Supreme Court of United States.
*414 J.R. Ingersoll and C. Ingersoll, jun., for Randel.
J.R. Tyson and Cadwallader, for Brown.
*416 Mr. Justice McKINLEY delivered the opinion of the court.
Randel filed his bill against Brown, on the chancery side of the Circuit Court of the United States for the eastern district of Pennsylvania. In which he states that, wishing to negotiate a loan of $10,000, to be secured on certificates of the funded debt of the Chesapeake and Delaware Canal Company, he applied to Brown to aid him in the negotiation, with one of the banks in Philadelphia. And that it was agreed between them, that Randel should deliver to Brown two certificates of the funded debt of the canal company, for $5000 each, and execute to him a power of attorney, authorizing him to transfer the certificates to himself, or to any other person; and that Brown should, upon his own note, and the pledge of the certificates, if practicable, obtain a loan, for Randel.
And in pursuance of this agreement, he executed the power and delivered it and the certificates to Brown. That instead of obtaining a loan of money, as he had promised, Brown transferred the certificates to himself, and delivered them up to the canal company, and obtained new ones in his own name. That when Randel applied to Brown to know whether he had obtained the loan of $10,000 for him, Brown replied, that he had bad news for him "I have not succeeded at the bank;" that the bank had a disposition to lend, but had not the means. That Randel then requested him to return the certificates of debt, which Brown refused to do; saying, he intended "to hold on to them" till Randel settled with him, or made him the present he had promised him.
Randel then put the following interrogatories to Brown: "Whether he did not receive the certificates and power of attorney in trust and confidence, in the manner and under the circumstances aforesaid; and whether he had any interest in the same, and was not, in holding the same, a mere trustee for the complainant, and did not refuse to deliver them to him; and whether he did not transfer said certificates to himself, on Monday, the 24th of October; and what circumstances occurred before the board of directors, or were communicated to him; and whether he did not inform the complainant, that he had not succeeded at the bank, and give the complainant to believe, that he had made application on that, or the preceding day; and whether the certificates were not transferred, by said Brown, to his own use, *417 and not for the use of the complainant; and what use or disposition, if any, he had made thereof, and to whom, and for what consideration."
The answer denies all the material allegations of the bill, except it admits the receipt of the power of attorney and the certificates of debt. Brown then sets up, in his answer, a claim for services rendered to Randel, from the early part of the year 1831, till the 24th day of October, 1836, of various kinds, but particularly, in attending to, and preparing for trial, a suit brought by Randel against the said canal company. And he alleges that Randel agreed to give him a reasonable compensation, for time to be expended in his service, in any event, and to pay his travelling and other expenses; and in the event of success in the suit, the additional compensation of two and a half per cent. on the amount that might be received thereon; and that Randall finally recovered judgment, and received from the company, the sum of $230,000, in payment thereof.
But before the payment, and while it was uncertain whether any thing would be realized from the judgment, Brown states that, from exposure, in the service of Randel, he was taken sick, and it being uncertain whether he would recover or not, he applied to Randel for payment for the time then expended in his service, whereupon Randel caused to be transferred to the use of Brown $2000, part of said judgment. And a short time thereafter, about the month of September, 1834, Randel requested him to accept an order, drawn on him by Randel, in favour of a certain William H. Camac, for $2000, promising, at the same time, to place funds in his hands to meet its payment; which induced him to accept it. Brown refers to the order, in his answer, and which is as follows:
"Sir Out of the sum of $2000 with interest due, and to become due thereon, which was assigned, at my request, by Samuel H. Hodson, to you, being one-fifth part of the sum assigned by me to him, on trust, the 27th of January last, out of the judgment obtained by me against the Chesapeake and Delaware Canal Company, please to pay to William H. Camac or order the sum of $2000, out of the first moneys you obtain from said company on said account, or on account of tolls attached. If more than one year elapse before you obtain the whole of said sum of $2000, then pay to said Camac an interest of six per cent. on whatever balance may remain unpaid, after the expiration of said term of one year." Brown accepted this order on the 26th of September, 1834.
