Westerfield v. Rogers

The facts, so far as they will be discussed by us, are without substantial dispute and are in substance as follows:

Jason Rogers died at Morrisania, Westchester county, where he resided, August 25tli, 1868, leaving him surviving his widow, Mary Ann Rogers, and Mary J. Rogers, now Westerfield, Flora E. Rogers and Thomas Rogers his only children and heirs at law. At the time of his death he was possessed of a large estate. He left a last will and testament which was duly admitted to probate in Westchester county as a will of real and personal property. By it lie, among other bequests, created three trusts; one for the benefit of his daughter Mary J. Rogers, now Westerfield, during life, with

Some time prior to the year 1882, Thomas Rogers married the daughter of William Cauldwell, and on the 23d of January of that year he executed and delivered to his father-in-law an instrument in writing, under seal, in which Cauldwell joined, whereby, after reciting some of the provisions of his father’s will, and his desire to provide for his wife and to pay certain debts out of • the estate and income to which he might be entitled by inheritance, or under the provisions of his father’s will, and upon the express consideration of one dollar and natural love and affection for his wife and children, he gave, granted, bargained, sold and conveyed to Cauldwell all of the share or net income of the general residuary estate of his father, accrued or accruing, which he then had or to which

After Cauldwell had been appointed trustee in place of Columbus B. Rogers and the moneys and securities had been taken possession of by him, he from time to time withdrew moneys belonging to the trust estates and applied the same to his own use. In February, 1892, he took from the securities deposited in the vault belonging to the Flora E. Rogers trust $23,000 in United States 4$ bonds, which he sold for $26,795.00, and loaned the same to Thomas Rogers upon a mortgage given by him to the trustee upon his undivided interest in the real estate left by his father and which was included in the Cauldwell trust for the benefit of his wife and children. In September, 1893, Cauldwell and Rogers filed their accounts with the surrogate as trustees, and asked for a judicial settlement of their accounts as such to that time. These accounts were verified by them. At that time Cauldwell had appropriated $20,000 of the trust fund to his own use, but this sum was subsequently restored by him to the trust estates. In the accounts so filed by the trustees it appeared that large amounts of money had been received by them in the distribution of the assets of the Rogers Locomotive & Machine Works, which was then in liquidation, and a question arose as to whether the funds paid over upon the

Shortly after Cauldwell had returned the $20,000 appropriated by him to the trust estates, he again commenced to withdraw and appropriate to his own use the moneys of the estates, and so.continued until the 8tli day of December, 1895, at which time he disclosed to his son-in-law Rogers, the cotrustee, the fact that he had so drawn and appropriated the moneys of the estates, which at that time amounted to $131,778.53. He was then in want of more money and he arranged with Rogers to deed to them, as trustees of the estates, certain real property owned by him, including the Hotel Empire in the city of Hew York; and thereupon further sums were drawn out of the estates, with the consent of Rogers, which brought up the funds of the estates appropriated by them to the sum of $197,000. The property conveyed to the trustees was heavily incumbered by mortgages. Upon the Hotel Empire there .was a first mortgage of $450,000 and a second mortgage of $60,000, and upon the other real estate turned over to the trustees there was a mortgage of $10,000. They then concluded to purchase the second mortgage upon the Hotel Empire of $60,000 which the holder had offered to sell for $52,000; and other moneys were needed for taxes and the preservation of the property, and thereupon other properties owned by Cauldwell were transferred to the trustees and still further sums taken from the estates by the trustees, amounting in the aggregate to upwards of $300,000. The appropriation of these moneys by Cauldwell was not disclosed to the plaintiffs in this action until about the middle of April, 1897, more than fifteen months after Cauldwell had advised Thomas Rogers of his appropriation of the moneys of the estates.

