Where there were two trustees of the property of insolvents, and
one of them made an assignment, but the other neither joined in it
nor assented to it afterwards, the assignment was void.
And in the present case also the assignee appears to have
received an assignment of the property only as security, until its
profits should pay a debt due to him by the insolvents. That debt
being extinguished, he has no right, as owner, to claim an account
of further profits from the holder of the property.
The facts in the case are stated in the opinion of the Court, to
which the reader is referred.
Page 53 U. S. 189
MR. JUSTICE CURTIS delivered the opinion of the Court.
Samson Almy filed his bill in the Circuit Court of the United
States for the District of Rhode Island, stating that one
Christopher Lippitt, on 7 March, 1828, entered into a contract in
writing with Hazard & Co. the effect of which was to create an
equitable mortgage on certain machinery for the price thereof
advanced by Hazard & Co., who were to supply Lippitt with
cotton, receive and sell the cloth, allow him three and a half
cents per yard for manufacturing, and credit half the profits
towards paying for the machinery, retaining the other
Page 53 U. S. 190
half for their own services and the interest on the cost of the
machinery. The bill further states that in May, 1829, Hazard &
Co. failed in business and transferred all their property to Thomas
R. Hazard and Charles Low in trust for the benefit of their
creditors, and that on 9 March, 1830, the complainant purchased of
the assignees their interest under the contract with Lippitt, by a
written instrument of sale of that date, a copy or which, annexed
to the bill, is as follows:
"The assignees of R. G. Hazard & Co. hereby sell and convey
to Samson Almy the right, title, and interest which they have to a
certain contract with Christopher Lippitt, bearing date March (3d
mo.) 7, 1828 a copy of which is hereto annexed, together with the
balance due from said Lippitt on account of payment for machinery,
as expressed in said contract; also their right, title, and
interest, to the machinery held as collateral security for the said
balance due from said C. Lippitt agreeable to the aforesaid
contract, a schedule of which is hereto annexed, for which Samson
Almy agrees to pay them the said assignees or account with them for
the sum of five thousand dollars, and it is further agreed that if
Low and Fenner should redeem their one-half of the aforesaid
contract by the payment of the drafts drawn upon them by R. G.
Hazard & Co. on account thereof, and to return one-half of the
aforesaid five thousand dollars to said Samson Almy, he
relinquishing to said Low and Fenner all claims upon the aforesaid
one-half part of the said contract."
"Providence, 3d month 9th, 1830."
"For assignees of R. G. Hazard & Co."
"R. G. HAZARD"
"R. G. HAZARD & CO."
"SAMSON ALMY"
"Witness: A. E. Forbush"
"Whereas R. G. Hazard, for the assignees of R. G. Hazard &
Co., has made an agreement with Samson Almy, bearing date 3d month
9th, 1830, relative to contract existing between Christopher
Lippitt and R. G. Hazard & Co., dated March 7th, 1828, and of
the machinery held by them as collateral security, by debts due
from Christopher Lippitt and drafts drawn on Low and Fenner, I
hereby ratify and confirm the above agreements the same as if made
by myself as assignee of R. G. Hazard & Co."
"South Kingston, 3d month 10th, 1839"
"THOMAS R. HAZARD,
Assignee"
"Witness: Robert Rathbone"
The bill further states that from the time of the failure of
Hazard & Co. till his purchase from the assignees, the
complainant supplied Lippitt with cotton pursuant to the original
contract
Page 53 U. S. 191
between Hazard and Co. and Lippitt, having agreed with the
assignees so to do; that after his purchase from the assignees, he
continued to supply cotton to Lippitt till September, 1832, when
Lippitt refused to receive more; that in August, 1831, he also
furnished to Lippitt a speeder, which cost five hundred and fifty
dollars; that in September, 1832, when Lippitt ceased to receive
cotton from him, there was due upon the mortgage the sum of five
thousand four hundred and five dollars 87/100, for which sum he
then had a lien on the machinery; that Lippitt transferred the
machinery to Wilbur, the defendant, with notice of the
complainant's rights, and after the complainant had demanded the
machinery of Wilbur, the latter sold it and refuses to account. The
bill prays for an account of the value of the machinery, and that
Wilbur may be decreed to pay to the complainant, out of the sum
found to be its value, the money due upon the mortgage, including
the amount of the advance made by the complainant to purchase the
speeder.
