John H. Capen's Appeal from Probate

*WINDHAM COUNTY, MARCH TERM, 1859. Present, Storrs, C. J., Hinman, Ellsworth, and McCurdy, Js, John H. Capen's Appeal from Probate. C, who was treasurer of a corporation, made sundry notes in the name of the corporation, payable to his own order, procured them discounted upon his indorsement, and appropriated the money to his own use. While the notes were outstanding in the hands of sundry holders, both the corporation and C failed and made assignments in insolvency. The holders presented the notes against both estates, and they were allowed against that of the corporation, which paid 20 per cent, upon them, and against the estate of C, for the remaining 80 per cent. The corporation also presented a claim against the estate of C, for the full amount of the notes. Held that the amount which should be allowed to the corporation, against the estate of C, was only the 20 per cent, which it had actually paid upon the notes. If, in the above case, the money obtained on the notes by C, could be regarded as the money of the corporation, then C would have at once become indebted to the corporation for the whole amount of the money taken, but as the notes themselves were appropriated by C, and the money obtained upon them never came into the hands of the corporation, the latter was to be regarded as standing in the relation of surety .to C upon the notes, and therefore could have no claim upon him until it liad been compelled to pay the notes, oí a part of them, and only to the extent of such payment. Appeal from the report of commissioners on the estate of the appellant, allowing a claim in favor of the Wells Manufacturing Company, a corporation, against the estate. The facts which were agreed on by the parties, were as follows. Capen, the appellant, was the treasurer and agent of the company, and, as such treasurer, made sundry notes in the name of the company, payable at bank to his own order, and indorsed the same in his own name, on which notes he obtained the money for *his own use and benefit, and never made any entry [ *221 ] of the same on the books of the company. Soon after, and while the notes were outstanding in the hands of sundry holders, the Wells Manufacturing Company assigned all its estate for the benefit of its creditors, and soon after Capen also assigned all his estate for the benefit of his creditors. The notes were presented by the holders thereof, as claims against the estate of the company, and were allowed by the commissioners thereon, and a dividend of twenty per cent, was paid upon them from the estate, and a further dividend was expected to be paid from the estate. The holders of the notes presented them also to the commissioners on Capen’s estate, as claims against him as indorser of the same, and the commissioners allowed eighty per cent, on them to the holders, having deducted the twenty per cent, paid from the Wells Manufacturing Company’s estate. The Wells Manufacturing Company also presented a claim against Capen’s estate for the full amount of the notes, and the commissioners allowed the same ; and to the allowance of this claim the appellant objects. On these facts the case was reserved for the advice of this court. Arnold, for the Wells Manufacturing Company, contended that the company was entitled to an allowance of the full amount of the notes, as they were liable to innocent holders of them for the full amount; that such liability constituted a legal “ claim ” against the estate, within the meaning of the statute ; Rev. Stat., tit. 14, sec. 76 ; that Capen was to be regarded as having taken so much of the funds of the company as he obtained upon the notes, he having no title to the money any more than to the notes ; and that there was no danger that injustice would be done to the appellant, by compelling him to pay the amount twice over, since the court of probate could, make such order with regard to the payment of the claims allowed, as would prevent the payment of more than the full amount; citing, with regard to the powers of the *court of probate in such a case, Waterman’s Appeal [ *222 ] from Probate, 26 Conn., 97. Burnham, for the appellant, contended that the money obtained upon the notes never became any part of the funds of the company, and that Capen could not, therefore, be liable to the company for the amount of the money obtained; that the company stood in the position .of accommódation makers of the notes, or of sureties to Capen, and would have no claim upon him unless they were compelled to pay the notes, and then only to the extent of such payment; that, ■ therefore, the twenty per cent, which they had actually paid was all that could be legally allowed them'; that the balance of the amount for which they remained liable was sufficiently provided for in the allowance of that balance to the holders of the notes, who w'ould receive all that the estate of Capen could pay upon them, and so far as they received payment would so far relieve the company ; and that an allowance to the holders of the notes of the remaining eighty per cent, and at the' same time an allowance to the company of the whole amount, would constitute an allowance of $180 for every $100 of the debt. [MAJORITY — Stores, C. J.] Stores, C. J. The question in this case is, whether the appellant is indebted to the Wells Manufacturing Company, in the full amount of the notes, mentioned in the agreed statement of facts, executed by the formér for, and on behalf of the latter, or only for the sum which has been paid on those notes by that company to the holders of them ; and this must depend on the question, whether the money received by the appellant on the discount of those notes is to be deemed to have been received by him for, and as the agent of, the company, and therefore as its property, or to have been received by him for himself, and on liis own account, and as his own property. If the notes were procured by the appellant to be discounted at the bank for and on account of the company, the avails of them would be placed (by the bank to its credit and be money belonging to [ *223 ] *it in the hands of the bank ; and, when it was drawn out by the appellant, and appropriated by him for his own personal purposes, it would constitute money of the company had and received by him to his own use, for which he would become indebted, to the company.; and in that case the company would have a..legal claim against his estate for the ■whole amount so received by him. If, however, the notes were discounted for the appellant, and on his account, the avails would go to his credit, and would belong to him, and the use of them would.be an. appropriation of his own money, and not that of the company; and, in that case, the company would have no right of action, and therefore could present no claim against the appellant or his estate, until the company should have .paid the amount due on the notes in full or in. part,'to the holders into whose hands they had passed, and then only for the amount it -had so paid. Although the appellant, in the making and sale or negotiation of the notes, and his receipt and appropriation of their avails to his own use, would be guilty of a breach of trust towards the company, by which he, by virtue of his authority as its agent, would render it liable, as the maker of the notes, to the holders, still, in determining the relation created by the transaction between him and the company, it would be necessary to look at the particular use which was made of the notes by the appellant; for his obligation to the company, if he had used funds belonging to the company, in which case he would clearly become its debtor, would be very different from that which would arise from constituting the company an accommodation maker for him of the notes, which would create between them only the relation of principal on his part and of surety on the part of the company. In one case the company would have a right of action against him immediately, but none in the other until the company had been subjected to pay on the note. Although the form of the notes indicates, and, as between the company who are the makers, and innocent' holders for value, the former could not deny, that they were given for a valuable consideration, the real transaction and the object for which they were *made, would be open to inquiry be- [ *224 ] tween the original parties, the appellant and the company ; and, on the agreed statement of facts which in this case is submitted to us, we have no doubt that the notes were made by the appellant for his own use, that he designed only to pledge the credit of the company for their payment, and that they were, both by him and the bank to whom they were negotiated, intended and understood to be discounted solely on his account and for his benefit. There is, in that statement, not only nothing which, by a just construction, imports, or even implies, that Capen procured the money on those notes for, or on account of, the Wells Manufacturing Company, or treated it as their property, but it alleges that he “ obtained the money on them for his own use and benefit, and never made an entry of the same on the books of the company.” And if, in this case, for the purpose of determining the true nature of his act in obtaining the money on the discount of the notes, or of ascertaining the particular person for whose benefit it was intended to be done, it were allowable to consider the form in which the business was transacted, it appears, in confirmation of that part of the finding which we have mentioned, that the notes were so drawn that they appeared to have been given by the company to Capen for value, and that they were made negotiable, and therefore controlable by him personally. These being all the facts presented in relation to the present question, we are of the opinion that, in respect to those notes, the indebtedness of Capen to the Wells Manufacturing Company ought to be found to be only the amount which has been actually paid upon the notes by the company. And the superior court is advised accordingly. In this opinion the other judges concurred.