Coe v. Beckwith — 31 Barb. 339

Majority

p. 339

Coe vs. Beckwith and others.

Headnote

The conveyance of a rail road in trust tq secure bondholders, with authority to the trustee, on default of the company in paying coupons, to take possession and run the road and collect the income, gives no title to money voluntarily deposited to the credit of the trustee for the payment of coupons, by the officers of the rail road company, when the trustee has not taken possession of, or- run the road, nor taken any action against the company by virtue of the trust deed.

Money deposited to the credit of a person designated in the deposit as a trustee, under prior instructions to such person and to the depositary that the money should be applied to the payment of several creditors, cannot be reached by attachment in favor of one of those creditors, against the debtor, in an action at law.

The person to whose credit the deposit is so made is a trustee of the fund, and is entitled to apply to a court of equity for instructions in the execution of his trust.

The creditors have a vested interest in the fund, and the debtor making the deposit cannot afterwards control or divert it.

In án action by the trustee, for instructions, from the court, as to the administration of the trust, neither the sheriff holding a warrant of attachment against the depositor, nor the depositary of the fund, are necessary parties, where the plaintiff in the attachment suit has been joined as a party.

In such action all the creditors need not, in case they are numerous and unknown to the plaintiff, be joined as parties.

A demurrer cannot perform the office of a plea in abatement for want of parties, by furnishing the names of persons deemed necessary parties to the action, who have not been joined.

DEMURRER -to complaint. The substance of the complaint is given in the opinion of the court. The grounds of demurrer were: 1. That this court has no jurisdiction of the person of the defendant. 2. That it has no jurisdiction of the subject of the action. 3. That there is a defect of parties defendants in this, that the following persons should be joined as defendants: (1.) The Cleveland, Zanesville and Cincinnati Rail Road Company; (2.) The United States Trust Company; (3.) John Kelly, sheriff of the city and county of Eew York ; (4.) Francis Vose, Edward Livingston, Charles L. Perkins, and such others as were known to the plaintiff to be holders of the unpaid coupons due on said bonds,

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and of said bonds. 4. That the complaint did not state facts sufficient to constitute a cause of action.

Frederick A. Lane, for the plaintiff.

Frederick E. Mather, for the defendant Beckwith.

The defendant Beckwith has demurred to the complaint in this action. The plaintiff alleges in his complaint that he is a trustee under a trust deed from the Cleveland, Zanesville and Cincinnati Bail Boad Company, conveying the track, equipments, tolls and income of the road, to secure the holders of the first mortgage bonds of the road, amounting •to $500,000, and is authorized thereby to take possession of the road and equipments, carry it on, and apply the proceeds to the payment of the bondholders, after deducting expenses, in case the company make default in paying the coupons, &c. as they become due, for the period of sixty days, after demand by the bondholders. That none of the coupons have been paid by the company since 1856. That the plaintiff, under the trust deed, took possession of the tolls and income, and the same were deposited in the United States Trust Company to the credit of “ George S. Coe, trustee.” The complaint sets forth a letter to the trust company from the president of the rail road company, dated February 19, 1858, informing the trust company that all funds thereafter remitted by the rail road company “ are to be deposited to the credit of George S. Coe, trustee of our first mortgage bonds, for the purpose of paying the coupons on our bonds secured thereby.” The rail road company had previously deposited funds in the trust company, since the rail road company had ceased paying coupons at maturity, to the credit of the plaintiff as trustee, and Beckwith had been paid some $453 on coupons then overdue. The complaint states that various sums have since been deposited in the trust company, to the credit of “ George S. Coe, trustee,” which the plaintiff took possession of under the said deed, and which were intended to meet those coupons of the

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rail road company on these bonds due in 1856. That an attachment has been granted by this court in an action brought by Beckwith against the rail road company, on coupons of the first mortgage bonds due in 1856, 1857, 1858 and 1859, amounting to $9520, directed to the sheriff of this city, who has served it on the trust company and on the plaintiff, accompanied by a special notice that Beckwith claims that the attachment covers funds mentioned in the letter of 19th February, 1858. That Beckwith claims to hold the funds now on deposit in the trust company to the credit of the plaintiff as aforesaid, by virtue of the said attachment. That the holders of the coupons are numerous, and unknown to the plaintiff, and it is impracticable to make all the holders thereof parties. Four parties who are holders of a large amount of these coupons are made defendants, and they have made demand on the plaintiff for payment out of the funds so deposited to his credit in the trust company. The plaintiff alleges that he apprehends that he will be involved in some personal liability if he should pay the one or the other of these claimants, and he demands the instructions of the court as to who is entitled to the funds standing to his credit as trustee in the manner above mentioned.

The defendant, as one of his grounds of demurrer, insists that the complaint does not state facts sufficient to constitute a cause of action.

