Grinnell v. Suydam — 3 N.Y. Super. Ct. 132

Majority

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Grinnell, Minturn & Co. v. Suydam and others.

Headnote

One who advances money to another on a bill of exchange drawn by him against a shipment of flour, and besides the bill of exchange, receives as security the bills of

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lading of the flour, has no claim for re-imbursement of his advance, (on the exchange being refused acceptance, and the flour falling short of meeting the advance,) against third parties unknown to him when he made the advance, although they owned half of the shipment, and intrusted it to the drawer of the exchange, on his-agreement to advance to them, and although he had advanced to them beyond the value of their interest.

There is no privity of contract between the lender and such third parties, nor any ground of lien upon the fund which came to them from the drawer of the exchange, or upon his claim against them for the excess of his advances.

Though possession is not necessary to the existence of an equitable lien, it is necessary that the property or fund be distinctly traced.

A fund is not thus traced, when it has gone into the general bank account of the recipient, and after being mixed with funds from other sources, is disbursed by him in his general business ; although the party sought to be charged, received advances from him in the course of his contemporary disbursements.

The doctrine of equitable lien has no application to a fund advanced to the drawer of a bill of exchange, on the security of the exchange, and of a pledge of bills of lading transferred by the drawer.

(Before Doer, Mason, and Campbell, J. J.)

July 12 ;

Sept. 22, 1849.

This canse was brought to a hearing on the bill, and the answers of the several defendants. The facts, so far as they need be stated for the determination of the cause, were briefly as follows:

In the month of June, 1847, Edward J. Mann agreed to purchase of Suydam, Sage & Co. one half interest in a large quantity of flour about to he shipped from New York to London, and to make advances to them on the other half. He then applied to the plaintiffs, merchants in New York, to cash his bills on London to the amount of £5,000, or thereabouts, and to secure them by indorsing over the bills of lading of the entire shipment. The proposal was acceded to, the money advanced to. Mann upon his bills of exchange, and the bills of lading duly indorsed over to the plaintiffs.

Both the bills of lading and of exchange were forwarded to Messrs. Baring, Brothers & Co., at London, who, upon the failure of the drawee to pay the bills of exchange, took possession of the flour, and sold it at a considerable loss — the net proceeds not producing sufficient to repay the plaintiffs’ advances.

These advances were made to Mann in different sums, on different days, and deposited by him when received to his credit

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in the bank where he kept his account, and used and employed in his business.

In like manner, the sums which Mann paid to Suydam, Sage & Co., were paid at different times by checks, and in sums of various amounts. No distinction was made in the payments, whether on account of his half interest purchased from them, or on account of the advances agreed to be made to them, on their half, but they were made generally on account, and together exceeded by about $7,000, the whole amount Mann received from the plaintiffs.

In consequence of the loss on the sales of the flour, Suydam, Sage & Co. became indebted to Mann, for his over advance on their one half, the claim for which Mann assigned to one Vernon, as a security for a liability incurred on his account., and Vernon assigned the same to the defendants, Goodhue & Co., who were also made parties to the suit.

The plaintiffs claim to have an equitable lien on the sum thus due by Suydam, Sage & Co. to Mann, inasmuch (they say in their bill) as the money so advanced by Mann to them upon their moiety of the flour, was, as they believe and charge, a portion of the money advanced by the plaintiffs to Mann upon the bills of exchange; and they pray that Suydam, Sage & Co. may be decreed to pay to them the difference, whatever it maybe, between the advances made to them by Mann, and the proceeds of the one half of the flour belonging to them.

J. L. Wendell, for the plaintiffs.

A. 8. Johnson, for Mann, and Goodhue & Co.

6r. R. J. Bowdoin, for Suydam, Sage & Co.

By the Court.

It is not pretended in this case, that there was any privity of contract between the plaintiffs and Suydam, Sage & Co. The transaction out of, which the claim originated, was between the plaintiffs and Edward J. Mann. The negotiation was with him alone, and the money was advanced to Mm on security which he furnished. Suydam, Sage & Co.

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appear not to have had anything to do with the loan made by the plaintiffs. They came under no obligation with regard to it, nor is it anywhere alleged that it was made on their credit. On the contrary, the plaintiffs stipulated for the possession and control of the property, in addition to the personal security of Mann upon the bills, and they received all they asked for. It is true that, as between Mann and Suydam, Sage & Co., the latter were the owners of one half of the ñour; but as between the plaintiffs and Mann, lie was the owner of the whole. He had the control of the whole, and he was the only party dealing with or responsible to the plaintiffs.

