WELLES 'V. STOUT.
tion that he,had been and ,was an intemperate"man: came to that officer of the company whose duty it was to investigate the report not over 30 or 35 days before the death of the aS8ured. It was not his duty to neglect other business and give his undivided attention to the investigation of the matter 80 brought to his notice. All that could be expected or required of the company was that it should investigate the report in the due course of its business, and make its election to continue or cancel the risk when the truth was ascertained. The evidence showed. I think, that the company pursued the ,usual course adopted with reference to such reports, and acted with ordinary diligence. Another fact to be noted is, that no assessments were levieQ. on the policy between the date of itsdf:llivery and the assured's death. If it had levied assessments on the policy after the receipt of information that the policy was perhaps voidable, thejury might have been authorized to infer that the company had elected to continue the risk, notwithstanding the false representa-. tions of the assured. The case is barren of any elements of estoppel. During the two months thali elapsed between the issuance of. the policy an4 the a,ssured's death, the company did no act calculated to mil:llead him. ,The case, so far as thepl""intUiis concerned, rests wholly on the fact of the company's inaction for a period of 30 or 35 days after itw8s informed that tbe assured was a man of bad habits; and that fact alone, in my judgment, is not sufficient to warrant a jury in, finding that it waived the forfeiture. The motion for new trial is sustained.
WELLES '17. STOW.
(Oifocuit Gowrt. No D. IO'UJa, E. D. May 27,1889.,
NATIONAT., BANKS- INSOLVENCY-SlliT-OFF.
In an action by the receiver of an insolvent national bank to ,recover of a stockholder an assessment on his shares, the defendant alleged as a counterclaim that the comptroller of the currency had directed the bank to restore the value of certain securities held by it which had beell reported worthless by an examiner; that certain of the stockholders, including defendant, had raised a fund, which was placed in the hands of trustees, to apply"so much as might be from time to time required by the comptroller to retIre BUch securities; that the fund Was deposited with the bauk, with full notlQe of the purpose to which it was to be applied;' that a portion had been used to retire the securities designated, and that when the bank failed, the balance "of the fund came into the hands of the receiver, and was no,w claimed by him; as a part of the ordinary assets oftI;le bank; that a certain portion of this balance belonged to defendant. which amount he asked to set off against plaintiff's demand. Hela, th,at &,general demurrer, based on the ground that no set-off or Will! avan&b,le in such an action, would, be, overruled. as the claim could be set off if it was of..such a nature ,that the holder would be entitled to reeeive the full amount bef-o're distribution by the receiver to general , ," , creditors. ,
At Law. On demurrer to answer arid counter-claim. William Gra,haun, ,for Henderson, Hurd» Daniels & Kiesel and F. O'Donnell, for defendant.
SHIRAS, J. The plaintiff, as the receiver of the Commercial National Bank, seeks in· this fiction to recover from the defendant the sum of $5,500, being the amount of an assessment levied upon the shares of the insolvent bank by the comptroller of the currency. The defendant, among other defenses, by an amendment to the answer, set up a counterclaim based upon the following facts: That in December, 1887, the comptroller of the currency sent a letter of advice to the Commercial National Bank, requiring that proper steps be taken to restore the value of certain securities held by the bank which had been reported worthless by a bank examiner, and which impaired the standing of the bank; that in order to comply with the requirement of the comptroller certain of the stockholders of said bank raised a fund of $100,000, to which the defendant contributed the sum 01'$5,500, which fund was placed in the hands of J. R; Waller and J. K. Graves, as trustees for the contributors of such fund, with authority on their part to use and apply so much of said fund as might from time to time he required to retire such securities of said bank as the comptroller and the bank examiner appointed by him should designate; that said trustees placed said fund in the keeping of said Commercial Bank, with full notice to the bank of the purpose for which it was given, and to which alone it. could be applied; that the bank undertook to keep the fund for that purpose, and tor no other, and had nO authority fromsai'd trustees or from the owners of the fund to use the same for any other purpose; that of such fund $54,804.11 was applied by direction