After the decree had been entered upon settling the accounts of the trustees rendered in 1893, the plaintiffs petitioned the Surrogate’s Court for an intermediate accounting of the trustees from the date of their prior account, and such account

After the commencement of this action and in February, 1898, the plaintiffs petitioned the Surrogate’s Court for an order removing Cauldwell and Eogers as trustees, and upon that petition proceedings were had resulting in a decree, bearing date the 20th day of April, 1898, removing the defendants Cauldwell and Eogers as trustees and directing them forthwith to account to the court as such, excepting so far as they had already had their accounts passed and allowed. - Thereupon the trustee Eogers filed an account purporting to be an account of his proceedings as trustee from April 13th, 1897, to the date of his removal on April 20th, 1898. And thereafter in the proceedings in the Surrogate’s Court this account and the one filed by Thomas Eogers in the intermediate accounting of April 13th, 1897, were treated as the accounts required in and hy the order of removal, since taken together

In the meantime, and before the trial of this action took place, the proceedings before the surrogate continued upon the intermediate accounting resulting in a decree of the Surrogate’s Court bearing date the 21st day of February, 1898, in which he settled and adjusted the accounts of the trustees from September, 1893, until the 23rd day of October, 1897, charging the trustees Cauldwell and Rogers personally with the amounts that had been misappropriated. From this decree an appeal was taken by the trustees to the Appellate Division, second department, and resulted in the entry of an order of that court on the 11th day 'of July, 1898, as follows: “ Ordered and adjudged that the said decree appealed from be and the same is hereby reversed, so far as it charges Thomas Rogers with the liability for the misapplication of funds of the estate by William Cauldwell, prior to the 8tli day of December, 1895, and in all other respects affirmed.” ( 32 App. Div. 324 .) Subsequently a motion was made on the part of Mary J. Westerfield and Flora E. Rogers for a modification of the decree so as to permit a further hearing before the surrogate upon the question of the liability of Thomas Rogers for the moneys taken by William Cauldwell prior to December 8th, 1895, which motion was denied. Thereupon a motion was made to the Surrogate’s Court that the proceedings be opened and further testimony taken, and the surrogate, after hearing the parties, on the 20th day of March, 1899, granted the motion and ordered that the decree, as entered, be opened, and that each of the parties be permitted to present further proofs. It appears that some evidence was taken by the surrogate, and then the proceedings upon the intermediate accounting appear to have rested so far as this record discloses. It was, however, stated upon the argument and appears outside of the record that an appeal was taken from this order of the surrogate, and that subsequently it was

In the meantime the proceedings for an accounting by the trustees upon their removal proceeded before the surrogate, resulting in a decree dated August 30th, 1899, wherein their accounts were judicially settled up to the date of their removal, the surrogate holding Tilomas Rogers personally liable for all of the moneys misappropriated by his cotrustee Cauldwell. From this decree an appeal was taken to the Appellate Division and there the following order was entered: “ It is hereby ordered and adjudged that the said decree so appealed from be and the same hereby is reversed upon questions of fact as well as of law, with costs and disbursements to the appellants, and proceedings remitted to the surrogate for disposition, in accordance with the opinion of Hatch, J.” (Reported, 48 App. Div. 542 .) Upon this reversal certain questions were certified to this court, but inasmuch as each of the questions certified involved a question of fact under the evidence the appeal was dismissed. ( 163 N. Y. 209 .) Ho further proceedings appear from the record to have been taken under that proceeding.

In the meantime this action appears to have been brought to trial before the refer.ee appointed to hear, try and determine the same on the 5th day of July, 1899. The referee filed his report August 20th, 1900, upon which the judgment in this action was entered. It finds that Thomas Rogers is personally liable for all of the funds misappropriated by his cotrustee, and that the income of Thomas Rogers derived from the estate be appropriated by the trustee for the payment of the moneys so misappropriated. From this judgment an appeal was taken to the Appellate Division of the first department, which entered the following order: “ Ordered,

We have thus stated briefly the history of a portion of the litigation that has taken place with reference to this estate. We have omitted several proceedings and orders, and appeals therefrom, which are not material upon the questions that we now have under review. That the moneys of these trust estates have been misappropriated by the trustees in the amount found by the referee is not controverted. The chief contention has arisen over the liability of Thomas Rogers for the amount appropriated by his cotrustee, Cauldwell, prior to December 8th, 1895. The questions raised in the proceedings before the surrogate as to his liability for certain other items have practically been eliminated by the report made by the referee in this action, and it now appears to us that it is for the interest of the parties, as well as the public, that this litigation should be terminated, and if heroic treatment is necessary it should be applied.

