John Randel, Jr., placed in the hands of Brown two certificates
of stock, which Brown afterwards refused to restore.
Randel filed a bill in chancery against Brown, alleging that the
deposit had been made for an especial purpose which had failed. The
answer denied this, and claimed a lien on the certificates, or that
they were given as a payment.
Held, from the bill, answer, and evidence, that they
were not delivered to Brown either as a payment of a debt to
himself or to secure him from responsibility to another.
Held also that Brown had no legal or equitable interest
in them at the time of the rendition of the decree.
The rights of the parties, as they stand when the decree is
rendered, are to govern, and not as they stood at any preceding
time.
The retention of property, after the extinguishment of a lien,
becomes a fraudulent possession.
"A lien cannot arise where, from the nature of the contract
between the parties, it would be inconsistent with the express
terms or the clear intent of the contract."
The facts admitted or proved were few.
Prior to and during the year 1831, Randel was engaged in a
remarkably
Page 43 U. S. 407
troublesome litigation with the Chesapeake & Delaware Canal
Company. In that year, Brown was a student of law in the office of
John Sergeant, Esq., of Philadelphia, who was one of Randel's
counsel. Through his visits to the office, Randel became acquainted
with Brown, who was then twenty-five years of age.
In the latter part of 1831, Randel removed to the State of New
York, and engaged the services of John M. Clayton, Esq., of
Delaware, who became the principal counsel in the cause.
During the years 1832 and 1833, the suit was prosecuted in
Delaware against the canal company, Brown absenting himself from
the office of Mr. Sergeant, at first partially and then almost
wholly. The troublesome nature of the controversy may be inferred
from the facts, that the counsel for the canal company filed
sixty-two pleas, to each of which there was a replication or
answer. The whole of these were afterwards withdrawn, the record
broken up, new counts added to the declaration, twenty-nine new
pleas and demurrers filed, to each of which there was a replication
or a joinder in demurrer, as the case might require, all of which
were drawn out at full length. In the preparation of these papers,
Brown rendered such aid as he was able to do. The demurrers were
argued at May term and November term, 1833, and overruled. On 9
December, 1833, the cause came on to be tried, and on 25 January,
1834, the jury found a verdict in favor of Randel for $226,885.
On 18 September, 1834, the sum $2,000, with the interest due and
to become due thereon, was entered upon the record as being
assigned for the use of Brown.
On 22 September, 1834, Brown caused attachments to be issued
against the captains of vessels passing through the canal as
garnishees of the tolls.
On 26 September, 1834, Brown accepted an order drawn by Randel
in favor of William M. Camac for $2,000, payable out of the first
moneys he might obtain from said company on said account or from
tolls attached. If more than one year should elapse before the
whole of the $2,000 was obtained, then he was to pay to Camac an
interest of 6 percent on whatever balance might remain unpaid after
the expiration of one year.
During the years 1834, 1835, and 1836, the attachments became
the subject of much litigation, but were ultimately confirmed.
In March, 1836, an arrangement was made between Randel and the
canal company by which the latter issued certificates of stock,
Page 43 U. S. 408
the interest upon which and principal were to be paid in
preference to all other debts, the tolls being pledged for that
purpose. This arrangement, however, was not consummated until
April, nor were the certificates issued until July. They were then
issued in manuscript for $5,000 each. In October, they were issued
in a printed form.
On 18 April, 1836, Randel gave Brown his promissory note at
ninety days for $300, which was not paid.
On 22 October, 1836, Randel gave Brown a power of attorney
authorizing him to sell, assign, and transfer unto himself or to
any other person or persons $10,000 of the funded debt of the
Chesapeake & Delaware Canal Company, entitled to priority of
payment and transferable according to certificates thereof,
numbered 34 and 35, each for $5,000.
On the same day, Brown reassigned to Randel the $2,000 worth of
the judgment which had been assigned to Brown on 18 September,
1834.
Under the power of attorney, Brown transferred $10,000 to
himself, and took out new certificates in his own name.
