24 N.Y.S. 437 | N.Y. Sup. Ct. | 1893
Lead Opinion
This action was brought against the defendant as surety upon a bond dated October 6, 1865, conditioned for the faithful performance and discharge by one Welcome R. Beebe of his duties as trustee, in pursuance of an order of the supreme court appointing said Beebe trustee to receive and hold, for the use and benefit of Maria Louisa Collins, a certain fund of money which had been left by her mother, by last will and testament. Subsequent to the death of the trustee, Beebe, which occurred in 1884, Maria Collins, who was the life beneficiary of the trust fund, upon her application, was appointed trustee, under an order which directed her to apply the use, interest, and income of the fund, as directed by her mother’s will, to her own use, and the principal to the person or persons to whom the same should be determined to belong. She, having made a demand upon the executors of the former trustee, and failed to obtain the fund, commenced an action against such executors, which was referred to a referee, who subsequently reported that said Beebe, as trustee, was chargeable with the principal and interest upon the fund. Upon such report of the referee a judgment for the sum of $12,357.67 was
“Tlio general tendency of the English and American jurisprudence is to hold, in ordinary cases of suretyship, that a judgment against the principal is not conclusive upon the surety unless the latter was made a defendant to the action. * * * On the whole, the best rule which can be deduced from the authorities is that the judgment is conclusive upon the surety only In cases where the principal may be considered as the farmer’s agent in the particular transaction, and where, upon a fair construction of the contract of indemnity, it may be construed as binding the surety to a responsibility for the conduct or result of the suit in which the judgment is rendered; ■otherwise, the judgment proves only the fact of its own existence.”
And in the next section this author states that:
“Where the obligation of the surety is simply to pay money if the principal fails to do so, there is no such privity between them as will make a judgment against the principal evidence against the surety. But the case is different with regard to sureties on bonds given in the course of a suit or other proceeding, for in the latter instance the surety submits himself to the acts of the principal, and to the judgment, as itself a legal consequence falling within the suretyship.”
In the American and English Encyclopedia of Law (volume 12, p. 93) the rule is thus stated:
“Where a surety has contracted with reference to the action of his principal in some judicial proceeding, he is bound by a judgment against the latter. It would seem, by the weight of authority, in all other cases of surety-ship a judgment against the principal is at least prima facie evidence against the surety. But a surety may show that a judgment against his principal was obtained by fraud or collusion, or that the court had no jurisdiction to render the judgment.”
With respect to bonds given by administrators, it has been held in this state (Casoni v. Jerome, 58 ¡N7 Y. 316) that sureties are bound by the decree'of the surrogate, “because, by their contract, they have made themselves privy to the proceedings against their principal, and, when the principal is concluded, the surety, in the absence of fraud or collusion, is concluded also;” citing cases. In Harrison v. Clark, 87 N. Y. 576, Casoni v. Jerome was cited and approved; and therefore the law may be regarded as settled that, with respect to sureties upon an ordinary administration bond, they are bound by the decree of the surrogate, or by a judgment against their principal, in the absence of fraud or collusion. The surety’s obligation upon such bonds is to be responsible for the faithful discharge of the administrator’s duties; and the bind
To determine the surety’s liability, and the extent to which he is bound by the judgment against his principal, in the case at bar, resort must be ha,d to the bond itself, which provides as follows:
“Now, the condition of this obligation is such that if the above-bounden Welcome It. Beebe shall and will well and faithfully ‘perform and dischargt liis duties as such trustee, as named in said order, then this obligation shal’ be void, else to be and remain in full force and virtue'.”
We here find that neither by the nature of the contract nor the express terms of the bond does the surety obligate himself to be bound by the judgment of the court; and when it is sought to charge him, after the death of the principal, with the latter’s unfaithfulness, he should not be precluded by a judgment obtained against the representatives of the deceased principal in an action to which he was not a party, and of which he had no notice. But, assuming that the judgment was not binding upon the surety, there was, nevertheless, evidence presented showing that the former trustee had received the principal of the fund, and had failed to turn over the same, having converted it to his own use. The finding to this effect, therefore, was based on sufficient evidence; and, nothing to the contrary being shown, it would justify a recovery against the surety for such principal sum. In regard to the interest, it seems to me there are two grounds opposed to the recovery thereof: In the first place, no evidence has been given that interest was ever received by the trustee; and in the absence of such evidence the surety has a right to invoke the rule that a trustee is not liable to pay interest upon a fund, to a greater extent than interest has been received, which rule would prevent the trustee’s being chargeable with interest in a case where no interest was obtained by him upon a trust fund. Secondly, even though it had been shown that interest had been earned, it could not have been recovered by this trustee, because it was money that belonged, not to the trustee, but the beneficiary, to whom it should, from time to time, have been
“Where the contract of a surety is not an absolute guaranty of payment of a debt of his principal, but simply an undertaking of such a nature that proceedings must be taken against the debtor before the obligation of the surety to pay arises, the law implies a condition on the part of the creditor that due diligence shall be used in proceeding against the principal; and, to*441 establish a defense based on a breach of this condition, it is not necessary for the surety to show a request on his part to the creditor to proceed, and damage resulting to him from a failure to comply. The law presumes injury, and it is not incumbent upon the surety to establish it as a matter of fact.”
