick. 118; De Havilland v. Bowerbank, 1 Campb. 50.
    3. The trustee had no right to retain any sum for fees of counsel.
    The counsel for the trustee insisted, that he was not liable for the rate of exchange. The advance of exchange, at the time this suit was brought, was owing in part to the difference in currency between" the United States and England, and in part to the expense of transporting specie. 1. With regard to the difference of currency. By law, both gold and silver are standards of value in the United States. The law makes ten silver dollars worth a gold eagle, but in fact ten and a half silver dollars are not worth that coin. In consequence, all gold has been withdrawn from the currency of the country, and our standard is practically silver. In England, gold, and not silver, is the standard, silver not being a tender for any "urn above 40 shillings. The comparative value of gold having ■'sen since the par value of the pound sterling was fixed by Congress, it now requires a greater amount of silver to purchase an English pound than it did then. If a person were to carry 4 dollars and 44 cents in silver to England, he could not purchase a pound sterling or a gold sovereign ; he must carry about 4 dollars and 80 cents. But 4 dollars and 44 cents in American gold are worth nearly a pound sterling in England. The laws of the United States have, however, made 4 dollars and 44 cents of our silver equal to 4 dollars and 44 cents oi our gold ; and the Court cannot undertake to say that they are not equal. The fault lies in the laws of the United States, which have endeavoured to fix the relative value of gold and silver; a thing in its nature fluctuating. J. Q_. Adams on Weights and Measures, 143. 2. The other part of the advance on exchange arose from our imports from England exceeding our exports to that country. The balance having to be paid in cash, the expenses of transporting gold and silver to that country to pay the balance would of course regulate the price of bills. The debt being claimed in this country, there is no reason that the debtor should pay the expense of transporting it to England.
    Most of the cases cited on the other side relate to bills of exchange, which are sui generis and are governed by rules of their own. The rate of exchange is there allowed by statute. The damages do not include reexchange, but are intended as a penalty to insure payment of the bill. Grimshaw v. Bender, 6 Mass. R. 157; Bayley on Bills (Phil. & Sewall’s edit.), 238; Martin v. Franklin, 4 Johns. R. 124; Scofield v. Day, 20 Johns. R. 102; Pope v. Barrett, 1 Mason, 124; Napier v. Schneider, 12 East, 420; Woolsey v. Crawford, 2 Campb. 445.
    If Williams had brought an action against Cordis, he might have recovered interest ; but here the plaintiff and the assignees of Williams were contending for the funds in the hands of Cordis, and the property being locked up by the author ty of the law, so that he was prohibited from paying the debt to either at pleasure, to charge him with interest during the prohibition, would be unreasonable, and contrary to the authorities. Prescott v. Parker, 4 Mass. R. 170; Fitzgerald v. Caldwell, 2 Dallas, 215; Hoare v. Allen, ibid. 102; Foxcraft 
      
      fe, ibid. 132; Knight v. Reese, ibid. 182; Fitzgerald Oldwell, 1 Yeates, 274; Richards v. Salter, 6 Johns. Ch. 445; Rensselaer Glass Factory v. Reid, 5 Cowen, 604, 0; Sickman v. Lapsley, 13 Serg. & Rawle, 224; Conn . Peren, 1 Peters’s Ciro. Ct. R. 524; Bordley v. Eden, 3 lar. & M‘Hen. 167; Du Belloix v. Waterpark, Bayley on Bills, (Phil. & Sewall’s ed.) 234, note; Child v. Devereux, 1 Murphy, (N. Car.) 398. The St. 1794, c. 65, charges the trustee with only the “ goods, effects and credits of the principal ” which were in the hands of the trustee “ at the time the writ was served upon him ; ” so that if interest did not cease to run when the writ was served, what has accrued since cannot be recovered in the present suit. It is like rent falling due after the service of the trustee process. The plaintiff insists that Cordis has had the use of the money, and therefore in equity he ought to pay interest; but it does not appear that such use was beneficial to him, and the Court will not go into that inquiry. And besides, the trustee process is strictly a legal and not an equity process.
    The trustee may well retain from the funds in his hands, the expenses incurred by him in answering to the original trustee process. It was owing to no fault in him that that suit was instituted ; he could not prevent it; and he could not protect himself, except by appearing, and making a disclosure, and submitting to the Court the question, whether he would be justified in paying over his creditor’s money to a stranger. It was a serious and important question, whether the assignees of Williams under the commission of bankruptcy had not a better title than the plaintiff to the property in question. Blake v. Williams and Trustee, 6 Pick. 2S6, [2d edit. 315, note 1.] Williams was obviously in fault in not paying his debt to the plaintiff, and his property, the fund in litigation, ought therefore to pay these expenses. The trustee was obliged to incur them in consequence of having the fund in his possession; and they may be compared to storage paid by a trustee upon goods attached in his hands. Ellery v. Gouverneur, 3 Martin’s (Louisiana) R. 606; Sickman v. Lapsley, 13 Serg. & Rawle, 224; Paris v. Gilham, Cooper’s Chan. Rep. 56; Aldrich v. Thompson, 2 Bro. C. C. 149; Alt. Gen. v. City of London, 1 Yes. jun. 246. The uniform practice in this wealth has been, for the trustee to retain a sum to pa costs, and from the reasonableness of the thing his right so has never been questioned.
    
