Tucker v. Linn

Full title: TUCKER v. LINN et al.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: Mar 21, 1904

57 A. 1017 (Ch. Div. 1904)

Opinion

03-21-1904

TUCKER v. LINN et al.

H. C. Gilson, for complainant Clarence Linn, for defendants.

STEVENSON, V. C.

Suit by Ethel L. Tucker against Clarence Linn, individually and as administrator of John Linn, deceased, and others. Bill dismissed.

H. C. Gilson, for complainant Clarence Linn, for defendants.

STEVENSON, V. C. (orally). The complainant in her bill charges that between and during the years 1895 and 1898 the complainant "placed the sum of $1,840 in the hands of the defendant John Linn for investment in such securities as he might deem safe, and for the care, custody, management, and control for her of such securities after the investment of the said money; that the said John Linn, acting as attorney of and trustee for the complainant, thereupon took the entire charge of said moneys and investments until the death of the said John Linn, which occurred in the year 1898; that at the time of his death the said John Linn had in his possession, as attorney as aforesaid, and held in trust for the complainant, the said sum of $1,840, or the securities representing the same, together with the accrued interest or dividends thereon." I think that quotation from the bill sufficiently indicates what the cause of action is which the complainant sets forth. She failed to procure any of this trust estate from Mr. Linn in his lifetime. She says that she has failed to procure any of it since his death from his administrator, the defendant Clarence Linn. In my opinion, there is an entire failure of proof of that perfectly plain, simple, correctly stated, equitable cause of action. No doubt the counsel of complainant was disappointedat the rulings of the court with respect to the competency of the complainant to testify herself in this cause in regard to statements by the deceased, John Linn, or personal transactions with the deceased, John Linn. The proof which was presented and allowed to be competent indicated that at some time—probably in the year 1894—John Linn received $1,000 from the complainant. It was also proved that from 1893 until April, 1898, the time of the death of John Linn, the complainant acted in the capacity of working housekeeper, and that her services as such were not gratuitous. Whether she was paid for those services or not did not appear. That she rendered the services was perfectly plain, and that they were not rendered gratuitously was also plain. But here the proof stops, and the insistment is on the part of the complainant that $840 of those earnings were retained by Mr. Linn, and under an arrangement or understanding that he would pay interest—a better interest for the amount than the complainant could receive from the banks. Now, I am not going to deal with the question whether the fact of the payment of the $1,000 in 1894 or thereabouts was proved, or whether it was proved that any moneys due from Mr. Linn to the complainant as wages were retained by him, and remained unpaid by him at the time of his death. The answer sets up three defenses. The answer insists that the complainant has a complete remedy at law, and that she has no standing in a court of equity to prosecute her claim. The answer, in the next place, pleads the statute of limitations. I may not state the order of these defenses correctly. And then, last of all, denies the existence of the indebtedness. As I recall it, it denies that John Linn ever received the said sum of $1,840, or any sum, from the complainant, and denies that John Linn at the time of his death owed the complainant anything. It seems to me that, if the evidence is to be construed most favorably to the complainant, if it be conceded that John Linn received this $1,000, and also owed the complainant some amount of money for wages earned by her, and which he had not paid at the time of his death, the demand of the complainant is cognizable in a court of law, and not cognizable in equity. In my judgment, there is an entire failure, as I said before, to prove this particular equitable cause of action which is set forth in the bill of complaint. Undoubtedly, the cause of action set forth in the bill is one of which this court has full cognizance. That cause of action involves a perfectly simple and well-settled trust. The charge is that particular money was paid over by the complainant to the defendant's intestate to be invested in securities, and these securities were to be held by the defendant's intestate. No equitable title to the money passes in such a case. No equitable title to the securities in any way exists in the holder. If this bill had been proved to be true, then John Linn received money which he had no right to appropriate to his own use. He did not, by receiving the money, become a debtor to the complainant. He was charged with the duty of expending these moneys for securities or investing them in securities, and when he did so the equitable title to those securities would be in the complainant, and he would be the mere trustee, not having any beneficial ownership.

