Hutchins v. Sprague

[476] The opinion.of the court was delivered by Richardson, C. J. It is not disputed in this case, that previous to the commencement of this action, certain goods, accounts and notes passed, from the principal into the hands of the trustee ; nor is it disputed, that the amount due from the principal to the trustee, upon claims existing at the time the goods thus passed, together with the debt the trustee assumed to pay at that time, is greater than the value of the goods together with the amount of all the money that has been collected on the notes and accounts. But it is contended, on the part of the plaintiffs, that the goods, notes and accounts went into the hands of the trustee under a contract that was, with respect to creditors, fraudulent and void ; that such a contract could give to the trustee no lien upon the goods and money received ; and that notwithstanding the debts due from the principal to the trustee may exceed the amount which has come to the hands of the latter, still the plaintiffs are entitled to recover, the trustee having no right to apply what he has received to the payment of the debt due to him from the principal. And the question is, whether fraud in the contract between the trustee and the principal would under the circumstances of this case render the trustee chargeable. If it would, there must be a new trial to ascertain if there were fraud ; if it would not, then the trustee is entitled to judgment on the verdict. It is very clear, that, if the contract between the trustee and the principal were fraudulent, and these plaintiffs had attached the goods while in the hands of the trustee, the plaintiffs must have held the goods. For as the only title, which the trustee could have shown, must have rested upon the contract he made with the principal ; that being fraudulent and void, his title must have failed altogether. No lien could have been created by a fraudulent contract. [477] When a debtor dies insolvent, and one of Ms creditors has specific property in his hands on which he has no lien, upon the question whether such creditor can retain the property and set up his debt as an answer to a claim of it by the executor or administrator of the deceased, the judges of the supreme court of Massachusetts have been divided in opinion, Jackson and Putnam, Justices, having been of opinion that the creditor might retain the property, and Parker, C. J. and Thatcher and Wilde, Justices, being of a contrary opinion. 15 Mass. Rep. 389, Jarvis v. Rogers. In the case of Allen v. Megguire, 15 Mass. Rep. 490, it was decided that a mere creditor having goods of his debtor in his hands has no lien upon them and may he charged as the trustee of his debtor on account of them. But in the case of Thomas v. Goodwin, and Trustee, 12 Mass. Rep. 140, it was decided, that where one who was summoned as trustee had received goods of the principal debtor under a fraudulent contract, but before the service of the prodess upon him had paid debts of the principal to the amount of the value of the goods received, he was entitled to be discharged. As the fraud, in this last case, rendered void the contract under which the goods were received, it may seem at first view, difficult to reconcile these two decisions and to understand why the trustee might not protect himself by a debt previously contracted as well as by the payment of money afterwards on account of the principal. But we think they may be reconciled on the ground stated in the last mentioned case, which is in substance, that there is a locus ' penetentm, of which if the trustee avail himself, before the process is served upon him, by restoring the goods to the principal, he cannot be charged ; and that a bona fide payment to the value of the goods made to the creditors of the principal is tantamount to a restoration of the goods. And although the trustee might not have been able to avail himself of this principle for [478] his protection, had the goods been seized in his hands by virtue of a writ of attachment on the goods of the prin-eipai, we think it just and reasonable to adopt and apply it in this case. However fraudulent the contract under which the goods went into the hands of the trustee might have been, if, before the service of the process, he had repented of the fraudulent purpose and restored the goods to the principal, it is clear, he would have been entitled to be discharged in this case. And we see no reason why a bona fide payment of debts due from the principal to the full value of the goods, or even an actual and boña fide assuming to pay such debts to that value, should not be deemed equivalent in this case to a restoration of the goods. We are, therefore, of opinion, that there must be in this case Judgment on the verdict.