In re the Estate of Scudder

Samuel O. Scudder died at the city of Rome, ÜST.. Y., intestate, on or about March 2, 1895; and on the 9th day of May, 1895, Elizabeth R. Scudder, his widow, and George Barnard were duly appointed administrators of his estate. The bond given by them was a joint and several one in the penal sum of $120,000, and contained as sureties thereon Harmon G. Utley, Wheeler Armstrong, Henry Barnard, Charles E. Barnard and James E. Barnard.

George Barnard, one of said administrators, died on or about January 31, 1896, intestate, and in the proper proceeding, and on or about the.13th day of February, 1896, James. E. Barnard and Ered. M. Barnard were duly appointed his administrators.

Pursuant to an order of the court, the representatives of George Barnard filed their account of the assets in their hands belonging to the Samuel O. Scudder estate, which account among other things

Said George Barnard had the active if not the exclusive management of said estate, and he was the cashier of said bank.

Objections were filed by Nelson C. Scudder, one of the next of kin of Samuel O. Scudder, deceased, and by Elizabeth R. Scudder, the surviving administratrix, alleging that said sum was deposited, or allowed to remain on deposit by the said George Barnard, knowing that said bank for a long time prior to January 31, 1896, Was insolvent and an unsafe place of deposit, and that by reason of his negligent acts his estate, should account for any loss.

It appears that on August 9, 1895, a sight draft signed by Elizabeth R. Scudder and George Barnard as administrators of the S. O. Scudder estate, was drawn upon E. C. Benedict & Company of New York city, by which there was transferred from'said bank in New York to the Fort Stanwix National Bank of Rome, N. Y., the sum of $18,510.21. The sureties upon said bond and the representatives of George Barnard, therefore, insist that if there be any loss as to Said sum of $18,510.21, the said Elizabeth R. Scudder should be held individually liable, she having carelessly and negligently signed said draft and participated in the act of transfer of said fund. It is conceded, however, that the receiver of the Fort Stanwix National Bank of Rome has paid to the surviving administratrix herein, as dividends upn the entire deposit, the sum of $9,354.81.

Considerable evidence was given by- which the individual liability of Mrs. Scudder was sought to be fixed, but in a proceeding of this character it is not necessary or important to determine what might be her individual responsibility. She is not here seeking relief as an individual; she is the representative of the Samuel O. Scudder estate and is bound to protect its interests. What may be her status in some other capacity is another question.

If George Barnard were guilty of acts which entailed a loss upon the Scudder estate, his estate is liable therefor, and the surviving representative of the Scudder estate is the proper party to begin a proceeding to recover any deficit, and if, as an individual, she participated with George Barnard in certain negligent acts, his estate or the sureties upon their joint bond cannot in a proceeding

There is no doubt but that they are correct in the general proposition where two administrators participate in negligent acts by which an estate is jeopardized or loss arises they may become liable,- and their liability fixed and determined in.the proper proceeding; but what those rights and liabilities are, cannot well be fixed in -a proceeding instituted on behalf of an estate against the representatives of a deceased person for an accounting in that- particular estate. Upon a proceeding instituted by an executor for an accounting there may be charged to him certain investments or items, and certain things may be disallowed, in his account, and for which he must make up the deficit. That is far different from -this proceeding.

On the other hand if Mrs. Scudder as an individual were seeking to recover lost moneys and endeavoring to hold the Barnard estate or the sureties liable, they might properly ask that there be charged to her any individual liability. If a decree be entered against the estate of George Barnard, and that estate be insolvent, she, as surviving administratrix and the representative of the Samuel 0. Scudder estate is the proper party to begin an action against the bondsmen, although the sureties upon said bond are her sureties, as well.

' In an, action of that character said sureties could not successfully charge her with any individual responsibility, but would have recourse against her in an action for contribution. By this practice what may be the individual responsibilities and liabilities and the reciprocal relations between- the bondsmen and her, can then, be determined. -

The bond was given for the protection of the Scudder estate, and as an estate it is not interested in the effort of the bondsmen to compel their principal to contribute. Sureties are liable for the joint acts of the principals and the individual' negligence of each.

