Blake v. Traders' Nat. Bank

• Decision Date: 30 June 1887
• Citation: Blake v. Traders' Nat. Bank, 145 Mass. 13, 12 N. E. 414 (Mass. 1887)
• Parties: BLAKE and another, Ex'rs v. TRADERS' NAT. BANK and others.
• Court: Supreme Judicial Court of Massachusetts

145 Mass. 13

12 N.E. 414

BLAKE and another, Ex'rs v. TRADERS' NAT. BANK and others.

Supreme Judicial Court of Massachusetts, Suffolk.

June 30, 1887

COUNSEL

M. Storey, for plaintiffs.

The principles of equity fully sustain the claim of the complainants. The Traders' Bank took with notice of the trust, and with knowledge of all the facts which due inquiry would have disclosed. It therefore took with notice that the trustee had no right to pledge the shares as security for his firm's debt, or to authorize their sale, and the application of the proceeds to the payment of that debt. Atkinson v. Atkinson, 8 Allen, 15; Shaw v Spencer, 100 Mass. 382; Loring v. Salisbury Mills, 125 Mass. 138; Loring v. Brodie, 134 Mass. 453. Thayer and Davis, the successors of Howe in the trust, had the right in equity to compel the bank to account for the value of the shares. Duncan v. Jaudon, 15 Wall. 165; Ashton v. Atlantic Bank, 3 Allen, 217; Atkinson v. Atkinson, supra; Loring v. Salisbury Mills supra; Loring v. Brodie, supra; Story, Eq. §§ 533, 1257 1258; Lewin, Trusts, (6th Ed.) 804. The respondents, who have paid to Thayer and Davis the money which they were entitled to recover from the bank, are subrogated to their rights, and are entitled to pursue their remedy against the bank.

The general right of subrogation is clearly established. Hodgson v. Shaw, 3 Mylne & K. 183, pp. 190, 191; Latouche v. Pallas, Hayes, 450; Gedye v. Matson, 25 Beav. 310; Brandon v. Brandon, 3 De Gex & J. 524; Monticello v. Mollison, 17 How. 152, 155; Garrison v. Memphis Ins. Co., 19 How. 312, 317; Hall v. Railroad Cos., 13 Wall. 367; Hart v. Western R. Corp., 13 Metc. 99; Amory v. Lowell, 1 Allen, 504; Wall v. Mason, 102 Mass. 313; Mercantile Ins. Co. v. Clark, 118 Mass. 288. Its application in the manner for which the complainants contend is not less supported by authorities. Sheld.Subr. 104; Parsons v. Briddock, 2 Vern. 608; Wright v. Morley, 11 Ves. 12, 21, 22; Drew v. Lockett, 32 Beav. 499; Bunting v. Ricks, 2 Dev. & B.Eq. 130; Powell v. Jones, 1 Ired.Eq. 337; Fox v. Alexander, Id. 341; Kennedy v. Pickens, 3 Ired.Eq. 147; Rhame v. Lewis, 13 Rich.Eq. 269, 330; McNeil v. Morrow, Rich.Eq.Cas. (1831-32,) 172, 177; Edmunds v. Venable, 1 Pat. & H. 121; Taylor v. Taylor, 8 B.Mon. 419; Schoolfield's Adm'r v. Rudd, 9 B.Mon. 291; Waddington v. Vredenbergh, 2 Johns.Cas. 227, and note; Townsend v. Whitney, 75 N.Y. 425, 430, et seq.; Keokuk v. Love, 31 Iowa, 119.

To these propositions the respondents, in the argument at the hearing of the cause before a single justice, replied that the new trustees, by calling upon the sureties, elected to treat the conversion of the stock by Howe as complete; that thereby it became his property, and he became liable for its value; and that, having collected its value, they could not follow the property of its proceeds. To this it is urged, in reply, that, while a satisfied judgment in an action of trover operates to vest the title to the property converted in the defendant, and while, by a parity of reasoning, it is clear that the new trustees could not demand both the stock and the proceeds from Howe, there is no such identity of interest between Howe and his sureties as to make a payment by them inure to his benefit, or to the benefit of one who shared in and was benefited by his breach of trust. The payment by the sureties does not extinguish or affect the principal's liability. The sureties were secondarily liable. Its only effect is to transfer the right to enforce the primary liability from the obligee to the sureties. It might well be contended that an election to sue the insurer deprived him of his right to be subrogated to all the remedies of the insured against any one directly responsible for the loss. The well-established equity of subrogation cannot be defeated by the very election which makes the subrogation necessary. A similar claim was made in Loring v. Salisbury Mills, 125 Mass. 138, but it was overruled by the court.

The counsel rely on Winslow v. Otis, 5 Gray, 360, but this case does not help them. An administrator is charged with the assets as money. He is liable to pay the shares of heirs in money. Their remedy is a suit terminating in a judgment payable in money. They have no right to follow particular pieces of property, or to insist that any special property belongs to or should be assigned to them; and, of course, a surety who, by paying the administrator's debt, succeeds to their right, cannot make any other or greater claim than they could have done.

