Hatch, J.:
It appeared upon the trial that the testatrix, Mary Jewett, died on January 31, 1887, leaving a last will and testament, whereby'she constituted the defendants and one Benjamin K. True executors and trustees thereof. The will was duly admitted to probate, and said persons duly qualified as such executors. The questions that arise upon this appeal relate to the ninth clause of the will, which reads:
“ Ninth. I give and bequeath to my executors and executrix, in trust, so much and such a sum of money as will enable them to invest the same (which they are hereby directed to do), and keep the same invested, and therefrom produce a net sum of sixty dollars per year, which sum I hereby give and bequeath to the colored man, Isaac Thompson, now living with me, and which sum I direct to be [279] paid to him in quarterly payments during his natural life, and the principal sum so invested I give and bequeath to the herein-mentioned Benjamin K. True, and to Allen Prescott True, share and share alike, or in case of the decease of either of them before me, then to the survivor of them.”
In the course of the administration of the estate the funds, as received, were placed in bank .to the credit of the estate, checks upon which were payable only when signed by two of the trustees. About May 9, 1887, it was determined by the trustees to invest the sum. of §1,500 for the purpose of seeming payment of the annuity, and on that day the defendant George F. Hicks and True drew and signed a check, upon the estate account, for the sum of §1,500, and the same was delivered to True for the purchase of United States bonds. True never invested the money in any securities, but converted the same to his own use. He paid a part of the annuity irregularly, in small amounts, and died insolvent about December, 1891. On October 30, 1888, a judicial settlement of the accounts of the executors was had before the surrogate of Bichmond county. In the account as presented the executors credited themselves. with the sum of §1,500 and for the “ amount set apart for annuity of Isaac Thompson as per ‘ Schedule E. 1st.’ ” Thereupon the court entered a decree settling the accounts and directed “ that the sum of fifteen hundred dollars mentioned in £ Schedule E. 1st,’ of the account of said executor and executrix as cash paid to Benjamin K. True, executor, for purchase of United States bonds, being the amount set apart for the purpose of raising the sum of sixty dollars per annum for Isaac Thompson and now held by Benjamin K. True, be hereafter held by said executors and executrix as trustees under and pursuant to the trust created by the ninth clause of the will of said testatrix, and that said sum be invested by them forthwith according to law in the name of said executors and executrix as such trustees, and kept invested in their names to answer the terms of said trust.”
Up to the time of the entry of this decree neither of the defendants had interested themselves in the slightest to see that True executed the commission delegated to him by investing the funds intrusted to him. After the entry of the decree the defendant George F. Hicks, acting for himself and his co-executrix, demanded the money of [280] True or its investment, but did not obtain compliance with either demand. About May 21, 1889, Thompson instituted proceedings to punish True for contempt for failure to comply with the decree directing him to invest the money. This seems not to have proceeded beyond an order to show cause and its service, and no adjudication was had thereon. The court below found that the defendants and True had neglected to invest the money and produce the annuity, and that the defendants were negligent in not calling True to account and attending to the investment of the money in the bonds, and adjudged that they be charged as trustees with the sum of $1,500; directed that said sum be forthwith invested so that it would produce a net income of sixty dollars per annum, which sum was directed to be paid to plaintiff during his natural life, in quarterly payments, beginning January 1, 1895, and that plaintiff have judgment for the unpaid annuities and costs, amounting in the aggregate to $389.35.
It thus appears from the evidence and findings that the money which was paid to True came from the possession of the defendants and was paid to him from the funds of the estate, in pursuance of an agreement made by defendants so to do. The case is, therefore, brought within the rule that where the executor or trustee, sought to be charged, has received the funds of the estate, and voluntarily delivers them over to an associate, or does any act by which they are brought under the sole control and management of the latter, where otherwise he would not have received them, such executor or trustee so delivering the funds is liable for any loss that may be sustained as a consequence of such act. (Croft v. Williams, 88 N. Y. 384; Bruen v. Gillet, 115 id. 10.)
We find no case, upon the facts here presented, where this rule has been departed from. The evidence disclosed that True was a broker and dealt in the securities in which it was proposed to invest the money. There was no reason or excuse for delay in making the investment, and it seems to have been expected that it would be made at once, yet, in the continual presence of this expectation, the defendants did nothing, either by way of insistence or suggestion, to compel True to perform the obligation charged upon him and them, but remained perfectly passive in the matter until aroused to action . by the decree of the surrogate nearly eighteen months later. Even [281] then no decisive steps were taken. The cestui qui trust was making his wants known crudely but plainly, and with little light regarding his legal rights. True failed to pay the annuity promptly, sent one worthless check, and it was only by the most persistent effort that anything was forced from him. At some time, about this period, he must have been paid his fees as executor, amounting to $1,000, and this payment must have come through the defendants, as it does not appear that any moneys of the estate were collected by True individually, and money could only be obtained from the bank on the signature of two of the executors. With this condition of ignorance on the part of the cestui quA i/rust, and evidence of financial weakness on the part of Trae, the defendants were called upon to exercise prudence, care and diligence commensurate with known conditions for the protection of this fund. By no reasonable construction can we say that they did; on the contrary, there was a laxness and inattention to a plain duty which led the court below to a finding of negligence on their part in the discharge of their trust, and we think this finding is supported by the evidence. It is sought to defeat this conclusion by the claim that the decree of the surrogate is conclusive respecting the delivery of the money to True, and exonerates the defendants from liability on account thereof.
