Court Opinion

ID: 6593572
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:00:03.629482+00
Date Added: 2024-06-11T12:15:18.965558
License: Public Domain

Gbeen, Judge:
The first question to be decided in this cause is: — Should the court have sustained the demurrer to the plaintiffs’ bill?
The special object of the bill was to compel Jenkins, Jackson and Rathbone, who, when the cause of action arose, were-a partnership doing business under the name of Jenkins, Jackson & Go., to pay to the plaintiffs funds, which they had received from Latham, trustee, in a deed of trust duly recorded, which provided, that said funds should be paid to the plaintiffs. This appears on the face of the bill; and upon these allegations there can be no doubt, that Jenkins, Jackson and Rathbone were not necessary parties to the suit; and, if the plaintiffs had so elected, they might have brought the suit against the trustee and all the cestuis que trust and have obtained a decree for the debt against the trustee, because of his misapplication of the funds, which came into his hands, and out of which it was his duty to pay the plaintiffs’ debt. But as the plaintiffs elected to follow the funds thus misapplied into the hands of those, to whom such funds had been paid, they had a right to make such persons also parties defendant and to obtain a decree against them for the funds, which they had received from the trustee. In such a case the plaintiffs had a right to a decree directing the parties, who had improperly received this fund, to pay it to the plaintiffs; and, if they were unable to meet this responsibility, the plaintiffs had a right to a decree against the trustee as security of the parties, to whom he had improperly paid the fund, which should have been applied to the plaintiffs’ debt. That this is the law clearly appears from Story’s Eq. PL, § 221, which is as follows : — -“If a trustee has fraudulently or improperly parted with the trust-property, the cestui que trust may proceed against the trustee alone to compel satisfaction for the breach of trust, or he may at his election join the assignee also, if he was a party to the fraud, or if he seeks redress from, him.” This proposition of law is supported by the case of Bank v. Pollock, 4 Edw’ds Ch’y 215, the syllabus of which is as follows:—
“Where a bill charges, that shares of stock have by fraudulent conduct of one person got into the possession of two, *354the latter may be proceeded against in one suit, though each holds a distinct number of shares ; and it is. also right to make the wrong-doing person a party.
“ A clerk of a bank through fraud using the borrowed checks of’a firm, whose account (in that way overdrawn) was more particularly under his own supervision, withdrew money from the bank and bought stock with it and caused such stock to be placed in the name of his sisters without consideration — Held, that the sisters were to be construed as trustees for the bank defrauded. ”
The sisters in that case were not participants in the fraud. The Vice-Chancellor says: — “ I consider this case falls within the principle laid down by Mr. Justice Story in 2 Eq. Jur. 513, § 1,258. The identity of the property is shown and traced; and under such circumstances, as it can be laid hold of by a court of equity and distinguished from the property of all other persons and handed over to the equitable and rightful owner. (Thompson v. Perkins, 3 Mason 322 and cases there cited). ”
Point 2 of the syllabus in Bailey v. Inglee et al., 2 Paige Ch’y 278, is as follows : — “ A defendant may in some cases be a proper party to a suit, although he is not a necessary party, as in the case of á fraudulent assignment of a trust fund, where the cestui que trust may at his election either proceed against the trustee alone or may join the fraudulent assignee in the same bill. ”
In Burnet v. Dennett, 2 Brown Ch’y R., it was decided, that in “ a bill against a trustee, who has assigned his trust, the assignee ought to be made a party, as the decree should be first against him, the trustee to stand as security. ” This conclusion is approved by Judge Story in his Eq. Pl., § 155.
