Waterman v. Webster — 13 N.Y. St. Rep. 527

Majority

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George Waterman et al., Resp’ts, v. Gideon Webster et al., App’lts.^[1]

(Court of Appeals,

Filed January 17, 1888.)

Headnote

1. Mortgage to secure money to be paid minors on coming op age— Satisfaction piece—Action to set aside.

The defendant being indebted to Jasper A. and James M. Waterman in the sum of $1,500 in 1857, executed and delivered to Jasper, with the consent and direction of James, a mortgage upon certain premises. It declared that it was intended as a security for the payment * * * of the sum of $859.89, payable in.four years, and interest on the same accruing after the decease of said Sarah Waterman; and in case she should live beyond, then, on her decease, on the following conditions: That the said sum of $859.89 and interest on the same, accruing after the decease of the said Sarah, shall be invested * '* * for the benefit of George Waterman, Charles H. Waterman and Earl E. Waterman * * * or the survivor of them, to be distributed between them when they respectively arrive at age, and in case of the death of either the survivor or survivors to take 'his share of said sum, the securities to be prepared ready to execute before it shall be payable. * The said party of the first part reserves the right to have this mortgage discharged at any time after three years on his-executing another payable in the sami?manner that this is, and on the same conditions to the said .Jasper, etc.” Sarah Waterman died in 1870, and in 1871 and after the plaintiffs respectively reached the age twenty-one years, Webster paid Jasper A. Waterman the sum of $859.89, mentioned in the mortgage, and W atenúan executed a satisfaction piece of the mortgage, which Webster caused to be recorded. In an action by the plaintiffs, as beneficiaries under said mortgage, to have the discharge thereof canceled of record, and to enforce payment of the sum of $859.89. Held, that the plaintiffs were entitled to maintain the action.

2. Same—When trustee has power to receive payment op—When 1 Rev. Stat., page 730, § 66, does not protect one paying to trustee.

Held, that Jasper Waterman had no authority to receive the payment, and that as Webster acted in violation of the agreement embodied' in his mortgage, he could not be deemed to have acted in good faith in making the payment. That 1 Rev. Stat.-, p. 730, § 66, did not protect him.

8. Same—Mortgage vested in minors on coming op age—1 R. S., 737 §133.

After the death of said Sarah Waterman, and the plaintiff becoming of age, the power to enforce the mortgage for so much of the debt as was payable, as above, vested in the plaintiffs, and by statute was made part of their security.

4. Same—When trustee ceased to have authority—One deals with TRUSTEE AFTER HIS AUTHORITY HAS GONE AT HIS OWN RISK.

After the plaintiffs reached their majority, Jasper ceased to be trustee; or, if not, he had no right to change the essential provisions of the trust,

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far less to annul the trust itself, and in dealing with him in contravention of its terms and of its duty the defendants took the risk.

6. Same—Intent.

The provisions in the mortgage for the payment to other parties in the ■ event of the death of these children, or either of them, before they became of ago, and the right reserved to the mortgagor to have the mortgage discharged upon executing other securities upon the same condition, excluded the idea of other power on the part of Jasper, or of any intent that he should receive the money or deal with the matter in any way after those children became of age.

This action was brought by the plaintiffs as beneficiaries under a mortgage executed to Jasper Waterman by the defendant Webster, for the purpose of canceling of record a dischargé óf said mortgage, and for the foreclosure of the mortgage, to enforce payment of the sum of $859.89, which they claimed to be due. At the Cattaraugus county special term of the supreme court the judge granted the relief asked for, and upon appeal to the general term of the fifth department his decision was affirmed.

