Hammond & Burt v. Noble

57 Vt. 193

Opinion

The opixxioxx of the court was delivered by

Ross, J.

The plaixxtiffs testified that they told the defexxdant, upon the occasion when they gave him the order oxx the railroad compaxxy, “ to keep the moxxey uxxtil they called for it.” The defexxdaxxt testified that they told him “ to keep and use the money until they called for it.” The jury found that the plaintiffs were right in regard to the instruction given by them to the defendant on that occasion. In view of these claims and the verdict, it must be held as settled by the verdict that, under the instructions, the defendant had no right to use the money; but that he was to keep the identical money received from the railroad company on the order for the plaintiffs; that he was to hold the money collected as the property of the plaintiffs. Instead of obeying the instructions, he used the money, by mingling it with his own, and depositing it in his own name, and to his credit in the bank. He thereby converted the plaintiff’s property to his own use. By the conversion, and the unexpected revulsion in his" business, the money was lost to the plaintiffs. The contention is, whether the indebtedness thus created was discharged by the defendant’s composition in bankruptcy. The composition in this respect was just as effectual, and no more so, than a regular discharge in bankruptcy would have been. Scott & Co. v. Olmstead, 52 Vt. 211.

It is enacted by sec. 5117 R. S. U. S.: “No debt created by fraud, or embezzlement of the bankrupt, or by his defalcation as a public officer, or while acting in any fiduciary character, shall be discharged by proceedings in bankruptcy.” To avoid the effect of the composition proceedings, it is incumbent upon the plaintiffs to show that the debt which they are seeking to enforce was created in one of the ways named in the above quoted section. It is 'not contended that it was created by embezzlement, or by the defendant’s defalcation as a public, officer. The construction placed upon the last clause of this section, “or while acting in any fiduciary character,” by the United States Supreme Court, in Hennequin v. Clews, 111 U. S. 676, is that this clause relates back to the preceding clause, and includes only debts created by defalcation while acting in a fiduciary character; in other words, that there must be a trust rela tion established independent of the transaction out of which the indebtedness arose. Being1 an United States statute, the construction placed upon it by the United States Supreme Court is binding upon this court. The learned judge who delivered the opinion admitted that the construction was contrary to a majority of the decisions of other courts in regard to this clause of the section, as well as to the decisions of the English court in regard to a similar provision in the English Bankrupt Act. But the decision finds support from the decision of the United States Supreme Court in regard to a similar provision in the Bankrupt Act of 1841. Chapman v. Forsyth, 2 How. 202. The County Court, in its charge to the jury, placed the- case on the- ground that it came within the fiduciary clause of the- above quoted section. Although this was technical error, it was harmless, if the verdict of the jury brings it within the first, or fraud, clause of the section. On the- verdict, it is within this clause under the decisions of this court in Johnson v. Worden, 47 Vt. 457, and Darling v. Woodward, 54 Vt. 101.

In each of these cases the defendant had converted to his own use, without the- consent of the plaintiff, property which was in his possession, but which he held under the contract between him and the plaintiff, as collateral security for a debt which he owed the plaintiff’. In Johnson v. Worden, the property, thus held and converted, was a yoke of oxen conditionally sold by the plaintiff to the defendant; and, in Darling v. Woodward, the property was twenty-nine sheep, of which the defendant had given the plaintiff a bill of sale as collateral security for signing a bank note. Before the- note was paid the defendant, who had always retained possession of the sheep, sold them. The court held that the debts, thus created, were debts created by fraud, and not discharged by the respective discharges of' the defendants in bankruptcy. From the circumstances attending the transactions in both cases, it may well be inferred that the defendants intended no wrong to the plaintiffs by such sales, further than what arises from the sales, but supposed they should be able to meet the indebtedness for the payment of which the property was pledged, when it became due. But each was guilty of converting or using property, which, as between him and the plaintiff, he had no right to use in that way; and such use operated to deprive the plaintiff of his right thereto. No debt, in regard to such sheep or oxen, existed between the respective parties to the suits until such sale and conversion of the property by the defendant. The debts thei*eby created were held to have been created by active fraud. In the case at bar, the money collected was the money of the plaintiffs. The defendant, under the instruction found to have been given by the plaintiffs by the verdict of the jury, had no moral, nor legal right to use the money. His duty was that of a bailee, without hire, to keep it. While he discharged this duty, he was not the debtor of the plaintiffs in respect to the money. He only became their debtor when he wrongfully used the money. By using it, although he then intended to repay it to the plaintiffs, and felt that he was fully able so do so, he wrongfully deprived the plaintiffs of their property, and subjected them, by his voluntary, intentional act, to the liability of losing the same. He substituted his individual ability to respond in damages for property which belonged to the plaintiffs. Standing in the same relation to the money which the defendants in Johnson v. Worden, and in Darling v. Woodward, supra, did to the oxen and sheep; he, like them, wrongfully and intentionally used the property intrusted to him to the detriment and loss of the plaintiffs. In principle, the case at bar cannot be distinguished from the cases just cited. The decisions in those cases control the decision in this case. It is contended that inasmuch as the exceptions state “there was no evidence tending to show any actual fraud or any fraudulent intent in the defendant’s mingling the money with his own and using it,” that no actual fraud can be found in the transaction. But this statement follows the statement that the defendant, on collecting the money, immediately mingled it with his own and used it. This of itself, as we have seen, was a wrongful and fraudulent act, which changed' the relation of the defendant to the money from that of a bailee to that of a debtor. On the verdict, the debt thus created was not different in moral quality from that created by a clerk who, without consent or authority, uses his employer’s money, or of a treasurer of a corporation who, in like manner, uses the money of the corporation, — each, at the time, intending and honestly supposing they were, and should be, able shortly to return the same, but who by losses, perhaps arising in the use of the money, find themselves bankrupts, and so defaulters. On this construction of the exceptions it is not contended that the case of Neal v. Clark, 95 U. S. 704, in which it is held, that the fraud, to avoid the effect of a discharge in bankruptcy, must be actual fraud, in distinction from constructive fraud, is in conflict with the decisions of this court on that subject. The facts in Neal v. Clark show a clear case of constructive, or implied fraud, involving no imputation of bad faith, moral turpitude, or intentional wrong. In the case at bar, there was bad faith, a betrayal by the defendant of the trust the plaintiffs had reposed in him, and an intentional act that was legally wrong. The debt thus created was not discharged by the defendant’s composition with his creditors under the provisions of the Bankrupt Act of 1807.

