Opinion
(Decided 29 March, 1898.)
Lien — Trust — Breach of Contract.
Where a corporation, in pursuance of an agreement with plaintiff, retained from the wages of its employees the price of supplies furnished to the latter by him and became insolvent, and a receiver was appointed before the money was paid to plaintiff: Held, that no equitable trust or lien was created or attached to the funds in the hands of the receiver, the proceeds of collections of book accounts, so as to entitle plaintiffs to a preference over other creditors.
ACTION to have the defendant declared a trustee for the plaintiff of certain funds held by the defendant as receiver of the Park Lumber Company, heard before Robinson, J., at October Term, 1897, of WAKE. The facts appear in the opinion.
Shepherd Busbee for plaintiff (appellant).
Jones Boykin for defendant.
On the trial, upon the offer of witnesses by the plaintiff to prove the allegations of the complaint, his Honor intimated that the plaintiff could not recover if such allegations should be fully established, and in deference to such intimation the plaintiff took a nonsuit and appealed.
The Park Lumber Company, through its proper officers, agreed with the plaintiff as follows: The plaintiff was to furnish the employees of the defendant with an amount of supplies not to exceed their monthly wages, and did so furnish supplies. The lumber company agreed to retain from the employees' monthly wages the amount of their supply accounts and pay the same to the plaintiff, and pay balance of wages to the employee. The company retained enough of the wages to pay the plaintiff, but failed to pay the plaintiff. The (243) company became insolvent, and the defendant Porter was appointed its receiver. The case sent here by his Honor states that "the plaintiff admitted that the funds now and which had been in the hands of said receiver had come into his hands since his appointment as receiver from collections of book accounts, etc."
The plaintiff alleges that the employees of the lumber company agreed to the arrangement above referred to. Several material parts of the complaint are denied by the answer. After reading the pleadings his Honor held that if the plaintiff's allegations were fully established he could not have a trust declared in his favor on the funds in the hands of the defendant Porter.
The plaintiff claims a lien or priority on the funds now in the hands of the receiver, which came to his hands from collections of the book accounts, etc., since his appointment. It does not appear from the complaint when the receiver was appointed nor when the lumber company became insolvent. For the present the complaint must be taken as true. The defendant admits that the plaintiff is entitled to a personal judgment against the lumber company, but denies his right to a lien or priority on the funds in the receiver's hands.
We have no direct authority on the question and must resort to reason and principle.
Where property or money is impressed with a trust in the hands of an agent, bailee, etc., the beneficial owner may recover it, as such, and may follow it into any other kind of property, securities, or negotiable instruments, if it can be distinguished or identified, because the original trust character follows it. Whitley v. Foy, 59 N.C. 34. And any (244) lien attaching to it will be enforced, except against bona fide purchasers for value and without notice. And where there is no proof of a trust, either by writing or word, the law will not imply, and the court will not presume a trust, except in a case of absolute necessity. 2 Story Eq. Jur., sec. 1195 n. At law, a lien is the right to possess and retain a thing until some charge upon it is paid or removed. An equitable lien is not a jus in re or a jus ad rem. It is not a property in the thing itself, but is a charge upon the thing. 2 Story, supra, secs. 1215 and 1216. "It is simply the right to have a demand satisfied out of the property of another." Thigpen v. Leigh, 93 N.C. 47.
The nearest approach to an authority furnished us is McLeod v. Evans, assginee [assignee], 66 Wis. 401. Plaintiff left a draft on New York with a banker for collection. The banker collected the money (by credit on his correspondent's books) and before paying the plaintiff made an assignment for creditors. It was held by a divided Court that the proceeds of the draft were a trust fund in the hands of the banker, and that the plaintiff was entitled to full payment against other creditors out of the funds in the hands of the assignee. This differs from the case before us, because the plaintiff's draft and money went directly into the hands of the bank, and for collection.
In the case before us, the plaintiff has put nothing in the hands of the lumber company, and the employees have paid nothing into the hands of the lumber company, so there is nothing to which any lien can attach. It is at most a breach of personal contract on the part of the lumber company with the plaintiff, and that entitles him to a personal judgment. True, the employees agreed to the arrangement between the (245) plaintiff and the company, and received a part of their wages in the hands of the company, leaving the balance with their employer, and the latter is still liable to them for the balance.
The case states that the money now in the hands of the receiver came from the book accounts, etc., since his appointment, but it is not alleged that the retained wages constitute any part of the book accounts, and we are unable to see or say that that is so. The company was in a failing condition and for aught that appears the retained wages may have gone otherwise. It is not alleged that the contracting parties intended that a lien should be created, and we cannot say that such was the intention. We see nothing to which the lien could attach at the time of the agreement. It was an executory contract, which has been broken by one of the contracting parties.
We fail, then, to see any principle or reason why the plaintiff should be preferred to the other creditors.
Affirmed.
Cited: Garrison v. Vermont Mills, 154 N.C. 5.