Case Name: The New England Bank versus Winslow Lewis et al.
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1829-04-02
Citations: 8 Pick. 114
Docket Number: 
Parties: The New England Bank versus Winslow Lewis et al.
Judges: 
Reporter: Massachusetts Reports
Volume: 25
Pages: 117–125

Head Matter:
The New England Bank versus Winslow Lewis et al.
A judgment in an action against the indorser of a note, in his favor, on a verdict which was rendered on the ground that the action had been brought before notice was given to him, is no bar to another action commenced after notice was given ; ' and consequently such judgment is no bar to a suit in equity brought against the indorser and his assignees in order to enable the plaintiff to obtain the benefit of the assignment.
A suit in equity lies against persons to whom a debtor has assigned his property for the benefit of his creditors, by a creditor to whom the assignees refuse to pay his dividend.
If the assignee, having sufficient funds to pay tile creditors preferred in the assignment, exhausts the funds by payments to other creditors whose claims are not preferred, leaving one of the preferred creditors unpaid, he is liable to pay such preferred creditor the amount of his demand, even if the misappropriation was made inadvertently.
Creditors, for whose benefit an assignment is made by a debtor, are entitled to claim dividends under it, without becoming parties to it or signifying their assent to it, when the instrument itself does not require any signature or assent on their part; and they cannot be deprived of their rights under the assignment, without a refusal or waiver of their claim under it.
A creditor’s prosecuting a suit at law against the debtor, on which he had made an attachment, to final judgment, is not evidence of such a waiver.
It seems, that the mere declining of the president of a bank which is one of the preferred creditors in an assignment, to become a party to the instrument, is not alone sufficient evidence of a refusal of the bank to accept the assignment.
The answer of a defendant in equity stating facts which are not inquired of in the bill, is not evidence of such facts.
This was a bill in equity. The bill alleges that the defendants, Winslow and Henry Lewis, were indebted to the bank as indorsers of a note dated January 4tb, 1822, signed by Eyre M. Jeffries, for 1462 dollars 50 cents, payable in six months and grace to Robert Ludlow or order, and indorsed by him and by W. and H. Lewis. The bill also alleges a due presentment and dishonor of the note, and notice to the defendants.
The bill further alleges, that on January 15th, 1824, Wins-low and Henry Lewis, by indenture, conveyed their property to Alexander Townsend and Samuel Austin junior, the other defendants, in trust to pay certain claims set forth in a schedule thereto annexed, in full, one of which was that of the plaintiffs, and then to divide the residue of the proceeds of the property ratably among certain other creditors ; that the note has never been paid ; that Jeffries is insolvent, and that Ludlow died in solvent; and that the plaintiffs gave notice to the trustees, oi their intention to take the benefit of the provisions in the inden turc in relation to their claim.
The plaintiffs further allege, that the trustees accepted the trust; and in answer to a pretence of the defendants, that the indenture was never executed and delivered to the trustees, they charge that the same was executed and delivered to the trustees and by them accepted, and that they have proceeded to sell and dispose of the property, and to apply a part of the proceeds in payment of debts which by the terms of The indenture were postponed to that of the plaintiffs, but have re fused to pay the plaintiffs.
In answer to another pretence of the defendants, that the plaintiffs have no remedy, because they formerly brought an action atTaw against Winslow and Henry Lewis on the note, in which action judgment was rendered in favor of the defend ants, the bill charges that the defence set up at the trial of that action was, that the suit, which was commenced on the do) when the note fell due, was brought before notice of its dishonor had been given to the defendants, who were indorsers, and that this was the only defence, and that judgment was rendered in favor of Winslow and 'Henry Lewis on the ground alone that the action was brought prematurely ; and the bill alleges that this judgment is no bar to an action, even at law, on the note, brought after notice was given. [See Wet» England Bank v. Lewis, 2 Pick. 125.]
The prayer of the bill is, that the trustees may stand charged with the execution of the trust, and be ordered to pay the plaintiffs the amount of their debt.
The answers of the defendants admit the material averments as to the note, but insist that the "indenture was never delivered except conditionally, if they are allowed to do so after the decision of this Court in Ward v. Lewis. [See the case in 4 Pick. 518.] They also urge the judgment in the suit on the note as a bar to the bill.