On 29 October, 1836, Randel filed his bill in the Circuit Court
for the Eastern District of Pennsylvania, in which he alleged that
he was desirous of negotiating a loan from one of the banks in the
City of Philadelphia, and hoped to do so by depositing as
collateral security such of the certificates of debt, issued by the
canal company, as might be sufficient to protect the lender from
loss, giving at the same time his promissory note in the customary
form; that he stated this desire to Brown, who replied that he had
transacted business with the Schuylkill Bank, of which his cousin,
Frederick Brown, was a director, and that he would do what he could
for him; that Brown soon afterwards informed him that he feared he
could not succeed; that the complainant then informed Brown that he
would give $500 for a loan for a twelve-month; that the complainant
and Brown agreed that as a premium was offered, it would be better
that the name of the complainant should not appear in the
transaction; that Brown then said he would negotiate it in his own
name upon the hypothecation of the certificates, to which the
complainant agreed; that the complainant afterwards understood from
Brown that he had drawn a note for $10,000, payable in twelve
months, and placed at the foot of it a memorandum, showing that it
was to be secured by certificates of the debt of the Chesapeake
& Delaware Canal Company;
Page 43 U. S. 409
that the complainant then observed that it would be well to add
that a power of attorney would be given to sell or transfer the
certificates which would enable the bank at once to draw the
interest to meet the note.
The bill further stated that Brown came to the house of the
complainant in Wilmington on 22 October and stated that he had
prepared a new note according to the form above stated, which had
been presented to the bank and thrown out, but that it would be
presented again and it would be proper for him to have the
certificates and a power of attorney authorizing a transfer in
order to give it its best chance; that the complainant assented and
gave Brown two certificates of the character above described of
$5,000 each, and the power of attorney; that the complainant handed
to Brown a blank form of a power of attorney similar to the one
which had been filled, requesting him to fill it up as a copy, and
write upon it a receipt for the power and certificates, stating in
such receipt an engagement to return the certificates on the
punctual payment of the note and interest, and also an engagement
to account to the complainant for the dividends which he might have
received whilst the certificates were in his possession; that Brown
promised to make out a fair copy of such receipt and give it to the
complainant, which, however, he wholly omitted to do.
The bill further stated that at the next interview between them,
Brown said that the bank would not lend the money, and upon the
complainants' requesting that the certificates might be restored to
him, Brown refused, and said, "I mean to hold the certificates and
power of attorney until you settle with me; I have now got you in
my power;" that the complainant denied owing him anything, but that
he had always intended to make him, Brown, a handsome present.
The bill further stated that the complainant went immediately to
the office of the canal company for the purpose of stopping the
transfer, but found that Brown had effected it on Monday, 24
October, the power having been given to him on Saturday, the 22d,
and had, on Tuesday morning, received fresh certificates in his own
name.
The bill then charged that these proceedings of Brown were
fraudulent proceedings and a direct breach of trust; that the
deposit of the certificates was made in the hands of Brown merely
as a trustee, in the full trust and reliance that no use whatever
would be made of it but for the purpose of procuring a loan from
the Schuylkill Bank.
Page 43 U. S. 410
It then called upon Brown to answer whether he did not receive
the certificates and power of attorney in trust and confidence in
the manner and under the circumstances aforesaid, and to answer the
several charges in the bill, concluding with a prayer that Brown
might be ordered to restore the certificates, and in the meantime
an injunction might issue.
In March, 1837, Brown filed his answer, in which he set forth
that as early as the spring of 1831, at the instance and request of
the complainant, he engaged in the service of the said complainant,
and particularly in the suit with the canal company; that he had
various duties to perform, and assisted in the preparation of
papers of great extent and importance; that he attended diligently
to these services; that his whole time from 1831 to 1836 was
entirely at the command of the complainant; that soon after the
engagement, the complainant informed him that he would pay the
respondent a reasonable compensation for time actually bestowed in
his service in any event; that he would bear his traveling and
other expenses, and that in the event of success, he, the
complainant, would pay to the respondent two and a half percent on
the sum received in the said suit with the canal company.
The answer further set forth that the assignment of $2,000 of
the judgment was made to the respondent in payment, up to that
period, of the time expended by the respondent in the service of
the complainant.
The answer further set forth that the complainant desired him to
accept an order in favor of Camac for $2,000, promising to place
funds in the hands of the respondent to pay and take up the said
order, which order the respondent accepted.
The answer further stated that in April, 1836, the complainant
gave to the respondent his promissory note for $300 as a payment
for the time expended since the assignment of the judgment, which
note was never paid by the complainant.
The answer further set forth that on 20 October, 1836, after a
conversation between the parties respecting a settlement between
themselves, the complainant took from his pocket two certificates
of the funded debt, each for $5,000, and handed them to the
respondent, and upon the respondent's asking what they were for,
the complainant replied "they are to pay you and Mr. Camac," adding
that he wished the respondent to go to New Castle and reassign the
judgment for $2,000. In consequence of this, the respondent did go
to New Castle and reassign the judgment, on which same day the
Page 43 U. S. 411
complainant executed to the respondent the power of attorney
spoken of in the bill.
The answer then averred that the transfer of stock had been made
by the respondent to himself, and that the certificates had been
given to him not in trust, but absolutely as a payment to himself
for a debt due and ascertained from the said complainant and to
place him in funds for the payment of the order in favor of Camac.
