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County of Tompkins v. Ingersoll

81 A.D. 344 Court N.Y. App. Div. English

Delivered by Parker, P. J.:

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The County of Tompkins, Respondent, v. Monmouth H. Ingersoll, as Executor, etc., of Charles Ingersoll, Deceased, and Others, Respondents, Impleaded with William P. Harrington, Appellant.

Headnote

A county treasurer has authority to assign a dond and mortgage in which money deposited under order of a Surrogate’s Oourt is invested — an order of the court i» not necessary.
A county treasurer, who, by. direction of the Surrogate’s Court, has invested in a bond and mortgage money paid into that court and deposited with him in accordance with the statute, may, without obtaining an order of the court authorizing him to do so, assign such bond and mortgage to a person who-pays him the full value thereof, and the assignee, if he acts in good faith, without knowledge or notice of any dishonest purpose on the part of the county treasurer, will acquire a good title to the bond and mortgage even though the county treasurer converts the purchase price t'o his own use.
Appeal by the defendant, William P. Harrington, from a judgment of the Supreme Court in favor of the plaintiff and the defendants, other than the said Harrington, entered in the office of the clerk of the county of Tompkins on the 4th day of September, 1902, upon the decision of the court, rendered after a trial at the Tompkins Special Term, declaring void and canceling of record a-certain assignment of mortgage to the defendant William P. Harrington.
The f-un'd over which this controversy arises was derived from, proceedings to sell the real estate of Fred Whitlock, deceased, to-pay his debts, taken in the Surrogate’s Court of Tompkins county. It consists of the surplus moneys belonging to his widow and infant heir, and was in the custody of that court to be invested for their'
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benefit. Under the provisions of section 2796 of the Code tha decree which distributed the same should have provided for its. investment “ in the public securities of the State, or of the United States ; or for the loan thereof secured by bond, and by mortgage upon unincumbered real property within the State, worth at least, exclusive of buildings thereupon, twice the sum lent,” unless tha court, in its discretion, had directed that it be paid to the infant’s, general guardian upon proper security given. As I understand tha record, the decree in this case directed as follows: That said fund “be invested by the county treasurer of Tompkins county, at interest, in the manner provided by law.”
It appears that the county treasurer received such money on or about November 26, 1897, and, instead of investing it at once, ha deposited it to his credit as such treasurer in the Ithaca Trust Company, where it drew three per cent per annum. Subsequently, on. September 1,1898, such treasurer applied to such Surrogate’s Court,, on his own petition, for leave to loan $500 thereof to Mrs. Ophelia. J. Seeley, to be secured by a first mortgage upon certain premises, therein described, and stating that such property was worth $4,000, and that such loan would draw five per cent interest. The surrogate made an order directing that such loan be made; and a mortgage was thereupon executed by Mrs. Seeley to Charles Ingersoll, county treasurer of Tompkins county, his heirs and assigns, to. secure such amount, and was thereupon delivered to and held by him for about one year. Subsequently, such treasurer used and: appropriated to his own- use a large amount of the court funds in his hands, and on September 7, 1899, he sold and assigned the-mortgage in question to William P. Harrington for the full face, thereof and accrued interest, and used the inoneys so received to-replace other court moneys so converted by him. Such purchase, was made by Harrington for full value paid and in good faith.. The treasurer subsequently . absconded, being indebted for such court funds in a large amount, and the question now arises between, said Harrington and the sureties upon said treasurer’s bond, upon, whom the loss shall fall.
The action is brought by the successor of such treasurer to recover-the . amount, with other amounts converted, against such sureties, under the provisions of section 147 of chapter 686 of the Laws of
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1892, as amended by chapter 112 of the Laws of 1901, said Harrington being made a party to the action. The sureties claim that the assignment of such mortgage to Harrington, having been made without any order of court, was without authority, and did not operate to pass any title to him; that such mortgage is- still the property of such- treasurer’s successor, and that lienee they are not liable for any loss on that account. The sai'd Harrington claims that he acquired good title to the same. The trial judge held that no title passed by the assignment, and ordered judgment accordingly. From the judgment so entered, said Harrington takes this appeal.
Randolph Horton and George S. Tarbell, for the appellant.
Jared T. Newman, for the plaintiff, respondent.
E. A. Denton, for the defendants respondents.

I do not find that either the court or the Comptroller has ever made any rule prohibiting a county treasurer from selling and delivering a mortgage, or other security, without an order of the court. Nor do I find any provision of law to that effect. With the claim of the respondents, that such an act is prohibited by section 751 of the Code, I cannot agree. The term “ surrendered ” does not express, or in any sense siiggest, the transaction of a sale and delivery. It involves the idea of yielding, of delivering in response to a demand; and I cannot conceive that, by the use of such word, the Legislature intended to include every transfer or delivery that it might become necessary for a treasurer to make in the course of the management of any particular fund. The section prior to the amendment of 1892 (Laws of 1892, chap. 651) applied to money only, and prohibited the payment of it out of court without a court order. (See Laws of 1876, chap. 448, § 751.) It was intended, to apply to those instances where the party to whom it was ultimately to be distributed claimed that the event had happened which authorized its delivery to him, and it was so universally interpreted. A transfer of such money, by the treasurer, from one .bank to another, or from a bank to an investment in securities of any kind, was never controlled by such section. So long as it remained in the custody of the treasurer, it was. still in court and not affected by the section. It was only when the court parted with all control

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of it, surrendered it to the alleged owner, that such section applied. The amendment of 1892, having the same purpose in view, simply enlarged the prohibition so that it should apply to securities as well as to money. The section was not designed to protect funds or property in court from misappropriation by the county treasurer, but from being surrendered out of the custody of the court, upon claims of ownership unlawfully made.

