Atlantic Trust Co. v. Powell

23 Misc. 289, 50 N.Y.S. 866
CourtNew York Supreme Court
DecidedApril 15, 1898
StatusPublished
Cited by3 cases

This text of 23 Misc. 289 (Atlantic Trust Co. v. Powell) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantic Trust Co. v. Powell, 23 Misc. 289, 50 N.Y.S. 866 (N.Y. Super. Ct. 1898).

Opinion

Freedman, J.

The plaintiff by this action seeks to malee the estate of Benjamin. M. White, deceased, responsible for losses alleged to have been sustained by the estate of Elizabeth W. Whit-lock, deceased, in consequence of certain investments made by the said Benjamin M; White, while acting as executqr and trustee under the will of his sister, the said Elizabeth W. Whitlock.

The said Benjamin M. White died February 1, 1894, and in April, 1894, the defendant Wilson M. Powell was, by an order •of this court, appointed trustee in his place. Mr. Powell resigned ■as such trustee, and by a further order of this court, dated November 2, 1895, the plaintiff was appointed trustee in his stead under -the will of Elizabeth W.' Whitlock, deceased.

Benjamin M. White, by his own last will and testament, made the def endamts"Powell, Willits and Rider executors of his estate.

.The trust funds which came into the hands of Benjamin M. White in the year 1883, when he became sole surviving trustee of the estate of his sister Elizabeth W. Whitlock, amounted altogether to $31,000.

, 'Hie plaintiff on its appointment as trustee received from the •defendant Wilson M. Powell, the resigning trustee, certain assets -then composing the trust estate, as follows:

L. Bond and mortgage made by Frances. J. Arm am and her husband......................... $5,500
2. Bond of Mary J. Bolton (one of the defendants) and her husband......................... 1,000
"3. Note of B. M. White, dated November 1, 1892... 500
-4. Deed of Nos. 26 and 28 Chapel street, Brooklyn,, premises purchased by B. M. White, trustee, on foreclosure of mortgage.....1.............. 18,000
"5. Deed of No. 73 Furman street, Brooklyn, title to which was also acquired by mortgage foreclosure, 6,600

’As to the bond and mortgage made by Frances J. Annam and her husband it is conceded that .they are good security for the [291]*291money loaned and that the interest on them has been regularly paid.

The loan on the bond of Mary J. Bolton and her husband was not made by the trustee, but by the testatrix herself, and all claim on account thereof was withdrawn by plaintiff’s counsel on the trial.

The note for $500, made by White individually to himself as trustee, is admitted to be chargeable against the defendants, and the only question as to it, is whether it is not to be set .off against the amount established by the defendants as a counterclaim. This will be considered later on.

The only remaining claims of the plaintiff relate to the investment of $18,000, in the premises 26 and 28 Chapel street, and of $6,000, in the premises 73 Furman street.

As to the premises 26. and 28 Chapel street the investment was originally made by loans on mortgage, viz.: a mortgage dated February 28, 1888, for $13,000, and a mortgage dated May 29, 1890, for $5,000. These mortgages were foreclosed and the trustee was compelled to bid in the property. He received therefor a sheriff’s deed, dated December 5, 1892' and took title to himself as sole surviving executor, etc., of Elizabeth W. Whitlock, the consideration expressed in the deed being $18,000, the aggregate principal sum secured by-the two mortgages foreclosed.

As to the premises 73 Furman street, the investment originated in a loan of $6,000, in December, 1883. This mortgage was foreclosed and the loan renewed to the purchaser upon the sale. The second mortgage was foreclosed and- the loan renewed to a new purchaser upon the sale. The third mortgage was in process of foreclosure at the time of Mr. White’s death. Thereafter the foreclosure was completed and the property bid in at the sale for the benefit of the trust estate for the expressed consideration of $6,600. From 1883 down to the time of the foreclosure of the last mortgage 6 per cent, interest was realized on the investment.

It is claimed that these investments of $18,000 and $6,000 respectively were not made by Mr. White, with the toare or prudence incumbent upon him as trustee; but, on the contrary, [the samé were negligently made, and the- securities taken for these loans were inadequate; that the investments so made by Mr. White, as, trustee, were improvident 'and disastrous, and have so resulted that ho income whatever has been realized by the beneficiaries under Mrs. Whitlock’s will for the entire period between th'e date of [292]*292White’s decease and the appointment of the plaintiff .as trustee, and the plaintiff charges that substantial realization of the same by plaintiff of the assets turned over to it is precarious and doubtful.

But it is not claimed that Mr. White was guilty of any dishonesty or bad faith. ¡

The question, therefore, is whether he acted with reasonable prudencei in making the loans.

. The evidence shows that he invested his dead sister’s money oh like security, as he did his own money and his living sister’s money. He was, doubtless, actuated by a desire to secure for the children of his deceased sister, his own nieces,, who ¡are the beneficiaries1 named in the fourth clause of the will of Elizabeth W. Whitlock, the best possible income consistent with safety of the principal, and the loans seemed by the mortgages in question bore 6 per cent, interest, which Mr. White regularly paid /to .said nieces down to the time of his death. That Mr. White himself believed the property to be valuable, and the security good, .is shown by the.fact that he continued to pay to the said beneficiaries interest out of his own funds after the foreclosures, just as if the mortgages were still, existing. He, no doubt, expected to reimburse himself out of future rents, or from the proceeds of subsequent ¡sales. He bought in the property on foreclosure to prevent any loss to¡ the .estate he represented, and that he acted with good judgment in the matter of such purchases is shown by the testimony of the expert witnesses called by the defendants.

• The weight of the evidence is that, at the time the loans-were originally made, the Ohapel- street and Fumam street premises were adequate security, even if it be held that it was the' duty of Mr. White to loan no more upon them than about two-thirds of their respective, values; that, since that time, their values have become depreciated by reason of changes in the neighborhood over which Mr., White had no control; that Mr. White since that time did the best he could 'do under adverse circumstances; that at the time of his death in February, 1894, the premises were still worth substantially all they Oiád cost; and thatsihoe his death,"owing to the depressed condition in the market, such a depreciation! has occurred in nearly all Brooklyn property as to make it 'difficult to derive a suitable income from the premises in suit.

■ Now, Mr. White’s estate clearly cannot be held for the effects of the e’en eral depreciation which occurred after his death, and up to the time of his death he appears to have done all he could [293]*293do, provided the loans, when originally made, constituted proper investments, and as to that the weight of the evidence is that they were.

The result may, therefore, be an unfortunate one' to the beneficiaries under the will of Mrs. Whitlock, but under the circumstances of this case the estate of Mr. White should not be held liable on the theory that the investments were originally improper.

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Bluebook (online)
23 Misc. 289, 50 N.Y.S. 866, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-trust-co-v-powell-nysupct-1898.