The cause was heard in the circuit court on the bill, answer,
and evidence, and a final decree made in favor of the complainant,
and thereupon the respondent appealed to this Court.
The title of the complainant as a purchaser from the assignees
of Hazard & Co. not being admitted in the answer, it is obvious
that proof of the assignment to him is indispensable. The bill
alleges it to have been made by the written instrument, a copy of
which has been given. By reference thereto, it appears to have been
executed by R. G. Hazard, for the assignees. R. G. Hazard is
examined as a witness by the complainant, but does not state that
he had any authority from the assignees to act for them in this
behalf, nor is there any evidence of such authority in the
record.
His act is ratified in writing by Thomas R. Hazard, one of the
assignees. This is not sufficient. Trustees must unite to pass any
title to property jointly held by them.
Ex Parte Rigby, 19
Ves. 463;
Sinclair v. Jackson, 8 Cow. 543, 583;
Kirby
v. Turner, 1 Hopk. 309; 2 Story Eq., ยง 1280; Willis on
Trustees 136. The previous authority or subsequent assent of Low
must be shown.
It is urged that, though Low, the other assignee, did not sign
the paper nor ratify Hazard's act by any writing, he did by acts
in pais.
There are reasons why very clear proof of such ratification
should be required in this case. The first is that the bill itself
states no such ratification. It relies on the written paper alone,
and does not suggest that after the execution of the paper, one of
the assignees ratified the transfer by acts
in pais. But
another and more important reason is that this transaction
Page 53 U. S. 192
between Almy and R. G. Hazard, who undertook to act for the
assignees, was not in accordance with the trusts, on which the
assignees held the property. The nominal consideration of the
transfer to Almy was five thousand dollars; the real consideration
was a debt due to Almy from Hazard & Co. at the time they
became insolvent, and the purpose of the transfer to Almy was to
prefer that debt. This neither Hazard & Co. nor the assignees
had a right to do. And the proof should be very clear to induce the
court to declare that a trustee has ratified or acquiesced in a
breach of his trust amounting to a fraud on the other creditors of
Hazard & Co., whose rights he was bound to protect. We do not
find such proof in the record. There is no evidence tending to show
that Low was ever informed of the true nature of the transaction
between R. G. Hazard and Almy, or had knowledge that the purpose of
those parties was to give a preference to Almy's claim. And
consequently, if he had acquiesced in or even expressly ratified
the transfer while ignorant of its real character, it would have
been open to him afterwards to have disaffirmed it. But it is not
shown that Low did acquiesce in or ratify the act of R. G. Hazard.
The complainant put in evidence certain letters from Low to Lippitt
which have an important bearing on this part of the case. They are
as follows:
"PROVIDENCE, 6 February, 1832"
"DEAR SIR: Yours dated four days since is just at hand. Contents
noted. With regard to the contract, I am as desirous to have it
adjusted as you, and am ready to attend to it at any time you may
name. It will be necessary for you to take an account of what
cotton, yarn, cloth &c., you have on hand. You stated that Mr.
Hazard informed you that he had purchased the contract of the
assignees. That is not the case. I have made no disposition of
it."
"CHARLES LOW,
Assignee"
"PROVIDENCE, October 26, 1832."
"Mr. Christopher Lippitt, Sir: Having been notified by you that
you wish to close up the contract under which you have been
manufacturing, and to take the machinery, you paying the deficiency
of your half of the profits, you are hereby authorized and
requested not to receive any more cotton from Samson Almy to
manufacture under said contract, and to manufacture what cotton you
have on hand as soon as practicable. You are requested also to
render your accounts as soon as practicable, and we will have the
accounts of the profits prepared as soon as practicable, with a
view to a prompt and final settlement of the whole business. "
Page 53 U. S. 193
"Mr. Almy was never authorized to supply you with cotton under
the contract for his own account."
"Respectfully, your obedient servant,"
"CHARLES LOW,
for self and"
"
T.R. Hazard, assignee for R. G. Hazard & Co."
"PROVIDENCE, Nov. 13, 1832"
"DEAR SIR: I should like to know if you are furnishing yourself
with cotton and not receiving it from Mr. Almy, as you have been
heretofore. As for Rowland Hazard's being my agent for settling the
business, he cannot produce anything to show that I ever empowered
him to act for me in any one instance. I shall call upon Mr. Almy
within a few days and ask him for a settlement."
