When a creditor of an insolvent debtor seeks, in foreign attachment, to charge the trustee for funds which have come into his hands by virtue of a lawful contract, he must show that they are open to attachment, either because the defendant has a right of action against the trustee to recover them, or that the trustee has so conducted with the funds that his title to them has become fraudulent as to creditors.
L., treasurer of the county of R., having embezzled funds of the county, placed in the hands of B. securities to indemnify him against loss by reason of his having become surety for L. upon his official bond. While L. was under arrest upon a complaint for the embezzlement, certain of his friends, for the purpose of preventing the maintenance of the charge for embezzlement, paid through him to his successor in office a portion of the money embezzled, and B. paid the balance, his sole motive being to discharge his liability as surety. The amount so paid by B. was more than the proceeds of the securities received from L. In foreign attachment, held, that B. was not chargeable as trustee of L.
SMITH, J.
The plaintiff seeks to charge the trustee, upon the ground that the payment by him of $9,634.54, April 10, 1882, was made to defeat a criminal prosecution, that such payment is against public policy, that the money advanced to the defendant was in fact a loan to enable him to defeat a criminal prosecution, that the trustee combined with Lane's friends to pay, not his own debt but Lane's debt, and that their purpose was to suppress and destroy the evidence of Lane's guilt. To these various claims there are several answers.
1. Lane had embezzled the sum of $20,976.51, and Bell as his surety was indebted to the county in that sum. That sum, or so much as Lane should be unable to pay, it was the legal and moral duty of Bell and his co-sureties to pay. A suit had been commenced against him, and his property attached to enforce payment. Concede that the facts assumed by the plaintiff as grounds for charging the trustee are warranted by the bill of exceptions, the inquiry is, What evidence of the embezzlement did the payment by Bell and Lane's friends suppress or destroy? The embezzlement had already taken place; the crime was complete when the money was taken; Lane had confessed it, and surrendered himself to the sheriff; the commissioners had instituted a complaint against him for the crime, which was then pending, and an official examination of his accounts had disclosed a deficit of $20,976.51. None of these facts did the payment suppress or destroy. It tended, rather, to confirm them. But it is claimed that if Bell had delayed until a demand could have been made upon Lane by his successor in office, his inability to comply would have furnished more evidence of the crime. The charge then is, that Bell and Lane's friends conspired to suppress, not evidence which already existed, but evidence which the prosecution expected would come into existence when Dow should make a demand upon Lane for the amount of the deficit. The evidence in fact never existed. The fact of the embezzlement remained after the payment as before. The payment neither destroyed the fact nor the evidence of the fact.
2. But the facts assumed by the plaintiff as grounds for charging the trustee are negatived by the findings of the trial judge. The bill of exceptions finds that the money paid by Bell was paid to Dow for the county through Lane's hands in discharge of the liability of the sureties in the suit brought against them on the bond, and for that purpose, and was not loaned to Lane; that his sole motive in obtaining the securities from Lane was the indemnity of himself and of his co-sureties; and that his sole motive in paying what was paid was to discharge that liability. These findings negative the idea that Bell's purpose was the suppression of testimony, and dispose of the grounds on which the plaintiff seeks to charge the trustee. It was the legal right and duty of Lane to indemnify his sureties, and it was the legal right and duty of Bell to take the security. It was no less his duty to pay after taking the security. That the result might be to render it difficult or impossible for the government to obtain further evidence of the embezzlement by making a demand upon Lane is wholly immaterial, because Bell had no purpose of destroying or suppressing evidence. Promptness in paying, when a person's sole object was to discharge his liability, is not such dereliction of duty as should be followed by the infliction of a penalty in a legal or equitable proceeding; and equity especially does not punish even a fraudulent party by the forfeiture of what is fairly due him for payments and advances. Pittsfield Bank v. Clough, 43 N.H. 178; Forist v. Bellows, 59 N.H. 229; Weeks v. Hill, 38 N.H. 199.
3. The right of Bell to hold the funds assigned to him as indemnity for the money paid by him as Lane's surety is derived from a contract perfectly lawful. The plaintiff seeks to recover the proceeds of the contract. If the contract, lawful when it was entered into, has since become invalid as to creditors of Lane by the conduct of Bell, the case is as if no contract had been entered into and the trustee has funds of Lane in his hands received without consideration: the extent to which in a suit of an equitable character he can be held chargeable is the balance after adjusting the equities between him and Lane, and there being no balance he is entitled to be discharged. This is the doctrine of Weeks v. Hill, Bank v. Clough, and Forist v. Bellows, above cited. See, also, Catlin v. Henton, 9 Wis. 476, Faikney v. Reynous, 4 Burr. 2069, Armstrong v. Toler, 11 Wheat. 258, and Ripley v. Severance, 6 Pick. 474.
Exceptions overruled.
DOE, C. J., did not sit: the others concurred.