In Hood v. Hayward, 48 Hun, 338 , the court said: “ The plaintiff’s participation in the investments which resulted in loss to the estate furnishes no answer to her effort as executrix to recover all their moneys from the sureties. This action is really by the estate-to get back the money lost by wrongs for which Frederick Hood was liable, and it matters not who participated therein, so long as the. beneficiaries of plaintiff’s trust did not do so.”

Sperb v. McCoun, 110 N. Y. 605 , was an action upon an administrator’s bond. The proceeding was originally, brought in' the Surrogate’s Court of Queens county, where the plaintiff and one Burton T. Beach were appointed .administrators of the estate of Gilbert Dunspaugh. The bond was a joint and several one, containing the usual conditions. Subsequently, Beach misappropriated a certain sum belonging to the estate and thereupon the co-administrator began proceedings against Beach for an accounting, wherein he was directed to pay the plaintiff as administrator the money received by him. An execution having been returned unsatisfied, plaintiff began an action against the sureties for the deficiency, and recovered the full amount named. As to what plaintiff’s individual responsibility might be, the court said: “We do not deem it important now to determine the precise relation which the plaintiff individually, as one of the principals in the bond, bears to the sureties in reference to the default, of Beach.’ We will assume, as most favorable to the appellant, what has: apparently been decided in some cases, that he, as one of the prin

What Mrs. Scudder’s liability as an individual may be to the parties in this controversy cannot, therefore,, be determined in this proceeding.

It is also urged that any decree entered herein would be premature, as it is uncertain what the deficit may be, if any, and that a different rule should herein be applied, inasmuch as the representatives of George Barnard have no control or authority over said deposit or fund, that they are unable to collect the same, and that the Samuel O. Scudder estate should exhaust its remedy in the collection of dividends before a final determination be made.

. Section 2606 of the Code of Civil Procedure.is as follows: “ Where an executor, administrator, guardian or testamentary trustee dies, the surrogate’s court has the same jurisdiction, upon the petition of his successor, or of a surviving executor, administrator or guardian, or of a creditor, or person interested in the estate, or of a guardian’s ward, to compel the executor or administrator of the decedent to account, which it would have against the decedent if his letters have been revoked by a surrogate’s decree. And an executor or administrator of a deceased executor, administrator, guardian, or testamentary trustee may voluntarily account for any of the trust property which has come to his possession, and upon Ms petition such successor or surviving executor, administrator,, or guardian or other necessary party shall be cited and required to attend such settlement. With respect to the liability of the sureties in, and for the purpose .of maintaining an action upon the decedent’s official bond, a decree against his executor or administrator, rendered upon such an accounting, has the same effect as if an execution issued upon a surrogate’s decree against the property

Section 2552 has no application here. The authority to compel an accounting of the character indicated was first given by the statute of 1880. Before that time.the representatives of a deceased administrator or executor could not be compelled to account or deliver the trust property, to the proper party except there was filed a bill of discovery in a court of equity to ascertain the condition of the estate, and to compel the delivery thereof according to equitable principles.

The statute and the amendatory acts thereof which broadened the remedy, were enacted to protect estates, to prevent loss, to preserve the identity of assets and to prohibit an arbitrary representa- ■ tive of a deceased executor or administrator from retaining in his hands any 'trust property. An accounting can be compelled immediately upon the appointment of the executor or administrator of the deceased administrator or executor (Matter of Wiley, 119 N. Y. 642 ); and by the entry of the proper decree the status of the estate may be fixed, the value and extent of its assets measured, and the liability for any loss determined. If George Barnard negligently deposited the funds of the Samuel 0. Seuddor estate in the. Fort Stanwix Rational Bank, knowing its true condition,-it is his loss, and a misfortune perhaps for his sureties; but the Scudder estate should not suffer or be-delayed.in the collection of its property until the receiver of said bank has marshalled all its assets, a process extending through several years perhaps, and depending somewhat on the result of various and prolonged litigations. The loss, if any, must be borne by those who have assumed the liability.

