31 A.2d 831 | N.J. | 1943
This court in a case between the same parties reported in
We held in
Thereafter the learned Vice-Chancellor, pursuant to the opinion filed by him, limited the accounting to the profits, if any, made by the Trust Company. It was thereby allowed to go free respecting any profit the Mortgage Company may have made in the mortgage business. There is usually a brokerage charge made on the placement of a mortgage and sometimes on its sale. If so, this unjustly enriched the trustee because of its interest in the Mortgage Company.
In Magruder v. Drury,
The principles of Magruder v. Drury, supra, govern this case and the trustee is liable to account for the profits made by it and by its affiliate. See, also, Scott on Trusts § 170-22. The bonuses or commissions received by the Mortgage Company are not to be regarded as income to the trust estate, in which the infants would have no interest, but are like a profit derived from the sale or exchange of securities which increases thecorpus. 4 Bogert on Trusts § 819.
The profits, by whatever named called, if any, made by the Mortgage Company as well as by the Trust Company by reason of the undisclosed dealings, are to be recovered. There is no evidence in the records in the cases presented to this court as to what they were and discovery can be only made from the general books and records of the companies.
There is, of course, no requirements that the affairs of the Mortgage Company be examined with respect to any matter other than as to a profit, bonus or commission, if any, made with respect to the mortgages in the trust estate.
It was lawful for the Trust Company to deposit the funds awaiting investment in an account in its own bank. N.J.S.A.17:4-31. When the securities were purchased, the moneys must have been drawn from the account so that the remedy runs against any profit made with respect to the securities purchased and not against the moneys placed in the Mortgage Company's account.
The legislation cited changed the common law rule requiring a corporate trustee to keep trust moneys in an institution other than its own. A bank deposit creates a debtor creditor relation when the funds may be used in its own business. Hence, the statutory prohibition against such use. But whatever *264 the nature of the account the funds were so promptly invested that no inquiry should be pursued as to that matter. See, also,Restatement Trusts § 87 (J) 170M.
Such Mortgage Company books and papers, as show the profit and loss account as to each questioned mortgage, should be produced.
The order under appeal must, therefore, be reversed, with costs.
For affirmance — None.
For reversal — THE CHIEF-JUSTICE, PARKER, CASE, BODINE, DONGES, HEHER, PERSKIE, PORTER, WELLS, RAFFERTY, THOMPSON, JJ. 11.