Gilbert v. Hewetson

• Decision Date: 02 May 1900
• Citation: 82 N.W. 655,79 Minn. 326
• Parties: GILBERT v. HEWETSON et ux.
• Court: Minnesota Supreme Court

79 Minn. 326

82 N.W. 655

GILBERT

v.HEWETSON et ux.

Supreme Court of Minnesota.

May 2, 1900.

Appeal from district court, Winona county; Arthur H. Snow, Judge.

Suit by Charles C. Gilbert, receiver of Niels C. Fredericksen, against Michael Hewetson and wife. Judgment for defendants, and plaintiff appeals. Reversed.

Syllabus by the Court

1. The principle of equity jurisprudence, that a person occupying a fiduciary relation with respect to the business of another will not be permitted to deal or traffic with the trust property in his own interests, applied.

2. A receiver of the property of a resident of the state of Illinois, appointed in a creditors' suit pending in that state, to whom all the property of the debtor, real, personal, and mixed, is transferred by order of the court, acquires thereby title, and the right to recover upon a debt due to the debtor from a resident of the state of Wisconsin. The situs of such debt is at the domicile of the creditor.

3. Defendant, Hewetson, was a trusted clerk and confidential adviser of plaintiff, who was a duly-appointed and acting receiver of the property of one Fredericksen, and as such clerk had general charge of the affairs of the receivership. He thereby obtained knowledge and information concerning certain property belonging to the trust estate, and wrongfully, with the assistance of others, collected and invested $3,000 thereof in lands within this state, in his own name and for his own use and benefit. Held, that the land should be impressed and charged with a trust in favor of the receiver to the extent of such sum of money, with interest.

4. The statute of limitations, to be available as a defense, must be pleaded. If not pleaded, the statute is waived, except in cases when the question is raised by demurrer. Hardwick v. Ickler, 73 N. W. 519, 71 Minn. 25, followed.

5. A receiver appointed in a creditors' suit has no authority in law to permit his clerk or agent to deal in the property belonging to the receivership, to his own interests, and detrimental to the trust, nor can he ratify or sanction such act on the part of his agent or clerk, except, perhaps, by express authority and approval of the court appointing him, upon a showing to such court of all the facts. Webber & Lees, for appellant.

Munn & Thygeson and J. P. Kyle, for respondents.

BROWN, J.

This is an action to enforce a constructive trust. The defendants had judgment in the court below, and the plaintiff appeals.

The facts, in brief, are as follows: In December, 1889, in a creditors' suit brought in the superior court of Cook county, in the state of Illinois, one Edward Filkins, of the city of Chicago, was duly appointed by said court receiver of the property and estate of the defendant in such action, N. C. Fredericksen, with all the powers, rights, and duties of receivers in such cases. Said Filkins duly qualified as such receiver, and thereafter continued to act as such until August 5, 1892, when, by proper order of the same court, the plaintiff in this action was duly appointed his successor. Plaintiff duly qualified as such, and now is the duly-qualified and acting receiver in such matter. At the time of the appointment of such receiver, said Fredericksen resided in the state of Illinois. In addition to such appointment, said superior court duly made a further order requiring said Fredericksen to deed and transfer to said receiver all and singular his property, real, personal, and mixed, and requiring and ordering that, in case of his failure to make such transfer, John F. Noyes, a master in chancery of said court, do so for him. Fredericksen refused to make the transfer, and said master in chancery duly made and executed a proper conveyance of said property to such receiver. From December, 1889, to August, 1892, the defendant Michael Hewetson was in the employ of said receiver as clerk, and as such had general charge of the business of the receivership, with access to the books and papers pertaining thereto, and during the whole of said time occupied a position of trust and confidence to said receiver with respect to the business, property, and effects belonging to the estate. Among other items of property claimed by said receiver to belong to said Fredericksen, and to said receiver, by virtue of his said appointment, were certain causes of action against one Nunnenmacher for the recovery of usurious interest by him unlawfully taken from Fredericksen, which causes of action were claimed to amount in the aggregate to between $100,000 and $200,000; the facts with reference to which were unearthed and brought to light by said Hewetson acting as such confidential clerk. Said Nunnenmacher resided in the state of Wisconsin. The receiver brought an action in the circuit court of that state, seeking a recovery upon such causes of action, and the supreme court of that state held that a receiver appointed by the court of another state could not maintain such an action in the state of Wisconsin. Filkins v. Nunnemacher, 51 N. W. 79. A motion for a reargument of said cause was duly made to that court, and the same was pending at the time of the settlement to be presently mentioned. During the time he was so acting as the agent and clerk of said receiver, said Hewetson also discovered from the books and papers in his charge and under his control that one Rice, a resident of the state of Wisconsin, held and owned certain promissory notes against said Fredericksen, amounting in the aggregate to the face value of about $96,000. Subsequent to the decision of said supreme court of Wisconsin, and pending the motion for a reargument, said Hewetson, and certain of the attorneys who had been retained by and were acting for said receiver, connived and conspired together to purchase said Rice notes, and therewith, and by means of a suit thereon against Fredericksen in the courts of Wisconsin, coupled with a garnishment against said Nunnenmacher, to force a settlement with said Nunnenmacher upon said causes of action so due to said Fredericksen, and to appropriate the proceeds thereof to their own use and benefit. Said Hewetson and attorneys understood from the decision of said Wisconsin supreme court that the receiver could not enforce his claim to the causes of action against Nunnenmacher in the courts of that state, and they sought to take advantage of the situation, and secure the same for their own benefit. In pursuance of this agreement between said Hewetson and said attorneys, said Hewetson, some time in the year 1891, negotiated a sale of said promissory notes from said Rice to one of said attorneys for the sum of $3,000. Later on in said year, and while said receiver's action to recover from said Nunnenmacher was still pending in said supreme court of Wisconsin, said attorney to whom said notes were sold and transferred brought suit thereon in the circuit court of Wisconsin against said Fredericksen, the maker thereof, and said Nunnenmacher as garnishee, seeking thereby to charge said Nunnenmacher with the indebtedness which the receiver was endeavoring to obtain by his suit. The attorneys so engaged with said Hewetson were the same attorneys who were acting for the receiver in his suit against Nunnenmacher. In February or March, 1892, the said attorneys procured a settlement from said Nunnenmacher of both the receiver's suit and the action brought by them on said Rice notes, and Nunnenmacher paid to them in full adjustment of the Fredericksen claims against him the sum of $36,000; $1,000 in settlement of the receiver's suit, and $35,000 in settlement of the suit on the Rice notes. The receiver accepted the $1,000, supposing that that was all he could realize. He was so advised by said attorneys. The receiver knew that one of his attorneys held the Rice notes, that action had been brought thereon, and also knew that negotiations were pending for the settlement thereof, but he did...