U.S. Supreme Court
Randel v. Brown, 43 U.S. 2 How. 406 406 (1844)
Randel v. Brown
43 U.S. (2 How.) 406
John Randel, Jr., placed in the hands of Brown two certificates of stock, which Brown afterwards refused to restore.
Randel filed a bill in chancery against Brown, alleging that the deposit had been made for an especial purpose which had failed. The answer denied this, and claimed a lien on the certificates, or that they were given as a payment.
Held, from the bill, answer, and evidence, that they were not delivered to Brown either as a payment of a debt to himself or to secure him from responsibility to another.
Held also that Brown had no legal or equitable interest in them at the time of the rendition of the decree.
The rights of the parties, as they stand when the decree is rendered, are to govern, and not as they stood at any preceding time.
The retention of property, after the extinguishment of a lien, becomes a fraudulent possession.
"A lien cannot arise where, from the nature of the contract between the parties, it would be inconsistent with the express terms or the clear intent of the contract."
The facts admitted or proved were few.
Prior to and during the year 1831, Randel was engaged in a remarkably chanrobles.com-red
troublesome litigation with the Chesapeake & Delaware Canal Company. In that year, Brown was a student of law in the office of John Sergeant, Esq., of Philadelphia, who was one of Randel's counsel. Through his visits to the office, Randel became acquainted with Brown, who was then twenty-five years of age.
In the latter part of 1831, Randel removed to the State of New York, and engaged the services of John M. Clayton, Esq., of Delaware, who became the principal counsel in the cause.
During the years 1832 and 1833, the suit was prosecuted in Delaware against the canal company, Brown absenting himself from the office of Mr. Sergeant, at first partially and then almost wholly. The troublesome nature of the controversy may be inferred from the facts, that the counsel for the canal company filed sixty-two pleas, to each of which there was a replication or answer. The whole of these were afterwards withdrawn, the record broken up, new counts added to the declaration, twenty-nine new pleas and demurrers filed, to each of which there was a replication or a joinder in demurrer, as the case might require, all of which were drawn out at full length. In the preparation of these papers, Brown rendered such aid as he was able to do. The demurrers were argued at May term and November term, 1833, and overruled. On 9 December, 1833, the cause came on to be tried, and on 25 January, 1834, the jury found a verdict in favor of Randel for $226,885.
On 18 September, 1834, the sum $2,000, with the interest due and to become due thereon, was entered upon the record as being assigned for the use of Brown.
On 22 September, 1834, Brown caused attachments to be issued against the captains of vessels passing through the canal as garnishees of the tolls.
On 26 September, 1834, Brown accepted an order drawn by Randel in favor of William M. Camac for $2,000, payable out of the first moneys he might obtain from said company on said account or from tolls attached. If more than one year should elapse before the whole of the $2,000 was obtained, then he was to pay to Camac an interest of 6 percent on whatever balance might remain unpaid after the expiration of one year.
During the years 1834, 1835, and 1836, the attachments became the subject of much litigation, but were ultimately confirmed.
In March, 1836, an arrangement was made between Randel and the canal company by which the latter issued certificates of stock, chanrobles.com-red
the interest upon which and principal were to be paid in preference to all other debts, the tolls being pledged for that purpose. This arrangement, however, was not consummated until April, nor were the certificates issued until July. They were then issued in manuscript for $5,000 each. In October, they were issued in a printed form.
On 18 April, 1836, Randel gave Brown his promissory note at ninety days for $300, which was not paid.
On 22 October, 1836, Randel gave Brown a power of attorney authorizing him to sell, assign, and transfer unto himself or to any other person or persons $10,000 of the funded debt of the Chesapeake & Delaware Canal Company, entitled to priority of payment and transferable according to certificates thereof, numbered 34 and 35, each for $5,000.
On the same day, Brown reassigned to Randel the $2,000 worth of the judgment which had been assigned to Brown on 18 September, 1834.
Under the power of attorney, Brown transferred $10,000 to himself, and took out new certificates in his own name.
On 29 October, 1836, Randel filed his bill in the Circuit Court for the Eastern District of Pennsylvania, in which he alleged that he was desirous of negotiating a loan from one of the banks in the City of Philadelphia, and hoped to do so by depositing as collateral security such of the certificates of debt, issued by the canal company, as might be sufficient to protect the lender from loss, giving at the same time his promissory note in the customary form; that he stated this desire to Brown, who replied that he had transacted business with the Schuylkill Bank, of which his cousin, Frederick Brown, was a director, and that he would do what he could for him; that Brown soon afterwards informed him that he feared he could not succeed; that the complainant then informed Brown that he would give $500 for a loan for a twelve-month; that the complainant and Brown agreed that as a premium was offered, it would be better that the name of the complainant should not appear in the transaction; that Brown then said he would negotiate it in his own name upon the hypothecation of the certificates, to which the complainant agreed; that the complainant afterwards understood from Brown that he had drawn a note for $10,000, payable in twelve months, and placed at the foot of it a memorandum, showing that it was to be secured by certificates of the debt of the Chesapeake & Delaware Canal Company; chanrobles.com-red
that the complainant then observed that it would be well to add that a power of attorney would be given to sell or transfer the certificates which would enable the bank at once to draw the interest to meet the note.
