Wilson v. Jackson

204 Mass. 432 | Mass. | 1910

Loring, J.

[After the foregoing statement of the case.] Some confusion has been brought into the case by the original solicitor of the petitioner in insolvency because of his treating the amendment in January, 1895, to the petition in the Court of Insolvency as an amendment which made the original petition a bill in equity. We agree with the learned counsel who appeared before us in support of the present bill that the amendment of January, 1895, did not convert the petition into a bill in equity. The duty of accounting owed by assignees of the estate of one adjudicated an insolvent under the State insolvency laws is a duty within the exclusive jurisdiction of the Court of Insolvency in which the insolvency proceedings were begun. A court of equity would have had no jurisdiction of such a bill. If the petition of May 16, 1894, was made into a bill in equity by the petitioner’s amendment of January, 1895, the petitioner by that amendment put himself out of court. The petition originally was and after the amendment must be taken to have remained a petition in the insolvency court to require the assignees to file an account of their doings as assignees.

The rule under which the present supervisory suit was sent tc the master directed him “to find the facts.” His ruling as to the decree which the Court of Insolvency should have entered was not within the scope of the duties imposed upon him by the order of reference, and may be disregarded.

No appeal to the full court was taken from the decree of the single justice of this court, made on November 24, 1906, and no leave ever has been given by the full court under R. L. c. 159, § 28, to reopen that decree by filing a late appeal. That decree therefore is final on all matters covered by it. By that decree the fact was established that the insolvent had been a party to two frauds upon the Court of Insolvency. The only matter of fact left open was the settlement of the assignees’ account. The decree in effect directed that the account should be settled first and that the question whether the insolvent was precluded from recovering by reason of these frauds should be decided after the account had been settled.

The finding of the master that the insolvent was not in pari delicto is a finding on a fact which, having been settled by the decree of November 24, 1906, was not open for trial, and his findings on that issue may be disregarded.

The Court of Insolvency in its decree of May 15, 1907, did not follow in one respect the direction contained in the decree of the single justice dated November 24, 1906. The direction was that the administrator of Pratt’s estate should file an account of the doings of the assignees and of the survivor, and that the administratrix of Coburn’s estate should file an account of the property which came into her hands belonging to the insolvent estate. In the decree of the Court of Insolvency made on May 15, 1907, both assignees are charged with the 112,715.08.

But the decree stopped short with the allowance of the account so amended, and no order was added for the payment of this sum to the insolvent, which, but for the finding of the insolvent’s frauds, should have followed as matter of course the allowance of that account.

This question remains to be decided, to wit: Is the insolvent precluded from calling his assignees to account by having been a party to these two frauds or either of them ?

The single justice who made the decree of November 24, 1906, doubtless thought that a true account might throw some light on the question of fraud, and for that reason postponed the decision of that question until the account had been settled. The account confirms the result which follows from the facts found by the decree of November 24, 1906, and we shall take up that question as it was left by that decree.

It appears from the master’s report on which the decree of November 24, 1906, was founded, that three or four weeks before April 12, 1892 (that is to say, before the confirmation of the compromise and the granting of. the discharge), Carpenter put the agreement to divide (which theretofore had been made by word of mouth) into writing. By the written agreement four persons were to share in the residue of the estate after paying the compromise of twenty per cent, and sixty per cent (in place of twenty per cent) to the bank. But Coburn refused to become a party to this arrangement and it was signed by the three, it being orally agreed that the division should be into thirds in place of fourths. By the written agreement the insolvent agreed to take “ as part payment of his share ” the equity in his real estate at the assessed valuation of $5,800, and Pratt and Carpenter agreed that he should have that as his share in any event. It also appears from the master’s report that the amount of the illegal payment to the bank was $5,359.22. That was not paid until April 25, 1892, but the amount to be paid was known on April 12, when the written agreement was made. The trade for this sixty per cent payment was found to have been made before April 1. From these facts the conclusion is irresistible that the insolvent knew before the confirmation of the twenty per cent compromise that he was cheating his creditors to an amount which they expected would reach the sum uf four times $5,800 plus $5,359.22, or more than $28,500.

We have gone into the question of the expected amount by Which the insolvent knew that he was cheating his creditors because the only possible ground on which (in our opinion) this fraud upon his creditors and upon the court could be thought not fco prevent his calling his assignees to account was that it was an amount which he might reasonably have thought would be due to his assignees and his attorney and which they offered to share with him. But the amount of the cheat disposes of such a contention.

The question which we have to decide therefore is this: If an agreement is made between an insolvent, his attorney, and a man who to carry out the fraud is to be and is made one of his assignees, to cheat the insolvent’s creditors to the amount of some $28,000 to $29,000 by offering to them a compromise less than their due by that amount, and to divide this sum of money equally among the three, what are the rights of the insolvent if he can prove that the agreement to divide equally was not carried out and that he did not get his share?

Counsel have at no time attempted to ask the court to give to the insolvent what is at the bottom of this complaint, namely, his equal share of the plunder. If that had been asked it would have been too apparent that one of the three was asking the court to force the other two to pay to him his share of a fund created by fraud. That difficulty is not avoided by the course which was adopted by the insolvent, namely, to ask for an accounting. The money which the insolvent asked the court to make his assignees account for was the sum out of which he had cheated his creditors by the aid of his attorney and one of the assignees. The position of the insolvent is not improved by asking that the whole sum out of which he had cheated his creditors should be paid over to him in place of the one third share of it to which as part of the fraudulent agreement which created the fund he agreed to limit himself in order that the other two might help him in the fraud which created the fund.

