
    
      Francis Mulligan et al. vs. Daniel Wallace.
    
    Defendant, a Commissioner in Equity, having funds of the Court to the amount of about $1,600, in his hands, was ordered by the Court to invest the same at interest, on good personal security; one M. owed the defendant, on his private account, about $1,000, and defendant, as Commissioner, loaned M. the $1,600, on bond and personal security, retaining, by M.’s offer, out of that sum, the amount that M. owed the defendant. M. and his surety afterwards became insolvent, and nothing could be collected on his bond: — held, that defendant had not invested the $1,600 in conformity to the order of Court, and that he was liable for the whole amount thereof, with interest.
    
      Before Dargan, Oh., at Union, June, 1850.
    So much of the Circuit decree as relates to the point on which this case was decided, is as follows :
    Dargan, Ch. — Daniel Wallace, the defendant, as Commissioner in Equity for Union district, was in possession of a fund belonging to the complainants, called the Mulligan fund. At June Term, 1836, this fund, amounting to one thousand five hundred and eighty-eight dollars and seventy-seven cents, being cash in the hands of the Commissioner in Equity, was, by an order of the Court, directed to be invested at interest on good personal securities. The Commissioner was ordered to make the investment. In June, 1837, in the execution of this order, he took the bond of Daniel A. Mitchell, as principal, and one William T. Crenshaw, as surety, for the amount of the fund. The reason the defendant assigns for not having sooner made the investment, is, that such was the abundance of money, that he was unable to effect a loan. At .Tune Term, 1840, the Commissioner reports to the Court, that although he considers the parties to the bond, (Mitchell and Crenshaw.) to whom the fund was loaned, as solvent, yet, as they were somewhat embarrassed with debt, he recommends that an order be made, requiring additional security, and that on failure to comply within a reasonable time, the bond should be put in suit.
    The order was passed, and in pursuance thereof, one Giles N. Smith was given as additional security to the bond.
    At June Term, 1842, the defendant reported that he was “not well satisfied that the securities to the bond were sufficient,” and recommended that an order be passed, requiring that a new bond, with two good and sufficient securities, be given within a reasonable time, and in default thereof, that the bond be put in. suit. The Court made an order according to the recommendation of the Commissioner. Mitchell was served with a notice of the order, and failing to comply, the bond was lodged with an attorney for suit, and a writ was issued on the 25th February, 1843. Before judgment was recovered, Mitchell and Smith had confessed judgments to more favored creditors ; the former to a very large amount. The property of the obligors to the bond has all been sold by the sheriff, with the exception of some negroes carried off by Mitchell from the State. None of the proceeds of the sale has been applied to this claim, which has been utterly lost by the insolvency of the parties.
    The complainants have filed their bill against the defendant, for the purpose of making him. liable for not having invested the fund in conformity with the order of the Court.
    They allege that Daniel A. Mitchell was indebted to the defendant, and that the defendant, instead of loaning the fund, kept it himself, and gave up to Mitchell the bond or note on which he was privately indebted to the defendant, and took his bona, with Crenshaw as surety, for the amount of the Mulligan fund. The only evidence on this point, is that which is afforded by the defendant’s answer. The defendant was particularly interrogated in regard to this transaction, and the facts as he states them, are to be regarded as the only evidence by which the question is to be adjudged. The defendant denies that Mitchell was, at the time, indebted to him the whole amount of the Mulligan fund. The precise amount of Mitchell’s indebtedness to him, he does not remember. He has no means now of accertaining, but believes that it was something over one thousand dollars. He did keep to himself as much of the Mulligan fund as was equal to the debt which Mitchell owed him, turned over to him the balance in cash, and took his bond, with Cren-shaw as surety, for the whole amount of the Mulligan fund. He had then on hand that fund in cash, in the specific bills in which it had been paid to him. He was not anxious to realize his debt on Mitchell at that time. It was Mitchell’s offer to discount, in the loan, the amount that he owed to the defendant. According to the defendant’s best recollection, there was no previous agreement to this effect between Mitchell and the defendant ; nor was the collection of his own debt against Mitchell, any inducement in negotiating the loan to him. This is substantially the defendant’s statement of facts. •
    The question is, whether this was an investment according to the order of the Court. I am far from thinking that the bona fides of the defendant is to be impugned in this transaction. His character for official and private integrity, and his present high position, would forbid any such conclusion. Nor is there any thing in the facts, as they appear to the Court, from which such an inference could be deduced. But the question is, whether he has followed the terms of the order, in investing the Mulligan fund; and whether the policy and settled principles of the law do not forbid that the financial officer of the Court should be permitted to mingle up his own private money transactions with those of his official trust. I am of opinion, that he did not pursue the terms of the order in the investment, tie did not invest the Mulligan fund, except in part. To the amount of a thousand dollars or more, he invested his own debt or claim against Mitchell, and to that amount retained the Mulligan fund in his own hands.