An account was also alleged against the complainant, the
particulars of which were stated.
The answer admitted that the respondent had applied to his
cousin, Frederick Brown, to procure a loan of money for the
complainant, amounting to $10,000; that he drew his note for that
sum, stating at the foot of it that the same amount of the funded
debt of the canal company would be offered as collateral security,
but denied that Frederick Brown was to receive $500, or that the
note was offered at the Schuylkill Bank, or any other bank. It
denied also that the matter of the loan had any connection with the
two certificates handed to the respondent by the complainant. On
the contrary, it averred that the loan was to be secured by other
certificates.
The answer further averred that no allusion was made directly or
indirectly by the complainant to the certificates or power of
attorney until a conversation in which the respondent declined to
act as agent for the complainant in the purchase of a piece of
ground unless the complainant would pay all his debts, and that the
complainant then for the first time, with great asperity, asked why
the respondent had not given him a receipt for the certificates.
The conversation proceeded with much warmth, and terminated with a
demand from the complainant for a restoration of the certificates
and a refusal to surrender them on the part of the respondent. The
answer then replied particularly to the interrogatories of the
complainant, and concluded by saying that the certificates were
surrendered to the court upon the presentation of the complainant's
bill.
Under commissions to take testimony, a vast mass of evidence was
collected, consisting chiefly of the declarations of the parties
respectively as to the compensation which Brown was to receive for
his services, and the value of those services.
In May, 1839, the case was referred to John M. Scott, Thomas I.
Wharton and Peter McCall, Esquires, who were authorized to act as
masters therein, with power to take depositions &c., and
directed to report the evidence to the court, together with a
statement by the
Page 43 U. S. 412
said masters, or a majority of them, of such facts as in their
opinion were established by the evidence, together with their
opinion touching any matters on questions which they may deem
material for consideration, and especially, first, to report the
terms, consideration, and conditions of the transfer of the two
certificates of debt referred to in the bill and answer, in the
consideration of which, the answer of the defendant, so far as it
is responsive to the averments of the bill or interrogatories or a
denial of the former, is to be taken as evidence of the cause
according to the rules of equity. Second, to report what sums of
money have been paid by the plaintiff to defendant for or on
account of disbursements made by defendant -- time, labor expended,
services rendered, for or to the plaintiff, for his use or at his
request; whether any sum is yet due to defendant therefor, and to
what amount.
Two of the masters united in a report; the third filed a
separate one.
The two masters, in their report, recapitulated the principal
part of the evidence which led them to their conclusion, and
found:
1. That the delivery of the certificates by the complainant to
the respondent was not absolute, but upon a trust.
2. That the trust was to raise money.
3. That of the money so to be raised, part was to be paid to Mr.
Camac, and that, as to this part, the respondent had a direct
interest in the execution of the trust, in consequence of his
acceptance of the draft in favor of Mr. Camac, referred to in the
answer, and of his retransfer of the interest in the judgment upon
which the draft was drawn.
4. That another portion of the money so to be raised, was to be
paid to Mr. C. Ingersoll.
5. That no express appropriation of the balance or any part
thereof was made at the time by the complainant in favor of the
respondent.
6. But that an intention had been declared previously by the
complainant to pay or present to the respondent, through the medium
of such certificates, a sum of money, the amount of which was not
stated or specified, as a compensation or remuneration for his
services during the pendency of the suit with the Chesapeake &
Delaware Canal Company; but we do not find that any express
reference to such declared intention was made at the time of the
transaction.
7. That in point of fact no money was raised upon the
certificates.
Page 43 U. S. 413
8. That on Monday, 24 October, 1836, the certificates were
transferred by the respondent (under the power of attorney) to
himself, and so remain, and
9. That since the filing of the bill in this case, the
complainant has parted with all the remaining certificates of debt
due to him by the said Chesapeake & Delaware Canal Company.
The two masters further reported, that the weight of testimony
was against the allegation that the transfer of the $2,000 was in
payment for time expended.
They further reported that such a promise was made by the
complainant, as the respondent has set forth, but that nothing was
due to the respondent for his time expended.
They further reported that for labor and services rendered by
the respondent to the complainant, for his use and at his request,
there was due a sum equal to two and one-half percent on the amount
of the judgment recovered against the canal company,
viz.,
the sum of $5,659.64. And that the debt due to Mr. Camac had been
paid by Randel since the cause commenced.
On the subject of payments, the two masters reported that there
was a balance of $10, which was to be applied to Mr. Randel's
credit on the general account.
