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Woodruff v. Boyden

3 Abb. N. Cas. 29 Court N. Y. Superior Court; Special Term, English

Delivered by Sanford, J.

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WOODRUFF v. BOYDEN.
N. Y. Superior Court; Special Term,
June, 1877.

Headnote

Accounting by Trustee.—Purchase by.
The nsason of the rule prohibiting a trustee from claiming that trust property purchased by him was bought for his individual benefit, applies as well where the property bought by the trustee, though not itself trust property, is yet such that by means of it the trust was to be worked out.
Thus, where B and W were each creditors of R, and B executed to W a declaration of trust whereby B agreed to hold a certain judgment in his own favor against R, for the joint benefit of himself and W, in the proportion of their respective claims,—Beld, that on a sale of the judgment debtor’s property under execution issued by B on his judgment, and purchase by B of such property, he could not be allowed to claim he had bought it for his own benefit; but, on the contrary, he must be deemed to have bought it for „the joint benefit of himself and W, under the terms of the trust agreement, and that he must account to W for its real value.
And where, under such circumstances, the trustee mingles such property with his own, the onus of proving its real value is upon him; and on his failing to give satisfactory evidence thereof, the presumptions are against him.
Action for an accounting by a trustee. Trial by the court.
The action was brought by Woodruff, Morris & Co., the plaintiffs, to compel George 0. Boyden, the defendant, to account for certain property purchased by him at a sale by the sheriff of Alleghany county, Pa.3 under execution on a judgment in his favor against John D. Ramaley of Pittsburgh.
The material facts were as follows:
In January, 1875, the plaintiffs, Woodruff, Morris & Co., and the defendant, George O. Boyden, both wholesale merchants in this city, were creditors of said Ramaley, a retail hat dealer in Pittsburgh. Boyden
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was a judgment creditor, having recovered a judgment in a Pittsburgh court on January, 1874, for some $3,700. Woodruff, Morris & Co., were simple contract creditors. On January 4, 1875, Boyden executed to plaintiffs an agreement or declaration of trust, whereby he declared and agreed that he held his said judgment against Bamaley, in trust, for the benefit of himself and the plaintiffs, according to the proportion of their respective claims, to wit: about $2,500 and $3,500 ; that whatever was realized on such judgment was to be shared in such proportion, and whatever was made out the personal property of the judgment debtor should be applied to the judgment.
In March, 1875, he caused execution to be issued on this judgment. The sheriff of Alleghany county levied on Bamaley’s stoók and fixtures, in his hat store, in Pittsburgh. A sale was had. At this sale, defendant, through a third person, one Nieper, bought in a large amount of the property at nominal prices. He then accounted to Woodruff, Morris & Co. only for the nominal amount which was realized on the execution, some $1,400, charging among other things, a sum of $220 as having been paid out by him upon an execution ahead of his own as a prior lien. Plaintiffs did not know of such purchases by him, and received their dividend. Some time afterwards they discovered this fact, and also that the defendant had purchased this prior judgment for half its face (and on the trial of this action it appeared that defendant had been reimbursed this outlay by the judgment debtor).
They then demanded of him an accounting of the real value, and to enforce it brought this action. Upon the trial it further appeared, that the defendant had, for a year subsequent to the sale, continued the business at the same store as the judgment debtor, Bamaley, who ran it as defendant’s agent. In that, the fixtures were used, and the hats and caps bought by
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defendant at the sheriff’s sale. From time to time defendant sent on from this city other hats and caps, which were mingled with what he had bought at the sheriff’s sale, as one common stock, sold as one common stock, and no separate accounts of sales kept. About the expiration of the year, and about the time this action was commenced, he claims he sold the whole to Nieper (the person through whom he bought the goods at the sheriff’s sale), for $300. But he gave no evidence to show that this was a bona fide sale. Some evidence was given on both sides as to the value of the fixtures, and hats and caps, but of very necessity that evidence was general in its character.
John Brooks Leavitt (Nelson, Smith & Leavitt, attorneys), for plaintiffs, urged:
I. The rule which prevents a trustee from claiming, as against an objecting cestui que trust, that trust property purchased by him at a sale, was bought by him for his individual benefit, applies in this case. The defendant did not do a wrongful act in simply buying the property at the sale under his execution. It was a prudent act for him to do so. Judgment creditors are often obliged to do so to protect themselves. But he having bought it, the trust agreement steps in and says, that which you rightfully bought in the exercise of your lawful right as a judgment creditor, cannot by reason of this agreement be claimed by you as your own property, as having been bought for your own benefit. You must be deemed to have bought it to protect us as well. You cannot be heard to urge aught else (Hawley v. Cramer, 4 Cow. 717 ; Van Epps v. Van Epps, 9 Paige, 237; Moore v. Moore, 4 Sandf. Ch. 638 ; affirmed in Court of Appeals, 5 N. Y. [1 Seld.] 256; Cobb v. Goodhue, 11 Paige, 110; Chapin v. Wood, Clarke, 46 5; Whichcote v. Lawrence, 3 Ves. 740; Hoyt v. Martense, 16 N. Y. 231 ; Slee v. Manhattan Co., 1 Paige, 48).
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II. The property of the judgment debtor was not trust property in the strict sense. But the trust created by this agreement consisted in the collection by the defendant out of the property of the judgment, debtor, and it is just as inconsistent with his duty to. plaintiffs, to be allowed to purchase for his own individual benefit, at low prices, as it would be for a trustee to buy in trust property (Same cases).
III. The judgment against Ramaley was defendant’s. The execution was issued by defendant, the sale was by direction of defendant. Plaintiffs could do nothing, except to attend and protect their interests. But this agreement was for that purpose. Had they attended the sale, and bid for their own protection, there would have been two persons whose interest were allied, bidding in opposition. They ought not, therefore, to have attended to it, and that agreement was made that they need not. It made defendant their agent, to protect their interest as well as his own.
IV. The defendant, having bought this property, was bound to keep an account of it, and what it sold for (Hart v. Ten Eyck, 2 John. Ch. 62; Perry on Trusts, 821).
V. Having failed to keep accounts of it, all presumptions as to its value are against him. The articles are to be presumed most valuable of their kind. The burden of disproof is on him (Armory v. Delamirie, 1 Smith's Lead. Cases, 636; Blauvelt v. Ackerman, 23 N. J. Eq. 493 ; Lupton v. White, 15 Ves. 432).
VI. An action for accounting lies. The cestui que trust is not confined to asking for a resale, but may require an account (Fulton v. Whitney, 5 Hun, 16 ; Michoud v. Girod, 4 How. 553 ; Story's Eq. §§ 1261, 1262).
VII. Although the property in question was in a foreign State, this court, as a court of equity, having jurisdiction over defendant’s person, can give the des
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ired relief (1 Story’s Eq. §§743, 744; Burnley v. Stevenson, 24 Ohio St. 474 ). The property being out of the jurisdiction of the court furnishes another ground why a resale should not be ordered, but defendant decreed to pay over the value, as shown upon this trial.
VIII. Plaintiffs being ignorant of these purchases by defendant, when they received the dividend on the nominal amount, no question of ratification or acquiescence can arise.
IX. As to the judgment in favor of Baldwin & Hills against Ramaley, for $220, it being shown that not only did defendant buy it for half its face, but he was reimbursed that amount by Ramaley. He, therefore, cannot charge any of it, but its full amount should he divided according to the trust agreement.
Hiram F. Hatch (Hatch & Van Alen, attorneys), for defendant, urged:
The property purchased by the defendant was not itself trust property. It was sold by the sheriff at public auction, and the defendant had the right to purchase it on his individual account (Sheldon v. Sheldon, 13 Johns. 220 ; Sugden on Ven dors, 388-395).

