McLeod v. Evans

• Citation: 28 N.W. 173,66 Wis. 401
• Parties: MCLEOD v. EVANS, ASSIGNEE, ETC.
• Decision Date: 15 May 1886
• Court: United States State Supreme Court of Wisconsin

66 Wis. 401

28 N.W. 173

MCLEOD

v.EVANS, ASSIGNEE, ETC.

Supreme Court of Wisconsin.

May 15, 1886.

Appeal from circuit court, Grant county.

For dissenting opinion, see 28 N.W. 214.A. W. & W. E. Bell, Bushnell & Watkins, and J. W. Murphy, for appellant, Robert E. McLeod.

Carter & Clearly, for respondent, Jonathan H. Evans, assignee, etc.

COLE, C. J.

This is a suit in equity to recover in full from the defendant, who is an assignee of one Hodges, the proceeds of a draft of $1,500. The first most serious question of law we have to consider arises upon these facts found by the learned circuit court: The plaintiff had a draft for $1,500, drawn on the Ninth National Bank of New York city. Desiring to cash this draft, he went to the bank of Mr. Hodges, in the city of Platteville, on the thirtieth of January, 1884, to get the money upon it. Hodges told him that he was not in funds at the time so as to cash the draft, but said he would collect it for him. Thereupon the plaintiff left with Hodges the draft for collection, and took a receipt, which reads as follows: “PLATTEVILLE, Wis. 1-30-84. By Robert E. McLeod, for collection. Currency, ____; coin, ____; checks, ____. Ninth National, New York. $1,500. O. F. GRISWOLD, Cashier.” Mr. Hodges told the plaintiff to return in a week, when he expected the money would be there for him; that at the end of the week the plaintiff came to the bank, but was informed by Hodges that the money had not yet come from the Ninth National Bank of New York; that it took some time to make collections of this kind; whereupon the plaintiff went away, and did not again return until after Hodges had suspended banking business, which was on the evening of the eighth of February, 1884; that as a matter of fact the draft was not sent by Hodges to the Ninth National Bank of New York for collection, but was sent to the National Bank of America, Chicago, with which bank Hodges did his business in that city. The Chicago bank did not, for such draft, send the cash to Mr. Hodges, but gave him credit for the amount on its books, and Mr. Hodges drew on that bank, after this, drafts, which were cashed by the bank; and that at the time Hodges suspended banking business there was nothing due him from the Chicago bank. It is admitted that on the eleventh of February, 1884, Hodges assigned to the defendant all his property for the benefit of his creditors. Among the assets, there was $500 cash in Hodges' bank which came to the hands of the defendant, but it does not appear that this sum was a part of the proceeds of the $1,500 draft.

Now, the first question upon this state of facts is, does the plaintiff stand upon the same ground as the other creditors of Hodges in respect to the estate in the hands of the assignee, or has he a paramount right to be paid first out of such assets? The argument of the plaintiff's counsel in support of his superior right in equity is briefly this: That the collection of the draft was a trust assumed by Hodges; that neither the draft nor its proceeds belonged to him; that it was his plain duty to collect it, and keep its proceeds separately, and deliver them to the plaintiff when demanded; that it was a gross fraud on his part not to do so; that he knew when he received the draft for collection he was in failing circumstances, and largely insolvent; that the testimony indisputably shows that it was a mere pretense that he had sent the draft to New York for collection; that he really had the avails of it when the plaintiff called for his money at the end of the week as he was directed to do, and was told that it had not come. It is said the relation between Hodges and the plaintiff was not that of debtor and creditor, but that a fiduciary relation existed between them; that the proceeds of the draft was a trust fund in his hands which did not belong to him, and which the assignee could not take as a part of his estate. Counsel says that “the general proposition which is maintained, both at law and in equity, upon this subject is that if any property, in its original state and form, is covered with a trust in favor of the principal, no change of that state and form can divest it of such trust, or give the agent or trustee converting it, or those who represent him in any right, (not being bona fide purchasers for a valuable consideration, without notice,) any more valid claim in respect to it than they respectively had before such change. An abuse of a trust can confer no rights on the party abusing it, or those who claim in privity with him.” 2 Story, Eq. Jur. § 1258; Snell, Eq. Pr. 155.

The counsel on the other side does not challenge the correctness of this argument, or the soundness of the principle of law relied on, but he says they have no just application to the facts here, because the proceeds of the draft cannot be traced to, or identified in respect to, any property which has come to the hands of the assignee. Consequently, he says the plaintiff's claim is simply this: because he left his draft for collection with the assignor, which the latter wrongfully converted, that this gives him a lien in equity upon the general property of the wrong-doer for its value. The able counsel frankly admits if the proceeds of the draft had been found in the safe of Mr. Hodges when the assignment was made, with marks to identify the fund that then such proceeds would not have passed to the defendant. He also concedes if the proceeds could be traced into any other property into which they had been converted, or had been mixed by Hodges with his own funds, that then the plaintiff could claim such property, or follow and reclaim the proper amount of money, as against the world. This would be so, because he was the real owner; Hodges holding the proceeds only as his agent, as trust funds; or the property into which the proceeds had been converted would be impressed with the trust. But it is said none of the proceeds of that draft are in the hands of the assignee, nor is there any security bought or obtained by the draft in his possession. Still, these facts are indisputable: The Chicago bank to which Hodges sent the $1,500 draft gave him credit for the amount on its books. Hodges drew against that credit in the regular course of his business as a...