Townsend, in his answer, states that after executing the indenture he returned^ it to the Lewises, and never saw it again until the filing of the bill in Ward v. Lewis, when two parts were put into his hands by the Lewises as their counsel ; he denies that any part of the property ever came to his hands, or that he acted as assignee ; and he asserts that the trusts were never affirmed by the plaintiffs, but were disaffirmed by their suit at law ; and he denies that he ever had notice that the plaintiffs intended to avail themselves of the trust, until August 25, 1825, at which time he received a written notice from their solicitor that they desired to avail themselves of the trust in the indenture, which notice was addressed to him and Austin, but which he did not communicate to Austin until April 20, 1827, supposing Austin to have received a like notice.
The answer of Austin relies upon the same facts which are stated in Ward v. Lewis, to show that the indenture was never delivered ; and states that property of the Lewises was put nto his possession, with which he charged himself, the particulars of which appeared in an account referred to ; and that the Lewises having settled with all their creditors who had subscribed the indentures, the balance of the account was merged in his private accounts with the Lewises, which accounts have all been liquidated and paid, except 3882 dollars, the amount of the judgment against him in the suit of Ward v. Lewis, which he paid out of his own property that he has since received of the Lewises 2820 dollars, leaving a balance of 1062 dollars due him, for which he has no security ; that after the execution of the indenture, certain proceedings were had among the creditors, which are stated at large in his answer in the case of Ward v. Lewis, from which he was led to believe that the indentures were given up and abandoned, and that he acted accordingly ; he further states, that shortly after he had signed the indenture, Samuel Dorr, the president of the New England bank, having called on him to examine the indenture, he asked Dorr to execute the same in behalf of the plaintiffs, which Dorr declined ; and he denies that he ever received any notice that the plaintiffs intended to avail themselves of the trust, until about April 20, 1827, and after the termination of the suit of Ward v. Lewis. He also insists that the judgment on the note, at law, against the plaintiffs, was a bar to this suit; and denies any trust, or that the same was ever affirmed by the plaintiffs ; but alleges that the same was disaf firmed and repudiated by the psosecution of the suit at law by the plaintiffs.
^1888^
Shaw and Bartlett, for the plaintiffs,
relied upon the decicion in Ward v. Lewis, 4 Pick. 518, as establishing the facts that the indenture of assignment had been executed and had not been annulled.
The judgment in the former action on the note would be no bar even to an action at law, for the cause of action on the note accrued subsequently to the commencement of that suit.
It may be contended that the trustees bad not reasonable notice that the plaintiffs intended to avail themselves of this assignment. But the presumption of law is, that they intended to avail themselves of it, and no notice of acceptance on then part was necessary. Nicoll v. Mumford, 4 Johns. Ch. R. 529; Halsey v. Fairbanks, 4 Mason, 206; Brooks v. Marbury, 11 Wheat. 96; Shepherd v. M'Evers, 4 Johns. Ch. R. 136; Gregory v. Williams, 3 Meriv. 582. The plaintiffs have been guilty of no loches. Stackhouse v. Barnston, 10 Ves. 466; Hercy v. Dinwoody, 2 Ves. jun. 87; Whichcote v. Lawrence, 3 Ves. 740. It is doubtful indeed, whether these trustees would be protected against this claim, even by the statute of limitations. Wood v. Dimmer, 3 Mason, 320. It was their duty to notify the trust to the plaintiffs. Dunch v. Kent, 1 Vern. 260, 319.
To show that bringing the suit at law was not an abandonment of the plaintiffs’ rights under the assignment, the following cases were cited. Wake v. Wake, 1 Ves. jun. 336; Whistler v. Webster, 2 Ves. jun. 371.
The acts of Dorr cannot be considered as a rejection of the assignment, for Dorr had no authority to execute the instrument. Besides, the acts of Dorr, as alleged by Austin, have not been proved ; which is necessary in order to affect the plaintiffs ; for allegations in an answer, of new facts in avoidance, and not being a direct denial of matter charged in the bill, are not evidence, but must be supported by other proof. Cooper’s Eq. Pl. 328; Hart v. Ten Eyck, 2 Johns. Ch. R. 62; Simson v. Hart, 14 Johns. R. 63; Randall v. Phillips, 3 Mason, 383; Green v. Hart, l Johns. R. 580.
jS. Hubbard and Townsend, for the defendants,
conté-ded that the verdict and judgment in the former action on the note, were a bar to this suit. 3 Bl. Com. 376; Ferrer's case, 6 Co. 7; Hitchin v. Campbell, 2 W. Bl. 831; Kitchen v. Campbell, 3 Wils. 308; Jackson v. Swartwout, 8 Johns. R. 383; Seddon v. Tutop, 6 T. R. 607; Homer v. Fish, 1 Pick. 440.
