p. 76In re BOSTWICK. In re WM. RADAM MICROBE KILLER CO.(Supreme Court, Appellate Division, First Department.Headnote
Corporations—Mortgages—'Trustee—Who May be Appointed.The owner of corporate bonds should not be appointed trustee in a mortgage given to secure the bonds.
Appeal from Special Term, New York County.
Judicial proceedings on the application of Walter W. Bostwick for the appointment of a person to execute a trust under a mortgage given by the Wm. Radam Microbe Killer Company. Appeal from an order appointing a trustee.
Argued before O’BRIEN, P. J., and INGRAHAM, McLAUGHEIN, CLARKE, and HOUGHTON, JJ.A. H. Parkhurst, for appellant.
Terry Smith, for respondent.
The Wm. Radam Microbe Killer Company, a domestic corporation, on or about November 30, 1903, executed, acknowledged, and delivered to Joseph
p. 77of mortgage, which mortgage was filed in the office of the register of the count}' of New York on October 21, 1905. Said Morris accepted the trust and appointment as said trustee, and continued to act down to November 8, 1905, when iii writing he resigned his trust and now declines to act. Walter W. Bostwick, alleging the foregoing facts, and that, by assignment, he is the owner of all the outstanding bonds of said company, and that default was made in the payment of interest on the coupons of said bonds due and payable on July 1, 1905, and that the said bonds and indenture of mortgage provide for foreclosure sale of the property set forth in said mortgage six months after the default, and that, by reason of the resignation of said Morris, it is necessary that some one be substituted in the place and stead of said trustee, petitioned the Supreme Court for his own appointment as such substituted trustee. The court granted such petition, and the company brings this appeal from so much only of said order as appointed the petitioner trustee.
It appears that there is some question as to the validity of a considerable number of the bonds ; the company alleging that they had been delivered under a misrepresentation of fact, and that, by resolution, the board of directors had rescinded the contract and sale upon which they had been delivered, and repudiated any liability under said bonds. It also appears that under the indenture of mortgage the trustee had certain discretionary powers conferred upon him. It seems clear, therefore, that it would not be proper to appoint the owner and holder of the bonds the trustee under the mortgage. It would make the cestui que trust the trustee, and such is obnoxious to well-settled principle. If there be necessity for any trustee, obviously said trustee, as between the company which denies the validity of the bonds and the holder of the bonds, who demands foreclosure of the mortgage and payment of the bonds, should be disinterested. It is a general and well-settled provision of law that the office of trustee and beneficiary may not be united in the same person, as the two interests are incompatible. Rankine v. Metzger, 69 App. Div. 269 , 74 N. Y. Supp. 649 , and cases cited.
So much of the order as appoints Walter W. Bostwick trustee is reversed, with costs against the petitioner, and the matter remanded to the Special Term, with instructions to appoint some disinterested person trustee. All concur.