The third master concurred with the other two as to the contract
for two and one-half percent, and that the transfer of the
certificates was in trust, but was of opinion that Brown's own
claim was to be paid out of the proceeds, and that the $2,000
contract was not disproved by evidence sufficiently strong to
deprive the answer of the weight given to it by the rules of
equity.
Numerous exceptions to this report were filed by both the
complainant and respondent; on the part of the complainant, it was
objected that the report was erroneous because.
1. The part of the answer which stated the contract for two and
one-half percent was not responsive to the bill.
2. The respondent furnished no account of disbursements made or
services rendered.
3. The payments alleged to have been made were not proved.
4. The sum of $80 was a payment, and not a loan.
5. That nothing was due to the respondent from the
complainant.
On the part of the respondent, it was objected
1. That the sums charged to the respondent in the account were
not sustained by the evidence.
Page 43 U. S. 414
2. That the masters had not allowed the respondents sufficient
credits.
In October, 1841, the cause came on to be heard upon bill,
answer, replication, master's report, exhibits, depositions, and
exceptions to report, and the court decreed that the exceptions to
the master's report be disallowed; that there was due by the
complainant to the respondent the sum of $5,649.64, with interest
thereon from the fifth day of May, 1840, making together the sum of
$6,136, which said sum should be paid and satisfied by and out of
certain certificates of debt or the proceeds thereof, given to the
complainant by the Chesapeake & Delaware Canal Company, and
then under the control of the court. And it was further ordered
that the costs of the suit, including the fees of the masters, be
divided between and equally paid by the complainant and
respondent.
From this decree, both parties appealed to this Court.
Page 43 U. S. 416
MR. JUSTICE McKINLEY delivered the opinion of the Court.
Randel filed his bill against Brown on the chancery side of the
Circuit Court of the United States for the Eastern District of
Pennsylvania. In which he states that, wishing to negotiate a loan
of $10,000, to be secured on certificates of the funded debt of the
Chesapeake & Delaware Canal Company, be applied to Brown to aid
him in the negotiation, with one of the banks in Philadelphia. And
that it was agreed between them that Randel should deliver to Brown
two certificates of the funded debt of the canal company for $5,000
each and execute to him a power of attorney authorizing him to
transfer the certificates to himself or to any other person, and
that Brown should, upon his own note and the pledge of the
certificates, if practicable, obtain a loan for Randel.
And in pursuance of this agreement, he executed the power and
delivered it and the certificates to Brown. That instead of
obtaining a loan of money, as he had promised, Brown transferred
the certificates to himself and delivered them up to the canal
company and obtained new ones in his own name. That when Randel
applied to Brown to know whether he had obtained the loan of
$10,000 for him, Brown replied that he had bad news for him -- "I
have not succeeded at the bank;" that the bank had a disposition to
lend, but had not the means. That Randel then requested him to
return the certificates of debt, which Brown refused to do, saying
he intended "to hold on to them" till Randel settled with him or
made him the present he had promised him.
Randel then put the following interrogatories to Brown:
"Whether he did not receive the certificates and power of
attorney in trust and confidence, in the manner and under the
circumstances aforesaid, and whether he had any interest in the
same, and was not, in holding the same, a mere trustee for the
complainant, and did not refuse to deliver them to him, and whether
he did not transfer said certificates to himself, on Monday, 24
October, and what circumstances occurred before the board of
directors, or were communicated to him, and whether he did not
inform the complainant that he had not succeeded at the bank, and
give the complainant to believe that he had made application on
that or the preceding day, and whether the certificates were not
transferred by said Brown to his own use,
Page 43 U. S. 417
and not for the use of the complainant, and what use or
disposition, if any, he had made thereof, and to whom, and for what
consideration."
The answer denies all the material allegations of the bill,
except it admits the receipt of the power of attorney and the
certificates of debt. Brown then sets up in his answer a claim for
services rendered to Randel from the early part of the year 1831
till 24 October, 1836, of various kinds, but particularly in
attending to and preparing for trial a suit brought by Randel
against the said canal company. And he alleges that Randel agreed
to give him a reasonable compensation for time to be expended in
his service, in any event, and to pay his traveling and other
expenses, and in the event of success in the suit, the additional
compensation of two and a half percent on the amount that might be
received thereon, and that Randel finally recovered judgment, and
received from the company, the sum of $230,000 in payment
thereof.
But before the payment, and while it was uncertain whether
anything would be realized from the judgment, Brown states that,
from exposure in the service of Randal, he was taken sick, and it
being uncertain whether he would recover or not, he applied to
Randel for payment for the time then expended in his service,
whereupon Randel caused to be transferred to the use of Brown
$2,000, part of said judgment. And a short time thereafter, about
the month of September, 1834, Randel requested him to accept an
order, drawn on him by Randel, in favor of a certain William H.
