The opinion of the court was delivered by
T. B. Sweet, George M. Noble, and E. M. Shelden, who were defendants below and plaintiffs in error here, were president, vice-president, and
In June, 1898, at the request of the trust company, through Shelden, its treasurer, the plaintiff below, defendant in error here, which is a corporation, with its place of business at Montpelier, Vt., sent to the trust company the note and mortgage of J. E. Weaver for $1545, owned by plaintiff, with instructions to collect and remit. Accompanying the mortgage, as requested, was a release of the same, to be surrendered with the mortgage upon payment. During the month the trust company collected the amount of the note, but it was never remitted to plaintiff, nor was it known by plaintiff until November following that the amount had been collected. In the meantime, about September 1, a receiver was appointed by the federal court, who took charge of the property and effects of the trust company.
In December, 1898, plaintiff filed in the federal court its petition of intervention asking that its claim be allowed as a trust fund, and decreed a first lien on the assets in the hands of the receiver. The petition was submitted to a special master, but no report made thereon. Subsequently this action was brought by plaintiff against defendants Sweet, Noble, and Shelden, to recover of them the said sum of $1545, charging that they had wrongfully converted the proceeds of the collection to the use of the trust company. Defendants denied liability, and pleaded that the pro
The right of plaintiff to follow the funds in the-hands of the receiver as a trust fund is a recognized-remedy (Bank v. Bank,
Is ¡there inconsistency in following the trust property -so far as it can be traced and in recovering of the ¡trustee damage which the beneficiary has sustained Iby reason of the misappropriation? In Heidelbach v. National Park Bank, 87 Hun, 117,
“An election once made is determined forever, and it may be determined by any decisive act made with full knowledge of all the facts, and the bringing of an .action to enforce one of the .remedies sufficiently evi- . dences such election ; but if a person has two.or more ■consistent, instead of two or more inconsistent remedies, for the recovery of the same debt, he may resort to all, although he can have but one satisfaction.”
In Fowler v. Bowery Savings Bank,
“If the money had been absolutely the money of the plaintiff, left on special deposit with the bank,*646 then he could have pursued the money wherever he •could trace it without losing his remedy against the bank. In such a case the plaintiff would not be barred of bis right of recovery against the bank until he had ■either recovered his money, or the value of the same. All his remedies would be consistent, being based upon ■the theory of a wrongful disposition of his property. So, too, where a trustee, in breach of his trust, disposes of the trust property, the beneficiary of the trust may pursue it or its proceeds wherever he can trace them, so far as the law will permit him to do so, 'without relieving the trustee.” (Page 455.)
In Hervey v. Rawson,
“The plaintiff cannot, of course, have more than one satisfaction, but the general rule in cases of trust is, that when the trust property has been misappropriated or misapplied by investing itin an unauthorized .manner, the beneficiary may pursue and recover‘the trust property so.far as it can be traced, unless the purchaser or holder of it has obtained a good title against the beneficiary, and can also recover of the trustee any damages which the beneficiary has sustained by reason of the misappropriation or misapplication.”
As appears from the averments of plaintiff’s petition of intervention, and from the petition filed in this case, plaintiff has at all times disaffirmed the wrongful act of defendants in the conversion of its funds. In neither proceeding was there a recognition of title to the funds in the trust company, or a ratification of the wrongful act of defendants. The amount, if any, that may be recovered from the receiver will go to reduce the damage of defendants. There is nothing inconsistent in the two positions. There is nothing in the nature or the justice of the. case which should preclude plaintiff from pursuing this course, which is for the interest of the defendants. To hold that the pro
The consistency of remedies is a matter to be determined by the facts in each case. No arbitrary rule •can be enunciated which will constitute a test for all ■cases. In the case at bar plaintiff, after filing its petition of intervention in the federal court, could have maintained an action against the trust company, the ■trustee in this case, to recover its damages for the misappropriation of the funds of plaintiff, the limitation being that there could be but one satisfaction of plaintiff’s claim. In the view we take of the ■case, if the conversion of the money was through the wrongful act of defendants, the same rule would apply to them. We find no inconsistency in plaintiff’s adopting the two remedies. There was, in the two remedies, no controversy as to the ownership of the trust property ; there was no waiver of plaintiff’s claim ■of ownership ; there was no ratification of the act of defendants ; there was no affirmance of an act or contract in the one proceeding and a disaffirmance of it in the other. The two proceedings are between different parties. There can be but one satisfaction of plaintiff’s claim.
