Andrews Institute for Girls v. New York Steam Co.

Second Circuit

Andrews Institute for Girls v. New York Steam Co.

266 F. 872, 1920 U.S. App. LEXIS 1771

CourtCourt of Appeals for the Second Circuit

DecidedJune 2, 1920

DocketNo. 244

StatusPublished

This text of 266 F. 872 (Andrews Institute for Girls v. New York Steam Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Andrews Institute for Girls v. New York Steam Co., 266 F. 872, 1920 U.S. App. LEXIS 1771 (2d Cir. 1920).

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Opinion

HOUGH, Circuit Judge

(after stating the facts as above). By considering the point decided on the motion in the court below and presented by this appeal, we are not to be understood as expressing approval of the order permitting intervention. As to the propriety of granting permission to intervene we express no opinion; the point not having been argued.

Assuming as true the allegation that Stevenson bought Steam Company stock from St. John individually, it is immaterial. Indeed, the Foresters do not pray for a lien or other relief in respect of that sum. The demand of the Foresters is contained in what is called an answer to the bill of complaint in foreclosure, and is set up by way of counterclaim, apparently under equity rule 30 (201 Fed. v, 118 C. C. A. v). Whether this is a proper, or even permissible, method of presenting [875]*875such a claim as this, is another matter, not argued, and as to which no opinion is expressed.

What the Foresters want, however, is plain enough, viz. to have their junior mortgage bonds, representing Stevenson’s very ill-judged investments, promoted in lien so as to outrank all the Steam Company securities held by the Institute. To reach this result by any kind of proceeding in this suit in equity, the Foresters must show a cause of. action against the Institute.

[1] Such cause of action is asserted to exist because, when Stevenson bought the junior mortgage bonds, he committed a breach of the trust imposed upon him by law as president of the Foresters, and that the Institute “procured” Stevenson to do what he did through St. John, and of such breach of trust by Stevenson St. John had knowledge. The use of the word “procured” in this connection is singular. Its meaning in criminal law is well known and can be accurately stated; but in a bill in equity it cannot be stretched to mean “knowingly induced.” Indeed, its use on the civil side may be called a solecism and its meaning vague. To knowingly induce a trustee to violate his trust for the pecuniary advantage of the inducer is an obvious fraud, and would be within the decision in Fyler v. Fyler, 3 Beav. 550. But no such cause of action is here well pleaded.

[2] Perhaps a more fundamental objection to the claim attempted to be set forth is that there are no allegations of fact showing that Stavenson was in any legal or accurate sense of the word a trustee, or that in buying the junior bonds of the Steam Company he committed a breach of any trust. No such trust relation can be spelled out of the statutes to which we are referred, and while in a certain sense any corporate officer who improvidently invests the corporate funds is violating his trust, that popular locution is much too vague to warrant any such relief as was approved in theory, but denied in fact, in the Fyler Case, and is here attempted.

[3] In short, this intervener is at the best in the position of one loaning money to an embarrassed corporation and taking security therefor, who deems himself in equity entitled to a lien for his loan superior to that of mortgages existing when he loaned. That no such equity exists was adjudged in Farmers’ Loan, etc., Co. v. Bankers’ etc., Co., 148 N. Y. 315, 42 N. E. 707, 31 L. R. A. 403, 51 Am. St. Rep. 690, and cases cited.

No cause of action being shown entitling the Foresters to a lien other than the lien of the bonds which they have, the order below was right; and it is affirmed, with costs.

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HOUGH, Circuit Judge

(after stating the facts as above). By considering the point decided on the motion in the court below and presented by this appeal, we are not to be understood as expressing approval of the order permitting intervention. As to the propriety of granting permission to intervene we express no opinion; the point not having been argued.

Assuming as true the allegation that Stevenson bought Steam Company stock from St. John individually, it is immaterial. Indeed, the Foresters do not pray for a lien or other relief in respect of that sum. The demand of the Foresters is contained in what is called an answer to the bill of complaint in foreclosure, and is set up by way of counterclaim, apparently under equity rule 30 (201 Fed. v, 118 C. C. A. v). Whether this is a proper, or even permissible, method of presenting [875]*875such a claim as this, is another matter, not argued, and as to which no opinion is expressed.

What the Foresters want, however, is plain enough, viz. to have their junior mortgage bonds, representing Stevenson’s very ill-judged investments, promoted in lien so as to outrank all the Steam Company securities held by the Institute. To reach this result by any kind of proceeding in this suit in equity, the Foresters must show a cause of. action against the Institute.

[1] Such cause of action is asserted to exist because, when Stevenson bought the junior mortgage bonds, he committed a breach of the trust imposed upon him by law as president of the Foresters, and that the Institute “procured” Stevenson to do what he did through St. John, and of such breach of trust by Stevenson St. John had knowledge. The use of the word “procured” in this connection is singular. Its meaning in criminal law is well known and can be accurately stated; but in a bill in equity it cannot be stretched to mean “knowingly induced.” Indeed, its use on the civil side may be called a solecism and its meaning vague. To knowingly induce a trustee to violate his trust for the pecuniary advantage of the inducer is an obvious fraud, and would be within the decision in Fyler v. Fyler, 3 Beav. 550. But no such cause of action is here well pleaded.

[2] Perhaps a more fundamental objection to the claim attempted to be set forth is that there are no allegations of fact showing that Stavenson was in any legal or accurate sense of the word a trustee, or that in buying the junior bonds of the Steam Company he committed a breach of any trust. No such trust relation can be spelled out of the statutes to which we are referred, and while in a certain sense any corporate officer who improvidently invests the corporate funds is violating his trust, that popular locution is much too vague to warrant any such relief as was approved in theory, but denied in fact, in the Fyler Case, and is here attempted.

[3] In short, this intervener is at the best in the position of one loaning money to an embarrassed corporation and taking security therefor, who deems himself in equity entitled to a lien for his loan superior to that of mortgages existing when he loaned. That no such equity exists was adjudged in Farmers’ Loan, etc., Co. v. Bankers’ etc., Co., 148 N. Y. 315, 42 N. E. 707, 31 L. R. A. 403, 51 Am. St. Rep. 690, and cases cited.

No cause of action being shown entitling the Foresters to a lien other than the lien of the bonds which they have, the order below was right; and it is affirmed, with costs.

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266 F. 872, 1920 U.S. App. LEXIS 1771, Counsel Stack Legal Research, https://law.counselstack.com/opinion/andrews-institute-for-girls-v-new-york-steam-co-ca2-1920.

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