Davis, J.:
This action is brought, first, to compel" an accounting by the executors of Daniel E. Seybel, for the purpose of ascertaining the amount of money justly and equitably due to the plaintiff from the estate of Daniel E. Seybel; second, to compel the defendant Union Trust Company, as executor of Mary J. Alker to assign to the plaintiff a certain bond and mortgage for $6,000 made by Leon Noel to the Park Mortgage Company, and for a judgment decreeing that the defendant Park Mortgage Company pay to the plaintiff such part of the $6,000 as would represent that part of the mortgage which the executor of Mary J. Alker failed to transfer to the plaintiff; third, to compel the Park Mortgage Company to assign to the plaintiff $200 of the mortgage of John Kitson Wright and wife, made to the Park Mortgage Company, and fourth, to trace the moneys alleged to belong to the plaintiff for the purpose of declaring that the property represented by the money be impressed with a trust in behalf of the plaintiff.
The court at Special Term dismissed the complaint against the executor of Mary J. Alker, and the defendant Welch, as executor, on the merits and rendered judgment in favor [864]*864of William F. Behrmann, as substituted trustee of Fannie Clarkson, against the executors of Seybel for $6,000, and for the further sum of $200, which latter amount was the consideration received by Seybel from the Dyckman estate for the purchase of Fannie Clarkson’s share of the Wright mortgage. The judgment also directed that the defendant Park Mortgage Company execute and deliver to the defendant Welch, executor of Isaac M. Dyckman, an assignment of the $200 interest in the Wright mortgage.
Daniel E. Seybel, for some time prior to 1910, was a member of the law firm of Silkman, Fettretch & Seybel. This firm did a large business in the purchase and sale of real estate, loans of money on bond and mortgage, and in purchasing and selling bonds and mortgages. An important part of their business consisted in investing the moneys of clients intrusted to it for that purpose. In order to carry on the business most conveniently for themselves and their clients, the firm organized the Park Mortgage Company. Whenever it purchased real estate or mortgages for clients, the title thereof was taken in the name of the Park Mortgage Company, the latter issuing at the time certificates showing the interest of the clients in the particular property. The corporation was in the absolute control of the members of the firm, they being the officers and directors, and Seybel being the controlling member of the corporation. The corporation kept no bank account and had no money of its own, nor did it keep any books. The moneys of the clients were kept in the firm’s bank account and the transactions with the clients were recorded in the firm’s books, and statements of the transactions were rendered to the clients in the firm name. The ownership of the various mortgages was shown in a book kept by the firm and known as the mortgage book. In this book were entered the names of the owners of the mortgages with a full description of the security.
Silkman died in 1910 and the business was continued by the new firm of Fettretch & Seybel. Fettretch having died in 1912, the business went on with the new firm of Seybel & French and was continued by that firm until the death of Seybel, on May 4, 1915.
The plaintiff Fannie Clarkson, now Mrs. Behrmann, [865]*865and Mary J. Alker were both clients of Seybel’s firm and each intrusted to it money for investment. Mr. Seybel had full charge of these investments, and it was he who decided into what securities the money should be placed.
The claim of the plaintiff has its origin in the following circumstances: Seybel had been executor of the estate of James Clarkson, deceased, who was the father of the plaintiff. In June, 1911, Seybel, through the American Audit Company, prepared an account of his proceedings as said executor and submitted it to the plaintiff for her examination and approval. Having examined the account she executed and acknowledged a receipt and release by the terms of which she acknowledged the receipt from Daniel E. Seybel of $7,343.58 in cash and securities in full payment and satisfaction of her one-fifth share of the residue of the estate of her father. This receipt states that it is taken as a full discharge of Seybel to account and that she had examined the account, covering a period from September 7, 1893, down to and including June 1, 1911.
