Hutchinson v. Lord

1 Wis. 286

• Court: Wisconsin Supreme Court
• Decided: June 15, 1853
• Status: Published

Opinion

By the Gow%

Crawfoed, J.

It appears from, tire "bill of exceptions in this case, that the goods, for the taking of which this action was instituted, were claimed by the plaintiff below by virtue of an assignment made to him by Caleb Wall, on the 28th day of June, 1849, for the benefit of certain creditors of Wall, named in the schedules attached to said assignment ; that, on the same day, but after the execution of the deed of assignment, these goods were attached, at' the suit of Holbrook, Carter & Co., against the said Caleb Wall; that the defendant Hutchinson was United States marshal for the District of Wisconsin at the time of the taking of the goods, to whom the writ of attachment from the United States District Court for said district was directed ; that the defendant White was his deputy, and that Finch and Lynde were the attorneys of the plaintiffs in said writ of attachment. If the assignment from Wall to Lord was valid in contemplation of law, then Lord acquired the property in the goods which could not be disturbed ; but if, by that assignment, he obtained no title to the goods, against the creditors of Wall, the assignor, then his possession was not legal or sufficient, as against such creditors ; so that we deem it unnecessary to treat of the position taken in argument by the counsel for the defendant in error, that, possession being shown in the plaintiff below, it was enough in this case.

As a general rule, in this form of action, the possession of the plaintiff is sufficient to enable him to maintain his suit in that respect; but where a paramount right is shown to be in a third person, and the defendant connects himself properly with such third person, the rule is otherwise. And here we may remark, that the question whether Holbrook & Co. were, at the time of the taking complained of, creditors of Wall, is sufficiently answered by reference to the deed of assignment, and schedule R, attached thereto. This instrument is executed, under seal, by Caleb Wall, of the one part, and by Gfeorge P. Lord, the plaintiff below, of the other part. The statement of indebtedness by Wall “to the several persons mentioned in the schedules,” and “in the several sums of money set opposite their respective names ” in. the said schedules, and the fact that Holbrook, Carter & Co. are included and named in schedule R, must, we think, operate as an estoppel. Lord cannot controvert the fact of such indebtedness.

We are now brought to a consideration of the objection urged to the deed of assignment. By it, the assignee is empowered “ to sell and dispose of the assigned goods, &c., in such manner, either at public or private sale, cmd upon such terms, and for such prices as to him shall seem advisable.” It authorizes him to collect the assigned debts, and “ to compound, compromise cmd settle any of said debts, in such manner and upon such terms as to him shall seem expedient, and, upon such settlement, to release and discharge the same.” And it further declares, “ that the said party of the secondpa/rt, while acting m good faith, shall not be made or held personally Viable in the premises in cmy ma/rmer?

The plaintiffs in error insist that the provision in ths assignment, which we have last cited, vitiates it, inasmuch as it restricts the liability of the assignee.

Willis, in his treatise on the duties and responsibilties of trustees, says : “ A trustee is bound- to manage and . employ the trust property for the benefit of the cestui que trust, with the care and diligence of a prov- -*■ ° x ident owner, and, so far is this rule extended, that however fully a discretionary power of management may have been given, yet, if the trustee omit doing what would he plainly beneficial, he will, be answerable.” And in another place he says : “ if, in the management of the trust property, they (the trustees) be guilty of fraud or negligence, want of cautdon, misrepresentar tion, mistake or concealment, or wilful misconduct, or misapplication, or omit doing what is plainly beneficial for the estate, notwithstanding the utmost latitude be given them for conducting the trust, they will be guilty of a breach of trust.” (Willis on Trustees, 125, 172-3; Lewin on Trusts, 299.

In Story's Equity Jurisprudence, chap. 32, .§ 1272 and 1273, it is said :

“ Courts of equity have laid down some artificial rules for the exercise of the discretion of trustees, which import (to say the least) extraordinary diligence and vigilance in the management of the trust property. Thus, for example, if a trustee should lay out trust funds in any stock, in which a court of equity itself was not in the habit of directing funds in its own possession to be laid out, although there should he no maxa eides, yet, if the stock should fall in value, he would be held responsible for the loss.” See also Hovendon on Frauds, 486.

The application of these authorities to the case before us is obvious. In the absence of the clause in this assignment which is objected to, the law, whether administered in its own courts of in courts of equity, would impose upon a trustee or assignee the obligations and responsibilities spoken of in the works which we have quoted. But the parties to this deed of assignment have chosen not to leave the liability of . , _ _ , _ , the assignee where the law places it, but to provide expressly that he “ shall not be held or made personally liable in the premises while acting in good faith.”

