Newell v. Hadley

• Decision Date: 06 September 1910
• Citation: 92 N.E. 507,206 Mass. 335
• Parties: NEWELL et al. v. HADLEY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

206 Mass. 335

92 N.E. 507

NEWELL et al. v. HADLEY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

September 6, 1910

COUNSEL

Mathews Thompson & Spring, for plaintiffs.

Eugene J. Hadley and Geo. L. Mayberry, for defendants.

OPINION

LORING J.

This is a bill in equity brought by the surviving trustee under the will of Andrew H. Newell and the beneficiaries of that trust against the trustees and beneficiaries under the will of James B. Pickett.

In November, 1901, one Charles F. Berry was the active trustee of each of these two trusts. His co-trustee in the Newell trust was Andrew Newell, whose residence was in Australia and his co-trustee in the Pickett trust was Thomas E. Major whose residence was in Ohio.

On November 15, 1901, Berry found himself in immediate need of $2,000 to be sent to the West in order to carry through a private speculation of his own. The Pickett trust was in need, but not in immediate need, of money for taxes and mortgage interest due in respect of a building or buildings owned and maintained by that trust. The need of money for taxes and mortgage interest on the part of the Pickett trust came from the fact that Berry had previously stolen money from that trust exceeding in amount the money needed for these purposes.

Under these circumstances Berry, on November 15th, took to certain brokers a certificate for 51 shares of stock, the property of the Newell trust, and instructed them to sell the shares, and asked for an advance of $11,000 on account. He received from the brokers their check for $11,000, payable to 'C. F. Berry, Trustee.' Berry and Major, trustees of the Pickett trust, had a deposit account with the Old Colony Trust Company, on which checks could be drawn by either trustee. Berry indorsed the check for $11,000 and deposited it to the credit of this account. There was at that time the sum of $1,380.44 to the credit of that account. The deposit of the check for $11,000 seems to have been made after banking hours on the 15th, and for that reason was credited on the 16th of November. On the afternoon of the 15th Berrly drew a check for $2,000 on this account, took it to the Trust Company, and obtained for it two drafts on New York, each for $1,000, which he sent to the West to carry through his personal speculation. Thereafter he drew 21 other checks on the account. The last check, for $63, was dated December 16, 1901, and resulted in the account being overdrawn to the amount, as stated in the reservation, of $8.88, but which appears to have been $18.88. Four of these checks, amounting in the aggregate to $3,864.85, were used by Berry for his personal expenses; 11, amounting in the aggregate to $7,903.14, were used by Berry in paying on account of the Pickett trust taxes and mortgage interest due on the buildings of the Pickett trust, wages due to the scrubwomen and elevator boys of these buildings, and bills for lighting, steam heating and insurance on these buildings; 6 checks, amounting in the aggregate to $568.33, were used in payments to the beneficiaries of the Pickett trust of income due to them; and the last check, for $63, of which $18.88 was an overdraft, was used in paying to Mr. Major, Berry's co-trustee in the Pickett trust, the commissions due to him for services as trustee for that trust. That is to say, on the last check $44.12 was drawn out of the $11,000. Berry testified that he had no personal bank account at that time, and that he deposited the check for $11,000 with the Old Colony Trust Company to the credit of Mr. Major and himself, trustees of the Pickett trust, because that 'was the handiest place,' by which we understand him to have meant that depositing the check for $11,000 to the credit of the account of Major and himself as trustees of the Pickett trust was the most convenient way for him to cash it. He further testified that when he made this deposit 'it did not enter my [his] head' to make the deposit as payment of his debt to that trust. At that time he knew that he was largely in debt to the Pickett trust, and on an examination made during the hearing before the single justice he found that the sum then due from him to the Pickett trust amounted to $11,185.50 gross, or, deducting a sum equal to the usual commissions, to $9,515.50. But he testified that at the time (to wit, on November 15, 1901) he did not know the exact amount of that debt. In March, 1902, Berry was again the debt to the Pickett trust to the amount of $8,042.33. From some source or sources not mentioned in the reservation he paid up this amount on March 26th and rendered an account on March 27, 1902, which was allowed. Berry resigned his position of trustee of the Pickett trust in March, 1903, and was succeeded by the defendant Hadley.

