Hungerford v. Curtis

• Decision Date: 30 June 1920
• Docket Number: No. 420.,420.
• Parties: HUNGERFORD v. CURTIS et al.
• Court: Rhode Island Supreme Court

110 A. 650

HUNGERFORD

v. CURTIS et al.

No. 420.

Supreme Court of Rhode Island.

June 30, 1920.

Appeal from Superior Court, Providence and Bristol Counties; Chester W. Barrows, Judge.

Bill by Joseph W. Hungerford against Rennselaer L. Curtis, receiver, and others. Decree for respondents, and complainant appeals. Reversed.

Samuel H. Davis, of Westerly, and Nathan W. Littlefield, of Providence, for appellant.

Huddy, Emerson & Moulton, of Providence, for appellees.

VINCENT, J. This is a bill in equity brought by Joseph W. Hungerford, of East Haddan, in the state of Connecticut, against Rennselaer L. Curtis, as receiver of the Atlantic National Bank, a corporation located in the city of Providence, state of Rhode Island, James H. Morton and Ella G. Morton, both of said city of Providence, and the National Exchange Bank, a corporation located and doing business in said Providence, to recover the proceeds of certain moneys intrusted by the complainant to the respondent James H. Morton for investment. The complainant alleges that such moneys were wrongfully deposited by said Morton in the Atlantic National Bank in his own personal account, and later wrongfully applied by him to the purchase of a certain cashier's check of said Atlantic National Bank dated April 10, 1913, in the amount of $7,800.

The complainant asks that the respondent Curtis, as receiver of said bank, be compelled to transfer to the credit of the complainant the indebtedness of the Atlantic National Bank owed to Ella G. Morton as evidenced by said cashier's check, and that the National Exchange Bank be ordered to transfer to the credit of the complainant certain deposits made to the credit of Ella G. Morton, being the proceeds of dividends paid to her by respondent Curtis on said claim of $7,800.

Upon a hearing of the case in the superior court it was adjudged and decreed that, with the exception of the first deposit of $2,000 and accrued interest, the respondent Curtis was entitled to a lien on the deposit in the National Exchange Bank and upon the balance of the claim upon said cashier's check to satisfy a judgment of $10,712 in his favor and against the respondent James H. Morton.

From this decree the complainant has appealed to this court. His reasons of appeal, as summarized, present the following questions: (1) Was the purchase of the $11,000 cashier's check on November 27, 1911, a restitution of the dissipated trust funds, and were the funds as evidenced by said check impressed with the original trust? (2) Was the respondent Curtis entitled to a lien on the claim of Ella G. Morton against the Atlantic National Bank on the Unpaid balance of the $7,800 cashier's check? (3) Was the respondent Curtis entitled to apply the deposit of Ella G. Morton in the National Exchange Bank to the indebtedness of James H. Morton? The complainant, Joseph W. Hungerford, deceased in February, 1910, pendente lite, and at the time of his death was 87 years of age. Nellie H. Randall, the executrix of his will, has been substituted as complainant.

The original complainant, Hungerford, had known James H. Morton for some 20 years prior to 1916. In December, 1904, he intrusted Morton with $784.16 which the latter was to retain on deposit and appropriate to the purchase of securities for him whenever it might be advantageous to do so. Morton at that time was a bank clerk in Providence. He deposited this fund in complainant's name in the Old National Bank, and in the course of time it grew, varying from $1,000 to $10,000. This fund was used both with which to buy securities for complainant, and also to deposit dividends and interest and the proceeds of securities sold for complainant. Every six: months Morton rendered to complainant an account of his stewardship. These statements showed that complainant had property consisting mostly of stocks and bonds amounting to about $60,000, and that Morton collected the interest and dividends. The Old National Bank was taken over by the Industrial Trust Company in 1900, and on August 1, 1906, complainant closed this account by drawing a check on the Industrial Trust Company payable to the order of Morton for the full amount of principal and interest, which was $10,438. The same day Morton, without the knowledge and consent of complainant, deposited this check together with funds of his own amounting, all told, to $15,551.22 in the Atlantic National Bank in his own name, and from that time until November 27, 1911, complainant's money was intermingled with Morton's in this account; complainant's funds being put in and taken out of the account from time to time. Cashier's checks were issued to Morton by the Atlantic National Bank at various times from October 2, 1900, up to the failure of the bank on April 12, 1913. The bank paid Morton 4 per cent. interest on these checks. The balance of Morton's account reached its lowest point on November 14, 1911, when it was $75.99, and stayed at that amount until November 30, 1911, although he was carrying cashier's checks during that time.

