Nonotuck Silk Co. v. Flanders

• Decision Date: 16 March 1894
• Citation: 87 Wis. 237,58 N.W. 383
• Parties: NONOTUCK SILK CO. v. FLANDERS.
• Court: Wisconsin Supreme Court

87 Wis. 237

58 N.W. 383

NONOTUCK SILK CO.

v.FLANDERS.

Supreme Court of Wisconsin.

March 16, 1894.

Appeal from circuit court, Bayfield county; J. K. Parish, Judge.

The Nonotuck Silk Company filed a claim against the estate of A. C. Probert, an insolvent, and procured an order to show cause why said claim should not be declared preferred. On the hearing the claim was so declared, and the assignee appeals. Reversed.

The other facts fully appear in the following statement by CASSODAY, J.:

It appears from the record that for several years prior to June, 1893, the defendant's assignor, A. C. Probert, conducted a banking business at Washburn under the name of the Bank of Washburn; that May 24, 1893, the plaintiff, a corporation at Chicago, sent a draft for $99.67, on one Lemke, to the Bank of Washburn for collection; that June 2, 1893, the draft was presented to Lemke, and paid by his check on the Bank of Washburn on the same day; that June 3, 1893, the Bank of Washburn issued its draft on the Union National Bank, its Chicago correspondent, for the proper amount, and forwarded the same to the plaintiff; that the plaintiff did not receive the draft until June 9, 1893, and deposited the same immediately in the First National Bank of Chicago; that that bank presented the draft to the Union National Bank June 10, 1893, but payment thereof was refused; that the Union National Bank then had no money to the credit of the Bank of Washburn, but did have collaterals, left there expressly to protect overdrafts, more than enough to protect the draft in question, as well as all other drafts issued upon that bank by the Bank of Washburn; that June 7, 1893, the Bank of Washburn closed its doors, Probert having failed; that June 26, 1893, Probert perfected an assignment for the benefit of his creditors, and on that day the defendant, his assignee, took possession of all his property, including the Bank of Washburn and its effects; that Probert's assets at the time of such assignment amounted to $261,716.31, and his liabilities to $236,492.31; that such assets consisted of commercial paper, secured and unsecured, stocks, real estate, etc.; that no money whatever came into the hands of said assignee, except a few pennies and a $2.50 gold piece; that all money in the Bank of Washburn on and after June 1, 1893, was used in paying checks drawn against deposits, and in paying clerk hire or employes of the Bank of Washburn; that none of the moneys of Probert, and none of the proceeds of the collection made for the plaintiff, was used in acquiring other property or invested in other property of any kind, but that all money in the possession of Probert at and after receiving said check of Lemke for the plaintiff was used in paying the debts of Probert, so that no money, or the proceeds of the money, in the Bank of Washburn, or the plaintiff's collection, or the proceeds of said collection, ever came into the hands of said assignee in the shape of property of any kind whatsoever; that September 18, 1893, the plaintiff filed its claim against said estate; that October 17, 1893, the plaintiff procured an order to show cause why its said claim should not be declared preferred; that on the final hearing of that application, December 6, 1893, it was ordered by the court that said claim be, and the same was thereby, declared a preferred claim, and the money and effects upon which the same was founded were thereby declared to be trust funds, and the said assignee was thereby ordered to pay said claim of $99.42, in full, out of any moneys in his hands belonging to said estate, in preference of all claims against said estate not preferred, together with costs and disbursement of such hearing, taxed at $25. From that order the defendant brings this appeal.Lamoreux, Gleason, Shea & Wright, for appellant.

Warden & Alvord, for respondent.

CASSODAY, J. (after stating the facts).

The amount involved is small, but the case is important by reason of others dependent upon it, and the nature of the question involved. It appears that A. C. Probert was the sole owner of the Bank of Washburn; that June 7, 1893, he failed, and his bank closed its doors; that June 26, 1893, he made a voluntary assignment of all his property to the defendant for the benefit of his creditors. There is some force in the suggestion that the receiving of Lemke's check in payment of the plaintiff's draft on him, held by Probert's bank for collection, and the sending to the plaintiff of a draft made by Probert's bank on the Chicago bank for the amount of such collection, four days prior to such failure, was nothing more than the substitution on the books of Probert's bank of a credit to the plaintiff, or to the Chicago bank, for the amount, in lieu of the former credit for the same amount to Lemke. But it appears that, at the time of giving the check, Lemke had funds in Probert's bank to the amount of the check, and hence the transaction would seem to be substantially the same as though Lemke had actually drawn the money on the check, and then immediately handed the same back in payment of the draft on him in favor of the plaintiff, and then held by Probert's bank for collection; and that Probert's bank then retained the money so paid in by Lemke, and in lieu thereof sent to the plaintiff its draft on the Chicago bank, as mentioned in the foregoing statement. As therein indicated, the money so represented by the check was, with other moneys, used up in paying the debts of Probert, so that no part of that money or the proceeds of that collection, either in the shape of money or of property of any kind, ever came into the hands of the defendant, as such assignee. Such being the facts, it is manifest that the plaintiff is not here reclaiming his own property intrusted to Probert's bank, nor the avails or the proceeds thereof, but is here claiming a preference over other creditors out of other assets and property of Probert received by the defendant by virtue of such assignment. Certainly, there is no statute in this state giving any such preference, nor any authorizing an insolvent debtor, by way of a voluntary assignment, to give such preference. Laws 1883, c. 349; Laws 1885, c. 48; sections 1693a, 1693c, Sanb. & B. Ann. St. It follows that, if the plaintiff is entitled to such preference at all, it must be by virtue of some established principle of equity or the common law.

The early English cases only went to the extent of holding, in effect, that the owner of property intrusted to an agent, factor, bailee, or other trustee could follow and retake his property from the possession of such trustee, or others in privity with him, and not a bona fide purchaser for value, whether such property remained in its original form, or in some different or substituted form, so long as it could be ascertained to be the same property, or the product or proceeds thereof, but that such right ceased when the means of ascertainment failed, as when the subject of the trust was money, or had been converted into money, and then mixed and confounded in a general mass of money of the same description, so as to be no longer divisible or...