Barrow v. Rhinelander

| New York Court of Chancery | Dec 7, 1818

The Chancellor,

1. The first exception is, that the Master has not credited the defendant with 1,250 dollars, which he claims to be credited for, on the 1st of May, 1793, as the amount of money which Prior assumed to pay him, on account of a bond executed by Andrew Uunderhill to the defendant.

The evidence produced by the defendant, is the exhibit, {M.) being an account from 1793 to 1795, in which the defendant is charged with sundry items, and on the credit side is an entry in these words, under the date of the 1st of May, 1792, (though evidently intended for 1793,) “by Andrew Underhill, 'for so much I assumed to pay, 500 poundsat the bottom of the account, Prior, by a certificate under his own hand, speaks of “ the settlement of the above account.”

The answer of the defendant, states the 500 pounds to have been a lone to Prior. The answer and the books do not agree with the above account. But though there is confusion as to this charge, yet one fact must silence all criticism. The defendant, before the Master, claimed this debt of 500 pounds, as a sum assumed by Prior for Under-hill. The plaintiffs examined Prior before the Master, but not as to this charge. He, and he only, could have explained this item in the settled account, if it was not correct as it there stood. By omitting to examine him on this point, the presumption is irresistible, that the account on this head was correct. The exception must be allowed.

2. 3. The second exception is, that the Master had reported that he had ascertained that the defendant took from Prior, before his bankruptcy, without permission, certain securities for the payment of money; and the third exception is. that the Master had ascertained that the amount of principal and interest of certain of the securities fe» ceived from Prior, by the defendant, had been lost by the negligence, default, and Want of due diligence of the defendant, in collecting or attempting to collect the same.

The Master was directed by a decretal order, to charge the defendant with the amount' due on such securities, for moneys, as were taken by the defendant from Prior, before his bankruptcy, without permission; and also, with the amount of such securities for money received from Prior, by the defendant, as were lost by the' negligence, default, or want of due diligence of the defendant, in collecting or attempting to collect the same.

There can be no possible objection to the reasonableness of the order, and these two exceptions go to the fact, that the Master reported that h-¡ had ascertained that such occurrences had taken place. The Master was bound by the order to make the inquiry,.and to report the truth; and if any grievance exists in the case, it can only be as to the application of the discovery. The discovery and the report would otherwise be perfectly harmless. To see the application of the inquiry and of the facts'so ascertained^ we must have recourse to the 4th and 6th exceptions.

4. The 4th exception is, that the Master had charged the defendant, on the 16th of September, 1796, with 190 dollars and 4 cents, as, and for the balance due ón that day, on Seaman Jlvery's note; and the

6. 6th exception is that the Master had charged him . with 81 dollars' and 44 cents, as, and for the amount of David Barman's note, and had charged him as of the date of the 6th of October,’ 1801.

The bill charged the defendant with a breach of trust, inasmuch, as that having possession of the valuable papers of Prior, he had, without the knowledge or consent of Prior, taken several bonds and promissory notes for the payment of money, and which had never been assigned or delivered to him, and which he afterwards pretended to hold as a collateral security for the payment of money. The answer to this part of the bill admits that while he was in the service of Prior, the bonds, notes and other valúable papers of Prior, were kept in an iron chest, and that he, at sundry times, took from among those papers certain securities for th*» payment of money, of which the notes in question were a part. But the defendant avers that they were taken with the express permission of Prior, and he denies that he took from among those papers any bond or note whatever belonging to Prior, without his previous consent or permission.

Here the parties were completely at issue upon this point of fact.

The proof in support of the charge, consists of the testimony of witnesses corroborated by circumstances.

Edmund Prior, the bankrupt himself testifies, that the notes in question were taken by the defendant from his possession, without his knowledge or consent. He says, that they were never assigned, and he missed them in March, 1801, though, he concludes, that they were taken sometime in the year 1800. He says further, that the defendant refused to give him any account of the securities so taken.

