City of Marquette v. Wilkinson

119 Mich. 413 | Mich. | 1899

Lead Opinion

Grant, C. J.

(after stating the facts). Two questions are presented:

1. Five witnesses testified to the arrangement between Mr. Wilkinson and the banks for the deposit of these funds. Three are the bondsmen. It is insisted that their testimony is incompetent under 3 How. Stat. § 7545, upon the theory that they are the real parties in interest, and are, therefore, excluded from testifying to matters equally within the knowledge of the deceased. Who are the real parties to this controversy, so as to make them “opposite parties,” within the meaning of the statute? The estate of Mr. Wilkinson is not interested, because it is not concerned in the distribution of the fund. It cannot be depleted by establishing this agreement. Neither will it be increased thereby. The assignees, in any event, would receive this money only to pay it out, either to the general creditors or to the cestui que trust. They are not, therefore, opposite parties, within the meaning of the statute. The banks are not interested, because, in any event, they must pay the money. They are, therefore, not opposite parties. The bondsmen are only contingently interested. They may or may not become liable. Should the assets be sufficient to pay all the liabilities, — and there is nothing upon this record to show that they are not,- — no liability will attach. In any event, they are only liable for such deficit as may remain after the distribution of the entire estate among the creditors. It is true, they might be sued upon the bond before the estate is distributed, and in that event they would be subrogated to the rights of the city in the estate. This is a controversy between the creditors alone, to wit, the city and the other creditors; and the reason upon which the statute is founded, excluding testimony, does not apply. McClintock's Appeal, 58 Mich. 152; Brown v. Bell, Id. 58. The contingent liability of the bondsmen does not render them opposite parties, within the meaning of the statute, or disqualify them from testifying. Schofield v. Walker, Id. 96; Latourette v. McKeon, 104 Mich. 156.

2. Are these trust funds? The character of the fund in Wilkinson’s bank, as between him and the city, is not here in controversy. Nor is it material that the city had no knowledge of the arrangement with the other banks. Cestuis que trustent are not debarred from enforcing a trust through ignorance of it,at the time of its creation, but may enforce it whenever they ascertain its existence. Martin v. Funk, 75 N. Y. 134 (31 Am. Rep. 446).-

It is urged that this agreement is void as against public policy. If this be granted, neither Wilkinson, nor the banks, nor the bondsmen could take advantage of it. The city alone could rescind it on this account. It has not chosen to do so, and no other party can complain.

It is also clear that Wilkinson’s assignees have no other or better title to these funds than did Mr. Wilkinson iu his lifetime. Mr. Wilkinson had deposited these funds with the other banks as the city’s money, to be paid out only for city purposes. They were not regular deposits to be drawn upon generally by Wilkinson, but were special deposits to be drawn upon for a special object. The funds had passed beyond Wilkinson’s control, except under the terms of the agreement. Had Mr. Wilkinson given his check upon either of these banks to pay his personal debts, would the banks have been legally bound to pay ? If the banks had been garnished for the personal debts of Wilkinson, could the garnishee suit be sustained ? To so hold would he in direct violation of the express terms of the agreement, and defeat the very purpose for the deposit of these funds. If it be granted that the main purpose was to protect the bondsmen, the city is not thereby estopped to seek the fund thus deposited, and compelled to look to the bondsmen. Suppose the bondsmen had become irresponsible. The city would certainly then have a direct interest in the funds. It is, however, elementary that the cestui que trust may pursue his funds regardless of any security he may have by way of bonds.

To apply another test, suppose these bondsmen had declined to sign the bond unless Mr. Wilkinson would deposit with them two-thirds of the city funds, to be> kept by them, and paid out only on his check or order to pay city liabilities. Here the main purpose undoubtedly would be to protect the bondsmen. Upon an assignment for the benefit of the creditors, would the bondsmen be compelled to return the moneys to Mr. Wilkinson’s assignees, to be distributed among the general creditors, rather than to devote them to the special purpose for which they were deposited ? If not, then certainly there is no difference in principle when the funds are deposited with a third person to secure the bondsmen. Wilkinson, the banks, and the bondsmen saw fit to agree that, as fast as Wilkinson received the city’s moneys, two-thirds thereof should be deposited with the defendant banks, first, to preserve them for the benefit of the city, and, second, to secure the bondsmen. . The transaction was legitimate, and impressed upon the funds the character of a trust. The banks were under obligation, both moral and legal, to hold the" funds, and pay them out for the specific purpose agreed upon.

We think our conclusion is clearly within the principle established by the following decisions: Sherwood v. Central Mich. Savings Bank, 103 Mich. 109; Wallace v. Stone, 107 Mich. 190; Sunderlin v. Mecosta County Savings Bank, 116 Mich. 281, and authorities there cited; Cleveland, etc., R. Co. v. Hawkins, 79 Fed. 29; Montagu v. Pacific Bank, 81 Fed. 602; Libby v. Hopkinsf 104 U. S. 303; People v. City Bank, 96 N. Y. 32; Martin v. Funk, supra; In re Gaffney’s Estate,. 146 Pa. St. 49; Davis v. Ney, 125 Mass. 590 (28 Am. Rep. 272); Reiff v. Horst, 52 Md. 255.

The death of Wilkinson terminated the agreement with the city. It was a personal contract, and nqt assignable. The court of chancery has jurisdiction to determine the rights of the parties, • and direct the completion of the trust.

Decree affirmed, with costs.

Moore, J., concurred with Grant, C. J.

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Concurrence Opinion

Hooker, J.

We concur in the conclusion reached by the Chief Justice. We are of the opinion that the evidence, aside from that given by the bondsmen, clearly establishes the trust. We do not, therefore, pass upon the question whether the testimony of these bondsmen was admissible under the stafute.

Montgomery and Long, JJ., concurred with Hooker, J.