Bumstead v. Sanders — 39 N.Y. St. Rep. 618

Majority

p. 618

Amelia H. Bumstead, an Infant, App’lt, v. Walter T. L. Sanders et al., Resp'ts.

(Supreme Court, General Term, Third Department,

Filed July 11, 1891.)

Headnote

Guardian—Liabilities of—Taking possession op estate—Worthless MORTGAGE.

Defendant, plaintiff’s guardian, received fro* the trustee of a certain fund, which trust had determined, a second mortgage, with other securities, as plaintiff’s half of the trust fund. There had been an action for the construction of the trust, and the complaint showed that the trust fund was partly invested in the second mortgage. - The first mortgage was foreclosed, and on the sale the property produced only enough to satisfy it. Plaimiff brought an action to charge defendant with the loss. Held, that the defendant properly took the securities from the trustee, as they belonged to the fund, and that he could not be held liable for the worthlessness of a part.

Appeal from a judgment upon trial by the court without a jury, entered in the clerk’s office of Rensselaer county on the 19th day of July, 1890.

This action was brought for an accounting, and to require the' defendant, as trustee of Amelia H. Bumstead, an infant, to pay over to her or her guardian the sum of $3,500 and interest thereon, alleged to have been held by him as such trustee.

Lansing & Cantwell (James Lansing, of counsel), for app’lt; Townsend, Roche & Nason (Martin I. Townsend, of counsel), for resp’ts.

—It was decided by this court in the case of Sanders, Trustee, v. Bullard (Albany, May, 1883,) that on the

p. 619

death of Henry Bumstead, December 25, 1872, the trust created for his life by the will of the testator ceased. It was adjudged by the special term, December 6, 1873, in Bullard, Trustee, v. Bumstead, that on the death of Henry. Bumstead half of the fund of $10,000 held in trust for him vested in Amelia H, the present plaintiff, but that in case Henry D. Bumstead should have other children, such children should be at liberty to apply to the court, if so advised, for a share of said $5,000.

Subsequently to the making of the last decision, and in January, 1874, the father of Amelia H. petitioned the court, and stated that she had no general guardian, and asked the appointment of some person as trustee to take care of her interests. The court did thereupon, on the 4th day of January, 1874, appoint the present defendant trustee of said trust fund of $5,000.

As we remarked in the opinion above referred to, we do not know of what trust the defendant was appointed trustee, since the trust under the Bumstead will ceased December 25, 1872. He was not the successor of the trustee of that original trust It would seem as if his appointment was that of a guardian of Amelia H., with perhaps some reference to the suggestion in the order of December. 6, 1873, that other children of Henry D. might, if any and if so advised, apply to the court for a share in the fund.

At the time of the commencement of the action of Bullard, Trustee, v. Bumstead, it appeared by the complaint therein that the $10,000 were invested in bonds and mortgages held by the then trustee, which he was ready to deliver to the party entitled; and it was in respect to the fund thus invested that the judgment therein was made, and that thereafter the appointment of defendant was also made.

The defendant accepted the appointment, and thereupon received from the.trustee of the original trust (which had then expired) a mortgage of $3,000, on which accrued interest of $577.50 had been capitalized and $1,500 in cash or its equivalent. The martgage was a second mortgage and on a foreclosure of the first in September, 1880, the property brought "practically only enough to pay the first mortgage ánd costs.

This action is brought for an accounting. The court held the defendant liable for the $1,500, about which there is no question, but did not hold him liable for the $3,500. The plaintiff appeals. The ground of the plaintiff’s claim is the alleged misconduct of defendant in accepting from Bullard, trustee, the $3,500 mortgage. We may assume for the present that the investment in that mortgage was one which Bullard as trustee ought not to have made. The question is, did the defendant do wrong in taking it

It is to be observed that the investment had been made long before the defendant had anything to do with the property. The bonds and mortgage were made specifically to Thomas J. Bullard as trustee for Henry Bumstead. They were, therefore, a part of the trust property at the time when defendant was appointed. And the complaint in the judgment roll to which we have above referred, showed that fund was invested in bonds and mortgages.

p. 620

Now in this state - of affairs it was the duty of the defendant to take the securities which belonged to the fund. If he had neglected to do so and had assumed instead to sue the administrators of Thomas J. Bullard, then deceased, the former trustee, he would have assumed a very serious risk. If he could have maintained such an action (a point we need not decide) the estate might have been unable to pay, and thus he might have greatly injured his trust property.

