United National Bank of Troy v. Weatherby — 70 A.D. 279

Majority

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The United National Bank of Troy, Plaintiff, v. Catharine Ida Weatherby, as Administratrix, etc., of Nelson L. Weatherby, Deceased, Appellant and Respondent; The Travelers’ Insurance Company of Hartford, Conn., Appellant; James C. Wilbur, Individually and as Surviving Partner of the Firm of Weatherby & Wilbur, Defendant, and International Navigation Company, Respondent.

Headnote

Deposit, in a bank account in the name of a firm of brokers, of moneys of an insurance company and of a navigation company — under what circumstances they are respectively impressed with a trust— effect of the moneys being from time to time wrongfully withdrawn and thereafter being replaced.

The firm of Weatherby & Wilbur, who were engaged in the insurance and brokerage business, kept a bank account in the name of “ Weatherby & Wilbur.” In August and September, 1898, Weatherby, who was the agent for the Travelers’ Insurance Company, deposited in the account premiums collected by him for that company amounting to §813.64. In September, 1898, he deposited in the account §360.08, which represented the avails of drafts sold by the firm for the International Navigation Company. Weatherby died October 5, 1898, at which time the account contained §724.87. Several times

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during the month of September Weatherby, by means of withdrawals, made without the knowledge of the insurance company or the navigation company, reduced the account below the sums needed to discharge the two claims, but, as many times, made good such deficiency from some, undisclosed source. It did not appear that Weatherby deposited in the account any money except trust money, or that he had deposited therein moneys held in trust for any one but the insurance and navigation companies.

Held, that the several withdrawals and restorations made by Weatherby in his lifetime did not operate to extinguish the identity of the moneys originally deposited belonging to the insurance and navigation companies;

That, in the absence of any other claimants of the §724.87 than the creditors of Weatherby or his administratrix, such moneys constituted a trust fund, applicable to the discharge of the claims of the insurance and navigation companies.

Appeal by the defendant Catharine Ida Weatherby, as administratrix, etc., of Nelson L. Weatherby, deceased, from that portion, of a judgment of the Supreme Court in favor of the defendant' International Navigation Company, entered in the office of the clerk of the county of Rensselaer on the 13th day of August, 1901, upon the .decision of the court- rendered after a trial at the Rensselaer Trial Term before the court without a jury, which awarded the International Navigation Company $360.08, with interest and costs, out of a fund deposited in court by the plaintiff.

Also an appeal by the defendant the Travelers’ Insurance Company of Hartford, Conn., from that portion of the said judgment denying said defendant any part of said fund and awarding costs personally against said company in favor of the defendant Catharine Ida Weatherby, as administratrix, etc., of Nelson L. Weatherby, deceased.

This is an appeal from a judgment of a Trial Term of the Supreme Court declaring the interest of the several defendants in a fund of $1,240.89, deposited in plaintiff’s bank in the name of “ Weatherby & Wilbur.” The plaintiff makes no claim to the fund, and the contention is between' the defendants. A judgment of interpleader having been entered by consent, the said $1,240.89 has been paid into court. The defendant Catharine Ida Weatherby claims the money as administratrix of Nelson L. Weatherby, who died October 5,1898. The Travelers’ Insurance Company claims a portion of the fund, viz., $418.64 and interest, $313.64 haying been collected as premiums on policies of insurance and as agent of the' company by Nelson L. Weatherby in his lifetime, and $105 having

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been collected by the administratrix since his decease. James C. Wilbur appeared, but made no answer. He is the Wilbdr named in the firm name of Weatherby & Wilbur. The International Navigation Company claims $360.08 as avails of drafts sold which were by the company remitted to “Weatherby & Wilbur” for sale as brokers, the money realized on sale to be returned to the company.

The Special Term, on stipulation of parties as to the facts, decided that the International Navigation Company was entitled to have the full amount of its claim and interest from- October 5, 1898, paid out of the fund.

The court further decided that the Travelers’ Insurance Company bore the relation of “creditor to Weatherby,” and neither the insurance company nor J ames C. Wilbur was entitled to any share of the fund.

The court further found that Catharine Ida Weatherby, as administratrix, was entitled to the balance of the fund, and judgment was accordingly directed, with costs, in favor of the administratrix against the Travelers’ Insurance Company. From this judgment the Travelers’ Insurance Company and the administratrix appeal.

Shaw, Bailey & Murphy, for the plaintiff.

Learned Hand, for the respondent International Navigation Company.

Henry W. Smith and William W. Morrill, for the appellant Travelers’ Insurance Company.

James B. Egan and H. D. Bailey, for the administratrix.

King & King, for the defendant Wilbur.