The court properly excluded the offered evidence. The scope of that testimony was to show that, at the time the defendant committed the wrong, and thereby created the debt, he honestly supposed that he was amply able financially to repair the wrong, but unexpectedly found that he could not do so. It did not tend to change, in law, the character of the act out of which the debt arose.

The result is no error working injury is'found in the trial and judgment of the County Court, and that judgment is affirmed.

The defendant has preferred a petition for -a new trial, on the ground that one of the jurors who tried the case was an alien, incompetent to act in that capacity, and that such incompetency was unknown to him, or his counsel, until after the rendition of the judgment in the County Court. It is incumbent on the defendant to establish such alienage. The competency of the juror will be presumed until the contrary is shown. Keenan v. State, 8 Wis. 132. To establish the incompetency, the petitioner has introduced as witnesses the juror and his uncle. The uncle testifies that he judges from the time at which he was told by his grandmother that his grandfather came to Canada, that the juror’s father was born in Canada. The juror testifies that he has understood that lie was born in Canada, but never was told so by his father, or mother, or any near relative that he can name, but was told by his father that he (the father) was born in Dutchess County, New York. It is contended by the plaintiffs, the petitioners, that hearsay, or common reputation among family connections who may be supposed to know, while admissible to establish pedigree, legitimacy, and marriage, is not admissible to establish particular facts like the time or place of one’s birth. Such is the holding in the cases cited by the plaintiffs’ counsel. King v. Erith, 8 East, 539; Wilmington v. Burlington, 4 Pick. 173 ; Union v. Plainfield, 39 Conn. 563; Carter v. Montgomery, 2 Tenn. Ch. 216; Mima Queen v. Hepburn, 7 Cranch, 290. In the latter case Chief Justice Marshall states the doctrine contended for.

In Wharton on the Law of Evidence, s. 208, the law of this subject appears to be carefully stated as follows: “ Pedigree * * * includes not merely the relationships of a family, but the dates of the births, deaths and marriages of its members, when the object of such evidence is to trace relationship. Legitimacy is necessarily involved in the scope of such declarations. It has been doubted whether the place of birth can be proved by such declarations. But the better opinion now is, that declarations are admissible to show such place when genealogical questions only are concerned. It is conceded, however, in settlement cases, hearsay proof of this class is inadmissible.”

But whatever view is held in regard to the admissibility of such testimony in this proceeding, the testimony fails- to establish the incompetency of the juror. All the testimony is to the effect that the grandfather was an American citizen. If the hearsay testimony is excluded, there is no evidence to show that the juror or his father was born in Canada. If the hearsay testimony is admitted, it shows that the juror’s father was born and lived most of the time in the States, and if the juror was born in Canada, it was under such circumstances that it was decided, on the testimony of his uncles, that he was a voter in this State without naturalization; in other words, that he was not born an alien. In either view of the law relative to the admissibility of this class of testimony, it fails to establish the alienage of the juror.

The petition is dismissed with costs.