63 N.E. 475 | Ind. | 1902
The appellants and the appellee, Charles W. McLaughlin, formed a supposed copartnership for the purpose of acting as the agents of one Fleming in finding a purchaser for property owned by Fleming. The firm was to advertise the property; all the expenses of the enterprise were to be borne equally by them; and the commissions they were to receive for making a sale were to be equally divided among the copartners. They found a purchaser, and the sale was effected. Their commissions amounted to $400 and were paid by Fleming to the appellee, Charles W. McLaughlin. He failed and refused to account to his copartners for the moneys so received, and converted them to his own use, and to the use of his wife, his co-appellee herein, in the following manner: The appellees, McLaughlin and wife, being the owners of the real estate described in the complaint, conveyed the same to one Charles H. Grant, in trust. At the request of the appellees, for their use, and in the discharge of his trust, Grant executed a mortgage on the premises to one Hutchens to secure the repayment of a debt of $500, and immediately afterwards reconveyed the premises to the appellees, in consideration of their agreement to pay said mortgage debt. The appellee, Charles W. McLaughlin, without the consent of his copartners, then paid the $400 of partnership funds so held by him to Hutchens on account of the mortgage debt of the appellees, and Hutchens released the said mortgage. Thereupon McLaughlin, without consideration, conveyed all of his interest in the said premises to his wife and co-appellee. At the time the $400 of partnership funds was applied upon the mortgage debt, and at the time of the conveyance of the mortgaged premises to Mrs. McLaughlin, she knew that the said moneys belonged to the firm. All the partnership debts were paid before this suit was brought, and the appellee, Charles W. McLaughlin, *294 is insolvent. The foregoing facts are set out in the first paragraph of the complaint, and the relief sought in that paragraph is an accounting, a personal judgment against Charles W. McLaughlin, and the enforcement of a lien for the amount due on the real estate conveyed to Mrs. McLaughlin. The second paragraph charges a conspiracy between McLaughlin and his wife to defraud the appellants, and alleges, substantially, the same facts as the first. It asks for an accounting, a personal judgment against the appellee, Charles W. McLaughlin, a cancelation of the entry of satisfaction of the Hutchens mortgage, and the foreclosure of that mortgage for the use of the appellants. The appellee, Vone McLaughlin, demurred to each paragraph. Her demurrers were sustained, and judgment was rendered against the appellants. The rulings on the demurrers present the only questions for determination on this appeal.
It is urged in support of the decision of the trial court that a demand for a settlement before the commencement of the suit was necessary, and that neither paragraph of the complaint alleges such demand; that the suit was prematurely brought, because the partnership had not been wound up; and that, upon the facts pleaded, the appellants were entitled to no relief.
(1) No demand was necessary before bringing the action for an accounting and settlement. 15 Ency. Pl. Pr., 1058; McClung v.Copehart,
The demurrers admit that the appellee, Charles W. McLaughlin, has, without the consent of his copartners, ap plied the partnership funds to the payment of his individual debt in the discharge of a mortgage lien on real estate conveyed to his wife with notice of the fraud. As between themselves, the appellee, Charles W. McLaughlin, must be regarded as a trustee of the firm for the partnership funds collected and held by him. Where a trustee has, in fact, converted trust funds to his own use, or has, without authority, invested them in property into which they can be distinctly traced, the cestui que trust has the right to follow the same into the new investment; and, where trust funds are invested in the hands of third persons having knowledge of their character, they still remain impressed with the obligation of the trust in the hands of the holders, and are subject to be reclaimed and restored to the trust fund.Pearce v. Dill,
For like reasons, we are of the opinion that the second paragraph, also, was sufficient in its statement of facts to entitle the appellants to an accounting, a personal judgment against Charles W. McLaughlin, and the enforcement of the trust against the real estate conveyed to the appellee, Vone McLaughlin; but we do not decide that any subrogation *297 of the appellants to the rights of Hutchens in the mortgage took place. Under the second paragraph, as well as under the first, the trust may be enforced against the real estate conveyed to Mrs. McLaughlin to the extent hereinbefore indicated.
For the errors of the court in sustaining the demurrers of the appellee, Vone McLaughlin, to the first and second paragraphs of the complaint, the judgment is reversed, with instructions to the court to overrule the said demurrers, and for further proceedings in conformity to this opinion.
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