The trustee or assignee may in the utmost good faith omit to do some act which would b & plainly beneficial to the trust property or to the cestui que tomst, and for this omission the law would hold him personally liable. He might, with no mala fides whatever, neglect to do that which a provident owner would deem proper to be done in relation to the property. Nay, it is laid down by very high authority, that “ gross negligence is, or, at least, may be, entirely consistent with good faith and honesty of intention.” Vide Story on Bailments, 15. He might, in good faith, be incautious, or commit mistakes detrimental and highly injurious to the cestui que trust, and in all these cases, the law would hold him personally liable ; but, by the instrument before us, this liability is taken away, provided he has acted in good faith.

A trustee or assignee for the benefit of creditors, is not intended to be a mere passive depository of the estate, (or title,) but he is “ bound to exert himself actively” in the execution of the object for which the assignment is made, and certainly the obseavance of good faith alone, would not come up to a full discharge of the duties imposed.

Without adverting to the numerous cases in which the trustee has been held to the liability we have above stated, we will refer to the recent case of Litchfield and others vs. White and Leonard, cited at the bar (3 Sandford's R., 545.) In that case the assignment was held to be fraudulent and void, because it contained a provision that the assignee should not be liable or accountable for any loss that might be , u ~ t 1 sustained by the trust property, or the proceeds thereof, unless the same should happen, by reason oj his own gross negligence or* wilful misfeasance. Apart from this provision, the assignee would be liable, as we have seen, for gross negligence or wilful misfeasance, and the effect oí the provision would have been to relieve him from all other personal liability, and so in the case at bar, the effect of the provision would be, to relieve Lord from all personal accountability whatever, so long as his acts were m good faith.

We are unable to see any difference in principle between the cases. In the very able opinion of the court, given by Mr. Justice Sandford, in the case just cited, he says : “The effect of the assignment, therefore, is to withdraw the debtors property from the reach of creditors pursuing their lawful remedies, and to place it in the hands of any assignee, where it may be wasted and lost, unless he chose to exercise a much greater degree of diligence than he has undertaken to bestow upon it. The property is vested in a trustee,, who by the debtor’s act, without the assent of the creditor’s, it exonerated from the principal le gal liabilities of trustees. This is the practical operation of the assignment, as expressed upon its face, and to our minds it discloses an intent to hinder and delay creditors. Every provision in am assignment, tohich exempts the assignee from amy liability that he would by law be subjected to 'as assignee, is of itself a badge of fraud. The insertion of clauses which in their operar tion may lead to the waste and loss of the property, declares an intention on the part of the insolvent debtor, to devote Ms property to some purpose other than that of the payment of his debts.

ijij^ agsignor iSj in law, deemed to have intended all consequences which may legitimately flow from the provisions of the assignment. We must, therefore, hold that the debtor in this case intended to place his assets in a situation where his creditors could not reach them, and where, through his own sub-agency or otherwise, they would be lost to such creditors. The intent to hinder, delay and defraud the latter, thus becomes a necessary legal inference from the provision under consideration.”

The views here taken, are deemed by us entirely appropriate to the case before us.

Indeed, the assignment in the case cited, required at the hands of the assignee a much more ample discharge of his duties, than does the assignment in this case.

It is also insisted, that the authority given to the assignee to dispose of the assigned property “ upon such terms and for such prices” as he should deem advisable, is equivalent to an authority to sell upon credit, and therefore the instrument is void.

That an assignment for the benefit of creditors, which empowers the assignee to sell the assigned property on credit, is fraudulent and void, (unless, in deed, the creditors have assented thereto,) is the settled doctrine in New York at the present time.

In Barny vs. Griffin, 2 Coms. R., 365, Mr. Justice Bronson, in delivering the opimon of the court, says : “ It is an unanswerable objection to the deed, that the assignees are authorized to sell the property on credit? And the reasons which he assigns for his conclusion are cogent. It is true that this part ot the opinion given by the learned judge was not necessary to the decision, for the assignment in that case was held void for another reason; but the objection there so forcibly urged has, since that time, been directly passed upon by the Court of Appeals of that State. In the case of Nicholson and others, appellants, vs. Leavitt and others, respondents, (October term, 1852,) Mr. Justice Gardiner, in giving the opinion of the court, discusses this point upon authorities, and fully sustains the opinion of Judge Bronson. In the latter case, the Court of Appeals held certain assignments, containing a power to sell upon credit, to be fraudulent and void, as to creditors.

Upon principle, as well as upon the authorities we have referred to, we are led to conclude that a power to sell upon credit, given to an assignee by a debtor in failing circumstances, would of itself be a badge of fraud, because it would afford a means, and have a direct tendency, to “ hinder and delay creditors.”

Let us enquire whether the assignment in this case is obnoxious to this objection. The assignee is empowered to sell “ upon such terms and for such prices ” as he shall think proper.

