Towle v. Mack
| Decision Date | 01 February 1829 |
| Parties | EBENEZER TOWLE, Orator, v. JAMES MACK and CHARLES PHELPS, Respondents |
| Court | Vermont Supreme Court |
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The Orator complained that Mack was bail for him in a certain case on the twenty fourth day of March 1819, and that the Orator, for his security, conveyed to him his farm, containing seventy acres of land, and delivered him certain stock and farming tools, all in trust to pay the demands of the Orator, for which said Mack had become bail, and to account with the orator for the balance. Also, that before the seventh of May in said year, Mack had been sued as trustee of said Orator, and, to secure him in this and the other matters, the Orator conveyed him two other pieces of land, in trust, to sell and account for, after this trustee-action should be settled--That said Mack gave back a writing showing said trust in the first instance, but not in the last--That said Mack, sold said lands to one Josiah Wilber for a large sum, received a part of the pay, and took his notes for the remainder. Also, that he had sold the stock and farming tools, & c. and received large sums of money therefor-- That Mack refused to account for this property, but had confederated with the other defendant, Phelps, and conveyed to him the notes given by Wilber for the land, & c.--That both had been applied to, but refused to render any account of the property, or to pay the balance to the orator; and prayed that they might be compelled to render an account, and pay him whatever should appear to be due to him.
The respondents severally answered to this bill of complaint.--Mack acknowledged the receiving the property, but denied all the trust, except what is described in the writing he gave to the orator when he received his first deed. He also answered, that the stock he received was of less value than $ 150, and when he received it, the orator executed to him a writing which he attached, as part of his answer, which appeared to be a conveyance of the stock for the security of $ 150 received by the orator of Mack. He also attached to his answer a schedule of the monies received and paid out by him. The defendant, Phelps, answered that he purchased of Mack certain notes against Wilber, and took an assignment of a mortgage given to secure the payment of these notes, and that he paid Mack for the same; and denied any knowledge of any trust or confidence between Mack and the orator. These answers were traversed and the testimony taken and published. At the February term of this Court, in 1828, Mack, considering himself liable to account, so far as required by the writing he gave the orator when he received the first deed, submitted to a decree, that the account be taken without prejudice; that he might be at liberty to contest his liability to account with regard to some of the matters charged. Phelps resisted the account altogether. There was, then, a hearing as between him and the orator, upon the question of his accounting.
Upon the hearing with regard to both defendants, the testimony was referred to by the solicitors, and by the Court in their opinion, with such correctness, it needs no recital here.
Argument for the Orator against Mr. Phelps. This defendant admits, in his answer, his commencing a trustee-action against Mack, as trustee of the Orator, for his own debt against the orator, and the settlement of the same. He admits his receiving the Wilber notes, & c. to the amount claimed by the orator. His receipts show he collected the same. He denies in his answer, that he ever received any other property of said Towle, He denies also, that he had notice, or knew that said farm was conveyed to said Mack in trust, to sell the same, & c. or that the said notes and mortgage were the property of said complainant. Had this defendant such notice, or information, as would put him upon enquiry? It is not necessary that he should have had direct and formal notice; still less, knowledge. Dexter v. Harris, 2 Mason, 536. 1. He had constructive notice from the record of the declaration of the trust, like a separate defeasance of a mortgage. This was recorded the day of its date. He does not deny knowledge of the record. 2. He brought a trustee-suit against Mack as trustee of Towle, soon after Towle went away; which was settled with Mack the 16th of Dec. 1819, before the assignment of any of the notes. 3. Mack settled the suit with Phelps himself; he told Phelps how it was. Phelps told him he could not defend, and he settled. But how is the proof on this point?--Ebenezer Huntington testifies, that he was informed by Charles Phelps and James Mack that he had brought his action against said Mack to recover of him a sum of money which Phelps pretended was due to him from Towle, and thinks, during the pendency of said suit, Phelps informed the deponent that he was acquainted with the way and manner in which Mack received Towle's property--That Phelps said the notes were given for the farm, & c. Nathan Wyman testifies, that, soon after the commencement of the suit, Charles Phelps v. Mack, to recover a debt said by Phelps to be due to him from Towle, Phelps enquired of deponent respecting Mack's having Towle's property in his hands, and this deponent informed Phelps that Mack had the property of Towle in his hands, and was agent; for Mack had informed this deponent that there would remain in his hands, of Towle's property, more than $ 500, after paying all his debts, & c. Samuel Kinsley testifies, that in December, 1820, or in June, 1821, the deponent enquired of Phelps why it was that some people in Windham were unfriendly to Mack in the Wilber case, and interfered to prevent a settlement between them? Phelps said that was because Mack had taken Towle's property into his hands and helped Towle to run away. Samuel Arnold, Esq. says, that in August or September, 1821, he called on Mack for a settlement, which he then refused; but said he had the three last of these notes--but would take advice. The deponent called on him again in September or October, of the same year, at which time he had taken advice of Charles Phelps, Esq. and refused to account or settle. Phelps' account, not made out at the time of the dates of the several transactions, purports to have been entered on or about the 1st of May, 1822. It must have been made out to answer some purpose. When was it actually entered on book? and for what purpose? It is entitled to no credit.