Simultaneously with the execution of the receipt and release Fannie Clarkson executed an instrument giving and granting unto Seybel and his successors, $7,000 in cash and securities, in trust, to invest and reinvest the same upon bond and mortgage, upon property in the State of New York, and upon such other securities as trustees are permitted to invest in under the laws of the State of New York. Seybel was also authorized to receive the rents, income and profits from such investments and to pay over the net amount to Fannie Clarkson during her life. At her death the principal sum or the securities remaining in his hands were to be given to such persons as she might appoint by her last will. The instrument then provides for the disposition of this fund in case Miss Clarkson made no appointment by will. The instrument also empowers Seybel and his successors to sell and convey any real property which may be purchased by him upon the foreclosure of any mortgage investment and to give and deliver deeds thereof.
Among the assets appearing in Seybel’s account of proceedings as executor of Miss Clarkson’s father, was the bond and mortgage of Leon Noel for $6,000. It represented part [866]*866of the $7,343.58 belonging to Fannie Clarkson as her share of her father’s estate. It was, therefore, part of the trust fund passing to Seybel under the deed of trust. The mortgage in question was made by Leon Noel to the Park Mortgage Company in 1904. On the same date that the deed of trust was executed, the Park Mortgage Company executed and-issued to Seybel, as trustee for Fannie Clarkson, a certificate stating that it had sold to Daniel E. Seybel, as trustee for Fannie Clarkson, the Noel bond and mortgage for $6,000, and agreeing that, upon the surrender of the certificate and on demand of the person entitled to the bond and mortgage, it would deliver an assignment of the bond and mortgage. This certificate was signed by “ Park Mortgage Company, by Daniel E. Seybel, Treasurer.” The bond and mortgage were never assigned to Fannie Clarkson or to her trustee, Seybel, but interest thereon was paid by Seybel’s firm to Fannie Clarkson down to December 26, 1914.
When this certificate was issued it was pinned to the bond. The bookkeeper of Seybel’s firm testified that when a mortgage was transferred in this way, it was the practice of the firm to have the Park Mortgage Company issue a certificate and pin it to the bond. He also testified that the various clients who dealt with the firm were aware of this practice and that they were told that their interests were being taken care of in this particular way and knew that the bonds and mortgages were held in the name of the Park Mortgage Company and not in any other name, one of the purposes of this practice being to evade the paying of personal tax.
On the books of the law firm there was an account entitled Daniel E. Seybel, trustee for Fannie Clarkson. This account carries the Noel mortgage and the various payments of interest made to Fannie Clarkson.
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Davis, J.:
This action is brought, first, to compel" an accounting by the executors of Daniel E. Seybel, for the purpose of ascertaining the amount of money justly and equitably due to the plaintiff from the estate of Daniel E. Seybel; second, to compel the defendant Union Trust Company, as executor of Mary J. Alker to assign to the plaintiff a certain bond and mortgage for $6,000 made by Leon Noel to the Park Mortgage Company, and for a judgment decreeing that the defendant Park Mortgage Company pay to the plaintiff such part of the $6,000 as would represent that part of the mortgage which the executor of Mary J. Alker failed to transfer to the plaintiff; third, to compel the Park Mortgage Company to assign to the plaintiff $200 of the mortgage of John Kitson Wright and wife, made to the Park Mortgage Company, and fourth, to trace the moneys alleged to belong to the plaintiff for the purpose of declaring that the property represented by the money be impressed with a trust in behalf of the plaintiff.
The court at Special Term dismissed the complaint against the executor of Mary J. Alker, and the defendant Welch, as executor, on the merits and rendered judgment in favor [864]*864of William F. Behrmann, as substituted trustee of Fannie Clarkson, against the executors of Seybel for $6,000, and for the further sum of $200, which latter amount was the consideration received by Seybel from the Dyckman estate for the purchase of Fannie Clarkson’s share of the Wright mortgage. The judgment also directed that the defendant Park Mortgage Company execute and deliver to the defendant Welch, executor of Isaac M. Dyckman, an assignment of the $200 interest in the Wright mortgage.
