Muller v. . Kling , 209 N.Y. 239 ( 1913 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] I think that we should affirm the determination, which the Appellate Division has made of this controversy. The facts show that the plaintiffs did not purchase the draft on Demachy Seilliere upon the general credit of the drawers, Scholtz, Sanchez Co.; but upon the security afforded by their collateral draft on Invernizio, their debtor, for the same amount, payable to Demachy Seilliere and which was remitted to that firm to secure their acceptance of the draft, according to an arrangement with them. The facts furnished the inference, irresistible as it seems to me, that Scholtz, Sanchez Co. intended, and that the plaintiffs understood, that a debt, or part of an indebtedness, owing by Invernizio to the former, was to be transferred, and ultimately paid, to Demachy Seilliere, as a fund to cover the payment of the draft upon them. Summarily stated, the transaction was that the plaintiffs purchased the draft on the French firm, upon the drawers exhibiting to them, to induce the purchase, a letter of the French firm, in which they promised to accept drafts, up to a certain limit, "upon the security of drafts drawn by Scholtz, Sanchez Co. upon Invernizio, to be furnished therewith;" the drawers, at the time, informing the plaintiffs that they would secure their draft on Demachy Seilliere, by sending to that firm another draft drawn by them on Invernizio for the same amount against an existing indebtedness of Invernizio, upon an account for goods sold. Had the transaction been effectuated, as intended and understood when entered upon, there would have been a substitution of the liability of Invernizio to Demachy Seilliere for that of Scholtz, Sanchez Co. The purpose of the transaction, plainly enough, was to facilitate the collection of the money owing by Invernizio in account. The question is whether, as between the plaintiffs and the general creditors of Scholtz, Sanchez Co., the equities of the former are superior. The defendant stands in the shoes of Scholtz, Sanchez Co.; with no greater rights, as against the plaintiffs, than his assignors possessed. If the plaintiffs purchased the draft upon the general credit of the drawers, then, to what end and purpose were all the acts of the latter in inducing the purchase? They had some meaning. I think that the circumstances attendant upon the purchase disclosed that the plaintiffs had parted with their money on the supposed security of a fund, to be created by the transfer of the drawers to the drawees of the debt owing by Invernizio. In transactions of such a nature, the surrounding circumstances are to be considered by a court of equity in determining the intention of the parties. (Throop Grain Cleaner Co. v. Smith,110 N.Y. 83; Fourth Street National Bank v. Yardley,165 U.S. 634.)

The equities of the plaintiffs are the greater; because, in giving the value of the draft to the drawers, they enabled them to realize immediately on Invernizio's debt to them. Whether the result of this transaction was to effect an equitable assignment of a fund, it may not be necessary to decide. Any act, which makes an appropriation of a fund, amounts to an equitable assignment of it. (Story's Eq. Jur. sec. 1047.) In my opinion, the circumstances do justify us in giving such a construction in the present case. If, from what took place, the inference is to be drawn that the parties intended that the plaintiffs should be entitled to the security of the draft on Invernizio, I think a court of equity might give effect to the intent by holding that there was an equitable assignment of the debt it was drawn against. Such a construction, to use the language of Judge FINCH in Tallman v. Hoey, (89 N.Y. 537), when speaking upon the subject of equitable assignments, (p. 539) "proceeds upon a necessity demanded by the justice of the case, and to obviate an injury, or a wrong, which would otherwise occur. Where the holder (of a bill) has parted with nothing, and so loses nothing by the application of ordinary legal rules, no pressure of justice requires the intervention and the help of an equitable doctrine." Whatever may be the doubt as to the application of this equitable rule, I think there should be no doubt that the plaintiffs' case is safely within the equitable doctrine that, where the just and clear rights of a party to payment of a debt from a particular fund can be secured in no other way, the fund, or its proceeds, will be regarded as a trust for his better security. (See Vail v. Foster, 4 N.Y. 312, 314.)

In view of the full and able discussion of the question by Mr. Justice MILLER, at the Appellate Division, it is unnecessary to say more. I think, under the circumstances surrounding the negotiation of the sale of the draft to the plaintiffs, that the defendant took over the moneys, in question, as a fund charged with a trust for its application to their claim and that the general creditors have no equal right thereto.

The judgment should be affirmed.

CULLEN, Ch. J., WERNER, HISCOCK, COLLIN and CUDDEBACK, JJ., concur; MILLER, J., not sitting.

Judgment affirmed.