Beyond doubt the claims of the International Navigation Company and of the Travelers’ Insurance Company aré for moneys held in a trust capacity. Weatherby held them as agent. Hence the decision of the trial court that the relation between Weatherby and the Travelers’ Insurance Company was only that of debtor and creditor requires a reversal of the judgment, or a modification of it,

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if it appears that the Travelers’ Insurance Company is entitled as • cestui qu’e trust to any portion of the fund.

It does not seem to admit of doubt but that the Travelers’ Insurance Company is entitled to- the $105 (less commissions) collected after the death of Weatherby by the administratrix and forming a part of this fúnd. As to the $313.64 collected in the. lifetime of Weatherby, its recovery in this action depends upon whether the proof is sufficient to warrant a finding that it now forms a part of this fund. It is an admitted fact that in small sums, on. different days in the months of August and September, 1898, this was deposited and was made a part of. a fund in the plaintiff’s bank kept under the name of “Weatherby & Wilbur.”

It is also admitted that the $360.08, claimed by the navigation company, was in like manner deposited by Weatherby in this fund during the month of September, 1898.

The fact is admitted also that Weatherby died October 5, 1898, and at that time the fund kept in bank and designated “ Weatherby & Wilbur ” amounted to $724.87, a little more than enough to satisfy these two claims, not allowing interest.

It is admitted that at all times prior to and on the 1st day of September, 1898, this fund had been kept and was then more than sufficient to satisfy the then deposits on account of these two companies ; that on September 2, 1898, by reason of withdrawals by Weatherby on that day, without the knowledge of either of the companies, the fund was reduced below a sum needed to discharge these claims; that on September 6, 1898, he made the fund good by restoration and continued the same good until September 17, 1898; that between September sixth and September seventeenth Weatherby received and deposited in this fund $290.26 of Navigation Company’s money and $199.63 of Travelers’ Company’s money, and the fund on that date was more than sufficient to satisfy their claims ; that on September seventeenth, without the knowledge of either company, Weatherby by withdrawals again reduced the fund below the sum needed to discharge these claims; that during the succeeding five days he restored the money, so that on September twenty-second the fund was again in excess of the united claims of these companies; that on the twenty-third of September Weatherby by withdrawals, without the knowledge or consent of either company,

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again reduced the fund below what was needed to satisfy these two claims, and subsequently made restoration, so that at the time of his death on October 5,1898, the fund amounted to $724.87. This seems to be the admitted history of this fund. I think it may be accepted as an uncontroverted fact in the case that deposits by Weatherby in the name of “Weatherby & Wilbur ” constituted a trust account. The business was in the nature of a trust business. The agreement of March 9, 1898, between Weatherby & Wilbur, which is set forth in the complaint, is claimed by the administratrix to have been a dissolution of that firm. However that may be, it is there stated .that the business was “ doing an insurance and brokerage business in the city of Troy.” The other undisputed facts show that the “insurance” was only the collection of premiums on insurance policies as agents, and brokerage was the handling of other people’s property as brokers for a commission. The agreement was to continue this business. Moreover, the agreement fairly contemplated a separate account and no mixture of funds. “ No personal accounts or debts to be made by either party to be charged against the business, or in such manner that the same can be presented as an offset against insurance premiums of the creditor.” Then the provision that, “at the end of each year the said Weatherby shall render a full account of the business,” required a separate account. Again, the law against the mixing of trust moneys with other moneys requires a separate deposit account; and the fact that this account was so kept in bank by Weatherby after the so-called dissolution seems conclusive that it was in tendea to represent and did represent a trust account — the depositary of trust money received by Weatherby. The fact that Weatherby on occasion, either inadvertently or intentionally, drew out money from this account for improper use, does not destroy the trust character of the account itself. Once the depositary of trust money it must be regarded as continuing so, and the money found in it must be taken as impressed with a trust until the trust is discharged. If we are right in assuming that this was a trust account, the act of Weatherby in every instance in making deposits in this account was a declaration on his part that such deposits were impressed with a trust. And there is no evidence in this case of any deposit therein by Weatherby of any money other than trust money,

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and the express admission by all the parties that this account w.as the depositary of the money held in trust for these two’companies it seems to me leaves no room to question that this was exclusively a trust account. It could not have been more so if the account had been designated “Weatherby, agent.” The only confusion that can be claimed then is that which arises from the mingling of trust funds with other trust funds, and this claim is one which the various. eestuis que trust can determine among themselves in the first instance, for the creditors of Weatherby or the administratrix representing them can have no interest in the fund until the various trusts are discharged.