In Le Roy vs. Beard, 8 Howards R., 451, Mr. Justice Woodbury, in defining the power granted by a letter of attorney, in which the agent or attorney was authorized to sell lands “ on such terms in all respects” as he deems advantageous, lays some stress on the word terms.

ITe says: “ Terms is an expression applicable to the conveyance and covenants to be given, as much as to the amount of, and the time of pay mg, the consideration.”

Bouvier, in his “ Law Dictionary,” has it thus: “ Teems, in contracts. This word is used in the civil law to denote the space of time granted to the debtor for discharging his obligation; these are express terms resulting from the positive stipulations of the agreement, as where one imdertahes to pay a certain sum on a certain day, and also terms which tacitly result from the nature of the things which are the object of the engagement, or from the place where the act is agreed to he done. For instance, if a builder engage to construct a house for me, I must allow a reasonable time for fulfilling his engagement.”

On the other hand, the word terms is susceptible of a very varied signification, dependent on the subject-matter spoken of where, or in the sentence in which, it is used. Webster construes it to mean a limit or boundary, any limited time — in law, the limitation of an estate, or the time in which a court is held, and in contracts, “ terms, in the plural, are conditions, propositions stated, or provisions made, which, when assented to or accepted by another, settle the contract and bind the parties.”

This latter definition is a legal, as well as a popular and common one, which does not necessarily confine us to time, as the idea communicated by the words, but in giving it a legal construction as used in this instrument, we must’bear in mind that, if the assignor had intended by this expression to mean prices only, it was wholly unnecessary to have used it at all, for he immediately and expressly gives that power by the words, “and for such prices.”

He seems to use the word terms as distinguished from the Trové, prices. '

But it is unnecessary to draw very nice distinctions on this matter, for, if it be true (and we believe it to "be) as laid down in 10 Wend. 250, that “it is a general principle applicable to all instruments or,agree-t i -in-i - , „ i inents that whatever may be fairly implied from the terms, or language of an instrument, is in judgment of law, contained in it, “ then there is no doubt, that from the peculiar manner in which the word is used in this assignment, it would do no violence to the intention of the assignor, to imply, that, when he expressly gave a control of the prices at which his goods were to be sold, he also by the word terms gave a control of the other conditions, which usually accompany a sale of goods. If a question were made between the assignee and those for whom he acted, as to his power to sell on credit, we have no doubt that Tie could fully justify the exercise of such power, under the language used in this assignment.

It was the duty of the court below, to have instructed the jury in relation to these conclusions of law, arising from the face of this assignment, because they constitute of themselves evidence upon the question of intent which the defendant below had a right to have submitted to the jury.

The tenth instruction asked by the defendants below, and which was refused in the form asked by the court, we think, was a proper one.

If the jury had found from the évidence, and believed “ that the assignment in question was made to hinder and delay the creditors of "Wall,” certainly the plaintiff’s below could not recover, having no right of any kind to the property taken, save that which he derived through the assignment.

The court erred in refusing to charge the jury as asked in this (tenth) instruction.

The defendants below also asked the court among other tilings to charge the jury “ that if the jury find from the evidence that the marshal, Hutchinson, or his deputy, White, defendants in this suit, took the goods in question by virtue of said writ of attachment, and if they also find from the evidence, that the goods were the property of Wall at the time of the levy, then, and in ■ that case the plaintiff cannot recover in this suit.”

This instruction was refused, so far as it related to the defendants, Finch and Lynde, but we are wholly unable to see the rule of law which would exclude it, as to any of the defendants.

It is a plain proposition of law that if the goods were proved to be the property of Wall, then they were liable to be taken in attachment at the suit of Wall’s creditors, and the whole testimony in the case justified an instruction of this kind. Nor do we perceive that if the instruction could be given as applicable to the defendants, Hutchinson and White, it was not equally applicable to the case of Finch & Lynde.

These latter defendants are claimed to be liable only because they gave a bond of indemnity to the defendant Hutchinson, as marshal,"and without enqui-ring how far they could be rendered liable in this respect, (upon which we give no opinion at present:) It is clear, to our minds, that whatever would justify or constitute a defence for Hutchinson and his deputy, would be equally a defence for Finch and Lynde. It was stated at the bar, that' these latter defendants were not in an attitude, before the court below, to avail themselves of the same justification which might be urged by the other defendants, because they had filed a plea of the general issue only ; but by looking into the record we find that on the trial of the case, by leave of the court, these defendants, Finch and Lynde, were permitted to amend them plea, by adding thereto a notice(of justification, similar to the notice filed by the other defendants ; so that if any just distinction could be made on this account, the reason for such distinction does not exist.

It is unnecessary to examine the other errors assigned in this case.

The judgment of the Circuit Conrt is reversed.