Free access — add to your briefcase to read the full text and ask questions with AI
Hatch, J.:
It appeared upon the trial that the testatrix, Mary Jewett, died on January 31, 1887, leaving a last will and testament, whereby'she constituted the defendants and one Benjamin K. True executors and trustees thereof. The will was duly admitted to probate, and said persons duly qualified as such executors. The questions that arise upon this appeal relate to the ninth clause of the will, which reads:
“ Ninth. I give and bequeath to my executors and executrix, in trust, so much and such a sum of money as will enable them to invest the same (which they are hereby directed to do), and keep the same invested, and therefrom produce a net sum of sixty dollars per year, which sum I hereby give and bequeath to the colored man, Isaac Thompson, now living with me, and which sum I direct to be [279] paid to him in quarterly payments during his natural life, and the principal sum so invested I give and bequeath to the herein-mentioned Benjamin K. True, and to Allen Prescott True, share and share alike, or in case of the decease of either of them before me, then to the survivor of them.”
In the course of the administration of the estate the funds, as received, were placed in bank .to the credit of the estate, checks upon which were payable only when signed by two of the trustees. About May 9, 1887, it was determined by the trustees to invest the sum. of §1,500 for the purpose of seeming payment of the annuity, and on that day the defendant George F. Hicks and True drew and signed a check, upon the estate account, for the sum of §1,500, and the same was delivered to True for the purchase of United States bonds. True never invested the money in any securities, but converted the same to his own use. He paid a part of the annuity irregularly, in small amounts, and died insolvent about December, 1891. On October 30, 1888, a judicial settlement of the accounts of the executors was had before the surrogate of Bichmond county. In the account as presented the executors credited themselves. with the sum of §1,500 and for the “ amount set apart for annuity of Isaac Thompson as per ‘ Schedule E. 1st.’ ” Thereupon the court entered a decree settling the accounts and directed “ that the sum of fifteen hundred dollars mentioned in £ Schedule E. 1st,’ of the account of said executor and executrix as cash paid to Benjamin K. True, executor, for purchase of United States bonds, being the amount set apart for the purpose of raising the sum of sixty dollars per annum for Isaac Thompson and now held by Benjamin K. True, be hereafter held by said executors and executrix as trustees under and pursuant to the trust created by the ninth clause of the will of said testatrix, and that said sum be invested by them forthwith according to law in the name of said executors and executrix as such trustees, and kept invested in their names to answer the terms of said trust.”
Up to the time of the entry of this decree neither of the defendants had interested themselves in the slightest to see that True executed the commission delegated to him by investing the funds intrusted to him. After the entry of the decree the defendant George F. Hicks, acting for himself and his co-executrix, demanded the money of [280] True or its investment, but did not obtain compliance with either demand. About May 21, 1889, Thompson instituted proceedings to punish True for contempt for failure to comply with the decree directing him to invest the money. This seems not to have proceeded beyond an order to show cause and its service, and no adjudication was had thereon. The court below found that the defendants and True had neglected to invest the money and produce the annuity, and that the defendants were negligent in not calling True to account and attending to the investment of the money in the bonds, and adjudged that they be charged as trustees with the sum of $1,500; directed that said sum be forthwith invested so that it would produce a net income of sixty dollars per annum, which sum was directed to be paid to plaintiff during his natural life, in quarterly payments, beginning January 1, 1895, and that plaintiff have judgment for the unpaid annuities and costs, amounting in the aggregate to $389.35.
It thus appears from the evidence and findings that the money which was paid to True came from the possession of the defendants and was paid to him from the funds of the estate, in pursuance of an agreement made by defendants so to do. The case is, therefore, brought within the rule that where the executor or trustee, sought to be charged, has received the funds of the estate, and voluntarily delivers them over to an associate, or does any act by which they are brought under the sole control and management of the latter, where otherwise he would not have received them, such executor or trustee so delivering the funds is liable for any loss that may be sustained as a consequence of such act. (Croft v. Williams, 88 N. Y. 384; Bruen v. Gillet, 115 id. 10.)