Under the agreement of January 4, 1875, the defendant became bound to treat the judgment previously recovered by him against Ramaley, as a security for the payment of Ramaley’s - indebtedness as well to plaintiff’s firm as to himself, and to apply the proceeds and avails of such judgment, and all moneys collected thereon, to the payment of such indebtedness,—yro rata—according to the respective amounts due to the plaintiffs and to himself. In the enforcement of that judgment he acted as the agent of and trustee for the plaintiffs.

As such, he became the purchaser at the execution sale under such judgment, of a large amount of pers

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onal property, fixtures and stock in trade of the judgment debtor.

' Suppressing the fact of such purchase, he accounted with the plaintiffs for the nominal proceeds of the property apparently realized by him and credited on the execution, but permitted the judgment debtor to retain possession of the property and carry on the business as agent for himself, he contributing, from time to time, to the stock in trade, other goods and merchandise of like character, as the exigencies of the business or his own convenience required, lio separate accounts were kept of the merchandise thus commingled,—the defendant having assumed that his purchase under the execution sale was for his own individual and exclusive benefit, and that the plaintiffs had no interest therein. His answer to the complaint, which was filed for the purpose of compelling Mm to account for the property thus purchased, alleges that he has not been able to realize for such merchandise the amount paid by him therefor, on the sale, but that what he purchased was for his own individual account and not otherwise.

I am of opinion that he is accountable to the plaintiffs for the merchandise and other property thus purchased by him, and that he was bound to dispose of the same for the joint benefit of both parties. The evidence shows that he has sold and disposed of all such property. Having disposed of it, the burden is then upon him to furnish complete and satisfactory accounts, showing such particulars of the transaction as should satisfy the court of its good faith and of the adequacy of the consideration realized. This he has wholly failed to do. In the absence of such accounts, and in view of the manifest impossibility of obtaining them, evidence has been offered, on both sides, as to the actual value of the property purchased by him under the execution.

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Upon the whole evidence, I am satisfied, and find, that the fair value thereof, exclusive of the fixtures and lease, was $2,084. The fixtures, &c., were worth $800. The lease $925, making, in the aggregate $3,809, for which he should be held responsible, and charged in account.

On the other hand, he is entitled to be credited with the amount specified by him in his account as having been paid by him at the sale, as the price of the property purchased, viz.: $1,317, leaving him accountable for $2,492.

But in his account rendered to the plaintiffs, he deducted from the proceeds of the sale alleged to have been realized by him, the sum of $223.83, claiming to be allowed that amount by reason of his having discharged the prior lien upon the property of a judgment for said sum, in favor of one Baldwin. The evidence shows, and I find as a fact, that this judgment was purchased by him from the judgment creditor, for a sum much less than that actually due thereon, and that the . amount paid by him for it was reimbursed to him by Ramaley, the judgment debtor. Under these circumstances, the amount of such alleged lien should be added to the defendant’s side of his account, increasing Ms liability to $2,715.83.

Distributing this amount between himself and the plaintiffs,—in the proportion of two-fifths to him and ■three-fifths to them (a basis of adjustment winch they concede for the purpose of convenience in computation, although slightly to their disadvantage), they are entitled to receive $1,629.48, as their share of the fund, Interest oh that amount, from July 5, 1875, should be allowed them, together with costs.

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