Tomlinson v. Claywell, 57 N.C. 317, 4 Jones Eq. 317 (1858)

Dec. 1858 · Supreme Court of North Carolina

57 N.C. 317, 4 Jones Eq. 317

JOHN H. TOMLINSON against A. F. CLAYWELL and other.

In a bill, for tlio settlement, of a commercial firm between the partners, it was Held not to bo multifariousness to pray for an account and settlement of a trust, male by them, to secure creditors, and of funds deposited with third persons, as collateral security for the firm debts.

The maker of a deed of trust, on account of his continuing liability to the creditors, and oí'his resulting trust, is entitled to have an account from the trustee, and in a bill, for that purpose, he is not obliged to make the secured creditors parties.

Appkal from the Court of Equity of Iredell county, Manly, J., presiding.

The bill was filed for the settlement of a partnership firm. The plaintiff alleged, that lie and the defendant Claywell, entered into a copartnership, in the business of merchandising,, under a verbal agreement, according to which, Tomlinson was to advance $2,000, and Claywell, who bad had some experience in the business was to take charge of the store and give his personal attention thereto — the said Tomlinson rendering such assistance from timo to time as might be needed, and the profits or losses were to be shared equally between' them ; that the plaintiff accordingly advanced the sum stipulated, which was laid out in a stock of goods and the business was commenced in the Spring of 1851, in the town of Jones-ville, in Yadkin county; .that it continued until the Fall of 1855, and not being prosperous, they conveyed to the defendant, ~W. II. A. Spier, all the books, book accounts and. notes of the firm, and various items of property in trust, to secure the payment of the debts of the firm to certain creditors therein named, which deed bears date 2d of November, 1855; that by the terms of this deed, the trustee was to collect all the notes, accounts, &c., and sell the property conveyed, and apply the proceeds of both to the payment of the specified debts ; that he accepted of this t-rnst, and took into his possession the property mentioned in the deed ; that the defendant, Spier, failed to execute the trust as undertaken ; that he did not collect a large portion of the notes and accounts conveyed to him; that ho permitted the said Claywcll to take into his possession and use for his own benefit a portion of the effects conveyed to him, knowing him to be insolvent; that by neglect and mismanagement ho suffered the funds conveyed to him to be wasted and lost, and he prays for an account against the said trustee.

The «bill alleges further, that previously to the execution of this deed of trust, viz.: in August, 1855, all the goods of the firm were sold by the partners to Gentry, Fulton & Gentry, of Ashe county, for about sixteen hundred and fifty dollars for which three Several notes were taken, payable to the firm; that shortly thereafter these notes were deposited by the firm with the defendant, Benham, to indemnify him, the said Benham, and the defendant Spier, against certain debts whereon they were sureties for the firm, which debts were also provided for in the deed of trust; that these notes of Gentry, Fulton & Gentry were not conveyed in this deed of trust, but by an agreement with his partner, Claywell, were to be the property of the plaintiff for cash advances he had made to the firm; that sometime in the Winter of 1856, the plaintiff took up the notes of the Ashe firm deposited with Benham, and in lieu thereof put into his hands a note on N. D. Tomlin for about $100,, and one on F. M. Sanders for $105, which were the individual property of the plaintiff and that he also transferred to the defendants, Benham and Spier, $331 in cash, then deposited in the bank at Salem; that Benham and Spier drew this money from the bank and applied it to their private uses; that they collected also the notes on Tomlin and Saunders and applied the proceeds to their private uses; that while the notes of the Ashe firm were in the possession of Benham, he collected $90, which he has not accounted for.

The plaintiff further alleges that in consequence of the failure of Spier to pay off the debts secured in the deed of trust, he has been obliged to pay out of the proceeds of the notes on Gentry, Fulton & Gentry, the sum of $600 towards debts secured in the said deed, and that one Lazenbury, a surety of tlie firm, has been obliged to pay another debt, secured in the said deed, of about $100.

The prayer of the bill is for an account and settlement of the firm, also of the trust fund in the hands of the trustee, and of the effects deposited with Benham and Spier as collateral security, and for these purposes Benham and Spier were made parties defendant.

The defendants demurrer to the bill for multifariousness and also because it appears from the face of the bill that one H. B. Lazenbury was interested in the matters set forth therein, who was not made a party. The cause was set down for argument on the demurrer, and his honor ordered and decreed that the demurrer be overruled, from which the defendants appealed.

Clement, for plaintiff,

Boyden, for defendants.

Peaeson, C. J,

The main purpose of the bill is to have an account and settlement of the firm of “Tomlinson & Clay-well.” In order to effect this, it was absolutely necessary to have an account of the debts, &c., which had been conveyed by the firm in trust for the payment of certain of its creditors, because, until it was known how much had been realized of this trust fund, or what application had been made of the sums collected, the condition of the firm could not be ascertained, and of course, the business could not be closed. The same considerations are appropriate to the notos taken for the stock on hand, which were placed in the hands of the defendant, Benham, as collateral security to him and for the the greater part of which, other notes and cash were after-wards substituted. A settlement of the firm necessarily involved all of these transactions, so that it is not true, that the bill covers several distinct and independent subjects of controversy and the demurrer cannot be sustained on the ground of “ multifariousness.” The maker of a deed of trust for the payment of debts, in consequence of his continuing liability to the creditors for whom the deed is collateral security, and of his resulting trust, is entitled to an account from the trustees, and may sustain a bill without making the secured creditors parties; lie may join them if he chooses, but the trustee has no right to object, if the relation is treated as one of speL cial personal confidence between him and the trustor, to' which the duty of rendering an account is necessarily incident.

The trustor has a right to be informed, what amount of the fund has been realized, which of the debts have been paid, and what other disposition has been made of the amounts collected and reduced to cash. To a bill, charging gross neglect on the part of a trustee in respect to making collections, waste of the fund by permitting an insolvent party to apply a portion of it to his own use, and fraud, in applying other portions to the individual use of the trustee, by reason of which negligence, waste, and fraudulent misapplication of.the fund, the trustor has been forced to advance a large portion of his individual funds, and one of his sureties upon a debt secured by the trust, has also been forced to pay a large sum, a- demurreron the ground that the creditors named in the deed and particularly the surety who has paid off one of the debts; are hot made parties, looks bad, because it admits the alledged negligence, waste, and fraud ; on this account, we are glad upon an examination of the authorities to find,- that the demurrer cannot be sustained, Patton v. Bencini, 6 Ired. Eq. 204, Mitford Plead. 175, 1 Daniel Ch. Prac. 304: and the cases there cited.

Besides the fact, that the maker of the deed has a resulting trust and is liable for the debts secured, there is between him and the trustee, a particular ' relation, which entitles him, Whenever there is a mismanagement of the fund, to arrest it at once, without stopping to ascertain which of the creditors may, or may not be satisfied; putting the relation on the ground of agency, and leaving the rights of the creditors to be cared for and protected in a subsequent stage of the proceeding, on the Same principle that one member of a firm, if his partner i's wasting and misapplying the effects, may file a bill for an account and settlement, and for the appointment of a receiver in order to close the business, without making the creditors parties, but leaving them to come in under an interlocutory order in the cause, to have satisfaction of their debts out of the fund. There is no error.

Pee Cueiam, Interlocutory order affirmed.