Brookhouse v. Union Pub. Co.

• Decision Date: 03 October 1905
• Citation: 62 A. 219,73 N.H. 368
• Parties: BROOKHOUSE v. UNION PUB. CO.
• Court: New Hampshire Supreme Court

62 A. 219

73 N.H. 368

BROOKHOUSE

v. UNION PUB. CO.

Supreme Court of New Hampshire. Hillsborough.

Oct. 3, 1905.

Bill by Nina D. Brook house against the Union Publishing Company to recover sums of money with which it is alleged the defendants are chargeable as trustees for the plaintiff. The facts were partly agreed to and partly found by the court. Transferred on plaintiff's exceptions from the May term, 1904, of the superior court. Exceptions overruled.

From a date prior to May, 1805, to October, 1805, Joseph C. Moore was the defendant's treasurer and manager, and had the practical control of their affairs. From February, 1804, to October, 1805, they also had an assistant treasurer, whose powers and duties were the same as those of the treasurer in case of the latter's absence or disability, excepting authority to sign certificates of stock. The defendants had a deposit account with the Manchester National Bank. Moore used this account as a conduit for his private enterprises, keeping a record thereof upon the defendants' books. Moore was also guardian of the plaintiff, then a minor, and had deposited in a savings bank, in his name as guardian, sums of money belonging to the plaintiff. May 23, 1805, he withdrew from this bank $2,250, receiving a certificate of deposit and a draft upon a Boston bank, both payable to himself as guardian, or order. He indorsed these papers as guardian and passed them to the defendants' assistant treasurer, to be deposited in the Manchester National Bank to the defendants' credit. The assistant treasurer indorsed the defendants' name upon the papers and deposited them the same day, in accordance with Moore's instructions. An entry was made by Moore's direction upon the defendants' cash book, by which cash was charged with $2,250, as if received from him. May 24th Moore drew two checks, in the defendants' name, in favor of the Halifax Mills, upon the Manchester National Bank, amounting to $2,250, neither of which was for the defendants' benefit. The checks were paid by the bank and charged to the defendants on May 29th. Upon each of the days intervening between May 24th and May 20th, sums of money amounting to $3,000 or $4,000 were deposited in the national bank in the defendants' name, and sums amounting substantially to the same totals were withdrawn, leaving the balance at the close of business each day less than $30. Nearly all the sums deposited were Moore's, and the sums withdrawn were used in part to pay his bills and in part to pay the defendants' bills. August 21, 1805, a further sum of $1250 was withdrawn from the plaintiff's savings bank account in the form of a certificate of deposit, put in the defendants' account at the national bank, and entered upon the defendants' cash book, the same in all respects as the first sum. When the deposit in the national bank was made, the defendants' balance there was only $20. Other sums belonging to Moore were deposited with the $1,250, making the total deposit $8,065. The defendants' cash account of August 21st shows the receipt of these sums of Moore and the payment of sums on his account amounting to $6,570. The account of the next day's transactions shows the receipt of $6,300 from Moore and the payment of $6,788 on his account. August 21st he drew a check for $820 to pay the defendants' help, and also drew other checks. The defendants' check book showed that there would be a balance of $2,313.26 in the bank to the defendants' credit, after satisfying these checks. When Moore withdrew the money from the savings bank, it was his intention to deposit it in the defendants' account with the national bank for the purpose of checking it out for the benefit of others than the defendants, and he carried the intention into effect. The finding as to intention is made from the manner in which the transactions themselves took place and from Moore's habit for years of using the defendants' account with the national bank for his private business. The plaintiff excepted to this finding. From May to October, 1895, Moore was indebted to the defendants in a sum exceeding $3,500. The question whether the plaintiff, now 21 years old, is entitled to recover the sums withdrawn from the savings bank, or either of them, was reserved.

Taggart, Tuttle, Burroughs & Wyman, for plaintiff. Burnham, Brown, Jones & Warren, for defendants.

