McDermott v. Hayes

• Decision Date: 18 June 1912
• Docket Number: 968,969.
• Citation: 197 F. 129
• Parties: McDERMOTT v. HAYES et al. (two cases).
• Court: U.S. Court of Appeals — First Circuit

197 F. 129

McDERMOTT v. HAYES et al. (two cases).

Nos. 968, 969.

United States Court of Appeals, First Circuit.

June 18, 1912

Nelson B. Vanderhoof, of Boston, Mass., for appellant.

Alfred S. Hayes, of Boston, Mass., for appellees.

Before PUTNAM, Circuit Judge, and BROWN and HALE, District Judges.

HALE District Judge.

This is an appeal in these two cases from the decree of the District Court upon the intervening petition of Willard G. Nash. The record shows that the cases are actions at law, begun by writs dated September 28, 1911, and entered at the October Term, 1911, of the Circuit Court for the District of Massachusetts. On October 2, 1911, the plaintiff made an attachment on these writs of all the right, title, and interest, which the defendant had in and to any and all real estate in the county of Suffolk. On October 26, 1911, the defendant, Hayes, filed a motion in each case for the discharge of the attachments of real estate in Suffolk county. These motions describe the parcels attached, and recite that, although the record title to those parcels stood in the name of the defendant, Hayes, he was not in fact the owner thereof, but held the same as trustee for one Willard G. Nash, and for the creditors of Nash, whereupon the plaintiff moved that a special precept be issued in each case to attach any real estate of the defendant, Hayes, in Middlesex county, and in Norfolk county, and on the same day the motions were allowed, special precepts were issued, and on October 30, 1911, attachments were made of any real estate standing in the name of the said Alfred S. Hayes, in Middlesex and Norfolk counties. On November 7, 1911, the defendant Hayes filed a motion in each case for the discharge of said attachments of real estate in Middlesex and in Norfolk counties. These motions describe the parcels of land under attachment, and ask that the attachments be discharged for the reason that although the record stood in the name of the defendant Hayes, he did not own said real estate, but held it in trust for Willard G. Nash and Nash's creditors. At a hearing in the Circuit Court on motions to release the attachments, it was ordered by the court that matters of fact under these motions be found by a master. Charles K. Darling, who was appointed master, filed his report on December 11, 1911 finding in substance as follows:

(1) That the real estate under attachment was conveyed to the defendant, Hayes, by Nash in fee simple.

(2) That the defendant, Hayes, had made an oral agreement with said Nash, and the latter's creditors, to hold the said real estate as trustee for them.

(3) That there was no written agreement, memorandum, or declaration of trust between the defendant, Hayes, and Nash as to said real estate, either in the deeds of conveyance or elsewhere.

(4) That there was a power of attorney on record from said Nash to the defendant, Hayes, but that said power contained no express reference to any trust.

(5) That the motions to discharge the Suffolk county attachments, and the accompanying affidavits, contain no reference to, or notice of, a trust regarding the real estate afterwards attached by the plaintiff in Middlesex and Norfolk counties.

(6) That said causes of action against the defendant, Hayes, accrued prior to the appointment of the plaintiff, as receiver of the Continental Company. That at the time said actions accrued the defendant, Hayes, was a director, a member of the executive committee, assistant treasurer and secretary of said corporation. That no official of said company (except the defendant, Hayes) or any one else connected with said company had knowledge of said oral trust agreement. That neither the plaintiff receiver, nor his counsel, had any knowledge of said oral trust until after the filing of the aforesaid motions to dissolve the Suffolk county attachments (which motions and affidavits set forth the oral trust agreement only as regards said Suffolk county real estate and not as regards the Middlesex and Norfolk real estate subsequently attached). That at the time of making the Suffolk county attachments the plaintiff receiver and his counsel had no knowledge of said trust and acted in good faith and in the belief that the land in question was the property of the defendant, Hayes; and that as to the subsequent attachments in Middlesex and Norfolk counties they had no notice, 'unless as a matter of law the aforesaid affidavits filed by the defendant, Hayes, in regard to the Suffolk county attachments, constitute such notice,' upon which the master did not pass.