The claim is made :by the administratrix that the several withdrawals and restorations made by Weatherby in hiis lifetime, operated to extinguish the identity of the money originally deposited belonging to these companies. The complete answer to that, it seems to me, is that such withdrawals were wrongful whether intentional or inadvertent, and presumably the wrongdoer by making subsequent deposits intended to make restoration and right the wrong. Under such circumstances, the eestuis que trust have a right to adopt these acts done for their benefit, and as against all the world besides the act of restoration is conclusive until at least it is shown that the. money used to make restoration belonged to. some one besides the wrongdoer. The act of restoration impressed the restored funds with the same trust which attached to. the money originally deposited. ' This, if we correctly interpret the opinion of the court, was so held in Baker v. N. Y. Nat. Ex. Bank ( 100 N. Y. 31 ). That was a case of deposits of proceeds of sales on commission made by Wilson & Bro. in the name of “ O. A. Wilson & Bro., agents.” The court held that this fund could not be reached by a creditor of Wilson & Bro., though that creditor was the bank itself, and the court,, by Andrews, J., says the -bank. “ could' not appropriate it to the debt of Wilson & Bro. even with their consent to the prejudice of the eestui que trusts.” The court further says as to these deposits not being in fact the proceeds of sales of goods óf their principals, “ conceding that Wilson & Bro. used the specific proceeds for their own purposes and their identity was lost, yet ■when they made up the amounts so used and depositéd them, in the •trust account, the amounts so deposited were ■ impressed with the

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trust in favor of the principals and became substituted for the original proceeds and subject to the same equities.” This was in effect held■ by the Court of Appeals at an earlier date (Van Alen v. American Nat. Bank, 52 N. Y. 1 ) and was followed in Gerard v. McCormick ( 29 N. Y. St. Repr. 709 , 712).

We are lead to the conclusion, therefore, that in the absence of other claimants than the creditors of Weatherby or the administratrix, the $724.87 constitutes a trust fund which is applicable by the direction of the court in this action to the discharge of the claims of these two companies. Nor do I think that we are embarrassed by any suggestion that there may be other oestmis que trust entitled to share in this fund and not here represented. A similar suggestion was made in Baker v. N. Y. Nat. Ex. Bank (supra), and it was there disposed of by the court saying: “The objection for defect of parties was not taken in the answer and moreover it does not appear that there are any unsettled accounts of Wilson & Bro. with any other person or persons for whom they were agents.” This case, so far as the complaint and several answers and stipulation of facts go, precludes the suggestion that there are other persons interested who have not been made parties to this action.

So far as the claim of the International Navigation Company goes, it might be supported on the grounds that Wilbur was, as to that company, a copartner of Weatherby and the money collected and deposited in name of Weatherby & Wilbur was copartnership money and first applicable to the discharge of this company’s claim. The contention that the stipulation by fair construction is an admission that this company had knowledge of any dissolution—if there was one in fact — and that the company dealt with Weatherby as an individual, is refuted by the receipts for the drafts and the letters with which the drafts were forwarded. As to the Travelers’ Company there is no question but it dealt with Weatherby alone as its agent. Wilbur under the written agreement of March 8, 1898, has a right to. insist that these moneys arising from the business shall be used to discharge the obligations of the business first; if there were any surplus it would be in the nature of profits, one-lialf of which would have to be applied for Ms benefit. This right of Wilbur any creditor of the firm may claim to be subrogated to and so work out the application of the copartnership effects to the discharge of the

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creditor’s claim. ■ I do not, however, deem it necessary that the navigation company should exercise its right to these moneys on that theory, I think it is plain that both of these companies are entitled to this fund because it is impressed with a trust for their benefit.

While the money paid into court amounts to $1,240.89, that portion of this which was turned over to the bank after the decease of Weatherby is not impressed with any trust by reason of any declaration or act of restoration on the part of Weatherby; hence only that portion other than the $724.87 actually identified as trust money can be taken by either of these companies. That portion is $9.80 of navigation company’s money and $78.75 (being $105 less agent’s commissions) Travelers’ Insurance Company’s money.

The judgment must, therefore, be modified by directing that of the $1,240.89 deposited in court there be first paid the sum of-$360.08 to the International Navigation Company and $392.39 be paid to the Travelers’ Insurance Company; that the International Navigation Company and the Travelers’ Insurance Company - are each entitled to costs of the action and costs of this appeal; that the balance of said $1,240.89, less thé said taxable costs allowed to each of the companies and lawful commissions, be paid over to the administratrix Catharine Ida Weatherby.

All concurred.

Judgment modified in accordance with opinion, and as so modified affirmed, with costs as indicated in opinion.

Cases cited

Baker v. New York National Exchange Bank 100 N. Y. 31 N.Y. 1885-10-06 p. 284
Van Alen v. American National Bank 52 N. Y. 1 N.Y. 1873-01-21 p. 285