April 2d, 1829
The plaintiffs have lost their rights under the assignment, by their delay in acceding to it. Lane V. Jackson, 5 Mass. R. 162. The notice received by Townsend was too late, and Austin,' in fact, never had notice till a long time after. Austin certainly ought not to be prejudiced by the plaintiffs’ néglect, in consequence of which he has paid out all the funds. Hunt v. Rousmanier, 3 Mason, 294.
The prosecution of the suit was of itself a rejection of the assignment; and so were the acts of Dorr

Opinion:
Wilde J.
delivered the opinion of the Court. Several points made in this case were fully considered and determined at a former term, in the case of Ward and another against the present defendants. I shall therefore, in delivering the opinion of the Court, notice those points only which distinguish this case from the former.
And first, the defendants contend that this suit is barred by a judgment recovered by the Lewises in an action at law founded on the same cause of action set out in the bill. The plaintiffs admit, in their bill, that their action at law was founded on the same note, but not on the same cause of action. On the contrary, they aver that the judgment in the action at law was rendered solely on the ground fhar the plaintiffs' right of action had not then accrued, for want vf notice prior to the commencement of the action. And this averment is not denied in the answers. And the rule is, that if any matter is charged by the bill which may avoid a bar to the action, it must be denied particularly and precisely in the answer. The fact however has not been denied in the argument, and it is sufficiently proved, if proof be necessary, by-the report of the former action.
We are therefore to consider, whether the facts charged in the bill are sufficient to avoid the bar. And we think they are. The general rule is laid down in Ferrer's case, 6 Co. 7 ; " when one is barred in any action &c. by judgment &c., he is barred as to that, or the like action, of the like nature, for the same thing forever." When, however, the real merits of an action have not been inquired into in a former suit, issue may be taken on the fact, the judgment being pleaded in bar. Hitchin v. Campbell, 2 W. Bl. S27. And when issue is thus taken on the fact, evidence is admissible to prove what passed at the former trial. Seddon v. Tutop, 6 T. R. 607. And of course, when the fact is admitted by demurrer or otherwise, the bar must fail. It is clear, therefore, we think, that as the merits of the present suit were necessarily excluded in the former action, because no cause of action had then accrued, the judgment in that action is no bar, either at law or in equity.
We think it also equally clear, that the plaintiffs have no adequate remedy at law. It is true they might recover judgment against their debtors. But a judgment against insolvent debtors, without satisfaction, cannot be considered an adequate remedy, nor indeed any remedy. If therefore the plaintiffs are interested in the trust fund, as they claim to be, it cannot be doubted that their proper remedy is in equity.
And the principal question is, whether the. plaintiffs have any interest in the trust fund.
It has been argued that they have not, because they never became parties to the assignment, and did not, within a reasonable time after the assignment was made, signify to the trustees that they assented to the provision made for them by their debtors, and intended to claim the benefit of it. It was decided in the case of Ward, that it was not necessary for the preferred creditors to become parties to the deed of assignment made for their benefit. The trust was created by Wir;slow and Henry Lewis, and the trustees, by becoming parties to the deed and accepting the trust, were bound in equity to execute it on the application of any of these creditors ; and the trustees were bound to retain funds in their hands for that purpose, and not to pay other creditors unless there should be an overplus after paying the preferred creditors, or unless these ireditors, or some of .them, should refuse to accept the provision made for them, or should waive the benefit by some act equivalent to a refusal. 2This case therefore depends altogether on the question, whether the plaintiffs have refused the provision made for their benefit in the deed of trust, and if not, whether sufficient facts appear to amount to a waiver.