We find no case, upon the facts here presented, where this rule has been departed from. The evidence disclosed that True was a broker and dealt in the securities in which it was proposed to invest the money. There was no reason or excuse for delay in making the investment, and it seems to have been expected that it would be made at once, yet, in the continual presence of this expectation, the defendants did nothing, either by way of insistence or suggestion, to compel True to perform the obligation charged upon him and them, but remained perfectly passive in the matter until aroused to action . by the decree of the surrogate nearly eighteen months later. Even [281] then no decisive steps were taken. The cestui qui trust was making his wants known crudely but plainly, and with little light regarding his legal rights. True failed to pay the annuity promptly, sent one worthless check, and it was only by the most persistent effort that anything was forced from him. At some time, about this period, he must have been paid his fees as executor, amounting to $1,000, and this payment must have come through the defendants, as it does not appear that any moneys of the estate were collected by True individually, and money could only be obtained from the bank on the signature of two of the executors. With this condition of ignorance on the part of the cestui quA i/rust, and evidence of financial weakness on the part of Trae, the defendants were called upon to exercise prudence, care and diligence commensurate with known conditions for the protection of this fund. By no reasonable construction can we say that they did; on the contrary, there was a laxness and inattention to a plain duty which led the court below to a finding of negligence on their part in the discharge of their trust, and we think this finding is supported by the evidence. It is sought to defeat this conclusion by the claim that the decree of the surrogate is conclusive respecting the delivery of the money to True, and exonerates the defendants from liability on account thereof.
By the Code of Civil Procedure (§ 2742) a judicial settlement of accounts, by the decree of a Surrogate’s Court, is made conclusive of four things: First, that the items allowed to the accounting party for money paid to creditors, legatees and next of kin, for necessary expenses and services, are correct. Second, that the accounting party has been charged with all interest on money embraced in the account for which he is legally chargeable. Third, that the money charged to the accounting party, as collected on debts stated in account, is all that was collectible. Fourth, that allowances for decrease, and charges for increase in value of property, were correctly made. We find nothing here which settles conclusively that True alone was chargeable with this money. So far as the account appears, it does not show that True had the money, and the defendants are simply credited with the sum set apart. The decree recites that the schedule shows cash paid to True for the purchase of bonds, and recites that he now holds it. But these recitals do not have the force nor are they intended to have, of relieving the defendants from [282] responsibility in connection with the fund, or of thereafter preventing inquiry as to how this fund came into True’s hands, and nothing in the statute gives it such effect. The substantial effect of the decree is to charge the defendants, as trustees, with the sum, and direct its investment to answer the terms of the trust. The force of this, unexplained, is to charge the defendants with the fund. They are not to he exonerated by showing that True had the money unless they go farther, and show that he came by it under such circumstances as charge him alone, or that they have been guilty of no dereliction of duty respecting it. (Matter of Niles, 113 N. Y. 547 ; 1 Perry on Trusts, §§ 417, 418, 419 ; 1 Lewin on Trusts & Trustees, §§ 263-266.)
If such be the fact it is idle to say that the decree is conclusive of plaintiff’s right to show that in fact the defendants are alone responsible for the money being in True’s hands.
It is further claimed that no power to amend the complaint existed in the court. It is true that the complaint was framed upon the theory of a recovery for the annuities due and unpaid. Such is its prayer for relief. But all the facts were pleaded which entitled plaintiff to a recovery, and the relief granted was fairly within the scope of the issue. The parties tried the action upon the theory that the defendants were to be charged for money sufficient to produce the annuity or be relieved entirely. All the evidence was introduced without objection, and the court was authorized to permit any judgment consistent with the complaint and embraced within the issue. (Code Civ. Proc. § 1207; Hale v. Omaha Nat. Bank, 49 N. Y. 626; Thacher v. Hope Cemetery Assn., 46 Hun, 594.)
The complaint, as originally framed, alleged, in. its seventh paragraph, that the defendants had failed and neglected to invest the money and pay the annuity, and had illegally appropriated the money to their own use and benefit. This alleged negligence, and the amendment allowed did not change the cause of action; it embraced a new allegation of negligence, but did not bring in a new cause of action. It was, therefore,, within the power of the court to allow it. (Davis v. N. Y., L. E. & W. R. R. Co., 110 N. Y. 646.)
If it were otherwise it does not appear that the defendants objected to the order amending the complaint. The order recites that the application to amend was made upon the trial in order to conform it 'to the evidence and facts; for aught that appears the defendants con[283] sented to the amendment, and they cannot now he heard to object thereto.
"While we reach the conclusion that the defendants are chargeable with the annuity secured to be paid by the terms of. the will, we think the judgment itself is unnecessarily onerous in compelling the investment of this fund. The will provides for the paying of the annuity during plaintiffs life, and upon his death the principal sum is to be divided between Benjamin 3L True and Allen Prescott True, share and share alike. As between Benjamin K. True and these defendants no claim can be made for his distributive share, and, so far as tire present controversy is concerned, it is not necessary to determine, nor could it be, from the present record, what the rights of Allen Prescott True are. It is sufficient now to provide for the "payment of the annuity, and this may be done by a modification of the judgment providing that the defendants give a suitable bond, secured by a mortgage upon unincumbered real estate, for the payment of the annuity, in lieu of the investment of the $1,500. This modification has the sanction of authority. (Earle v. Earle, 93 N. Y. 104.)
The judgment appealed from should be modified as above, the security to be approved by a justice of the Supreme Court, and, as modified, affirmed, with costs.
All concur.
Judgment modified so as to direct that appellants may give a bond, secured by mortgage upon unincumbered real estate, in lieu of the investment of the fund, such bond to be approved by a justice of the Supreme Court. So modified, the judgment is affirmed, with costs.