In re the Judicial Settlement of Johnson

42 Misc. 651 | N.Y. Sur. Ct. | 1904

Tallmadge, S.

It appears from the testimony that the balance of $775, referred to in the account, consisted of proceeds of a mortgage amounting to $500, and of amounts paid on vendue notes and on sales of personal property. Two hundred dollars of the $500, representing said mortgage, was paid by the mortgagor to Addison O. Hull, the coexecutor, which amount was thereafter retained by him, the mortgage at the time of the payment being in the possession of said Hull. Thereafter and in the month of April, 1892, the mortgagor paid the balance of said mortgage amounting to $300. At the time of this payment the mortgage was forwarded by Addison O. Hull, who was then residing at Amsterdam, N. Y., to William F. Johnson, who was then residing at Windham, N. Y. The mortgagor forwarded to Johnson checks aggregating $300, which represented the balance due on said mortgage, and Johnson executed a satisfaction of the mortgage and forwarded the same to the mortgagor. The checks received by him from the mortgagor were third parties’ checks, and were either indorsed by Johnson, or not indorsed by him, and forwarded to his coexecutor, Addison O. Hull. About the time of the payment of the balance of said mortgage and the sending of the checks, some correspondence was had between Johnson and Hull in reference to the investment of the money by Johnson, and he informed Hull that if he collected and retained the money it would be necessary for him to deposit the same in the Savings Bank of Catskill. Hull informed Johnson that he could invest the same at five per cent, interest, at Amsterdam. After Hull received the checks, he received the money thereon, and paid the interest thereon to the parties entitled to receive the same under the provisions of said last will and testament, until April 1, 1902. The $275 herein-before mentioned was all collected and paid to the said Addison O. Hull, excepting the sum of $5, representing an account which was collected by Johnson and paid over to Hull, and $30, the purchase price of a chattel or chattels purchased by Johnson at the vendue, which amount Johnson also paid to Hull, and Hull paid the interest on this $275 to the parties entitled to receive the same until the 1st day of April, 1902. Johnson had no knowledge of how the money was invested by Hull, though, he 'knew that he was paying the parties entitled to receive the same the interest thereon, annually.

It is claimed on the part of Hattie A. Schrect, that Addison O. Hull made and executed a note payable to himself and Johnson for $775, which was the only investment he made of said funds, and that said Hull is now insolvent, and that inasmuch as Johnson received the checks aforesaid, and satisfied said mortgage, he should be held accountable for the same, together with, the moneys received and collected by Johnson, and paid over to Hull.

The general rule is that an executor is responsible for his own acts, and not for those of his associate, so that if he receives and misapplies the money, or does any act by which it goes to the hands of the other, who diverts or wastes it, and but for which act the latter would not have had it, a liability to make good the loss results. If, however, the executor is only passive and simply does not obstruct the receipt and collection of assets by his associate, he is not liable for the latter’s waste, but where he knows and assents to such misapplication, or negligently suffers his coexecutor to receive and waste the estate, when he has the means of preventing it by proper care, he becomes liable for a resulting loss, but mere assent to the executor’s receiving the funds is not enough. Ordinarily, in the collection of assets, the rights of each are alike, and one has no control or supremacy over the other; one, therefore, may sit passive and see the other receive funds of the estate and, making no objection, be deemed to assent, but that does not make him responsible for what has been received. He must in some manner know and assent to the misapplication; he must be a, consenting party to the waste or neglect some duty consequent upon his knowledge of a misapplication intended or in progress. A wrong done or a duty omitted must lie at the foundation of his liability. This is held in Croft v. Williams, 88 N. Y. 388.

The liability of a coexecutor usually attaches at the time of the payment of the funds from one coexecutor to the other. A misapplication of the funds thereafter, or a devastavit of funds in the hands of one executor without the consent of the other executor, will not create a liability against the executor not in fault. If Johnson had known that Hull was using this money in his individual business, it might have been his duty to have taken some means for the purpose of causing the same to be properly invested, but the evidence shows that Johnson understood that the money was properly invested, and that he had no •knowledge that Hull had converted the money to his own use.

In the case of Bruen v. Grillet, 115 N. Y. 10, the court says: “ We have lately held that one executor is responsible for his own acts and not for those of his associate; and if the latter collect and misapply the money, the executor who has not received it is not liable for the waste.”

In Purdy v. Lynch, 145 N. Y. 462, the court says: “ The ground of liability is personal neglect. * * * The rules governing the liability of trustees should be strictly maintained, and they should he held to the most rigid accountability for the-performance of all their duties as such, yet in all cases the question is, taking into consideration all the facts and circumstances, has a trustee employed such prudence and diligence in the discharge of his duties as in general men of average prudence and discretion would under like circumstances employ in their own affairs, and in determining the proper answer to be given to that question we are to look at the facts as they exist at the time of their occurrence, not- aided or enlightened by those which subsequently take place, by reason of which the loss has occurred.”'

