Court Opinion

ID: 8788833
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:43:50.558532+00
Date Added: 2024-06-11T17:03:13.483785
License: Public Domain

NOYES, Circuit Judge
(after stating the facts as above). The City receiver holds and has the right to hold the amount of the petitioner’s demand. The question is whether he holds it in trust for the petitioner.
No express trust is shown. No lien is claimed. No agreement between the City Company and the Metropolitan Company running in terms to the petitioner or to-the class to which it belongs appears. No express duty is imposed in its favor by the apportionment decree. The petitioner’s demand .must stand or fall as based upon an 'implied trust. And if a trust can be implied it must be upon the theory that although not stated so expressly the fund in question was really set aside by the action of the parties and the court for the payment of the petitioner’s demand.
Now it must be regarded as established that where in a transaction between two persons an amount is permitted to be retained by one for payment to a third person, a trust will be created in his favor which *665he may enforce.1 Western Tie, etc., Co., v. Brown, 196 U. S. 502, 25 Sup. Ct. 339, 49 L. Ed. 571; Carley v. Graves, 85 Mich. 483, 48 N. W. 710, 24 Am. St. Rep. 99; Matter of Le Blanc, 14 Hun (N. Y.) 8; Le Roy v. Globe Ins. Co., 2 Edw. Ch. (N. Y.) 657. The underlying principle is the same as if money were placed in the hands of one person to be delivered to another and in such a case the Supreme Court has said (McKee v. Lamon, 159 U. S. 317, 322, 16 Sup. Ct. 11, 13 [40 L. Ed. 1651):
"There can be no doubt of the general proposition that when money is placed in the hands of one person to be delivered to another, a trust arises in favor of the latter, which he may enforce by bill in equity, if not by action at law.”
In the present case, as already shown, there was no distinct agreement between the parties, nor did the apportionment decree order, that the moneys which the City receiver had the right to'hold to reimburse Ms estate for obligation's incurred should be used to meet such obligations. But we think that such was the substance of the agreements and the decree. The history of the transactions culminating in the order demonstrates, in our opinion, that the receiver of the City Company was entitled only to reimbursement for expenditures; that lie had no right to retain any moneys except for such purpose, and that when he did retain them he assumed an obligation, enforceable in equity, to meet the obligation for which he retained them.
More in detail: The lease and contracts show that the fund in question was provided for the purpose of reimbursement for expenditures — to enable the City Company to pay debts incurred by it in construction work — and not for the purpose of paying it the value of improvements made. The instruments repeatedly refer to “expenditures.” Moreover in practice it appears that the City Company received reimbursement only for money actually expended. Manifestly it was not intended that the City Company should do the work on credit, leave its obligations unpaid, acquire a floating debt and subject the Metropolitan property to mechanics liens. Besides, the relations of the parties were such that the City Company had no right to collect more than it expended. Both the agreements and the decree contemplated indemniñeation — reimbursement of out-of-pocket expense. The City receiver holds an amount representing the petitioner’s demand. He holds it to reimburse himself on account of such demand. Every equitable consideration requires that he should pay it over. And it is quite immaterial that the petitioner may háve known nothing about the City-Metropolitan arrangements when it delivered the gravel.
For these reasons we hold that upon the agreements and the decree the City receiver by deducting from the fund and holding moneys on account of construction obligations became charged with a duty to the Metropolitan interests to discharge such obligations upon which a trust arose enforceable in equity in favor of the construction creditors like the petitioner, and, consequently, that the District Court was right in holding the petitioner entitled to payment.
*666In the circumstances the receiver as a trustee was not chargeable with any more interest than he actually received.
The order of the District Court is affirmed with costs.

 Dillon v. Barnard, 21 Wall, 430, 22 L. Ed. 673, is not regarded as inconsistent with this statement.