Humes, et als. v. Scott

Humes, et als. v. Scott. Bill in Equity to recover Trust Funds. 1. Lien upon property seized under judicial process; effect of re-plevin bond. — Where property is seized under judicial process and replevied, the lien is not thereby destroyed, since the property remains in the custody of the law until the bond is forfeited. 2. 8ame; same; express trust. — A party receiving property under a replevin bond when the same has been seized under judicial process holds it in express recognition of the rights of the plaintiff and, in the strictest sense of the word, is a trustee of an express trust. 3. Same; same; case at bar — Where a mortgagor replevies property seized under a bill to foreclose and enters into an agreement with the sureties on the bond to deposit the proceeds of the property when sold to the credit of one of the sureties as trustee for himself and the others, such an agreement creates an express trust in favor of the complainant in the' bill entitling him to follow and recover such proceeds in the event of a successful termination of the foreclosure suit. 4. Same; same; same; following trust funds in the hands of third pUrties. — In such case where a part of the proceeds thus deposited has been paid to third parties under an agreement to refund the same “when it shall be judicially determined that said bondsmen shall be liable and have the same [the money] to pay” the complainant or real owner of the decree may subject such amount in the hands of such third parties, — they having received the same with knowledge of its trust character. 5. Same; same; same; release of sureties; assignment of contract. — In such case where the complainant releases the sureties on the replevy bond in consideration of the surrender of certain property insufficient to pay the decree and the assignment of such contract to the real owner of the decree, such owner may maintain bill against the parties who have-received the funds in recognition of the trust since the agreement of release expressly preserves the obligation to refund. 6. Same; same; same; stale demand.; statute of limitation.. When the bill in such case is filed within six years from the judicial ascertainment of liability upon the bond, it is not subject to the objection of staleness or the statute of limitations, since it is filed to enforce an express trust and not one created or imposed by operation of law. 7. Same; same; same; adequate remedy at law. — The complainant- in such bill has not an adequate remedy at law, as-equity has original and exclusive jurisdiction in all matters, involving trusts. Appeal from the Chancery Court of Morgan. Tried before Hon. W. H. Simpson. In June, 1889, John P. Scott filed his hill in the ■city-court of Decatur against Mary W. Cotton to foreclose a mortgage upon a stock of goods which he had 'sold to said Mary W. Cotton upon credit. The goods were seized under a writ of seizure and replevied by the respondent, with R. P. Baker and others as sureties. The respondent entered into an agreement with Baker as trustee for himself and the other sureties by which she agreed to deposit the proceeds of the sale of the goods in bank to the credit of Baker as trustee as aforesaid to protect him and the others from liability on the replevy bond. Some of the goods were sold and the proceeds deposited in accordance with the agreement. Subsequently, in 1889, Baker paid to appellants the sum of one thousand dollars, part of said proceeds, under an agreement by which said sum was to be refunded “when it was judicially determined that said bondsmen shall be liable and have the same to pay to said Scott by reason of their suretyship on said bond.” At the November term, 1892, of the Supreme Court of Alabama, Scott ob tained a final decree in bis favor. Subsequently said Scott released the bondsmen upon the surrender of a portion of their property, which was insufficient to pay the decree and the assignment of the above obligation from appellants. The decree remains unpaid. This bill is filed by appellee, who alleges that she was the owner of the stock of good® sold to Mary W. Cotton, and that John F. Scott acted as her agent in selling the same and taking the mortgage therefor, and that she is the real owner of the same, and the decree, together with the agreement above stated which had been transferred to her. This bill was filed in March, 1897. The appellants demurred to the bill upon the grounds that thb bondsmen have not paid nor had to pay the sum received by appellants, and because the same isi a stale demand, is barred by the statute of limitations, and complainant has an adequate remedy at law. This demurrer was overruled. It further appears from the bill that the sureties on the replevy bond are insolvent. The other facts appear in the opinion. From the decree overruling the demurrer respondents appeal and assign the same for error. Watts, Trot & Caffby, for appellants. (No brief came to the hands of the reporter.) Thos. C. McClellan and W. R. Francis, contra. The appellee’s lien under the attachment was not destroyed by the replevy. — Woolfolh v. Ingram, 53 Ala. 11; Rhodes v. Smith, (56 Ala. 174; Gordaman v. Malone, 63 Ala. 556; Scarborough v. Malone, 67 Ala. 570. The unqualified release of one or more of the sureties, even at common law, only discharged the other sureties pro tanto. — Pegram v. Riley, 88 Ala. 399; Gummings v. May. 91 Ala. 233. Of course, the release of insolvent sureties is no injury to the others. The latter are then merely bound for a larger proportion of the general