Emery, Y. C.
(after statement of facts and issues).
The objection as to defect in parties, because of omission to join the personal representatives of deceased trustees, is unfounded. The general rule as to trustees under private trusts is that each trustee is severally liable for a loss resulting from a joint breach of trust. 1 Lew. Trusts *767, *772. A fortiori trustees and receivers, acting as judicial trustees, under the Corporation act and decrees of court in insolvency and dissolution proceedings, must be liable severally as well as jointly for defaults in which they have joined. The title to part of the trust property here in question (the unpaid purchase-money due from the purchaser) devolved on the survivors alone, with the right to recover it from the purchaser, and as to all of the trust fund or property, the trusteeship survives on the death of one of several joint trustees. And a-s it is the duty of the survivors to account for the trust fund and place it in a proper position, the representatives of a deceased trustee vare not necessary parties to a suit or proceedings against the surviving trustees to account for the trust fund in their hands. Beattie v. Johnstone (Vice-Chancellor Wigram, 1850), 8 Hare 169. As the estate of the deceased trustee is, however, liable to account for a default in which he joined, the representatives may be joined as proper parties. Wilkinson v. Dodd, 40 N. J. Eq. 123, 141, and cases cited.
London Gas Light Co. v. Spottiswoode (Vice-Chancellor Bird, 1885), 14 Beav. 264. The general rule that all parties liable to a demand should, be before the court, is a rule of convenience in procedure adopted to prevent further suits for contribution, and not a rule of necessity. I Dan. Ch. Pr. (6th Am. ed.) *272. It may therefore be dispensed with for sufficient reason, for the purpose of rendering a final decree between the parties in court.
The defendant trustees in this case were judicial trustees under the- Corporation act and the decree of the court defining their powers and duties relating to the sale of the assets of the corporation, and the distribution of the proceeds of sale among the parties entitled, who were also fixed by the decree. The case as to their liability for interest stands as follows: The decree for sale was based on and contemplated a sale for cash only, with an immediate distribution pro rata of the entire purchase-[13]*13money available under the decree for that purpose among the preferred stockholders named in the decree. There was therefore a double default of the trustees; first, in conveying the assets, without requiring payment in cash of the entire purchase-money, and second, in immediately distributing or paying back to the purchaser alone the whole cash received upon the conveyance. As the amount of this payment was the purchaser’s entire pro rata share of the whole purchase price fixed by the decree, the distribution was a partial preferential cash payment to this single stockholder to. the extent of about $43,750. The entire assets were conveyed by the trustees for the purpose of continuing the use of them in carrying on the trade of the purchaser who received them for this purpose, without being required by the trustees to pay interest on the deferred purchase-money payment, and who did so use and hold them for over ten years. According to the claim presented in the arguments and briefs on behalf of defendants, the trustees and the purchaser as between themselves seem to have acted upon the idea that they were dealing altogether with unpaid purchase-money, payable by the purchaser to the trustees, and to be credited on its bid when afterwards paid, but without interest. But under the form which the purchase, conveyance and partial payment actually took by the choice of the purchaser, viz., the payment of cash instead of tendering receipts for the purchaser’s distributive share of the entire purchase price, the form as well the legal effect of the transaction was to make the cash received from the purchaser by the trustees, money which was trust funds belonging to the trustees only for distribution pro rata. This transaction made the return of the entire cash payment to the purchaser, instead of merely its distributive share thereof, a misapplication by the trustees of the funds for distribution, to the extent of the over-payment. In either aspect of the case, the trustees are liable to the beneficiaries, whose shares in the purchase price have been wrongfully dealt with for the sole benefit of the purchaser. The principal having been paid over by order of the court, the question now to be decided is, whether 'by reason of these defaults or either of them, the trustees are liable to the shareholders whose share in the purchase [14]*14price have been thus wrongfully dealt with, for interest, when they have in fact received no interest, and if so, to what extent and how it shall be computed.
