Court Opinion

ID: 9642881
Source: CourtListenerOpinion
Date Created: 2023-08-22 18:11:28.128119+00
Date Added: 2024-06-11T18:05:15.426577
License: Public Domain

PARKER, Circuit Judge
(dissenting).
I am of opinion that the judgment appealed from should be affirmed on any one of three grounds: (1) that it was not necessarily adjudicated in the North Carolina.suit that the Guaranty Company was the agent of the Bank-Trustee in accepting the payment made by Lazarus; (2) that the Bank-Trustee was a mere formal party to the North Carolina suit at the time of the entry of the judgment relied upon as an estoppel; and (3) that the Bank-Trustee was not a party to the North Carolina suit in its individual capacity but merely as trustee.
The Bank-Trustee is chargeable under the trust indenture with payments received by an agent which it had appointed. It is not chargeable, however, with payments made to one professing to act as its agent who was not in fact such, unless chargeable with liability therefor because of gross negligence or wilful default. The question of gross negligence or wilful default was not involved in the North Carolina suit, nor was the agency of the Guaranty Company necessarily adjudicated therein. It was alleged, it is true, that the Guaranty Company was the agent of the Bank-Trustee in making the collection; but it was also alleged that the Bank-Trustee was estopped to deny the agency of the Guaranty Company because of the course of dealing which had been followed. The decision in favor of Lazarus may well have been based on the latter ground; and this would not establish liability on the part of the Bank-Trustee to the bondholders for the moneys received and converted by the Guaranty Company. The North Carolina judgment, therefore, cannot be held to establish the liability of the Bank-Trustee for the collection, for it is well settled that where judgment may have been predicated upon one of several grounds, it does not estop as to any of them in the absence of extrinsic evidence showing the > precise point upon which the decision was based. Russell v. Place, 94 U.S. 606, 24 L.Ed. 214; De Sollar v. Hanscome, 158 U.S. 216; 15 S.Ct. 816, 39 L.Ed. 956; Chrisman’s Adm’x v. Harman, 29 Grat. 494, 69 Va. 494, 26 Am.Rep. 387; Hairston v. Hairston, 117 Va. 207, 212, 84 S.E. 15; Chakales v. Djiovanides, 161 Va. 48, 170 S.E. 848.
Agency by estoppel does not establish agency in fact. It means merely that the one against whom the estoppel is asserted may not deny the agency as against one who has been misled by his conduct into believing that it .existed. A. L. I. Restatement, Agency, § 31; 2 Am.Jur. pp. 86-88; Huff-cut on Agency, 2d Ed., pp. 62-71. Only a person so misled may rely upon the estoppel. Where it is successfully asserted against a trustee, the cestui que trust, not having been misled, is in no position to avail himself of the same estoppel. As between him and the trustee, the question is whether 'the conduct of the latter has been such as to subject him to liability. The trust indenture here provides that such liability depends upon gross negligence or wilful default. These were not adjudicated directly or indirectly by the North Carolina suit; and in his second conclusion of law, which is not questioned, the District Judge found that they did not exist, saying: “2. The defendant was not guilty of gross negligence or wilful default in connection with the payment by Lazarus to the Guaranty Title & Trust Corporation of the amount of the Lazarus notes with interest and anticipation fee, or in connection with the failure of the Guaranty Title & Trust Corporation to pay over to the defendant the amount so received by it, and is not liable to the plaintiff by reason thereof.”