William Prior, another witness, testifies, that, to his knowledge, the defendant took away a number of notes deposited in the desk of Prior, and that the notes were missing when the defendant left the service of Prior^ That by the direction of Prior, he called on the defendant for a list'of those securities, and he refused to give it; but the witness having a list of the missing notes, and mentioning them, the defendant confessed that the greater part of them were in his possession.

This positive testimony, accompanied with this refusal, outweighs the answer; especially when we consider the want of credit which the whole view of the case shows, is deservedly attached to many parts of this answer.

It is admitted, that Prior assigned to the defendant, se» curities to the value of upwards of 16,000 dollars, and that these notes were not assigned, or endorsed; and why were not these notes regularly assigned, if intended to be delivered 1 The omission affords, of itself, a strong ground of inference, that they were taken without permission.

I am entirely satisfied with the conclusion drawn by the Master, that these notes were taken by the defendant from the possession of Prior, without his knowledge or consent. It being admitted, and it is indeed abundantly proved, that the makers were solvent on the 4th of July, 1801, so as to take the case out of the agreement of the solicitors, the defendant has made those notes his own by such a fraudulent appropriation, and he is justly chargeable with the amount of them.

If the case turned on the point of negligence, or a want of due diligence in the collection of the notes, every presumption ought, of course,to be made against the defendant. In odium spoliatoris omnia prcesumuntur.

The testimony is decisive, that this act of spoliation caused the loss of Barmin's note. Prior testifies, that when that note fell due, (which was in the autumn of 1801,) Barmm called upon him to.pay it, and as he had not the note in his possession, Barmm refused to pay it, and went away, and has since become insolvent. The defendant states in his answer, that in 1802, he frequently applied by letter to Barmm, for the payment of the note, and that in 1801, he made a personal demand upon Barmm, who refused to pay, because Prior had given him notice not to pay. Barnum, upon his examination, confirms the testir mony of Prior, and contradicts the answer of the defendant, He has no recollection that the defendant ever applied to him personally W payment, or that Prior ever forbade or requested him not to pay the note to the holder. The tender by the defendant, of these unassigned and unencfonvd notes to one of the assignees, on the 28th of Jlpril, 1802, was therefore, an act perfectly, and most justly unavailing.

As to the note of Seaman and Avery, the testimony of Prior would lead us to conclude, that the money was from the want of a prosecution in due season. The letter of Amasa Paine to the defendant in 1804, shows that Avery was then dead, and died insolvent, and that nothing was to be obtained on the note, and the defendant does not appear to have made any effort towards the collection of this note, until asíate as 1804. He was properly chargeable with the amount of those notes.

The 2d, 3d, 4th, and 6th exceptions are, consequently, overruled.

5. The 5th exception is, that the defendant is charged on the 18th of December, 1798, with 6,114 dollars, as, and for the balance due on Samuel Beman’s bond, assigned to him by Prior, and which bore date on the 11th of April, 1795.

The bond of Beman, here referred to, was for 2,055 pounds, and was assigned to the defendant on the 4th of February, 1799, as a collateral security for the debt due from Prior to him.

It is in proof, by the testimony of Beman himself, that in the summer of 1802, Beman, by his agent, M. Wheeler, made an offer to the defendant of a tract of land in >the town of Hampton, in the county of Washington, containing 1,338 acres, then worth 4 dollars an acre, towards a satisfaction of the bond, and that the defendant might take the land at a fair valuation. This offer the defendant rejected. Wheeler, the agent, confirms this fact, in all its essential parts, and, he says, that he further informed the defendant, that Beman said, he should be unable to pay the debt in any other way. It is also in proof, that Williams was employed by Beman to make the same offer, and Williams, who is now dead, told Beman he had made the offer, and that it was rejected. Williams had further offered to release, as far as respected that land, the lien of a judgment which he owned, and which xvas against Beman, and bound the land, provided the defendant would accept that land in payment of the bond.— The offer, with this additional advantage, was still rejected. It is further in proof, that Williams applied personally, on behalf of Beman, to Prior, and offered to settle the bond, by giving the land accompanied with a release of his judgment upon it, and that Prior, deeming the offer liberal, consented to accept of it. Prior says, that he, then, with the assent of one of the assignees, proposed to the defendant, that if he would agree to the offer, and accept the land in satisfaction of the bond, the assignees would indemnify him against any loss upon a fair sale of the land. The defendant still refused, and the consequence was, that the whole of the land was sold under the judgment, and the debt due from Beman totally lost. It is, further in proof, that in the spring of 1802, Beman offered to the defendant 3,000 dollars in land, and 2,000 dollars in obligations, upon the bond, and this offer was also rejected.