But, apart from all this, the beneficiary, and not the trustee, could alone recover such interest.
Another and a serious question is as to the validity of the order appointing Maria Collins trustee in the place and stead of Beebe, deceased. She was the life beneficiary, and the result was to vest in her, as trustee, the legal title to a fund, the use, interest, and income of which were bequeathed to her during life. In Greene v. Greene, 125 N. Y. 506, 26 N. E. Rep. 740, it is said:
“To the constitution of every express trust there are essential these elements, viz. a trustee, an estate devised to him, and a beneficiary. The trustee and the beneficiary must be distinct personalities, or otherwise there could be no trust, and the merger of interests in the same person would effect the legal estate in him of the same duration as the beneficial interest designed. That the legal and beneficial estates can exist, and be maintained separately, in the same person, is an inconceivable proposition. It is quite 51s much of an impossibility, legally considered, as it is physically.”
And in Woodward v. James, 115 N. Y. 346, 22 N. E. Rep. 150, the court said:
“It is undoubtedly true that the same person cannot be both trustee and beneficiary of the same identical interest. To say that he could, would be a contradiction in terms as complete and violent as to declare that two solid bodies can occupy the same space at the same instant.”
Upon these and other authorities, which support the same view, it is strenuously urged by the appellant that tire order of the court appointing Maria L. Collins trustee was an absolute nullity, upon the theory that no person can be both trustee and beneficiary for the same interest at one and the same time; that the existence of this dual relation is a physical and legal impossibility; and that no decree, however positive in its terms, can render such a relation a reality. We think that in this argument, and in the authorities to which reference has been had, the appellant overlooks the distinction between the creation of a trust and the selection of a trustee to carry out the provisions of a valid trust. As held in Greene v. Greene, supra, the fact that the beneficiary was appointed trustee would prevent the creation of a valid trust, and for the reasons therein stated. But, where a valid trust has been created, —which, it is conceded, was the situation in the case at bar,—it remains but to determine what effect, if any, results from the appointment of the beneficiary for life as trustee of the trust fund. It, no doubt, would have been more advisable to have selected some one else, because, as the fund was intended eventually to go to persons other than the beneficiary for life, it would be more natural, and apparently more secure, to have it held by some one other than such life beneficiary, who might not be very zealous in seeing that the fund was preserved, and kept intact, for those who would succeed after her death. We do not think, however, that any of these reasons or suggestions as to the impropriety of the appoint
I therefore have reached the conclusion that for the principal sum shown to have been given to the trustee, and never accounted for to the beneficiaries, the surety is liable, less any amount which he can legally claim as an offset against the same. In this connection the defendant proved that he had given to the beneficiary some $900, and this fact was found by the learned trial judge. This finding was not excepted to, and, no appeal having been taken 'by plaintiff from the judgment, the defendant is entitled to be credited with such amount. My opinion is that the judgment in favor of the plaintiff should be reduced to the principal sum of $4,397.29, less the $900, for which balance, with interest thereon from the 22d day of May, 1884, the plaintiff should recover, and that the judgment, as so modified, should be affirmed, without costs to either party upon this appeal.
