Barlow v. Yeomans , 1867 N.Y. App. Div. LEXIS 205 ( 1867 )

By the Court,

Ingalls, J.

Reuben S. Barlow, one of the executors of the -will of James Barlow, deceased, received a portion of the estate and sold the same, and applied the money arising from said sale to his business, thereby commingling it with his own property, and preserving no evidence by which the trust fund can be identified. Under such circumstances we áre clearly of opinion that in the distribution of the assets of the said Eeuhen S. Barlow by the surrogate, no preference can be allowed in favor of the trust estate, but the same must stand on a footing with the other creditors. This principle is unmistakably recognized in the following cases : Hart v. Bulkley, (2 Edward’s Ch. 70;) Kip v. The Bank of N. Y. (10 John. 63;) Willett v. Stringer, (17 Abb. 152.) I have been unable to find an authority which asserts an adverse doctrine. When the identity of the trust fund is preserved; so that it can be traced, it will be protected ; but when the trustee is allowed to absorb the same in his business, it ceases to be sacred, and loses all preference. This rule undoubtedly operates harshly in some instances, but on the whole it is reasonable. A trustee should in all cases keep the trust fund separate, as thereby he protects himself from personal liability in case of loss of the fund. And the trust estate is far less liable to be sacrificed. A trustee has no moral or legal right to speculate upon trust property, or to subject the same to the hazards of trade. It not unfrequently happens that the cestui que trust is subjected to loss arising from the improvidence, carelessness, or dishonesty of the trustee, which the courts are powerless to remedy. Judgment must be entered in favor of the defendant, in accordance with the foregoing, in the form prescribed by section 373 of the Code.

[Albany General Term, September 16, 1867.

Miller, Ingalls and Hogeboom, Justices.]