It seems to me therefore, that in this case Jenkins, Jackson and Rathbone, late partners under the name of Jenkins, Jackson & Co., were proper parties defendant to this bill. But it is claimed, that they were not so made parties, as in the bill the prayer is, that Jenkins, Jackson and Rath-bone be made parties defendant, that is, that they be individually made defendants. But they would have been made individually defendants, if the prayer had been that Jenkins, Jackson and Rathbone, late partners as Jenkins, *355Jackson & Go.; for they were individually responsible, if the funds were, as alleged in the bill, even improperly received from the trustee by the said firm on claims, which it held against the grantor in the deed of trust. It surely is a mere technicality to say, that, though the bill in one part states, that these persons, when they received this money, were partners under the said firm name, yet, because in the prayer of the bill they were not said to be late partners, the bill was fatally defective. To sustain this position assumed for the first time in this Court, counsel rely on a note in Sands’s Suit in Equity, page 25: — “ If among the defendants there be any one, who fills several characters and is a proper party in each character, care must be taken to make him a party in each. When, for example, a devisee of the equity of redemption ought to be a party, though he be a defendant in the character of executor and answer as such, that will not be sufficient; he must be a party called upon to answer as to his individual interest: (Mayo v. Tomkins, 6 Munf. 520). In a bill brought by a residuary legatee against an executor, if the executor be administrator of one of the residuary legatees, he should be made a defendant as administrator of such legatee as well as in his character of executor. (Stephens v. Starke, 3 Munf. 29). And a decree can not be made against a widow to restrain her from conveying her right of dower, if she be not made a defendant to the bill as widow or in her own right but merely as administratrix of the decedent and guardian of his children (Pennington v. Hanby, 4 Munf. 144). ” There can be no question that Sands lays down the law correctly in this note. But the addition to the individual names of the members of the old firm of the words — - ■“ late partners doing business under the firm name, of Jenkins, Jackson & Oo. ” would not indicate the character, in which they would be sued, but would only be a descriptio personis very proper to be added, but not at all essential. It was obviously so regarded in the court below ; for in the decrees of the court this description of these persons was constantly added. It is unnecessary to consider separately each of the four grounds of demurrer, as they are obviously based on false views of the law or have been shown, by *356what we have already said, to be without foundation. The court therefore did not err in overruling the demurrer.
The commissioner’s report set out in the statement of the-case not being excepted to, though it was returned to the court more than three years before it was acted upon by the court, must be held to be true. The case was referred to a commissioner twice to ascertain how much was due to the plaintiffs on the debt secured by the deed of trust and declared to have priority over all other debts; — what was the value of the property, which came into the hands of the trustee, what disposition he made of it, and how much money he paid to Jenkins, Jackson Co. His first report was unsatisfactory, and the cause was re-committed to him for a new report, which was made and was entirely satisfactory to all parties. From this report it appears, that the trustee came into possession of property, which, when estimated by the prices, at which he sold it, not by the valuation put upon it in the inventory made before the sale, was worth $1,936.55. Of this with the assent of all parties there was to be paid to Browning & Co. $264.32, and that amount was actually paid. This would leave in the hands of the trustee $1,672.23, out of which he should have first paid the amount due to the plaintiffs, which was, as stated in the deed of trust, $280.00 with interest from January 12, 1876; but instead of paying them this sum he paid them, only $117.15, leaving a balance, which on August 12, 1880, according to the commissioner’s report, amounted to $211.56, which on May 1,1876, must have been about $168.00. Instead of paying this $168.00 to the plaintiffs the trustee paid, as the commissioner’s report shows, to Jenkins, Jackson & Go. $162.91 on a debt due from Kirk to them. They certainly had no pretence of a lien on the trust-property or on any property of Kirk’s prior to January 18,1876; for they brought no suit and issued no attachment on their claim till that day, which was six days after the recording of the deed of trust.
There was no question, that this payment to Jenkins, Jackson & Go. as well as the subsequent payment of $120.00 to the same parties made on the 23d of May, 1876, was a breach of trust, and that they knew it to be a breach of *357trust, and that out of the money so wrongfully paid by the trustee the balance of the debt due to the plaintiffs could and should have been paid. So that upon the principles, we have laid down, the balance of the debt due to the plaintiffs should in this suit have been decreed to be paid to them by the members of the late firm of Jenkins, Jackson & Co.— that is, according to the commissioner’s report, $211.56 with interest thereon from August 12,1880.
The two receipts above referred to filed with the commissioners, when taken in connection with the date of the attachment issued by Jenkins, Jackson & Go., show beyond controversy, that the payment of each of the sums, for which they were given, was a breach of trust by the trustee, and that Jenkins, Jackson & Co., at the time they received the money, knew that the payment of it was a breach of trust. To show this 1 here give a copy of these two receipts :
“ Ravenswood, May 1st, 1876.