Again, in Nantz v. Oakley, 120 N. Y. 84, the court say: “ The question in reference to the liability of executors and administrators for the default of each other, independent of any bond, is well settled by the authorities. Each of several executors or administrators has the power to reduce to possession the assets and collect all the debts due the estate, and is responsible for all that he receives. The payment of money or delivery of assets to a“ coexecutor or coadministrator will not discharge him from liability; for, having received the assets in his official capacity, he can discharge himself only by due administration thereof in accordance with the requirements of the-law. -Consequently one joint executor or administrator is not liable for the assets which come into the hands of the other, nor for the laches, waste, devastavit or mismanagement of his co-executor or coadministrator, unless he consents to or joins in an act resulting in loss to the estate, in which event he will become liable.” The turning over of the checks in question by Johnson to Hull was not the turning over of assets, under the-meaning of the law, creating a liability. The mortgage that Johnson had in his possession represented value, and the checks-were substituted in the place of the mortgage, but the checks •were in themselves of no value excepting as they represented value, hut the avails or proceeds of the checks were assets under the meaning of the law creating a liability. The avails or proceeds of the checks were not received by Johnson, but were wholly received by Hull, the coexecutor.

This distinction is made in the ease of Paulding v. Sharkey, 88 N. Y. 432. There the executors were impowered to sell real estate, and they made a joint conveyance. The consideration was paid by check to the order of one of the coexecutors, who in good faith indorsed it to G., a coexecutor, who collected it. The court says: “ By the account submitted to the surrogate, it appears that the money in question never came to the hands of Sharkey. There was on his part the exercise of good faith in the execution of his trust. The coexecutor had an equal right with Sharkey’ to possession of the money, and it came into his hands, therefore, without fault on the part of the respondent.”

This distinction is referred to with approval in the case of Bruen v. Gillet, 115 N. Y. 16, and is also held to be an authority upon the question that turning over a check by one executor to his coexecutor, where the check is collected by such coexeoutor, creates no liability on the part of the person receiving such check and turning the same over to such coexecutor in the regular course of business. Matter of Provost, 87 App. Div. 86.

I am, therefore, of the opinion, that Johnson turned over the checks to his coexecutor, who had had the active management and supervision of the affairs of the estate, in good faith, without any fault on his part, and that he should not be charged with the amounts received by such coexecutor, representing such checks. The testimony, however, shows that five dollars in cash came into the hands of Johnson at one time, which he paid to his coexecutor, and that thirty dollars, the purchase price of a chattel or chattels was also paid by Johnson to his coexecutor, and under the rule previously stated, Johnson should be held liable and his account should be surcharged with the sum of thirty-five dollars, unless such moneys were used to pay a portion of the expenses of administration. The testimony fails to disclose what was done with the five dollars or thirty dollars paid by Johnson to Hull, and as the burden was on Johnson to show that the money collected by him was applied in a due course of administration by the trustees, and he has only accounted for the same by showing the payment to his coexecutor, he should be held liable for such amount.

I am, therefore, of the opinion that William F. Johnson, as such executor and trustee, should be held to be jointly and severally liable with his coexecutor, Addison O. Hull, for the payment of said sum of thirty-five dollars, and that his account should be surcharged accordingly.

Decreed accordingly.

LIABILITY FOR ACTS OF CO-EXECUTOR.

GENERALLY.

The individual property of an executor may be taken for a tax imposed upon him in his representative capacity, when no property of the intestate, testator or cestwi que trust can be found, and the regularity of the assesstment cannot be impeached in an action against the collector for a neglect of duty by a plea that there were other executors who acted jointly with the person upon whom the tax was imposed. Williams v. Holden, 4 Wend. 223.

Administrators or executors who retained an attorney to represent them in proceedings against them on a final accounting before the surrogate are jointly liable to such attorney, though their interests upon the distribution are different. Mygatt v. Wilcox, 45 N. Y. 306.

Merely formal acts, such as the indorsement to an associate of negotiable instruments payable to the representatives jointly will, apparently, not impose liability. Paulding v. Sharkey, 88 N. Y. 432.

A business man familiar with the values of property and accustomed to making investments is not justified in leaving the entire management of the estate in the hands of his co-executrix without supervision or inquiry, she being a woman who is unacquainted with business and whose time is occupied with domestic duties. Earle v. Earle, 93 N. Y. 104.

He who holds a position of trust jointly with others cannot remain passive, when he knows of irregular "acts of his associates, without incurring responsibility for such acts. Matter of Niles, 113 N. Y. 548.

The mere fact that one of two or more executors is passive, and does not participate in the administration or interfere with the acts of his co-executors in taking possession of the property and collecting moneys of the estate, will not charge him with liability for waste by them; it must appear that he had some reason to apprehend that such might be the consequence of their acts. Cocks v. Haviland, 124 N. Y. 426.

Signing of joint-checks may impose liability. Palmer v. Ward, 91 App. Div. 449.