Daniel E. Seybel, for some time prior to 1910, was a member of the law firm of Silkman, Fettretch & Seybel. This firm did a large business in the purchase and sale of real estate, loans of money on bond and mortgage, and in purchasing and selling bonds and mortgages. An important part of their business consisted in investing the moneys of clients intrusted to it for that purpose. In order to carry on the business most conveniently for themselves and their clients, the firm organized the Park Mortgage Company. Whenever it purchased real estate or mortgages for clients, the title thereof was taken in the name of the Park Mortgage Company, the latter issuing at the time certificates showing the interest of the clients in the particular property. The corporation was in the absolute control of the members of the firm, they being the officers and directors, and Seybel being the controlling member of the corporation. The corporation kept no bank account and had no money of its own, nor did it keep any books. The moneys of the clients were kept in the firm’s bank account and the transactions with the clients were recorded in the firm’s books, and statements of the transactions were rendered to the clients in the firm name. The ownership of the various mortgages was shown in a book kept by the firm and known as the mortgage book. In this book were entered the names of the owners of the mortgages with a full description of the security.
Silkman died in 1910 and the business was continued by the new firm of Fettretch & Seybel. Fettretch having died in 1912, the business went on with the new firm of Seybel & French and was continued by that firm until the death of Seybel, on May 4, 1915.
The plaintiff Fannie Clarkson, now Mrs. Behrmann, [865]*865and Mary J. Alker were both clients of Seybel’s firm and each intrusted to it money for investment. Mr. Seybel had full charge of these investments, and it was he who decided into what securities the money should be placed.
The claim of the plaintiff has its origin in the following circumstances: Seybel had been executor of the estate of James Clarkson, deceased, who was the father of the plaintiff. In June, 1911, Seybel, through the American Audit Company, prepared an account of his proceedings as said executor and submitted it to the plaintiff for her examination and approval. Having examined the account she executed and acknowledged a receipt and release by the terms of which she acknowledged the receipt from Daniel E. Seybel of $7,343.58 in cash and securities in full payment and satisfaction of her one-fifth share of the residue of the estate of her father. This receipt states that it is taken as a full discharge of Seybel to account and that she had examined the account, covering a period from September 7, 1893, down to and including June 1, 1911.
Simultaneously with the execution of the receipt and release Fannie Clarkson executed an instrument giving and granting unto Seybel and his successors, $7,000 in cash and securities, in trust, to invest and reinvest the same upon bond and mortgage, upon property in the State of New York, and upon such other securities as trustees are permitted to invest in under the laws of the State of New York. Seybel was also authorized to receive the rents, income and profits from such investments and to pay over the net amount to Fannie Clarkson during her life. At her death the principal sum or the securities remaining in his hands were to be given to such persons as she might appoint by her last will. The instrument then provides for the disposition of this fund in case Miss Clarkson made no appointment by will. The instrument also empowers Seybel and his successors to sell and convey any real property which may be purchased by him upon the foreclosure of any mortgage investment and to give and deliver deeds thereof.
Among the assets appearing in Seybel’s account of proceedings as executor of Miss Clarkson’s father, was the bond and mortgage of Leon Noel for $6,000. It represented part [866]*866of the $7,343.58 belonging to Fannie Clarkson as her share of her father’s estate. It was, therefore, part of the trust fund passing to Seybel under the deed of trust. The mortgage in question was made by Leon Noel to the Park Mortgage Company in 1904. On the same date that the deed of trust was executed, the Park Mortgage Company executed and-issued to Seybel, as trustee for Fannie Clarkson, a certificate stating that it had sold to Daniel E. Seybel, as trustee for Fannie Clarkson, the Noel bond and mortgage for $6,000, and agreeing that, upon the surrender of the certificate and on demand of the person entitled to the bond and mortgage, it would deliver an assignment of the bond and mortgage. This certificate was signed by “ Park Mortgage Company, by Daniel E. Seybel, Treasurer.” The bond and mortgage were never assigned to Fannie Clarkson or to her trustee, Seybel, but interest thereon was paid by Seybel’s firm to Fannie Clarkson down to December 26, 1914.