“ Rec’d of M. 0. Latham, trustee of Mrs. E. Kirk, assignee of T. Kirk, one hundred and sixty two dollars and ninety one cents, to be applied on claim in the hands of R. S. Brown and H. C. Elesher for collection, being the same claim E. E. Starcher attached goods for March. 1876.
“ Jenkins, Jackson & Co.”
“ Parkersburg, W. Va, May 23, ’76.
“ Rec’d of M. C. Latham, trustee of Thos. Kirk, twenty dollars, which is to be applied on our claim against said Kirk in Brown’s and Flesher’s hands for collection.
“$20.00 Jenkins, Jackson & Co.”
To escape the inevitable consequences of the wrongful receipt of this money, the members of the late firm of Jenkins, Jackson & Go. in their answer say :• — “ They did not know of this deed of trust till long after its execution.”' — The receipts show on their face that Jenkins, Jackson & Co. knew of the deed of trust, when they received the money, and that was long after the deed of trust was recorded. These receipts also contradict the statement in the answer, that “the sums so paid them by said Latham were received by them in good faith on their just claim and demand against *358said Thomas Kirk,” and the further statement in said answer, “that each and every of the sums paid by said Latham to them was paid by him on said judgment bona -fide under a claim of right by them under and by virtue of said attachment and judgment.” — Both parties knew, that this attachment was issued and the judgment was obtained some time after the recording of this deed of trust, which imposed on the trustee the duty to pay to the plaintiffs the identical money, which he paid to Jenkins, Jackson & Oo. This payment could not have been made nor received bona fide by either party. So far as the record shows, there was no allegation ever made by any one, that this deed of trust was fraudulent. And if it was fraudulent, the trustee could not in geod faith accept the trust and then violate his duty under it.
The appellees’ counsel in their argument endeavor to escape from the conclusions, which I have reached, by two arguments, which do not consist. One of these arguments is, that the plaintiffs seeing that Jenkins, Jackson & Go. had attached a part of this stock of goods conveyed by said deed of trust, assented expressly or tacitly to the application by the trustee of a part of the proceeds of the sale of the goods to their attachment-debt, thus waiving the preference they had before claimed under the deed of trust. There is nothing whatever in the record to sustain such a view. In their answer the members of the late firm of Jenkins, Jackson & Co. do not pretend, that such was the case. On the contrary they simply claim, that they received, and the trustee paid them, this money bona fide; but they do not say, that it was paid to them with the express or tacit agreement of any of the cestuis que trust. The trustee files no answer setting up such a pretence; and no deposition is taken in the cause to prove such a fact. When the commissioner was issuing an order simply to ascertain what property had been received by the trustee, and what disposition he had made of it, and how much money he had. paid Jenkins, Jackson & Oo., the trustee appeared and gave his deposition, no one else being present, in which he made some vague statements about his having accounted for all the money, which came into his hands by paying expenses, (rent, clerk-hire, &c.,) in carrying out the wishes of the *359grantor in the deed of trust and of one of the cestuis que trust and of the parties representing the creditors. From such loose statements the appellees’ counsel would have us infer, that the plaintiffs approved of the payments made to Jenkins, Jackson & Oo., though the trustee in this deposition says not a word about having paid them anything and does not even mention their names nor the names of the plaintiffs.
I have stated the substance of this deposition in my statement of the case ; and there is nothing in it, from which an inference can be drawn, that Latham designed to make any such allegation; and, if he had made such an allegation, it would have been a matter of no importance, as the statement would have been made not in a deposition taken in the cause on notice but on an inquiry before the commissioner, which was altogether foreign to an inquiry, whether or not this money had been properly paid to Jenkins, Jackson & Oo. The fact that they issued an attachment and had it levied, on some goods of Kirk’s, which they say but do not prove were a part of the stock of goods conveyed in this deed of trust, if it were true, would be very poor evidence, that they had good grounds for such attachment. As it appears, that the constable never took possession of these goods, but on the contrary permitted them to remain in the hands of the trustee, who went on and sold them as trustee, while Jenkins, Jackson & Oo. took no steps to prevent it but permitted all these goods levied on by the constable under their attachment to be sold, and never obtained any order of sale in their attachment-case nor in fact any other order than the order issuing the attachment, it seems to me, the fair inference is, that this attachment issued for a cause, which does not appear, the affidavit, on. which it was based, not being in the record, was abandoned, because Jenkins, Jackson & Co. thought, it could not be sustained. But it is immaterial, whether it was abandoned or not. There is certainly no evidence, that any compromise was made between the cestuis que trust and Jenkins, Jackson & Co. — nor are there any allegations in the pleadings nor proofs in the evidence, upon which it is possible to assume, that there was any such compromise.