of said trustees to the retirement of securities designated by the comptroller; that when the bank failed the remainder of the trust fund was in the hands of the bank for the purpose designated, but no further securities had been designated by the comptroller to the retirement of which it could be applied; that the whole amount of said balance came into the hands of the receiver of the bank, the present plaintiff, who claims it as part of the ordinary assets of the bank; that of this balance the defi:mdant is the owner of $2,485.77 and for this iJ.mount and interest he prays judgment, and that the same may be set off against the claim of the receiver, based upon the assessment of 100 percent. upon the stock owned by defendant. To this counter-claim the plaintiff dQmurs on several grounds, the first 9fwhich is that no setoff, counter-claim, or cross-demand is available as a defense in this action. The statutory'eounter-claim provided by the Code of Iowa in. eludes matters of recoupment and set-off, and any new matter constituting a cause of action in favor of the defendant against the plaintiff, and owned by the defendant whim the suit was brought, may be set np as counter-claim. Code, § 2659. It is, however, urged that under the rules laid down in Ken'nedy v. Gibson, 8 Wall. 498; Sawym- v. Haag, 17 Wall. 610, and other caSeS decided by the supreme court, the only remedyopen to the defendant is to prove up his claim as a creditor, and take his share of the proceeds realized from the assets of the bank by way of a dividend. If the relation existing on the part of the defendant is simply that of a creditor of the bank, there would be force in the BUggestionj but thec1aim set up on behalf of the defendant is not that the
bank was indebted to him as one of the contributors to the fund in question, but that this fund was a trust fund appropriated to a specific purpose; that the bank received it in trust for this special purpose, and not as an ordinary deposit, creating solely the relation of debtor and creditor; that when the receiver took possession of the bank he received this trust fund, but now claims that it forms part of the ordinary assets of the bank. Practically the charge is that the receiver has wrongfully converted the trust fund, and refuses to account therefor. Suppose the defEmdant, when the receiver took possession of the bank, had had in the bank a package of United States bonds, or of gold, amounting in value to $5,000, the same being a special deposit, and the receiver hll.d taken possession thereof, sold the same, and added the proceeds to the general fund realized from the ordinary assets of the bank. Certainly defendant, under such circumstances, could have called the receiver to account for the value of the property thus wrongfully converted by him; and could have compelled a restitution to him of the full amount realized from the property. The receiver, by his wrongful act, could not have changed the relation in which the owner of the special deposit stood towards the bank or himself, and make him a simple creditor of the bank for the amount, and l!8 such entitled only to his dividend with other creditors. In the supposed case, the special of the package of bonds or gold did not create the relation simply of creditor and debtor between the depositor and the bank, but rather that of trustee and cestui que t1"U8t, and this relation would continue attached· to the deposit when it passed to the receiver. If the receiver should, under such circumstances, refuse to account for the deposit as a trust fund, and should claim it as part of the ordinary assets of the bank, and convert it into money, and mingle it with other funds in his possession, the owner of the fund, by an a.ppropriate proceeding, could certainly can hiro to account thenifor, and would not be limited simply to the right of filing his claim and receiving a dividend thereon through the comptroller. Holding the claim against the receiver, is there any reason why he might not avail himself of it as a set-off against any claim' the receiver might have against him? Certainly, if he could maintain an independent action against the receiver iar the recovery of the trust fund or property or its proceeds, he might avail himself of it by way of counter-claim, 'for the results reached would be identical. The argument that the assessments upon the capital stock of the bank constitute a trust fund for the common benefit of all the creditoI;s, and that no one who is a stockholder and a creditor of the bank can obtain a greater share of such trust fund by setting off the debt due him us a creditor against his liability as a stockholder, does not meet the question presented in this case. Tht: point first arising is whether a claim against the receiver, of such a nature that it is entitled to be paid in full before distribution of the assets can be made by way of dividends declared upon the debts due creditors, can be-set off by the holder thereof against a claim by the receiver for the amount of an assessment against· the same person as a stbck-