Nor do I find anything in the other sections of chapter 8, title 3, of the Code that in terms forbids such a sale and transfer by the treasurer.

The scheme of that title is substantially as follows : When a final judgment or decree directs merely that money be paid into court, it must be paid to the county treasurer. There does not seem to be any provision requiring him to mvest it, but he must deposit it in such trust companies, etc., as the Comptroller has designated.

The court may, however, and in most instances must, direct in the final judgment or decree that the money when so paid into court shall be invested by the county treasurer in the public securities of the State, of the United States, or in bond and mortgage upon property worth twice the amount loaned. When so directed, it is the duty of the treasurer to invest accordingly.

There is a further provision in section 747, which, in substance, authorizes the court at any time to direct that money which has been paid into court may be changed from one method of investment to another, upon its being made to appear by proper and sufficient evidence that the interests of the owners thereof require it. The purpose of this section is, evidently, not to protect the fund from misappropriation by the county treasurer, but to secure to the persons interested therein the right to have it invested in some manner more advantageous to them than that in which the treasurer has already invested it. All investments are taken in the name of the treasurer, and the title to the same are, by .section 749, vested in him. He, therefore, has the ultimate control of it as long as it is in court; and, hence, as in all other trusts, the protection of the beneficiaries seems to depend upon the pecuniary responsibility of the trustee and his sureties. I do not discover in the system any effort to protect the funds from the treasurer, by limiting his custody or management of the same.

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Inasmuch as there is no rule or provision of law that forbids the treasurer from selling and transferring a mortgage which he has taken to himself upon the loan. of court funds, is there any reason why the usual principles which control the disposition by the trustee of securities belonging to a trust fund should not apply ? When by a final decree a treasurer is directed to invest by loaning on-bond and mortgage, he is given authority to keep the fund so invested, such is the purpose of the direction, and he has, therefore, authority to change the securities as from time to time his best judgment and the exigencies of the case shall require. And his responsibility for each loan made seems to be similar to -that of any trustee who loans for the benefit of the trust. I can see no reason, therefore, why his powers concerning such loans should not be similar to such other trustees. Ordinarily trustees may discharge a mortgage taken. Clearly, it would seem, that the treasurer should have that power. Indeed, section 749 gives him authority to sue for and collect, and so, in effect, gives him authority to discharge; for the right to discharge should follow the right, to exact payment. And if lie may collect and discharge the mortgage, upon what theory should he be prohibited from selling and assigning it ? Suppose the mortgagor cannot himself pay the mortgage when it becomes due, but can procure one to purchase and carry it for him, is there any sensible reason why the treasurer may not take the amount due thereon and assign it to the one whom the mortgagor designates ? Suppose-the treasurer becomes doubtful of the security, but is, able to sell it in the market for its full value, should he not have the legal power to do so at once, whenever he thinks the safety of the fund requires ? Suppose the fund is invested in government bonds and it becomes' necessary to collect a part thereof to meet the claim of an infant owner who has become of age, may he not sell such bonds in the. market without an order of court ? The same reasons which have ever permitted a trustee, who by the terms of the trust is directed to invest the fund and keep it invested for the benefit of the beneficiary, to sell and assign and give good title, or acquittal, thereof, apply to a county treasurer, concerning his management, of the court funds; and I am of the opinion that the question whether he has given good title to any particular mortgage sold and assigned by him should be governed by the same rules. Indeed, section 749
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puts the treasurer upon the same footing as guardians, committees, etc., and it has been distinctly held that a guardian may so assign and transfer, before it is due, a mortgage taken by him as such, and that the purchaser acquired good title thereto, although the guardian subsequently misappropriated the amount received for the same. (See Field v. Schieffelin, 7 Johns. Ch. 150 .) That it has been the usual practice of county treasurers to so manage such securities see Baldwin v. Crary ( 30 Hun, 422 ). (See, also, Chesterman v. Eyland, 81 N. Y. 398 .)

Assuming, as I do, that the county treasurer had lawful authority to sell and transfer a mortgage which he had taken as an investment of moneys received under a decree of court directing him to invest the same, the defendant Harrington must be deemed to have acquired a good title to the one in question in exchange for the full value which he paid for the same. There was nothing to suggest that the amount was not needed for the purpose which the treasurer claimed he had in view, nothing to suggest any dishonest purpose or intent .on the treasurer’s part. He had the title to the mortgage and authority to sell it; and, under the circumstances appearing in this case, Harrington might rely upon that. (Spencer v. Weber, 163 N. Y. 493 , 502.)

I conclude that the judgment should be reversed and a new trial granted, costs to abide the event.

All concurred.

Judgment reversed and new trial granted, with costs to appellant to abide event.

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