Haven v. Wentworth

Woodbury, J. delivered the opinion of the court. Our statute in relation to trustees is a substantial transcript of a statute in Massachusetts on the same subject; and both of these statutes in many respects resemble the custom of London concerning foreign attachments and garnishees.! 1) . J . ? , , , . / Hence the decisions under the above custom and under the Massachusetts statute have always been thought entitled to much weight in the construction of our own statute. Under them it has been held, that a person cannot be charged as a trustee for “ credits” or “ debts,” unless an absolute debt or liability exist against him in favor of the principal. Bac. [95] Ah.“ Custom of LondonA H. 1.—1 Rolle Ab. 551.—1 Mass. Rep. 471.—3 Mass. Rep. 33, 68.—11 Mass. Rep. 493. (1) Wendell terai-1802- (2) 9 Mass. 261< 438— Sed. 14 Mass, Rep. m For the principal could not recover of the supposed trustee a debt still contingent; and the creditor of the principal, possessing only his power, cannot have judgment, when no debt exists. s oh endum in presentí cm t futuro. As this is an equitable proceeding, it has been contended, that the debt due from the trustee must be equitable as well as legal; but the soundness of this distinction need not be settled in the present case.(l) In respect to “ goods and effects” in the hands of the trustee, it. has been held that he is not chargeable for them, unless they are the subject of attachment and execution, or unless a present right of action for them exists in favor of the principal.(2) The application of these doctrines to the disclosure under consideration has, after some hesitancy, inclined us to an . . , . , . , , opinion, that trie trustee ougnt to be discharged. The origin of the insurance association, the office held by the trustee, the form of taking the premium notes, the invariable usage and understanding as to the disposition of the notes, which was in itself reasonable, and had been recognized by the principal, all indicate, that the credits of each member on the agent’s books, were merely hypothetical and contingent. They were always subject to a deduction of all his premium notes returned, his proportion of the current expenses of the association, and the amount of his losses on policies subscribed in that office. No member would consider his interest in the apparent credit upon the books, as absolute ; he would rather regard it as a contingent fund, subject to be reduced, or even extinguished, according to the extent of the above deductions ; and consequently, the fund would be bound by the usage. 9 Mass. Rep. 155.— 10 do. 26.—11 do. 85.-7 do. 43.—13 John. 44.* Regarding the fund then as a “ debt,” it was so fast as the premium notes were collected, subject to particular appropriations ; and before the last disclosure, those appropriations had been made to the amount collected. (1) 12 j0hn. 220. — t Mass. Rep. 439. — 9 Mass. Rep. 537‘ (2)8 John. tos. —3 East, "m But other notes remained in the hands of the trustee, which may, for ought that appears, be valuable and be itere-after collected. The trustee, however, cannot be charged on account of them; because, as “ goods and effects,” they, being negotiable notes, are not the subject of attachment or execution.(1) And also, because no action could have been sustained for them bv the principal. Trover would not have •> 1 r lain, as there was no conversion ; and assumpsit m any form would have failed, as they Mad neither been demanded by the principal, nor collected by the agent.(2) An additional reason, which is paramount to all others, and which characterizes the whole case, is, that the premium notes, whether uncollected or collected, are upon the disclosure to be considered a qualified pledge for specific purposes ; and till those purposes are accomplished they cannot be reached in the hands of the agent. This clearly distinguishes it from all the cases concerning set-offs by general brokers. 1 D. & E. 113.—16 East 58.—1 Maul. & Selw. 494.—2 do. 112.—4 do. 566. Because those cases rest on general principles, and are not cases where an association like this was formed ; the premium notes running to the broker himself; and an established usage existing among the members for the broker to hold the proceeds of the notes as security to the insurers in the office. We are aware, that our view of the case may, in the event of the funds of the principal being insufficient to satfy all the demands of the office, cause some difficulty in the apportionment of the funds among the claimants. If the principal be solvent, the question is of no consequence ; but if insolvent, these funds might, in analogy to bankrupt estates, and to voluntary assignments for the benefit of creditors, be divided in an equal ratio, among those entitled to receive them. Or they might, as appears more feasible and proper under all the circumstances, be paid over by the agent to the creditors in the office, according to the priority in the date of their claims. [97] Neither of these courses would furnish any better- ground of complaint, than a separate creditor' would have in England, where his claim on partnership funds is postponed till all the partnership debts are first satisfied. Cow. 445, Fox vs. Hanbury.—3 B. & P. 239.—Doug. 650.—1 East 367.-2 John. 282. It is apparent, that in neither of these courses, will the principal be able to withhold or conceal these funds from his honest creditors ; because, in the end, they are all liable to the payment of his debts ; first, the debts incurred in the association, and next the debts out of the association. As little, too, can the trustee evade responsibility; because, in due time, he must account for all the funds with somebody ; and the only present complaint is, that he first appropriates them to the payment of those who have become creditors in the office. We have attempted to show, that under all the circumstances, this complaint is ill founded; but if expectations are entertained, that, after the payment of that class of creditors, a balance will remain in the hands of the trustee, this action may be continued till that payment is made. The plaintiffs may then have the first lien upon such sum as shall remain. If no such expectations are entertained, let the trustee be discharged. Trustee discharged. Footnotes [*] 31 Jfilm. 230. — 1 Brodemk & Bingham, 223.