30 N.Y.S. 171 | N.Y. Sup. Ct. | 1894
Francis A. Bush, the lunatic, having died intestate, Alfred Gordon was duly appointed administrator of his goods, chattels, and credits, and as such filed Ms petition for the accounting of the committee, Frank F. Hathaway, who thereupon joined in such petition, and, having filed his accounts as such committee, the court duly appointed Royal Corbin as referee to take and state the accounts of such committee, who, after hearing the parties, made Ms report, which, on application to the court, was modified, and, as modified, was confirmed, from wMch order of confirmation this appeal is taken.
The first question raised on this appeal is as to whether two mortgages held by the committee as such should be turned over to and received by the administrator at their face value as a part of the trust fund in the hands of the committee, or whether he should be charged with the face value of the same in cash. The appellant, Hathaway, succeeded Hiram Clark as committee of the estate of Francis A. Bush, the lunatic. Clark had been such committee for several years, and on his accounting, on the 14th of February, 1892, there was found to be due the estate of the lunatic the sum of $8,257.13, and also a bond and mortgage for $1,000, given to the committee, Clark, by one George L. Clark, and a pension certificate issued to the lunatic, granting him a pension at the rate of $72 per month. On the 15th of February, 1892, Hathaway, as committee, filed his inventory of the estate of the lunatic, stating that he had then on hand, cash, $8,257.13, and the George L. Clark mortgage of $1,000, for which he on that day gave his predecessor, Clark, his receipt. The referee finds the appellant, Hathaway, at the time of giving such receipt, received in lieu of cash from his predecessor, Clark, a mortgage of $2,500, executed by said Clark to Merritt Sowles, and assigned by him to Hathaway as such committee; and that at the same time, in lieu of cash, he, as such committee, received another mortgage, made by Gregory to Webster Clark, a brother of Hiram Clark, committee, on which there was unpaid and owing the sum of $1,406.50, principal and interest. ■ Hathaway, as such committee, received from his predecessor several other real-estate mortgages as cash, about which no question is raised here. The referee held and reported that the Clark and Gregory mortgages were not proper securities in which to invest the trust funds in the hands of the committee belonging to the lunatic, or to allow the appellant to turn them over to the administrator in payment and discharge of his liability as such committee, and the special term sustained the report of the referee in that respect. The appellant.
The referee, in his thirteenth finding of fact, finds that this Clark mortgage of $2,500 was doubtful security for that amount, and by his fourteenth finding of fact he finds that the same was not taken by Hathaway in entire good faith; and by his conclusion he finds that the lunatic’s estate is not bound to take the same, but is entitled to demand cash of the committee for the amount of the same. Exceptions were duly taken by the committee to such findings and conclusions. The referee, in his report, refers to the social, business, and kinship relations existing between Hiram Clark and the appellant at the time he became the committee of this lunatic, to which the
“My own judgment, after an examination of the subject, and bearing in mind the nature of the office, its importance, and the considerations which alone induce men of suitable experience, capacity, and responsibility to accept its usually thankless burdens, is that the just and true rule is that the trustee is bound to employ such diligence and such prudence in the care and management as in general prudent men of discretion and intelligence in such matters employ in their own like affairs. * * * The preservation of the fund, and the procurement of a just income therefrom, are primary objects of the creation of the trust itself, and are to be primarily regarded.”
Adopting the rule as above stated, and applying it to the security under consideration, and eliminating all the extraneous consideration of the relations between the outgoing and incoming committee, and testing this question by an examination of the sufficiency of the security alone, it seems clear that the referee’s determination as to the Clark mortgage was erroneous. The estate of the lunatic has thus far suffered no loss by this investment. The assignor of this mortgage took it as a sufficient security for a loan to Clark of $2,500. He was a business man, and president of a bank, at the time of making such loan and taking this security. Several apparently competent business men and real-estate owners and dealers, acquainted with the real estate covered by this mortgage, and with other real estate located in its vicinity, testified that its value was, at the time of the assignment of this security to the committee, from $3,000 to $4,400. The mortgage bore interest at the legal rate of interest, and contained the interest and insurance clause, and was apparently in every respect a desirable security. If, under such conditions, the trustee charged with the duty of keeping trust funds invested on interest is to be held responsible for payment of the-same in cash, without recourse to the securities, then the duties and obligations of committees and trustees will become too onerous and risky for ordinary business men, and responsible and competent men will refuse to assume such duties. It is quite true that trusts; for the benefit of the incompetent and infants should be administered with great care and fidelity, and that improvidence or dishonesty on the part of a trustee should be visited with severe condemnation and penalties by the courts. But when the trust has been: administered with fidelity, and with prudence and caution that would characterize a prudent business man in the management of his own affairs, if loss happens, it should not be visited upon the trustee. I am therefore clearly of the opinion that the Hiram Clark mortgage was a security in which the committee might, at the time he took the same, lawfully invest the trust funds; and that the administrator of the estate of the lunatic should be required to take the
A careful examination of the evidence of the Henry Gonyea mortgage leads to the conclusion that that was full and adequate security for the amount of the trust fund invested in it, and that the reasons-stated in reference to the Hiram Clark mortgage apply with equal force to the Gonyea mortgage, and that it, too, should be received by the administrator of the estate of the lunatic, and credited to the committee on his accounts. The referee was right in disallowing the committee’s claim for personal services, and in his refusal to allow for the payment of interest on the Moon mortgage. The order appealed from should be so modified as to allow the appellant a credit of $2,500, the amount of the Hiram Clark mortgage, and $1,466.50, the amount of the Henry Gonyea mortgage, and that those-mortgages, with the bonds accompanying them, be transferred and delivered by the appellant to the administrator of Francis A. Bush, the deceased lunatic, and, as so modified, that the same be affirmed, without costs of this appeal to either party as against the other. All concur.