*418 It is further charged in the answer, that on the 18th day of April, 1836, for time expended in his service, from the date of the assignment of the said sum of $2000, down to that time, Randel gave to Brown a promissory note for $300, payable ninety days after date. He then charges, that the two certificates of debt were delivered to him by Randel, on the 20th of October, 1836, for the purpose of paying himself, and the debt of $2000 to Camac. And at the same time, Randel requested him to go to New Castle and reassign the part of said judgment which had been assigned to him as aforesaid; and that he, Randel, would then execute the power to Brown to enable him to transfer said two certificates of debt to himself. And accordingly, on the 22d of the same month, he at New Castle reassigned to Randel said sum of $2000, part of said judgment, and received from him the power of attorney, authorizing him to transfer said two certificates of debt, numbered 34 and 35, to himself, or any other person.
And in answer to the interrogatories in the bill, Brown says, "that he did not receive said certificates and power of attorney, in trust and confidence, in the manner and under the circumstances therein set forth, but absolutely, as an unqualified transfer, in payment of a debt due to him, by the complainant, and distinctly admitted by him, and to enable him, the respondent, to pay William H. Camac the amount of his, the respondent's, acceptance, as before stated; and that said respondent has an absolute and unqualified interest in the certificates, to the whole amount of their principal and interest, and that he does not hold them as trustee for the complainant, nor any other person, but in his own right, and for his own use.
"And that he did refuse to deliver said certificates to the complainant, and did actually transfer said certificates to himself, on Monday, the 24th day of October last; and that he did not place said certificates before the directors of the Schuylkill Bank, on Monday, the 24th, or Tuesday the 25th of October last. That touching the disposition your respondent has made of the said certificates, he says, that they still stand in the name of your respondent, and were surrendered to this honourable court, on the presentation of the complainant's bill of complaint." To the answer the complainant filed a general replication. And, after time had been allowed the parties to take depositions, the court referred the case to three masters, with special instructions.
The masters after a very thorough examination of the evidence in *419 the cause, reported against the claim of Brown for separate compensation for time; but allowed him the two and a half per cent. commissions, claimed in his answer, amounting to $5659 64, as compensation for all services rendered. Both parties excepted to the report. Brown, to that part of it which disallowed his claim for separate compensation for time; and Randel excepted to that part which allowed to Brown two and a half per cent. on the amount of the judgment against the canal company.
The court overruled these and all other exceptions, confirmed the report of the masters, and rendered a decree in favour of Brown for the amount allowed by the masters, with interest from the fifth day of May, 1840, amounting together to the sum of $6136, to be paid out of these two certificates. From this decree both parties have appealed to this court.
The right of Brown to compensation for time, and his right to commissions on the amount of the judgment, are both involved in his assertion of the more general right, to be compensated, for all his services, out of these certificates. The principal questions, therefore, which we deem it necessary to examine are, 1st. Were the certificates delivered to Brown in payment of a debt to himself, and to pay the debt to Camac? And if they were not so delivered; then, 2d. Had Brown such a legal or equitable interest in the certificates as authorized the decree of the court below? A just solution of these questions depends upon a proper examination of the evidence applicable to them, and the particular circumstances under which the witnesses acquired a knowledge of the facts they have deposed to.
Shortly after the bill was filed, and before Brown had filed his answer, he went to Delaware to ascertain what evidence he could obtain from persons having a knowledge of the services he had rendered to Randel. And from the inquiries he made of several of the witnesses, and the disclosures made to them, of the nature of his controversy with Randel, it is reasonable to suppose, that he intended, at that time, to rest his defence upon the amount and value of his services only, and that he had not then thought of claiming the certificates, as having been delivered to him in payment of a debt due for those services. The depositions of four of those persons are found in the record; T.B. Roberts states, in his deposition, that Brown asked him what evidence he could give, as to the value of his services, while with Randel, stating, that the witness was aware of his having been for years doing business for him.
*420 The witness then says, that Brown stated to him, "that the certificates had been put into his hands by Mr. Randel; to raise money upon them, to pay certain debts of Randel's in Philadelphia; one of which he mentioned was to Mr. Camac; I think, he stated himself, under some obligation to have paid by Mr. Randel; and another debt to Mr. Charles Ingersoll; he did not state that the balance was for himself. He said he had exerted himself to negotiate the certificates to several persons, but had not succeeded;" "that Mr. Randel wished him to return the certificates to him, but he had refused to do so, until Mr. Randel settled certain debts he owed."
