Stickney v. Parmenter

Rowell, J. This is debt on a judgment of the probate court rendered against the defendant on settlement of his account as administrator of the estate of the plaintiff’s intestate. Plea, discharge in bankruptcy. Replication, that the cause of action is a debt created by the defendant’s misappropriation and defalcation while acting in the fiduciary capacity of administrator as aforesaid. Replication traversed. A discharge in bankruptcy releases the bankrupt from all his provable debts except those, among others, that “were created by his fraud, embezzlement, misappropriation, or defalcation while acting as an officer or in any fiduciary capacity.” Bankr. Act 1898, § 17. In the agreed facts the parties say that upon the facts and the pleadings, they are at issue whether there is a defalcation while acting in a fiduciary capacity, within the meaning [61] of said act, and that that question is submitted to the court as a question of law. That is the only question submitted to the court below, and the only question raised by the pleadings, and consequently the only question before us, though another has been argued, namely, whether by proving the debt and talcing a dividend the discharge bars the action, even if the debt is fiduciary. The “fiduciary capacity” meant by said act, embraces only cases of technical trusts, not cases of implied trusts; and that an administrator is a technical trustee, and therefore within the act, cannot well be doubted. Cronan v. Cotting, 104 Mass. 245, 6 Am. Rep. 232; Hennequin v. Clews, 78 N. Y. 427, 32 Am. Rep. 641; III U. S. 676; Laramore v. McKenzie, 60 Ga. 532; 16 Am. & Eng. Enc. Law. (2d Ed.) 780; Wolcott v. Hodge, 77 Am. Dec., note 384. But it is claimed that to avoid a release by the discharge, it must appear that the debt was created by a defalcation involving bad faith, and that that does not appear. But it appears that the defendant did not keep the money of the estate separate, but mingled it with his own, and that therefore the probate court charged him with interest to more than half the amount of the judgment. It must be taken, on this record, that such mingling was intentional on the part of the defendant, and therefore it was wrongful, a misappropriation, and a conversion to his own use. It was a breach of trust committed in bad faith, and a defalcation, within the meaning of the act. Mr. Pomeroy says that absolute and most scrupulous good faith is the very essence of a trustee’s obligation, and that for a trustee to mix trust funds with his own is a breach of the duty of good faith. 2 Pom. Eq. Jur. §§ 1075-1076. Cf. Drake v. Wild, 65 Vt. at page 616, 27 Atl., at page 428. And see Laramore v. McKenzie, 60 Ga. 532; Bracken v. Milner, 5 [62] Am. Bankr. R. 23, 104 Fed. 522; Heffren v. Jayne, 39 Ind. 463, 13 Am. Rep. 281; Flanagan v. Pearson, 42 Tex. 1, 19 Am. Rep. 40. It is further claimed that that part of the debt made up of interest cannot be said to have been created by the defalcation. But as the interest is but an incident of the principal, it follows the principal, and must be regarded as part and parcel of it, in analogy to the doctrine of accession. The claim that some of the assets of the partnership went in to swell the judgment, and that such part thereof is released by the discharge, as it never came into the hands of the defendant as administrator, is not sustained, for it appears that the judgment was not thereby increased, but decreased. Judgment affirmed.