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Francis v. United Jersey Bank
New Jersey Supreme Court
87 N.J. 432, 432 A.2d 15 (1981)
Charles, Jr. and William Pritchard (sons) were directors of Pritchard & Baird Intermediaries Corp. (Pritchard & Baird), a reinsurance broker that controlled millions of dollars of client funds in an implied trust. The only other director was their mother, Mrs. Pritchard. The sons siphoned large sums of money from Pritchard & Baird in the form of “loans.” Eventually, the corporation went insolvent because of the siphoned funds. During the time the funds were misappropriated, Mrs. Pritchard did nothing in her role as director. She never went to the corporate office; she never received or read financial statements; and she knew nothing of the corporation’s business affairs. Her husband, the deceased founder of Pritchard & Baird, had actually warned her to watch out for the sons before he died. Subsequently, Mrs. Pritchard died and the trustee in bankruptcy (representing the interests of many creditors) brought suit against the estate of Mrs. Pritchard (defendant) to recover the siphoned funds. Mrs. Pritchard’s estate appealed the ruling of the appellate court in favor of the trustee.
Rule of Law
Holding and Reasoning (Pollock, J.)
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