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App. Div.]


so, the defendants cannot call upon the courts to strain rules for their protection when they are sought to be held accountable for what they have produced. In such cases it may be that the parties do not stand in pari delicto. The borrower at usury was never regarded as occupying that relation to the lender. And so, where there is oppression upon one side and necessary submission upon the other, such relation does not exist. "When one holds the rod and the other bows to it," the holder cannot be heard to say that the contract thus forced is illegal. (Broom Leg. Max. [8th ed.] 724.) The record, however, does not clearly establish such relation, and we are, therefore, not called upon to say what the rule would be in such

a case.

If our views be correct, it follows that the judgment should be affirmed.

All concurred.

Judgment and order affirmed, with costs.

her Guardian ad Litem, and Others, Respondents, v. GEORGE H.
DALEY and Others, Defendants, Impleaded with ELIZABETH C.
JONES, as Executrix of GEORGE A. JONES, Deceased, Appellant.

Trust fund edge

its use in the business of a corporation by its secretary with knowlcredits of payments on the earlier items — personal liability of the secretary when the beneficiaries may sue to enforce such liability — proof that the corpus of the fund was thus used.

A secretary of a corporation who, with knowledge that the corporation is insolvent, and that moneys held by the vice-president and treasurer of the corporation as trustee are being used in the business thereof, actively participates in the use of the trust moneys, is chargeable as a trustee de son tort with liability for the loss sustained by the trust fund in consequence of such insolvency, notwithstanding the fact that there was no intent to defraud the trust estate, and that the secretary acted in the transaction as an officer of the corporation. The fact that, during the period subsequent to the time when the secretary acquired knowledge of such use of the trust moneys, the amount of trust funds withdrawn from the corporation exceeded the amount of trust funds APP. DIV.-VOL. XXXVIII. 64

38 505

159a 146

38 505 41 480


[Vol. 38. deposited with it during such period, does not relieve the secretary from liability for the balance due the trust estate at the time he acquired such knowledge where it appears that the trust funds had been used in the business of a firm, to whose property and business the corporation succeeded, and that the account of the trust estate with the firm and corporation constituted a continuous running account, and that the moneys withdrawn should hence be applied in discharge of the debts prior in point of time.

An action to enforce the liability of the secretary may be brought by the beneficiaries of the trust where it is alleged in the complaint that the plaintiffs, together with certain defendants, are the only parties in interest and that the trustee refuses to begin an action.

Evidence that the trustee had paid over to the cestuis que trustent the amount of the income of the estate is sufficient to authorize the court to find that the deficit was in the corpus of the estate and not in the income.

APPEAL by the defendant Elizabeth C. Jones, as executrix of George A. Jones, deceased, from an interlocutory judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Richmond on the 23d day of July, 1898, upon the decision of the court, rendered after a trial at the Richmond Special Term, adjudging that the defendant George H. Daley and the defendant Elizabeth C. Jones, as executrix of George A. Jones, deceased, are jointly and severally liable and indebted to the estate of Albert Ward and to George H. Daley, as trustee thereof, in the sum of $28,886.46, with interest thereon from January 14, 1897, and appointing a receiver to collect said moneys and hold the same subject to the order of the court.

George J. Greenfield [Louis S. Phillips with him on the brief], for the appellant.

Walter S. Logan [Charles M. Demond with him on the brief], for the respondents.


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

App. Div.]