The bill further stated that Brown came to the house of the complainant in Wilmington on 22 October and stated that he had prepared a new note according to the form above stated, which had been presented to the bank and thrown out, but that it would be presented again and it would be proper for him to have the certificates and a power of attorney authorizing a transfer in order to give it its best chance; that the complainant assented and gave Brown two certificates of the character above described of $5,000 each, and the power of attorney; that the complainant handed to Brown a blank form of a power of attorney similar to the one which had been filled, requesting him to fill it up as a copy, and write upon it a receipt for the power and certificates, stating in such receipt an engagement to return the certificates on the punctual payment of the note and interest, and also an engagement to account to the complainant for the dividends which he might have received whilst the certificates were in his possession; that Brown promised to make out a fair copy of such receipt and give it to the complainant, which, however, he wholly omitted to do.
The bill further stated that at the next interview between them, Brown said that the bank would not lend the money, and upon the complainants' requesting that the certificates might be restored to him, Brown refused, and said, "I mean to hold the certificates and power of attorney until you settle with me; I have now got you in my power;" that the complainant denied owing him anything, but that he had always intended to make him, Brown, a handsome present.
The bill further stated that the complainant went immediately to the office of the canal company for the purpose of stopping the transfer, but found that Brown had effected it on Monday, 24 October, the power having been given to him on Saturday, the 22d, and had, on Tuesday morning, received fresh certificates in his own name.
The bill then charged that these proceedings of Brown were fraudulent proceedings and a direct breach of trust; that the deposit of the certificates was made in the hands of Brown merely as a trustee, in the full trust and reliance that no use whatever would be made of it but for the purpose of procuring a loan from the Schuylkill Bank. chanrobles.com-red
It then called upon Brown to answer whether he did not receive the certificates and power of attorney in trust and confidence in the manner and under the circumstances aforesaid, and to answer the several charges in the bill, concluding with a prayer that Brown might be ordered to restore the certificates, and in the meantime an injunction might issue.
In March, 1837, Brown filed his answer, in which he set forth that as early as the spring of 1831, at the instance and request of the complainant, he engaged in the service of the said complainant, and particularly in the suit with the canal company; that he had various duties to perform, and assisted in the preparation of papers of great extent and importance; that he attended diligently to these services; that his whole time from 1831 to 1836 was entirely at the command of the complainant; that soon after the engagement, the complainant informed him that he would pay the respondent a reasonable compensation for time actually bestowed in his service in any event; that he would bear his traveling and other expenses, and that in the event of success, he, the complainant, would pay to the respondent two and a half percent on the sum received in the said suit with the canal company.
The answer further set forth that the assignment of $2,000 of the judgment was made to the respondent in payment, up to that period, of the time expended by the respondent in the service of the complainant.
The answer further set forth that the complainant desired him to accept an order in favor of Camac for $2,000, promising to place funds in the hands of the respondent to pay and take up the said order, which order the respondent accepted.
The answer further stated that in April, 1836, the complainant gave to the respondent his promissory note for $300 as a payment for the time expended since the assignment of the judgment, which note was never paid by the complainant.
The answer further set forth that on 20 October, 1836, after a conversation between the parties respecting a settlement between themselves, the complainant took from his pocket two certificates of the funded debt, each for $5,000, and handed them to the respondent, and upon the respondent's asking what they were for, the complainant replied "they are to pay you and Mr. Camac," adding that he wished the respondent to go to New Castle and reassign the judgment for $2,000. In consequence of this, the respondent did go to New Castle and reassign the judgment, on which same day the chanrobles.com-red
complainant executed to the respondent the power of attorney spoken of in the bill.
The answer then averred that the transfer of stock had been made by the respondent to himself, and that the certificates had been given to him not in trust, but absolutely as a payment to himself for a debt due and ascertained from the said complainant and to place him in funds for the payment of the order in favor of Camac. An account was also alleged against the complainant, the particulars of which were stated.
The answer admitted that the respondent had applied to his cousin, Frederick Brown, to procure a loan of money for the complainant, amounting to $10,000; that he drew his note for that sum, stating at the foot of it that the same amount of the funded debt of the canal company would be offered as collateral security, but denied that Frederick Brown was to receive $500, or that the note was offered at the Schuylkill Bank, or any other bank. It denied also that the matter of the loan had any connection with the two certificates handed to the respondent by the complainant. On the contrary, it averred that the loan was to be secured by other certificates.
