Chaves v. Myer

OPINION OP THE COURT. POPE, J. — This is a suit brought by the appellees, Elias Chaves and wife, alleging in their complaint substantially, as follows: That on November 17, 1902, plaintiffs recovered a judgment in the district court of Bernalillo county against the defendant Myer individually and as administrator of the estate of Bafael Armijo deceased for the sum of twenty-two hundred and seven and 58-100 dollars, upon which judgment on November 28, 1902, execution was issued with return of nulla bona dated January 27, 1903. A certified cop}^ of the judgment is attached to the complaint. The complaint after alleging' that the defendant Myer is insolvent avers that the judgment was for the distributive share of the estate of the said Bafael Armijo, to which plaintiffs are entitled. Tt is further alleged that on March 6, 1900, the defendants, Maria A. de Lucero and J. Bias Lucero, her husband, executed and delivered to the defendant Myer a mortgage upon certain real estate in Bernalillo county, which mortgage was duly recorded March 7, 1900, a copy of the mortgage is attached to the complaint. An' inspection of this shows that it runs to Myer personally and upon the following conditions: “Whereas the said parties of the first part (Maria A. de Lucero and J. Bias Lucero) have received of the said party of the second part (B. Myer) two thousand and eight dollars, said sum having been paid to the said second party in his capacity of administrator de bonis non of the estate of Rafael Armijo, dec., to which said estate said sum of two thousand and eight dollars is belonging; Now, therefore, if' within the time of limitation under the laws of the Territory of New Mexico, regulating the administration of estates and the liability of administrators, no claim or demand shall be made against Ben Myer as administrator of said estate nor any proceedings be entered against him, then this indenture shall be null and void and of no effect, otherwise to remain hr full force.” It is further alleged that at the time of the execution and delivery of this mortgage, Myer as administrator of the Armijo estate had in his hands the sum- of $2,008, which “in equity and good conscience belonged” to plaintiffs and which they were entitled to receive from said defendants as their distributive share- of said estate, which said Myer and said J. Bias Lucero well knew; but that the said J. Bias Lucero, contriving to defraud plaintiffs out of said sum of money caused said mortgage to be executed and delivered to the said Myer to induce him, and did thereby induce him, to procure from the probate court of Bernalillo county an order authorizing him to pay over to the said J. Bias Lucero the said sum of $2,008 and to pay him, the said Lucero, under said order the said sum of money. It is further alleged that while by the terms of said mortgage it is conditioned as aforesaid, it was in truth and in fact, executed for the purpose of securing the payment of any judgment which these plaintiffs might obtain against said Myer for the distributive share of said estate and for no other purpose except as above stated to induce Myer to turn over to said Lucero, the above named sum in his hands as administrator and to enable the’ said Lucero to get possession of the same. It is further alleged, that said order allowing the payment of said sum on said mortgage, was obtained without notice to plaintiffs, although Myer and Lucero well knew, that plaintiffs were claiming said sum; that thereafter, plaintiffs appealed from said order of the probate court to the dsitrict court, when said order was vacated and set aside and the judgment of November 17, 1902, above referred to, was entered. The complaint also alleges that plaintiffs have requested Myer to bring suit to foreclose said mortgage, but that he refused so to do and complainants pray that said mortgage be foreclosed to satisfy said judgment of $2,207.58. To this complaint the defendant Myer answered in effect, admitting all of its allegations. The defendant Lucero, demurred upon the ground, first, that said complaint does not state a cause of action against defendants, and second, upon the ground that these defendants are not necessary or proper parties to the action. 1 The court overruled the demurrer and then Lucero electing to stand thereon, judgment was entered granting the relief prayed, whereupon, the last named defendants prosecute their appeal to this court. The assignments of error and the briefs and arguments point out a number of respects in which, it is alleged, the complaint failed to state a cause of action. It is urged, first, that there is no sufficient allegation that the sum of money advanced by Myer to Lucero belonged to the plaintiffs and that there could not be any such allegation for the reason that no particular sum could belong to any designated legatee in advance of a final settlement of the Armijo estate. We are of opinion, however, that the allegation that the sum held by Myer as administrator, and subsequently loaned to the Luecros, "in equity and good conscience,” belonged to plaintiffs and that they "were entitled to receive (it) from said defendant as their distributive share of said estate” sufficiently alleged ownership, especially when taken in connection with the recital and finding in the judgment attached to and made a part of the complaint to the effect that "the said Ben Myer as such administrator has settled all claims against said estate except those of said appellants,” (Elias Chaves and wife, the plaintiffs herein). It is further contended that' the amount paid over to the Luceros was a part of the $2,708, -which the judgment recites belongs as a matter of fact to the Luceros as their part of the Armijo estate. We find nothing in the record to sustain this rule; on the contrary it is clearly averred that the sum here in controversy was a fund belonging to the plaintiffs by reason of the fact that all other claims, both in the nature of debts and bequests, had been paid. 2 It is said further, however, that conceding the liability of the defendant J. Bias Lucero, no such liability exists against the wife Maria A. de Lucero, there being-no allegation that she knew of or participated in the fraud. No such point was apparently made in the court below, however. The only grounds of demurrer there urged were first, that the complaint “does not state a cause of action against defendants” and second, “defendants are not necessary or proper parties to the action.” As was said in Crabtree v. Segrist, 3 N. M., 500: “It does not appear that either of these points was raised or insisted upon at the trial and we are therefore of opinion that they cannot he presented and urged before us. The general rule that only such assignments of error can be presented to the appellate court as were brought to the attention of the trial judge, so as to permit of their correction by him, is strengthened in this Territory by the statutory provision that hio exceptions shall be taken in an appeal to any proceeding in the district court, except such as shall have been expressly decided in that court.’ ” But independent of this consideration it is clearly averred that Mrs. Lucero joined in the note and mortgage made to Myer in exchange for plaintiff’s legacy. She admits in her mortgage that the whole amount was paid to her and to her husband and that the same belonged, when received by them, to the Armijo estate. Under the other facts averred in the case, this sum was wrongfully paid to and received by both and no reason occurs to us why the lien given to secure the repayment of this amount should not he foreclosed as against both. It is further to be noted that the complaint does not ask nor does the decree award a general judgment against either, but is confined to a provision for the sale of the-property mortgaged. 3 Tt is also urged that the suit cannot he maintained because an adequate remedy existed at law in that the plaintiffs could have sued out garnishment upon the Luceros and thus have held the amount loaned them, to respond to the judgment secured. We are unable to concur in this view. The suit here brought is for the purpose of impressing a trust upon the mortgage security taken by Myer in exchange for plaintiff’s money, .and is designed to realize the amount by foreclosure of the lien. The character of action is one peculiarly of equity cognizance as a part of the original chancery jurisdiction. 4 The remedy by attachment or garnishment or both is not a common law one, but rests upon statute. It is well settled that the fact, that statute may have given an additional remedy, does not oust the courts of preexisting inherent equity jurisdiction affording the same result in the absence of words in the statute prohibitive of such concurrent' jurisdiction. Thus in 1 Pomeroy’s Eq. Juris. Sec. 276, it is said: “There is still another principle affecting the equitable jurisdiction, which remains to be considered in all its relations, namely: Whenever a court of equity, as a part of its inherent powers had jurisdiction to interfere and grant relief in any particular case or under any condition of facts and circumstances such jurisdiction is not, in general, lost, or abridged, or affected, because the courts of law may have subsequently acquired a jurisdiction to grant either the same or different relief, in the same land of cases, and under the same facts or circumstances. * * * In other words, the exclusive jurisdiction to grant purely equitable reliefs, as well as the concurrent jurisdiction to confer legal'reliefs, is still preserved, although the common law courts may have obtained authority to award their remedies to the same parties upon the same facts.” And in Section 278, among the classes of cases instanced in which this principle has been applied, are “suits to recover a fund impressed with a trust or where a trust relation in view of equity exists between the parties where the plaintiff might recover the same sum by an action of assumpsit for money had and received or like legal action,” and also Sec. 280, where it is said that “a statute authorizing a garnishment by a proceeding at law, does not take away nor abridge the equity jurisdiction to enforce an equitable attachment or sequestration by suit under the .same circumstances.” We are of opinion, however, that the remedy by garnishment would fall very far short of being equally plain, adequate and complete with that of foreclosure. The one would be to seek a judgment against the Luceros upon the incoming of their answer, to be followed by an effort to find unencumbered property out of which such judgment might be realized, while the other gives the direct remedy ■of foreclosure upon property already subject to a lien. We consider this point therefore as entirely untenable. It is further urged that the amount for which judgment was rendered was excessive in that it could at most have been only for the amount of the trust fund diverted, whereas judgment was rendered foreclosing the lien to pay the entire amount of the judgment secured. We do not find it necessary to decide this question for the reason that the assignments of error raise no point as to the amount of the judgment. It has been distinctly held by this •court that it will not consider questions not raised' by the assignment of errors. Maxwell v. Tufts 8 N. M. 401; Lamy v. Lamy, 4 N. M. 29. It is further urged that the form of mortgage is purely a personal security to Myer, that it could be enforced only by him, and the plaintiffs’ redress was by a suit against Myer and his bondsmen. We do not consider this position well founded. The theory upon which the action was brought was that Myer, a trustee, had invested the trust funds in another form of property, to-wit, a real estate mortgage, which latter he was holding in his own name in disregard and defiance of his trust. A court of equity will not permit an administrator under ■such circumstances to dictate terms. He cannot divert trust funds and say to the defrauded cestui que trust, ‘your only remedy is to sue me and secure the satisfaction of your claim by levy, if perchance, I still have the property purchased with your money.’ On the contrary, the ancient equitable principle is that the cestui que trust under such circumstances has the option either to hold the trustee, personally liable or to follow his money into the property which, the trustee has in violation of his trust secured. In Oliver v. Piatt, 3 How. 401, it was said by the' court, speaking through Mr. Justice Story: “It is a clearty established principle in that (equity) jurisprudence, that whenever the trustee has been guilty of a breach of the trust and has transferred the property, by sale or otherwise, to any third person, the cestui que trust has a full right to follow such property into the-hands of such third person, unless he stands in the predicament of a bona fide purchaser, for a valuable consideration without notice, and if the trustee has invested the' trust property or its proceeds in any other property into which it can be distinctly traced, the cestui que trust has his election either to follow the same into the new investment or to hold the trustee personally liable for the breach of trust.” The general principle is thus stated in 2 Pom. Eq. Juris. Sec. 1051: “A constructive trust arises whenever another’s property has been wrongfully appropriated and converted into a different form.. If the person having money or any kind of property belonging to another in his hands wrongfully uses it for the purchase of lands, taking the title in his-own name; or if a trustee or other fiduciary person wrongfully converts the trust fund into a different species of property, taking to himself the title; or if an agent or bailee wrongfully disposes of his principal’s securities,, and with the proceeds purchases other securities in his own name; in these and all similar cases equity impresses a constructive trust upon the new form or species of property, not only while it is in the hands of the original wrongdoer but as long as it can be followed and identified in whosesoever hands it may come, except in those of a bonafide purchaser for value and without notice; and the court will enforce the constructive trust for the benefit of the' beneficial owner or original cestui que trust, who has thus been defrauded.” And in 2 Story Equity Jurisprudence, Section 1258, it is said: “The general proposition, which is maintained at law and in equity upon this subject is, that if any property, in its original state and form, is covered with a trust in favor of the principal, no change of that state and form can divest it of such trust or give the agent or trustee converting it, or those who represent him in right, (not being bona fide purchasers for valuable consideration without notice) any more valid claim in respect to it than they respectively had before such change. An abuse of a trust can confer no rights on the party abusing it or on those who claim in privity with him. This principle is fully recognized at law in all eases where it is susceptible of being brought out as a ground of action or of defense in a suit at law. bn courts of equity, it is.adopted with a universality of applications.” It is further urged that under the terms of .the morto-.w«> rlnfaifit had not occurred justifying a foreclosure. The condition of the mortgage, whether viewed from the standpoint of the actual language used or as illumined by the allegation that said mortgage was executed “for tlie mimóse of securing the payment of any judgment which n I a inti ifs might obtain against Myer for their distributive share of the estate and for no other purpose,” was satisfied by tlie allegations of the complaint, which show that a claim had been against Myer, as administrator, the ■propriety and seasonableness of which had been established, prior to the bringing of this suit, by a judgment of the district court. 5 Finally, it is argued and with special emphasis, thai upon the allegation of the complaint the mortgage is void as against public policy and cannot be enforced. It is urged that the allegation to the effect that the mortgage was given to induce the administrator to procure from the probate court an order allowing him to pav ovor to Lucero the amount in hand belonging to appellees is tantamount to an allegation of a conspiracy to embezzle that sum of money in the hands of the administrator and to defraud appellees out of their interest in the estate and that a court of eonity will leave the transaction where it' finds it and will refuse to grant, anv relief, oven to the innocent defrauded owner of the fund misappropriated. We are unable to acquiesce in this view. Considering first, tlie character of the agreement between Myer and Lucero, we incline to the opinion that the allegations of the complaint when fairly construed are simply to the effect that before the defendant Myer would loan to Lucero the fund in his hands belonging to appellees. he exacted from the Luceros the mortgage in question; -and having secured it he thereupon procured an order of the probate court permitting such loan. Whatever may be said of the transaction as a usurpation of power by the administrator, we believe there would be little difficulty in holding that it fell short of being such an agreement as upon principles of public policy would be debarred from enforcement, even by Myer himself. But, however this may be, we are unable to subscribe to the view that where by fraud between two parties there is effected the substitution of a mortgage for cash belonging to an innocent third party, the latter is debarred from realizing on such security, which is practically his. It would be using the law as a means of fraud, rather than of its prevention, to hold the funds of a person in the hands of a trustee may be converted by a corrupt agreement between the trustee and a third party and yet the cestui que trust be abso-' lutoly remediless to realize on the security, simply because! the agreement to which he was in no sense a party and for which he may have been in no sense to blame, was corrupt. Bereft of his property by fraud of others, and deprived of his right to reclaim it or its equivalent because they, not lie, had been dishonest, he would indeed have reason to say that the law was a mere sham and that the courts were without efficiency to redress private wrongs. We have not overlooked the numerous authorities cited by appellants to the effect that the law will not lend its aid to the enforcement of an immoral agreement or one in contravention of public policy, and from this rule of law there can be no dissent. The extent to which the cases go is, howevei;, to enforce the rule against the parties to the wrong, not against the innocent victim of it. We find no support in the authorities, not in morals, for the construction that one mav wrong another and then set up the wrono- as a defence, when called to account. The judgment of the lower court is affirmed. William J. Mills, C. J., Edward A. Maim, A. J., John R. McFie, A. J., Frank W. Parker, A. J., concur Abbott, A. J., not having heard the argument took no part in this decision.