other trustees named in the will, who had declined to serve. Daley commenced the active execution of his duties as trustee in June, 1883, and he immediately began the deposit of moneys of the Ward estate with the copartnership of Devlin & Co. in the same month, and continued so to deposit and to draw moneys through Devlin & Co. so long as such firm was in existence; the course of business in this regard being for Daley to take the moneys which usually came to him by check, indorse the same to Devlin & Co., who deposited them in the bank account of the firm indiscriminately with other funds. An account was opened upon the books of Devlin & Co. crediting the Ward estate with the moneys received. These moneys were withdrawn from Devlin & Co. in various forms, by check, draft and the payment of tradesmen's bills incurred by the beneficiaries under the will of Ward. It does not appear in the record what the arrangement was which existed between the firm and Daley, as trustee, through which the moneys of the Ward estate went into the bank account of the firm, except that they were to pay interest upon daily balances. All that otherwise appears upon that subject is that such was the course of business. George A. Jones, deceased, was at this time connected with the firm of Devlin & Co., but whether as partner or otherwise, or what his interest therein was, does not appear. There is no proof in the case showing that he personally had any arrangement or understanding with Daley that the moneys of the Ward estate should be deposited with the firm, or that he was consulted in respect thereto or had any relation therewith, or that he occupied such a position in the firm as would have enabled him to have made any arrangement in connection therewith; and this is true of all the details in connection with the funds of the Ward estate from 1883, when the deposits began, down to February, 1891, when a change was made in the firm. In that year a corporation was organized, known as Devlin & Co., for the purpose of carrying on the same business that had been carried on by the firm prior thereto, the capital stock being $300,000, divided into 3,000 shares of $100 each. The stockholders consisted of eight members. Jeremiah Devlin held 1,835 shares; Thomas H. O'Connor, 340; Thomas D. O'Connor, 10; Daniel C. Devlin, 10; William C. Phelps, 4; Estate of William Devlin, 400; George H. Daley, 346, and George A. Jones, 5. There were five trustees of this corporation, and for the


[Vol. 38. first year they were Jeremiah Devlin, Eugene J. McEnroe, Henry W. Penoyar, Joseph F. Webber and Merritt E. Haviland. The corporation carried on business in the same manner as the firm had done, and Jones' connection therewith consisted in his holding of five shares of stock. It does appear, however, that Jones, after the formation of the corporation, took a more or less active part in the management and direction of its affairs, although he held no office. The last election of trustees of this corporation was held at a stockholders' meeting on March 6, 1893, at which time Jeremiah Devlin, George H. Daley, George A. Jones, William C. Phelps and Daniel C. Devlin were elected trustees; and upon the organization of this board Jeremiah Devlin was elected president; George H. Daley, vice-president and treasurer, and George A. Jones, secretary. This was the last election of officers of the corporation, and they continued to carry on its business until January 14, 1897, when, being insolvent, it made a general assignment for the benefit of its creditors, without preference. It is established by the testimony that as early as January 31, 1895, George A. Jones was aware that the corporation was then insolvent and unable to pay its debts. He was also aware at that time that moneys of the Ward estate had been used prior thereto for the benefit of said corporation in its business, and he to a considerable extent had personally made use of such moneys, in his capacity as secretary, for the relief of the corporation, with the knowledge and assent of Daley, the trustee.

On January 31, 1895, there was a balance on the books of said company to the credit of the Ward estate of $26,330.95. 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 or in part, made up of amounts deposited with the firm of Devlin & Co.; for so far as this account is concerned, while there was change from the firm to a corporation, in reality it was more a change of name than of substance, as there was no break in the business 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 in this record from which it may be determined whether this balance due on the Ward estate was an indebted

. App. Div.]


ness of the firm or of the corporation or both. When the assignment was made the whole sum of moneys which had been deposited with the firm and with the corporation by Daley, as trustee, including the balance of January 31, 1895, was $75,639.75. Of this sum the trustee, as the court has found, between January 31, 1895, and January 14, 1897, the date of the assignment, withdrew the sum of $46,753.29, leaving due to the estate of Ward on the last-named date $28,886.46. During the same period there was deposited by Daley, as trustee, with the corporation $45,984.41, while the withdrawal, as we have seen, was $46,753.29; thus making the actual withdrawal during this period of time $768.88 more than was deposited with the corporation.

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 of 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. was 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 substance and effect as averred therein. The defendants offered no evidence on the trial, and the case is to be disposed of on the undisputed proof.

Several claims are advanced by the defendant Jones, who is the only appellant, why this judgment may not be supported; the first

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