The order of the Appellate Division herein is one that we are not familiar with. We have not in our practice met an order similar in form. It, upon the facts as well as the law, dismisses the appeals and all the proceedings, including the judgment, and then vacates them and sets them aside. The only jurisdiction that the Appellate Division had to review the judgment, it derived from the notices of appeals that had been served in the case; and when it dismissed the appeals it deprived itself of any further power or jurisdiction over the judgment or the proceedings in the action. Under the Code the Appellate Division may affirm, reverse or modify a judg

•We shall for the purpose of considering this question treat the dismissal of the appeals as not intended. In the first place, we recognize the rule to be as claimed by the Appellate Division, that where two courts have concurrent jurisdiction of the subject-matter the court first acquiring jurisdiction will be allowed to proceed with the case. This action, as we have seen, was brought on the 17th day of August, 1897. The only proceeding then pending in the Surrogate’s Court was the intermediate accounting of the trustees which had been ordered to be filed from the date of their last accounting in 1893. This was not a final accounting and did not include the time that would intervene before the date of their removal. The Supreme Court had jurisdiction to settle and adjust accounts of trustees and to distribute trust estates. This was settled in Matter of Ayrault ( 81 Hun, 107 ; affirmed, 146 N. Y. 389 ). The complaint, as we have seen, demanded the removal of the trustees and that others be appointed in their places, and that Thomas Rogers’ interest in the residuary estate be charged as liable to make good the amount of the

As we have already stated, the substantial controversy between the parties arose out of the misappropriation of the funds of the estates by Cauldwell prior to the 8th day of December, 1895. At that time he had improperly drawn from the estates and applied to his own use the sum of $131,118.53. He then saw Rogers and told him of his misappropriation. Within a few days thereafter he deeded over to himself and Rogers, as trustees, certain real estate, and subsequently certain other property upon which he obtained from the estates, with Rogers’ consent, other large sums of money for which Rogers unquestionably is liable. He contends, however, that he is not liable for the misappropriation prior to the 8th day of December, 1895, for the reason that he knew nothing about it and that he had been excluded from the management and care of the trust estates by his sisters, the plaintiffs in this action. This defalcation had been discovered prior to the bringing of this action, and it was one of the questions involved in the accounting then pending before the surrogate, known as the intermediate accounting, and the

It may be that this court would have readied a different conclusion with reference to the liability of Thomas Rogers had we the power to review the determination of the Appellate Division upon this question. The claim is made that the plaintiffs, the sisters of Thomas, had practically excluded him from having any care or control over the trust estates. This was a controverted question of fact, in which, under the Constitution of the state, the Appellate Division became the court of last resort, and the duty devolved upon that court of finally determining that question; and this court has no power to review the same, unless in case of a divided opinion, in which

All of the real estate and property of Cauldwell on December 8th, 1895, was liable to be appropriated for the satisfaction of the moneys that he had misappropriated from the trust estates. Instead of reporting the defalcation to his sisters, Thomas kept it a secret for a period of a year and three months thereafter, endeavoring to make something out of the property turned over to him by Cauldwell, which would save his father-in-law from loss and disgrace. He also joined in appropriating large sums of the estate in the way of betterments and in conducting a hotel business. This he should not have done. The property of Cauldwell should have been sold and the proceeds, if any, should have been applied upon the amount that had theretofore been improperly taken from the trust estates.

It further appears that after the defalcation had been discovered by these plaintiffs it became necessary to have additional sums of money used, in order to preserve the property that had be.en turned over by Cauldwell to the trustees, and that with their consent, or their attorneys, the sum of $25,000 was borrowed, which was subsequently paid out of the trust estates.

We think that the judgment of the Appellate Division should be reversed; and that the judgment entered upon the report of the referee should be modified by deducting from the amount found owing by Thomas Rogers the amount of $131,778.53, which had been appropriated by Cauldwell prior to the 8th day of December, 1895; and that the judg. ment herein directing a sale of the property- turned over to the trustees by Cauldwell should be modified by adding thereto, that out of the proceeds of such property the amount

(dissenting). The Appellate Division, having reached the conclusion that the commencement of this suit was an offense against orderly judicial procedure, held properly, in my view, that the trial court should have refused to take jurisdiction, and it necessarily follows that the discretion which the trial court could have exercised the Appellate Division of that court might exercise, and in this case properly did exercise.

