154 F. 791 | 1st Cir. | 1907
This is in the line of the events described in our opinion in Marion E. Tucker, petitioner, passed down on October 31, 1906, and reported 153 Fed. 91. In that opinion we pointed out that Luther P. Tucker, deceased, domiciled in the state of New York at the time of his decease, grandfather of Marion E. Tucker, by his will, duly probated and allowed 'in New York, gave to Frederick M. Tucker and Tracy H. Tucker as trustees a certain fund, to be invested by them as trustees, the income thereof to be paid over to said Marion E. Tucker during her .natural life. The persons thus named as trustees were also made executors of the will, and were duly qualified as such executors by the proper Surrogate’s Court of the state of New York. The persons thus named as trustees, Frederick M. Tucker and Tracy H. Tucker, were transacting a brokerage' business by the name of Frederick M. Tucker & Co., and on an involuntary petition, filed in the District Court for the District of Massachusetts on July 6, 1903, were duly adjudged bankrupts, both as copartners and as individuals. We showed in Marion E. Tucker, petitioner, that the question was made whether Frederick M. Tucker and Tracy PI. Tucker had ever been duly qualified as trustees under the will. Nevertheless, we also showed that they had received into their hands the legacy given by the will, and assumed to act as trustees therefor, and that the assets arising thérefrom were at one time duly earmarked as trust assets. Consequently, we showed that, according to the general rules of equity, which allow no trust to fail merely for the want of trustees,
The origin of this appeal is very well shown by the certificate of the referee to the learned judge of the District Court, as follows:
“Tlie bankrupts, as trustees under the will of I/utlier P. Tucker for the boneiit of Marion K. Tucker, had at the date of their bankruptcy a note of the iirm of F. M. Tucker & Co. for $5,000, which they had taken for money» of tlie trust estale loaned to the firm by themselves as trustees. This noto was originally secured by certain stocks, the greater part of which were sold hy them before the bankruptcy, and other stocks were substituted for them, some of which were sold after the bankruptcy to an amount which I found sufficient to pay the note, which I accordingly found liad been paid. There finis remained in the hands of the bankrupts some of the original securities and some of those which had been substituted, and I ordered that (hese be delivered to the trustee in bankruptcy, all of which will more fully appear from tlie decree and finding», which, with the evidence taken at tlie hearing's at which the title to these stocks was in issue, are herewith Irans-miited. This order was made upon a hearing- on a petition hy the trustee in bankruptcy, asking that an oidor lie entered that the securities in the hands of tlie bankrupts be delivered to him: counsel for the present trustee under the will not waiving any right to object to the jurisdiction of the court in any respect.”
The person described as the “present trustee” in the certificate is Hatch, the petitioner, now the appellant, who has been duly qualified as trustee in lieu of the trustees named in the will, who, since our determination of Marion E. Tucker, petitioner, already referred to, have withdrawn themselves from the trust. The record shows, as stated by the referee, that the stocks in question were claimed to have been, throughout all the proceedings, in the hands of Frederick M. Tucker and Tracy H. Tucker, assuming to hold them in the trust capacity which we have described, though since the proceedings in the District Court now appealed from they have been held for whom it might concern in the hands of a gentleman who was acting as their counsel.
The District Court confirmed the order of the referee, finding that the trust had no interest in the securities, and it-directed them to be delivered to Curtin, the trustee in bankruptcy of the copartnership, and the appellee herein. It was claimed by Hatch, as trustee, in the District Court, that the securities still belong to the trust, and that they were not in the possession of the trustee in bankruptcy, and that, being held adversely, the District Court had no jurisdiction to make the order which was made in reference to that possession. He also, of course, claimed that the entire merits of the case were with him, as representing his trust No proceeding in the nature of a petition for revision has been filed in this court, but, as appears in the title of the case, it has come to us on appeal in the strict sense of the term. If both of these positions had been insisted on before us, First National Bank v. Chicago Title and Trust Company, 198 U. S. 280, 25 Sup. Ct. (593, 49 L,. Ed. 1051, would apply, and we could not take jurisdiction over the matter on an appeal; but the proposition that the District Court had no jurisdiction by a summary proceeding over
The first question, of course, is whether the $5,000, or any other sum was advanced from moneys appertaining to the trust named in the will of Tuther P. Tucker, and was taken for the personal use of the bankrupt copartnership of F. M. Tucker & Co., and stocks set aside and otherwise earmarked as collateral. On this point we have no doubt. If funds which were earmarked as belonging to a trust were thus appropriated, it is unimportant, so far as this case is concerned, what was the form of the appropriation. The account books of Frederick M. Tucker and Tracy H. Tucker as trustees were not produced, and, indeed, the record suggests that they kept no proper accounts in reference to the trust. Frederick M. Tucker testified that, prior ⅛> April, 1903, there was a fund in the. Massachusetts Toan & Trust Company earmarked as belonging to this trust, and which in fact did belong to it. This is not contradicted, although the record does not show the origin of this fund, and the testimony taken discloses no effort to show it. We are not permitted b)r the record to find otherwise than that the moneys were so deposited in trust. Also, we are not permitted by the record to find otherwise than that $5,000 of this fund was on April 18th transferred to the use of the bankrupt copartnership of F. M. Tucker & Co., and was in fact used for their benefit. Frederick M. Tucker testified positively to that fact, and also testified that a note was given therefor, dated April 18th and made payable to George H. Nolte, carrying collateral, and indorsed in blank by George H. Nolte, and that this nóte and the collateral were turned over to the trustees under the will, and deposited in a box in the State Street Safe Deposit Vaults at Boston. Tucker testified, also, that this transaction was entered on the journal of the copartnership, under the date named (April 18th), and that there was at the same time an entry in detail of the collateral given therefor. The trustee in bankruptcy could easily have contradicted this evidence if not true, but he did not do it. One Kimball, who was formerly a bookkeeper for the bankrupt copartnership, testified to cotemporary entries on its cashbook, showing a cash receipt of $5,000, and a remittance of the same to New York on the firm’s account, and also a proper debit entry to “bills payable” of the note which we have described, as also carrying interest at 6 per cent. Notwithstanding some confusion in the testimony, which is not of an extraordinary character, these facts positively appear, and we are not justified in disregarding them; so that we find that $5,000 was withdrawn from the trust fund for the benefit of the bankrupt copartnership, and collateral deposited therefor, as maintained by the appellant.
