Salisbury Mills v. Townsend

The stock, upon which the dividend in question was declared, was held by George H. Rogers as trustee of Mrs. Mountford under her marriage settlement, and stood upon the plaintiffs’ books in his name as “ George H. Rogers, trustee.’ It was transferred by him, by the method prescribed in the Gen Sts. c. .60, § 13, but in pledge to secure his own debts, and in fraud of his cestui que trust, to various persons, from whom by *121several mesne conveyances it came to the hands o£ the defendant Townsend, who received it in good faith, for a valuable consideration, and without notice of the trust, and thus acquired a good title in the stock. Stone v. Hackett, 12 Gray, 227, 231.

The defendant Loring, having been appointed, upon the death of Rogers, trustee of Mrs. Mountford, contends that the plaintiffs were themselves in law her trustees and bound to protect her interests against any fraudulent transfer by Rogers; and that it was wrongful in the plaintiffs to record his assignment and issue new certificates to his assignee, because they knew, or had reason to know, by the manner in which Rogers transferred and used the stock, and by his receipts and the entries on their books, that he was transferring and using the stock for his own benefit and in violation of his trust and in fraud of his cestui que trust. That question cannot be tried upon this bill. The plaintiffs cannot in strictness be called trustees of the stock. They have no title in it, nor can they restore it, or render to the cestui que trust anything but damages. If the plaintiffs have acted tortiously, whether through negligence or constructive fraud, in recording the transfers and issuing certificates, the appropriate remedy of the cestui que trust, and an adequate and complete one, is by an action at law against them for damages. Sewall v. Boston Water Power Co. 4 Allen, 277. Pollock v. National Bank, 3 Selden, 274, 278. Farmers’ Bank v. Wayman, 5 Gill, 336. Cohen v. Gwynn, 4 Maryl. Ch. 357.

But the dividend, which is the specific fund in controversy, is not affected by the question whether the plaintiffs are so liable. They have no beneficial interest in the dividend; each of the defendants claims it; and the plaintiffs cannot determine without hazard to themselves to which of the defendants it belongs. This is sufficient to maintain a bill of interpleader, although the plaintiffs may have interests in other questions not relating to the specific fund. Atkinson v. Manks, 1 Cowen, 691, 705. Shaw v. Coster, 8 Paige, 339. Oppenheim v. Leowolf, 3 Sandf. Ch. 571. The decree of interpleader must therefore be affirmed.

The defendant Townsend, holding the stock by a bond fide transfer for a pecuniary consideration, was not bound to examine *122the books of the corporation, or to look beyond the certificates which were assigned to him, in search after the validity of former assignments, and is entitled to the dividend in controversy. Lowry v. Commercial Bank, Taney, 310. Bayard v. Farmers' Bank, 52 Penn. State, 232. But it appears that the stock was transferred to him as security for a loan, the amount of which is agreed upon; and it is agreed that, upon payment of this loan with interest, the defendant Loring is entitled to redeem the stock. The decree may therefore be, that, upon payment of the amount due within a reasonable time to be fixed by the decree, the dividend may be paid to Loring, otherwise to Townsend.

Decree accordingly.