If I am right in the proposition that the Supreme Court had, in view of the proceedings pending in another court involving the same questions, the right to refuse jurisdiction in its discretion, then it also follows that this court is without power to review that exercise of discretion.

Before the commencement of this action the powers of the Surrogate’s Court of. Westchester county had, by these plaintiffs, been invoked to pass ’ upon questions affecting- the administration of the estate, and the Surrogate’s Court seems to have in the meantime made such decrees as were in the main satisfactory to the plaintiffs here, the petitioners there; but the trustees were aggrieved, and so ah appeal from one of the decrees was taken to the second Appellate Division (Matter of Westerfield, 32 App. Div. 324 ), where a reversal was secured in two respects, one of which relates to an item referred to infra.

The action of the surrogate on the next hearing seems not to have been satisfactory for his decree was again reversed. (Matter of Westerfield, 40 App. Div. 610 .)

A further hearing was had and the surrogate’s decree thereon

The indications are that the controversy in the Surrogate’s Court was as bitterly contested as the trial in the Supreme Court. There are some questions which the learned referee in this case undertook to pass upon as original propositions, just as if no court having jurisdiction of the subject-matter had ever decided them, but which it is now conceded were res adjudioata. Indeed, the majority opinion, while indicating a tendency to differ with the decision of the second Appellate Division on the appeal from the surrogate’s decree as to the item of $131,778.53, nevertheless says, “We think, therefore, that the Surrogate’s Court having acquired jurisdiction of this controversy prior to the commencement of this action, the determination of the Appellate Division reversing the decision of the surrogate became res adjudioata and was binding upon the Supreme Court and the referee in the trial of this action.” But the referee, clothed for the time being with the authority of the Supreme Court, disregarded not only the decrees of the Surrogate’s Court, but the several reviews, thereof by the second Appellate Division and marshaled the facts in carefully prepared findings, as if no proceedings had ever been had in a court having jurisdiction to pass upon most of the questions brought to his attention upon the hearing.

An examination of the decisions and the opinions in the Surrogate’s Court and the Appellate Divisions indicates that these plaintiffs were, in those proceedings, far more successful in Surrogate’s Court than at the Appellate Division. Indeed, those two courts differ as to the large item above mentioned. And it may well be that the second Appellate Division’s posi

Confronted with this situation, the first Appellate Division proceeded to a careful review of the facts for the purpose of ascertaining whether it was the duty of the trial court to have refused to entertain jurisdiction of the suit, and to have dismissed it. And, having reached the conclusion that whether it should be dismissed or not rested in the exercise of the sound discretion. of the Supreme Court, it determined that under the peculiar facts of this case that discretion should have been exercised by the dismissal of the complaint, and thereupon it exercised that discretion of the Supreme Court, as it rightfully might. In support of the position taken it marshaled the facts and cited authorities in the Supreme Court and in this court so carefully in its opinion that nothing can now be advantageously added, and I rest my-position — that the. Appellate Division had the power to reverse the judgment and dismiss the complaint, on the ground that the Supreme Court ought not, under the circumstances, to have taken jurisdiction of this suit—-upon the opinion below.

My attention has not been called to any answer to tlie assertion by the court below that the power rested in the Supreme Court in the exercise of a sound discretion to refuse to take jurisdiction of this suit, in view of the fact that nearly — if not quite all — of the questions were already in controversy in another court; and it is safe to assume, I think, in view of the decision by this court on that subject, that no answer can be made to it. Hence it would seem to follow that there is no question in this case which this court can review, for it has been held again and again that it has not the power to review an exercise of discretion committed to the Supreme Court after its exercise by that court. Indeed, it has never been held otherwise.

The judgment should be affirmed.

Gray, O’Brien and Bartlett, JJ., concur with Haight, J.; Parker, Ch. J., reads dissenting opinion; Cullen and Wegner, JJ., absent.

Judgment reversed, etc.