The answer further averred that no allusion was made directly or indirectly by the complainant to the certificates or power of attorney until a conversation in which the respondent declined to act as agent for the complainant in the purchase of a piece of ground unless the complainant would pay all his debts, and that the complainant then for the first time, with great asperity, asked why the respondent had not given him a receipt for the certificates. The conversation proceeded with much warmth, and terminated with a demand from the complainant for a restoration of the certificates and a refusal to surrender them on the part of the respondent. The answer then replied particularly to the interrogatories of the complainant, and concluded by saying that the certificates were surrendered to the court upon the presentation of the complainant's bill.
Under commissions to take testimony, a vast mass of evidence was collected, consisting chiefly of the declarations of the parties respectively as to the compensation which Brown was to receive for his services, and the value of those services.
In May, 1839, the case was referred to John M. Scott, Thomas I. Wharton and Peter McCall, Esquires, who were authorized to act as masters therein, with power to take depositions &c., and directed to report the evidence to the court, together with a statement by the chanrobles.com-red
said masters, or a majority of them, of such facts as in their opinion were established by the evidence, together with their opinion touching any matters on questions which they may deem material for consideration, and especially, first, to report the terms, consideration, and conditions of the transfer of the two certificates of debt referred to in the bill and answer, in the consideration of which, the answer of the defendant, so far as it is responsive to the averments of the bill or interrogatories or a denial of the former, is to be taken as evidence of the cause according to the rules of equity. Second, to report what sums of money have been paid by the plaintiff to defendant for or on account of disbursements made by defendant -- time, labor expended, services rendered, for or to the plaintiff, for his use or at his request; whether any sum is yet due to defendant therefor, and to what amount.
Two of the masters united in a report; the third filed a separate one.
The two masters, in their report, recapitulated the principal part of the evidence which led them to their conclusion, and found:
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 in favor of Mr. Camac, referred to in the answer, and of his retransfer 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 thereof was made at the time by the complainant in favor of the respondent.
6. But that an intention had been declared previously by the complainant to pay or present to the respondent, through the medium of such certificates, a sum of money, the amount of which was not stated or specified, as a compensation or remuneration for his services during the pendency of the suit with the Chesapeake & Delaware Canal Company; but we do not find that any express reference to such declared intention was made at the time of the transaction.
7. That in point of fact no money was raised upon the certificates. chanrobles.com-red
8. That on Monday, 24 October, 1836, the certificates were transferred by the respondent (under the power of attorney) to himself, and so remain, and
9. That since the filing of the bill in this case, the complainant has parted with all the remaining certificates of debt due to him by the said Chesapeake & Delaware Canal Company.
The two masters further reported, that the weight of testimony was against the allegation that the transfer of the $2,000 was in payment for time expended.
They further reported that such a promise was made by the complainant, as the respondent has set forth, but that nothing was due to the respondent for his time expended.
They further reported that for labor and services rendered by the respondent to the complainant, for his use and at his request, there was due a sum equal to two and one-half percent on the amount of the judgment recovered against the canal company, viz., the sum of $5,659.64. And that the debt due to Mr. Camac had been paid by Randel since the cause commenced.
On the subject of payments, the two masters reported that there was a balance of $10, which was to be applied to Mr. Randel's credit on the general account.
The third master concurred with the other two as to the contract for two and one-half percent, and that the transfer of the certificates was in trust, but was of opinion that Brown's own claim was to be paid out of the proceeds, and that the $2,000 contract was not disproved by evidence sufficiently strong to deprive the answer of the weight given to it by the rules of equity.
Numerous exceptions to this report were filed by both the complainant and respondent; on the part of the complainant, it was objected that the report was erroneous because.
1. The part of the answer which stated the contract for two and one-half percent was not responsive to the bill.
2. The respondent furnished no account of disbursements made or services rendered.
3. The payments alleged to have been made were not proved.
4. The sum of $80 was a payment, and not a loan.
5. That nothing was due to the respondent from the complainant.
On the part of the respondent, it was objected
1. That the sums charged to the respondent in the account were not sustained by the evidence. chanrobles.com-red
2. That the masters had not allowed the respondents sufficient credits.
In October, 1841, the cause came on to be heard upon bill, answer, replication, master's report, exhibits, depositions, and exceptions to report, and the court decreed that the exceptions to the master's report be disallowed; that there was due by the complainant to the respondent the sum of $5,649.64, with interest thereon from the fifth day of May, 1840, making together the sum of $6,136, which said sum should be paid and satisfied by and out of certain certificates of debt or the proceeds thereof, given to the complainant by the Chesapeake & Delaware Canal Company, and then under the control of the court. And it was further ordered that the costs of the suit, including the fees of the masters, be divided between and equally paid by the complainant and respondent.
From this decree, both parties appealed to this Court. chanrobles.com-red