Concurrence Opinion
(concurring.) I do not think that the judgment against the executor of Beebe is conclusive upon these defendants, who were sureties upon Beebe’s bond, but who were not parties to the action in which such judgment was rendered, and had no notice of its pendency. It seems to me that this question was presented in the case of Thomson v. McGregor, 81 N. Y. 596, and that the decision therein is controlling. In that case one Biker was appointed receiver of copartnership property, and he gave a bond, the condition of which was, “if the said Charles B. Biker shall henceforth faithfully discharge the duties of his trust.” Biker was removed as receiver, and, by an order upon an accounting, was directed to pay to his successor a sum of money as the balance in his hands. It was held in the court below, in that case, that that order was conclusive upon his sureties, and in reversing the judgment against the sureties the court say:
“If the order was wrong, if the receiver owed no balance, if he was required to pay what was not due, then he had faithfully performed his duty as receiver, although not obeying the mandate of the court. It is said ‘the surety has contracted that the receiver will pay.’ Undoubtedly, hut pay what? Not any sum which the court may order, unless, indeed, the surety has bound himself by that rigorous contract, but such sum as the receiver justly owes, and as an honest and faithful officer ought to pay; and upon that question the surety has a right to be heard. We do not see that it avails anything to try to distinguish between an order which is binding as an adjudication against*443 liis principal and an order which is conclusive evidence as a fact. The sub.stantial thing remains, though the phrases are changed. The doctrine, pushed to its logical results, might make every surety for the performance of duty bound by the adjudication against his principal, or so nearly so as practically to abrogate the rule which holds him only when he has explicitly contracted to submit himself to the judgment of the court. We think the vice ■of the reasoning lies hid in the failure to sufficiently distinguish the relative positions of the principal and surety. As between the principal and the creditors of the fund, it is the receiver’s duty to pay according to the order, for he has been heard, and is bound by the adjudication. But, as between the surety and such creditors, it is not the receiver’s duty to pay according to an order made without the surety’s knowledge, as to which he has not been heard, and which is not, against him, a binding adjudication.”
And in commenting upon the cases where it is held that the sureties on an administrator’s bond are bound by an adjudication .as to the amount due by the administrator, such as Scofield v. Churchill, 72 N. Y. 563, and Casoni v. Jerome, 58 N. Y. 320, the court •say:
“In these cases, besides the general covenant to faithfully execute the trust reposed, there is also the special agreement to obey all orders of the surrogate. That the rule, in these cases, which makes the adjudication against the principal conclusive on the surety, is always based upon the special covenant, which, in terms, submits the latter to the judgment or order of the court, indicates very plainly that the general words were not deemed sufficient, in and of themselves, to effect that result. * * * In every decision which has made the adjudication against the principal conclusive upon the surety, it has been founded on apt words or phrases, other than the general promise to perform duty, and which indicate an understood purpose to contract beyond the ordinary liability.”
The condition of the obligation sued on in this case is as follows:
“Now, the condition of this obligation is such that if the above-bounden Welcome R. Beebe shall and will well and faithfully perform and discharge his duties as such trustee, as named in said order, then this obligation shall be void, else to be and remain in full force and virtue.”
And as was said in Thomson v. McGregor, supra, if the trustee accounts for the trust fund which has come into his hands, he has well and faithfully performed and discharged the duties as such trustee, and the plaintiff, to recover upon the bond, must. prove, by evidence admissible against the sureties, that the principal had failed to account for the trust estate in his hands.
The court below found that Beebe was appointed trustee by an •order of the supreme court dated September 11, 1865. That fact was proved by the order of the court making the appointment, and that order is also recited in the bond signed by these defendants. The court also found the making and execution of the bond sued on, which bond was also introduced in evidence. The court also found that on the 25th of October, 1865, the sum of 14,297.29 was paid to Beebe as trustee, and that fact was proved by the evidence of John Collins, who swore that he was present when the money was paid to Beebe. The court then found that Beebe continued to be trustee of the fund to the date of his death, which occurred on the 22d of May, 1884; that he left a last will and testament, which was .admitted to probate, and letters testamentary issued to his executors therein named. And there was evidence to sustain these findings. The court then found that by an order dated 24th of
The court also found that defendant Donohue, between January 1, 1887, and January 1, 1890, lent and advanced to plaintiff divers sums of money, amounting to the sum of $900, and a conclusion of law that defendant was entitled to deduct that sum from the amount due on the bond. The plaintiff, in his brief submitted on the argument of this appeal, objected to the allowance of this sum; but he did not except to the finding of the court, nor to the conclusion of law, and did not appeal from the judgment. The plaintiff cannot object on this appeal to the allowance of this $900, and it should be deducted from the amount due to plaintiff. The judgment should be modified by reducing the recovery to the sum of $4,297.29, less $900, making $3,397.29, and interest thereon from the 22d day of May, 1884, and as so modified affirmed, without costs to either party upon this appeal.
Dissenting Opinion
(dissenting.) Upon an inspection of this record, it would appear that this action was tried at a circuit term of the supreme court of the state of Rew York. We are not aware of the existence of any such term or branch of the supreme court; and, if the regularity of this judgment had been assailed upon the ground that it appeared upon its face that the proceedings were assumed to have been had in a court which had no existence, a serious question might have been raised. It is apparent that the counsel for the respondent is unaware of the fact that the
In the disposition of this case the questions of law involved will be considered upon the findings of the learned court below.
