Summary
In Rogers Locomotive Works v. Kelley (supra) moneys were deposited by a corporation with a firm of bankers with instructions to apply them in payment of interest coupons falling due on the bonds of another corporation, the payment of which had been assumed by the depositor.
Summary of this case from Sayer v. WynkoopOpinion
Argued February 8, 1882
Decided February 28, 1882
Artemas H. Holmes for appellant.
Wheeler H. Peckham for respondents.
By the judgment in this action, the defendants Kelly Alexander were required to pay to the defendant Connor, sheriff, etc., the sum of $13,148.06, to be by him applied upon a judgment recovered by the defendant Bills against the New Orleans, St. Louis and Chicago Railway Company, also a defendant in the action. The claim of the sheriff to the money is founded upon an attachment issued April 30, 1875, in an action by Bills against the railroad company, and which on the following day was levied by the sheriff on $13,148.06 in the hands of Kelly Alexander, claimed by the sheriff as the property of the corporation, and subject to levy under the attachment. The defendants Kelly Alexander have appealed from the judgment and the respective rights of the sheriff, and Kelly Alexander depend upon the following facts: The New Orleans, St. Louis and Chicago Railroad Company was created by the consolidation of the New Orleans, Jackson and Great Northern Railroad Company and the Mississippi Central Railroad Company, and had assumed the payment of the mortgage bonds of the latter road. On the first day of May, 1875, one Rodney, the assistant treasurer of the defendant corporation, deposited with the firm of Kelly Alexander, bankers in the city of New York, $25,000, to meet interest coupons on the bonds of the Mississippi Central Railroad Company, payable in that city and falling due on that day, taking from Kelly Alexander a receipt in the following words: "Received, New York, May 1, 1875, from J.M.C. Rodney, twenty-five thousand ($25,000) dollars in trust, to apply the same to an equal amount of the coupons of the first mortgage bonds and consolidated mortgage bonds of the Mississippi Central Railroad Company, in the order in which such coupons shall be presented to us for payment, after having been duly identified for payment at our office by stamp impressed thereon, the said money not to be subject to the control of said company, otherwise than for the payment of said coupons as above described. (Signed) Kelly Alexander." The money so deposited was a part of $55,000 raised by the corporation defendant for the express purpose of paying the coupons on the bonds mentioned, and when received, was placed by Kelly Alexander to the credit of "coupon trust account" on their books. On the morning of May 1, 1875, Kelly and Alexander paid coupons duly stamped by the New Orleans, St. Louis and Chicago Railroad Company of the description mentioned in the receipt, to the amount of $11,851.94, when the sheriff levied the attachment upon the balance of the $25,000 then remaining in their hands, being the sum of $13,148.06. Within a few days thereafter, Kelly and Alexander, not regarding the attachment, paid out the balance of the fund remaining in their hands when the attachment was levied, in satisfaction of other coupons of the Mississippi Central Railroad Company duly presented and identified. The question is, whether the attachment bound the $13,148.06, part of the $25,000 deposited with Kelly Alexander by Rodney, and levied upon by the sheriff, so that payments thereafter made by them in accordance with the terms of the receipt, and charged to said fund, were wrongful and a violation of the rights of the attaching creditor. The question turns upon the true construction of the transaction between Rodney and Kelly Alexander. If that transaction was an absolute and irrevocable appropriation by the New Orleans, St. Louis and Chicago Railroad Company of the fund deposited, for the uses mentioned in the receipt, then plainly the corporation had no remaining interest therein subject to attachment. If on the other hand, the fund, when deposited, remained the property of the corporation, and the direction to pay the coupons was a mere revocable mandate, creating an agency only and not a trust, the right of the sheriff to the fund cannot be denied. If the transaction was of the latter character, the attachment bound the interest of the corporation, and the subsequent payments by Kelly Alexander were in their own wrong. We think the transaction was of the former and not of the latter character. The intention of the corporation to devote the fund deposited with Kelly Alexander, exclusively to the payment of the coupons, and to place it in their hands as trustees for that purpose, is clearly indicated in the receipt, and the application of the fund for paying the coupons, was in precise accordance with the purpose for which it was raised. The receipt recited the trust, and Kelly Alexander, by their acceptance, bound themselves to perform it. The corporation parted with all control of the fund, inconsistent with the trust declared in the receipt. The possession was transferred to the trustees, subject only to the restriction that they should pay the coupons in the order of presentation after identification by the corporation. The provision for identification was a reasonable precaution against mistake or fraud. On the deposit being made, Kelly Alexander became vested with the title to the fund for the purposes of the trust. It was not essential to the completeness of the trust that the creditors to be benefited should have been notified, or should have assented to it. ( Martin v. Funk, Adm'r, 75 N.Y. 134, and cases cited.) If Kelly Alexander had refused to pay coupons according to the terms of the receipt, the performance of the trust could have been compelled, upon the application of the holders. If the creditors refused to assent to the trust, or if their debts were otherwise satisfied, a trust would result to the corporation in respect to the unexpended balance in the hands of the trustees. But so long as the trust was continuing, the sheriff's right, under the attachment, if any, was subordinate to the rights of the holders of coupons to have the fund applied to their liquidation, although the coupons had not been presented when the attachment was levied, and the existence of the trust was not then known to the holders. The coupon holders were creditors of the company. The fund in question was raised to pay the coupons. The corporation had a right to make the arrangement in question to prevent a default in meeting the interest on its bonds, and the arrangement made was, we think, effectual in law, as against the claims of other creditors. The case of Martin v. Funk, Adm'r, supports the conclusion we have reached, that the transaction now in question constituted a valid trust in Kelly Alexander for the purposes declared in the receipt. The case of Kelly v. Roberts ( 40 N.Y. 432) was the case of a mere revocable direction. There was, in that case, no trust, and the party giving the direction had not parted with his title. The case of The Ætna National Bank v. The Fourth National Bank ( 46 N.Y. 82) was also the case of a direction merely, and proceeded upon special circumstances fully disclosed in the opinion. It follows that Kelly Alexander were justified in disposing of the fund in accordance with the trust, notwithstanding the levy of the attachment.
There is no ground for the suggestion that Kelly Alexander applied any part of the $25,000 to their own use; the referee expressly found that they paid out, on coupons, the entire deposit of May 1, 1875. They applied a portion of a subsequent deposit of May 3, 1875, upon a debt of the company to them. That deposit was not attached and it was properly conceded by the counsel of the sheriff on the trial, that he had no claim upon it. It is unimportant, therefore, to consider whether that application was authorized. The parties to this appeal have no interest in the question.
We have assumed that Rodney, in making the deposit of May 1, 1875, and in taking the receipt, represented the New Orleans, St. Louis and Chicago Railroad Company. He was the assistant treasurer. The money deposited was the money of the company. The coupons to be paid were debts of the company. The coupons first paid were stamped at the company's office "paid by Kelly Alexander," and Kelly Alexander rendered to the company an account of the deposit of May 1, 1875. The evidence is, we think, conclusive, that the deposit was made by the company, and that in making the arrangement with Kelly Alexander, Rodney was acting as its agent.
The order of the General Term should be affirmed and judgment absolute rendered for the defendants, Kelly Alexander, on the stipulation.
All concur.
Order affirmed and judgment accordingly.