    There may not have been, on the part of the Commissioner, the slightest want of honesty of purpose in this transaction. Let that be conceded. But that is not the question. It is necessary that the financial department of the Court should be kept pure, and without suspicion. It is important that the officer in charge of it, should not be exposed to the temptation of making unlawful gain, and therefore, that he should be subject to rules, which should forbid his embarking in private speculation, in connection with affairs of his office, however innocent and lawful such speculations might be, if disconnected with his official duties. In order to carry out this policy effectually, it is necessary that rules should be established and inflexibly adhered to, which should forbid all such dealings and transactions. The enquiry in such case, is not whether the particular transaction is fair and honest. It may be a very corrupt transaction, and yet be made to wear a very fair exterior. Such is the power of the officer, on account of the nature of the trust and confidence, that a transaction of this character is difficult to be probed to the bottom; to say nothing of that numerous class of cases, in which the rights of parties committed to his hands might be grossly injured, without ever coming to their knowledge, or if known, without the ability or energy, on the part of the persons injured, to seek redress by appealing to Courts of justice. To prevent such great mischiefs, the law inhibits such dealings altogether.
    I am not aware of any case that is precisely a precedent for this. But I am satisfied that it falls within well settled principles and analogies. A Commissioner in Equity, like all other agents and trustees to sell, cannot purchase at his own sale, however fair the competition, equivalent the price, or honest the transaction in every particular. The object of the rule is to prevent such purchases altogether; the tendencies being, (however fair and honest the particular transaction,) to lead to corruption and peculation. It removes temptation, by withholding all inducements by which cupidity may be excited.
    In Com. of Public Accounts vs. Rose, (1 Des. 461,) it was held that an Attorney General, acting for the State in a suit upon a bond placed; in his hands for collection, cannot discharge or' release the same by taking lands or other property in payment, the proceeds of which he applied to his own use, without accounting to the State. Though he had delivered up the bond and mortgage by which the debt was secured, the debtor was not thereby discharged, but the original debtor was decreed to pay the debt. In the case of Latham vs. Sarrazin, cited in the last mentioned case as having been then recently decided, it was held that an attorney can do no act incompatible with the nature and end of his authority -; and that if he gives a discharge, or releases the debt without receiving it, his client would not be bound by it.
    In Jamieson vs. Forbes, Walker and others, (3 Des. 529,) Forbes, an attorney, had gotten possession of a bond by assignment, from W. H. Gibbes, the Master of the Court., The assignment was made to Forbes, not for his own benefit, but for third persons, who were interested as creditors, and he assigned it to the defendant, Walker, in satisfaction of his own debt. It was decreed by the Court, that the assignment by Forbes was void, and the bond was enforced against the obligor, for the benefit of the persons originally interested in it.
    In the Treasurers vs. McDowell, (1 Hill, 184,) it was held that though an attorney has an authority, after judgment, to receive his client’s money from the defendant in execution, and thereby to discharge the judgment, he cannot discharge the judgment by accepting an indemnity, or by making executory contracts in relation to his client’s rights. Jackson vs. Bartlett, (8 Johns. 366); Kellogg vs. Gilbert, (10 Johns. 220.)
    It seems to me that the foregoing cases present strong analogies for the case now- before me. In the latter, the defendant, the Commissioner in Equity, was ordered to invest a certain sum, then in cash in his hands, at interest. In the execution of the order, he kept to himself, and for his own use, a portion of the fund, and invested a debt due himself on a note. This, I have said, is no compliance with the terms of the order. It is objected to this view of the case, that it was the same thing substantially, because, if the cash had been paid to Mitchell on the loan, he could then forthwith have handed it over to the defendant, in payment of his note, and the effect of the rule would be to require an empty formality, and something to be done by indirection, which could not be done directly. The Court would look with great jealousy upon a case where the transaction had assumed the form stated in this argument. But I apprehend it will not be doubted, that if an attorney were to satisfy the claim of his client, or the sheriff that of a plaintiff in execution in his hands, by receiving property to his own use, or by accepting in satisfaction his own debt, the whole transaction would be held void, and the original debt enforced — yet the argument here urged in favor of the defendant, would apply with equal force in the case supposed ; for there, the debtor might go through the formality of paying the money to the attorney, or sheriff, and receiving back and giving his own debt, or other property, in payment. In either case the objection is unavailing. ■ In the present instance, that subterfuge or contrivance has not been resorted to. If it had, the Court would have looked closely into the transaction. It is time enough to decide such a case when it arises. The decree of the Court must be against the defendant, for the sum of one thousand dollars with interest, for he admits that he received at least that much of the Mulligan fund, in payment of his note on Mitchell.
    It is ordered and decreed, that the defendant account before the Commissioner of this Court, for one thousand dollars, and the interest thereon, so far as the same has not been paid, and that the Commissioner report thereon.
    • The defendant appealed, on the following grounds:
    1. Because the Commissioner complied with the order of the Court, in loaning the money, and the decree should have been for defendant.
    