On February 15, 1912, a hearing was held in the District Court, the cases having come over from the Circuit Court. Upon the suggestion of the learned judge sitting, the motions and affidavits to which we have referred were then supplemented by an intervening petition filed by Willard G. Nash, asking for the dissolution of the plaintiff's attachments, for the reasons set forth in the motions to which we have referred. This petition was filed nunc pro tunc, and the hearing proceeded upon it. The master's report was considered as having been made upon the intervening petition. To this petition the plaintiff receiver demurred, on the ground that it did not show that the plaintiff had notice or knowledge, as required by the statutes of Massachusetts, at the time the attachments were made, that the property was held by the defendant, Hayes, on an oral trust for the benefit of Nash, the petitioner, and on the further ground that the petition was founded on a trust agreement not in writing as provided by the statutes of Massachusetts. On March 11, 1912, the District Court entered its interlocutory decree ordering that the attachments be dissolved unless within five days the plaintiff receiver give a bond in the sum of $20,000, conditioned upon the payment of all damage sustained by reason of the attachments, in the event of their being held invalid in the intervening petition, or elsewhere. 194 F. 902. Although the District Court did not affirmatively overrule the plaintiff's demurrer, the action of the court reached that substantial result. On March 16, 1912, the plaintiff receiver appealed in each case, and filed his assignment of errors and his appeal bond. And thus the cases come before us.

1. Should the District Court have sustained the appellant's demurrer?

The District Court substantially overruled the demurrer by a decree dissolving the plaintiff's attachments of real estate.

It is now urged by the appellant that the petition, to which he has demurred, failed to allege that the appellant, the plaintiff, had notice of the oral trust agreement set out in the petition, at the time the attachments were made, as required by the statutes of Massachusetts. The following statute is brought to our attention (Revised Laws, c. 147, Sec. 3):

'No trust concerning land, whether implied by law or created or declared by the parties, shall defeat the title of a purchaser for a valuable consideration and without notice of the trust, nor prevent a creditor who has no notice of the trust from attaching the land or from taking it on execution in like manner as if no such trust existed.'

Section 915 of the United States Revised Statutes provides that in common-law causes in the Circuit and District Courts the plaintiff shall be entitled to remedies, by attachment or other process, against the property of the defendant, similar to those which are provided by the laws of the state in which such court is held for the courts thereof. In Schunk v. Moline, Milburn & Stoddart Co., 147 U.S. 507, 13 Sup.Ct. 416, 37 L.Ed. 255, the Supreme Court gives force to this statute, in matters where the jurisdiction of the court is in question. By section 933, Revised Statutes of the United States, Congress has provided further that:

'An attachment of property upon process instituted in any court of the United States, to satisfy such judgment as may be recovered by the plaintiff therein, except in cases mentioned in the preceding nine sections, shall be dissolved when any contingency occurs by which, according to the laws of the state where said court is held, such attachment would be dissolved upon like process instituted in the courts of said state: Provided, that nothing herein contained shall interfere with any priority of the United States in payment of debts.'

Under the statutes of the United States, and in pursuance of the practice of federal courts, it is clear that chapter 147, Sec. 3, of the Revised Statutes of Massachusetts, applies in this proceeding. The statute has received the interpretation of the Massachusetts court in Attorney General v. Massachusetts Benefit Association, 173 Mass. 378, 53 N.E. 879, where the court said:

'The statute is broad in its terms and makes no exception in regard to the nature of the trust. It expressly declares that no trust shall prevent a creditor who had no notice of it from attaching.'

In that case the attachment was the same in form and substance as the attachments in the cases now before us. In United States v. Canal Bank, 3 Story, 79, 82, Fed. Cas. No. 14,715, Judge Story said:

'I understand that, under the local laws of Massachusetts and Maine (which upon this subject are the same), it has been held, that the attaching creditor is entitled to a prior satisfaction, out of the real estate attached, if he has not, at the time of the attachment, any notice of the prior unrecorded deed.'

Judge Story also gives his opinion that in states where there is no such local statute an attaching creditor in all cases, except cases of fraud or gross...