Citation Numbers: 138 N.E. 83, 234 N.Y. 394, 25 A.L.R. 1470, 1923 N.Y. LEXIS 798
Judges: Cardozo
Filed Date: 1/9/1923
Status: Precedential
Modified Date: 11/12/2024
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 396 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 399 The action is in equity, brought by a surviving executor to follow and reclaim trust moneys converted by a deceased fiduciary. *Page 400
In September, 1915, John C.R. Eckerson had an account in his own name with the defendant, the Hudson Trust Company. He told Mr. Purdy, one of the defendant's officers, that he wished to open a second account, which for his own bookkeeping reasons was to be kept separate from the first. This account, it was agreed, would be designated "special." A day or so later he opened the new account with a deposit of $7,000. He brought with him a certified check for that amount upon the United States Mortgage and Trust Company. The check was signed "Wm. R. Denham by John C.R. Eckerson, att'y. in fact," and was drawn to the order of "John C.R. Eckerson, Trustee." Some comment was made by Mr. Purdy upon the use of the word "trustee" instead of the word "special." Mr. Eckerson said that he supposed the words to be interchangeable, that in fact there was no trust, and that the deposit was his own. Upon his indorsement of the check, an account described as "special" was opened in the defendant's books. At that time the standing of the depositor with banks and in the business community generally was high. His reputation went far to disarm suspicion of wrongdoing.
William R. Denham, the drawer of the check through Eckerson as agent, had signed a power of attorney in April, 1915. The power was a broad one, conferring authority on the agent for and in the name of the principal to make and indorse negotiable paper; to borrow money; to keep one or more banking accounts; and to draw against the accounts and make deposits therein. Mr. Denham was ill when the special account was opened, and died a few days later, September 21, 1915. His will named two executors, Eckerson and the plaintiff. Letters were issued to both, but the plaintiff took little part in the administration of the estate. Securities which had belonged to Mr. Denham were kept in a box of the United States Safe Deposit Company. Eckerson removed them, brought them from time to time to McCurdy, *Page 401 Henderson Co., stockbrokers, and caused them to be sold. Checks of McCurdy, Henderson Co., aggregating $18,817.36, drawn to the order of J.C.R. Eckerson and J.C.R. Eckerson, "special," were deposited in the special account in April, 1916. They were for the proceeds of sales. Checks of the same firm, aggregating $22,468.54, drawn to the order of J.C.R. Eckerson, "executor," were deposited in the same account in May, 1916. They were for the proceeds of other sales.
Eckerson at these times was the executor and trustee of another estate, that of Joseph H. Snyder. He kept an account as the representative of that estate with the Hudson Trust Company. A judgment of the Supreme Court made in April, 1916, in an action for an accounting directed distribution of $188,089.35, adjudged to constitute principal, and $52,999.81, income. The assets held by the trustee were not sufficient to permit the payments to be made. His embezzlements had brought about a deficit of $166.166.38. In this emergency, he made good his thefts from one estate, or part of them, by stealing from the other. He drew three checks aggregating $29,195 upon the "special" account, which contained the proceeds of the securities belonging to the estate of Denham. The checks, dated in May, 1916, were to the order of the estate of Joseph H. Snyder, and were placed to the credit of Eckerson, as executor. He distributed the moneys thus obtained among the Snyder legatees.
Eckerson died in October, 1916, and his thefts were then discovered. The surviving executor of the Denham estate now looks for reimbursement both to the Hudson Trust Company and to the estate of Joseph H. Snyder, represented by the defendant Taylor, who on the death of Eckerson was appointed the agent of the Supreme Court to execute the trusts. The Appellate Division has held that in accepting the check for $7,000, which opened the account, and in accepting the three checks *Page 402 for $22,468.54, drawn by McCurdy, Henderson Co. to the order of "Eckerson, executor," the Hudson Trust Company had constructive notice through the form of the checks that the deposit was a breach of trust. Judgment has gone against the trust company for the total of these items, less, however, the balance remaining in the special account on the death of the depositor. The result is to charge the trust company with liability for $18,448.87 principal, and interest $6,008.88, in all $24,457.75. The Appellate Division has held that the defendant Taylor, as agent or trustee, must refund $29,195, principal, and $9,340.40, interest, in all $38,535.40, moneys withdrawn from the estate of Denham and turned over without right to the trustee of the estate of Snyder. Both the Hudson Trust Company and Taylor appeal.
(1) The liability of the trust company will be the first subject of inquiry.