. Trustees under private deeds or documents, wrongfully investing or misapplying trust funds for the purposes of. trade, are liable for interest, and if the trusts require annual payments to beneficiaries, annual rests are made. This is done not by way of punishment (which would seem to be beyond the power of a court of equity, whose jurisdiction in this class of cases extends only to the protection of rights of property), but by way of returning to the beneficiaries, in compensation for their loss, that profit or return on the trust funds, which the trustee must be presumed to have made by the wrongful use of trust funds, either in his own trade or that of another. According to usual and ordinary methods of business, upon advances of funds for use in trade, annual rests are made. The trustee is therefore liable for such compound interest, when, according to the usual and ordinary methods in the business for which the loans were made, he would have been entitled to receive interest annually, and therefore must be presumed to have received it. If the funds are used in the trustee’s own trade, the cestui que trust has in addition the option of taking the profits or compound interest. In McKnight v. Walsh (Chancellor Zabriskie, 1872), 23 N. J. Eq. 136, 146; S. C., affirmed on appeal. 24 N. J. Eq. 498 (at pp. 509, &c.); Attorney-General v. Alford, 4 DeG. M. & G. 843, and Burdick v. Garrick (Court of Appeal, 1870), 5 Ch. App. 241; S. C., 39 L. J. Ch. 369 (Lord Chancellor Hatherly, at p. 373); Vyse v. Foster (Court of Appeal, 1872), 8 L. R. Ch. 309, these general principles upon which compound interest is chargeable against such trustees for willful default by the wrongful investment of funds in trade, either of themselves or others, are worked out. In the following case, compound interest was charged against the defaulting trustee, Fowler v. Colt, 25 N. J. Eq. 202; S. C. on appeal, Salisbury v. Colt, 27 N. J. Eq. 492 (1875), where the trustees failed to separate and invest trust funds, but left them in stock of a company, and interest was payable annually. In French v. Armstrong (Vice-Chancellor Stevens, 1912), 79 N. J. Eq. 289, an officer of [15]*15a building and loan association using funds in his hands for loans, was charged with compound interest for eight years. I think extended reference'to'numerous cases from other courts cited and analyzed by counsel on both sides in their elaborate briefs is unnecessary.
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Emery, Y. C.
(after statement of facts and issues).
The objection as to defect in parties, because of omission to join the personal representatives of deceased trustees, is unfounded. The general rule as to trustees under private trusts is that each trustee is severally liable for a loss resulting from a joint breach of trust. 1 Lew. Trusts *767, *772. A fortiori trustees and receivers, acting as judicial trustees, under the Corporation act and decrees of court in insolvency and dissolution proceedings, must be liable severally as well as jointly for defaults in which they have joined. The title to part of the trust property here in question (the unpaid purchase-money due from the purchaser) devolved on the survivors alone, with the right to recover it from the purchaser, and as to all of the trust fund or property, the trusteeship survives on the death of one of several joint trustees. And a-s it is the duty of the survivors to account for the trust fund and place it in a proper position, the representatives of a deceased trustee vare not necessary parties to a suit or proceedings against the surviving trustees to account for the trust fund in their hands. Beattie v. Johnstone (Vice-Chancellor Wigram, 1850), 8 Hare 169. As the estate of the deceased trustee is, however, liable to account for a default in which he joined, the representatives may be joined as proper parties. Wilkinson v. Dodd, 40 N. J. Eq. 123, 141, and cases cited.
London Gas Light Co. v. Spottiswoode (Vice-Chancellor Bird, 1885), 14 Beav. 264. The general rule that all parties liable to a demand should, be before the court, is a rule of convenience in procedure adopted to prevent further suits for contribution, and not a rule of necessity. I Dan. Ch. Pr. (6th Am. ed.) *272. It may therefore be dispensed with for sufficient reason, for the purpose of rendering a final decree between the parties in court.