A.C. Gray, to whom Brown applied, for the purpose of getting his services as commissioner to take depositions for him, in this suit, says, Brown stated, "that he had received a transfer of $10,000 from Randel of the canal's debt, for the purpose of raising money; with which Mr. Randel wished to pay his debts; he stated also, that Mr. Randel owed him money for services, which he had rendered him, during the long litigation which had taken place between Randel and the canal company. In consequence of these things, he had determined to hold on to these certificates, as the only means to enforce the settlement of his claims."
Thomas Janvier, another of these witnesses, states, that when Brown applied to him to ascertain what testimony he could give in this case, Brown stated that Randel had promised to pay him two and a half per cent. on the judgment against the canal company. The witness replied, that his testimony might operate against him, as the only claim he had ever heard him assert, was, that he intended to make Randel pay him $2000 for his services. Janvier then says, "that in the course of the conversation he gave me a history of the transaction, upon which this suit is founded; and told me that Randel had given him these certificates, which are now in controversy, for the purpose of negotiating a loan, to pay certain debts he had contracted debts due to Mr. Camac, Mr. Charles Ingersoll, and himself; so far I recollect positively. I am certain, from the information of Mr. Brown, that the certificates were given for the purpose of negotiating a loan, to enable Randel to pay certain creditors. I am certain he named Mr. Camac, Mr. C. Ingersoll, and himself as creditors."
Cornelius D. Blaney, the fourth witness, says, he does not recollect that Brown stated how the certificates came into his hands; in other respects his testimony is, substantially, the same as that of the other *421 three witnesses; and it appears, that he was present at the conversation between Brown and the witness, Roberts.
After collating this evidence with clearness and ability, the masters proceed to say, "It is remarkable, that to none of these persons did the respondent state the fact, that he had transferred these certificates into his own name; it is remarkable also, that if, at that time, he did entertain the same clear and positive conceptions of his rights, which is set forth in the answer, he did not simply and plainly state that right, and say, "they (the certificates) were given in payment, or part payment of my own claim, and of my liability to Mr. Camac." We cannot close our minds to the force of the testimony of these four persons. It has been ably urged, that evidence gathered from the declarations of a party is unsafe, peculiarly liable to the effects of misapprehension, of inattention, of defect of recollection that a word omitted, or displaced, may change the whole character of the declaration. We have felt the force of the argument, but it does not prevail against the influence of the concurring testimony of four intelligent and respectable men, giving a very uniform account of the respondent's representation of his own case; and, in relation to the question of trust, giving such a narration as to lead to one and the same result. We have observed too, that it is the same species of evidence, upon which the respondent asserts his alleged contract with the complainant, which contract he states in his answer, in the words or declarations of the complainant, alleged to have been uttered to himself, at a time much less recent than his own declarations to the witnesses."
"The testimony of these witnesses then, establishes, in our opinion, and accordingly we find, and so report,
"1. That the delivery of the certificates by the complainant to the respondent was not absolute, but upon a trust.
"2. That the trust was to raise money.
"3. That of the money so to be raised, part was to be paid to Mr. Camac; and that as to this part, the respondent had a direct interest in the execution of the trust, in consequence of his acceptance of the draft drawn in favour of Mr. Camac, referred to in the answer, and of his re-transfer of the interest in the judgment upon which the draft was drawn.
"4. That another portion of the money so to be raised was to be paid to Mr. C. Ingersoll.
"5. That no express appropriation of the balance, or any part *422 thereof, was made at the time by the complainant in favour of the respondent."
We concur entirely with the masters in their reasoning, and in the conclusions they have arrived at, upon this testimony, except as to the supposed interest of Brown in the execution of the trust, mentioned in the third specification. Upon that we shall have occasion to comment, in another part of this opinion. This evidence sustains the allegations of the bill, fully, and contradicts the answer, as to the objects and purposes for which the two certificates were delivered by Randel to Brown. There is, therefore, no further pretence to say, that Brown received the certificates in payment of a debt to himself, and for the purpose of paying the debt to Camac. And this evidence establishes another material fact in this case; and that is, that Brown had no interest or property in the certificates before they were delivered to him by Randel; and whether he acquired any in them afterwards, leads us to the consideration of the second question. Had Brown such an equitable interest in the certificates as authorized the decree of the court below?
