Curtis & Co. v. Waring & Co.

Mr. Justice Trunkey delivered the opinion of the court, January 5th 1880. This action was brought for damages for the conversion of oil by Richard S. and Orville T. Waring, late co-partners as Waring Brothers & Co., the summons served on Richard S., and the cause tried against him alone. The verdict established the fact that the plaintiffs’ “ oil was shipped to the Philadelphia house, to be there kept in store for them, without any right, on the part of Waring Brothers & Co., to sell or use the same, but simply keep it on storage until the plaintiffs should order it to be sold.” No other disputed fact was passed on by the jury, save the amount of damages. The verdict was rendered subject to the opinion of the court on points reserved, to wit: 1. Whether the composition of the defendant with his creditors, in accordance with the provisions of the bankrupt law, is, under all the evidence in the case, a bar to the plaintiffs’ action; and 2. Whether the plaintiffs’ evidence shows that the defendant was guilty of fraud, or was acting in a fiduciary relation, within the meaning of the bankrupt law. The third assignment of error cannot be sustained. It was unnecessary for the defendant to prove that he had performed or tendered performance of the terms of the composition. For reasons stated in Bidwell v. Bidwell, ante, p. 61, while the decree of the District Court of the United States stands, or while the proceeding in bankruptcy is pending in that court, the courts of the state have no jurisdiction of an action for recovery of the original debt, if such debt be not within the 33d section of the Act of 1867. It was not there determined whether a debt created by fraud of the bankrupt, or while acting in a fiduciary character, is discharged by a composition; nor need it be here. This question is not raised in the facts presented. The plaintiffs contend they are entitled to recover under the principle held in Leggett v. Barton, 11 Vroom 83 (7 The Reporter 116). In that case the defendant pleaded his discharge by a composition in bankruptcy; the plaintiff replied that the debt was fraudulently ' contracted; to which replication the defendant demurred. The pleadings admitted the debt was fraudulently contracted, and therefore the point was, whether it, like,other debts, was discharged by the composition. Here the fraud is denied, and a reserved question whether there is evidence to show it. From the plaintiffs’ testimony, i.t appears they agreed with Waring Brothers & Co. to ship oil to them at Philadelphia, to be there stored until they authorized its sale, at certain rates per month for storage, and stipulated commissions on sales; and Waring Brothers & Co. to make advances, pay cooperage, insu [109] rance, and expenses of mixing oils. This contract was made with R. S. Waring, who did the firm business at Pittsburgh; the oil was shipped, from August 27th to October 12th 187?, to Philadelphia, where Orville T. Waring had charge of the business. In January 1875, having heard that the credit of Waring Brothers & Co. was shaking, the plaintiffs called on' R. S. Waring at Pittsburgh for the oil, who said it had been sold and he was sorry for it, that he regretted it, and could not give the oil or money. Before the failure the plaintiffs borrowed from Waring Brothers & Co. $1500, and gave orders for $2600, got under the arrangement for advances on security of the oil. All through their argument the plaintiffs urged that R. S. Waring, the defendant, took and sold the oil and appropriated the proceeds to his own use, without color of right, and that such is the true interpretation of the verdict. It was not submitted to the jury to find whether R. S. Waring, in fact, participated in the sale of the oil,' or wittingly shared its proceeds, or even had knowledge of its sale before the failure of the firm. He was in Pittsburgh, his partner in Philadelphia, when the oil was sold, and there is no pretence of proof that he directed the sale. No exception was taken to the reservation in the second point, nor is error assigned to the disposition of fact therein. The fourth assignment alleges error in law, under the facts found by the jury. What they found is already noted, and is to the effect only that R. S. Waring, as a copartner, is liable in trover for conversion of the oil. A man may intend no wrong and yet be liable in trover for the value of property he took by mistake: Forsyth v. Wells, 5 Wright 291. The conversion by one partner of property, which came into possession of the firm or partnership account, is the conversion of all, and makes all liable in trover: Nisbet v. Patton, 4 Rawle 120. In that case Gibson, C. J., cites a number of instances where trover was held to lie against innocent partners. The mere fact of a verdict against the defendant, with a reservation for the court to say if there is evidence of fraud, signifies nothing as to his guilt of actual fraud — that is not found. The oil was consigned to Waring Brothers & Co., as factors, and they ha^d a special property in it, a lien on it for their commissions, charges and advances ; and this notwithstanding the oil was not to be sold until a time to be named by the consignors. Under the Bankrupt Act of 1841, a factor who received and retained the money of his principal, was not a fiduciary debtor. That act intended technical trusts and not those which the law implies from the contract: Chapman v. Forsyth, 2 How. 202. For reasons by Wells, J., in Cronan v. Cotting, 104 Mass, 245, we adopt the conclusion that the phrase “while acting in any fiduciary character,” in the Act of 1867, must have the construction which the Supreme [110] Court of the United States had put on the similar clause in the Bankrupt Act of 1841. In Neal v. Clark, 5 Otto 704, where it was held by the state court that Neal was not chargeable with actual fraud, but had committed constructive fraud, which implicated him in the devastavit, the Supreme Court of the United States ruled, “ That the term fraud as used in section 5117 of the Revised Statutes, section 33 of the Bankrupt Act of 1867, means positive fraud, or fraud in fact, involving moral turpitude or intentional wrong, as does embezzlement; and not implied fraud, or fraud in law, which may exist without imputation of bad faith or immorality. Whatever view may be taken of the act of him who actually converted the plaintiffs’ oil, in absence of affirmative evidence that his partner, R. S. Waring, in fact participated in the sale, or knowingly appropriated its proceeds, the court was right in holding that he was not guilty of positive fraud, involving moral turpitude or intentional wrong; afid though fraud was implied against him because of the partnership relation, yet the action was barred by the composition in bankruptcy. Judgment affirmed.