Kerr v. Laird

Mr. Justice Handy delivered the opinion of the court. This was a bill in chancery filed by the appellant against the appellees for an account of a joint-stock concern, consisting of a parcel of land laid out for a town, in which all' the parties were interested. It appears that the company was composed of six stockholders, of whom the appellant’s intestate was one, who entered into articles of agreement in the year 1836 in relation to the enterprise, under which the management of the affairs of the concern was intrusted to four of their number, of whom the appellant’s intestate was not one, and the appellee Laird, who were appointed trustees for the company; and in virtue of the provisions of the articles, Laird was also appointed by the trustees their agent or treasurer, and was to receive a compensation for attending to the business, a commission of five per cent, on all moneys received by him. A majority of the trustees was required to act, in order to bind the company or transact the business intrusted to them; and they were required at least once a year to make dividends of moneys received, and in case of failure to do so, they were to be liable to an action by each member entitled for the recovery of his dividend. No dividend [550] was made to the appellant’s intestate, and it appears that Laird collected for the company $28,254.48, but no dividend could be made or paid over, because of the death of a majority of the trustees. Hence it became necessary to file the bill, in order to justify the appellee in settling with the stockholders the dividends respectively due them. The account of the amount of money received by him is satisfactory, and is not contested; but the point of controversy is whether Laird should be charged with interest upon the moneys received by him as agent for the company; and this depends upon the circumstances of the case. The bill alleges, that for several years Laird had used for his own purposes the funds of the company which he had collected, and that he is responsible for interest thereon. The answer admits that he has used the most of the identical money received by him, “ yet he has always held himself in readiness to pay the full amount due by him; ” that by using the funds collected, he has saved a large amount which would otherwise have been lost, as a portion of the collections were in uncurrent money, which would have been worthless if it had been kept on hand ; that in making collections, he frequently took notes from the debtors of the company on other persons, upon which he was compelled to take property, &c., in order to save the debts which otherwise would have been lost; and hence he submits that he is not chargeable with interest. He also insists that he is not liable for interest, 1st, because no demand was made of him by the appellant or his intestate; and 2d, that as treasurer, he was only liable to pay the dividends declared by the trustees, and that no dividends were ever declared by them which were to be paid over. The report of the commissioner to “whom the matter of account was referred, having charged Laird with interest, exceptions were taken by him thereto, and the same were sustained by the vice-chancellor. And hence the question is brought to this court. The sole question submitted for our decision is, whether the agent is liable or not for interest on the moneys collected by him. [551] No principle of law is more firmly settled than that a trustee who mingles money received by him as a trustee with his own funds, and makes use of it, is liable for interest. This is not denied as a general rule by the appellee; but it is insisted that there is no such liability under the circumstances of this case, because the use he made of the money was beneficial to the company. Let us examine this point as the facts are presented in the record. The bill charges that Laird made use of the funds of the company for his own purposes. This is admitted by the answer, and then it proceeds to state the reasons why the funds were used, which are that collections were made in many cases in uncurrent money, which would have been lost by depreciation had it been kept on hand, and in other cases by taking property in discharge of claims due the company, which otherwise would have been lost. It is to be observed that there is no proof of the facts stated as a justification for the use of the money. The statements of the answer in that respect are not responsive to the bill, and therefore cannot be regarded as evidence. And whatever weight the circumstances therein stated could, if proved, have, as justifying the appellee in using the money, there is nothing to exempt him from liability as the case is presented. After admitting the use of the funds, the answer goes on to state that he “ has always held himself in readiness to pay the full amount due by him to the company.” This may be true, and still he would be liable for interest. , The ground upon which he is responsible for interest, is the appropriation of the trust funds to his own use, and the legal presumption arising therefrom that he made a profit by it; and though he may have been ready to pay at all times, this would not absolve him from his liability for the use of the money; for he might have had other resources from which he could have made payment. His mere readiness to pay could not exempt him from liability unless he kept the money set apart as trust funds, and ready at all times to be paid to the parties entitled to it; for otherwise, any trustee, having great resources at command, might employ trust money in his hands to his. own profit and not be liable for interest, because he was ready at all times [552] whenever required to pay the amount out of other means within his power, but of which he would not avail himself unless required to pay the trust money. But it is contended that Laird, as treasurer of the company, was only bound to pay the dividends declared by the trustees, and that none were ever declared, and that he is, therefore, not responsible for interest. This objection would equally discharge him for the principal and interest, which is not contended for; but it is untenable as to either. The bill is filed for an account and settlement of the affairs of the company in the hands of the treasurer, the board of trustees being dissolved by the death of a majority of them. The treasurer was the agent not only of the trustees, as is contended, but of the stockholders to whom he is accountable upon the dissolution of the board of trustees. As such he is accountable to the stockholders for the moneys received by him, and if he is chargeable with interest he is also responsible to them for that in like manner as he is responsible for the principal; and upon such an accounting, it is wholly immaterial whether dividends were declared by the board of trustees or not. His responsibility arises from his having in his hands as an individual, funds belonging to the company, for which as well as the use of them he is liable to the cestuis que trust. Nor is there any force in the objection that he was liable only upon demand. It is admitted that he made use of the trust money, and that is the ground of his liability for interest. The object of a demand would be to place him in default on refusing payment; but when the use of the money is the ground of his liability, no demand is necessary, as he would be liable for interest in such case whether he paid the money on demand or not. ,The order of the vice-chancellor allowing the exceptions of the appellee. Laird to the commissioner’s report, charging him with interest, is reversed, the exceptions overruled, and the report confirmed as to Laird.