In the third specification before referred to, the masters reported that Brown had a direct interest in the certificates, on account of his acceptance of Randel's order in favour of Camac, and his having relinquished to Randel his interest in the judgment. It is difficult to ascertain upon what ground it was assumed, at the date of the report, that Brown had an interest in these certificates. The order was drawn upon a special and contingent fund, which might never be received; and until received, Brown was not liable to pay. There is no proof in the cause that can be relied upon, to show on what consideration the re-assignment was made; unless the statements in Brown's answer are to be received as evidence. When the answers of the defendant are directly responsive to the allegations of the bill, they amount to positive proof. But in this case there is no allegation in the bill, in relation to this assignment or re-assignment. Brown, in giving a history of the transactions between him and Randel, sets up in his answer this sum of $2000, as having been assigned to him in part payment of his services; and in another part of his answer, he states, that upon receiving the certificates and power of attorney, at the request of Randel, he re-assigned his interest in the judgment to him.
This being clearly matter in avoidance, it is entitled to no more consideration, as evidence, than are the allegations of the bill. There *423 is no evidence, therefore, that the re-assignment was made in consideration of the delivery of the certificates by Randel to Brown. But there is strong presumptive evidence, that it was made in consideration of the payment of the order to Camac by Randel, or of his promise to Brown, that he would pay it; for it appears by the report of the masters, that it was admitted by the parties, and the counsel on both sides, that the amount of the order had been paid by Randel to Camac after the commencement of this suit.
But if Brown had even acquired a valid lien on the certificates, on account of the acceptance of the order, and the re-assignment of his interest in the judgment, the payment of the order by Randel, pending the suit, extinguished the lien, and no decree ought, on account of this supposed lien, to have been rendered in favour of Brown; for it is the rights of the parties, at the time the decree is rendered, that ought to govern the court in rendering the decree. In either aspect of the case, however, Brown's right to these certificates is reduced to naked possession; and, since his refusal to restore them to Randel, his possession has been fraudulent.
It has been contended, by Brown's counsel, that, as the masters have reported that a large amount was due from Randel to Brown, and that Randel had parted with all the rest of his certificates of funded debt; that, therefore, Brown had a right to payment out of the certificates in controversy in this case. In support of this proposition, they relied on the case of Handy and Harding, 11 Wheat. 103.
The bill, in that case, stated that Wheaton, under whom the complainants claimed, as heirs-at-law, about the year 1802, began to exhibit symptoms indicating loss of intellect, and soon became incompetent to the management of his estate. Under these circumstances, it was agreed among his children, that Handy, who had married his daughter, should endeavour to take his estate out of his hands, and preserve it for the benefit of his heirs-at-law. That it was agreed, that Wheaton should be prevailed on to convey the real property to Handy, for a nominal consideration, who should forthwith execute an instrument of writing declaring that he took and held the same in trust. 1st. To provide a decent support for the grantor, during his life; and after a full remuneration for his expenses and trouble, in that respect, to hold the residue of the estate for the benefit of the heirs-at-law. Handy procured the conveyance from Wheaton, and entered upon and possessed the property till his death, but refused to execute the declaration of trust.
*424 The bill then prayed for an account; and that a decree might be rendered, exonerating the estate from the deed to Handy, after satisfying his just claims, &c.
The answer denied that Wheaton was incapable of conveying, when the deed was made. It denied also that the defendant purchased as a trustee; and averred, that he was a purchaser for a full and valuable consideration.
The Circuit Court decreed that the deed should be set aside; and that an account should be taken of the receipts and disbursements of Handy, and that he should be credited for all advances made, and charges incurred for the maintenance of Wheaton during his life, and for repairs and improvements made on the estate. This part of the decree was affirmed by the Supreme Court. Handy's possession of the estate was consistent with the intention of the parties; the advances made and charges incurred, for the maintenance of Wheaton, were according to their agreement; and the repairs and improvements made, preserved the estate, and enhanced its value. Thus far Handy executed the trust fairly, and thereby acquired a lien on the funds in his hands, arising from the rents and profits; nor were these acts tainted by his subsequent fraud, in refusing to execute other parts of the trust; and besides the complainants in their prayer for relief authorized the court to allow Handy his just claims against the estate. This case does not, therefore, give any support to the proposition assumed by the counsel of Brown.
