Taylor v. Taylor

• Decision Date: 28 March 1883
• Citation: 74 Me. 582
• Parties: JOSEPH D. TAYLOR and another, in equity, v. LORENZO TAYLOR.
• Court: Maine Supreme Court

74 Me. 582

JOSEPH D. TAYLOR and another, in equity, v. LORENZO TAYLOR.

Supreme Judicial Court of Maine.

March 28, 1883

ON EXCEPTIONS.

The exceptions were to the ruling of the court in overruling a demurrer to a bill in equity. The case is sufficiently stated in the opinion.

William L. Putnam, for the plaintiffs, cited: Bradley v Farwell, Holmes' Rep. 433; Coons v. Tome, 9 F. 533; Koehler v. Iron Company, 2 Black 715; Insurance Company v. Hill, 60 Me. 178; McLean v Weeks, 61 Me. 277; S. C., 65 Me. 411; Crocker v Smith, 32 Me. 244; Brown v. Whitmore, 71 Me 65; Simpson v. Warren, 55 Me. 18; Doe v. Cribner, 41 Me. 277; Bayard v. Hoffman, 4 John. Ch. 450; Winsor v. Kendall, 3 Story 507; Carr v. Gale, 3 W. and M. 38; Sawyer v. Hoag, 17 Wall. 610; Carr v. Hilton et als. 1 Curtis 230; First Con. Church v. Trustees, 23 Pick. 153; Goodell v. Buck, 67 Me. 514; R. S., c. 77, § 5, Cl. 4; McLaren v. Brewer, 51 Me. 402; E. & N. Am. Railway Co. v. Poor, 59 Me. 277; Pratt v. Curtis, 2 Lowell 87; Bump on Bankruptcy, (10 ed.) pp. 347, 348; Scamman v. Cole, 3 Cliff. 472; Flanders v. Abbey, 6 Bissell 19; Judge Fox, in Goodenow v. Deering et als. (not reported).

J. and E. M. Rand, for the defendant.

In this bill in equity, Joseph D. Taylor and William B. Tobey, assignees in insolvency of the Dirigo Slate Quarry Company, seek to recover of Lorenzo Taylor a sum of money received by him of the treasurer of said company in payment of a debt due to him from said company. The bill is against Lorenzo, individually; and is for the mere collection of a sum of money.

Respondent, by demurrer, objects that complainants have a plain, adequate and complete remedy at law.

The claim is one of which a court of common law would take cognizance in an action for money had and received. We submit that complainants have a plain, adequate and complete remedy at law; and, if so, a court of equity will decline jurisdiction. 1 Daniell's Chancery (3d Am. ed. 1865), p. 574; Story's Equity Pleadings, § § 472, 473; Thayer and al. v. Smith, 9 Metc. 469.

We submit that the insolvent law of Maine confers upon this court no jurisdiction in equity to enforce the payment of this claim against respondent.

Under that law, the Supreme Judicial Court has " full equity jurisdiction; " the assignee has " power to maintain all suits at law and in equity," and by § 48 (under which this claim arises), " the assignee may recover the property or the value of it from the person so receiving it or so to be benefitted."

The last bankrupt act conferred upon the United States courts equally full equity powers, and the precise words of § 48, insolvent law above quoted, were used in the bankrupt law. Bump's Bankruptcy (9th ed. 1877), 795.

Yet a bill in equity to recover the value of a stock of goods was dismissed because the remedy was at law. Garrison v. Markley, 7 N. B. R. 246.

DANFORTH, J.

This is a bill in equity, in which the complainants, as assignees of an insolvent corporation, seek to set aside a payment made by the insolvent to the respondent, a creditor, as a fraudulent preference under the law, and to recover the amount so paid. The allegations in the bill show that the respondent was not only a creditor, but also the treasurer of the insolvent corporation, and as such, within four months of the insolvency, had executed a mortgage of the company's lands, upon the credit of which and in behalf of the corporation, he borrowed the sum of seventy-five hundred dollars, and " unlawfully, inequitably and unjustly applied the whole of said seventy-five hundred dollars" in payment of his own debt against said corporation, excluding the other creditors from any share in, or benefit from said sum. There are other allegations sufficient to show, if true, a fraudulent preference to this respondent. It is also alleged that by reason of his acts thus set out, this respondent " became in equity trustee of said seventy-five hundred dollars, and in equity held and now holds said sum in trust for all said creditors of said corporation, and for your orators as their representatives," and that said payment was made in fraud of the other creditors of said corporation. To this bill there is a general demurrer on the ground that, if true, " there is a plain, adequate and complete remedy at law."