Now, it seems to me that, even if this bill could be amended so as to make its allegations correspond with the proofs, and the proofs are to be taken most favorably to the complainant, as I am undertaking to do, then we have a transaction, or series of transactions, which resulted in creating the relation of debtor and creditor between these people, pure and simple. The money, whether you take the $1,000 or take any portion of these wages that were earned—the money received or retained by John Linn—according to the bargain between these two persons, was to be appropriated by John Linn; was to become his own property, his own estate. He could expend it, do with it as he pleased. He was not to hold that money in specie as a deposit for the benefit of the complainant, who trusted him with it, in which case one kind of a trust would exist; and he was not to pay it out for her use; and he was not to invest it in securities, and then hold the securities for her, the legal title to which would be in him and the equitable title to which would be in her. He was to appropriate that money, and pay her back, either on demand or at some future time, other money, equivalent to what he had borrowed, presumably, plus interest thereon. Now, whenever you have that kind of a transaction, you have a case of legal indebtedness, and you cannot have any trust. There is a great deal of vague thought, I think, in some of the books arising from overlooking the essential element of a trust. There can be no trust unless you have property held by one person for the benefit of somebody else. You may have confidential or fiduciary relations, as they are called, and you can have situations in which these equitable words are employed which relate to trusts. But in order to the existence of a trust you must have property which is held by one person, as I have said, for the benefit of somebody else. The essential element of the trust is the division of the title between the legal and the equitable title. You have no such situation where you have the relation of debtor and creditor. The man who borrows money appropriates the money, and the lender means that he shall. He does not take that money to hold it in trust for the lender. He takes it for himself. And upon the facts which the complainant may claim in this case a bill in equity, in my judgment, is no more appropriate than it would be for a depositor, so called, of money in a bank, to file a bill in the court of chancery against the bank to recover his debtTwo cases are cited to which I mean briefly to refer. And I may say that the briefs of counsel that were put in after this cause was argued seem to leave no room for further search for authorities. I take these cases from those briefs. The first case is Gutch v. Fosdick, 48 N. J. Eq. 353, 22 Atl. 590, 27 Am. St. Rep. 473, decided in 1891 by Chancellor McGill. Suit was brought by complainant against the administratrix of one Jacob Erwin to recover money upon an instrument which reads as follows: "New York, July 3, 1877. I hereby certify that I hold in trust for Frances E. A. Gutch the sum of four thousand dollars, for which I agree to pay interest at five per cent. per annum, and I promise to refund to her the said four thousand dollars on demand. $4,000. J. Erwin." The chancellor, in dealing with the language of this instrument, finds a trust. He says: "It is to be observed that by it Jacob Erwin declares that he holds $4,000 in trust; not that he owes that sum, and that he will refund it; not that he will pay it. The language is evidently selected with care to fully and consistently express a deposit in trust, in contradistinction from a promised payment of a loan or indebtedness. The declarant does not owe; he holds in trust Considered independently of the words 'in trust,' the word 'hold' implies a defensive possession, entirely consistent with that of a trustee. The declarant is to pay Interest while he thus holds, but he is not to pay the principal sum. That he is to refund. The word 'pay,' importing indebtedness, is applied only to the interest which springs from the use of the fund. When disposition of the fund itself is mentioned, the word 'refund' is used in the sense of 'restore.' I fail to perceive how more apt words could be selected to express the idea of a pure deposit in trust. And, besides, it is a continuing trust, for it contemplates a holding which will justify payment for the use of the fund. The certificate, then, does not stand upon the footing of a promissory note which treats of the payment of an indebtedness, but upon the footing of a deposit in continuing trust until the cestui que trust shall by her act in demanding payment, determine the trust." Now, it may be that the chancellor finds that it was the intention of the parties that the principal should be held by Mr. Erwin, and not appropriated to his own use. If so, I can understand that language. If, however, the real intention of the parties was that Erwin should appropriate the $4,000, then I confess I cannot follow the reasoning of the chancellor; and it seems to me that the use of the term "refund" does not alter the fact that what was created by this transaction was the relation of debtor and creditor, the debtor borrowing the money; It being the intention of the parties that it should become his property, that he could do what he liked with it, and that at a future time he would pay back an equivalent I do not, however, have to pass upon the controlling force of this case at present, as I shall briefly explain in a moment The other case, cited on the other side, is that of Agens v. Agens, 50 N. J. Eq. 566, 25 Atl. 707, decided in 1892, more than a year after the case of Gutch v. Fosdick, by Vice Chancellor Van Fleet. Here the bill was filed against an executrix to recover the amount of money represented by a duebill given by the deceased to the complainant, and which reads as follows: "$29,530 96/100 Newark N. J., May 29th, 1877. Due Thos. Agens Twenty Nine Thousand Five Hundred and Thirty Six 96/100 dollars for cash deposited in trust with me Fredk. G. Agens." As I understand the opinion of Vice Chancellor Van Fleet, he holds that the bargain disclosed by this paper did not create a trust, but a pure indebtedness, and that the obligation of the borrower was one cognizable at law, and not in equity. Vice Chancellor Van Fleet cites the case of Gutch v. Fosdick, but not upon the point in respect of which it seems to me there is an inconsistency between the two cases. Now, as one side cited one case, and the other side the other, I have felt that counsel had a right to know the exact view that I take of the force of those cases. The true rule, I think, is that no parties who enter into a transaction which creates the relation of debtor and creditor, by which money passes from one to the other, the party receiving the money having a right to appropriate it to his own use, and merely agreeing that subsequently he will pay back the same amount of money, or the same amount with interest—I say, when that is the transaction, the parties cannot give a court of equity cognizance of the obligations which are thus created by using language that sounds in equity. Why, if that were true, you could make all promissory notes enforceable in equity by simply putting at the conclusion a clause that the borrower constituted himself the trustee of the lender, and agreed that the loan should be regarded as a deposit, and agreed that it should be considered that there was a trust Parties who enter into strictly legal obligations have not the power to change their character by using verbiage of that kind. In this Gutch Case, and in the later case, the Agens Case—these cases that I have read—it seems to me the question is, does the language in those instruments, which sounds in equity, properly construed, create any equitable obligation or equitable relation? If so, then a court of equity may have cognizance. But if the real, true meaning of the instrument is that it is simply a case of borrowing and lending, then there can be no trust, it seems to me, and a court of law is the only court having cognizance of the case.