Austin, in his answer, states, that soon after he had signed the trust deed, Dorr, then president of the New England bank, called on him and requested him to exhibit the deed of trust, which was done, and that it was read by him, and that he was thereupon requested by Austin to sign and execute the same in behalf of the bank, which he declined to do. And this, it is contended, being an answer to an interrogatory in the bill, must be taken to be true unless disproved, and that no evidence to disprove it has been offered in the hearing of the case. We do not find in the bill any particular interrogatory touching this part of the answer. There is the general interrogatory touching all the matters and things alleged in the bill; and it is averred in the bill, that the plaintiffs, after the assignment in trust to Townsend and Austin, did give them notice that they were desirous of availing themselves of the trusts in their favor, and that they were ready and desirous to execute the trust deed, if they ought by the terms of it so to do ; but the matter relied on by the defendants is not the proper answer to this averment in the bill; nor does it purport to be. An answer to an interrogatory must be positive and direct, and not argumentative. Now it might be true, that the president of the bank did, on one day, decline to sign and execute the trust deed, either because he might suppose it not necessary for the preferred creditors to become parties to the deed, or because he might not think himself authorized to execute the deed without consulting the other directors, and taking counsel touching the matter ; and the next day, after being better advised, he might have offered to execute the deed as averred in the bill. The question for the defendants t-answer was, whether the plaintiffs did offer to execute the trust deed ; and a simple affirmative or negative would have been the proper answer. But if the defendants saw fit to go further, as they had the right to do, and aver additional matter on which they rely in their defence, they must prove the additional matter, it being traversed by the general replication. The result therefore is, that if the plaintiffs would avail themselves of the averment in the bill, that they offered to execute the trust deed, they must be held to prove it; and so on the other hand, if the defendants rely on the averment in the answer of Austin, that the president of the bank did actually refuse to execute the trust deed in the behalf of the company, they must prove the fact. Now we think there is no satisfactory proof of either averment; certainly none to prove the averment in Austin's answer, and the presumption from the evidence is pretty strong the other way; for if it were true, as averred by Austin, that soon after the trustees signed the trust deed, the plaintiffs, by their president, did disaffirm the trust in their favor, and did refuse to become a party to the deed, it would be difficult to account for the fact testified to by one witness, that so late as May, between four and five months after the execution of the deed, Austin acknowledged that the plaintiffs' debt was to be paid in preference to certain other debts. So Haskell testifies, that Austin, and also Winslow and Henry Lewis, did frequently state to him, that the debts enumerated in the schedule, to the amount of 54,653 dollars 54 cents, which included the debt now claimed, were to be paid in full from the proceeds of the property assigned. And that this sum was always deducted, when computations were made for the purpose of ascertaining the amount which would remain for other creditors.
But it has been argued, that the plaintiffs, by electing to proceed in their action at law after the provision made for them in the trust deed, have virtually waived that provision, which it is said was made for the purpose of relieving the goods from the- attachment made in that action. It is not however made a condition of the trust, that the nlaindffs should discon nnue their suit, nor does it appear that the defendants in that suit either expected or wished it to be done. They insisted on their defence to the action, and eventually prevailed. Under these circumstances the plaintiffs had a right to proceed to trial, with the view of saving themselves from costs. If they had prevailed in their action, and had then elected to rely on the attachment rather than on the provision made for them in the deed of trust, this undoubtedly would have amounted to a waiver and disaffirmance of the trust. But merely prosecuting the action to final judgment cannot, we think, have any tendency to show a waiver of the trust.
We are, therefore, of opinion, that there is no sufficient evidence in the case to show that the plaintiffs have refused 01 waived the trust in their favor, and that they, therefore, have a good right in equity to claim the benefit of that trust; and that the trustees are bound to execute the trust, and to pay the plaintiffs' demand out of the proceeds of the sale of the assigned property and effects, it appearing that this fund is more than sufficient to pay all the preferred creditors.
This may operate hardly upon Austin, if he has incautiously paid away the trust fund to other creditors without taking an indemnity. But he must certainly be answerable for any misappropriation of the trust fund, and if he has no indemnity, the loss must fall upon him, unless he can recover back the money paid to the other creditors as money paid by mistake, or can procure indemnity from the Lewises. It is sufficient for the plaintiffs to show, that the trust fund in the hands of Austin was fully equal to the amount of the claims of the preferred creditors, and this appears by the account stated and annexed to the answer.
See 1 Stark, on Evid. (5th Am. ed.) 222, 223; Parker v. Thompson, 3 Pick. 428; Standish v. Parker, 2 Pick. (2d edit.) 22, notes; Wood v. Jackson 8 Wendell. 44
See Buffum v. Green, 5 N. Hamp. R. 71 ; Hempstead v. Starr, 3 Day, 348; Marlborough Manuf Co, v. Smith, 2 Connect. R. 579; Brown v. Minturn, 2 Gallison, 557; De Forest v. Bacon, 2 Connect. R. 633; Cunningham v. Freeborn, 1 Edwards's Ch. R. 256; S. C, 11 Wendell, 240; Russell v. Woodward, 10 Pick. 415; Brewer v. Pitkin, 11 Pick. 298; Copeland v. Weld, 8 Greenleaf, 411; Bradford v, Tappan, 11 Pick. 76
See Coverdale v. Wilder, 17 Pick. 178.