The plaintiffs' first contention is that the defendants are liable for the wole $11,000. In our opinion that is not so. Berry did not in fact intend to make the $11,000 the property of the Pickett trust by borrowing that money in behalf of that trust or by paying with it his debt to the Pickett trust. All that he intended to do was to put the $11,000 in the name of himself and his co-trustee in the Pickett trust as the 'handiest' way of cashing the $11,000 check. The $11,000 while it was on deposit in the Old Colony Trust Company belonged in equity to the Newell trust as the property into which its $11,000 had been converted. The whole $11,000 had been all drawn out by Berry before the defendants or any of them knew anything about it. A defendant is not liable to repay to the owner the amount of a stolen check fraudulently put to his (the defendant's) credit to enable the thief to collect the amount of it when the proceeds have been drawn out by the thief before the defendant knows anything about the matter.

It follows that the defendants are not liable for the $3,864.85 applied by Berry for his own use.

The plaintiffs' second contention is that so far as the $11,000 was applied in discharge of debts owed by the Pickett trust the Newell trust has a right of recovery.

The amount drawn out of this bank account to pay debts owed by the Pickett trust is (as we have said) $7,903.14. But there was the sum of $1,380.44 to the credit of the Pickett trust in this bank account when the $11,000 was deposited. There is a question therefore whether the amount of the plaintiffs' $11,000 used in paying the defendants' debts is $7,903.14, or $7,903.14 less $1,380.44; that is to say, $6,522.70. As matter of convenience we will now assume that it is the smaller amount (namely, $6,522.70) and we will deal with the matter later on.

On the footing that the amount paid out for debts is $6,522.70, the amount paid out for mortgage interest and taxes was $6,045.19 and for unsecured debts due from the Pickett trust $477.51.

It was decided in Foote v. Cotting, 195 Mass. 55, 80 N.E. 600 15 L. R. A. (N.S.) 693, that under the circumstances of the case at bar the Newell trust has no remedy at law even for the money belonging to it used in paying taxes on the land of the Pickett trust. But it was suggested in that case, at 195 Mass. 63, 80 N.E. 600, 15 L. R. A. (N. S.) 693 , that to the extent to which one trust has been benefited through the payment out of its money of the taxes on the land of the other (under circumstances such as those in the case at bar) there might be a remedy in equity on the principle of subrogation, citing Webber Lumber Co. v. Shaw, 189 Mass. 366, 75 N.E. 640. For a recent case which lends support to that suggestion see the first case reported under the title of Title Guarantee & Trust Co. v. Haven, 196 N.Y. 487, 89 N.E. 1082, 1085. It would seem that on this principle the plaintiffs would be entitled to a decree (1) for a charge upon the defendants' land to the amount of the tax paid with their (the plaintiffs') money and (2) for a charge, except as against the mortgagee, upon their (the defendants') land to the amount of the mortgage interest paid with their (the plaintiffs') money. But it is not necessary to pursue this further because we are of opinion that the plaintiffs are entitled to a personal decree against the defendants for simple debts paid with their (the plaintiffs') money, and that they are entitled on the same ground to a personal decree for payments of taxes and mortgage interest made with their money.

It has long been the settled law of England that where the money of A. has been used in extinguishing the legal liabilities of B (although no debt or other obligation is created thereby at law), equity will let A. enforce against B. the obligations of B.'s creditors paid off by his (A.'s) money. The principle was applied in Harris v. Lee, 1 P. Wms. 482, where a wife borrowed money to pay for necessaries and afterwards the husband died having devised land in trust for the payment of his debts. Although a husband is liable for his wife's debts incurred for necessaries, he is not liable for money borrowed by his wife to be used in paying for necessaries. That was admitted in Harris v. Lee, ubi supra, and Knox v. Bushell, 3 C. B. (N. S.) 334, is a decision to that effect. Not only was that decided in Knox v. Bushell, but it was also decided there that in such a case there is no remedy on the common counts or in any other way at law. It was held in Harris v. Lee that the plaintiff (whose loan to the wife was void) had a right to be paid the sums which were due to the creditor who had furnished necessaries to the wife and who had been paid out of the money furnished the wife under the void loan. The principle was applied also in case of money borrowed by an infant, which was used to buy necessaries. Marlow v. Pitfeild, 1 P. Wms. 558. It was pointed out in Marlow v. Pitfeild that there is no liability at law in such a case;...