It- appears that by the will of one Ann Bloodgood, who died in March, 1855, there was given and bequeathed the use, income, and interest of the sum of $4,500 to Maria Louisa Collins, for and during her natural life, to be paid to her half-yearly on her own separate receipt; that letters testamentary upon this will were issued to one William C. Brinclcerhoff, an executor therein named; that upon the settlement of the estate of said Ann Bloodgood thesai-d sum of $4,500 became reduced to the sum of $4,297.29; and that by order of the court, in September, 1865, one Beebe was appointed trustee to receive said sum of $4,297.29, and to apply the-use, interest, and income of said fund in the manner and to the-person in said will of said Ann Bloodgood mentioned; that said Beebe ,was required to give a bond in the penal sum of $10,000, and', that -the bond upon which this suit was brought was thereupon-executed by the defendant Donohue and one Ryckman, which bond' was duly approved, and thereupon said sum of $4,297.29 was paid to Beebe; that Beebe continued to hold said fund until his death, which occurred in May, 1884, and subsequently thereto his last' will and testament was duly admitted to probate by the surrogate of the county of blew York; that in June, 1884, this court attempted to appoint said Maria Louisa Collins, the beneficiary of' the fund in question, upon her petition to the court, trustee to receive and hold said fund, and to apply the use, interest, and income thereof to her own use, and to account and pay over the principal to the person to whom the same should be determined to belong; and in January, 1885, said Collins, having duly qualified, by executing the bond required by the order-appointing her, demanded of the executors of Beebe the fund of' $4,297.29, together with the interest thereon, and that they refused to comply with the demand so made; that in August, 1885, said’ Maria L. Collins* as trustee, commenced an action against the-executrix and executors of Beebe for an accounting of the acts and proceedings of Beebe as to said fund, which accounting was duly ordered, and upon the coming in of the referee’s report upon such accounting a judgment was entered for the sum of' $12,367.65, being the principal sum of $9,636.40, together with in-' terest thereon from the 22d of May, 1884, and $658.19 costs of the-action, in all amounting to $13,315.84; that, upon due leave of the surrogate, execution was issued upon the judgment", which was returned by the sheriff wholly unsatisfied; that no part of said' judgment has been paid, and the same remains wholly unpaid;, and!
Various questions have been raised upon this appeal, some of which it is necessary, very briefly, to discuss; and the first is that the court had no power whatever to appoint Maria L. Collins trustee, and that she could obtain no title whatever to the trust fund by reason of such appointment. It is claimed by the counsel for the respondent that said Maria L. Collins, as cestui que trust, was not excluded from occupying the relation of trustee for her own benefit, and he cites some authorities which favor that view. But it seems to us that a very brief consideration of those things necessary to the existence of a trust show the fallacy of such' a position, and the recent authorities are distinctly opposed to any such incongruity. It seems to be absolutely certain that the court has no greater power in the appointment of a trustee than a testator has; and, if a testator has no power to appoint a cestui que trust his -trustee, then it would seem to follow, as a natural consequence, that an attempt upon the part of the court to make such an appointment would be wholly nugatory. There are three necessary ingredients to the existence of a trust: First, the subject-matter of the trust; second, a trustee; and, third, a beneficiary. And, if there is an attempt to merge the functions and duties of a beneficiary with those of a trustee, the trust is absolutely destroyed. In the case of Woodward v. James, 115 N. Y. 346-357, 22 N. E. Rep. 150, this view was sanctioned, where it is held that:
“It is undoubtedly true that the same person cannot be at the same time trustee and beneficiary of the same identical interest. To say that he could, would be a contradiction in terms as complete and ns violent as to declare that two solid bodies can occupy the same place at the same instant. Where, however, the trustee is made beneficiary of the same estaite, both in respect to its quality and quantity, the inevitable result is that the equitable is merged in the legal estate, and the latter only remains.”
And in the case of Coster v. Lorillard, 14 Wend. 265, it was held that the legal character of the trustee is wholly separate and distinct from that of the beneficiary. Each is incompatible with the other, and both cannot, by any possibility, be united in the same person. It is therefore apparent that the court had no power to make the appointment of this beneficiary as a trustee for herself, and, if such a thing was attempted to be done, such action upon the part of the court would be void. Bow, it is to be observed that all that the court did was to appoint Maria L. ColVns trustee to receive and hold the said fund of $4,297.29, and nothing else, and to apply the use and income of that fund :her own use.