      2. Because the Commissioner was guilty of no omission or neglect of duty, but on the contrary, used unusual diligence in endeavoring to secure the fund.
    3. Because the decree should have conformed to the former order of the Court, directing one-half the interest to be appropriated to the payment of certain debts, although the defendant should be liable.
    The complainant also appealed, on the ground :
    Because, from the case made, the Chancellor should have decreed against the defendant for the whole demand.
    
      Bobo, for complainants.
    
      Herndon, Dawkins, for defendant.
   Wardlaw, Ch.,

delivered the opinion of the Court.

The reasoning and authority by which the Chancellor has been conducted to the conclusion, that the defendant did not invest the fund in question in conformity to the order of the Court, are so satisfactory, that additional observations would add little to their strength. But in determining the extent of defendant’s liability, the decree does not seem to carry out fully its own principles. To secure the faithful execution of his duties, by the officer having charge of the funds in the custody of the Court, it is indispensable that he should be held to such strict accountability, as will disable him from making profit, by mixing private affairs with his official functions. To remove all temptation to the officer to engage in private speculations with trust funds, we must declare all such transactions to be unlawful. This is a rule, founded on policy, and of general application, and not depending upon the fairness or fraud of particular transactions. A trustee to sell, is forbidden to purchase at his own sale, however full may be the price he offers, and however frank and honest may be his conduct; and so a trustee to lend, shall not make the loan to himself, nor in lending to another, substitute his own ‘rights and credits’ for the trust money. Without meaning to impeach the honesty of the defendant in this case, it is proper to suggest, that an officer might be too readily induced to lend fifteen hundred dollars of the funds of the Court, upon insufficient security, if, in the process, the temptation be offered to him that he may cotemporaneously collect his own debt for $1000 from the borrower. One great purpose of establishing, as a rule, that such transactions are unlawful, is to avoid the necessity of inquiry into the circumstances of particular cases. The opportunities of evasion, and the difficulty of scrutiny,. are so great, that an inflexible rule on the subject is a matter of necessity. If the officer will mingle his private affairs with his official functions, he shall do it at the hazard of indemnifying suffering parties to the full extent of their loss.

It is manifest in this case, that full justice cannot be done to the plaintiffs, by fixing the liability of defendant at any sum short of the whole amount of the fund he was directed to invest. The defendant states in his answer, that he does not remember, and has no means of ascertaining, the precise amount of the borrower’s debt to him, but that it was something over one thousand dollars. The debt, then, was more than one thousand dollars, and why should defendant’s liability be limited to that sum, or any other less than the whole amount of the fund? The impossibility of ascertaining precisely the sum, and all the confusion on the subject, have been produced by the official misconduct of the defendant, and he must pay the penalty.

On the defendant’s third ground of appeal, it has been suggested to the Court, that by the original order of the Chancellor, directing the sale of the estate,- the proceeds of which constitute the fund in question, one-half of the interest of the fund was to be appropriated to the payment of certain debts- of Mulligan, until they were extinguished, and the other half only to be appropriated for the use of the plaintiffs. If this be so, one-half of the interest of the fund must be applied to the creditors, protected by the original order, and one-half to the use of the plaintiffs, until the interest lawfully accruing, would extinguish the debts, and afterwards the whole interest be applied to the use of the plaintiffs ; all proper payments of interest being allowed.

It is ordered and decreed, that the defendant account with the plaintiffs, before the Commissioner of this Court, for one thous- and five hundred and eighty-eight dollars and seventy-seven cents, and the interest thereon from June, 1837, on.the principles of this decree ; and that the circuit decree be modified accordingly.

JohnstoN, Dunkin and Dargan, CC., concurred.

Decree modified.  