      June 27th.
   Parker C. J.

delivered the opinion of the Court. Thi scire facias is brought in order to obtain execution for a stir supposed to be in the hands of the trustee, not disclosed or paid over by him on execution, consisting of the difference of exchange, the interest upon the balance of the account between him and Williams, and the sum retained for expenses ; and we are to determine whether all or either of these items are chargeable upon the trustee in this suit.

In regard to the exchange, it appears by the answers, that it was considerably above par at the time of the service of the writ; so that if a remittance had been made by bills, 10 or 12 per cent advance must have been paid for them ; and the debt being to be paid in England, justice, as well as the usage of business, it is thought, requires that the creditor should receive the full value of his debt there.

We do not find however any authority for making this the rate of damages, when a foreign creditor sues for his debt in this country, except in the case of a dishonored bill of exchange ; in which case, by general usage, the rate of exchange is estimated as part of the damages to be recovered. This is supposed to be founded on the custom of merchants, and seems limited to the case of a protested bill of exchange ; and different usages prevail in different countries, in regard to the amount to be allowed and the manner in which it shall be done, it.being included in the sum allowed for damages, which in Massachusetts was formerly 10 per cent, as stated in the case of Grimshaio v. Bender, and 20 per cent in New York and Pennsylvania, by statute.

By St. 1825, c- 177, of this Commonwealth, it is now set tied, that bills on Europe, payable there but protested and sent back, shall be recovered against the drawer or indorser here, with the current rate of exchange,'and five per cent in addition thereto, with interest on the contents from the time when the same shall be refused acceptance or payment.

The ground upon which the original usage and the statute R.ns have been adopted, is the great inconvenience and 6 intent of business which may occur, in consequence of vappointment in regard to funds relied upon, where a bill Ivn upon a foreign country. The same reason does not to balances of accounts, and there is no case decided, hich any thing beyond the debt due and interest has been wed in a suit commenced here by a foreign merchant, ex-jt one in the Circuit Court of the United States for Penn■vania, which will be presently cited and remarked upon.

The question came before the court in New York, in the ose of Martin v. Franklin, 4 Johns. R. 125. The suit was y an English merchant for the price of goods purchased in England by a merchant of New York the defendant. It was determined that he could recover only the amount due at the >ar'of exchange. And the same principle was decided in an>tber case, Scofield v. Day, 20 Johns. R. 102.

The only case which has been cited or which can be found, where the current rate of exchange was allowed in making up the judgment, except on bills of exchange, is in 2 Washington’s Cir. Ct. Rep. 167 ; but this is a <pase of very little authority, as the point was not started in a/rgument, and was settled by the court suddenly without advancing any reason in support of it.

-^■trRhglarrtr, where the custom of merchants has introduced this principle into the law, it is not applied to the acceptor of a bill who has refused to pay ; because his contract is only to pay the bill according to the face of it; but it is applied to drawers and indorsers, because they undertake that the bill shall be paid, and that they will indemnify the holder. Napier v. Schneider, 12 East, 420. Now the liability of a debtor on a balance of account, is not greater than that of an acceptor of a bill ; nor has the creditor suffered the disappointment from-the failure to remit, which the holder of a bill does at not finding funds in the country and in the hands to which he has been directed for them.

