Court Opinion

ID: 6690199
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:37:01.291355+00
Date Added: 2024-06-11T16:01:05.323039
License: Public Domain

WHITING and GATES, JJ.
(dissenting.) It stands conceded by the grain company that the grain in question was raised in 1918; that, before any part thereof was delivered to the grain company, plaintiff wrote such company advising it of its mortgage, and directing such company not to sell any grain delivered to it by the mortgagor; that plaintiff directed the grain company to issue storage tickets or sale tickets in the names of both the mortgagor and mortgagee; that the grain company was also, by the cashier of plaintiff’s bank and prior to the receipt of any of the grain from the mortgagor, advised of the mortgage and directed not to pay the mortgagor any money therefor; and that the grain com'pany received the grain, mixed it with other grain, and shipped and disposed of it in the regular course of business.
Erom the above facts it is certain: that the grain company assumed one of two positions, and occupied same for the several months after it disposed of this grain and before it paid over the proceeds of same to the trustee in bankruptcy: Either it received the grain and disposed' of it in defiance and in denial of plaintiff’s rights under its mortgage; or else it received it in full recognition of plaintiff’s rights and claims it had made. If it did the first, then a cause of action for conversion immediately arose, against which it 'has absolutely no defense, it appearing that the mortgage was valid. If it did! the second, then it voluntarily assumed the relation of trustee of plaintiff of such portion of the proceeds of said grain as would pay the mortgage indebtedness. *603If it wrongfully converted said grain, it cannot ¡be heard in defense to say that the money it received therefor was taken out of its hands by a representative of the mortgagor. If it sold said grain in full recognition of the mortgage and intending to hold the proceds and pay same out in accordance with the rights of the mortgagor and mortgagee — in other words, in compliance with the instructions of the mortgagee — then it became a trustee, just as did Pettigrew in the case of Threshing Machine Co. v. Calhoun, 37 S. D. 542, 159 N. W. 127, and cannot defend on the ground that the trust funds were taken out of its hands as the property of the mortg-agor, even upon a valid order of a court, when, if it had disclosed that it was holding part of such funds as trustee for plaintiff, no valid order for .the delivery of such part could have issued.
Our colleagues concede that if the grain company, as trustee of this fund, had' set up the fact that it was holding a part thereof for plaintiff, the referee in bankruptcy could not, in a summary proceeding, 'have directed the trustee in bankruptcy to take possession of that part of such fund. Our colleagues are, however, of the opinion that no duty rests upon such a trustee to make such a claim; that, because there was no such duty upon it, it committed no wrong in allowing this fund to be taken from it in the sum)m!ary proceeding; and that, therefore, it can defend in this action because of the. fact that the money was thus taken from it. In apparent justification of their views, they state that they cannot conceive it to be the law that one holding propery of a bankrupt must, at his peril, assert and litigate the right of other persons, where the trustee himself makes no claim- to any title or interest in the property. -Can it be the law that a trustee owes no duty to protect the rights of his_cestui que trust? We understand the rule to be that, where one holds money or other property as a trustee, it is his duty to assert the rights of those for whom he hold's the property; or, at least, to turn the fund into court as provided by section 2324, R. 'C. 1919, to the end that adverse claimants thereto may have their rights adjudicated. There is a rule of law, the soundness and justness of which is so axiomatic that it has been recognized' as an axiom in English jurisprudence and so declared by our statute (section 49, R. C. 1919), “No one can take advantage of .'his own wrong.” It was the grain com*604pany’s duty as trustee to assert a claim on béhalf of the plaintiff, and, having failed to do so, it should not now be allowed to defend against plaintiff upon the ground that the money was taken from it under an order of the federal court, which could not have lawfully been made if it had performed its clear duty. The propositions involved here seem to us to be so elementary as to admit of no possible dispute.