There is still another consideration. In the action above mentioned of Thomas J. Bullard, trustee, this present plaintiff was a party defendant. Before the decision in that action Thomas J. Bullard died. Of course his duties then ended. In fact the trust had ceased before the action was commenced. Hence the accounts of said deceased trustee could have been passed in that action, and the present plaintiff could have had a settlement, and could have charged the estate of said deceased trustee as might have been proper.

But the plaintiff insists that notwithstanding the trust estate had been actually invested in this bond and mortgage, the defendant was not bound to take it, but could have required the administrators of the deceased trustee to pay him cash. He cites Ormiston v. Olcott, 84 N. Y., 339 , to sustain this proposition. In that case one of two trustees, the one who had managed the estate, died. None of the trust property had been kept distinct, but it had all been practically absorbed in the estate of the deceased trustee. So that it stood simply as a debt from his estate. In this situation, the surviving trustee took from the estate an Ohio mortgage, . which in the end appeared to be of doubtful value. The general term thought the acceptance of that mortgage was not justifiable. 22 Hun, 270 . But the court of appeals held otherwise; refused to hold the defendant liable, and decided that the action of the trustee did not come under the rule which forbids a trustee to make a foreign investment. Now, it is evident that the action of the trustee in that case was far less justifiable than that of this defendant. In that case the defendant was one of the original trustees. Here, he is not, and is not even a successor in the trust. In that case, there were no securities specifically belonging to the trust, and the defendant could have demanded cash. Here, there was a specific investment, which it would be hazardous to reject. In that case, the trust was still existing. Here, it is ended, and the estate has vested in the plaintiff. In that case too, as was held by the general term, the estate of the deceased trustee was solvent. The court of appeals said they were not certain of this; but did not find the contrary. But they point out the difficulty and delay of attempting to collect the.claim from the estate. All that difficulty exists here, with the further obstacle that an actual and specific investment had been made and was held by the estate of the deceased trustee. This circumstance would make still more difficult the recovery of money from the estate.

The decision in Matter of Foster, 15 Hun, 387 , if applied to the present case, would show that the estate of Thomas J. Bullard is

p. 621

liable to the present plaintiff. It does not in the least show this defendant is liable. In that case a trustee had resigned and been discharged, and passed the securities to his successor. 'Some of these securities which he had taken were unauthorized. The ■cestui que trust was allowed to maintain a proceeding against such former trustee to set aside his discharge, and to compel him to make good the improper investments which had subsequently proved worthless. It is apparent that this case is directly in point to sustain an action by the present plaintiff against the estate of Thomas J. Bullard, but by implication, at least, is opposed to a recovery in this case.

Nor does the case of Baskin v. Baskin, 4 Lans., 90 , sustain the plaintiff. A special administrator had collected money and deposited it in a bank, taking a certificate payable in six months, with interest. The executor received that certificate, and did not attempt to collect it until the failure of the bank, eighteen months after the certificate became payable. They were held liable as negligent, in not collecting a loan.

Under the decision, then, the defendant was not liable for taking this bond and mortgage. Nor do we see that subsequent neglect has been shown. The defendant, by the same counsel who now represents the plaintiff, sued the administrators of Thomas J. Bullard in February, 1882, to recover for the loss on this investment, but he was defeated. It has been shown above from the decision of December, 1873, that the half of the estate vested in the plaintiff. And by Matter of Foster, that she can sue the administrators of Thomas J. Bullard for any injury sustained by her.

If the defendant is really her guardian, though nominally trustee, the plaintiff urges that as such guardian he might have brought such an action. Perkins v. Stimmel, 114 N. Y., 359 ; 23 N. Y. State Rep., 657, cited by plaintiff, does not sustain that view, and we think it is not supported by the best authorities. Bradley v. Amidon, 10 Paige, 235; Segelken v. Meyer, 94 N. Y., 473 . Certainly it is not so plain as to make defendant liable in damages for not acting thereon, when the plaintiff herself might bring the action in her own name.

Judgment affirmed, with costs.

Landon, J., concurs.