"Yours &c.,"
"CHARLES LOW,
Assignee for"
"
R. G. Hazard & Co."
In these letters, Low not only denies R. G. Hazard's agency but
Almy's right to supply cotton on his own account, and declares in
so many words that he has made no disposition of the contract which
created the mortgage, and Mr. Lippitt testifies that Low always
told him R. G. Hazard never was appointed the agent of the
assignees, and had nothing to do with their business. It does not
appear that up to the time when he wrote the last of these letters,
he was aware that Almy was supplying cotton to Lippitt by reason of
an assignment of the contract to him. It does not appear that he
knew Lippitt received cotton from Almy under the contract, but this
he had done for nearly a year before Almy took the assignment of
the contract, by virtue of an arrangement between Almy, Lippitt,
and the assignees of Hazard & Co. as the bill itself states,
and notice of the discontinuance of that arrangement is not brought
home to Low until after Almy had ceased to supply cotton to
Lippitt. The acquiescence by Low in Almy's acts of furnishing
cotton under the contract is not, therefore, referable to an
assignment of the contract to Almy, and still less does it amount
to a ratification of such an assignment as the assignees were not
able to make without a breach of trust.
If it were necessary, therefore, to decide the case upon this
point, we must hold that Almy has failed to show a valid title from
the assignees. But we are of opinion that, independent of this
defect in his title, the bill cannot be maintained.
It has already been stated that Almy did not purchase this
mortgage, but took an assignment of it for the purpose of obtaining
payment of a debt which Hazard & Co. owed him at the time of
their failure. This is proved, and at the same time
Page 53 U. S. 194
it is shown that when he ceased to furnish cotton to Lippitt in
September, 1832, his debt was paid. Christopher H. Lippitt
testifies:
"I did converse with Samson Almy, at different times while he
was stocking the mill, in relation to the interest he had in doing
so. He said the only interest he had in furnishing stock for the
mill was to get a debt to him from R. G. Hazard & Co.; that he
did not care to continue the business after said debt was paid, and
that after that, it made no difference to him who stocked the mill,
whether my father or anybody else. I told Mr. Almy that if it would
be any damage to him for my father to stop receiving stock from
him, that he might still continue to furnish the mill. Mr. Almy
replied that it would be no damage to him, and that my father had
better stock the mill himself, as he, Mr. Almy, had got his debt,
and more too. Subsequent to my father's furnishing the mill, Mr.
Almy gave him a letter of recommendation to a house in New York for
the purpose of aiding him in purchasing cotton. He did state that
he had no further interest in having the mill run for him, as he
had secured his debt as I stated in my answer to the previous
cross-interrogatory. He said it was a matter of indifference to him
whether the mill and machinery was run any longer for him or not,
but that he would run it for my father's benefit if so
desired."
Christopher Lippitt also testifies:
"At the time I stopped manufacturing for Mr. Almy, we had some
conversation about furnishing cotton. Mr. Almy says that, if I were
in your place, I wouldn't manufacture for them any longer, they are
all bankrupt, you don't know who you are manufacturing for. I
observed to Mr. Almy that if I stopped receiving cotton from you,
won't it be an injury to you? He said, no, not in the least, for I
think I've got my pay, and more too. I then observed to him that
probably I might stand in need of some assistance from him if I
commenced on my own account; he promised to render me all the
assistance that he well could, give me some recommendations and
introductions, where I might buy cotton. Afterwards, sometime in
the year 1834, he gave me introductions to go to New York to buy
cotton. I stopped by the advice and consent of Mr. Almy. The letter
he gave was addressed to Messrs. Jenkins, Merrick & Co., New
York; I was also advised by Mr. Almy to send my goods to them for
sale, and I did send most of my goods to them in future,
accordingly. I never heard him say that he had any lien or claim on
the machinery whatever. He said the contract between me and R. G.
Hazard & Co. was placed in his hands by them for the purpose of
getting a debt that R. G. Hazard & Co. owed him, or that he had
become obliged or bound to pay for them. "
Page 53 U. S. 195
There is nothing to control this evidence except the testimony
of R. G. Hazard. He said,
"S. Almy, the only probable purchaser to whom it seemed safe to
sell, objected on account of apprehension of difficulty with Low
and Fenner, but by promising my personal services in the subsequent
management of the business and obligating myself by some other
conditions, I prevailed upon him to make the purchase."