That in such cases the assignees represent the creditors and are competent effectually to assert their rights to all the property of the insolvent fraudulently conveyed, cannot be, and in this case, is not denied, and the real question in issue here is, whether they have adopted the proper remedy or must be turned over to that which the law may afford them.

It is claimed that the bill may be sustained upon either of two grounds, namely: I, a breach of trust, and II, a fraudulent preference under the insolvent law. Under the allegations in this bill, it cannot be supported upon the first. The respondent's possession of the money as treasurer, does not render him a trustee of the company for whom he acts. As treasurer he is a mere depositary of the money, having no title to it, no control over, or duty in relation to it, except that of safe keeping, and no discretion in paying out or otherwise disposing of it, but in these respects is governed and controlled by the corporation which is the real owner. The treasurer is an agent and his possession is that of his principal. Insurance Company v. Hill, 60 Me. 183; Sprague v. Steam Nav. Co. 52 id. 592; Pettingill v. Androscoggin R. R. Co. 51 id. 370; Angell and Ames on Cor. 8th ed, § 312.

Very different from this is that trust over which equity has jurisdiction; a trust which is " defined to be an equitable right, title or interest in property, real or personal, distinct from the real ownership thereof. In other words, the legal owner holds the direct and absolute dominion over the property in the view of the law; but the income, profits or benefits thereof in his hands belong wholly, or in part, to others." 2 Story's Eq. Jurisprudence, 9th ed. § 964.

Further, this respondent as treasurer, is accountable to the company and to that alone. But to the company, and to these complainants, so far as they represent the company, he has done no wrong. There is no allegation in the bill that he did not safely keep the money, or that he made any disposition of it without the consent and direction of the proper officers. On the other hand it is claimed that the appropriation, which is the real cause of complaint, was made by the company itself. Hence there is no dereliction of duty on the part of the respondent to the company. Nor is there any such dereliction as treasurer toward the creditors. His possession of the funds of the corporation imposed upon him no duty toward them. He could not without the direction of the proper officers pay any debts of the corporation, nor could the creditors maintain any process against him for the collection of their debts, and the complainants as their representatives stand in no better condition. With the directors the case might be somewhat different. They have the control and disposition of the funds. In this respect to a great extent, they represent the company and have a duty to perform toward it which is substantially a trust and for a violation of which the proper process would unquestionably lie in favor of those directly interested, as held in Koehler v. The Black River Falls Iron Company, 2 Black 715, and other similar cases. But even here it is not intimated that any process could be sustained against the directors except by such persons as were legally interested in the property misappropriated.

It is, indeed, alleged in the bill that this respondent having received the money, it became " his duty to apply it upon equitable principles to the benefit of all the creditors of the corporation." But as already seen, this duty did not arise from his possession of the funds as treasurer, but if at all, by virtue of having received them as a creditor in payment of his debt under such circumstances as rendered it a fraud under the insolvent law upon the other creditors; and the allegations in the bill so show. Thus when that duty has arisen, if at all, the money has been misappropriated by the company, or its officers, and the respondent is no longer in possession of it as treasurer, has no duty to perform in regard to it as such, but holds it under the authority of the corporation as one of its creditors. To hold property in trust is one thing; to have obtained it by fraud is another and a very different thing. Thus all the allegations in this bill show that the liability of the respondent, if any, rests upon a fraud and not upon a trust, and the question involved is not one of duty on the part of the respondent, but of title to the money.

That the allegations in the bill sufficiently show that the respondent received the payment of his debt in fraud of the other creditors of the insolvent, is certain; and upon this branch of the case, we think the bill must be sustained.

In coming to this conclusion we lay no stress upon the provisions of the insolvent act, except so far as it declares the facts set out to be a fraud. It has been decided by this court that § 11 of the insolvent act does not determine the nature of the process to which an assignee may, or must resort to enforce his rights to property alleged to belong to the insolvent estate, for the purposes of distribution among the creditors, against a person claiming an adverse...