Camac, for $2,000, promising at the same time to place funds in his
hands to meet its payment, which induced him to accept it. Brown
refers to the order in his answer, and which is as follows:
"Sir -- Out of the sum of $2,000, with interest due, and to
become due thereon, which was assigned at my request by Samuel H.
Hodson to you, being one-fifth part of the sum assigned by me to
him, on trust, 27 January last, out of the judgment obtained by me
against the Chesapeake & Delaware Canal Company, please to pay
to William H. Camac or order the sum of $2,000, out of the first
moneys you obtain from said company on said account, or on account
of tolls attached. If more than one year elapse before you obtain
the whole of said sum of $2,000, then pay to said Camac an interest
of six percent on whatever balance may remain unpaid, after the
expiration of said term of one year."
Brown accepted this order on 26 September, 1834.
Page 43 U. S. 418
It is further charged in the answer that on 18 April, 1836, for
time expended in his service from the date of the assignment of the
said sum of $2,000 down to that time, Randel gave to Brown a
promissory note for $300, payable 90 days after date. He then
charges that the two certificates of debt were delivered to him by
Randel on 20 October, 1836, for the purpose of paying himself, and
the debt of $2,000 to Camac. And at the same time Randel requested
him to go to New Castle and reassign the part of said judgment
which had been assigned to him as aforesaid, and that he, Randel,
would then execute the power to Brown to enable him to transfer
said two certificates of debt to himself. And accordingly, on the
22d of the same month, he at New Castle reassigned to Randel said
sum of $2,000, part of said judgment, and received from him the
power of attorney authorizing him to transfer said two certificates
of debt, numbered 34 and 35, to himself or any other person.
And in answer to the interrogatories in the bill, Brown says
"That he did not receive said certificates and power of attorney
in trust and confidence in the manner and under the circumstances
therein set forth, but absolutely, as an unqualified transfer, in
payment of a debt due to him, by the complainant, and distinctly
admitted by him, and to enable him, the respondent, to pay William
H. Camac the amount of his, the respondent's, acceptance, as before
stated, and that said respondent has an absolute and unqualified
interest in the certificates to the whole amount of their principal
and interest, and that he does not hold them as trustee for the
complainant, nor any other person, but in his own right, and for
his own use."
"And that he did refuse to deliver said certificates to the
complainant, and did actually transfer said certificates to
himself, on Monday, 24 October last; and that he did not place said
certificates before the directors of the Schuylkill Bank, on
Monday, 24, or Tuesday, 25 October last. That touching the
disposition your respondent has made of the said certificates, he
says that they still stand in the name of your respondent, and were
surrendered to this Honorable Court on the presentation of the
complainant's bill of complaint."
To the answer the complainant filed a general replication. And
after time had been allowed the parties to take depositions, the
court referred the case to three masters with special
instructions.
The masters, after a very thorough examination of the evidence
in
Page 43 U. S. 419
the cause, reported against the claim of Brown for separate
compensation for time, but allowed him the two and a half percent
commissions, claimed in his answer, amounting to $5,659.64, as
compensation for all services rendered. Both parties excepted to
the report, Brown to that part of it which disallowed his claim for
separate compensation for time, and Randel excepted to that part
which allowed to Brown two and a half percent on the amount of the
judgment against the canal company.
The court overruled these and all other exceptions, confirmed
the report of the masters, and rendered a decree in favor of Brown
for the amount allowed by the masters, with interest from the fifth
day of May, 1840, amounting together to the sum of $6,136, to be
paid out of these two certificates. From this decree both parties
have appealed to this Court.
The right of Brown to compensation for time and his right to
commissions on the amount of the judgment are both involved in his
assertion of the more general right to be compensated for all his
services out of these certificates. The principal questions,
therefore, which we deem it necessary to examine are 1st, were the
certificates delivered to Brown in payment of a debt to himself,
and to pay the debt to Camac? And if they were not so delivered,
then 2d, had Brown such a legal or equitable interest in the
certificates as authorized the decree of the court below? A just
solution of these questions depends upon a proper examination of
the evidence applicable to them and the particular circumstances
under which the witnesses acquired a knowledge of the facts they
have deposed to.
