Waterman v. . Webster , 108 N.Y. 157 ( 1888 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The appeal is to succeed or fail upon the findings of the trial judge. From those it appears as a fact that the payment of the mortgage was made by Webster to Jasper Waterman; that he had no authority to receive it; that it was wrongful and unwarranted, and, therefore, gave no support to the satisfaction or discharge which he signed and delivered to Webster. Against the conclusion of the trial judge the appellant contends (1), that the only parties to the mortgage were Webster and Jasper Waterman; and (2), that even if the mortgage was in whole or in part for the benefit of the plaintiffs, Jasper Waterman had the same right to receive the moneys secured thereby that he would have if upon the face of the mortgage it appeared to be for his sole benefit. In support of this contention the appellants cite section 113 of the Code of Procedure (then in force), which declares that the trustee of an express trust "may sue without joining with him the person for whose benefit the action is prosecuted," and which applies that character to one "in whose name a contract is made for the benefit of another," and from it he argues that the conclusion of the trial court is wrong. The point was not taken on the trial, nor does it seem to have any application. The payment was without suit, and how it would have affected the parties had it been made in the course, or as the result of legal proceedings we need not inquire. There was no suit, consequently no question as to proper parties. But the special authority of the mortgagee was the same as the general law on which the appellants rely. The mortgage provides that in case of default in payment, the mortgagee might sell the premises and retain the amount then due for principal and interest. This authority was not resorted to. The payment was voluntary, and the cases (Considerant v. Brisbane, 22 N.Y. 389,396; Brown v. Cherry, 38 How. Pr. 352; People v.Norton, 9 N.Y. 176; Grattan v. Life Ins. Co. 15 Hun, 74;People ex rel. Becar v. Struller, 16 id. 234) cited by the learned counsel for the appellants in support of his claim that the right to receive payment follows from his right to maintain an action for its enforcement, do not go to that extent. They do show that section 113 embraces not only formal trusts declared by deed, but all cases in which a person acting in behalf of a third party, enters into a written express contract with another either in his individual name or in his own name expressly in trust for another. The contract now involved is of neither description. The mortgage contained an express agreement to pay Jasper $650.12. So much was in a certain event to be paid directly to him and to that extent he might either receive payment or enforce the mortgage. But how was it before that event occurred? The grant was "security for the payment of $1,500 and interest," but to whom? — the interest on the whole sum, "to Sarah Waterman." She was the mother of Jasper and James, and had a dower interest in the premises, the conveyance of which formed the consideration of the mortgage. Upon her death $640.12 was "payable to Jasper," and upon the same event the remainder of the $1,500, viz., $859.89, was to be invested in real estate securities "for the benefit of the plaintiffs," children of James, "to be distributed between them when they respectively arrive at age." There is not only no provision for payment of this sum to Jasper, but it is provided that the securities shall "be prepared, ready to execute before it shall be payable." The further provisions in the mortgage for the payment to other parties in the event of the death of these children, or either of them, before they become of age, and the right reserved to the mortgagor to have the mortgage discharged upon executing other securities upon the same condition, exclude the idea of other power on the part of Jasper, or of any intent that he should receive the money or deal with the matter in any way after those children became of age. It was after that event happened to all, that the defendant Webster paid, and Jasper received the money which should have been paid to them. The power to enforce the mortgage for so much of the debts as was so payable, vested in the plaintiffs and by statute was made part of their security. (1 R.S., tit. 2, art. 3, chap. 1, pt. 4, p. 737, § 133.) If, therefore, upon default of Webster, an action had been brought by Jasper, it must be presumed that the plaintiffs' rights would have been protected against a payment by the mortgagor in violation of the terms of the mortgage, and it cannot be supposed the court would either have authorized the receipt of money in place of securities for the infants, or, after their majority, have allowed money payable to them to go to the hands of Jasper. As to them he had ceased to be a trustee, or, if not, he had no right to change the essential provisions of the trust, far less to annul the trust itself, and in dealing with him in contravention of its terms and of his duty, the defendants took the risk. (Swift v. Smith, 102 U.S. 442; McPherson v. Rollins,107 N.Y. 316.)

The learned counsel for the appellants also argues that Webster is protected by the provision of section 66, 1 Revised Statutes, page 730, title 2, part 11, chapter 1, article 2. It also seems inconclusive. "No person," it says, "who shall actually and in good faith pay a sum of money to a trustee, which the trustee as such is authorized to receive, shall be responsible for the proper application of such money, according to the trust; nor shall any right or title derived by him from such trustee, in consideration of such payment, be impeached or called in question, in consequence of any misapplication by the trustee, of the moneys paid." What authority had Waterman to receive the payment? If the above views are correct he had no authority, and as Webster acted in violation of the agreement embodied in his mortgage, he cannot be deemed to have acted in good faith in making payment. The lien in question was not for the benefit of the mortgagor; he had been separately provided for and was fully paid. It was created for the benefit of the plaintiffs by the direction of their father, from whom the consideration moved, and with the concurrence of the defendants. It remained, notwithstanding the fraud or mistake by which the defendants were actuated in placing a formal discharge upon the record, and whether it was by one or the other the plaintiffs should not suffer. The mortgage had for its object the benefit of the plaintiffs. They were the persons intended to be benefited, and were so named. For this reason also they are entitled to maintain this action.

We think the court below committed no error, and that the judgment appealed from should be affirmed.

All concur.

Judgment affirmed.