The point is now, whether the defendant, under the peculiar circumstances of the case, ought not to be responsible for the value of an offer which was so perversely and unconscientiously rejected, by means of which refusal, the whole debt has been lost.

I am of opinion, that the defendant was guilty of a breach of trust in the relation under which he stood to Prior and his assignees. He was bound to exercise a reasonable and equitable discretion, instead of which, his conduct, in this -case, was tyrannical, oppressive, and unjust.

The defendant had, at the time, extravagant security for what was due him, independent-of this bond. He had a mortgage on a house and lot in New-York, and a deed for lands in Clinton county, and population shares, and other personal securities, assigned or assumed, to the amount of upwards of 20,000 dollars, for a debt, not exceeding ip the whole, one fifth of the sum total of that accumulated security; and yet, with this abundant security, he would accept of nothing short of the uttermost farthing in money, for Bernards bond, though he was assured by the debtor, that the offer he made was the only means of payment in his power, and though he was solicited by Prim-, and by Prior’s assignees, in the shape of a proposition, calculated to subdue the most obstinate perverseness.

The defendant had uniformly endeavored to involve his claims upon Prior, and the amount of his security, in mystery and difficulty, the better to conceal the mischiefs of his avarice. He was repeatedly requested by Prior to make an account of his demands, and of the securities of Prior, which he held, and he as repeatedly refused. At one time, he said, he would not, because “there were certain circumstances attached to the business that would render it unsafe for him to render such an account as might endanger the security oj his bonds.” For the same reason, he refused to give a list of the securities. At last, he appeared to yield to importunity, but said, that he would not be able to make out any such account, unless he had the privilege of using the books of Prior, and to which Prior assented. He then undertook to make out the account, and consumed the greater part of five months in preparing it. He repeatedly refused to make out a list of the securities of Prior, in his hands, until, at last, by the particular desire of Bobert Bourne and Wm. Prior, he made a partial list

The same unreasonable and oppressive spirit, which manifested itself in this conduct, seems to have pervaded all the transactions of the defendant with Prior, as disclosed in this case. . The defendant dealt oppressively and fraudulently with Prior from the beginning; and the rejection of the offers of Beman, pressed as they were by the most persuasive motives, was only a continuation oí the abuse of trust.

As the defendant lost the debt of Beman, by his refusal to close with any offer that was made; and as his conduct, jn this respect, was a breach of duty resulting from the relation in which he stood with Prior, he ought to be held responsible for the value of the property so rejected and lost.

It is said, however,' that Beman was insolvent on the 4th of July, 1801, and that this brings the case within the agreement of the counsel.

I should doubt very much, whether a case of this kind fell within the meaning of that stipulation. The provision was intended to meet the charge of negligence in prosecution, and to afford a test of the absolute inability of the party to pay at a given time. But here the debtor absolutely offered payment in land, dnd the question of solvency or insolvency, does not arise. There was no objection to the title offered by Beman, accompanied with the offer of the release of the judgment. The refusal of the defendant applied, to the subject offered, and not to its value or title. We must assume both of them to be as they were stated. If it were now a question as to the solvency of Beman, we have his testimony, that his property was sufficient, on the 4th of July, 1801, to pay all his debts, and that it was the subsequent forced sales of his property which rendered him insolvent. He says, that in calculating on his solvency in 1801, he did not inélude the partnership debts of the house of Scott, Beman, and Wheeler, because, he says, that Scott had made such arrangements with the creditors, that he was exonerated from the debts of the house.