*360The other position assumed in this Court by the counsel for Jenkins, Jackson & Co. is, that this Court ought to hold as fraudulent and void the deed of trust, under which the appellants claim. But we must decline to enter into any such inquiry. There was no allegation made in the court below, that the deed of trust was fraudulent and void. Most of the grounds, upon which allegations of fraud are now made, arise out of the fact, that Eunice Kirk was the wife of the grantor and the largest beneficiary in the trust; but it does not appear on the face of the deed of trust, that she was his wife, and no one reading the bill and answers and all the proceedings in the case would ever imagine, she was his wife, and it only incidently appears in the cause four years after the institution of the suit by witness Latham speaking of her as the wife of the grantor. In the mean time, before it was even thus incidently made known, all the property conveyed by the deed of trust had been sold, and all the proceeds of the sale had been disposed of and paid out by the trustee. Of course this Court can not of its own accord undertake to consider the question, whether the deed of trust was fraudulent and void, it having been regarded by all the appellees, so far as the record shows, as not fraudulent and void. No suggestion, that it was fraudulent had ever been made. The suggestion was first made in the argument of counsel in this Court. Such an inquiry would be utterly foreign to the case before us, as made by the pleadings; We might infer from Commissioner Walker’s report, that perhaps to some small extent Eunice Kirk may have been injured by the improper payment of $200.00 to Jenkins, Jackson & Co. by the trustee; but as this sum very little exceeded what the trustee failed to pay to the plaintiffs, who were to be paid before she was paid anything, it is obvious, that very little would be due to her on a settlement of the accounts of the trustee, he having paid over to her every thing he received after paying the prior claim of the expenses of executing the trust, except what was paid Jenkins, Jackson & Co. She has filed no answer and, so far as appears to us, does not setup any claim against either the trustee .or any of the members of the firm of Jenkins, Jackson & Co. It would not therefore seem to be right *361for this Court to continue the cause on the docket of the -court below with a view merely of entering into an inquiry as to rights or supposed rights of hers, which she does not .assert.
For these reasons I am of opinion, that the decree of the Circuit Court of August 18, 1885, should be set aside, reversed and annulled; and the appellants should recover of the appellees, Frank Jenkins, J. M. Jackson, Jr., and John V. Rathbone and Mathew C. Latham, their costs in this Court expended ; and this Court proceeding to render such decree, as the court below should have rendered, must adjudge, that the said Frank Jenkins, J. M. Jackson, Jr., and John V. Rathbone, late partners doing business under the name and firm of Jenkins, Jackson & Company, do pay to J. Nelson Vance and George Adams, late partners doing business under the name and firm of Vance & Adams, $211.56, with interest thereon from August 12,1880, till paid; and that this cause be remanded to the Circuit Court of Jackson county to be retained on the docket of that court, till the sum above decreed and said costs shall be made out of said parties, or till it is ascertained, that it can not be made ; and when the same shall be made, the court below will enter a ■final decree in said cause adjudging, that the costs of this suit in said Circuit Court be paid by said Frank Jenkins, J. M. Jackson and John V. Rathbone, late partners doing business under the name and firm of Jenkins, Jackson & Co., and by Mathew C. Latham. But if the whole of said sum of $211.56 with the interest thereon from August 12,1880, can not be made out of the above parties, against whom it is decreed, then whatever part of said sum can not be made out of them, must be decreed against Matthew 0. Latham as their security; and the costs of this suit in the Circuit Court in such case must be decreed in the manner above mentioned.
ReveRSed. Remanded.