The trial court found that on the 30th day of November, 1857, the defendant Gideon Webster was indebted to Jasper A. Waterman and James M. Waterman in the sum of $1,500 for lands conveyed by them to him; that James M. Waterman was the father of the plaintiffs, who were then under the age of twenty-one years; that Webster, to secure the payment of the said sum and interest, to the persons and in the manner hereinafter stated, executed and delivered to Jasper A. Waterman, with the consent and direction of James M. Waterman, the mortgage upon the premises described in the complaint, and the same was duly recorded. It bears date November 30, 1857, and in substance declares that the grant “is intended as a security for the payment of the sum of $1,500 and interest, as follows: Interest on the whole sum payable annually to Sarah Waterman, mother of said Jasper, during her life, and the sum of $640 * * * at her decease to said Jasper, and the sum of $859.89, payable in four years, and interest on the same accruing after the decease of said Sarah Waterman, and in case she should five beyond, then, on her decease, on the following conditions: That the said sum of $859.89, and interest on the same accruing after the decease of the said' Sarah, shall be invested in or secured on real estate of value sufficient to render such sum secure for the benefit of George Waterman, Charles H. Waterman and Earl E. Waterman, children of James M. Waterman, or the survivor of them, to • be distributed between them when they respectively arrive at age; and in case of the death of either, the survivor or survivors to take his share of said sum; the securities to be prepared ready to execute before it shall be payable; and in case of the decease of all

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of the said children before they become of age, then the sum hereby secured for their benefit shall be payable to James M. Waterman, if he shall then be living; and in case of his death, to the brothers and sisters, equally, of the said James M. Waterman then surviving, on the same conditions.

The said party of the first part reserves the right to have this mortgage discharged at any time after three years on his executing another payable in the same manner "that this is, and on the same conditions, to the said Jasper, on lands situated within this state, amply sufficient in value to secure the whole sum hereby secured. The mortgage shall be payable at my dwelling-house in Gowanda, N. Y., and this conveyance shall be void if such payments be made as herein specified.”

Sarah Waterman died Hay 3,1870, and James M. Waterman died May 10, 1370. The sum of §040.12 was paid to Jasper Waterman, or his assignee, as provided in the mortgage, and no question arises as to the validity of that payment. But the court further found that on the 6th of March, 1871, and after the plaintiffs respectively reached the age of twenty-one years, Webster wrongfully and unlawfully paid Jasper A. Waterman the sum of $859.89, mentioned in the mortgage, and executed a satisfaction piece or discharge of the mortgage, which Webster caused to be recorded. One Hill was a subsequent purchaser of the premises and he was charged with notice. He does not appeal to this court.

Mr. Morris, for app’lts; Mr. Woodbury, for resp’t.

The appeal is to succeed or fall upon the findings of the trial judge. From those it appears as a fact that the payment of the mortgage was made by Webster to Jasper Waterman; that he had no autherity to receive it; that it was wrongful and unwarranted and, therefore, gave no support to the satisfaction or discharge which he signed and delivered to Webster.

Against the conclusion of the trial judge, the appellant contends: First, that the only parties to the mortgage were Webster and Jasper Waterman; and, second, that even if the mortgage was in whole or in part for the benefit of the plaintiffs, Jasper Waterman had the same right to receive the moneys secured thereby that he would have if upon the face of the' mortgage it appeared to be for his sole benefit. In support of this contention the appellant cites section 113 of the Code of Procedure (then in force), which declares that the trustee of an express trust “may sue without joining with him the person for whose benefit the action is

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prosecuted,” and which applies that character to one “in whose name a contract is made for the benefit of another,” and from it he argues that the conclusion of the trial court is wrong. The point was not taken on the trial, nor does it seem to have any application. The payment was without suit, and how it would have affected the parties had it been made in the course, or as the result of legal proceedings, we need' not inquire. There was .no suit, consequently no question as to proper parties. But the special authority of the mortgagee.was the same as the general law on which the appellant relies.

