71 Wis. 133 | Wis. | 1888
This case is clearly ruled by the decision in McLeod v. Evans, 66 Wis. 401, and Francis v. Evans, 69 Wis. 115, unless those cases are to be overruled. A majority of the court are not disposed to disturb them or modify the doctrine laid down in them. The equities of the plaintiff to a preference over the general creditors are certainly as strong, if not superior to the equities of the plaintiffs in those cases. Here the plaintiff left her United States bonds with Hodges for safe-lceejping, in October, 1882. In August, 1883, Hodges, in the course of his regular business as banker, deposited the bonds with a Galena bank, as collateral security for the payment of his note then made, of $7,000. The proceeds of the Hodges note, the cashier, Griswold, says, were put into his general banking business.' On February 6th or 7th Hodges directed the Galena bank to sell the bónds and apply the proceeds on his note, which had been renewed and was not then due. The Galena bank informed Hodges that they had sold the bonds and applied the proceeds as directed. The Hodges note is indorsed February 11, 1884, with a payment of $3,710.90, the proceeds of the bonds. Hodges’ bank closed on the 8th of February, and he made an assignment of all his property for the benefit of his creditors on the 11th. It appears that some time in January, 1884, the plaintiff directed Hodges to sell her bonds and immediately remit the proceeds to her in California, where she resided. It is not pretended that Hodges assumed to act, in directing the bonds to be sold, under any instructions given him by the plaintiff. He simply misappropriated or wrongfully converted the bonds to his own use, without the least color of right or authority. They were left with him for safe-keeping merely, and he sold or pledged them to raise money to put into his banking business. This is the fair inference from the testimony. It is true, Griswold, on being subsequently called, qualified the statement that the money borrowed of the Galena bank on
The question then is, Must the plaintiff, whose property has thus been wrongfully misapplied, stand upon the same footing as the general creditors as to the assets assigned? We think not. We say, as we did in the McLeod Case, that it is an irresistible conclusion from the facts that the proceeds of these bonds found their way into the Hodges estate and went to increase the assets of the bank which were assigned. It seems inequitable that the general creditors should profit by, or have the benefit of, the fraud committed by the assignor in respect to these bonds. For Hodges never owned them; they were never a part of his estate by right, but, by a gross violation of trust, amounting to a crime, he mixed this trust property with his own, and the assignee seeks to hold it for the benefit of all the creditors. The plaintiff has a paramount right to be first paid out of the assets. This is the doctrine of the cases decided by the court, which we see no sufficient reason for changing. It was not my purpose, at this time, to enter upon a discussion of the principles upon which these cases rest. Enough is said in the opinions to indicate our views upon that subject. I shall make but one further remark. Among the authorities cited to sustain the decision in the McLeod Case was People v. City Bank, 96 N. Y. 32, which, as reported, would seem to be in point. In that case the court says that the object of Sartwell, Hough & Ford, in drawing and depositing their checks with the bank, was to provide a fund for the payment of the specific notes mentioned, and the engagement of the bank was thus to apply the fund. “ Thus a trust was created, the violation of which constituted a fraud, by which the bank could not profit, and to the benefit of which the receiver is not entitled. . , .
Taylor and Cassoday, JJ. While approving of the “ progressive ” or “ modern rule ” of equity, as affirmed in Re Hallett's Estate, 13 Ch. Div. 696, Ave Avere forced to dissent from the conclusions of the majority of this court in McLeod v. Evans, 66 Wis. 413, for the reasons there given, to the effect that, in our judgment, that decision Avas a departure from a avell-established rule of equity, and not supported by any well-considered adjudication. It is true that some things were said in People v. City Bank, 96 N. Y. 32, and Peak v. Ellicott, 30 Kan. 156, cited in the majority opinion,
By the Court.— The judgment of the circuit court is affirmed.