Metropolitan Nat. Bank v. Campbell Commission Co.
Citation | 77 F. 705 |
Parties | METROPOLITAN NAT. BANK OF KANSAS CITY, MO., v. CAMPBELL COMMISSION CO. (GREGORY, Intervener). |
Decision Date | 12 December 1896 |
Court | United States District Courts. 8th Circuit. Western District of Missouri |
Francis M. Black for intervener.
Geo. A Neal, for receivers.
The question to be decided arises on exceptions filed by the intervener, Gregory, to the master's report denying to intervener a right of preference to the general assets in the hands of the receivers, except as to the sum of $121.27 in money on hand at the time receivers took charge of the estate.
The controversy arose out of substantially the following state of facts: The Campbell Commission Company advanced to the intervener large sums of money for the purchase of cattle and hogs, to be sold through the Campbell Commission Company, to secure which Gregory executed the company chattel mortgages on all the cattle purchased and fed by him under said arrangement. Among the notes thus secured was one for $5,000. Within a few weeks before the failure of the company and appointment of the receivers, Gregory made a consignment of cattle to the company to be sold with the understanding that the proceeds thereof were to be applied to the liquidation of said $5,000 note. The amount realized out of these cattle by the company was $6,473.69. Instead of applying the same to the satisfaction of said $5,000 note, the company paid thereof the sum of $3,818.55 to one Hall (to whom it owed for moneys advanced, the sum of $9,064.23) within a few days before the appointment of a receiver. The balance of this fund was otherwise paid out and dissipated, until only the sum of $121.27 was found on hand when the receivers took possession of the assets of the company. This company had offices at Chicago, St. Louis, Omaha, and Kansas City, with various contracts and transactions had at each of these offices in the handling and selling of cattle under arrangements with parties to whom moneys had been advanced and with whom contracts had been made for the sale of such stock on commission. The transaction in question was had with the Chicago office. The only property which came into the hands of the receivers at the Chicago office consisted of office furniture and some small outstanding accounts, which aggregated $984.12. The receivers have realized on office furniture and fixtures at all the points aforesaid, and on other contracts held by the company for commission on cattle, and on the sale of outstanding notes and accounts, the sum of $7,400, as shown by the final report of the master. No part of the money realized by the company on the cattle shipped by Gregory went into the property or assets out of which this sum of $7,400 was realized, with the exception of the said sum of $121.27. The master further finds that, just before the appointment of the receivers, the intervener, on learning of the failure of the company to pay off the $5,000 note, applied to the company at Chicago for protection and security; that upon his insistence the company was persuaded to turn over to him the sum of $2,000 of the moneys on hand in the office at St. Louis, realized from the general business of the company at that point, and also induced the company to turn over to him a large amount of notes and accounts payable to the company, aggregating a sum equal to the balance claimed by the intervener, which sum of $2,000 and notes and accounts he holds, but which notes and accounts are probably of little value. The conclusion on the law of the case, reached by the master, is that the intervener is not entitled, out of this fund, to a preference over other general creditors of the company, except as to said sum of $121.27. To this conclusion the intervener takes exception.
The master, in his conclusions on the law of the case, followed the ruling of this court in Bank v. Latimer, 67 F. 27. The essence of that ruling was that, where A. received a particular fund which in equity belongs to B., with directions to apply it to a specific purpose or to a specified use for B's benefit, A. becomes a trustee, by implication, of such funds; and if, in perversion of his trust, he appropriates the fund to his own use, as between him and B, the latter, in addition to his right of action at law as for a conversion or for money had and received, is entitled in equity pursue the trust fund in hind, if remaining in the hands of the trustee, or the receiver in case of insolvency; and, if not on hand in king, he can pursue it into any form of property into which it may have been converted; or, if the fund had been mingled with the mass of A.'s other property, so that it was incapable of identification and separation by reason of the confusion, then a court of equity would declare the amount of the trust fund to be a charge upon the mass of the insolvent's estate with which the fund had been blended, to be satisfied in preference to the claims of general creditors. But, if the fund so received by A. had been paid out or disposed of by him at the time of the appointment of the receiver, and no part of it had contributed to the acquisition of the property taken possession of by the receiver, B.'s equity to a preference over other creditors in the remaining assets of the estate was gone. This is a sale by counsel for the intervener, who asserts the broad proposition that the preferential rights of intervener should be carried and applied to any assets in the hands of the receiver, regardless of the fact that the trust fund misappropriated by the debtor in no matter entered into or contributed to the creation of the property coming into the possession of the receiver.
Out of regard to the earnest insistence of the intervener's counsel, as well as the respect entertained for his experience and learning, i have re-examined the grounds of the ruling in Bank v. Latimer. In that case I took as the predicate of the decision the following language from the opinion of Mr. Justice Bradley in Frelinghuysen v. Nugent, 36 F. 239:
It is true, as suggested by counsel, that the peculiar facts of that case rendered the conclusion of Mr. Justice Bradley on the whole case correct, independent of the postulate above quoted. But this in no degree diminishes the force of his clear declaration that 'this is as far as the rule has been carried,' and the further statement, made by him, that:
Such, too, was the view of the law entertained by Mr. Justice Miller. In his opinion in Litchfield v. Ballou, 114 U.S. 195, 5 Sup.Ct. 820, speaking to the point of the right of an equitable creditor pursuing his fund into other property of the debtor, he repudiated the contention of complainant for the reason, inter alia, that:
'There is no evidence that the funds which went to build these works are traceable to their source in any instance.'
This precise question, in a similar case in principle, was elaborately considered by the court of appeals in the Ninth circuit, in Spokane County, v. First Nat. Bank, 16 C.C.A. 81, 68 F. 979, delivered shortly after the decision in Bank v. Latimer. The effort there, as here, was to enforce the trust 'against any assets in the hands of the receiver,' regardless of the fact that it was not shown by the bill that any of the complainants' money, or any assets thereby...
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