There is no parallel between these cases, as a brief comparison will show. Brown's possession of the certificates, after refusing to restore them to Randel, was not only fraudulent, but wholly inconsistent with the contract with Randel; and in violation of the trust upon which he received them. And Randel, so far from authorizing the court to allow Brown's claim out of the certificates, stated positively in his bill, that he owed him nothing. The proof shows conclusively, that Brown had neither property nor interest in the certificates, before they were delivered to him by Randel. Unless he can show, therefore, that he has a lien on them, he can neither hold them as security for the payment of the claims set up in his answer, nor is he entitled to payment out of them, at law or in equity. To create a lien on a chattel, the party claiming it must show the just possession of the thing claimed; and no person can acquire a lien, founded upon his own illegal or fraudulent act, or breach of duty; nor can a lien arise, where, from the nature of the contract between the parties, it *425 would be inconsistent with the express terms, or the clear intent of the contract. For example, if the goods were deposited in the possession of the party for a particular purpose, inconsistent with the notion of a lien, as to hold them or the proceeds for the owner, or a third person. Story on Agency, 73, 74, 75; Lamprier v. Pasley, 2 Term R. 485; Cranston v. The Philadelphia Insurance Company, 5 Binn. 538; Turno v. Bethune, 2 Desau. 285; Jarvis v. Rogers, 15 Mass. R. 389, 395; Weymouth v. Bowyer, 1 Vesey, Jun. 416; Taylor v. Robinson, 8 Taunt. R. 648; Gray v. Wilson, 9 Watts, 512; Madden v. Kempster, 1 Camp. 12; Crockford v. Winter, 2 Camp. 124.
In the case of Madden v. Kempster, Lord Ellenborough said, "The defendant being under an acceptance for Captain Hart, whose agent he had been, might have retained a sum of money to answer that acceptance. But the plaintiff is entitled to recover this sum of money, the defendant having obtained it by misrepresentation. He mentioned nothing of the acceptance, he obtained it as a balance when no balance was due to him. He cannot, therefore, set up the lien to which he might otherwise have been entitled." Lord Ellenborough held the same doctrine in the case of Crockford v. Winter; and the same doctrine was held in Taylor v. Robinson, 8 Taunt.
In this case of Madden v. Kempster, it is admitted that Kempster would have had a good lien on the £60 if he had obtained the money honestly, and in the course of business. But having obtained it by misrepresentation he was not permitted to set up the lien, to which he might otherwise have been entitled. How then, can Brown set up a lien on these certificates, holding possession of them as he does, by just as gross a fraud? There is no aspect in which the question can be placed, consistently with the evidence and the authorities above cited, that will justify the decree in his favour. To permit this decree to stand would be to sanctify fraud, and to allow Brown, by taking advantage of his own wrong, to obtain compensation for his services in a court of chancery, upon a case purely cognisable in a court of law, the decree of the Circuit Court is, therefore, reversed, and the cause is remanded to the Circuit Court with directions to enter a decree for the plaintiff, conformably to this opinion, and that the defendant pay costs in both courts.
This cause came on to be heard on the transcript of the record *426 from the Circuit Court of the United States for the Eastern District of Pennsylvania, and was argued by counsel. On consideration whereof, It is now here ordered and decreed by this court, that the decree of the said Circuit Court be, and the same is hereby reversed with costs; and that this cause be, and the same is hereby remanded to the said Circuit Court, with directions to that court to enter a decree for the complainant conformably to the opinion of this court, and that the defendant pay the costs in both courts.
This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the Eastern District of Pennsylvania, and was argued by counsel. On consideration whereof, It is now here ordered, adjudged, and decreed by this court, that this appeal be, and the same is hereby dismissed with costs; and that this cause be, and the same is hereby remanded to the said Circuit Court with directions to that court to proceed therein conformably to the opinion of this court in this case on the appeal of the complainant.
