Candee v. Penniman

Dutton, J. This case stands on a demurrer to a petition in chancery. A brief statement of the principal allegations contained in it will show that the demurrer must be overruled. The petition alleges that the Beacon Dam Company issued bonds to a large amount, and mortgaged its real estate and machinery to Penniman and others as trustees, who are some of the respondents, to secure them. The corporation afterwards went into insolvency and is in fact utterly insolvent. Abbott, one of the respondents, became the owner of some of the bonds, and lodged several of them with the Broadway Bank of New York, as security for advances made by the bank to a less amount than the bonds. Candee, the petitioner, holding a note against Abbott, sued him and factorized the Beacon Dam Company as the debtor of Abbott, on account of his interest in the bonds which he had lodged with the Broadway Bank. This suit is still pending. He then, .called on the directors of. the Broad [238] way Bank to ascertain what their claim on the bonds was, but they refused to disclose the state of their account with Abbott, insisting that, as the holders of the bonds, they had a right to demand and receive the full amount of them. The mortgaged property has been sold with the consent of the Beacon Dam Company, the trustee in insolvency, and the trustees to secure the bonds, and enough of the avails is in the hands of the trustees, one of whom holding the funds resides in this state, the others residing out of the state, to pay all the bonds in full. The trustees are desirous of paying off all the bonds and of relieving themselves of the trust, and some of them insist that they have the right to do it, without regard to the rights of the petitioner. He asks that the directors of the Broadway Bank’ may be. required to disclose the situation of their account with Abbott, and that the trustees may be enjoined from paying the bonds to the bank, and may be required to retain enough of the funds which they have received from the sale of the mortgaged property to satisfy any judgment which he may recover in his suit against Abbott. He makes no claim to the bonds except as subject to the just demands of the bank, and the trustees are ready and willing to pay the bank whatever is justly due, whenever that can be ascertained. On this state of facts, which the demurrer admits,' we think the petitioner is clearly entitled to relief. The action both of the legislature and of the courts in this state, has been in favor of the application of all a debtor’s property, except necessaries, to the payment of his debts. If Abbott had retained his bonds in his own hands, he would have been entitled .to the aid of a court of equity to compel the trustees, if necessary, to apply the moneys which they hold in trust to the payment of the bonds. His only remedy would have been in equity. The only party which he could have sued at law would have been the Beacon Dam Company, and that is insolvent. The peculiar remedy for a cestui que trust against a trustee, is an application to a court of chancery. Again, as Abbott lodged these bonds with' the Broadway Bank as collateral security for advances made by the bank, he [239] would have had a right to call on the bank for an account, and if necessary to petition a court of chancery to compel a disclosure by the bank. Even if the action of account would have been his appropriate remedy against the bank it is now provided by the statute law of this state that a petition in chancery will also lie. The main question in the case then is, whether Candee by his factorizing suit has become vested with Abbott’s equitable right's. Previous to the statute law of 1850, (Comp. 1854, p. 139,) we suppose he would not. Judah v. Judd, 1 Conn., 309. He would only have acquired the legal rights of Abbott against the Beacon Dam Company. It has not been denied that by the factorizing suit he attached the interest which Abbott had in the bonds, nor that Abbott had an interest in them although they had been lodged with tire bank. The statute of 1850 above referred to gives to the attaching creditor the security which belongs to the debt attached. The inference then is irresistible, that the petitioner has entitled himself to the same claim against the trustees which Abbott had. He has indeed a stronger claim to the interposition of a court of chancery than Abbott. In the factorizing suit he left no copies with the trustees, and if he had they would have been unauthorized and unavailing. The trustees were under no obligations to regard his factorizing suit, as the proceedings in that case made no mention of the bonds, and if they had seen the copy left with the Beacon Dam Company they would not have been apprised that the petitioner claimed the security. held by the trustees. The only remedy for the petitioner was to apply for an injunction to prevent the trustees from paying over the money. The claim of the petitioner is strengthened by the fact that unless enjoined the trustees might pay over the money into a different jurisdiction and compel the petitioner to resort to a court there, in order to obtain his just rights. Again, the petitioner, by force of the same statute, has acquired all the equitable rights of Abbott against the Broadway Bank, and we have seen that he would have had the right to compel the bank to disclose. It has been urged that this application is premature—that, [240] at all events, the petitioner had no right to call upon a court of equity till he had obtained a judgment. But we know of no such limitation to the power of a court of chancery. If it were so, judgments would often be l’endered worthless, through a loss of the only security which would render them of any avail. It can not be doubted that if a creditor should attach a wood lot, he could, while the suit should be pending, enjoin the debtor from cutting off the wood. It has been insisted further, that the proper remedy is to allow the Broadway Bank to collect the bonds, and then to proceed against it to recover the surplus above its demands. But we see no necessity or propriety in compelling the petitioner to pursue such a course. The money to which he will be entitled, if he recovers a judgment, is in this state. The bank has no claim to any money in the hands of the trustees, .except the amount of its demands against Abbott, which the trustees are ready-to pay, and to which payment the petitioner does not object. What good reason can be given why the surplus should go out of the state into the coffers of the bank, for no purpose whatever except to compel the petitioner to go out of the state, and institute a new process there to' compel the bank to pay over the money. We advise that the demurrer be overruled. In this opinion the other judges concurred.