Court Opinion

ID: 6948271
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:28:13.411897+00
Date Added: 2024-06-11T16:07:59.582451
License: Public Domain

Caton, J. The liability for which this action was brought, was evidenced by the following writing: — “ Received of Sylvester Blish, four hundred dollars for the purpose of procuring a quarter section of timber land for Aaron Kellogg and his friends, in Vernon, Connecticut State. H. G. Wright. Monmouth, 19th May, 1836.” Blish testified that when he gave the money to Wright he explained to him that it belonged to Aaron Kellogg, Hubbard Kellogg, and Ralph Tolcott, for whom the land was to be purchased. He further testified that Tolcott died before the commencement of this action, and that the Kelloggs, the plaintiffs, were still living, and that Wright admitted to him, before his death, that he had not purchased the land. The defence was, a discharge of the intestate under the general bankrupt law. The question is, whether- this was a fiduciary debt within the meaning of that act. The debts which form an exception to the operation of the discharge in bankruptcy under that act, are “ those which have been created in consequence of a defalcation of a public officer, or as executor, administrator, guardian, or trustee, or while acting in any other fiduciary capacity.” Under this act the supreme court of the United States, in the case of Chapman v. Forsyth, 2 Howard, 202, decided that money received by a factor on the sale of the goods of his principal, does not create a fiduciary debt within the meaning of that act. The reason assigned for that decision is, that according to the course and usage of the trade, the factor is permitted to carry such money into account and mingle it with his own money, whereby it ceases to be the money of the principal and becomes the money of the factor, who becomes debtor to the principal to that amount. If there be an implied agreement between the principal and the factor that the latter may take and use the money in his business till called for, by being thus carried into general account, it becomes an ordinary debt, the same as money loaned, subject to call. But such was not the character of this transaction. The money was here placed in Wright’s hands for a particular purpose, with-no authority to him to use it in his general business, or appropriate it in any way different from the trust which he assumed when he received the money. It continued to be the principal’s money in Wright’s hands, as much as it was in Blish’s hands, or even in their own; and using it in any way different from his instructions and his agreement was a breach of the trust which he had assumed. He did not become debtor to his principals till he misapplied the funds. Had he bought the land intended to be purchased, or any other lands with this money, and taken the deed to himself, a resulting trust would have arisen in favor of the principals whose money was thus invested. Had the principals consented that he might use the funds in his business, and then, at a convenient season, purchase the land with his own funds for their use, then it would have become an ordinary debt, so soon as he used the money in pursuance of such consent. I understand the rule to be, where one receives the money or property of another as agent or bailee, the title to which is to remain in the principal, and which is to be paid over or delivered to him, or to be used in a particular way or for a specific purpose for his use, that then the money or property is received or held in a fiduciary capacity, or as trustee. In such a case a special trust and confidence is reposed beyond that of mere credit, and it was against the violation of such confidence that congress designed to provide, by the exception quoted. In the case of White v. Platt, 5 Denio, 269, it was held, by the supreme court of New York, that money collected by one in whose hands a note was left for collection, is the money of the principal in the hands of the agent, and if the agent use or fail to pay over the money, he is guilty of a breach of trust, and a fiduciary debt is created within the meaning of the act of congress. The same rule was held by the chancellor in the case of Kingsland v. Spaulding, 2 Barb. Ch. R. 341. We think this was a fiduciary debt, and was not discharged by the decree in bankruptcy. Had the plaintiffs below appeared and proved up their debt before the commission, and received their dividends, they would thereby have waived the benefit of the exception in the statute. But there is no pretence that they did this. The judgment of the circuit court must be affirmed. Judgment affirmed,.