I am not obliged, however, to reject the authority of Gutch v. Fosdick on the authority of the later case of Agens v. Agens. I have indicated the views that I entertain of thesetwo cases, and what the right rule is deducible from them, simply that counsel may understand that I followed their argument, and they may know how I deal with that argument. In the case here before this court I do not find that there was language used by Mr. Linn and the complainant which would create a trust relation, even if all that is said by Chancellor McGill in Gutch v. Fosdick is to be taken as a correct statement of the law; even if we are to assume that when parties enter into purely legal contracts by the use of the phraseology of equity they can add equitable features to them. Even if I am wrong in the general principle that. I have endeavored to explain, I do not find in this case that the parties did use any terms which indicate anything more than an ordinary contract of borrowing and lending. The employer often says to his employé, "Well, let me keep your wages." "Keep" is the word commonly used. "Keep" is the word that is proved here to have been used by Mr. Linn?quot;Let me keep your wages, and I will pay you interest; better interest than you can get in the bank." That does not indicate any trust relation. It does not indicate that the employer is receiving the fund in trust to invest for the employé. Nothing of the kind. It indicates that the employer is borrowing money. He is enabling his employé to lend him money at a higher rate than he can get at the bank. It is a very common thing. And so with all the other words that were employed. I followed the witnesses very closely, and I have since to some extent reviewed the testimony. I do not find that there is any language that indicates that Mr. Linn at any time assumed any other relation than that of debtor to the complainant. I think, therefore, that on that ground alone the bill should be dismissed?on the ground that the court has no jurisdiction.

On one point I do not wish to be misunderstood. I am not dealing with a case where relations of trust and confidence—fiduciary relations of any kind whatever existing prior to the transaction under investigation—displace legal contracts and legal rights by equities of various kinds, and hence give rise to equitable remedies. In this case the complainant does not set forth that she was induced to enter into a legal contract with Mr. Linn because of any such pre-existing relations of confidence, and on that ground pray that such legal contract be set aside, and her equitable rights growing out of such relations of confidence enforced. The case, in this respect, seems to be substantially on all fours with Gutch v. Fosdick, and the sole foundation of the complainant's alleged equity is to be found in the contract itself—the contract which the complainant and Mr. Linn, acting at arm's length, saw fit to make. It is the nature of the contract itself, assuming the parties to be fully capable of contracting with each other upon terms of equality, upon which complainant's claim for equitable relief is based. Regarding the case strictly in this light, and giving the greatest possible force to the doctrine enunciated by the chancellor in Gutch v. Fosdick, I fail to find that these two parties in fact made any bargain which either of them supposed created any other relation than the definite legal relation of debtor and creditor.

If any other conclusion were proper, then, of course, the further difficulty would confront the complainant which is illustrated in, I think, both these cases of Gutch v. Fosdick and Agens v. Agens. I think no one would have the hardihood to claim that a court of law would have no jurisdiction of this claim. Certainly before Mr. Linn's death the complainant might have enforced all the obligations that are suggested in her favor by this proof in an action at law against him. And that action would lie against his administrator, and the statute of limitations might be pleaded as a bar; and both these cases?the Agens Case and the Gutch Case—hold that, where both courts have jurisdiction, if the statute of limitations is a bar to the action in the court of law it is a bar to an action for the same object in the court of equity. But I do not deem it necessary to pass upon the question whether the statute of limitations is a bar. It may be that the complainant will be able to conceive a theory upon which she can even now maintain an action at law, and escape from the bar of the statute, which undoubtedly will be pleaded.

I shall advise that the bill be dismissed on the ground of want of jurisdiction.