liability. — Authorities supra. But, under the Code (1886) § 2774, the release can have only the effect intended by the parties thereto. Smith v. Gayle, 58 Ala. 600. What the parties to the release i intended is too clear for controversy. The three sureties actually transferred all their rights in the premises to John F. Scott, whose rights the ap-pellee has. — Troy v. Smith, 33 Ala. 469; Sheldon on Subrogation, 89; Brandt on Sur. 283; Carlisle v. Wil-kin’s Aclmrs., 51 Ala. 371. The partial assignment of obligations gives no right of action at law. — Pleasants v. Er shine, 82 Ala. 386; Kansas City It. B. Co. v. Robertson, 109 Ala. 296. [MAJORITY — TYSON, J.] TYSON, J. The replevying of the property did not operate to- relieve it from the lien created by its seizure under the writ. A replevy is intended merely as “an inexpensive method of preserving the property until it is wanted for the payment of the judgment that may be rendered, and until the bond is forfeited, the property remains in the custody of the law, and the lien is unimpaired.”—Kyle v. Swem, 99 Ala. 573; Cordaman v. Malone, 63 Ala. 556. A party receiving property under a replevy bond, like a bailiff or a pledgee, holds it in express ' recognition of the rights of the plaintiff in the suit. He may be said, in the strictest sense of the word, to be a trustee of an express trust. While entitled to the possession of the property until a determination of the cause in favor of the plaintiff, he is not the owner of it. The right of the plaintiff to subject the property is recognized by him — a recognition, it is true, imposed on him by his right to its possession. But it is actual and voluntary and not “superinduced upon the transaction by operation of law, as matter of equity, independent of the particular intention of the parties,” and is, therefore, not an implied or constructive, but an express trust.—James v. James, 55 Ala. 532; 1 Beach on Trusts, §§ 1-86. In this csae, there was a mortgage lien on the goods seized and replevied by the mortgagor. It is scarcely necessary to say that the mortgagor in possession was a trustee for the mortgagee, and when the mortgagor obtained the possession of the goods under her replevy bond, after seizure, she did not absolve that relation, but became 'also trustee under the bond. Her possession by virtue of the bond made her bailiff of the goods. So then when she, as mortgagor and bailiff, converted them, there was a double liability on her to make good the loss —one, arising from her character as mortgagor, the other upon her replevy bond. Appreciating her obligation, and in order to save her sureties on the bond harmless, she placed the proceeds of the property replevied and sold by her in the hands of Baker, one of her sureties, to answer its terms, if the suit should be.decided adversely to her. The effect of this transaction was to create an express trust, under which Baker, the recipient of the money, engaged to hold the funds to answer the purposes of the suit. Had the court in which that case was being litigated been made acquainted with the fact that the replevied property was being converted by Mrs. Cotton, the mortgagor respondent, and that the proceeds were being or had been placed with Baker for his and her other sureties’ indemnity, it would doubtless, if requested by the complainant mortgagee, have required Baker to pay the money into court or to have given security for its forthcoming upon a termination of the suit. For Mrs. Cotton had no right to sell the property. But, having sold it, the proceeds of such sale, when deposited with Baker by way of substitution, took the place of the property. As the complainant mortgagee in the suit would have had the right to claim the proceeds of the property in the hands of Mrs. Cotton as trust property, when the latter in effect recognized this right and voluntarily placed this money in her surety’s hands to meet the exigencies of the suit, though it may have been nominally for his indemnity, she created an express trust for the complainant in the event of success. And it was in this relation Baker held the money when Humes and others, on the 14th day of December, 1889, obtained one thousand dollars of it, under a written agreement containing the following stipulation, to-wit: “to return and pay back to Baker, trustee, for the indemnity of said bondsmen said sum of fl,000, in the event said cause (the suit to foreclose and in which the writ of seizure was issued) should by the complainant be appealed to the Supreme Court of Alabama and reversed and said bondsmen should in any event become liable by virtue of proceedings on said mortgage to said John Scott. Said money to be refunded when it shall be judicially determined that said bondsmen shall be liable and have the same to pay to said Scott, by reason of their suretyship on said bond.” The foreclosure 'suit haying terminated favorably to the complainant, and the bondsmen on the replevy bond having become liable, the complainant in this cause, who was the real owner of the mortgage sought to be foreclosed in the name of her husband, filed this bill against him and the parties who obligated themselves to return the thousand dollars obtained from Baker, to require the ■payment of that money to her, she having acquired by transfer the written obligation given for its repayment. The final decree in the foreclosure suit was affirmed by this court, upon appeal and supersedeas, at the November term, 1892, and this bill was filed in March, 1897. The respondents, who obtained the return of the f1,0 