Shortly after the bill was filed and before Brown had filed his
answer, he went to Delaware to ascertain what evidence he could
obtain from persons having a knowledge of the services he had
rendered to Randel. And from the inquiries he made of several of
the witnesses and the disclosures made to them of the nature of his
controversy with Randel, it is reasonable to suppose that he
intended at that time to rest his defense upon the amount and value
of his services only, and that he had not then thought of claiming
the certificates as having been delivered to him in payment of a
debt due for those services. The depositions of four of those
persons are found in the record; T. B. Roberts states in his
deposition that Brown asked him what evidence he could give as to
the value of his services while with Randel, stating that the
witness was aware of his having been for years doing business for
him.
Page 43 U. S. 420
The witness then says that Brown stated to him
"That the certificates had been put into his hands by Mr. Randel
to raise money upon them to pay certain debts of Randel's in
Philadelphia; one of which he mentioned was to Mr. Camac; I think
he stated himself under some obligation to have paid by Mr. Randel
and another debt to Mr. Charles Ingersoll; he did not state that
the balance was for himself. He said he had exerted himself to
negotiate the certificates to several persons, but had not
succeeded . . . that Mr. Randel wished him to return the
certificates to him, but he had refused to do so until Mr. Randel
settled certain debts he owed."
A. C. Gray, to whom Brown applied for the purpose of getting his
services as commissioner to take depositions for him in this suit,
says Brown stated
"That he had received a transfer of $10,000 from Randel of the
canal's debt for the purpose of raising money, with which Mr.
Randel wished to pay his debts; he stated also that Mr. Randel owed
him money for services which he had rendered him during the long
litigation which had taken place between Randel and the canal
company. In consequence of these things, he had determined to hold
on these certificates as the only means to enforce the settlement
of his claims."
Thomas Janvier, another of these witnesses, states that when
Brown applied to him to ascertain what testimony he could give in
this case, Brown stated that Randel had promised to pay him two and
a half percent on the judgment against the canal company. The
witness replied that his testimony might operate against him, as
the only claim he had ever heard him assert was that he intended to
make Randel pay him $2,000 for his services. Janvier then says
"That in the course of the conversation, he gave me a history of
the transaction upon which this suit is founded, and told me that
Randel had given him these certificates which are now in
controversy for the purpose of negotiating a loan to pay certain
debts he had contracted -- debts due to Mr. Camac, Mr. Charles
Ingersoll, and himself; so far I recollect positively. I am certain
from the information of Mr. Brown that the certificates were given
for the purpose of negotiating a loan to enable Randel to pay
certain creditors. I am certain he named Mr. Camac, Mr. C.
Ingersoll, and himself as creditors."
Cornelius D. Blaney, the fourth witness, says he does not
recollect that Brown stated how the certificates came into his
hands; in other respects his testimony is substantially the same as
that of the other
Page 43 U. S. 421
three witnesses, and it appears that he was present at the
conversation between Brown and the witness Roberts.
After collating this evidence with clearness and ability, the
masters proceed to say
"It is remarkable that to none of these persons did the
respondent state the fact that he had transferred these
certificates into his own name; it is remarkable also that if at
that time he did entertain the same clear and positive conceptions
of his rights which is set forth in the answer, he did not simply
and plainly state that right and say 'they [the certificates] were
given in payment or part payment of my own claim and of my
liability to Mr. Camac.'"
"We cannot close our minds to the force of the testimony of
these four persons. It has been ably urged that evidence gathered
from the declarations of a party is unsafe, peculiarly liable to
the effects of misapprehension, of inattention, of defect of
recollection -- that a word omitted or displaced may change the
whole character of the declaration. We have felt the force of the
argument, but it does not prevail against the influence of the
concurring testimony of four intelligent and respectable men giving
a very uniform account of the respondent's representation of his
own case, and in relation to the question of trust giving such a
narration as to lead to one and the same result. We have observed
too that it is the same species of evidence upon which the
respondent asserts his alleged contract with the complainant, which
contract he states in his answer in the words or declarations of
the complainant alleged to have been uttered to himself at a time
much less recent than his own declarations to the witnesses."
"The testimony of these witnesses then, establishes, in our
opinion, and accordingly we find, and so report,"
"1. That the delivery of the certificates by the complainant to
the respondent was not absolute, but upon a trust."
"2. That the trust was to raise money."
"3. That of the money so to be raised, part was to be paid to
Mr. Camac, and that as to this part the respondent had a direct
interest in the execution of the trust in consequence of his
acceptance of the draft drawn in favor of Mr. Camac referred to in
the answer, and of his retransfer of the interest in the judgment
upon which the draft was drawn."
"4. That another portion of the money so to be raised was to be
paid to Mr. C. Ingersoll."
"5. That no express appropriation of the balance, or any
part
Page 43 U. S. 422
thereof, was made at the time by the complainant in favor of the
respondent."
