Hennequin v. Clews

Headnote

I. Arrest.

1. Equitable action against all defendants combined.—Allegations constituting an action at law as to some.—Order of arrest, grantable when.

(a) Defendants, as to whom the allegations make a cause of action at law, for which under the Oode an arrest may be had, can, after the same has been tried, as an equitable action, and disposed of as such, and the issues as to allegations constituting the legal cause of action have been sent to a ¡¡wry for disposition, BE ABBESTED.

II. Bankrupt discharge.

1. Demand not affected by.

(a) Action for an unlawful conversion by the (trustee of property held in trust.

Appeal from order denying a motion to set aside an order of arrest.

This action was tried as an equity cause, and disposed of as such. Certain, allegations of the complaint as to which issues were raised by defendants Clews and Fowler, were held to constitute as to them an action at law, and were directed to be disposed of by a trial by jury. From the judgment entered on the decision an appeal was taken to the general term, where it was affirmed. The decision of the general term is reported ( 43 N. Y. Sup. Ct. 411 ), where the facts of the case are sufficiently detailed.

The order of arrest in question was obtained after the disposition of the cause at the special term, but before the affirmance of the special term judgment, which, however, had been affirmed at the time of the argument of the appeal from the order denying the motion to set aside the order of arrest.

I. It is not competent to arrest in the first instance in an equity' case, because the judgment must be an equitable judgment.

II. The reasoning that forbade an order of arrest in the case of Lambert v. Snow ( 17 How. Pr. 518 ), and Madge v. Percy, court of appeals, Dec. 11, 1875 (5 Weekly Dig. 593), in which the order was denied because two causes of action were united, ought to apply with equal force when numerous reliefs are asked for, as in this case.

III. The defendants, Clews and Fowler, are discharged from the debt against them, described in the affidavit on which the order of arrest was granted, and the other proofs used to sustain it in the court below.

IV. The debt is not one that comes within section 5117 of the Revised Statutes of the United States, providing that “no debt created by the fraud or embezzlement of the bankrupt, or by his defalcation .as a public officer, or while acting in any fiduciary character, shall be discharged by proceedings in bankruptcy ; but the debt may be proved, and the dividend thereon shall be a payment on account of such debt ’ ’ (Cronan v. Cotting, 104 Mass. 245 , and cases cited in the opinion of the court; Owsley v. Cobin, U. S. circuit court, South Carolina, 15 N. B. R. 489 —Opinion by Waite, Ch. J.; Woolsey v. Cade, 15 N. B. R. 238 , supreme court, Alabama; Grover v. Clinton, U. S. circuit court, Wisconsin, 8 N. B. R. 312 —Opinion by Hopkins, J., concurred in by Davis, J.; Chapman v. Forsyth, 2 How., U. S. supreme court, 208; Neill v. Scruggs, 17 N. B. R. 102 , U. S. supreme court; In re Smith, 18 Id. 24, U. S. D. C., S. D. N. Y.—Opinion by Choate, J.). (a) The nature of the claim against the defendants Clews and Fowler is identical with the plaintiffs’ claim in Cronan v. Cotting ( 104 Mass. 245 ). In that case the action was brought to recover for money received by the defendant to the plaintiffs’ use. It was referred to an auditor, whose report showed that the defendant was administratrix of the estate of her husband, between whom, at the time of his

decease, and the plaintiff, there were unsettled accounts ; and the plaintiff sent to the defendant certain acceptances, with directions to apply the proceeds thereof, or such part as should be needful for the purpose, to pay whatever balance was actually due from him to the estate of the intestate. The defendant collected on account of the acceptances, and applied so much of the proceeds as was necessary to pay a balance, which she claimed was due to the estate. But the auditor found that the amount thus applied exceeded, by $3,922.25, the balance actually due. After the judgment in the court below the defendant obtained a discharge in bankruptcy, which was pleaded in bar to said judgment. The plaintiff claimed, at the hearing before the court, that the relation between the plaintiff and defendant was that of a pledgor and pledgee, and that such being the relation, the debt sought to bé recovered was created by the defendant while acting in a fiduciary character, and thus within the terms of said bankruptcy statute. The court held that the trust in that case did not constitute a fiduciary relation, and that the debt in that case was simply a debt by contract, and that the defendant sustained no fiduciary character to the plaintiff while acting, in which said debt was created. These defendants claim that the debt in the case at bar, likewise, is simply a debt by contract. In both this and the Massachusetts case, the defendants stood in the relation of pledgees, and in each case, by implication of law they were liable to the plaintiffs, to return to them or account for the pledged property, if any, there should be remaining after the debt or liability was extinguished for or on account of which said property was pledged. In each case the debt arose out of an implied contract. And it is claimed that the defendants, Clews and Fowler, sustained no fiduciary character towards the plaintiffs while acting, in which this debt was created.

And it is claimed that the remarks of the supreme court of Massachusetts on this point are equally pertinent to the case at bar. Another ground of the decision in the Massachusetts case, was that the debt in that case was excluded from the class of fiduciary debts referred to in the statute, in consequence of the construction given by the United States supreme court in Chapman v. Forsythe ( 2 How. 202 ), to the phrase “ while acting in any fiduciary capacity,” which phrase the court considers the same as, “ while acting in any fiduciary character.” By the construction referred to, given by the United States supreme court, the phrase in question embraced cases of special, express or technical trusts of the same class as those enumerated in the bankruptcy statutes of 1841, viz.: ' “The defalcation of a ‘ public officer,’ ” “ executor,” “administrator,” “guardian” or “trustee,” and did not embrace implied contracts or those which the law implies from contract. The Massachusetts case decides the question, it would seem, upon what the court in Woolsey v. Cade, above cited, calls a “broader ground,” and stated in Chapman v. Fersythe in these words, “if the act embraces such a debt it will be difficult to limit its application. It must include all debts arising from agencies, and indeed all cases where the law implies an obligation from the trust reposed in the debtor. Such a construction would have left but a few debts on which the law could operate . . but this is not the relation spoken of in the first section of the act.” The other cases cited are to the same general tenor as the Massachusetts case, and the true construction of said section of the bankruptcy statutes should be deemed settled.

V. The construction Of the bankrupt law (§ 5117, supra), must be the same in every State, without regard to the local law of the several States (Grover v. Clinton, 8 N. B. R. 489 , by Judge Hopkins, coincided in

by Justice Davis of the supreme court of the United States; Woolsey v. Cade, 15 Id. 239; Owsley v. Cobin, 15 Id. 489, decision by Chief Justice Waite, where, in the learned judge’s opinion, he adopts, in so many words, the reasoning and conclusions of these decisions).

I. The cause of action against the defendants is to recover of them damages for the unlawful conversion of the plaintiffs’ bonds (Code of Civ. Pro. § 549, subd. 2; Id. § 550, subd. 3).

II. It is now well settled that where the right to an arrest is identical with the cause of action itself, the court will not try the merits upon affidavits, unless the defendant makes out clearly such a case as would entitle him to a nonsuit or a direction of a verdict in his behalf (Royal Ins. Co. v. Noble, 5 Abb. Pr. 54 , 56, and cases cited; Merritt v. Hecksher, 50 Barb. 451 ; Faris v. Peck, 40 How. Pr. 484 ).

III. So it is equally well settled that an arrest is not barred when a cause of action exists, on the ground that the plaintiff has accepted notes therefor (Shipman v. Shafer, 14 Abb. Pr. 447 ; Pettengill v. Mather, 12 Id. 436; Murphy v. Fernandez, 10 Bosw. 665 ; Harding v. Shannon, 20 How. Pr. 25 ).