Heidelbach v. Campbell

• Decision Date: 16 April 1917
• Docket Number: 13589.
• Citation: Heidelbach v. Campbell, 95 Wash. 661, 164 P. 247 (Wash. 1917)
• Court: Washington Supreme Court
• Parties: HEIDELBACH et al. v. CAMPBELL et al.

164 P. 247

95 Wash. 661

HEIDELBACH et al. v. CAMPBELL et al.

No. 13589.

Supreme Court of Washington

April 16, 1917

Department 2. Appeal from Superior Court, Spokane County; E. H Sullivan, Judge.

Action by Alfred S. Heidelbach and another against J. B. Campbell and another, as assignees of the estate of the S.E. Carr Company. From judgment for plaintiffs, defendants appeal. Reversed and remanded, with directions.

Skuse & Morrill and J. B. Campbell, all of Spokane, for appellants.

Samuel R. Stern, of Spokane, for respondents.

FULLERTON J.

This is an action brought by Alfred S. Heidelbach and his coplaintiffs against the assignees of the S.E. Carr Company an insolvent corporation, to recover trust funds belonging to them which they alleged passed to the assignees at the date of the assignment. From a judgment in favor of the plaintiffs, the assignees appeal.

The facts out of which the controversy arises are stipulated and, in so far as they are material to the question presented in this court, are in substance these:

On and prior to February 7, 1914, the S.E. Carr Company, a corporation, was conducting an extensive department store in the city of Spokane, dealing in general merchandise. On the date given it assigned its property to a trustee, of whom the appellants are the successors in interest, for the benefit of all of its creditors. Prior to the assignment, and on August 18, 1913, the respondents, through and under the name of one John C. Uhrlaub, consigned to the S.E. Carr Company 189 oriental rugs, identified by numbers, names, dimensions, and prices shown on a written statement accompanying the consignment, of the total value of $20,140. The terms of the consignment were written, and provided in effect that the S.E. Carr Company should hold the property in trust with the privilege of sale for the consignor's account, and that the property and the proceeds received from any sale should be and remain at all times the property of the consignor; that the consignee should account for the property at the listed prices, should make returns from sales every week, and should pay freight and other expenses incurred in shipping the rugs.

Between the date of the consignment of the property to the S.E. Carr Company and the date the company made the assignment for the benefit of its creditors, the consignee returned to the consignor one rug of the value of $124.25, and sold others of the aggregate value of $1,991. The remaining rugs were in stock at the time of the assignment, and were delivered by the assignees to the respondents on their demand. The rugs sold were not accounted for, and (to quote from the stipulation)----

the 'said S.E. Carr Company failed to keep the funds realized from the sale of the consigned rugs separate and apart from other funds, but mixed and commingled the same with the money of the said S.E. Carr Company, and the said S.E. Carr Company, prior to said 7th day of February, 1914, used said funds in payment of its employés and other running expenses, in paying other creditors and in the general operation of its business.'

Nor did the company pay the freight charges and other costs incurred in shipping the rugs; these costs and charges amounting to the sum of $338.66.

The S.E. Carr Company had in cash on the date of the assignment, $78.23 on deposit with a bank at Spokane, $16.43 on deposit with a bank at St. Louis, Mo., and $959.03 on deposit with a bank in New York City, N.Y. The first of these sums was turned over to the assignee, of the second the stipulation does not disclose what disposition was made, and the third was applied by the bank which held it on a note of $25,000, which the S.E. Carr Company owed to it, and which had become due prior to the date of the assignment. The company had on hand at the time of the assignment another fund created under the following circumstances (quoting again from the stipulation):

'The books of the S.E. Carr Company on said 7th day of February, 1914, showed an unextended balance of $2,600 in the account entitled 'office funds,' carried as cash in the office safe, and was composed of cash, cash items, memoranda, debit slips, and sundry expense items that was not put through the books until the end of a customary period, such as a week or two weeks, or when the fund became nearly depleted. This fund was also used in connection with cash taken in after banking hours to distribute each morning to the cashiers throughout the different departments for change to commence the business of the day. The exact amount of cash in said fund on the 7th day of February, 1914, is not now ascertainable, but it is believed to have been somewhere between $1,200 and $1,500.'

Prior to the commencement of this action the assignees treated the account as a general account and paid dividends thereon aggregating the sum of $786.86.

On these facts the court concluded that the respondents were entitled to recover the sum of $1,254.33, with interest thereon from August 18, 1913, the date the rugs were consigned to the S.E. Carr Company, and entered judgment accordingly.

The record does not disclose the precise ground upon which the trial judge rested his decision, but the respondents argue that the judgment is sustainable upon any one of three grounds: First, that since the insolvent wrongfully converted the proceeds of the sales of the rugs to its own use, the sum so converted entered into and became a part of the assets which subsequently passed to the assignees, and that a trust ex maleficio was thereby created by virtue of which the claimant has a lien on all of the assets of the insolvent, whether money or property; second, that since the rugs and the money received from their sales were held in trust by the insolvent, and were blended with the insolvent's own funds, the money coming into the possession of the assignees from the insolvent's estate is chargeable with the trust, on the presumption that the insolvent intended to use that which he had a right to use and whatever he withdrew from the account was from its own part of the common fund, and that the balance remaining is the trust fund; or, third, that equity will charge property of like kind and character passing from the insolvent to the assignees with the trust, even though it be shown that no property of the beneficiary was intermingled therewith.

The first proposition, while sustained in certain jurisdictions, is contrary to our own cases and contrary to the principles on which the right of recovery rests. The right of the beneficiary to pursue a fund and impose upon it the character of a trust is based on the principle that it is the property of the beneficiary, not upon any right of lien against the wrongdoer's general estate; and this whether the property sought to be recovered is in the form in which the beneficiary parted with its possession or in a substituted form. Rugger v. Hammond, 163 P. 408; Chase & Baker Co. v. Olmsted, 160 P. 952; In re Blattner's Estate, 92 Wash. 48, 158 P. 1015; Carlson v. Kies, 75 Wash. 171, 134 P. 808, 47 L. R. A. (N. S.) 317.

In the first of these cases the plaintiff sought to recover from the receiver of an insolvent bank moneys received by the bank from the sale of certain local improvement bonds which the plaintiff had caused to be placed in the possession of the bank to be sold on his account. He claimed the money as a trust fund, and sought to charge the money coming into the hands of the receiver from the insolvent with the trust. Stating the grounds on which recoveries were permitted under such circumstances, this language was used:

'Now, in so far as we are concerned with the trust theory upon which Rugger seeks recovery here, we are confronted with a question of title, and not a question of debt. Manifestly in so far as Rugger seeks recovery upon that theory, this is nothing more nor less than an action to recover property, and the fact that he seeks recovery of his property in a changed or substituted form such as in the eyes of the law might make it still his property does not in the least change

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