238 F. 39 | 6th Cir. | 1916
Reitz was a dealer in agricultural implements, and a petition in bankruptcy was filed against him October 12, 1908, in the Western district of Michigan. This was followed by a petition for the appointment of a receiver. A written consent to such appointment, signed by Reitz and by his attorney, Arnold, was filed October 17th, the order of appointment was made on the 19th, and the receiver qualified on the 20th. Shortly before the bankruptcy, Reitz had turned into cash certain of his assets, and had thus received more than $7,000. On October 21st and 22d, different banks in Chicago issued certificates of deposit, payable to Arnold, or his order, aggregating $7,000. At about this time Reitz absconded. An adjudication in bankruptcy, and the election of Horrigan as trustee, followed in due time. Several months later, these certificates of deposit, indorsed by Arnold in blank, were presented by Reitz to a bank in Canada, where they were cashed, and the money received by Reitz was (as it is thought) invested, in his wife’s name, by him in lands in Alberta. Horrigan, the trustee, undertook in one way and another, through the aid of the Canadian courts, to reach these lands, but, at last accounts, nothing had been realized. After such effort had been in progress for two or three years, the trustee brought this action in the court below against Arnold, alleging that Arnold was responsible for the diversion of this $7,000 from the bankrupt estate. After a trial upon the merits, verdict and judgment were rendered against Arnold for the full amount of the certificates and interest, and he brings this writ of error.
If the defendant had pointed out that the evidence of the Canadian proceedings was not admissible under the three specified counts, or had requested the court to charge that there-had been an election of remedies which barred recovery under these three counts, it would have been necessary to decide the question which we have passed; but-defendant’s offers and requests were all on the theory that the action was wholly one of trover, that the evidence was admissible for all purposes, and that the action could not be maintained at all. The limited admissibility of the evidence, and the limited bar which might result, were in no wise brought to the attention of the court.
We are content to rest upon these grounds our conclusion that there was no reversible error in this subject-matter, because it is highly artificial to treat this cause of action as technically in trover. Arnold’s substantial offense (if he committed any) was to aid Reitz in the concealing of and running away with this money; the inferred conversion by Arnold to his own use, which could make him liable in trover, was incidental, and did not really characterize his wrong against the estate. We think it the fair interpretation of the language hereafter quoted, in which the issue was submitted to the jury, and of the finding of the jury thereon (both interpreted with reference to the facts involved), that the real thing in controversy was not that kind of conversion by a wrongdoer to his own use which supports the typical trover-action, and which is the basis of holding that the title of his transferee becomes good against the plaintiff. For these reasons this defense, as attempted in this case, should have been presented and preserved with distinct reference to that partial application which we think was the only application which in any event could be permissible here; and this was not done.
By virtue of such relation, the trustee, on October 21st and 22d, had a title to these funds which was good as against Reitz and his agents and attorneys. Upon familiar principles, all who are bound to admit the trustee’s title, and who actively participate in depriving him of his property, must respond for the damages, and nothing short of collection from one will bar proceedings against another. It is not controlling that counsel have not found, nor have we, precedents for recovery by a trustee under such facts as these. To hold that the trustee cannot sue for tortious injuries inflicted upon the estate property intermediate the petition and the adjudication is to say that during this period the estate may be destroyed with impunity. We think his right to bring such an action is clear.
Defendant says that if Arnold had possession of Reitz’s money, and held it only as attorney for Reitz, it was Arnold’s duty to pay it over to Reitz upon demand, and that this duty was not terminated by the filing of the petition in bankruptcy; that this filing may create a lien, or rights in the nature of a lien, in favor of creditors, but it does not change the relations between the bankrupt and his attorney; that the bankrupt’s title continues perfect as against his attorney, and the latter cannot refuse to recognize the title because it may eventually turn out to be subject to the claims of a third party. These contentions might be granted without affecting this case; and this is because of the effect of appointing a receiver. Reitz and Arnold cannot be heard to claim ignorance of such an appointment. They had consented thereto, they knew that the order had been made or would be made, and they were bound to know what the real fact was. This appointment vested in the receiver a possessory right superior to that of the bankrupt and all his agents, and it became tire duty of Arnold to deliver this money to the receiver and .not to Reitz. The title of the trustee by relation and the possessory right of the receiver merge, and we see no reason why, for the purposes of this action, the trustee’s right is not the same as if the acts in question had been committed after his appointment.
If we turn to the other supposition of what may have occurred, we find it claimed that Arnold’s action would have been that merely of a messenger for Reitz, rUio went to the bank and changed the form of securities as requested; that for Reitz to change his funds from
“These are the claims of th'e parties, respectively, and, by these claims are' presented the important questions for you to determine, and those questions are these: Did the defendant purchase the five certificates of deposit, aggregating $7,000 from the banks in 'Chicago with funds which' belonged to Mr. Reitz, or his estate in bankruptcy? And did this defendant, acting with Mr. Reitz, conceal such moneys and convert them to their use, or to the use of either of them, with the intent to hinder, delay, and defraud the creditors of Mr. Reitz? If you answer those questions in the affirmative, your verdict will be in favor of the plaintiff in this case. If you answer those questions, or either of them, in the negative, your verdict will be in favor of the defendant.”
Arnold’s story was considerably supported by documentary evidence and by testimony of others, and we are asked to say that a jury had no right wholly to reject it, and to find against him a verdict based solely on inferences drawn from circumstances. Howard was dead; two other witnesses who could have supported Arnold in vital particulars were dead; and Mr. and Mrs. Reitz were beyond the reach of the court, and neither testified. On one side was Arnold’s testimony; on the other side were inferences from the conceded facts and improba
There is also an assignment of error because the court refused to instruct the jury that fraud must be shown by clear and satisfactory proof, that honesty, not dishonesty, is presumed, and that the plaintiff’s evidence must exclude the probability that the transaction was honest. Instructions of this general tenor have often been approved (Walker v. Collins [C. C. A. 8] 59 Fed. 70; 73, 8 C. C. A. 1); but we find no controlling or persuasive authority holding that
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