It is said, again, that the bond in question was merged in a subsequent judgment bond which Beman gave to Prior, in 1797, asa trustee for several creditors, and in which judgment bond the existing debt to Prior was included. On this last bond a judgment was entered, But in answer to this objection, it is to be observed,. that all the parties concerned considered the defendant as having the absolute control of the Beman debt, and all acted upon that assumption. The equity of the case is not, therefore, affected by the subsequent bond and judgment. One bond will not extinguish another, even at law; and whether the entry of judgment, on the second bond, would do so at law, under the circumstances of this case, néed not be discussed. Every person that had an interest in the transaction, the defendant, and Beman and Prior, and the assignees of Prior, all considered the first bond in the hands of the defendant, as a subsisting debt. This was the universal understanding, and the technical objection cannot be listened to here, whatever force might be attached to it in a court of law. Prior says, tha t the judgment bond was taken in his store when the defendant was with him, and he believed the defendant knew it, and that it was only taken as a farther security. If the defendant was considered by all parties as having the entire control of Bemhri’s debt, by means of the first judgment, Prior could not deal with Beman, in respect to the offer of the lands, without the privity and consent of the defendant. If he had attempted to extinguish the debt without the knowledge of the defendant, it would have been dealing treacherously with the defendant, and contrary to the act of assignment of the original bond. This assignment being made a long time subsequent to the judgment bond, was an affirmance by Prior of the subsisting force of the first bond. Nor could Prior accept of the offer of the lands, by reason of another insuperable objection. He was, at the time of the offer, a declared bankrupt, and his property had been assigned to the present, plaintiffs. It was for that reason that Prior communicated the offer to them, and obtained the consent of one of them, (and which was sufficient for the defendant to act upon,) to the composition which was proposed.

The defendant never put his objection, to receiving thelands, upon the ground of the want of a sufficient assent Qn part 0p t¡)e assignees 0f prior. The presumption 0f a competent assent is irresistible, from the testimony of Prior, and fropi the conduct of the defendant. His conduct amounted to an admission of such consent.

The letter of Prior to Beman, in March, 1802, has been mentioned as evidence that the original bond was not deemed valid. But that letter cannot be permitted to affect the case. It was written in answer to a letter from Beman, complaining of a suit, in Prior’s name, on the bond, and Prior informs him that the suit was without his knowledge, and that the defendant would not give him any satisfaction as to his affairs, and that he could not tell on what ground the bond was assigned to the defendant. Regretting that Beman should be in a situation so embarrassing, he suggests, whether Beman might not plead, in bar of the suit, the judgment bond, as being-of later and higher authority. This letter was evidently written in a moment of despair, arising from a view of his injuries and misfortunes. It was on the very eve of Prior’s bankruptcy, and the suggestion can have no effect on the uniform tenor of Ms acts, both prior and subsequent to that time.

Upon the whole, as the defendant obstinately refused every proposition, and kept the security to himself, until the debt was lost, I think he is not now to be heard to say, I am not in fault, or I am not responsible for so great a ■waste upon the estate. The admission of such a plea, would be giving success and security to the most aggravated and obstinate violation of the duties of a trustee, and of the plainest principles of equity and good conscience.

I shall, consequently, give effect to the most essential part of the Master’s Report on this point, but shall modify it so far as to charge the defendant only with the value of the lands tendered in the summer or autumn of 1802. The value, as proved by the testimony of Beman, was 5,325 dollars, and that sum, as of the 1st of September, 1802, is to be substituted to the sum in the report of 6,114 dollars, as of the 18th of December, 1798.

As to the costs of the exceptions, the defendant will be entitled to costs of the exceptions taken on the part of the plaintiffs and overruled; and of the first exception, taken on his part and allowed. The plaintiffs will be entitled to the costs of the second, third, fourth, and sixth exceptions overruled, and neither party will be entitled to any costs for the fifth exception, which has been thus modified.

Decree accordingly,