Ordinarily an executor is responsible only for his own acts. Matter of Hunt, 38 Misc. 613, 3 Mills Surr. 253.

ALLOWING BREACH OF TRUST BY CO-EXECUTOR.

An executor would be liable for a loss resulting from the use of funds of the estate in business by his co-executor, even though he had not actual knowledge of such use, where he could have ascertained the fact by making due inquiries. Wilmerding v. McKesson, 103 N. Y. 329.

An executor is not liable for the misappropriation by his co-executor of a fund which such co-executor lawfully received from the testator during his life-time, where it appears that nothing occurred to' excite his suspicion as to the integrity or responsibility of his co-executor, until the latter refused to comply with a request to deposit the fund in a trust company, and that the executor thereupon consented to the institution of proceedings to compel his co-executor to make the deposit. In re Hoagland, 79 App. Div. 56.

ALLOWING POSSESSION OF ASSETS'BY CO-EXECUTOR.

If an executor permits a coi-exeeutor to collect debts due to the estate, such executor, in the absence of evidence tending to show that he was guilty of negligence in not taking notice of matters which should have aroused his suspicion, is not liable for the waste or misappropriation of such trust funds by his co-executor, but where the fund or property has, actually come within the control or possession of the executors jointly, all of the executors assume the responsibility for the proper administration of the fund, and if they turn the fund over to the sole control of one of their number and he misappropriates it they will be liable for the misappropriation, independent of whether they knew or ought to have known of the misappropriation. In the Matter of Hunt, 88 App. Div. 52 (reversing 38 Misc. 613, 3 Mills. Surr. 253).

Joint executors are jointly liable for their joint acts and severally liable for their individual acts; one whose co-executor appropriates to his own use moneys which the latter withdraws from a bank account standing in the joint names of the two executors, through the medium of checks signed by both the executors, is liable for the devastavit, notwithstand,ing that she signed the checks in reliance upon, the false representations of the delinquent executor that such checks were to be used in the payment of debts of the estate. Palmer v. Ward, 91 App. Div. 449.

COLLECTION OF ASSETS.

Where payment of an indebtedness due the estate was made by a check payable to the joint order of the two executors of the decedent, both the executors indorsed the check and signed a receipt for the money; the proceeds of the check were collected by one of the executors, who died after wasting the entire fund; no part of the proceeds of the check were ever paid to the surviving executor, nor did any part of such proceeds pass through the latter’s hands, except in the matter of the endorsement of the check, held, that the surviving executor was not liable for the devastavit committed by her associate. Matter of Provost, 87 App. Div. 86.

DEBTS DUE ESTATE FROM CO-EXECUTOR.

An executor who purchases a farm originally belonging to the estate and who pays his co-executor the balance of the purchase price still due the estate, is not liable for his co-executor’s misappropriation of the payments, it appearing that when he made the payments the executor had no-reason to suspect his co-executor’s honesty or financial responsibility. Matter of Demarest, 9 N. Y. Supp; 292.

HAVING INDIVIDUAL INTEREST IN THE TRANSACTION.

Where the testator appointed three executors, one executor’s liability on a claim against a vessel, in which testator owned an interest, arising while it was being employed in his own business, was measured by the extent of the testator’s interest. Hansehell v. Swan, 23 Misc. 304.

INVESTMENTS.

Executors charged with a duty to invest the fund for the securing of an annuity who pay the fund to one of their number and make no effort to see to its investment are liable for its loss. Thompson v. Hicks, 1 App. Div. 275.

Delay in failing to compel investment by a co-executor to whom funds, have been delivered until after judicial proceedings, and with knowledge of the irresponsibility of the co-executor, will impose liability. Thompson v. Hicks, 1 App. Div. 275.

SUBROGATION.

Subrogation to the rights of an executor as legatee cannot be permitted where the interest of the legatee has passed to an innocent third party by foreclosure of a mortgage executed by the legatee. Drake v. Paige, 127 N. Y. 562.

WHERE ASSETS ARE DELIVERED TO CO-EXECUTOR.

An executor is answerable only to the extent of the assets proved in his hands, without reference to Bis co-executors; for one executor or administrator is not chargeable with the acts or devastavit of his companion, but is only answerable for the assets which have come into his own hands; if however assets have come into his possession and he deliver them over to his co-executor, he is then answerable for their due administration. Douglass v. Satterlee, 11 Johns. 16.

Where an executor, by his negligence, suffers his co-executor to receive and waste the estate, when he has the means of preventing it by proper care, he is liable to the beneficiaries for the waste. Adair v. Brimmer, 74 N. Y. 541.

In order to charge a surviving executor with the devastavit of a deceased sole acting co;-executor, it must be shown that the surviving executor was negligent and suffered his co-executor to receive and waste the estate when he had the means of preventing it by proper care. Matter of Hunt, 38 Misc. 613, 3 Mills Surr. 253.