38 A.D. 505 | N.Y. App. Div. | 1899
The facts connected with the subject of this action are in brief these: For a long time prior to 1883, the firm of Devlin & Co. was in existence in the city of New York, and was engaged in business as dealers in clothing. The defendant George H. Daley was connected with such firm as a bookkeeper, and had been since 1862. In 1883 Daley was appointed trustee under the will of Albert Ward, he having been substituted, by decree of the court, in the place of
On January 31,1895, -there was a balance on the books of said com: pány tó the credit of the Ward estate of ;$26;3,30.95. It does not; -appear, however,:in the testimony,-nor has,the court found, when the; money was deposited which went"-to make up the amount, of this, indebtedness. For aught- that appears it may have been, either in - whole o,i-in .part, made up of amounts deposited -with the firm- of Devlin ,& Co.; for so .far as this account is concerned, while them was change, from the firm to a corporation, in reality it, was more a -change-of nameFhan of substance, as there was no break in the bush ■ iiéss; carried on,, and-but little in the method of its. conduct. ' The., books which were introduced,, either, as regards; items ;of -the-Ward account or.the general balance sheet, do not go back of January? 1895,' so,-that there is nothing irt- this record- from whiclrit may be. deter-. mined."whether tlfis balance due on the Ward estate was-an indebted^
By this action, the beneficiaries of the estate of Ward seek to charge the estate of George A.- Jones With liability for the balance due the estate óf Ward on the date when the corporation made its ' assignment, and the judgment which has been rendered so charges his estate therefor. The theory of the action and the averment of the complaint is that on the 20th day of March, 1895, Devlin & Co. wras insolvent and unable to pay its debts ; that for a month prior to said twentieth day of March Jones knew that Daley, as trustee, was in possession and control of a large amount of money of the Ward estate; and that Daley and Jones, desiring to continue the business of Devlin & Co., notwithstanding its insolvency, agreed between themselves that the said George H. Daley should pay over to said insolvent corporation funds which should come into his hands as trustee; that Daley and Jones should use such funds in carrying on the business of the corporation; that they should and would be individually liable and responsible for such moneys so to be loaned and used in the business, as copartners; that the said Daley and Jones would pay back the same to the estate of Ward, and that said estate should lose nothing by reason of the loaning and use of such moneys in the business of the corporation.The trial proceeded upon the theory of the complaint, and the court found said agreement in sub- ■ stance and effect as averred therein. The defendants offered no ' evidence on the trial, and the case is to be-disposed of on the undis- --. puted proof.
Several claims are advanced by the defendant Jones, who is the ‘ only appellant, why this judgment may not be supported; the first
We come, therefore, to a consideration of the main question in this case; and first, as to whether the evidence is sufficient upon ■ which the court was authorized to find that Jones stood in relation to this, estate in the position of a trustee de son tort. The evidence ■ is clear that Jones was aware of the use of the trust funds of the Ward estate some time prior to January ..'31,, 1895, It may ,be assumed that so far as the trust funds of the estate of Ward were ; used by the firm of .Devlin & Co.,, or by, the corporation which ' was thereafter formed, Jones would' not have been: personally
It is a well-settled proposition of law — too well settled to now -admit of dispute — that where a person dealing with a trustee in respect of trust funds, with knowledge on his part that the trustee is making unlawful disposition of the trust estate, receives such funds with such knowledge, he is chargeable as a trustee de son tort, and may be called upon to respond to the cestui que trust, either by way of restoration of specific property or, if that be not admissible, as and for a conversion of the trust funds. (English v. McIntyre, 29 App. Div. 439; First Nat. Bank v. Nat. Broadway Bank, 156 N. Y. 459; Barnes v. Addy, L. R. [9 Ch. App. Cas.] 244; Blyth v. Fladgate, L. R. [1 Ch. Div. (1891)] 337.) While it is true "that fraud lies at the basis of' fixing liability of this character, yet it is not essential that there should have been a corrupt intent, •either to cheat the trustee or . the cestui que trust out of the moneys "thus received. In the eye of the law fraud may be predicated upon the act, even though there may have been an honest intent to restore the funds at some future time. - The act of receiving is unlawful,, ■and fraud may be predicated of such act. (1 Perry Trusts, §§ 169, 170.)
In the present case it is strenuously insisted that the evidence did not warrant the. court in finding an agreement between the trustee and Jones to use the moneys as partners , in the business, and to hold the estate of Ward harmless therefor. It is quite true that
The case's- relied upon to exonerate Jones from liability for his acts, in this respect do not support the defendants’ contention. In Wilson v. Lord Bury (L. R. [5 Q. B. Div.] 518) the directors of a. company were held not liable for a failure by it to replace a mortgage Which had been paid to the company, although the latter had agreed with the plaintiff that it should be replaced if paid Off. This holding went upon the ground that the act was a mere breach of contract on the part of the company, and that as the directors had not. actually participated therein, and were- not shown to have knowledge of the transaction,, they could not be held liable as trustees of the plaintiff.; that liability could only, attach to the principal in the. transaction, and the mere relation to it as directors, with nothing -else, Was not sufficient upon which to predicate liability. In that cáse there was nó offer to show that the defendants therein had any knowledge of the insolvency of the company at the time when- t-li'emortgage was paid -off. Had knowledge of the insolvency of the
The further claim is made by the defendants that Jones may not be made liable for the balance due the Ward estate on January 31, 1895. This claim proceeds upon the theory that more money w-as withdrawn by the trustee after that period than was paid in of the trust funds, and that Jones’ undertaking was to hold the Ward estate harmless in respect of moneys which should be advanced after that. time. This claim would have controlling force were it not for the fact that the property of Devlin & Co. had all. been transferred to the corporation at the time it was organized, and the business thereafter carried on was the same business, for all the pur
In Devaynes v. Noble (1 Tud. Lead. Cas. 1) the estate of a, deceased banker was sought to. be charged with the payment of a particular deposit made prior to his decease. The account in the. bank was a continuous running account, in which the plaintiff' made deposits and withdrawals; and charging the withdrawals against the earliest items of the account, it showed no indebtedness existing at the time of the death of the decedent whose estate was sought to be charged; that the subsequent deposits, after the death, were to be held as constituting a new debt for which the members of the firm were liable; and they .having become bankrupt, no equitable rule could be invoked which would enable the' plaintiff to treat the withdrawals as being from the deposits with the firm after the decease. The doctrine of that case has found uniform application. (Pattison v. Hull, 9 Cow. 747; The Antarctic, 1 Sprague, 206; Commissioners v. Springfield, 36 Ohio St. 643 ; Bussey v. Gant, 10 Humph. 238; Jones v. Benedict, 83 N. Y. 79; Webster v. Mitchell, 22. Fed. Rep. 869 ; Buster v. Holland, 27 W. Va. 510.)
These views lead us to the conclusion that the judgment belowwas right, and it should, therefore, be affirmed.
All. concurred.
Judgment affirmed, with costs.