It is necessary, then, to ascertain whether the plaintiff has any title to these funds, as a trustee. If he has such title, he is entitled to apply to this court for instructions as to his conduct in relation to the trust, when questions of difficulty arise; and in that event, also, the defendant will have acquired no lien upon the funds in question by virtue of his attachment.

In my opinion the complaint fails to make title in the plaintiff to the funds in question by virtue of the trust deed. In order to derive title under this deed, it is necessary that the plaintiff take possession of the rail road, and run it, whereby he would be entitled to the tolls and income, and after

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paying expenses, could divide them among the bondholders. The complaint does not> however, allege that the plaintiff has ' taken possession of the road, or run it. The funds have been deposited to his credit in the trust company as trustee, but he did not acquire them in any manner by virtue of any power or authority tinder the trust deed. The complaint does not show that any one was under any legal liability to deposit those funds to the credit of the plaintiff, any more than to the credit of another person. The position which he held, rendered him a very proper person to be chosen for the purpose of receiving and paying out the funds; but there is nothing to show his right to compel any person to account to him for the earniúgs of the road. The plaintiff could acquire that right under the deed:, only by taking possession of the rail road. True, the complaint alleges that he has taken possession of the tolls and income, but how did he do it ? That has not been disclosed. The money in question may have been taken possession of by being deposited to the plaintiff’s credit, and that is all that this allegation (from the other facts stated) can mean in this case-.

The allegation that the plaintiff took possession of this money by virtue of the deed, is merely a mental deduction or conclusion, without any facts stated upon which any one else can arrive at the same result.

It is stated in the complaint that an officer of the rail road company visited the east, after the company were in default for the- non-payment of coupons^ for the purpose of making an arrangement with the bondholders; but it is not alleged that any arrangement was in fact effected, or that any change was made in the trust, or in the manner- of securing the payment of the bonds or coupons; or any thing from which the plaintiff derives title to the funds in question.

The plaintiff must stand, so far as this complaint is concerned, upon the' appropriation made by the letter of February 19th, 1858, and the actual deposit made in pursuance thereof. The complaint does not state, expressly, that the

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rail road company deposited the funds in question; but from the whole tenor, it is fairly to be inferred. If not deposited by the rail road company, then none of the defendants have any interest therein. The allegation is that there has been deposited various sums in the trust company to the credit of George S. Coe, trustee; but who made the deposits, or from what source derived, is not definitely stated. It was then alleged that the plaintiff took possession of them under the trust deed. That he took possession is probable, but that he did so under the deed is impossible from the evidence of any fact alleged. The complaint then alleges that the funds so deposited were intended to meet the coupons which fell due in 1856. This latter averment is pregnant with meaning, and is probably the saving fact in the complaint.

I am of opinion that the allegations of the purpose for which the deposits were made, of the taking possession thereof by the plaintiff, and of the letter of February 19th, 1858, apprising the trust company of the account and purpose for which the future deposits of the rail road company were to be made, constitute an appropriation of the funds; and that the plaintiff was invested thereby with the title thereto as trustee for the holders of the coupons, who had an immediate right therein, and could enforce a pro rata division thereof on demand, and was not invested therewith as agent only for the rail road company. The rail road company cannot control or reclaim the deposit. As to them, the deposits áre appropriated. The trust company would be liable to the plaintiff, in a suit on behalf of the holders of the coupons, if they should suffer these deposits to be withdrawn on the authority of the rail road company alone.

The objection of the want of authority in the officers of the rail road company to make these deposits in the manner they did, is not tenable, inasmuch as if deposited without authority the act would constitute a breach of trust. It does not appear that the officers had not the authority. Courts never

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assume a breach of trust to have been committed. Authority to make the deposit must be presumed.

[New York Special Term,

April 14, 1860.

The objection for the want of proper parties is not, I think, well taken.

1. The rail road company have fully parted with all» title to the money, and have dedicated it to the holders of the coupons.

2. The plaintiff’s check will afford a good discharge to the trust company, and the coupons which he retires, he will then hold as the trustee or agent of the rail road company. Therefore neither the trust or rail road companies are necessary parties.

3. The sheriff has no interest, at present. The fund is not in his possession or control.

4. The plaintiff’s excuse for not joining all the holders of coupons, is well recognized and sufficient, viz. that they are numerous and unknown.

The demurrer is irregular in naming others who are holders of such coupons, who have not been joined as defendants. It assumes the-functions of a plea in abatement. No conclusion is to be drawn therefrom adverse to the plaintiff, as such statements are not within the office of a demurrer.

The defendant Beckwith is one of the same class of coupon holders as the other defendants, and entitled to participate with them pro rata only; and it would be wholly unjust and inequitable for him to obtain the whole fund, or more than Ms share, by a common law action upon his coupons. At least it so appears from the allegations of the complaint.

Judgment must be for the plaintiff on the demurrer, with leave to the defendant to answer the complaint in twenty days. The costs of the demurrer are to abide the event of the action.

Leonard, Justice.]