284 N.Y. 470 | NY | 1940
Lead Opinion
On February 2, 1927, Sophie Samuels conveyed real property, located at 245 Broadway in the city of New York, to the appellants as trustees by a written instrument in which she created an irrevocable trust for her own benefit and for the benefit of her children. The conveyance was duly recorded in the office of the Register of the County of New York on April 26, 1927. The conveyance was made subject to the lien of a mortgage held by the Equitable Trust Company as security for a loan of $250,000 and to the lien of a second mortgage for $75,000. There was no assumption of payment of the mortgages by the trustees. One of the trustees was the husband of the grantor, two were her brothers-in-law and the fourth was the attorney for and friend of the Samuels family. She provided in the trust instrument that the trustees should not receive any compensation for their services and should not be liable for any damage or otherwise, except for misconduct or gross negligence. Among other things, the trustees had express power to sell, lease, mortgage or exchange the real property which formed the corpus of the *474 trust and to execute and deliver any other instrument which might be desirable and necessary to carry out that power. The trustees accepted the trust and entered upon the discharge of their duties and have since continued in the discharge thereof.
On January 5, 1928, the appellants executed and delivered to the plaintiff a bond in which they acknowledged that they were indebted to the plaintiff in the sum of $30,000 and a mortgage upon the aforesaid property as security for the payment of the loan. The bond begins with this clause: "KNOW ALL MEN BY THESE PRESENTS, That we, EPHRAIM SAMUELS, JULIUS SAMUELS, ISIDORE SAMUELS and CLINTON T. TAYLOR, as Trustees under a Deed of Trust dated February 2d 1927, recorded in the office of the Register of the County of New York, April 26th, 1927, in Liber 3581 of Conveyances, Page 471, hereinafter designated as the obligor, do hereby acknowledge ourselves to be justly indebted to EAST RIVER SAVINGS BANK, a domestic banking corporation, having its principal place of business at Nos. 291-3-5 Broadway, Borough of Manhattan, City of New York, hereinafter designated as the obligee, in the sum of Thirty Thousand ($30,000) dollars lawful money of the United States, which sum I, said obligor do hereby covenant to pay said obligee, its successors or assigns, on demand, with interest thereon, to be computed from the 5th day of January, 1928, at the rate of five and one-half per centum, per annum." Each of the defendants-appellants signed his name and attached his seal and underneath the names was written "As Trustees above mentioned" and the instrument was acknowledged by them as trustees. The mortgage begins with a similar clause. In the bond, it will be observed, the defendants are referred to as a class and designated as the obligor. In the mortgage the defendants are also designated as a class and referred to throughout the instrument as the mortgagor. The mortgage is signed by each of the appellants, under seal, and contains, underneath the names, "As Trustees above mentioned" and was acknowledged by them as trustees. *475 Among other things, the mortgage contained various covenants by which the mortgagor covenants to pay the indebtedness therein provided, to keep the buildings on the premises insured against loss by fire for the benefit of the mortgagee, to prevent waste, that the whole of the principal sum shall become due after default in the payment of any installment of principal or of interest for thirty days or after default in the payment of any tax, water rate or assessment for thirty days after notice and demand to pay all taxes, assessments or water rates, and upon default thereof that the whole of the principal sum shall become due at the option of the mortgagee, etc.
On December 30, 1927, an agreement was entered into between the East River Savings Bank, as party of the first part, and defendants-appellants, "As Trustees under a Deed of Trust dated February 2d 1927, recorded in the Office of the Register of the County of New York, April 26th, 1927, in Liber 3581 of Conveyances, Page 471, hereinafter designated as the party of the second part." It will here be observed that the instrument designates the defendants as a class, as the party of the secondpart, and throughout the instrument similar reference to them is made. By that instrument the mortgage formerly held by the Equitable Trust Company which had been acquired by assignment by plaintiff and the mortgage for $30,000 were consolidated into a single first mortgage and joint lien upon the premises for the principal sum of $280,000 with interest thereon to be computed from January 5, 1928, at the rate of five and one-half per cent per annum, and again the appellants, as in the case of the $30,000 mortgage instrument, covenanted in the same form as in the latter instrument as a single party except that the covenant for payment was to the effect that such party would pay the sum of $280,000. This instrument was also signed by the individual defendants-appellants under seals with the entry after their names "As Trustees under a Deed of Trust" and the instrument was acknowledged by them as trustees. Simultaneously the existing second mortgage *476 of $75,000 was subordinated to the consolidated first mortgage.
