Case ID: ny-st-rep_13/html/0634-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Danforth, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Louise Zimmerman et al., Executors, etc., Resp’ts. v. George Kinkle, Impleaded, etc., App’lt.
    
    
      (Court of Appeals,
    
    
      Filed February 7, 1888.)
    
    1. Trust—Liability of party taking trust fund in violation of trust—Both trustee and cestui que trust can maintain suit to-recover—Parties.
    Whoever receives property knowing it to he the subject of a trust and to have been transferred by the trustee in violation of his duty or power, takes it subject to the right not only of the cestui que trust, but also of the trustee to reclaim possession or recover for its conversion. In such an action it is not necessary to bring the plaintiffs (if trustees) before the court in their individual character.
    2. Pleading—Suit for cancellation of bond—Complaint.
    In an equitable action for the cancellation of a bond and the restoration of $5,000 belonging to the estate represented by the plaintiffs as executors, and which money they had placed in the hands of one of the defendants to indemnify him against liability as surety upon the bond, the com plaint charged, among other things, that the bond “ was given for no consideration, but was extorted from the plaintiffs,” and that these circumstances were known to the defendant. On demurrer, held, that the complaint was sufficient.
    3. Same—When only one cause of action—Who necessary parties to AN ACTION TO CANCEL A BOND.
    The complaint alleged that on the settlement of the accounts relating to transactions of the firm of which testator was a member, certain of the defendants wrongfully exacted of the plaintiffs a bond which they, together with the defendant Kinkle, executed to the said defendants upon condition that if the obligors should “keep inviolate and confidential aU the business transactions and dealings of the late copartnership firm * * * which may ever at any time, in anywise, have come, or which may hereafter come to their knowledge, and shall also preserve and keep inviolate and confidential the contents and correspondence and other writing relating thereto, and shall not disclose or divulge the same, then the obligation to be void, otherwise to remain in full force and virtue.” Held, that the object of the suit was single, to have the money restored to the fund from which it was taken; that the right to that relief would follow from the cancellation of the bond; that the presence of Kinkle as well as that of the obligees was necessary to prevent further litigation and have the various interests of the parties determined in one action.
    4. Same—When parties not in pari delicto.
    The plaintiffs coming into court in their representative character as executors of-a deceased person were not in pari delicto with the defendant Kinkle.
    Appeal from a final judgment of the general term of the supreme court, second department, in favor of the plaintiffs, entered upon an order of the special term, which sustained a demurrer by defendant Kinkle, to the complaint, and overruled said demurrer.
    The action was in equity, for the cancellation of a bond, and the restoration of $5,000, belonging to the estate represented by the plaintiffs as executors, and which money they had placed in the hands of one of the defendants to indemnify him against liability as surety upon the bond.
    The complaint alleged in substance .that the testator, William Zimmerman, in his life-time, Emil Dieckerhoff, Louis Raffioer and Adolph Erbsloeh, were co-partners in business, and that after the death of Zimmerman, a settlement of accounts relating to firm transactions, was had between the plaintiffs on one side and the defendants -Emil, Louis and Adolph on the other, in which the latter wrongfully exacted of the plaintiffs, and they, with the defendant, George Kinkle, executed a bond in the penal sum of $5,000, to the said Emil, Louis and Adolph, upon condition that if the obligors should '' keep inviolate and confidential all the business transactions and dealings of the late co-partnership firm of Dieckerhoff, Raffioer & Co., and of Caron & Co , the predecessors of said first named firm, which may ever at any time, in any wise have come, or which may hereafter come to their knowledge, and shall also preserve and keep inviolate and confidential the contents and correspondence and other writing relating thereto, and shall not disclose or divulge the same, then the obligation to be void, otherwise to remain in full force and virtue;” that Kinkle signed as surety and as such demanded and received from the plaintiffs the sum of $5,000 to be repaid with interest so soon as his obligation upon the bond ceased; that the bond “was given for no consideration, but was wrongfully extorted from the plaintiffs and was signed, executed and delivered for an illegal and immoral purpose, against public policy and for the purpose of interfering with the administration of public justice, and to suppress evidence of illegal, wrongful and unlawful acts on the part of the obligees therein named, all of which, said defendant, George Kinkle, well knew;” that the money so demanded by Kinkle was trust money and was “ received by him from the plaintiffs, as the executors and trustees of Wiliam Zimmerman, deceased.”
    The demurrer stated several grounds.
    I. That the complaint does not state facts sufficient to constitute a cause of action against him.
    II. That two causes of action have been improperly united.
    