We concur entirely with the masters in their reasoning and in
the conclusions they have arrived at upon this testimony, except as
to the supposed interest of Brown in the execution of the trust,
mentioned in the third specification. Upon that we shall have
occasion to comment in another part of this opinion. This evidence
sustains the allegations of the bill fully, and contradicts the
answer as to the objects and purposes for which the two
certificates were delivered by Randel to Brown. There is therefore
no further pretense to say that Brown received the certificates in
payment of a debt to himself and for the purpose of paying the debt
to Camac. And this evidence establishes another material fact in
this case, and that is that Brown had no interest or property in
the certificates before they were delivered to him by Randel, and
whether he acquired any in them afterwards, leads us to the
consideration of the second question. Had Brown such an equitable
interest in the certificates as authorized the decree of the court
below?
In the third specification before referred to, the masters
reported that Brown had a direct interest in the certificates, on
account of his acceptance of Randel's order in favor of Camac and
his having relinquished to Randel his interest in the judgment. It
is difficult to ascertain upon what ground it was assumed at the
date of the report that Brown had an interest in these
certificates. The order was drawn upon a special and contingent
fund which might never be received, and until received, Brown was
not liable to pay. There is no proof in the cause that can be
relied upon to show on what consideration the reassignment was made
unless the statements in Brown's answer are to be received as
evidence. When the answers of the defendant are directly responsive
to the allegations of the bill, they amount to positive proof. But
in this case there is no allegation in the bill in relation to this
assignment or reassignment. Brown, in giving a history of the
transactions between him and Randel, sets up in his answer this sum
of $2,000, as having been assigned to him in part payment of his
services, and in another part of his answer he states that upon
receiving the certificates and power of attorney at the request of
Randel, he reassigned his interest in the judgment to him.
This being clearly matter in avoidance, it is entitled to no
more consideration as evidence than are the allegations of the
bill. There
Page 43 U. S. 423
is no evidence, therefore, that the reassignment was made in
consideration of the delivery of the certificates by Randel to
Brown. But there is strong presumptive evidence that it was made in
consideration of the payment of the order to Camac by Randel, or of
his promise to Brown, that he would pay it, for it appears by the
report of the masters, that it was admitted by the parties, and the
counsel on both sides, that the amount of the order had been paid
by Randel to Camac after the commencement of this suit.
But if Brown had even acquired a valid lien on the certificates,
on account of the acceptance of the order, and the reassignment of
his interest in the judgment, the payment of the order by Randel,
pending the suit, extinguished the lien, and no decree ought, on
account of this supposed lien, to have been rendered in favor of
Brown; for it is the rights of the parties, at the time the decree
is rendered, that ought to govern the court in rendering the
decree. In either aspect of the case, however, Brown's right to
these certificates is reduced to naked possession; and, since his
refusal to restore them to Randel, his possession has been
fraudulent.
It has been contended by Brown's counsel that, as the masters
have reported that a large amount was due from Randel to Brown and
that Randel had parted with all the rest of his certificates of
funded debt, that therefore Brown had a right to payment out of the
certificates in controversy in this case. In support of this
proposition, they relied on the case of
Handy and
Harding, 11 Wheat. 103.
The bill in that case stated that Wheaton, under whom the
complainants claimed as heirs-at-law, about the year 1802, began to
exhibit symptoms indicating loss of intellect, and soon became
incompetent to the management of his estate. Under these
circumstances it was agreed among his children that Handy, who had
married his daughter, should endeavor to take his estate out of his
hands and preserve it for the benefit of his heirs-at-law. That it
was agreed, that Wheaton should be prevailed on to convey the real
property to Handy for a nominal consideration, who should forthwith
execute an instrument of writing declaring that he took and held
the same in trust 1st, to provide a decent support for the grantor,
during his life, and after a full remuneration for his expenses and
trouble in that respect to hold the residue of the estate for the
benefit of the heirs-at-law. Handy procured the conveyance from
Wheaton and entered upon and possessed the property till his death,
but refused to execute the declaration of trust.
Page 43 U. S. 424
The bill then prayed for an account and that a decree might be
rendered, exonerating the estate from the deed to Handy, after
satisfying his just claims &c.
The answer denied that Wheaton was incapable of conveying when
the deed was made. It denied also that the defendant purchased as a
trustee, and averred that he was a purchaser for a full and
valuable consideration.
