The Mount Holly news., 1919-11-25
Trust Funds Misappropriated

Trust Funds Misappropriated
Vice Chancellor Backes hande,
decision on Thursday in the case o
Edward d. Stokes against the Burlina
ton County Trust Company In al
action to recover from the estate O
William B. Wills some funds that has
been appropriated by Wills as trustes
for Reading Wood, lunatic.
In 1894 Willis was appointed guard
ian and trustee for Wood and received
the funds belonging to the estate. HI,
gave bond for $24,O 900 for the faithful
performance of the trust, and Mr..
Stokes became one of the bondsmen
After Wills death it was found thai
he had spent nearly all the principal oi
the trust. Some of the money he had
used to purchase the Indian Hill farm
OF Thomas Black, near Jobstown, for
which he took title in his own name.
The sum paid for the farm was $l8,-
411.19. This money, it was shown,
was received by Wills, few days be-
fore the farm purchase, from securities
belonging to the Wood estate, which
he had sold in Philadelphia. The
check received for the sale Of the Sc
curities he deposited to the credit Of
his personal bank account, and paid
for the farm from that account.
The Burlington County Trust Com
pany, ss executor for Wills, sold the
farm for $15.109.s0, and action was
brought to compel the executor to pay
this sum to the trust account and not
to place it in Wills personal estate.
The vice chancellor ordered that this
shall be done.
After Wills death the Mount Holly
Trust Company was appointed guar
dian and trustee for Reading Wood,
who then was living but has died
since.
V. Claude Palmer represented Ed
ward D. Stokes; George B. Evans ap-
peared for the executor.
The vice chancellor's opinion 10
given below:
This suit rs to recover trust funds fraudu-
lsntly misappropriated- The facts are few
and undisputed
Thomas Wood bequeathed to Israel H.
johnson $4,000 in trust for the benefit of
his demented son. Reading Wood Upon
Johnson's death William'B Wills was substi-
tinted as trusfaa md aho,,+ tha sa,,a g.. 1 j..
was appointed guardian of the incompetent
son by the Orphans Court of Burlington
County. Among other items, there came to
Wills's hands, as trustee, Lehigh Coal and
Navigation bonds Of the par value of $ll, 900 /;
and as guardian. Lehigh Coal and Navigation
bonds of the par value of $4,000. Shortly
after his appointments. 1895, Wills sold these
blocks of bonds for 81, ,893.76 and s2,7O3. Is
respectively. and with the proceeds purchased
the Indian Hill Farm, paying therefor sI3,-
4l1.19. and took title in his own name Wills
continued as trustee and guardian until his
death. 1915. when he was succeeded in both
Offices by the Mount Holly Trust Company
Wills's estate has been declared insolvent
His executor, the Burlington County Trust
Company. sold the Indian Hill Farm for
$15,109.60, which now forms part of the liquid
assets of the estate for pro rate distribution
among the creditors. Pursuant to a rule to
bar creditors, the Mount Holly Trust Com
pany, as trustee and guardian, presented its
claims for $S5,360.90 and S9,364.85 respective
ly which were allowed These claims repre-
sented the principal and accumulated interest
on the sums turned over to Wills when he
took Office as trustee and guardian. When
thew xUQr nroc ad md
til shortly before the hearing of this case, the
Mount Holly Trust Company was unaware
that Wills had used the funds of the two es-
tates to purchase the Indian Hill Farm.
The complainant. Stokes. is one of the
sureties Wills's bond of $24 900 given for
the faithful performance of the trust Tol
himself he filed this bill against
Wills's executor to recover for the Wood
(trust) estate SO much of the proceeds of the
sale of the Indian Hill Farm as represents the |
trust funds misappropriated by his principal |
in its purchase The Mount Holly Trust Com |
pany, as substituted trustee and substituted |
guardian. filed counter claim against Wills's |
executor to recover the entire proceeds
The defenses interposed by the Burlington
County Trust Company. executor of Wills, |
are technical 1t sets up that the complain
ant. as surety, has no standing to bring this /
he is not entitled to protection /
against ultimate loss by a restoration of the /
trust funds. / am not re- |
ferred to any authorities to support the prop
osition. and believe none can be found to even
give color to its soundness. Common honesty
and morality dictate that surety be relieved
from the consequences of the dishonesty of his
principal by compelling him to return the
oot. That is the complainant's effort and his
right to relief in equity is Hnquestionable
Irick v. Black, II N. J. Eq. 1ss: Philadelphia
8 Reading R. R. Co. v. Little. Al N. ]. e.
'19; Kidd v. Hurley. 81 N. ]. Eq. 1T; Beacon
Lamp Co. v. Travellers Insurance Co.. 81 N.
]. Eq. SO. But the question is academic in
view of the counter claim interposed by the
Mount Holly Trust Company. representing the
,estui que trust whose right to institute pro-
seedlings to recover the trust funds is con-
.eded. 1t is settled law that cestui que
rust may trace and recover trust funds un-
awfully diverted by his trustee. Smith v.
Combs. 40 N. ]. Eq. AGO. Babcock " Standish,
'S N. J. Eq. 376; Hunt v. Smith, 5s N. j. Eq.
,5; Ellicott. v. Kuhl. go N. J. Eq. 1888.
The objection to the relief prayed for by
he Mount Holly Trust Company. as substitut-
ID trustee and guardian, Is, that the Orphans
Courts decree of insolvency fastened the
claims of creditors of Wills upon the estate in
he hands Of the executor, equally, and that
It has elected to become common creditor
by presenting its claim under the rule to bar
.reditors. and consequently has waived its
right to trace the funds. The position is un-
ENABLE. The Orphans Court Act &C. s. Ss4S.
Sec. 99) providing that a decedent's estate,
4 insufficient to pay debts. shall be distrib-
lion to their debts, applies only to the es-
tate proper of a decedent and does not in
,lude trust funds of which he dies possessed.
As Vice Chancellor Howell remarked in
Koch v. Feick, 81 NJ j. Eq. 100. 1T is a de-.
,ree in favor of creditors only, and can fasten
their debts only on those funds which are ap-
plcable to the payment of debts" And there
was manifestly no waiver because, as admitted
by the pleadings, the Mount Holly Trust
Company did not know at the time it present
ed its claim that the trust funds were trace
able into. and formed part of. the Wills es-
tate There can, obviously be no waiver
without knowledge of the facts upon which
the alleged waiver is predicated
AS the farm was purchased by the trustee
with the joint funds of the trust and guardian
estates, the entire proceeds realized by the
executor from its sale enures to these estates.
(Shaler v. Trowbridge. rs N. J. Eq. 595) and
a decree will be advised awarding it propor-
with costs.
First Baptist Church
Rev. Oscar w. Henderson, Pastor.
Everybody welcome. All pews free. |
If you have no other church home, |
you will be made welcome here.
Sunday morning service 1890, SER
mon by DR.. William Russell. Subject
The World Wide Vision.
Pihla coh0nl o TX N m TaCav.h w