Default having occurred, an action was brought to foreclose the mortgage in which judgment was entered decreeing foreclosure and the defendants-appellants were held individually liable for all amounts found due and owing to the plaintiff on account of the foregoing transactions. The trial court found and concluded as a basis for holding the appellants individually liable that they, by those instruments, "in consideration of the consolidation of said bonds and mortgages and of the extension of time for the payment of the obligations secured thereby, and of other valuable consideration, the receipt whereof was therein acknowledged, jointly and severally covenanted and agreed that they would pay the principal sum of Two hundred Eighty thousand Dollars ($280,000) on the 1st day of February, 1933 and interest thereon meanwhile at the rate of five and one-half per centum per annum from the 5th day of January, 1928 semi-annually on the first days of February and August in each year and to comply with the other terms of said bonds and mortgages," etc., and declined to find, at the request of appellants, that it was not the intent of the parties that the appellants should be individually and personally obligated under the aforesaid instruments. The Appellate Division has affirmed by a divided court the judgment entered upon the findings of the Special Term.
The consideration for the execution and delivery of the foregoing instruments was amply alleged in the complaint and admitted by the answer. Those instruments were executory contracts since, made upon sufficient consideration, they provide that something remains to be done or not to be done by one or both the parties (12 American Jurisprudence, Contracts, § 9, pp. 506, 507; Farrington v. Tennessee,
All parties here insist that the intent as to the extent and character of the liability of the appellants appears from the face of the instruments and that parol evidence as to their intent is consequently inadmissible. However, they do not read the contract alike. Plaintiff asserts that the instruments, as written, indicate that appellants intended to be bound individually or, in any event, they are so bound under the authorities to which reference is made above. Appellants, on the other hand, read the instruments as indicative of their intent to be bound only in their fiduciary character. If not, they say, because of ambiguity, parol evidence may be received to show the circumstances surrounding the execution and delivery of the instruments and any understanding between the parties as to the character of the liability intended to be imposed (Chouteau v.Suydam,
The appellants might have absolved themselves from any personal liability by inserting in the instruments a clause to the effect that they could not be held personally liable (Pumpelly v.Phelps,
Prior to the commencement of the action for foreclosure the rate of interest was reduced to one and one-quarter per cent and such reduction was to be in effect until terminated by the plaintiff. Two quarterly interest installments were paid to the plaintiff at that rate but appellants defaulted in the payment of the third installment as it became due and paid no interest whatever for some time prior to the commencement of the action. When the interest was reduced plaintiff retained the right to terminate the arrangement. It was terminated by the commencement of the action of foreclosure and the demands for payment of interest at the rate of five and one-half per cent, and interest became due and payable at the rate of five and one-half per cent from August 1, 1937, to which date interest at one and one-quarter per cent had been paid by appellants and accepted by the plaintiff, as the courts below have held.
The judgments so far as appealed from should be reversed and the matter remitted to the Special Term for entry of the appropriate judgment in accordance with this opinion, with costs in all courts.
Dissenting Opinion
A deficiency judgment against the trustees personally was proper. The trustees could not bind the estate. In O'Brien v.Jackson (
The use of such phrases as "as trustee, etc." does not relieve the trustee from personal liability. They are merely *480
descriptive. In Taylor v. Davis (
The trustee is personally liable unless the contract, or other instrument, expressly relieves him of liability. In Taylor v.Davis (supra) the court said (at p. 335): "If a trustee contracting for the benefit of a trust wants to protect himself from individual liability on the contract, he must stipulate that he is not to be personally responsible, but that the other party is to look solely to the trust estate."
The court took defendants' testimony as to their undisclosed intention not to be personally bound. The testimony was inadmissible and was properly stricken out later. (Thomas v.Scutt,
The judgment should be affirmed.
LEHMAN, Ch. J., LOUGHRAN, FINCH, SEARS and LEWIS, JJ., concur with RIPPEY, J.; CONWAY, J., dissents in opinion.
Judgment accordingly. *481