When this certificate was issued it was pinned to the bond. The bookkeeper of Seybel’s firm testified that when a mortgage was transferred in this way, it was the practice of the firm to have the Park Mortgage Company issue a certificate and pin it to the bond. He also testified that the various clients who dealt with the firm were aware of this practice and that they were told that their interests were being taken care of in this particular way and knew that the bonds and mortgages were held in the name of the Park Mortgage Company and not in any other name, one of the purposes of this practice being to evade the paying of personal tax.
On the books of the law firm there was an account entitled Daniel E. Seybel, trustee for Fannie Clarkson. This account carries the Noel mortgage and the various payments of interest made to Fannie Clarkson.
It thus appears quite conclusively that Fannie Clarkson conferred upon Seybel as her trustee power to sell the Noel bond and mortgage. It is quite true that the Pa,rk Mortgage Company did not make a formal assignment of the bond and mortgage to Seybel as trustee. It simply issued the certificate referred to. Nevertheless, Seybel controlled the situation and had the right under the deed of trust to him to adopt whatever method he pleased to sell the bond and mortgage for the [867]*867benefit of Miss Clarkson. He made such a transfer by causing the Park Mortgage Company to execute and deliver an assignment of the bond and mortgage to Mary J. Alker under the following circumstances: Mary J. Alker had been a client of the law firm for several years and at one time had placed in the possession of the law firm about $50,000 for investment on her account. On December 26, 1914, she had a balance of about $16,500 in the hands of the firm for investment and was entitled to this money at any time.
On the latter date, Seybel, as trustee of Fannie Clarkson, caused the bond and mortgage to be transferred to the account of Mary J. Alker, the Park Mortgage Company issuing a certificate to Mary J. Alker in form similar to that formerly issued to Daniel E. Seybel as trustee of Fannie Clarkson. At the same time, the account of Mary J. Alker with the firm was charged with the bond and mortgage and Seybel’s account, as trustee of Fannie Clarkson, was credited with $6,000, the amount of the mortgage. The parties stipulated at the trial that on the 26th of December, 1914, the firm of Seybel & French had in their hands uninvested funds of Mrs. Alker amounting to more than $6,000, part of which was the proceeds of a mortgage which had been paid off May 19, 1914. It was also stipulated that a finding to that effect be made by the court, and that finding was made. Under the circumstances of this case it cannot be said that Seybel caused the Noel mortgage to be transferred to Mrs. Alker to pay an antecedent debt. In March, 1915, Mrs. Alker decided to transfer her account from Seybel & French to the Union Trust Company. Accordingly, a representative of the trust company called upon the firm and arranged to have the account turned over to the trust company. At this time the Noel bond and mortgage was still in the name of the Park Mortgage Company, the evidence of Mrs. Alker’s ownership thereof being the certificate issued by the mortgage company on December 26, 1914. Thereafter, the Park Mortgage Company executed and delivered an assignment of the Noel bond and mortgage to Mary J. Alker and this bond and mortgage with other property was turned over to Mrs. Alker’s representative and her account with the firm of Seybel & French closed. It is claimed by the plaintiff, among other things, [868]*868that this assignment was without consideration and in fraud of the plaintiff’s rights.
It thus appears that the plaintiff and Mrs. Alker stood in somewhat different positions with reference to the sale of the Noel bond and mortgage. In the first place, the sale was made possible by the plaintiff. There is no doubt that under the deed of trust' to Seybel he had full power to make the sale to Mrs. Alker. Moreover, the plaintiff never took the trouble to ascertain if the bond and mortgage had been assigned to her trustee Seybel. The result was to permit the legal title to remain in the Park Mortgage Company, and she is properly chargeable with the consequences naturally flowing from this omission. One of the consequences was to permit Mrs. Alker to take the assignment of the Noel bond and mortgage directly from the Park Mortgage Company with no indication that it was trust property. There is nothing in the record to show that Mrs. Alker had any knowledge of any private arrangement between the plaintiff and Seybel, and when she took over the assignment of the bond and mortgage from the Park Mortgage Company there was nothing in the transaction to make her suspect that they were the property of the plaintiff or her trustee. Had she been made aware of that fact and then made an inquiry as to the power of the trustee to sell, she would have discovered that the plaintiff over her own signature had conferred full power upon the trustee to make the sale. Having made the inquiry, she would have met the full measure of her duty as a purchaser and would be protected in taking the assignment. (Spencer v. Weber, 163 N. Y. 493, 502.)
