McCulloch v. Tomkins

| New York Court of Chancery | Jun 14, 1901

Grey, V. C.

The controversy between the parties has been narrowed to the disputes touching the purchase of the Linden street property by the defendant, with the complainant’s money, and the allowance of commissions to the defendant for (Collections made by him from her debtors. There are several formal questions raised by the exceptions, which may readily be disposed of. The first exception denies the authority of the master to inquire into the good faith of the defendant’s investment of complainant’s money in the Linden street house. An examination of the order of reference shows that the master was ordered to take an account of all the transactions between the complainant, as cestui que trust, and defendant, as trustee; that, for that purpose, the defendant should produce all documents in relation to investments made by him on behalf of the complainant, and that the master should report what investments have been made by the defendant for complainant. The power thus given to the master was fully sufficient to justify his inquiry as to the good faith and truth of the investment made by the defendant of the complainant’s money in the Linden street house. The first exception should be overruled.

The second, third, fourth and fifth exceptions deal with the investment of the complainant’s money by the defendant in the purchase of the Linden street house, and may be considered together. The defendant purchased this house from a Mrs. Baker, a widow, with whom he presently boards, and he claims that he paid the sum of $3,100 in cash for this house, undertaking, also, the payment of a $2,900 mortgage already on the property, making the total purchase-money $6,000. The complainant’s counsel contend that the actual payment made was but $1,100 cash, subject to the mortgage as stated, making the total purchase-price to be $4,000, of which only the sum of $1,100 paid in cash should be allowed to the defendant as a credit-against the complainant. The defendant is admittedly acting in a fiduciary capacity, having received the complainant’s money to be invested for her benefit. In the accounting he is asking an allowance for an expenditure of it made by him as trustee. The burden is upon him to show what was the actual expenditure made by him for which he claims a credit. The complainant appears,' by all the testimony in the case, to have trusted the defendant with blind confidence. Her manner on the stand, as well as the testimony which she gave, indicated her unquestioning reliance upon his good faith and honesty. In the deed by which the defendant purchased the Linden street property he is himself named as grantee. There is no indication on the face of the deed that the complainant has any interest in the property. No memorandum in writing was given her to show that the defendant had invested her money in his own name. She says that, until after the purchase had been effected, she did not even know that it had been made. He swears that she was previously consulted and approved of it. Mrs. Baker, the grantor, testifies that the price to be paid was $3,100 in cash, subject to a mortgage of $2,900. The deed itself was drawn by Mrs. Baker’s lawyer, under her orders. It is expressed to be for the consideration of $4,000,

“subject, however, to the operation of a certain mortgage against the same for $2,900, given by the within grantee to Charles Rhoads and others, &c., * * * which said party of the second part hereby assumes and agrees to pay as part of the said consideration.”

Mrs. Baker was unable to explain how the deed came to be drawn in this way. She swears that she gave no explicit directions to her counsel on this subject. Her lawyer who drew the deed was not called in behalf of the defendant to explain what instructions he received. The testimony of Mrs. Baker was given before the master. It is apparent, on its face, that she was desirous of making it as weighty as possible in favor of the defendant. She was quite unable to state in what way the $3,100 in cash was paid to her, although the transaction took place within a year last past. She failed, through her whole examination, to disclose a fact which, on cross-examination, was extorted from her, namely, that she held the defendant’s note for $2,000, which she and the defendant claim represents a part of the cash price of the purchase-money of the Linden street house. The master ■evidently disbelieved the statements made by Mrs. Baker and by the defendant to the effect that a cash payment of $3,100 was made for the Linden street house, and that its purchase-price was agreed to be $6,000. The master’s view of the testimony is sustained by a reading of it. The defendant has not carried the burden of proof to .show that the purchase-money was $6,000, and that he paid $3,100 in cash on this transaction. The weight of the evidence indicates that the purchase-price was $4,000, and that ■only $1,100 in cash was paid.