Error is assigned in the court’s giving to the jury the •following instruction :
“If you believe from the evidence in this case that in June, 1898, the plaintiff was the owner of the Weaver note and mortgage ; that the Trust Company •of America, then doing business in the city of Topeka, requested plaintiff to forward said note and mortgage to it for collection, and the same was forwarded with instructions that when collected the money should*648 be remitted to the plaintiff; that in pursuance to that request the plaintiff forwarded to the Trust Company of America the Weaver note and mortgage in June,. 1898, for collection ; that the Trust Company of America collected said note and mortgage, but failed and neglected to notify the plaintiff that the collection-had been made, and withheld from plaintiff information of said collection ; that plaintiff did not learn of' the facts of said collection until about November 22, 1898 ; that the Trust Company of America appropriated the money so collected to the use of said company without the knowledge or consent of the plaintiff;. that defendants had knowledge that the money so collected was a trust fund and of its misappropriation;. that the defendants, or either of them, participated in the misappropriation of the money, or knowingly permitted subordinates in the office to misappropriate the-money to the Trust Company of America, and acquiesced in such misappropriation, then I instruct you-that the defendants or such of them as participated in the misappropriation or knowingly acquiesced in the misappropriation of the money by subordinate-employees, would be liable in this action.”
The above instruction fairly states the law applica-ble to this case, where it is shown, as alleged, that defendants were the active executive officers of the-corporation and had personal charge and supervision of its business affairs, receiving and disbursing moneys that came into its possession. The personal- liability of defendants to plaintiff, as alleged, is not-statutory, but rests wholly on the common law. Upon the subject of the personal liability of the officers of a corporation for their wrongful acts to persons having-dealings with the corporation, see the following authorities : Anderson v. Daly, 38 Hun, App. Div. 505,
Complaint is made of the court’s giving to the jury the following instruction :
“If the defendants were, respectively, president, vice-president and treasurer of the Trust Company of America, a corporation, and the principal place of business of said company was in the city of Topeka, and the defendants had personal charge and supervision of the office and the business affairs of said company, directing and managing its affairs, receiving and disbursing moneys that came into its possession, then the defendants would be held to have knowledge of all the business affairs of the corporation which came under their personal observation and knowledge, of all the business affairs of the corporation which they might have known by the exercise of ordinary diligence in the conduct of the business affairs of the company.”
The corporation is primarily liable for the conversion or misappropriation of moneys by its employees ; the employees of the corporation are its agents within the line of their respective duties. The instruction complained of, as to liability, would probably be applicable where an action is brought direct against a corporation for a conversion or misappropriation of money by its employees. The usual remedy in such cases is an action against the corporation for the recovery of the money misappropriated. A proceeding against the managing officers of a corporation, as in the case at bar, is a somewhat unusual and extraordinary remedy. But where there were sent to a corporation a note and mortgage, with instructions to collect the same and remit, and the money was collected but not remitted, a recovery may be had' by the owner of the note and mortgage against the executive officers and managing agents having the active management,
That part of the instruction complained of which holds defendants personally liable for the conversion of funds by the subordinates, of which they had no actual knowledge, but by the exercise of ordinary diligence in the conduct of the business affairs of the corporation they might have known, does not meet our approval. The rule announced by the able trial judge in his charge to the jury, holding such officers liable for ordinary negligence, finds support in the following cases: United Society of Shakers v. Underwood, &c., 9 Bush. 609,
It is a well-known fact that much of the business of this day and age is transacted by corporations, many of them employing” numerous persons in the various departments of the work in which they are engaged. Large amounts of money and property are daily han
For the error in giving the instruction complained' of, which is the only material error disclosed by the record, the judgment will be reversed and a new trial ordered.