We begin with a consideration of the check for $7,000, which opened the account. The check was drawn, as we have seen, by Eckerson, attorney, to the order of Eckerson, trustee. The argument is that the trust company made itself a participant in the wrong when it placed the description "special" rather than "trustee" in the title of the account. Rights and wrongs are not built upon distinctions so inconsequent. If the word "trustee" had been added, Eckerson would have been equally free to draw the money out and use it as he pleased (Gray v. Johnston, L.R. 3 Eng. Ir. App. 1). The style of the account, the term of description attached to it, had no bearing on the result, no relation to the consequences. A different question would be here if the trust company had received the check for its own use, as, for example, in payment of a debt (Bischoff v. YorkvilleBank,
The plaintiff makes a point that the deposit, if not wrongful because of the description of the payee, is to be *Page 404
deemed wrongful, none the less, because of the description of the maker. The payee was described as trustee, the maker as an agent. One answer to this point suffices, though others may be available. The payee of the check, before delivering it to the defendant, had caused it to be certified. The legal result was the same as if he had received the cash over the counter (Freund v. Imp. T. Nat. Bank,
Reaching this conclusion, we are not required to determine to what extent the defendant would be protected by our ruling inHavana Central R.R. Co. v. Knickerbocker Trust Co. (
In thus disposing of the controversy, we do not forget such cases as Wagner Trading Co. v. Battery Park Nat. Bank
(
We pass to the checks of McCurdy, Henderson Co., amounting to $22,468.54, which were drawn to the order of Eckerson, "executor." Under our ruling in Bischoff v. Yorkville Bank
(supra), the defendant did not become a party to a wrong in crediting these checks to its depositor's personal account. We are told that the Bischoff case is to be distinguished upon the ground that there the account was general and that here it is special. The distinction is unreal. If we were to give it any effect at all, it would count in favor of the defendant's action rather than against, since the designation of the account as special suggests a separation of the items from those that are strictly personal. But in truth the label is unimportant. The executor was owner (Matter of Heinze,
(2) Our final subject of inquiry is the liability of the defendant Taylor as agent or representative of the Supreme Court in the execution of the trusts created by the will of Snyder.
When Eckerson took the money which he held as executor of one estate, and paid it to himself as the *Page 407
representative of another, he had notice in the act of transfer and acceptance that the money was stolen and ought not to be received. The notice was actual. It was not, as in Henry v.Allen (
We are reminded that the stolen money after the receipt by the trustee was paid out to legatees, to whom distribution was due under a judgment of the court. The distribution may render it impossible to identify or earmark the money in the hands of the trustee to-day. The impossibility affects the nature and scope of the relief. *Page 408
It does not involve as a consequence a refusal to give relief at all. The equitable lien is destroyed by the dissipation of the fund (Falk v. Hoffman,
It is argued that the legatees when they received the stolen money on account of a valid debt became holders for value, and acting without guilty knowledge may retain in good conscience the benefits received. Many cases are cited in support of this conclusion (Stephens v. Bd. of Education, Brooklyn,
It is argued that the effect of the judgment against the trustee under the Snyder will is to make the remaindermen suffer to a greater extent than the beneficiary of the trust for life or her personal representatives. Equity requires, it is said, that the burden of Eckerson's thefts be distributed proportionately between the life interest and the remainders. This, the brief tells us, has not been done. The life beneficiary or her estate has been paid in full; the judgment must be satisfied, it is said, out of assets that are held for the benefit of the remaindermen.
The point, if it is in the record at all, is not there with the clearness essential to make it the basis of our judgment. We do not know the terms of the will. There is no copy of it in the findings or even in the testimony. Possibly the cestui quetrust for life had equities superior to those of the remaindermen. We do not even know whether the money that was paid to her was part of the stolen money, or was derived from other sources. A *Page 411 deficit existed, but the estate had not been looted altogether, and its own assets were more than adequate to pay the cestui quetrust in full. The question is not before us whether if she has in fact been overpaid, a remedy against her or her estate is available hereafter at the suit of the remaindermen for a readjustment of the burden.
The judgment against the Hudson Trust Company, both at the Appellate Division and at the Special Term, should be reversed, except as to the conceded balance of $12,064.44, and the complaint dismissed except as to said balance, with costs in the Appellate Division and in this court. The judgment against the defendant Taylor as the agent of the court to execute the Snyder trusts should be affirmed with costs.
HISCOCK, Ch. J., HOGAN, POUND, McLAUGHLIN, CRANE and ANDREWS, JJ., concur.
Judgment accordingly.
Schuyler v. Littlefield , 34 S. Ct. 466 ( 1914 )
Hewitt v. Phelps , 26 L. Ed. 1072 ( 1882 )
Wylly v. S. Z. Collins & Co. , 9 Ga. 223 ( 1851 )
United States v. State Bank , 24 L. Ed. 647 ( 1878 )
Holly v. Missionary Society of the Protestant Episcopal ... , 21 S. Ct. 395 ( 1901 )
Colin v. Manufacturers Hanover Trust Co. (In Re Colin) , 1983 Bankr. LEXIS 4821 ( 1983 )
Conqueror Trust Co. v. Fidelity & Deposit Co. of Maryland , 63 F.2d 833 ( 1933 )
Cahan v. Empire Trust Co. , 9 F.2d 713 ( 1926 )
Maryland Casualty Co. v. City Nat. Bank , 29 F.2d 662 ( 1928 )
Childs v. Empire Trust Co. , 54 F.2d 981 ( 1932 )
Bank IV Olathe v. Capitol Fed'l Savings & Loan Ass'n , 250 Kan. 541 ( 1992 )
Andrew v. Presbyterian Church , 216 Iowa 1134 ( 1933 )
New Amsterdam Casualty Co. v. First Nat. Bank in Oklahoma ... , 144 Okla. 180 ( 1930 )
Rodgers v. Bankers National Bank , 179 Minn. 197 ( 1930 )
Feldman v. Capitol Piece Dye Works, Inc. , 185 F. Supp. 426 ( 1960 )
Marvin K. Woods v. The Bank of New York, and the 44 Wall ... , 806 F.2d 368 ( 1986 )
Cook v. Holland , 1978 Ky. App. LEXIS 648 ( 1978 )
Anderson v. Abbott , 61 F. Supp. 888 ( 1945 )
Cassirer v. Herskowitz (In Re Schick) , 42 Collier Bankr. Cas. 2d 118 ( 1999 )
Helena v. First National Bank of Helena , 173 Ark. 197 ( 1927 )