      (a.) That the cause of action against the defendants Dieckerhoff, Raffloer and Erbsloeh sounds in tort.
    (5.) That the cause of action against the defendant Kinkle, is ex contractu.
    
    (c.) That the cause of action against the defendants Dieckerhoff, Raffloer and Erbsloeh, does not affect the defendant Kinkle.
    
      (d.) That the cause of action against the defendant Kin kle, does not affect the defendants Dieckerhoff. Raffloer and Erbsloeh.
    (e.) That both causes of action are inconsistent with each other.
    The special term sustained the demurrer upon the grounds, (1) that the consideration of the bond was illegal and criminal, and so neither party could have relief; (2) that although an action might lie against Kinkle to recover the money received by him with knowledge that it belonged to the estate, it could not be joined with an action against the obligees of the bond. The general term reversed the order of the special term, with leave to answer over • The defendant did not accept that permission, and upon proof thereof final judgment was entered, and from that' he now appeals.
    
      A. Simis, Jr., for appdt; Hector M. Hitchings_ for resp’ts.
    
      
       Affirming 6 N. Y. State Rep., 768.
    
   Danforth, J.

There is nothing upon the- face of the bond to impeach its validity, and whatever might be the real transaction between the parties it is to be made out by allegations and evidence. The terms of the complaint show clearly enough that the bond is founded on a consideration condemned both by morals and public policy, and therefore the defendant claims that a party to it cannot be relieved, but must be left to the consequences of the forbidden transaction. How this might be if the action was by the plaintiffs in their individual capacity, it is not necessary to inquire. They come into court as executors of a deceased person and in a representative character. If in delicto at all, they are not, in pari delicto, and the enforcement of the rule would secure to the defendant the enjoyment of money which never belonged to his principals and which did belong to the estate in the honest management of which the plaintiffs also owed a duty to the testator’s beneficiaries. Ñor should the defendant be heard to complain of this. He admits by his demurrer that the money was trust money and that he received it from the plaintiffs as executors and trustees. They had no power to part with it for the purpose for which he received it, and in seeking to recover it back they are merely performing a duty in the execution of which a court of equity may properly assist.

The principle which justifies this conclusion was applied in the recent case of Wetmore’s Ex’rs v. Porter (92 N.Y., 76), where it was held that whoever receives property knowing it to be the subject of a trust and to have been transferred by the trustee, in violation of his duty or power, takes it subject to the right, not only of the cestui que trust, but also of the trustee to reclaim possession or recover for its conversion. That case also holds that in such an action it is not necessary to bring the plaintiffs before the court in their individual character, and this answers the objection that the omission to do so in this action makes a defect of parties. In another aspect also, the complaint is sufficient. It charges that the bond ‘ was given for no consideration, but was extorted from the plaintiffs,” and that these circumstances were also known to the defendant.

The defendant argues that the averment as to the bond being wrongfully extorted from the plaintiffs, is a mere conclusion, and that no facts are stated. Against a demurrer the general statement is sufficient. It defines an unlawful method or process by which an object is accomplished or end attained, and if not sufficiently definite or conclusive, the defendant’s remedy was by motion. Marie v. Garrison, 83 N. Y., 15.

Nor does the complaint improperly join two causes of action. It narrates a single transaction in which all parties were concerned, and while more than one cause may appear entitling the plaintiffs to the relief sought, they only represent acts by the commission of which the right to relief is made out. That some might have been omitted and a cause of action remain, should not prejudice the plaintiffs. The object of the suit is single, to have the money restored to the fund from which it was taken. The right to that relief would follow from the cancellation of the bond, but the presence of Kinkle as well as that of the obligees was necessary to prevent further litigation and have the various interests of the parties determined in one action. This was the conclusion of the general term.

The judgment appealed from should therefore be affirmed.

All concur.