The circuit court decreed that the deed should be set aside and
that an account should be taken of the receipts and disbursements
of Handy, and that he should be credited for all advances made, and
charges incurred for the maintenance of Wheaton during his life,
and for repairs and improvements made on the estate. This part of
the decree was affirmed by the Supreme Court. Handy's possession of
the estate was consistent with the intention of the parties; the
advances made and charges incurred, for the maintenance of Wheaton
were according to their agreement, and the repairs and improvements
made preserved the estate and enhanced its value. Thus far Handy
executed the trust fairly, and thereby acquired a lien on the funds
in his hands arising from the rents and profits; nor were these
acts tainted by his subsequent fraud in refusing to execute other
parts of the trust; and besides, the complainant, in their prayer
for relief, authorized the court to allow Handy his just claims
against the estate. This case does not, therefore, give any support
to the proposition assumed by the counsel of Brown.
There is no parallel between these cases, as a brief comparison
will show. Brown's possession of the certificates, after refusing
to restore them to Randel, was not only fraudulent, but wholly
inconsistent with the contract with Randel and in violation of the
trust upon which he received them. And Randel, so far from
authorizing the court to allow Brown's claim out of the
certificates, stated positively in his bill that he owed him
nothing. The proof shows conclusively that Brown had neither
property nor interest in the certificates before they were
delivered to him by Randel. Unless he can show, therefore, that he
has a lien on them, he can neither hold them as security for the
payment of the claims set up in his answer nor is he entitled to
payment out of them at law or in equity. To create a lien on a
chattel, the party claiming it must show the just possession of the
thing claimed, and no person can acquire a lien founded upon his
own illegal or fraudulent act or breach of duty, nor can a lien
arise where, from the nature of the contract between the parties,
it
Page 43 U. S. 425
would be inconsistent with the express terms or the clear intent
of the contract. For example, if the goods were deposited in the
possession of the party for a particular purpose inconsistent with
the notion of a lien, as to hold them or the proceeds for the owner
or a third person. Story on Agency 73-75;
Lamprier v.
Pasley, 2 T.R. 485;
Cranston v. Philadelphia Insurance
Company, 5 Binn. 538;
Turno v. Bethune, 2 Desaus.
285;
Jarvis v. Rogers, 15 Mass. 389, 395;
Weymouth v.
Bowyer, 1 Ves. 416;
Taylor v. Robinson, 8 Taunt. 648;
Gray v. Wilson, 9 Watts 512;
Madden v. Kempster,
1 Campb. 12;
Crockford v. Winter, 2 Campb. 124.
In the case of
Madden v. Kempster, Lord Ellenborough
said
"The defendant being under an acceptance for Captain Hart, whose
agent he had been, might have retained a sum of money to answer
that acceptance. But the plaintiff is entitled to recover this sum
of money, the defendant having obtained it by misrepresentation. He
mentioned nothing of the acceptance; he obtained it as a balance
when no balance was due to him. He cannot, therefore, set up the
lien to which he might otherwise have been entitled."
Lord Ellenborough held the same doctrine in the case of
Crockford v. Winter, and the same doctrine was held in
Taylor v. Robinson, 8 Taunt.
In this case of
Madden v. Kempster, it is admitted that
Kempster would have had a good lien on the �60 if he had obtained
the money honestly and in the course of business. But having
obtained it by misrepresentation, he was not permitted to set up
the lien to which he might otherwise have been entitled. How then,
can Brown set up a lien on these certificates, holding possession
of them as he does, by just as gross a fraud? There is no aspect in
which the question can be placed, consistently with the evidence
and the authorities above cited, that will justify the decree in
his favor. To permit this decree to stand would be to sanctify
fraud and to allow Brown, by taking advantage of his own wrong, to
obtain compensation for his services in a court of chancery upon a
case purely cognizable in a court of law; the decree of the circuit
court is therefore
Reversed and the cause is remanded to the circuit court with
directions to enter a decree for the plaintiff, conformably to this
opinion, and that the defendant pay costs in both courts.
Order
Randel v. Brown.
This cause came on to be heard on the transcript of the
Page 43 U. S. 426
record from the Circuit Court of the United States for the
Eastern District of Pennsylvania, and was argued by counsel. On
consideration whereof it is now here ordered and decreed by this
Court that the decree of the said circuit court be and the same is
hereby reversed with costs, and that this cause be and the same is
hereby remanded to the said circuit court with directions to that
court to enter a decree for the complainant conformably to the
opinion of this Court and that the defendant pay the costs in both
courts.
Order
Brown v. Randel.
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Eastern
District of Pennsylvania, and was argued by counsel. On
consideration whereof it is now here ordered, adjudged, and decreed
by this Court that this appeal be and the same is hereby dismissed
with costs and that this cause be and the same is hereby remanded
to the said circuit court with directions to that court to proceed
therein conformably to the opinion of this Court in this case on
the appeal of the complainant.
