Kerr v. Blodgett

Trustee.—Remedies of Cestui que Trust.—Pleading in Action for Accounting.—Former Adjudication.—Collusion. The remedies of a cestui que trust in case of the misapplication of the fund by the trustee,—stated. In an action against a trustee to compel him to account for the trust-fund, it is not proper to set up in the complaint an accounting already had in an action by other cestuis que trust, which it is alleged was collusive, and which, therefore, the plaintiff seeks to avoid. But if this is done, such unnecessary allegations do hot alter the nature of the action ; nor entitle the defendant to have the complaint dismissed, on the ground that it discloses a former adjudication upon the controversy. In an action against a trustee for an accounting, and for payment of plaintiff's distributive share of the trust-fund, the fact that the trustee has accounted under a previous judgment, in an action by a beneficiary for himself and all others who might come in, will not be a bar, if plaintiff shows that such judgment was collusive, and in fraud of his rights.

Appeal from a judgment. This action was brought by Robert H. Kerr and John P. Morgan against William T. Blodgett and Orlando Meads. The plaintiffs were judgment-creditors of one John Meads, Jr., of whom the present defendants were assignees. The relief asked was accounting and the payment of plaintiffs’judgment. A similar action in favor of James B. Wilson was heard at the same time. The claims were against a limited partnership, of which John Meads, Jr., was the general partner, and one William Tilden was the special partner. The complaint set forth that the assets had all been distributed among the creditors of John Meads, Jr., under and in pursuance of a judgment for that purpose, obtained by Dexter Reynolds against them. That on the distribution each creditor represented received a little over 61 per cent. That Dexter Reynolds bought up the claim of one of the creditors, and with it commenced a suit in the Supreme Court, Albany county, against the assignees, averring he was a creditor of the limited partnership, and claiming an accounting and settling of the trust-fund. That this suit was collusive in its nature, and instituted with a view to have a distribution in defiance of the rights of the plaintiffs and of some other creditors who refused to sell their respective claims at a sacrifice. That the present defendants, who were defendants in that suit, voluntarily appeared and admitted service of the suit. That they interposed no defence, and did not set up or assert the rights of their cesf/wís que trusty the creditors of John Meads, Jr. That the defendants, by their agent, John Meads, Jr., and other agents, while the proceedings were pending, were in frequent communication with the plaintiffs, endeavoring to purchase the plaintiffs’ claim at a lower price than its said value under said assignment. That the plaintiffs refused at all times to sell their said claim at the prices offered, believing that the same was worth more under the assignment, and were waiting, patiently, the maturity of the Meacham notes for distribution. That shortly after the mating of the assignment, and as soon as some portion of the trust-funds of said assignment were collected and in the hands of the assignees, John Meads, Jr., and others, acting on his behalf and on the behalf of the said defendants, or said Tilden, or of all of said parties, endeavored to and did purchase, from time to time, various claims against the assigned estate, from the creditors of the firm of John Meads, Jr. That false and fraudulent statements were made to said creditors as to the value of the assigned estate, and the probable time of distribution, to induce them to sell the same at a great deal less than their real value. That many of the claims purchased, were purchased at thirty and forty per cent, on the dollar, when the same were worth, under the assignment, sixty per eent., and so known to the defendants to be worth that sum. That in the month of June, 1859, almost all of the claims against the assigned estate had been, by said parties, purchased at the time of the commencement of said proceedings. That according as said claims were purchased, the same were assigned to John Meads, Sen’r, and Charlotte Meads, and one to the said Dexter Reynolds, who were represented as the parties purchasing the same, and stated as the parties advancing and paying the same. But, that said purchases of said claims were made, from time to time, in reality, for the benefit of the said limited co-partnership of John Meads, Jr., and the said defendants, and the said Tilden, and were paid for out of the trust-funds of said assignment; that such defendants, from time to time, furnished from the collections of the assigned estate, funds, although nominally loaning said moneys to said John Meads, Sen’r, and William Tilden & Nephew. That at the time of the commencing of said proceedings, nearly all of said claims against said estate had been purchased, and were nominally assigned to John Meads, Sen’r, and the said Charlotte Meads, but really were the property of the partners aforesaid. That at the time of the distribution under said proceedings, all of the claims against the assigned estate were nominally the property of John Meads, Sen’i, or his estate, and of the said Charlotte Meads, excepting a few hundred dollars, including the. claim of the plaintiffs, and the same had been purchased in manner aforesaid, at a price far less than their value, and that realized on said pretended distribution. That distribution was made in such proceedings of a little over 61 per cent., to these creditors who were thus represented. That all of the proceedings were conducted in a referee’s office in Albany. As soon as the plaintiffs ascertained the facts of the case, they brought these actions against the assignees, and claimed their dividend under the assignment; and in anticipation of the possible defence under that judgment of distribution, they set up the whole facts of the case, charged the collusive nature of that judgment, the breach of trust by the assignees, and prayed that it might be adjudged to be no protection to them. , The complaints contained another prayer for other general relief, and claimed that the plaintiffs be paid the whole of their judgments and interest. ♦ The causes came on for trial before Hr. Justice Allen, who refused to permit the plaintiffs to try their cases, saying he took their facts, as averred in. the complaints, to be true, and dismissed the complaints. The plaintiffs appealed.