Court Opinion

ID: 6436259
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:12:45.159502+00
Date Added: 2024-06-11T15:52:23.970610
License: Public Domain

DeCourcy, J.
The bill in equity alleges, in substance, that in the course of certain transactions the plaintiff entrusted to the defendant, Max Colmes (hereinafter called the defendant), certain diamonds and jewelry, valued at approximately $4,020, the title of which was to remain in the plaintiff; that they were to be sold in Rutland, Vermont, and accounted for to the plaintiff with a ten per cent profit; that after the sale the plaintiff at Boston demanded the return of his merchandise, but the defendant reported that he had been robbed of said property. The bill also avers “ that said diamonds and jewelry were entrusted to the respondent Max Colmes in a fiduciary capacity for the sole purpose of caring for them and to be returned to your complainant; ” that said Colmes was not in fact robbed, “ but has fraudulently retained, misappropriated and converted them while in a fiduciary capacity.” It further alleges that subsequently the defendant was adjudicated a bankrupt, that the plaintiff received a proportionate dividend in the bankruptcy proceedings, and that said Colmes is a member of a copartnership with the other defendants. The defendants filed a demurrer. It was sustained on the ground that no cause for equitable relief was shown by the bill.
An examination of the bill does not clearly disclose on what ground for equitable relief the plaintiff relies. The prayer for an order compelling the defendant to return the goods indicates that the plaintiff is seeking an equitable replevin under G. L. c. 214, § 3, cl. 1. But the general frame of the bill is one to reach and apply the defendant’s interest in a partnership, under § 3, cl. 7. The specific statement that the defendant “ is still indebted to him in the sum of $2,912.85 ” must be taken as true, for the purpose of the demurrer. Although the allegations are uncertain and confusing we are not prepared to say that the bill as a whole fails to show any ground for equitable relief. See H. G. Kilbourne Co. v. Standard Stamp Affixer Co. 216 Mass. 118. Mathieu v. Goldberg, 19 Am. Bankr. Rep. 191.
*285As to the effect of the defendant’s bankruptcy: Under § 17a of the bankruptcy act “A discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as . . . (2) are judgments ... for willful and malicious injuries to the person or property of another; ... or (4) were created by his fraud, embezzlement, misappropriation, or defalcation while acting as an officer or in any fiduciary capacity.” As to (4) it has long been settled that the term “ fiduciary capacity ” relates to technical or express trusts, and does not include trusts implied by law from contracts of agency or bailment. Woodward v. Towne, 127 Mass. 41. Chapman v. Forsyth, 2 How. 202. Noble v. Hammond, 129 U. S. 65. Upshur v. Briscoe, 138 U. S. 365. Further, the language of the act apparently applies only to debts created by a person who was already a fiduciary, independently of the particular transaction out of which the debt arose. Cronan v. Cotting, 104 Mass. 245. Crawford v. Burke, 195 U. S. 176. See cases cited in note 42 L. R. A. (N. S.) 1094. 1 Collier on Bankruptcy (4th ed.) 447. The allegations of the bill do not bring the defendant within this exception. The statement that he retained the property “ while in a fiduciary capacity ” is a mere conclusion of law and not an averment of fact.
The liabilities for “ willful and malicious injuries,” which are excepted from the operation of a discharge in bankruptcy under said § 17a (2) relate generally to torts and not to breaches of contract. See McChristal v. Clisbee, 190 Mass. 120; Bond v. Milliken, 134 Iowa, 447 ; 3 Ann. Cas. 169 note. However, it was held in McIntyre v. Kavanaugh, 242 U. S. 138, that a broker who sells and appropriates the proceeds of corporate stocks in excess of the debt secured thereby, without the knowledge or consent of their owner is guilty of a wilful and malicious injury to property within the meaning of said cl. 2 of § 17: and that his liability is not released by a discharge in bankruptcy. On the authority of that case it was decided in Baker v. Bryant Fertilizer Co. 271 Fed. Rep. 473, that one who misappropriated the proceeds of collections obtained in selling goods furnished to him under an agreement that the goods and their pro*286ceeds were to be the property of the plaintiff, was not released by a discharge in bankruptcy. See also In re Arnao, 210 Fed. Rep. 395; In re Keeler, 243 Fed. Rep. 770. Assuming the allegations of the present bill to be true, as we must for the purposes of the demurrer, under the controlling construction given to this section of the bankruptcy act by the federal courts, the defendant’s discharge in bankruptcy would not release him from his liability for the alleged fraudulent misappropriation and conversion of the plaintiff’s property. And we cannot say as matter of law on this record that the plaintiff waived his legal rights in this suit by proving his claims against the bankrupt estate. In re Menzin, 238 Fed. Rep. 773. Brown v. Hannagan, 210 Mass. 246. It follows that the decree sustaining the demurrer and dismissing the bill must be reversed.

Ordered accordingly.