The statute contemplates the entry of a decree in cases of this character. It expressly states that in respect to the liability of the sureties, a decree against the executor or administrator has the same effect as if an execution had been issued against decedent'in his lifetime and had been returned unsatisfied. If any of the ob

Considerable evidence was given as to the financial condition of said bank, but it is not necessary to' discuss said evidence at length. To the community at large it may have been considered a proper depository and an institution where strict rules of economy and integrity were followed; and a person unfamiliar with its. true condition might escape liability for any loss; but for une in a fiduciary capacity to deliberately deposit funds there, having knowledge of its situation, would be negligence of the grossest kind, and an example of remissness, in the discharge of official duty. An error in judgment, where', subsequent events show a loss and where it may be that the wisest course- was not pursued, will not charge one personally; but this controversy presents a widely different aspect. George Barnard was the manager of said bank and .for many years had .absolutely directed its financial policy. He had charge of the discounts and investments. He knew the magnitude of its liabilities. . He engaged- the clerks; made statements to the United States comptroller; often times directed entries on:the books of the bank;'gave instructions as to-the adoption of certain methods and how they should be followed. He had- knowledge of the apparent worthless paper which was carried - as valued assets; and in numerous transactions unnecessary here to recount he clearly demonstrated his familiarity-with the true condition, of the bank and his knowledge of its inevitable suspension. He knew there must come a time when there would be a conflict between the performance of his duties as cashier and his duties as-administrator. . There is imposed upon an executor or administrator -the obligation of depositing funds in a safe place, and in the discharge of his duty he is bound to exercise such care and diligence as .is found in men of intelligence and discretion in the conduct of their own business affairs. King v. Talbot, 40 N. Y. 76 ; McCabe v. Fowler, 84 id. 318.

It cannot be said that the disposal of the funds as Herein shown was the act of. a prudent man, or that' there was' exercised a .proper degree of discretion. ' x •

From the evidence in this case and applying the rules which govern- the- administration of estates, the irresistible conclusion is reached - that- when George Barnard deposited the funds of the

There is some conflict of authority as to what should be the proper rate of interest imposed, and no precise rule can be laid down, as each case depends largely upon its own facts.

In the Matter of Myers, 131 N. Y. 409 , the executor was charged the full legal rate where he had loaned the trust fund to a firm of which he was a member.

In the Matter of Babcock, 29 N. Y. St. Repr. 947 , an executor who was a stockholder and president of a bank was chargeable with interest upon trust funds therein at the rate allowed by the bank on time deposits, which in that case was three per cent.

The trustee in Cook v. Lowry, 95 N. Y. 104 , was charged interest at the legal rate with annual rests, where he had kept no account of the trust fund and had personally realized profits therefrom'and had rendered no account therefor.

Here the fund was placed to the credit of the Seudder estate, and there is no proof that George Barnard enjoyed any profits therefrom. The Fort Stanwix Rational Bank may have been benefited thereby and may have employed the same in the usual channels of business and possibly realized the usual rate of discount; and George Barnard may have indirectly participated therein in the reception of stock dividends, but he should not be considered according to the weight of the adjudicated cases as personally employing said fund in his own business. The fund in question was invested at two per cent, at E. 0. Benedict & Co.’s Bank in Hew York, and in the absence of personal gain to the administrator, those liable therefor should not pay a greater rate than the fund would have earned had it remained there.

Interest is given as an indemnity for any loss and here the measure of loss is two per cent.

The negligence of George Barnard should not be a source of profit or an investment to the Seudder estate by which it would receive a larger revenue than if the duties of the administrator had been faithfully performed. Therefore the amount as established in this case which the estate of George Barnard should account for and pay to the Seudder estate is the sirm of $18,709.62, with interest on $18,510.21 thereof, at two per cent, from August 9, 1895; upon which latter sum there should be credited at the respective times of payment the sum of $9,354.81, being the dividends paid by the receiver of the Fort Stanwix Rational Bank.

Commissions are disallowed.

There was some argument as to the proper disposition of the deposit remaining in the receiver’s hands uncollected, and it ig, therefore, suggested that if payment of the amount herein found is made to- the Scudder estate, said estate should transfer its interest in any future dividend to the persons who will he ultimately called upon-to make up any deficiency.

Findings in accordance with the foregoing may he submitted, and the proper decree thereupon entered.

Decreed accordingly.