Vohmann v. . Michel

78 N.E. 156, 185 N.Y. 420, 23 Bedell 420, 1906 N.Y. LEXIS 912

• Court: New York Court of Appeals
• Decided: June 12, 1906
• Status: Published

Opinion

Werner, J.

The appellants in this court concede that the calling in of the mortgage before it was due involved the exercise of a joint discretion by the trustees, in which the participation of them all was essential to protect any person dealing with them. The learned counsel for the appellants insists, however, that although the mortgage was called in before it was due, the trustees are estopped from challenging the validity of the transaction because' of their surrender to Ooenen of the full control of the trust estate, and their failure, upon the discovery of his dishonesty, to compel him to make restitution, as well as their omission to promptly notify the defendant Michel. We think this contention cannot be admitted, While the conduct of the appellants in these respects and in taking releases from their adult cestuis gue trustent may be quito sufficient to create an estoppel against them individual !y, we do not think their acts • constitute such an estoppel as to prevent them from enforcing, as trustees, the demands of the estate which they represent. (Ludington v. Mercantile Nat. Bank, 102 App. Div. 251; affd. on opinion below, 182 N. Y. 522.)

If this "were all that is shown by the record before us we should be compelled, notwithstanding the obvious hardships of the case, to concur in the conclusion reached by the learned Appellate Division. It appears, however, that at the time of the discovery of Coenen’s dishonesty two of the beneficiaries of the trust estate were adults. Hermann Pommer was then about 23 years of age, and Frank C. Pommer was about 25. They were at that time fully informed of Coenen’s misdeeds, and that his fraud and defalcation had entailed upon the estate a loss of about §21,000. With full knowledge of these facts they released the two trustees, Vohmann and Mecke, from all liability on account of Coenen’s default, and gave to Coenen himself receipts for their distributive shares in the estate. They concurred with the two trustees in permitting Coenen to resign his trust without calling him to account, and consented to his leaving the country without making any attempt to compel restitution. - They voluntarily released Vohmann and Mecke from all liability, although it was through their neglect of the duties of their trust that Coenen was afforded, to some extent at least, the opportunity to perpetrate his frauds, and in effect connived at Coenen’s unmolested escape from prosecution. After having released all the guilty parties ami acquiesced in all that had been done from the discovery of the irregularities in September, 1901, until the bringing of this action in February, 1903," they now seek to compel Michel, the innocent mortgagor, to ■ bear the full burden of Coenen’s wrongdoing in respect of this mortgage, although the mortgagor was not notified or given any opportunity to protect himself. We think it would be highly inequitable to permit the plaintiffs at this late day to disregard and disaffirm all' that has been done by the two adult cestuis que trusty and to proceed against these defendants in the same manner as they could have, done if they had not formally acquiesced in Ooenen’s default. “ Where the cestui que trust has assented to or concurred in the breach of trust, or has subsequently acquiesced in it, he cannot afterwards ¡iroceed against those who would otherwise be liable therefor.” (Beach on Modern Eq. Juris. § 244; Perry on Trust, § 850; Thompson v. Har rison., 2 Bro. Ch. 164; Kirby v. Taylor, 6 Johns. Ch. 242.) In this connection it should be borne in mind that at the time these adult beneficiaries ratified the defaulting trustee’s act they were entitled to the remainder of their shares of the trust fund, subject only to the contingency that they should arrive at the age of twenty-five years, a contingency which had occurred at the time of the trial. These remainders, therefore, were at the time of ratification subject to alienation and disposition by these two beneficiaries. We are, therefore, led to the conclusion that the adult beneficiaries, Hermann and Prank C. Pommer, have bargained away their right to now insist on a reinstatement of the lien of the mortgage so far as their interests aré concerned, and that the plaintiffs, who represent their interests, can have no greater rights than they have.

The judgment of the Appellate Division should be reversed, and the judgment of the trial court modified by directing that the $6,500 mortgage be re-established as a lien and foreclosed for only one-lialf of that amount, with interest, in favor of the two infant beneficiaries. As so modified, the judgment of the trial court is affirmed, and the record is remitted to the Special Term with directions to render judgment in accordance with the views herein expressed, without costs of this appeal to either party as against the other.

Cullen, Ch. J., O’Brien, Haight, Vann and Hiscock, JJ., concur; Willard Bartlett, J., not sitting.

Judgment accordingly.