The main contention put forward by the learned counsel for the administrator of the assignee of the insolvent’s claim against the assignees is that, in case of a composition, upon the granting of the discharge all property other than that which was necessary for the composition (in the words of the statute, R. L. c. 163, § 159) “ shall revert to and revest in him [the debtor] ; and the court may order any necessary or proper release or reconveyance thereof by an assignee or trustee to whom the same may have been assigned or conveyed ”; that the insolvent’s petition of January 21, 1895, for an account seeks the enforcement of the right secured to him by this statutory provision; that this right is not dependent on the conduct of the debtor and it is not necessary therefore to consider whether the insolvent was free from blame or was in pari delicto. Also that this petition was made after the time provided for in R. L. c. 163, § 109, had expired for applying to annul the discharge; that the composition has been confirmed and consequently nothing can be done with the sum of $12,715.08, found by the Court of Insolvency, or with the sum of $61,732.31 found by the master, but to pay it to the insolvent. The position taken is in effect this: Although the sum which the insolvent asks the court to compel the assignees to pay to him is the sum the insolvent cheated his creditors out of, yet since the time has expired for annulling his discharge and the confirmation of the composition has not been set aside, the statute revesting the property in the insolvent forces the court to direct the assignees to hand over the money to the insolvent. Wé do not assent to that proposition. In refusing to assent to it we do not have to rely on the fact that the words of the statute are “ the court may order ” a reconveyance, nor on the ground that this statute ought to be construed to apply only where there is honestly property of the debtor remaining in the hands of the assignees. The ground on which in our opinion the insolvent (and therefore the administrator of the estate of the insolvent’s assignee) is not entitled to have the court direct the payment over of this sum of money is that a court will refuse to act when its aid is sought by one who is a party to a fraud to secure his share or the whole of a fund created by that fraud.

The further contention has been made in behalf of the assignees of the insolvent that the case comes within Gargano v. Pope, 184 Mass. 571. In that case the plaintiff had a valid claim against two of the defendants. She made a champertous agreement with two attorneys (the other two defendants) by which she agreed to give to them for their services sixty-six and two thirds per cent of the sum recovered by her, and that they should have a lien on that sum for payment thereof. After the two defendants had agreed to pay $550 in settlement of the valid claim of the plaintiff, she brought a bill in equity to have the contract with the attorneys set aside and to have the sum agreed upon in settlement paid to her. It was held that she was not in pari delicto. In the case at bar there was -no honest fund as there was in Gargano v. Pope, which but for the agreement belonged wholly to the plaintiff. That is enough to distinguish that case. But as to Gargano v. Pope see also Downey v. Charles S. Gove Co. 201 Mass. 251. The case at bar comes within the doctrine of cases like Snell v. Dwight, 120 Mass. 9 ; Dunham v. Presby, 120 Mass. 285; Downey v. Charles S. Gove Co. 201 Mass. 251; Dent v. Ferguson, 132 U. S. 50.

In putting our decision on the ground on which we have put it we do not mean to intimate that the finding of the master that the insolvent was not in pari delicto would have stood had the master been directed to review the findings on that point made by the decree of the Court of Insolvency on June 15, 1900, and by the master in his report of October 20, 1906, confirmed by the decree of the single justice made on November 24,1906. We think.it proper to add that we have read all the evidence upon which the master reports he based his finding. That evidence consists of the evidence put in at the hearing on the supervisory bill which was dismissed in March, 1895, the evidence put in in the Court of Insolvency in 1895 and 1898, the evidence put in before the master under the supervisory bill of July 2, 1900, whose report is dated October 20, 1906, and the exhibits put in at those hearings. The master expressly states that “no witnesses appeared before me.” There is reason to think that part of the evidence on which the master (who reported on October 20, 1906) made his findings has not been sent to us. But on the evidence on which the master whose report is now before us says he found as a fact that the insolvent was not in pari delicto, that finding of the master could not have stood had that issue been one to be decided by him. Whether the insolvent was or was not in pari delicto depended upon the credit given or not given to his testimony. The story told by him was one which explained away his assent to written agreements made at the time and explained away his conduct at the time and was directly contradicted by the testimony of disinterested witnesses. The deposition of one of the persons from Wooster which he himself put in evidence showed that in the story he told to them there were several false representations. The judge of the Court of Insolvency who saw all the witnesses did not believe his story. The master whose report is dated October 20, 1906, did not believe his story. How far the findings of this master were founded on testimony of witnesses who appeared before him is not on the record altogether plain. The master whose report is now before us (had he been directed to review these findings) should not have upset the findings made by the Court of Insolvency and by the former master unless they were plainly wrong. Newton v. Baker, 125 Mass. 30. Whitney v. Leominster Savings Bank, 141 Mass. 85. Staples v. Mullen, 196 Mass. 132. This court having before it the same documentary evidence which was before the master, stands where he stood, and that rule does not apply to his findings. Harvey-Watts Co. v. Worcester Umbrella Co. 193 Mass. 138. Not only in our opinion is it the fact that the evidence does not show that the judge of the Court of Insolvency and the master who reported on October 20, 1906, were plainly wrong, but that evidence in our opinion shows that they were right.

The only question raised by the supervisory bill here in question is whether the insolvent is entitled to relief.

The entry must be

Bill dismissed.