The question returns, had Phelps such information upon the subject as will charge him with the consequences of notice? If Phelps had notice that the property which he was purchasing was trust property, he must be accountable to the cestui que trust.--All persons coming into possession of property, bound by a trust, with notice of the trust, shall be considered as trustees. 2 Mad. 103.--Ham. Dig. 638.--1 Scho. & Lef. 262.--16 Vesey, Jr. 249, 253, Daniels v. Davison. Though a purchaser did not know of any incumbrance before he paid his money, inasmuch as he knew it before the deed was executed, it affects him with notice. 1 Atk. 384. One, taking from a trustee with notice, levies a fine: this shall not bar the cestui que trust. 2 Mad. 103.--Ham. Dig. 647.-- 1 Scho. & Lef. 379.--4 John. Ch. Rep. 138.--1 Scho. & Lef. 355, 379.--Ham. Dig. 627. If a purchaser have notice of a trust at the time of the purchase, he becomes the trustee, notwithstanding the consideration paid.--1 John. Ch. Rep. 566. No act of the trustee can vary the rights of the cestui que trust.--Ham. Dig. 641.--8 Ves. 341. Property held in trust does not pass to the representatives of the trustee; but as long as it can be traced and distinguished, it goes to the benefit of the cestui que trust. 1 John. Ch. Rep. 119. A person, claiming as a bona fide purchaser for a valuable consideration, must deny the fact of notice of the trust, and of every circumstance from which such notice might be inferred. 1 John. Ch. Rep. 566.
Argument for Phelps. The defendant, Phelps, contends,--
1. That, as to purchasing the notes, if with notice of the general trusts, he cannot be called on to account. Even a purchaser of a trust estate, from a trustee with a general power to sell to pay debts, cannot be holden to account, or see to the application of the purchase-money. Sugden on Vendors, 365, note g. Certainly, then, the purchaser of a negotiable security, given for such estate, cannot be liable. Even a purchaser of stock is never called to account, but the trustee only, and his representatives, have to replace it. 4 Ves. Jr. 497.--5 id. 799, 800.--1 id. 297.
2. That, as to any improvident law-suits, the defendant is not implicated in any improvident management of the same. But, it is pretended that defendant knew the property (the attachment of which gave rise to the suits) to be of doubtful ownership and this rests solely on the testimony of S. Kingsbury, Esq. who says, " That in 1820, he was called on to sign the writ Mack v. Wilber,--that he advised Mack, under existing circumstances, not to have the writ served, as he then understood Leonidas Wilber claimed the property Mack was about to attach, and that they (Mack and Phelps) seemed to think the holding it doubtful." Now, Esq. Kingsbury did not sign the writ Mack v. Wilber, which was signed by E. H. Ranney, Esq. and served 14th August, 1820, but signed the writ Theos. Crawford v. L. Wilber, which was dated 17th November, 1820, and after the controversy had commenced; from which it is most evident that the witness is mistaken, probably from confounding, through defect of...
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