Fur & Wool Trading Co. v. George I. Fox, Inc.

The complaint alleges that goods belonging to the plaintiff were taken from its possession by force. The defendant receiving them with knowledge of the facts, sold them at a large profit but at a price unknown to the plaintiff. It has refused a demand to account for the sums received. The plaintiff, consequently, brings an action in equity to compel the defendant to disclose what amounts were so received by it, to repay the proceeds of such sale, and it asks for general equitable relief. This it has been held may not be done. The only redress is such as the law may give. Therefore, upon motion the complaint has been dismissed.

Some remedy at law there certainly is. The plaintiff might sue for conversion. If successful, it would, as a general rule, recover a personal judgment for the value of the goods at the time and place of the conversion. Or if the goods had remained in the hands of the wrongdoer, an action in replevin would have afforded a complete remedy for their recovery. Or again if they have been sold there is an action for money had and received, resulting in a personal judgment for the proceeds. If the plaintiff has no information as to this sum it may acquire it should it be necessary to enable it to frame a complaint by an examination of the defendant. (Matter of Erie Malleable IronCo., 90 Hun, 62.) Even though this be so is the plaintiff entitled to still other relief in excess of what a court of law is competent to give? Or is his case one where under historic rules, equity has been wont to assume jurisdiction?

At the outset we should say that the action may not be sustained as a bill of discovery, brought as such a bill was, not as an end in itself but as an aid to an independent proceeding. A complete remedy of this character being otherwise provided, such an action no longer survives. (Civ. Prac. Act. sec. 345.) But in certain cases equity will entertain a suit for an accounting. This is so where such a relation exists between the parties as under established principles entitles the one to demand it of the other. (Schantz v. Oakman, 163 N.Y. 148; Brown v. Corey, 191 Mass. 189.) A trustee in possession of trust funds may in a proper case be called to account to hiscestui que trust (Brinckerhoff v. Bostwick, 105 N.Y. 567), and this rule is enforced as well where the trust is implied as where it is express. (Hawley v. Cramer, 4 Cow. 717.)

Clearly a thief, having sold stolen goods may be treated as a trustee of the proceeds and also of any property into which they have been transformed, so long as either may be identified. Under such circumstances broader relief may be obtained in equity than at law. Where necessary, an accounting may be had. A lien may be declared. A surrender of the trust property may be decreed. (Newton v. Porter, 69 N.Y. 133; American S.R. Co. v.Fancher, 145 N.Y. 552; Hammond v. Pennock, 61 N.Y. 145;Jaffe v. Weld, 220 N.Y. 443.) The added reason that the defendant is insolvent is not essential. Such was not found to be the fact either in Newton v. Porter or in Jaffe v. Weld.

Where, however, the specific proceeds, in their original or in their transformed shape may not be traced, then no lien may be obtained. (Matter of Cavin, 105 N.Y. 256; Matter of Hicks,170 N.Y. 195.) No identification — no lien. The complaint will not be dismissed, however, if ultimately it is determined that such proceeds are not found in possession of the defendant. Because a trustee has mingled them with his general funds the right to a resort to equity is not ended. The same rule exists as to a trustee ex maleficio. If equity has properly obtained jurisdiction it may retain it so as to afford proper relief — personal judgment in such a case against the wrongdoer.

At least such jurisdiction is obtained where the trust fund has come into the hands of the trustee, where the cestui que trust is ignorant of its amount and of its subsequent fate, and where the trustee refuses to account. Such either by express statement or by fair inference is the complaint we consider. We so held inLightfoot v. Davis (198 N.Y. 261). Bonds are stolen and sold. Years thereafter the estate of the thief was required to account for the proceeds and repay that amount to the true owner from its general assets. The only relief prayed for, we said, was that the administrator "may account and pay over the amount of said bonds and the income thereof if it can be traced, and if it cannot be traced" that the plaintiff have judgment for the sum of $16,000, and we added: "The method by which equity proceeds in all these cases is to turn the wrongdoer into a trustee. If it may do so for the purpose of subjecting identified funds to the claim of the defrauded party, I do not see why it should not pursue the same method wherever it is necessary to protect the rights of the original owner. In the case of an actual trustee, the cestui quetrust may not only reclaim the trust property if he is able to trace it, but failing to trace it, he is entitled to an accounting and personal judgment against the trustee."

So we decide that the order dismissing the amended complaint was erroneous. The facts alleged entitle the plaintiff to an accounting and to the general equitable relief for which it prays. To that we confine our decision. The judgment of the Appellate Division and that of the Special Term should be reversed and the motion for judgment dismissing the complaint denied, with costs in all courts.

CARDOZO, Ch. J., POUND, CRANE, KELLOGG and O'BRIEN, JJ., concur; LEHMAN, J., dissents.

Judgment accordingly.