Court Opinion

ID: 3605142
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:50:51.223471+00
Date Added: 2024-06-11T14:07:27.935261
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 269 
[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 270 
Under the agreement between the plaintiff, defendant and Elizabeth Sterling, the defendant was to act as the agent of the plaintiff in the repair of the furnace and manufacture of iron which was provided for.
The complaint alleges that he had charge mainly of the sales of iron as well as the manufacture thereof; that he sold and disposed of large quantities thereof, and failed to pay the plaintiff or account to him therefor, but converted the same to his own use, in violation of the provisions of said agreement.
The proof shows and the referee has found, that the defendant sold and disposed of iron and failed to pay over the proceeds of the sales; that he overpaid for labor and materials, and appropriated to his own use profits arising from the buying and selling of lands and personal property. All of these transactions are not especially provided for by the agreement, but the evidence tends to establish that the sales were made by the defendant under and by the authority of the plaintiff, and that the avails of the sales were used in the ordinary course of the business, and an account kept of the same by the defendant. The defendant's duty under the *Page 272 
agreement, as already stated, was to act as agent in making repairs and in the manufacture of iron, and what he did beyond this was with the plaintiff's knowledge and assent, and appears to have been quietly acquiesced in. There was no express contract and no relationship of agent and principal agreed upon between the plaintiff and the defendant. But the defendant was interested in the sales, being entitled to a share of the money arising therefrom after certain deductions were made under the agreement. The sales of the land and personal property were also connected with and a part of the other transactions, as well as the payment of the moneys for labor and materials in the business. The defendant was, therefore, acting in part for himself and Mrs. Sterling as well as the plaintiff. They had a mutual interest in all these transactions, and the obligation incurred by him was not a debt created while acting in a fiduciary character, within section 33 of the bankrupt act, which was not and could not be discharged by the proceedings in bankruptcy.
Conceding that the provision of the bankrupt act of 1867 is broader and more comprehensive than that contained in the act of 1841, yet, applying to defendant's acts the effect of such a construction, it is not apparent that defendant occupied a fiduciary relationship, within the authorities to which we have been referred, as is manifest by an examination of these decisions. In each of the cases cited there was a positive and defined relationship between the parties, in which the fiduciary character was entirely apparent. In re Seymour (1 Benedict, 348) goods were deposited with Seymour to be sold by him on commission for the owner, and it was held that this established a fiduciary relationship which charged Seymour with the execution of a trust, under which it was his duty to return the property or remit the proceeds, and his failure to do so was a defalcation while acting in a fiduciary capacity, and that the demand was therefore a debt within section 33 of the bankrupt act which could not be released by his discharge in bankruptcy. This case also holds that the act of 1867 is broader than the act of 1841.Lemcke v. Booth, *Page 273 
(47 Mo., 385), holds that a factor or commission merchant stands in a fiduciary relation to his principal within the meaning of section 33, thus following the Seymour case. The same principle is also decided in In re Kimball (6 Blatch. C.C.R., 292), by Judge NELSON, on an appeal from the District Court. (See alsoWardwell v. Holloway, 12 Nat. Bank Reg., 61; Duguid v.Edwards, 50 Barb., 288; Whitaker v. Chapman, 3 Lans., 155;Roberts v. Prosser, 53 N.Y., 260.) The cases cited rest upon the principle that there was an agreement between the parties by which the relationship of principal and agent was created, or that by virtue of the same the party disposing of the property or money held as a factor or commission merchant, and thus occupied a fiduciary relation to his principal within the meaning of section 33 of the bankrupt act, or within section 179 of the Code of this State, which is somewhat analogous, and provides for the arrest of a defendant in an action for money received, embezzled or misapplied by any "factor, agent, broker, or other person in a fiduciary capacity." The defendant was not included within either of these terms. He was not a factor, as he had no control over the manufactured iron, or any right under a special agreement as a factor or agent to sell or dispose of the same. The only proof is that he sold by plaintiff's direction, and that the avails were used in the business which he was engaged in conducting for the joint benefit of the plaintiff, himself, and Mrs. Sterling. The plaintiff evidently had knowledge of these facts, and as he did not object, or assert his claim to sell and dispose of the iron, we may assume he acquiesced in the sales of the iron and the use of the money, and in the other acts of defendant which related to the business. The defendant had an interest in the profits, and occupied more the position of a partner than an agent, as his labors in respect to the sales and the receipt and disbursement of money were performed for the benefit of all the parties to the contract. He therefore clearly did not act as plaintiff's agent, and the fact that he was such is not established. The burthen of establishing the agency was upon the plaintiff, and in the absence *Page 274 
of positive and direct evidence it cannot be claimed that the proof showed either an express agreement or circumstances from which the inference fairly follows that the defendant was the managing agent charged especially with the duty of selling the iron, and under an agreement to account for the same. He neither acted in the capacity of agent, broker or factor. Although the plaintiff had a right to sell the iron he allowed the defendant to control it as he did, and the evidence shows that aside from the written contract the arrangement was extremely imperfect, and not well defined. No time was fixed for rendering and for a settlement of defendant's accounts. No account was either rendered by defendant, or called for by plaintiff, during the period of defendant's employment, and for nearly four years the whole business was conducted in the most loose and irregular manner, so that none of the parties profited by their unfortunate venture.
Upon such a state of facts a fiduciary relationship cannot be predicated. Clearly it would not be within the intention of the law, or of the parties, but, on the contrary, it would be extremely harsh and unjust, as well as against the spirit of the law to hold that, under such circumstances, a liability was incurred by the defendant while acting in a fiduciary capacity.
The judgment was right and should be affirmed.
All concur, except EARL, J., dissenting.
Judgment affirmed.