The mortgage provides that in case of default in payment, the mortgagee might sell the premises and retain the amount then due for principal and interest. This authority was not resorted to. The payment was voluntary, and the cases (Considerant v. Brisbane, 22 N. Y., 396 ; Brown v. Cherry, 38 How. Pr., 352 ; People v. Norton, 9 N. Y., 176 ; Grattan v. Life Ins. Co., 15 Hun, 74 ; People ex rel. v. Struller, 16 id., 234) cited by the learned counsel for the appellant in support of his claim, that the right to receive payment follows from his right to maintain an action for its enforcement, do not go to that extent. They do show that section 113 embraces not only formal trusts declared by deed, but all cases in which a person acting in behalf of a third party enters into a written express contract with another, either in his individual name, or in his own name expressly in trust for another. The contract now involved is of neither description. The mortgage contained an ex7 press agreement to pay Jasper $650.12. So much was in a certain event to be paid directly to him, and to that extent he might either receive payment or enforce the mortgage. But how was it before that event occurred ? The grant was “security for the payment of $1,500, and interest,” but to whom? the interest on the whole sum “to Sarah Waterman.” She was. the mother of Jasper and Jam.es, and had a dower interest in the premises, the conveyance óf which formed the consideration of the mortgage. Upon .her death $640.12, was “payable to Jasper,” and upon the same event the remainder of the $1,500, viz; $859.89, was to be invested in real estate securities “for the benefit of the plaintiffs, children of James, “to be distributed between them when they respectively arrive at age.” There is not only no provision for payment of this sum to Jasper, but it is provided that the securities shall “be prepared, ready to execute before it' shall be payable. ” The further provisions in the mortgage for the payment to other parties in. the event of the death of these children, or either of them, before they became of age, and the. right reserved to the mortgagor to have; the mortgage discharged upon executing ■

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other securities upon the same condition, exclude the idea of other power on the part of Jasper, or of any intent that he should receive the money or deal with the matter in any way after those children became of age. It was after that event happened to all, that the defendant Webster paid, and Jasper received the money which should have been paid to them. The power to enforce the mortgage for so much of the debt as was so payable, vested in the plaintiffs and by statute was made part of their security. 1 R. S., tit. 2, art. 3, ch. 1, part 4, p. 737, § 133.

If, therefore, upon default of Webster an action had been brought by Jasper, it must be presumed that the plaintiffs’ rights would have been protected against a payment by the mortgagor in violation of the terms of the mortgage, and it cannot be supposed the court would either have authorized the receipt of money in place of securities for the infants, or after their majority have allowed money payable to them to go to the hands of Jasper. As to them he had ceased to be a trustee, or if not, he had no right to change the essential provisions of the trust, far less to annul the trust itself, and in dealing with him in contravention of its terms and of his duty, the defendants took the risk. Swift v. Smith, 102 U. S., 442 ; Mc Pherson v. Rollins, 107 N. Y., 316 ; 12 N. Y. State Rep., 488.

The learned counsel for the appellant also argues that Webster is protected by the pz’ovision of section 66, 1R. S., 730, title 2, part 2, chap. 1, art. 2. It also seems inconclusive. “No person,” it says, “who shall actually and in good faith pay a sum of money to a trustee, which the trustee as such is authorized to receive, shall be responsible for the pz’oper application of such money, according to the trust; nor shah any right or title derived by him from such trustee, in consideratiozi of such payment, be impeached or called in question, in consequence of any misapplication by the trustee, of the moneys paid.”

What authority had Waterman to receive the payment ? If the above views are correct he had no authority, and as Webster acted in violation of the agreement embodied in his mortgage, he cannot be deemed to have acted in good faith in making paymezzt. The liezi in question was zzot for the benefit of the mortgagor; he had been separately provided for and was fully paid. It was created for the benefit of the plaintiffs by the direction of their father, from whom the consideration moved, and with the concurrence of the defendants. It remained, notwithstanding the fraud or mistake by which the defendants were actuated in placing a formal discharge upon the record, and whether it was by one or the other, the plaintiffs should not suffer. The mortgage had for its object the benefit of

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the. plaintiffs, they were the persons intended to be benefited, and were so name d. For this reason also they were entitled to maintain this action.

We think the court below committed no error, and that the judgment appealed from should be affirmed.

All