The fact that the shares were originally pledged to the Traders' Bank is no defense to this bill. As a matter of fact, the Traders' Bank and the Traders' National Bank are in all practical respects the same corporation. As matter of law, the reorganization of the bank as a national bank did not affect its liabilities. Atlantic Bank v. Harris, 118 Mass. 147; Watriss v. First Nat. Bank, 124 Mass. 571. But even if the national bank is to be treated as a distinct individual from the state bank, the liability of the former in this case remains clear.

The complainants have been guilty of no laches, nor is their claim barred by the statute of limitations. Dealing first, with the statute of limitations, it is submitted that, if the right of the complainants to sue in their own behalf is considered, the statute is no bar, because this suit was brought on the very day upon which they made the payment which is the foundation of their case. (2) If, in becoming subrogated to the rights of the new trustees, they take them subject to any limitations of time which would affect the trustees themselves, the statute is no bar, because the new trustees were appointed on July 1, 1878, and this suit was brought within six years thereafter. The respondent took the shares charged with a trust, and is bound to account for them as a trustee. The statute of limitations does not affect trusts. Duncan v. Jaudon, supra; Story, Eq. §§ 1257, 1258, 1520a; Hemenway v. Gates, 5 Pick 321, 322; Baker v. Whiting, 3 Sum. 486. Considering next the general allegation of laches, it is submitted that the facts show no unreasonable delay on the part of the complainants. See McKim v. Blake, 132 Mass. 343; McKim v. Blake, 139 Mass. 593, 2 N.E. 157; Sullivan v. Portland R. Co., 94 U.S. 811. The defense of laches rests upon the ground that the equity of the respondent arising from the acts or acquiescence of the complainant is greater than the equity set up in the bill. Stackhouse v. Barnston, 10 Ves. 453, 463-468; Clarke v. Hart, 6 H.L.Cas. 633, 655, 656; Prendergast v. Turton, 1 Younge & C. 98; Clegg v. Edmondson, 8 De Gex, M. & G. 787, 804, 807, 808; Bright v. Legerton, 2 De Gex, F. & J. 606, 615, 616; Tarbell v. Bowman, 103 Mass. 341, 344; Nudd v. Powers, 136 Mass. 273, 277; Bowers v. Hammond, 139 Mass. 360, 365. There is no equity which entitles the respondent to set up the defense of laches. Its position has not been changed. In re Baker, 20 Ch.Div. 230.

H.G. Parker and E.R. Hoar, for defendants.

A surety, on paying the debts of his principal, is entitled to be subrogated to all the securities, funds, liens, and equities which the creditor holds against the principal debtor as a means of enforcing payment from him. Sheld.Subr. 99, § 86, and cases cited. "Subrogation is a mode which equity adopts to compel the ultimate discharge of a debt by him who in good conscience ought to pay it, and to relieve him whom none but the creditor ought to pay." McCormick v. Irwin, 35 Pa. 111. The surety takes the rights of the creditor, and no more. Baylies, Sur. & Guard. 362, notes 5, 6. Subrogation is founded in equity and benevolence, and is not to be allowed, except in a clear case, and where it works no injustice to others. Wallace's Estate, 59 Pa. 401.

Howe was Blake's only creditor. Nothing is held by any one against Howe. Howe could not, either as trustee or in his individual capacity, recover the stock. The stock was never pledged by Howe as security for any liability of Blake on his account. The right of the trustees to recover the stock or its value from the Traders' Bank, a purchaser at full value, was a right which attached to them, by virtue of their office as trustees, to reinstate their fund, and because of the want of good title in the bank as against them; the deficit in the fund having been made good, whether by Howe or his sureties. Howe's sale of the stock is confirmed, and the right to recover the stock from the purchaser at full value. The trust fund having been made good, the trustees cannot recover the stock or its value from the bank. The trustees cannot pursue both remedies. Blake cannot be subrogated to the trustees to do what they cannot do.

Neither Blake nor his representatives can be subrogated to the official rights of the trustees. The trustees could recover the stock, or its proceeds, only in case of a deficit in the trust fund. They could claim the stock not as security, but only because of the lack of title in the bank, as between them and the bank. As to the rest of the world, the title of the bank is perfect. Blake can only claim through Howe. The statement in Sheld.Subr. § 89, does not cover this case. Neither the trustees nor the cestiu que trustent could reach this stock. See Winslow v. Otis, 5 Gray, 360, 363, 364. The plaintiff's testator, G.B. Blake, has lost all remedy he as surety could have had against the defendant bank, because he has surrendered security which he had to protect himself, which security was believed by all parties to be ample for such protection.

The Traders' National Bank is not liable for any wrong-doing of the Traders' Bank in the premises. The two banks are not the same corporation. The claim is stale, and barred by the statute of limitations. The...