On November 27, 1911, Morton gathered together what funds of complainant he had, and, mingling them with some money of his own, put the whole into a cashier's check of $11,000 of the Atlantic National Bank payable to his order, on which he received interest of 4 per cent. Morton testified that at this time he thought he would get Hungerford's affairs straightened out because Hungerford was an old man over 80 years of age, and that he accordingly procured the check in question putting in about $900 of his own money and $10,100 of Hungerford's. This $11,000 check was exchanged on December 28, 1911, for $500 in cash and a new check for $10,500. The $10,500 check and two other checks payable to James H. Morton for $500 each were exchanged on May 14, 1912, for a check for $11,667.28, which included $167.28 of interest payable to Ella G. Morton. Morton testified that he had this check made payable to Ella G. Morton because he feared attachment on account of a business venture. On July 2, 1912, the $11,667.28 check was exchanged for two checks, one payable to Ella G. Morton for $10,000, the other payable to James H. Morton for $1,000, and the balance in cash to James H. Morton. The $10,000 check was exchanged November 30, 1912, for a new check of the same amount payable to Ella G. Morton; the object of the exchange being the collection of interest. The same thing occurred on March 1, 1913. On March 26, 1913, the $10,000 check was exchanged for one of $9,000 payable to Ella G. Morton and two aggregating $1,000 payable to James H. Morton. On April 10, 1913, the $9,000 check was exchanged for cashier's check No. 9612 for $7,800, payable to Ella G. Morton, and two checks totaling $1,200 payable to James H. Morton.

During all these years, 1904-1913, Morton's semiannual statements rendered complainant set forth balances in the Atlantic National Bank designated as "J. H. M. Funds," amounting on the various dates as follows: July 1, 1907, $7,053; December 31, 1907, $6,700; on January 1 and July 1 of the years 1908-1913, $10,000; on December 31, 1913, $10,700. Morton testified that the "J. H. M. Fund" was the one intrusted to him by complainant, and that the only reason for depositing complainant's money in bis own account was in order to give himself prestige. On May 29, 1913, James H. Morton, as agent for his wife, executed proof of claim for the $7,800 as evidenced by the cashier's check. He told respondent Curtis at that time that his wife was sick, and asked if Curtis would allow him to execute the proof on his wife's behalf, adding that the claim was as much his as hers, and Curtis allowed him so to do. Curtis paid the first dividend of 25 per cent. amounting to $1,950, to Ella G. Morton, without question, and Morton deposited it in his wife's name on July 7, 1913, together with $50 of his own, in the National Exchange Bank. The same day Morton left Curtis's employ. When the second dividend of 12 1/2 per cent. was declared in September, 1913, Curtis refused to pay it to Morton, and declared his intention of retaining it against the indebtedness of the latter to the bank. It was finally arranged that in the future checks for dividends should be indorsed by Mrs. Morton and deposited in the National Exchange Bank; the savings deposit book of the bank to be delivered to Curtis as an evidence of good faith.

On April 26, 1916, dividends to the extent of 75 per cent. of the $7,800 and ac crued interest, including the $50 of Morton's own money deposited on July 7, 1913, amounted to $6,210.43. On March 20, 1914, Curtis brought suit against James H. Morton to recover the amount of six promissory notes aggregating $10,500, which were renewals of other notes given at various times to the bank by Morton in the years 1911-1913, and on March 30, 1914, recovered judgment for $10,712.49 and costs. The trial court found that in 1911 the James H. Morton account was drawn down to $75.99, and on the bank's failure on April 14, 1913, it had been wiped out, that the cashier's check of $11,000 on November 27, 1911, should be treated as if it had been put in Morton's checking account, but that Morton did not take out the check with the honest intention of replacing complainant's fund, and hence the trust fund must be regarded as obliterated...