As to the second ground, the North Carolina suit was brought to cancel the Lazarus notes .and mortgage as a cloud on the title to land. The Bank-Trustee was made a party to that suit because, as trustee, it held the papers which it was sought to cancel. No relief beyond the cancellation of the papers was asked against it as trustee and no relief whatever was asked against it in its' individual capacity.. Before the judgment which is relied upon as an estoppel was entered, it had transferred the notes and all rights thereunder to the National Bondholders Corporation and thereafter had no further interest in the litigation. While not dismissed from the suit, it was a mere, formal party, having no rights in the subject matter. The National Bondholders Association intervened and conducted the litigation; and the Bank-Trustee could not thereafter have made a defense nor have appealed from any judgment entered, for it had ceased to have any rights in the notes and deed of trust, the cancellation of which *147was the object of the suit. Such a mere nominal party is not bound by the judgment rendered in the action. 34 C.J. 995; Walker v. Philadelphia, 195 Pa. 168, 45 A. 657, 78 Am.St.Rep. 801; Ashton v. City of Rochester, 133 N.Y. 187, 30 N.E. 365, 31 N.E. 334, 28 Am.St.Rep. 619; Robbins v. Chicago, 4 Wall. 657, 672, 18 L.Ed. 427. As said in the case last cited: “Conclusive effect of judgments respecting the same cause of action and between the same parties rests upon the just and expedient axiom, that it is for the interest of the community that a limit should be opposed to the continuance of litigation, and that the same cause of action should not be brought twice to a final determination. Parties in that connection include all who are directly interested in the subject-matter, and who had a right to make defence, control the proceedings, examine and cross-examine witnesses, and appeal from the judgment.”
It must be remembered that the Bank-Trustee was made a party to the North Carolina suit in its fiduciary capacity. After it had parted with the papers which it held as fiduciary and its successor had been made a party to the suit, no question could arise in which it had any interest. The question of payment related to the status of the papers held by its successor, not to the question to its individual liability. If it had sought to appeal from the judgment in favor of Lazarus, its appeal would have been dismissed promptly on the ground that nothing was adjudicated against it by the judgment.
As to the third ground, the only purpose of making the Bank-Trustee a party in the North Carolina suit was to secure cancellation of the papers which it held as trustee; and it was made a party to that suit in its fiduciary capacity. The purpose of this suit is to enforce a personal liability against it. It is well settled that a judgment against one in his representative capacity does not bind him in his personal capacity and vice versa. 34 C.J. 984; 15 R.C.L. 1012-1013; Freeman on Judgments, § 156; Troxell, Adm’x, v. Delaware, etc., R. Co., 227 U.S. 434, 443, 33 S.Ct. 274, 57 L.Ed. 586; Amsterdam First Nat. Bank v. Shuler, 153 N.Y. 163, 47 N.E. 262, 60 Am.St.Rep. 601; Landon v. Townshend, 112 N.Y. 93, 19 N.E. 424, 8 Am.St.Rep. 712; Fuller v. Metropolitan Life Ins. Co., 68 Conn. 55, 35 A. 766, 57 Am.St.Rep. 84 and note; State ex rel. Hospes v. Branch, 134 Mo. 592, 36 S.W. 226, 56 Am.St.Rep. 533; Stockton B. & L. Ass’n v. Chalmers, 75 Cal. 332, 17 P. 229, 7 Am. St.Rep. 173 and note; Slocomb v. De Lizardi, 21 La.Ann. 355, 99 Am.Dec. 740; Benz v. Hines, 3 Kan. 390, 89 Am.Dec. 594 and note; Bridger v. Asheville, etc., R. Co., 27 S.C. 456, 3 S.E. 860, 13 Am.St.Rep. 653; Rahr v. Wittman, 147 Wis. 195, 132 N.W. 1107, 36 L.R.A.,N.S., 392; Keith v. Willers Truck Service Co., 64 S.D. 274, 266 N.W. 256, 104 A.L.R. 1471; May Coal Co. v. Robinette, 120 Ohio St. 110, 165 N.E. 576, 64 A.L.R. 441.
Plaintiff admitted in the court below that it could not prevail on the merits. (Appellant’s appendix 192). It seeks to unload its loss upon the bank, in spite of the limitations of the trust indenture, by invoking the North Carolina judgment, which was rendered after defendant had ceased to be anything more than a nominal party to the suit in which it was rendered and after plaintiff had taken defendant’s place therein as holder of the Lazarus notes and mortgage. It seems clear to me that the North Carolina suit did not adjudicate with precision the question upon which defendant’s liability depends, and that for that reason as well as for the reason that defendant was no more than a formal party to that suit at the time of the adjudication and, at all events, was not a party in the same capacity there as here, the principle of res adjudicata has no application.