In the case of Martin v. Franklin above cited, the court give the true reasons why a debt sued in this country by a foreign merchant is not to be increased by the rate of exchange. They say, “ The debt is to be paid according to the par, and not the rate of exchange. It is recoverable and payable here t0 th® plaintiffs or their agent; the courts are not to inquire inTo the disposition of the debt, after it reaches the hands of the agent. He may remit the debt to his principal in bills, or he may invest it here, or transmit it to some other part of the United States, or to other countries. We cannot trace the disposition which is to take place, nor award special damages upon such uncertain calculations. All that the plaintiffs can ask, is their debt, justly liquidated and paid, in the lawful currency of the United States.”

We subscribe to this doctrine, and are satisfied, that when the suit is brought in this Commonwealth by a foreign creditor, or by his creditor who sues here on the trustee process, the judgment can be only for the amount due at the par value of lawful money for sterling.

Whether the trustee is liable in this suit for interest on the balance in his hands, is the second question in this case. The Court have stated it to be their opinion, that he was chargeable with interest; but it having been suggested by one of his counsel, that on a former argument he was stopped upon this point, from which he inferred that the Court were with him, and being satisfied that such'1, an intimation w?as given, we thought proper to revise the decision arad, to receive an argument in writing ; which has since been given to us, and has due consideration. We however see no cause to revoke the decision. ■

It appears by the answer of the trustee, that an interest account was kept with him by Williams, and that he should have felt himself obliged to pay interest had he settled with Wil liams. It also appears, that when summoned as trustee, he did not set apart or deposit the amount of the balance due, but kept it mixed with his own funds, so that it formed part of his trading capital.

The first and principal objection to the allowance of interest is, that on the service of the trustee procees, the fund is locked up in the hands of the trustee, so that he is prevented by law from paying the debt, and is not at liberty to make any use of the fund ; so that the payment of interest, either to the principal defendant or the attaching creditor, would be oppressive and unjust.^ _

_ The basis of the argument is undoubtedly sound, and if the fact corresponds with the legal supposition, the conclusion would be unavoidable. But if this locking up of the fund is merely a fiction, the trustee in truth making use of it all the time the matter is in suspense, to allow him the benefit of the principle would be to adopt the shadow for the substance.

Prima facie, the service of the trustee writ stays the property in the hands of the trustee, and the law considers that it remains in statu quo until the judgment; but if it appears by the answer, that the money is in constant use, or so mixed up with his general funds as to form part of his trading capital, the reason of the rule ceases, and so the rule itself ought not to be applied. It is said, that for aught which appears, the use of the money may have been prejudicial to the trustee, for he may have lost by his trade or speculations ; but the right to interest does not depend upon the successful use of money, but merely upon the use of it. He who uses it takes the risk of profit and loss.

To follow up the metaphor made use of by the trustee’s counsel; the service of the writ turned the key upon the fund, but the trustee keeps the key, unlocks the chest, and takes the money into his own hands. In such case he cannot be allowed to say, “ the fund was locked up and therefore I will pay nothing for the use of it.” This is the reason of the thing, and there is no authority against it.

The only case which bears upon the subject, and that is very distinguishable from this, is Prescott v. Parker, 4 Mass. R. 170. The trustee had been indebted to the principal on a judgment recovered against him, which was satisfied by paying after-attaching creditors ; so that he must have been discharged, unless he were liable for interest on the judgment; and it was determined he was not. The reason given is, that in the case of a judgment, interest is given only as damages for detention of the debt, and that as by the service of the trustee process he was restrained from paying, there could be no damages for detention.

The reason thus given suggests the important distinction between that case and this ; between cases in which interest is g'ven by way of damages, and those in which it constitutes part of the debt; as contracts in which there is a promise to pay interest. In the former class it is obvious, that when one is summoned as trustee, he is in no fault for not paying, and as he made no agreement to pay interest, he ought not to be charged with it. In the latter, the interest is the debt, as much as the principal, and he ought to pay it, unless the use of the money has been actually prevented. The case before us is, in regard to interest, the same as if a promissory note had been given for the balance upon interest; for the defendant states that an interest account was kept, and if he had settled with Williams, he should have paid interest; it was therefore included in and a part of the contract.