It is proven that Mrs. Baker bought the property a year and a half before for $3,150. The testimony shows that she said, ■shortly before the making of the deed, that she expected to sell it for $4,000. The deed itself, drawn by Mrs. Baker’s counsel, is expressed to be made upon the consideration of $4,000, part of which, $2,900, was the mortgage then on the premises. The internal revenue stamp on the deed conforms in amount to the stated consideration—$4,000.

The testimony of the defendant claiming that he had .paid $3,100 in cash of the complainant’s money on this purchase also-appears to be uncandid and elusive. It is evidently given rather for its effect in supporting his claim, than as a frank exposition of the truth of the transaction.

A witness testifies that, about the time of the making of the deed to the defendant, he said that he had put $1,100 of his patient’s money into the purchase.

I am unable to accept the testimony of the defendant and Mrs. Baker against the contemporaneous statements of the same parties, the setting forth of the consideration in the deed and the-contradicting testimony of the other witnesses. The defendant admits that, although he took the title in his own name, he made the purchase with the complainant’s money for her benefit. I am satisfied that he did this without her knowledge or direction. Under such circumstances, if she chooses to accept this investment of her money, she has a right to do so. Her acceptance is a release and discharge of her trustee to the extent that he had actually invested her money in the purchase. He has no right, by setting up a false claim that he invested a greater sum, to-deprive her of the benefit of the purchase, upon allowing him what he actually paid. The second, third, fourth and fifth exceptions to the master’s report should be overruled.

The sixth exception to the master’s report objects that the-master has fixed the commissions allowed to the defendant at the sum of $100, whereas the defendant insists he should have the same commissions as are allowed by law to a trustee. The claim for these commissions is made for the defendant’s services in collecting a mortgage and some promissory notes due the complainant from her debtors living in the State of New York.

It may well be doubted whether a trustee who transfers the whole trust estate into his own name, without labeling it in any way, and then sets up a false defence, should be entitled to any commissions.

The defendant claims that he earned commissions by making collections for the complainant, by a combination of letter-writing and a making of “demonstrations.” Of what a “demonstration” consists is not precisely defined by the defendant. It was not, lie says, the making of any journeys or the employing of lawyers to collect the debts, though he did correspond with some lawyers about the mortgage. He could not remember that he had paid them any fees. So far as the defendant’s testimony explains what he calls a “demonstration,” it appears to have consisted of a locking of himself in a room and devoting himself to the “thought” of collecting the debts due to the complainant. The defendant testified that the parties who owed the complainant were not in any way connected with the Christian Science Church. The influence which he exerted by “thought” in collecting the money for the complainant was therefore enforced against unbelievers in Christian Science. The moving of an absent unbeliever to pay his debts probably required from the defendant a more intense application of healing power, entitling him, from his point of view, to a higher compensation for his labors.

There is no other evidence than defendant’s own testimony as to the complainant’s agreement to pay him a twenty per cent, commission. The complainant denies this. The defendant’s testimony is of no greater weight than complainant’s, and, indeed, as it is given, is quite incredible. The master, it should be observed, has not reported that the defendant .is entitled, because of his services, to any commission. The $100 is allowed, not because the defendant earned or deserved it, but because the complainant consented to give it to him. Save for this agreement of the complainant, no allowance of commissions would have been made to the defendant. The sixth exception to the master’s report should bo overruled. The master’s report should be confirmed.

Hpon the whole case, there should be a decree that the defendant convey the Linden street house to the complainant in fee-simple,'for the consideration of $4,000; that an allowance of $1,100 be made to him for his cash expenditures in purchasing the same, as stated in the master’s report; that the conveyance be subjected to the mortgage for $2,900 now on the premises, which mortgage the complainant, by accepting the deed, shall assume and agree to pay as part of the consideration of the said conveyance.

There should be a further decree in favor Of the complainant and against the defendant for the sum of $2,425.14, with interest thereon from the 30th day of April, 1901, the date of the master’s report in this cause.

I will advise such a decree, with costs of complainant to be taxed.