CHASE, J. The fact that Moore made use of the money in question for his own purposes very soon after he withdrew it from the savings bank, and that in using it he pursued the course of his habit in the use of private funds—depositing the money in the national bank in the defendants' name and immediately checking it out for his private purposes—was competent evidence upon the question of his intention at the time of the withdrawals. As this evidence has a tendency to support the court's finding, the plaintiff's exception to the finding must be overruled; and the finding must be accepted as true in considering the questions of law raised by the case. The plaintiff is entitled to the relief sought (1) if the defendants now have possession of the money in question; or (2) if they received it from Moore with notice of the trust and applied it to the payment of Moore's individual indebtedness to them; or (3) if they so received it and aided Moore in wrongfully diverting it from the plaintiff. Hill v. McIntyre, 39 N. H. 410, 75 Am. Dec. 229; Sherburne v. Goodwin, 44 N. H. 271; French v. Currier, 47 N. H. 88; Hardy v. Bank, 61 N. H. 34.

1. The first ground of relief certainly does not exist. The fund has been traced, not merely into the defendants' possession, but through their possession into the possession of other parties. Bank Commissioners v. Trust Co., 70 N. H. 536, 544 et seq., 49 Atl. 113, 85 Am. St. Rep. 646.

2. Nor is the second ground of relief established. The money was not paid and received on account of Moore's indebtedness to the defendants, but in the use by Moore of the defendants' deposit account with the Manchester National Bank as a "conduit" for, or means of, transmitting money in his private enterprises. If the defendants had any use whatever of the money, which is doubtful, it was only as an incident of the deposit during the brief time while the money was passing through their deposit account with the national bank, and with no Intention on the part of Moore, nor on their part so far as appears, to permanently convert the money to their uses. There was no such conversion of the money as will justify a court of equity in holding the defendants responsible for it as trustees for the plaintiff.

3. The question remains whether the defendants received the money with notice of the trust and aided Moore in wrongfully diverting it from the plaintiff. In considering this question, the matter of notice is of vital importance. The defendants took no part whatever in withdrawing the money from the savings bank. That was solely Moore's act, and, being accompanied with the intention of using the money for his own purposes, constituted a complete conversion of it. He had already converted the money to his own uses when he handed the certificates of deposit and the Boston draft, duly indorsed by him as guardian, to the defendants' assistant treasurer, with directions to deposit the same in the defendants' bank account. To consummate his fraudulent scheme, he deemed it convenient or advisable to use that account as a conduit through which to pass the money from himself to the parties to whom he would pay it The only persons who took part in operating, so to speak, the conduit were Moore himself and the defendants' assistant treasurer. No other officer or servant of the defendants did anything whatever in respect to the deposit or withdrawal of the money. The entries upon the defendants' books relating to the money were in Moore's name. An officer or agent of the defendants, however attentive to his duties, would not learn from an examination of the books that the plaintiff's money was passing through their bank account, or would discover facts that would put him upon inquiry in that direction. The defendants' assistant treasurer received no direct information as to Moore's fraudulent intention. His only knowledge relating to the transactions was that the certificates of deposit and draft were payable to Moore as guardian or order, were indorsed by him in that capacity, and were deposited with the defendants as if they were his private funds. In considering these facts it must be borne in mind that the certificates and draft, unlike certificates of stock in corporations or promissory notes, were mere temporary representatives of value or credits. They did not bear interest. They were negotiable paper according to the commercial law. 2 Dan. Neg. Inst. §§ 1652, 1703, 1705. In the ordinary course of business such paper is used like currency to pass money presently from one person to another in business transactions, not to represent money more or less permanently invested with a view of producing income. Decisions relating to the transfer by trustees of stock certificates, promissory notes, and similar papers afford little aid in a case of this kind. Circumstances that would conclusively show that a transfer of certificates of stock, etc., was in violation of the trust might be entirely consistent with a lawful transfer of certificates of deposit and drafts. To a person not informed of the circumstances by which Moore obtained these papers and of his intention in respect to their use, it would appear that he had a right to negotiate them as he did in this case. Indeed, if they did not lawfully belong to him individually in consequence of his past transactions in executing the trust, it would be his duty to make...