The defendant trustees in this case were judicial trustees under the- Corporation act and the decree of the court defining their powers and duties relating to the sale of the assets of the corporation, and the distribution of the proceeds of sale among the parties entitled, who were also fixed by the decree. The case as to their liability for interest stands as follows: The decree for sale was based on and contemplated a sale for cash only, with an immediate distribution pro rata of the entire purchase-[13]*13money available under the decree for that purpose among the preferred stockholders named in the decree. There was therefore a double default of the trustees; first, in conveying the assets, without requiring payment in cash of the entire purchase-money, and second, in immediately distributing or paying back to the purchaser alone the whole cash received upon the conveyance. As the amount of this payment was the purchaser’s entire pro rata share of the whole purchase price fixed by the decree, the distribution was a partial preferential cash payment to this single stockholder to. the extent of about $43,750. The entire assets were conveyed by the trustees for the purpose of continuing the use of them in carrying on the trade of the purchaser who received them for this purpose, without being required by the trustees to pay interest on the deferred purchase-money payment, and who did so use and hold them for over ten years. According to the claim presented in the arguments and briefs on behalf of defendants, the trustees and the purchaser as between themselves seem to have acted upon the idea that they were dealing altogether with unpaid purchase-money, payable by the purchaser to the trustees, and to be credited on its bid when afterwards paid, but without interest. But under the form which the purchase, conveyance and partial payment actually took by the choice of the purchaser, viz., the payment of cash instead of tendering receipts for the purchaser’s distributive share of the entire purchase price, the form as well the legal effect of the transaction was to make the cash received from the purchaser by the trustees, money which was trust funds belonging to the trustees only for distribution pro rata. This transaction made the return of the entire cash payment to the purchaser, instead of merely its distributive share thereof, a misapplication by the trustees of the funds for distribution, to the extent of the over-payment. In either aspect of the case, the trustees are liable to the beneficiaries, whose shares in the purchase price have been wrongfully dealt with for the sole benefit of the purchaser. The principal having been paid over by order of the court, the question now to be decided is, whether 'by reason of these defaults or either of them, the trustees are liable to the shareholders whose share in the purchase [14]*14price have been thus wrongfully dealt with, for interest, when they have in fact received no interest, and if so, to what extent and how it shall be computed.
. Trustees under private deeds or documents, wrongfully investing or misapplying trust funds for the purposes of. trade, are liable for interest, and if the trusts require annual payments to beneficiaries, annual rests are made. This is done not by way of punishment (which would seem to be beyond the power of a court of equity, whose jurisdiction in this class of cases extends only to the protection of rights of property), but by way of returning to the beneficiaries, in compensation for their loss, that profit or return on the trust funds, which the trustee must be presumed to have made by the wrongful use of trust funds, either in his own trade or that of another. According to usual and ordinary methods of business, upon advances of funds for use in trade, annual rests are made. The trustee is therefore liable for such compound interest, when, according to the usual and ordinary methods in the business for which the loans were made, he would have been entitled to receive interest annually, and therefore must be presumed to have received it. If the funds are used in the trustee’s own trade, the cestui que trust has in addition the option of taking the profits or compound interest. In McKnight v. Walsh (Chancellor Zabriskie, 1872), 23 N. J. Eq. 136, 146; S. C., affirmed on appeal. 24 N. J. Eq. 498 (at pp. 509, &c.); Attorney-General v. Alford, 4 DeG. M. & G. 843, and Burdick v. Garrick (Court of Appeal, 1870), 5 Ch. App. 241; S. C., 39 L. J. Ch. 369 (Lord Chancellor Hatherly, at p. 373); Vyse v. Foster (Court of Appeal, 1872), 8 L. R. Ch. 309, these general principles upon which compound interest is chargeable against such trustees for willful default by the wrongful investment of funds in trade, either of themselves or others, are worked out. In the following case, compound interest was charged against the defaulting trustee, Fowler v. Colt, 25 N. J. Eq. 202; S. C. on appeal, Salisbury v. Colt, 27 N. J. Eq. 492 (1875), where the trustees failed to separate and invest trust funds, but left them in stock of a company, and interest was payable annually. In French v. Armstrong (Vice-Chancellor Stevens, 1912), 79 N. J. Eq. 289, an officer of [15]*15a building and loan association using funds in his hands for loans, was charged with compound interest for eight years. I think extended reference'to'numerous cases from other courts cited and analyzed by counsel on both sides in their elaborate briefs is unnecessary.
