Dean v. Thurber

This appeal presents this question: when, imported goods, stored in a bonded warehouse, are held by-parties, through the possession of the warehouse receipts, as collateral security for the payment of promissory notes, and the makers of the notes become insolvent, and assign their property to an assignee for the benefit of their creditors, should the moneys paid by the assignee for duties, owing to the United States government, be charged against the fund in the assignee’s hands; or against the proceeds of the sale of the goods; where the assignee’s possession and right to dispose of them were under an arrangement between him and the parties holding the warehouse receipts, by which he should effect for them a realization upon their security. This question, under the circumstances of this case, is not, perhaps, free from difficulty. The general term, reversing a judgment recovered by plaintiffs against the assignee, have decided that the payments of duties were a charge against the goods, and we think their judgment the correct one.

. The plaintiffs had guaranteed the payment of the notes of the insolvent assignors and by taking them up from their holders, thus became possessed of the United States bonded warehouse receipts, which accompanied the notes as collateral securities for their payment. The assignee entered into an arrangement with plaintiffs and with other creditors, possessed of similar securities for their claims, by which all of this merchandise should be concentrated in his possesion, in order the better to conti ol the market ior

As the property pledged failed to sell for enough to pay the debt to them, after charging against the proceeds the sums paid for duties, the loss of this item of expense, they insist, must fall upon the common fund in the assignee’shands. The theory of the plaintiffs is that the duties constituted the personal debt of the insolvents, which was preferred by the law over all other debts, and which their assignee was bound to pay under the command and the sanction of the United States statute. The general term met this view by holding, in substance, that the assignee, in taking the goods into ' his custody for sale under the arrangement mentioned, was really acting for the plaintiffs in converting the goods into money, and, by the agreement, was bound to account to them for the proceeds, as would any agent in a transaction for others. They held that the payment of the expenses incurred by the goods, including the government duties, was a preliminary step which he had to take, for and in the interest of the plaintiffs, in order to possess himself of the goods and to realize their value.

We think this theory of an agency for the parties, growing out of the contractual arrangement referred to, sufficiently disposes of the plaintiffs’ contention. Under the agreement by which the secured creditors surrendered to Mr. Thurber, the assignee, their warehouse receipts for the purpose of controlling the market and creating, higher values, he cannot be deemed to have acted in his official capacity as assignee. He merely was an agent for the carrying out of a scheme, by which the secured creditors should realize more for their claim than would have been possible if each had acted separately. Apparently, he was individually concerned in the promotion of the scheme for a bank which he represented. Therefore, in what he did with the goods, he acted in the plaintiffs’ place and bound them by his acts, and not the assigned estate.

What the creditors obtained was a secured lien. The assignors could have paid the duties, without removing the goods, and, if they had done so, the security of the creditors would have been strengthened pro tanto; but they were not bound to do so. When the pledgees came to enforce their security, they would, in the first instance, be obliged to clear the pledged property of the government lien; for, otherwise, possession by them was impossible, for any purpose. The assignee could not, of course, do anything, as such, to affect the plaintiff’s security, to their prejudice; but neither could he use the funds of the assigned estate, in his hands, to enhance that security by discharging the lien for duties, subject to which the plaintiffs had "taken and held their security. For these funds were subject to the claims of the body of creditors and the assignee could not make a voluntary payment, to their prejudice. He could not give to the plaintiffs a greater preference, nor any more advantageous a position towards the estate, than they held at the time when the assignment was made. Even if we were to assume that the payment of the securities was a voluntary one, the assignee could not, by doing so, •change the equitable rights of the creditors, as they existed at the time the insolvents assigned their property, in trust, ■for their benefit.

Applying those equitable principles which govern in the marshalling of assets, we hold that the plaintiffs, for what their security is deficient in paying on their claim, have •only the right to resort to the common fund; and that they acquired no right to the repayment of the sums expended for duties by the assignee of the insolvent debtors.

The judgment appealed from should be affirmed, with costs to the respondent.

All concur, except Gray, J., not voting, and Ruger, ■Oh. J. absent.