But it is argued, that the creditor only attaches what is due at the time of the service of his writ; so that the trustee can be liable, on this process, for so much interest only as had previously accrued. But we think the attachment of the debt carries with it the interest, just as an increase of price or value of a chattel attached will be to the benefit of the attaching creditor, or the enhanced value of bank or other stock will be to his use. When indeed the debt bearing interest is attached, if instead of appropriating the sum due, the trustee uses it as before, he uses what by relation to the attachment may be considered as the creditor’s and not the principal’s money.

After viewing the subject on all sides, therefore, we are of opinion, that in this suit the trustee is answerable for interest on the balance of account, down to the time when the money was demanded on execution, the judgment on scire facias being restricted by the statute to the amount which ought to have been paid over on the first execution. St. 1794, c. 65, § 6.

Another question has arisen in this case, of some importance in practice, and which has not yet, to our knowledge, received a judicial determination in this Commonwealth. The trustee has reserved near 200 dollars to indemnify himself for the expenses of this and other suits, and we are called upon to decide whether he may lawfully retain this sum. There is no provision in the statute upon this subject. It gives costs to the trustee when he shah discharge himself, provided he offer tc make his disclosure the first term; but when charged as trustee, he has not this partial relief. On the one hand it seems hard that the trustee, brought into court to answer for the delinquency of another, should be obliged to sustain the expense which in most cases will unavoidably arise, with little or no prospect of reimbursement from the principal; for generally he will be unable to pay. But on the other hand, it must be obvious, that great inconvenience will follow from allowing such a deduction from the funds as will amount to an indemnity ; for in many instances, such expenses would absorb all the funds ; so that the attaching creditor would get nothing, and the funds of the principal would be consumed without paying his debt.

Besides, the litigated cases are, in point of interest, between the trustee himself and the attaching creditor; as where the trustee claims the goods or money as his own, in which case he ought to bear the expense ; or between the attaching creditor and some other creditors claiming under the principal by assignment or otherwise ; in which case the trustee, we think, may insist upon an indemnity, before he discloses the facts which will enable the assignee to set up his claim, or at least he may be made to bear the expense of litigation, and in such case there'would be no propriety in diminishing the fund for the expenses of such litigation.

It may be observed, too, that in all cases of scire facias founded upon a supposed withholding of the funds, the fault is in the trustee ; he causes the expense and ought to pay it. In the original process in this case, the question whether trustee or not was controverted between the plaintiff, who was an attaching creditor, and the assignees of Williams under the commission of bankruptcy. The assignees or creditors of Williams were the parties in interest. The trustee could not, we think, have been compelled to disclose the proceedings under that commission, without an offer of indemnity against the expense of the suit. And as to the scire facias, the questions are entirely between the trustee and the attaching creditor, whether he should be charged with the rate of exchange, interest, &c. the expense of which he cannot justly charge upon the fund.

It must be seen, therefore, that no general rule can be' established, by which the trustee may indemnify himself out of the funds in his hands, for the expense he may be made liable to ; and we think there is no discretion in the court to allow a deduction or not, according to the exigency of the particular case. We feel therefore constrained to refuse the allowance' altogether, believing that the legislature, if it had intended such deductions should be made, would have enacted a specific measure therefor, in a statute which seems to have been well studied by those who framed it.

If it should be thought reasonable, that a trustee, who at the first term discloses effects or credits in his hands, should be entitled to indemnify himself for the charges and expenses of the suit, out of the funds, the legislature will probably make some suitable provision therefor. Mr. Dane, in his Abridgment, considers it a hard case upon the trustee, to be obliged to sustain these expenses, in cases where he is ready to pay or surrender what he has in his hands; and we think so too ; but we do not think that we are vested with discretionary power in the subject.

JVoie. Judgment was rendered for the balance acknowledged by the trustee to be due to Williams, with interest thereon, at five per cent, to September 5th, 1828, deducting the sum paid over at that time upon the execution.