holder. If the stockholder, though liable for the assessment upon the shares .of the capital. stock owned by him, also" holds a claim of such a nature;that he entitled to receive and demand .payment thereof in full from the receiver 'before distribution ampng.the .general creditors can be made, why may he not avail·himselfofthe right to plead the same as a set-off or counter-claim to the amount due froni him asa stockholder? The amount coming to the general creditors will not be changed by allowing the mutual claims to be set off from' what it would be if the stockholder pays to the receiver the amount of his assessment, and the receiver pays to the stockholder theamou11t the latter is entitled to preferably to the general creditors. In principle such a case would fall within, the rule recognized by the supreme court in Scammcm v. Kimball, 92 U.S" 362, and Carry. Hamutcm,129U. Sup. Ct. Rep. 295. The broad ground, therefore, taken in the demurrer, that in cases brought by the receiver to recover the assessments upon the capitaLstock no setofforconnter-claim can be'made available, and the party is limited to a right to prOV8 up his claim ,as a creditor, and receive a diviqend thereon, .01' to an action against the "bank, cannot be sustained. If thefacts pleaded show that the claim amounts only to a debt due from the bank, an4 creditor, then no facts arising out 'of the ordinary exist entitling the holder of':8uch 8 olaim to a preference in. payment over.the other, general creditors, and in such. cases the stockholder cannot avail himself oithe right ,to set off a debt due him from the bank, for that w;ould be giving him an.-undue preference at the expense of the other. creditors. If, however; the facts pleaded show that the claim .sought ,torbeset off is of'Sllch a nature thatth8 holder thereof is en.titled to receive the fullllOlollnt thereofJrom the receiver before distti:bution in.the:way of dividends can be made, to the general creditors, . ·then the. right to sct off maybe allowed. .:The :princiipal questiou,tlierefore,is whethei' the .facts pleaded show .thatthe. claim relied on asa set-ofl'is8uch that the holder thereof is entitled to call the receiver to anaccounttherefor as a trust fund which ,passed into l;llshands asslllch, ,and not as an. ordinary. asset ,of; the in,solvent bank. The theory of the:clefendatitis that the fund :to which ·he.was' a,qontributorwasaifrust.:fun,d, raised for.a special purpose, and ,to which the. stockholders contributed in recognition of theirJiability to be called upon by way of assessment upon the shares held by them; .'that the fund thusraised.was the hands of the bank as a trust 'fund, to; .be used solely for the purpose named,and was "not deposited way of depositors; that the bank received the fund, ,knowing its trust character and purpose. and, undertook the charge thereof as· a trust fund; that the fund thus charged with this trust passed into the hands of the receiver when he took control of the affairs of the ·bank; and that. by treating it as part of the" ordinary assets of the bank hehas$oconverted:!it to his owri use: as receiver that a right of .adtion therefor has. accrued .to the contributorsofst1ch. fund. The quesistbe same ·thatwould be presented if the cletimdant had, paid in. full. to tbe'reeeiver th.eamount of the assessment made
upon the shares of capital stock held by him, and had then brought suit to recover his share of. the fund on the ground that the same was not part of the ordinary assets of the bank in which creditors had an interest, but was a trust fund held by the bank, touching which the relation between the bank and the defendant was of trustee and beneficiary, and ,not that of debtor and creditor.. If the facts are such that in such a proceeding the defendant could make good his claim to the fund as a special trust, to be accounted for as such, and hi regard to which the relation of debtor and creditor between the bank and himself did not exist, and which fund" whE'n it passed to the rl1ceiver,was not an asset of the bank, then, as the right of recovery against the receiver would exist in such independent proceeding, the same right may be made available as a set-off to the claim of the receiver. In support of the contention of defendant, the cases of McLeod v. Evans,28 N. W. Rep. 173; Peak v. EUicott, 1 Pac. Rep, 499; People v. Bdnk,96 N. Y. 82; Van Alen v. Bank, 52 N. Y.l; Peop7.e v. Bank, 78 N. Y. 269; 0iJ:y of St. Louis v. Johnson, 5 DiU. 241; Cook v. ThUis, 18 Wall. 332; Bank v. InsumnceC'o., 104 U. S. 54,-are cited, and it cannot be questioned that they show under what