East River Savings Bank v. 245 Broadway Corp. , 284 N.Y. 470 ( 1940 )

A deficiency judgment against the trustees personally was proper. The trustees could not bind the estate. In O'Brien v.Jackson (167 N.Y. 31) this court said (at p. 33): "The general rule is well settled in this state that executors or trustees cannot, by their executory contracts, although made in the interest and for the benefit of the estate they represent, if made upon a new and independent consideration, bind the estate and thus create a liability not founded upon the contract or obligation of the testator." Speaking of the rule, it was said inAustin v. Munro (47 N.Y. 360, 366): "The rule is too well established in this State to be questioned or disregarded; and any departure from it would be mischievous."

The use of such phrases as "as trustee, etc." does not relieve the trustee from personal liability. They are merely descriptive. In Taylor v. Davis (110 U.S. 330, 334, 335) the United States Supreme Court wrote: "A trustee is not an agent. An agent represents and acts for his principal, who may be either a natural or artificial person. A trustee may be defined generally as a person in whom some estate, interest, or power in or affecting property is vested for the benefit of another. When an agent contracts in the name of his principal, the principal contracts and is bound, but the agent is not. When a trustee contracts as such, unless he is bound no one is bound, for he has no principal. The trust estate cannot promise; the contract is therefore the personal undertaking of the trustee. As a trustee holds the estate, although only with the power and for the purpose of managing it, he is personally bound by the contracts he makes as trustee, even when designating himself as such. The mere use by the promiser of the name of trustee or any other name of office or employment will not discharge him."

The trustee is personally liable unless the contract, or other instrument, expressly relieves him of liability. In Taylor v.Davis (supra) the court said (at p. 335): "If a trustee contracting for the benefit of a trust wants to protect himself from individual liability on the contract, he must stipulate that he is not to be personally responsible, but that the other party is to look solely to the trust estate."

The court took defendants' testimony as to their undisclosed intention not to be personally bound. The testimony was inadmissible and was properly stricken out later. (Thomas v.Scutt, 127 N.Y. 133.)

The judgment should be affirmed.

LEHMAN, Ch. J., LOUGHRAN, FINCH, SEARS and LEWIS, JJ., concur with RIPPEY, J.; CONWAY, J., dissents in opinion.

Judgment accordingly.