Next comes the question whether any part of the loan has been paid. Apparently a few dollars have been paid on it in some way which the record does not disclose, and which, in view of the judgment which we will enter, it is not necessary for us to trouble our
The collateral was changed from time to time, the old collateral being taken out and new collateral substituted, as might be expected in connection with the business of F. M. Tucker & Co. as brokers; that being the usual method of dealing between brokers borrowing on collateral and the holders of. the collateral, because brokers are all the time changing their assets in the usual course of business. We therefore attach no importance to these changes in the collateral ; neither do we understand that anybody attempts to regard them as of any special account. Matters so continued until the 1st day of July, 1903, when Frederick M. Tucker told Kimball, the bookkeeper already named, to mark the note as paid, and that the collateral would be held and taken in payment for the note, and Kimball made an entry that day on the “bills payable” book as follows: “Paid on loan $4,677.50.” This entry related to the $5,000 note which we have described. Meanwhile, between April 18th and July 1st, F. M. Tucker & Co. had failed, and had made a voluntary assignment for the benefit of their creditors, which stood unrevoked until the petition in bankruptcy was filed against them. The $5,000 note provided that the collateral might at any time be sold at public or private sale, and the proceeds applied to the payment of the debt; but this, of course, under ordinary circumstances, would not permit the creditor of his own motion to transfer the collateral to himself as his own absolute property by a mere stroke of the pen. In the present instance this might have been permissible except for special circumstances, because F. if. Tucker 8z Co. on the one side, and Frederick M. Tucker and Tracy H. Tucker as trustees on the other, might be said to have been the masters of the whole situation; but, the voluntary assignment having intervened, the rights and powers of F. M. Tucker & Co. were suspended, and, moreover, as they were then insolvent and on the verge of bankruptcy, this transaction must be regarded in fraud of the statute. Therefore, under the circumstances, we are compelled to regard it as void. The trustee in bankruptcy, however, occupies the singular position of holding that it was void so far as he was concerned, but that it had some effect prejudicial to the petitioner, appellant, or to the beneficiary whom he represents. On the other hand, the transaction must be regarded as void from the standpoint of either of them, and wholly ineffectual.
To a considerable extent the collateral for the $5,000 note has been sold. The record, however, shows that the proceeds of these sales went to the benefit of F. M. Tucker & Co., and none to the benefit of the trust under the will. The collateral now remaining is appar-entl}- the same as was on hand when the petition in bankruptcy was filed, so that, as none of it has been disposed of since the bankruptcy proceedings were commenced, and as there is no suggestion in the record of anything in the nature of a preference in violation of the statutes in bankruptcy, the present status is to be determined according to the condition of things at the time the involuntary petition was filed; in other words, the equities involved are those which exist as
It is impossible on this record, however, far this court to ascertain whether the collateral remaining is sufficient to liquidate the debt to the trust. Under the circumstances, it is the duty of the District Court in bankruptcy to proceed in the usual way. If there is reasonable ground to apprehend that on an accounting the collateral now remaining and in issue here, if disposed of under proper directions, would liquidate the balance due on the note, with interest, less the minor payments to which we have referred, if there have been any such payments, and probably leave a balance for the benefit of the estate in- bankruptcy, the District Court in bankruptcy should dispose of the collateral, direct payment of the debt to the appellant, petitioner, for the benefit of his trust, as asked by him, and permit the trustee in bankruptcy to retain the surplus. If, however, there is no reasonable ground to apprehend that the estate in bankruptcy can derive any advantage from such a course of proceedings, the District Court in bankruptcy should direct the delivery of the collateral to the petitioner, appellant, as representing his trust, and permit proof of the debt to the trust as a secured claim, or cause liquidation in some other way which the law permits, or to which the parties, with the approval of the court, agree.
The decree of the District Court is reversed, and the case is remanded to that court for further proceedings in accordance with our opinion passed down this day, and the appellant recovers his costs of appeal against the appellee as trustee.