This is far too vague an account of the consideration and terms
of the sale to be relied on to control the explicit declarations of
Almy and the inferences to which his conduct gives rise.
This conduct tends to show he had only a conditional interest in
the property and that his interest had terminated. He not only
ceased to supply cotton in 1832, declaring at the same time that
his debt was paid and he had no longer any interest in the matter,
but he suffered Lippitt to run the machinery, and treat it as his
own until his failure in December, 1835, when Lippitt conveyed it
to Wilbur and others. It rested in their hands until November,
1836, when Almy demanded it of Wilbur. Nothing more appears to have
been done or said by him in reference to the property, till
October, 1840, when he wrote the following letter:
"PROVIDENCE, 10th month 23d, 1840"
"PELEG WILBUR,"
"Respected Friend: I have consulted counsel respecting the claim
I have against thee, and have made up my mind to commence a suit
immediately unless there is a settlement. If thee would like to see
Mr. Hazard, he will be in town on the 26th instant."
"Thy friend,"
"SAMSON ALMY"
Two years more elapsed, making ten years from the time when he
ceased to have anything to do with the machinery. This bill was
then filed, and R. G. Hazard is very active in the management of
the suit, as he says, by reason of an understanding between Almy
and himself when the assignment was made. This understanding must
have been included by him in that part of his testimony where he
speaks of promising his "personal services in the subsequent
management of the business, and obligating himself by other
conditions," and if one of those conditions was that Almy took the
transfer by way of security, and his debt had been paid, it is
quite consistent with Almy's real relation to this property that he
should lie by ten years, and when he moved that R. G. Hazard should
be active also.
Page 53 U. S. 196
But we find another piece of evidence in the record to which it
is proper to advert. It is the examination of Almy before the
master upon the subject of his title, in which he has undertaken to
give what he calls "the history of the whole matter." It is as
follows:
"In reply, I must give you the history of the whole matter. In
1829, I think, I made arrangement with Rowland G. Hazard, Low &
Fenner, and Christopher Lippitt, to furnish stock to Christopher
Lippitt under the contract made by R. G. Hazard & Co., and
Christopher Lippitt, they agreeing to give me one-half of the
profits for doing the business. We went on in that way, until I
made the purchase of the machinery, after which I became sole owner
and went on under the contract. At the time of R. G. Hazard &
Co.'s failure, they owed me five or six thousand dollars, due by
note, and the consideration of the contract or bill of sale was
those notes, so far as they were required -- that is, the agreement
was that that bill of sale, so far as it went, should go to cancel
these notes. The notes thus cancelled, it is my impression, were
surrendered to R. G. Hazard, as agent for the assignees. I can't
say that Mr. Hazard acted as agent of the assignees when I
surrendered the notes to him; he did when the contract was made. I
can't remember when I surrendered the notes to Mr. H., nor how many
of them there were. I could ascertain if time were allowed."
This is perfectly explicit except on one point, and that is
whether the transfer to him was an absolute sale, extinguishing the
notes, or by way of collateral security for the notes. A close
examination of his statement will tend to show it to have been the
latter.
He said
"the consideration of the contract or bill of sale was those
notes, so far as they were required -- that is, the agreement was
that that bill of sale, so far as it went, should go to cancel
those notes."
But if the consideration of the sale was the extinguishment of
the notes, what is meant by its extinguishing them, so far as it
went? This language is intelligible if the agreement was that he
should work out his debt through this contract with Lippitt. In
such case, the bill of sale might be said to extinguish the notes
so far as it went -- that is, so far as it should prove to be
effectual for that purpose. And this construction is much
strengthened by the fact that he does not profess to have
surrendered any of the notes at or about the time when the transfer
was made to him, and there is no reason to believe he did so before
his debt was paid. Taking this statement of Almy, in connection
with his repeated declarations to the Lippitts and his conduct in
reference to this property, we cannot doubt that the transfer
Page 53 U. S. 197
was made solely to enable him to obtain payment of these notes
by means of the contract with Lippitt, and that payment was thus
obtained.
Other questions have been made in the case which we have not
found it necessary to decide. Our opinion is that the decree of the
circuit court should be reversed and the bill dismissed with
costs.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Rhode Island and was argued by counsel. On consideration whereof it
is now here ordered, adjudged, and decreed by this Court that the
decree of the said circuit court in this cause 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
dismiss the bill of complaint with costs.