vlj.rying circumstances the general rule is recognized and applied, that where propertyormoneYreceived.upon a trust to !1pply it to a special purpose is misapplied by the trustee, it may be traced and followed,and restitution in kindorequivalent value may be, enforced. ,Whether the facts are such in the, PFesent case,as to justify the application of this doctrine is the pivota;1 questiondhesolution of whieh can be better undertaken -When the 'exact facts are before the court'; lind I shall not enter upon a consideration thereo/upon the demurrer. ,It is better that the matter should ,be heard lipon theevi. dence, rather than upon a derrturrer,as in the former mode of presenting the issue the full facts out,and the rights oithe parties be better protected. I'n that view of the matter demurrer will be overruled, with leave to present all the upon the iSf:lues hereafter submitted. " ., . In the second count of the answer the same general facts are pt;esented, but not in the technical form pf a counter-claim, with the suggestion that, if need be, the defendant asks leave to file a bill in equity. As the facts ,are now understood, such a course wouM seem advisable. The fund that it is alleged was by the stockholders lYas placed in hands of trustees, and in their name was deposited in the bank. If the right of set-off exists on behalf of the contributors, it would seem to be an equity,rather than a strict legal right to insist that the receiver should perform the trust by applying the trust fund for the benefit of the bank its creditorson one hand, and the protection ofthe stock. holders on the other; or, if it be viewed as a right to insist on the return of the fund in kind, the trustees and others interested should be parties,:tO the procee,ding" i,n order that the receiver may not behar. assed by more t11o.n one proceeding. The bill should be tiled on behalf of all so that, the one proceeding tUld, Qne decl'Ele .may, the rights of .all. . .
UNITED STATES f1. EDWARDS.
(Diafrict Oowrt,D. Oolorado.
PuBLIO LANDS-MINERAL LANDS.
June 12, 1889.)
Land returned on the go"ernmentsurvey as mineral land, of broken and rugged surface, with every indication of mineral ground, but on which no mines have been located,though inthe vicinity of valuable mines. and which is unfit for cultivation and !lntry as,agricultural lands, is within the meaning of act Congo June 3, 1878, allowing timber to be taken from mineral lands on the public domain for building, agricultural, mining, or .other domestic
At. Law. ., . ,.John D. Flemin.q, Dist. Atty., for.theUnited States. '.1. B. Belford, for defendant.
HALLET'r, J. This actiqllis to recover the value of timber taken from puqlic lands in Eagle All facts alleged in the cOmplaint are admitted, e:x:cepting the character of the land from which the tirp:ber was taken; and as to matter, the land is described with 'view toascertai'n whether the t.tse if! to the act of June 3, 1878, (20St, 88,)allowirig timber to from mineral lands of the public domain "for building, agricuitural, mining, or other domestic purposes." In the, statement of facts it,appears. that the land is of "a broken and r()yky surface, cut up by ledge!" @d ravines, and with every indication ,of ,being mineral ground." In plat of the government survey' it was returned as mineral land·.... No mines have .been found or located on any frqm which, the timber was taken, but valuable mines of the have been opened in the same township, and within' a few miles of that place. The la.nds appeltr to be high and rugged mountains, unfit for or pasturage. Although no mines have been. found in them, they are of' a character to contain mines, and may hereafter prove to be v1!luaple for mining purposes. So far as it relates to the matter in issue, tM act of 1878 is as f61l0,w!!: ,
domestic purposes, any timber or other trees gl'owinl't or being on the public lands, said lands being mineral; and not SUbject to entry under eXisting laws Of the United States except for mineral entry."
. "that all citizens of the UJ;lited States and other persons, bona fide residents Of the stflte of Colorado. I/C I/C I/C shall be, lind are hereby anthorized and permitted to fell and remove. for building, agricultural, mining. or other
ltwill be observed that the lands referred to from which timber may he taken are such as are subject to entry as mineral lands, as distinguished trom those which may be occupied under the pre-emption, homestead, and other acts relating to agricultural lands. In the practice of the .land departinent of the government these are classified by the' surveyors employed to survey public lands, and marked on the p1atsof such'8urveysas "mineral lands. " But this classification is subject to re"lew in the 'and may beset aside on proof the lands are' more valuable for agricultural or pastoral use than for any metal they