As the statutory and judicial trust was for receiving the purchase price and then holding and distributing, it is insisted that pending the delay in distribution, for which they were not in fault and during which they have received no interest, no interest should be allowed, and certainly not compound interest. These trustees, however, did not in fact retain the funds for distribution without investment, in which case they might either not have been liable at all for interest, or not beyond the amount which the shareholder would have received on money paid into court, but they made the delay of the shareholder the occasion of wrongfully misapplying the funds in their hands solely as judicial trustees, for the purpose of benefiting the purchaser by the use thereof in its trade without interest. This circumstance, in my judgment, makes them liable to the beneficiaries for the money belonging to them in their hands which the trustees loaned out, and for the usual and ordinary interest on money so advanced for trade, which would be interest with annual rests. Eo trustees can retain profits derived by themselves from the use of trust funds in their trade, nor can trustees under private trusts, in my judgment, give away solely for the benefit of a third person’s trade, the ordinary and usual return for the use of the trust money in their hands, without liability therefor. And statutory and judicial trustees or receivers are held to the most stringent rules of liability for the improper use of trust funds in their hands. Such trustees or receivers act under the obligations not only of ordinary trustees, but also a,s the officers of the court, upon whom the court, in protecting all parties interested, must depend for working out and assuring the safety and proper distribution of the corporate assets of which it has assumed control.
The fact that the principal of the trust funds improperly invested or misapplied wras in some sort subject to be repaid on call, cannot in this case at all relax the liability of the trustees [16]*16for interest with annual rests, and for the plain reason that the trustees, according to their own answer, do not seem to have reserved the right to recall even the principal, except “as and when” the shareholders applied to them for payment of their share of the trust funds. These trustees holding trust funds or property pending distribution were not authorized to invest at all, and if they chose to invest, rather than pay into court, or ask for further instructions, were chargeable themselves with the protection of the cestui que trust’s right to interest on the fund, as well as to the fund itself, and could not by any agreement with the lender, here a participator in the default, make the payment either of interest or principal dependent on the action of the cestui que trust. The shareholder not only had no control over the loan of the trust funds to the purchaser, but does not appear to have had any notice until the receipt of a letter from counsel in December, 1911, that the cash payable by the trustees as his share on dissolution had not been actually paid to the trustees, and had not been actually in their hands since the sale. Their answer in the Standard suit, which is set out in the trustees’ answer to this petition, expressly stated that this fund
“is beld by the trustees * * * and the same has yielded and is yielding no izztez-est and pz-oducizzg no benefit to the distz'ibuting company or its trustees on dissolution or the Standard company or its trustees.”
This statement construed fairly and in the sense in which it was manifestly intended to be taken, is substantially a statement that the money for petitioner’s distributive share was then in the trustees’ hands for payment to him and was so held uninvested. In this sense it was untrue. Had it been true, petitioner might perhaps not have had the right to charge the trustees with interest on a fund which was unproductive by no fault of theirs. But the real reason it was unproductive was their own default in loaning it for the benefit of the purchaser’s trade, without any interest, and subject to call only when the beneficiary applied to the trustees. It was probable that such application would not be made until the close of the protracted litigation against the Standard company, for the reason that the acceptance of the distributive share on the principal sum of [17]*17the preferred stock might, as against the guarantor of the dividends, be claimed to terminate the guarantee. And the possibility that in petitioner’s suit against the Standard company, this guarantee of dividends on the Spirits Distributing Company stock might be held to continue, may have been a reason for the purchaser paying cash, instead of tendering' its own receipts for its distributive shares on this guaranteed stock.
The result of the arrangement betunen the trustees and the purchaser was to secure the benefit of the use in the purchaser’s trade and without interest, and during a litigation which would probably be prolonged, of the portion of the fund in the hands of these judicial trustees, which belonged to the petitioner under the decree, and without any notice to him of this unauthorized use of the funds.
Under the entire circumstances appearing in the case, the trustees are chargeable with interest at six per cent, and with annual rests.