I think it is clear that Mrs. Alker was a bona fide purchaser of the bond and mortgage, without notice of any infirmity inherent in the transaction. It remains to inquire whether she gave any consideration for the assignment. The financial transactions with both Mrs. Alker and the defendant were carried on through the firm of Seybel & French, the latter giving the firm checks in settlement of income accounts with these clients.
When the Noel bond and mortgage were assigned to Mrs. Alker, she had on deposit with the firm for investment more than the amount of the bond and mortgage. Her account [869]*869with the firm was then charged with the amount of the bond and mortgage, and the account of Seybel, as trustee, was credited with $6,000. It may be contended that these were merely bookkeeping entries and were meaningless. It is nevertheless a fact that in banks, trust companies and other business houses, property is effectually transferred every day in this manner. And in the case at bar these entries had the effect of taking out of the account of Mrs. Alker a credit of $6,000, which, up to that time, had been subject to her call, and her account with Seybel & French was settled finally on that basis. The substance .of the transaction was the payment by Mrs. Alker to the trustee of the plaintiff of the sum of $6,000 in return for the Noel bond and mortgage, she having at the time more than $6,000 on deposit with Seybel & French for investment.
For these reasons I think Mrs. Alker paid a valuable consideration for the assignment of the bond and mortgage and has a right to retain them as against the plaintiff.
The result arrived at would not be changed even if the trustee intended to commit a fraud in the transaction. The fraud, if any, was made possible and easy by the plaintiff’s relinquishment of control over her property and by her failure to require that the bond and mortgage be held in the name of her trustee. Where one of two innocent parties must suffer through the fraud of a third party, he whose act made the fraud possible must bear the consequences.- (Yeoman v. McClenahan, 190 N. Y. 121, 127; Kirsch v. Tozier, 143 id. 390, 395.)
Finally, Mrs. Alker’s executor holds the legal title to the bond and mortgage in question and the case comes within the equitable doctrine referred to in Perry on Trusts (6th ed. § 218) where the author says: “ And it may be added that nothing is clearer than that a purchaser for valuable consideration, without notice of a prior equitable right, obtaining the legal estate- at the time of his purchase, is entitled to priority in equity as well as at law, according to the well known maxim that where equities are equal, the law shall prevail.”
The court has decreed that the $200 share of the Wright mortgage shall be assigned by the Park Mortgage Company [870]*870to the Dyckman executors, and that Fannie Clarkson recover of Seybel’s executors $200.
Fannie Clarkson originally owned the $200 share in the Wright mortgage, but it was never assigned to her by the holder, the Park Mortgage Company, nor did the latter issue to her the usual certificate of ownership. It appeared, however, on the books of Seybel & French in the account of Seybel as trustee under date of December 1, 1911, as the property of Fannie Clarkson and she received the firm’s check for interest thereon down to October 22, 1914. On October 22, 1914, Seybel, as one of the executors of Dyckman, bought the Wright mortgage, then reduced to $1,700, for the Dyckman estate, giving therefor a check for $1,748.45 drawn to the order of Seybel & French by himself as executor of Dyckman. This check was deposited in the firm’s account and by entries in the firm’s books the amount of the check was distributed among the accounts of those clients who appeared by the books to be owners of the participating shares of the Wright mortgage. Two hundred dollars were thus credited to the account of Fannie Clarkson as having been received from the executors of Dyckman. Entries were also made apportioning the interest then due. Thereafter interest on the Wright mortgage was paid to the Dyckman estate. It thus appears that the Dyckman executors gave full value for the share of Fannie Clarkson in the Wright mortgage, that they bought it from one upon whom she had conferred full power to sell and the transaction was carried through upon the books of Seybel & French in a manner with which she was acquainted and in which she must be held to have acquiesced.
The judgment of the Special Term should be affirmed, with costs.
Latjghlin, J., concurred; Clarke, P. J., and Scott, J., dissented.