The ground taken in the bill and on the argument was, that the facts of the case established an equitable lien in favor of the plaintiffs, upon the sum due by Suydam, Sage & Co. to Mann. It is essential, however, to a lien, that the subject matter of it be identified. At common law, a lien is the right to retain, the possession of personal property, until moneys due on or secured by it shall be paid. If the possession is lost, the lien is gone; and although in equity possession is not necessary to the existence of a lien, yet it is necessary that the property or fund be distinctly traced. If the lien is on moneys, in the hands of a particular individual, it is not enough that you know to whom the moneys have been paid. You must be able to follow them, and show that they have been kept as a distinct and separate fund. The leading cases on this point are collected in Hutchinson v. Reed, 1 Hoffman’s Ch. R. 316, 336. So that even were this a case to which the doctrine of equitable lien could apply, it -would be necessary for the plaintiffs to show that the moneys which they paid to Mann, were received and retained by Suydain, Sage & Co. As soon as they were mingled in general account with the other funds either of Mann, or of Suydam, Sage & Co., the lien was gone.

Now, the facts are, that Mann received the moneys from the plaintiff's, at different times, in different amounts, and as an advance on the whole of the flour; that he mixed and used them with his other moneys in his business, treating them as he lawfully might, as his own moneys; that he made payments to Suydam, Sage & Co., at different times and in different amounts,

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both on account of his half interest in the flour which he had purchased, and on account of the advance which he had agreed to make on the other half, and without distinguishing at the time of payment, on what account they were made; and that he thus paid to them upwards of $7,000 more than he received from the plaintiffs. It would, therefore, be a sufficient answer to any claim on the ground of lien, that the identity of the fund on which it might have been claimed has been lost.

But we apprehend that the doctrine of equitable lien has no application to this case; and that, even if the plaintiffs could trace the identical bank hills which Mann received, to the defendants, Suydam, Sage & Co., and could prove them to be now in their possession, the plaintiffs would not be entitled to them by virtue of any lien.

“ Liens in equity,” Mr. Justice Story observes, (2 Story Eq. Juris. § 1217,) “ arise from constructive trusts. They are therefore wholly independent of the possession of the thing to which they are attached as a charge or incumbrance.” To say, then, that the plaintiffs had a lien on these moneys, for any sum in which the property hypothecated to them might prove insufficient for their reimbursement, would be to say that when they came into the hands of Mann or of Suydam, Sage & Co., they came subject to that incumbrance, which the plaintiffs would have a right to enforce ; and a right on the one side, implies an obligation on the other. If the plaintiffs were entitled to a lien or incumbrance on the fund, or, in other words, Mann, or Suydam, Sage & Co. were bound to hold it in trust for the satisfaction of that incumbrance, they could not then use the fund or any part of it as their own, without being guilty of a broach of trust. The lien would extend to the whole, as it could not he known beforehand what might be the extent of the deficiency. The property held by virtue of the bills of lading might be entirely lost. The simple statement of the proposition, it appears to us, carries with it its own refutation. The very object of a borrower in effecting a loan upon a hypothecation of property, either personal or real, is to obtain money to be used by Mm at his pleasure. When received, it is Ms money, and not the money of the lender, or clothed with a trust, or

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subject to a lien in bis favor. If it were not his own, the whole object of the borrower would be defeated, and the money of no use to him. Nor does the lender look to any other security, than that of the property and the personal responsibility of the borrower. He satisfies himself that the property is sufficient at the time, and if it should prove insufficient, he falls back with a personal claim on the borrower; not upon any idea of lien, but by virtue of the obligation contracted for the re-payinent of the money at the time it is advanced. Were it once held to be law, that a lender of money could enforce a lien for it against every person who could be proved to have received it or any portion of it, from the borrower, no man would be safe in receiving payment of any debt. The money might have been raised by bond and mortgage, or by an advance on personal property, and the party who should receive it from the borrower might be involved, ere he was aware, in a suit claiming the money so received. Such a doctrine would have, it must be admitted, the merit of novelty; but that, we apprehend, is its only merit.

The bill must be dismissed with costs.