Peoples National Bank v. Mulholland

• Decision Date: 13 September 1917
• Citation: 228 Mass. 152
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: PEOPLES NATIONAL BANK v. ELIZA B. MULHOLLAND & another.

228 Mass. 152

PEOPLES NATIONAL BANK v. ELIZA B. MULHOLLAND & another.

Supreme Judicial Court of Massachusetts, Suffolk.

September 13, 1917

March 7 1917.

Present: RUGG, C J., BRALEY, DE COURCY, PIERCE, & CARROLL, JJ.

Equity Pleading and Practice, Recommittal of master's report. Trust Creation, Commingling of property, Tracing trust property. Evidence, Presumptions and burden of proof.

After the rescript of this court issued in accordance with the decision at an earlier stage of this suit in equity reported in 224 Mass 448 , the

Superior Court recommitted the case to the master for the determination of certain material facts in regard to the plaintiff's title to a certain importation of hides, and it here was held that the interlocutory degree recommitting the case to the master for this purpose was proper.

Where a bank, as the means of advancing money to a dealer to pay for an importation of hides, purchases the hides in its own name directly from the foreign seller and pays for them, and then, owning the hides, delivers them to the dealer in exchange for a trust receipt in which the dealer declares that he holds the hides "in trust" for the bank as its property with liberty to sell them for the bank's account or to manufacture and remanufacture the hides without cost or expense to the bank, and agrees "to keep said goods, and the manufactured product and proceeds thereof. . . . separate and capable of identification" as the bank's property, with a provision that the bank may at any time cancel the trust and repossess itself of the hides, raw or as manufactured product, a valid trust is created and the dealer holds the hides with the obligations incidental to the fiduciary relation.

In a suit to enforce the trust above described it was held that it was the duty of the dealer to keep the hides at all times, both in their raw and their manufactured state, "separate and capable of identification," and that that duty was not performed by having one person alone, who afterwards died, sufficiently familiar with the goods to be able to make a separation, and that, on the death of such person, there was a breach of the duty of the dealer under the trust receipt in having commingled the trust property with other hides so that the possibility of picking out from the mass the property of the bank was gone.

In the same case it was held that such commingling was done by the dealer in disregard of its obligation to the bank and was a breach of its fiduciary duty.

In the same case it was held that there had been a sufficient tracing of the hides of the bank into the commingled mass to establish a lien for the bank's claim, and, a part of the mass having been sold and a part destroyed by fire, the bank's lien attached to all that remained of the lot.

One, who without justification and in breach of fiduciary obligation has commingled his own property with that of another with which he has been entrusted, must at his peril return to the owner that which thus has been appropriated by him wrongfully and must prove what belongs to him or lose it.

In the case above described it appeared that a separate deposit had been made by the dealer of the proceeds received from sales of a part of the commingled goods to a certain corporation, and it was held that this separate deposit stood on the same footing as the unsold part of the commingled goods and was impressed with a like trust for the benefit of the plaintiff.

BILL IN EQUITY, filed in the Superior Court on February 4, 1913, to enforce an alleged trust in certain hides and the proceeds thereof named in a trust receipt dated March 22, 1910, and signed "E. F. Mulholland Co."

After the entry of the rescript issued in pursuance of the decision reported in 224 Mass. 448 , an interlocutory decree was made by Lawton, J., recommitting the case to the master for the purposes stated in the opinion. The master filed a supplemental report, to which no objections or exceptions were filed, and thereafter by order of Wait, J., after a hearing of the parties, a final decree was entered, which ordered

"That the master's supplemental report be and the same is hereby confirmed; and, it appearing that the plaintiff received the bill of lading as the agent of Kaufman, and upon accepting the draft to which it was attached, took title to the hides as security to itself for payment of the amount it had obligated itself to pay to Kaufman, and that it thereafter paid Kaufman out of its own funds; and that the only title which E. F. Mulholland Company ever had in and to the hides was such title as it held under the terms and provisions of the trust receipt;

"That as a matter of law, in view of the findings of the master and inference to be drawn therefrom, the deposits and the leather are sufficiently identified with Lot No. 73 to impress them with the trust claimed;

"That the claim of the Peoples National Bank against the firm of E. F. Mulholland and Company, composed of the defendant Mulholland and the late Cornelius J. Coughlin, be and hereby is established at the sum of $4,540.57, together with interest thereon at the rate of six per cent from October 1, 1911, amounting in all on this tenth day of November, 1916, to $[5]933.01, at which sum the debt due to the plaintiff as aforesaid is established;

"That the defendant Coughlin, as administratrix of the estate of the late Cornelius J. Coughlin, has in her hands, possession and control the sum of $2,241.22, and the sum of $997.59 (together with any interest that may have accumulated thereon since the date of the deposit of said sums in the Federal Trust Company) as the proceeds of the property of the plaintiff described in the plaintiff's trust receipt set forth in the bill, together with 1,510 feet of mat calf leather and 10,452 feet of black ooze calf leather, which is also the proceeds of the property of the plaintiff described in said trust receipts, and that said moneys and said leather are the property of the plaintiff; and the said defendant Coughlin, administratrix as aforesaid, shall forthwith pay over and deliver unto the plaintiff said moneys and said leathers, the same to be applied in reduction of the debt due the plaintiff;

"That the defendant Mulholland pay unto the plaintiff the aforesaid sum of $5,933.01, with interest thereon subject to a credit to be allowed of the amount paid to the plaintiff, together with that realized from the aforesaid leather, and let execution issue therefor. The defendants are hereby directed to pay the plaintiff its costs, amounting to $61.28, and execution is to issue therefor."

The defendant Ellen T. Coughlin, administratrix, appealed from this decree.

W. J. Cusick, for the defendant Ellen T.

Coughlin.

Lee M. Friedinan, for the plaintiff.

RUGG, C. J. It was decided when this case was here at an earlier stage, as reported in 224 Mass. 448 , that there was no finding by the master warranting an inference that the plaintiff purchased the hides from the foreign seller, Kaufman, on behalf of E F. Mulholland and Company, hereafter called the firm, now represented by the defendants, and that it took title to itself as security for its advances in making such purchase and received the hill of lading and draft as agent for Kaufman, the original seller. Thereafter, the case was recommitted by the Superior Court to the master for determination of the facts as to the purchase of the hides from the foreign owner, Kaufman, and the vesting of the title thereof, and the exact relation of the plaintiff to the purchase, the bill of lading, and the draft.

The interlocutory decree recommitting the case to the master for this purpose was proper. The first trial before the master had proceeded upon a footing respecting the plaintiff's title, which in the light of facts now revealed, might have wrought injustice. The right of the plaintiff was not disclosed by the...