197 A.D. 540 | N.Y. App. Div. | 1921
In 1895 one William West Durant executed a trust agreement which was supplemented later by agreements in 1897 and 1898, depositing certain moneys with the Continental Trust Company, the income from which to be paid to his wife, Janet L. Durant, the plaintiff herein, for the benefit of her and the children mentioned until the children became of age,
The plaintiff commenced this action to require Crowley to account, and upon a hearing an interlocutory judgment was entered directing the trustee to file his account and the proceedings upon the account, if objections were filed, should be had before an official referee. Crowley at no time objected to filing the account and so stated before the trial judge. One of the investments made by the trustee was in a $25,000 mortgage on some property in the outskirts of Yonkers, which will be described more fully hereafter. The main contest in the matter was over this investment, the beneficiaries claiming that it was improvidently made by the trustee and that he should be charged with the investment. After a lengthy trial the referee found that the property was security for the loan at the time it was made, but suggested that the trustee should have exercised greater diligence in looking into the personal qualities of the Tweedys, one of- whom was the mortgagor. Upon the referee’s report coming before the Special Term for confirmation, the Special Term adopted the findings of the referee and confirmed his report, which overruled the objections to the $25,000 investment and settled the accounts as rendered by the trustee.
Immediately after the appointment of the trustee in
The property in question consisted of five plots, each of about 50 to 54 feet frontage, aggregating 260 feet of frontage and being 139 feet in depth on one side, and about 100 feet in depth on the other. A two-story-and-a-half house with stone foundation and cemented cellar was built upon one end of the tract, being the most elevated portion of the tract, and in the rear of it was a story-and-a-half stable, the first story of which was of stone, the upper story shingled, with stalls and carriage room and rooms overhead. The portion .of the plot where the house was located was some 30 feet above the grade of Prospect Drive, on which the lots fronted, and the tract sloped down along this drive, so that the narrower end of the plot came substantially to grade. On the other side of the plot from Prospect Drive there was a street at right angles to this property and upon that street •were several houses. The tract had several large trees upon it and from the site of the house a view could be had across the valley over a part of Yonkers and to the Hudson and
The Tweedys continued to occupy the property for a time after the loan was made and paid the interest for two years and a half, when they stated they could no longer pay the interest, having had reverses, and offered to give a deed of the property. The trustee told Blake, who had made the loan for him, that he ought to take the property and endeavor to dispose of it and make good the loan. A deed was taken from the Tweedys to Blake in 1912, and Blake continued to pay some interest on the loan. Some of the taxes were paid after the making of the loan until finally the trustee foreclosed the mortgage, when Blake ceased any efforts in connection with the matter. There were then due and unpaid taxes for 1914, 1915 and 1916. The trustee and Blake after the making of the loan continued to have business relations and the trustee invested the balance of the $55,000 in five loans on Staten Island, through the instrumentality of Blake, who received commissions upon the loans. There is no question about these loans. After the making of the mortgage and about the time the Tweedys ceased paying interest, the trustee learned from them that they had rented the property for a time at $150 a month, and later at $125 a month. When the property was deeded to Blake he was unable to rent it for some time, and finally rented it on what the trustee calls a caretaking basis, the boys in the neighborhood having overrun
The immediate beneficiaries are all of full age and were all of age at the time the loan was made except one son who was about nineteen years of age. The trustee thinks he told one of the cestuis que trust concerning this proposed loan, but two of the cestuis que trust swear he did not tel'l them, and at least there is no positive testimony that he did. Upon the trial the plaintiff swore three experts, one of whom had no knowledge as to the values at the time the loan was made, except as he has acquired information since that time. The other two testified that in their opinion the property was of the value of from $17,500 to $18,500. The defendant trustee had four experts, one of whom was the appraiser Spock, selected by the owner Tweedy. Of the others, Snyder, the original appraiser, placed the value at $40,000. The witness Goodhart gave the value as $39,000 and the witness Howe at $33,000. These witnesses for the trustee all agree that the buildings were worth $13,000 and they differ only as to
This investment of $25,000, nearly one-half of the whole of the trust fund, in one mortgage and that on property highly speculative in its nature, very difficult to rent should it become unoccupied by the mortgagor, called for more care than was exercised by the trustee. Had he inquired more fully concerning the individuals obtaining the money from the loan, which the referee says he should have done, and had he inquired of the holders of the mortgages then existing on the property he would undoubtedly have learned facts which would have led him to doubt the correctness of the valuation placed on the property by his appraiser and by the property owner’s appraiser. While there is nothing in the record to impugn the good faith of the trustee in making the investment in question, it must be held that the trustee did not exercise the care and foresight that an ordinarily prudent man should have exercised in his own affairs.
The judgment should be modified and the referee’s report disallowed, in so far as it approves of the accounts submitted by the trustee. The interest on the $25,000 loan seems to have been paid down to June 1, 1916, and the trustee should be charged with the $25,000 loan and interest thereon from June 1, 1916. There are certain items in the account of rents received and disbursements made, from and concerning the property in question, all of which should be eliminated from said account and as the disbursements exceed the receipts by the sum of $1,102.56, the trust account should be surcharged with that sum. Upon his paying into the trust fund the said sum of $25,000 and interest from June 1, 1916, the Prospect Drive property should be conveyed to him individually. As so modified the judgment is affirmed, without costs.
Dowling, Merrell and Greenbaum, JJ., concur.
Judgment modified as directed in opinion, and as so modified affirmed, without costs. Settle order on notice.