00 received by them from Baker, demurred to the bill upon various grounds and prosecute this appeal from the decree overruling their demurrer. The first, second and fifth assignments of demurrer raise the point that the condition of the obligation to refund the money had not transpired, in that, the sureties on the replevy bond have not had to pay or paid the said ■sum of one thousand dollars and have not been damni-fied. This misconceives the terms of the agreement, which was to repay “when it shall be judicially determined that said bondsmen shall be liable and have the same [the money] to pay to said Scott.” It was so determined and so the obligation to refund existed by the very terms of the writing. The third, fourth and ninth assignments insist that the bondsmen were released and discharged from liability in respect to the thousand dollars, and that they (the appellants) are no longer liable on their contract. It appears that, after the final decree in the foreclosure suit, and the liability of the appellants to refund had become fixed, the complainant in that suit, in consideration of the transfer of the contract or obligation of the appellants and of other property possessed by them subject to execution, released and discharged the sureties on the replevy bond from “any and all further liability to me [him, Scott,] on, under or by virtue of the said forthcoming bond or said decree.” It is clear to us, that there is no escape from liability to refund the money on this point. The assignment of the obligation to refund preserved the liability and operated to except it from the release in so far as it involved the liability of the sureties on the replevy bond. So then, it may be said that by the terms of the release the liability on the bond was expressly excepted, at least, to the extent of the obligation assigned. The other- assignments make the defenses of staléness, limitations, and that -complainant has a plain, adequate and -complete remedy at law. This bill is one to follow trust property originally belonging to the complainant as mortgagee, which was returned to the mortgagor as bailiff under the replevy bond and converted by sale into money by her, and deposited to meet the judgment. The appellants received a portion of this money, acknowledging in writing its trust character, and promising to pay it whenever the liability of the sureties on the replevy bond was judicially determined. The purpose and intention as evidenced by the contract -of repayment was to restore the trust fund to the trustee, - Baker, to be appropriated by him to the payment of the mortgage debt as ascertained and enforced by the decree in the foreclosure suit. It was not money which Baker could -dispose of to the appellants, and the essence of their -obligation- was and its proper construction is, that they received the money in trust to be held by them -for the payment of the mortgagor’s debt, pro tant'o, when judicially detemined against the -sureties on the replevy bond. In -other words,- they as recipients -of the money from Baker understood and recognized his trust, which was to hold the -money as proceeds of mortgaged property for the payment of complainant’s debt if he succeeded, and the terms of their engagement, properly construed in connection with all the attendant facts, made them stand with respect to the complainant in the shoes of Baker in 'sio far as the money received by them is concerned. There was nothing adversary whatever in the conduct of the appellants prior to the rendition of the final decree in the foreclosure 'suit: Until then, they stood under the express terms of their contract precisely as Baker. They were bound under their agreement to make good the trust money received by them if necessary to a discharge of the mortgage debt and no one but the complainant in that suit could release them, from that obligation. The case,- then, isi equitable in all its features. And the bill is neither open to objection of staleness nor lim-’ Rations. It was filed within six years after the final decree in favor of the complainant in the foreclosure proceedings, when by the terms of the appellant’s contract, this complainant .became entitled to call on them for this -money. These appellants have no right to impute to their conduct in receiving the trust fund a character opposed to what it appears to have been by the terms of their written obligation. They cannot now say they acted tortiously and in contravention of the trust, and that they can only be held by construction of law, when they acknowledges! the trust and obtained possession of the money on the express condition to refund it on the determination of the litigation. It would be opposed to all ideas of justice to permit parties receiving trust funds under an agreement to- refund, when needed for the exigencies of the trust, to successfully insist that the statute of limitations began to run in their favor before that event happened. iWe will presume complainant’s assent to the transaction by which the proceeds of the mortgaged property were placed in Baker’s hands, since it was one for her indemnity and benefit. The money in Baker’s hands] was, in equity, essentially the complainant’s, and the appellant’s reception of a portion of it being in express recognition of Baker's trusteeship, their obligation to repay here sought to be enforced, is voluntary and contractual and in no sense a constructive trust -barred by limitations commencing to run on the reception of the money. There is no error in the record, and the decree is affirmed.