105 Misc. 386 | N.Y. Sup. Ct. | 1918
The defendant has made a motion for judgment on the pleadings consisting of a complaint and answer. The action is brought in equity for an accounting of trust funds deposited with the defendant by trustees and wrongfully used by them for their personal and individual purposes. The gist of the cause of action is that the defendant knowingly participated in the unlawful diversion and misappropriation of said trust fund. The defendant has demurred to this complaint, claiming that it sets forth no cause of action either at law or in equity, and that the cause of action which it attempts to set forth is an action at law. Inasmuch as I have determined that the complaint sets forth no cause of action, it is unnecessary, to determine whether the attempted cause of action is one in equity or at law.
The complaint alleges that the executors of Joseph H. Snyder, deceased, deposited certain of the moneys belonging to the estate in the defendant bank in an account entitled on the books of the defendant “ Joseph H. Snyder, deceased.” Thereafter the executors were directed to turn over to themselves, as trustees, all of the property of the estate of Joseph H. 'Snyder, including the balance of the money on deposit in that account, and said account was there
It is to be noted that the plaintiff, to bring himself within this rule, must prove either that the bank appropriated the fund for its private benefit or assisted the trustees to appropriate it for their private benefit after being charged with notice of the conversion. In the present case there is no claim or allegation that the defendant appropriated any of the trust funds for its own benefit. It can be held liable, if at all, only for participation with knowledge of the conversion, in the unlawful diversion and misappropriation of the trust funds by the trustees for their benefit. The allegation that the defendant participated in this misappropriation is evidently a conclusion of law which cannot aid the plaintiff unless this conclusion is supported by other allegations of fact contained in the complaint. Since the case of Bischoff v. Yorkville Bank, supra, the rule is firmly established in this state that the transfer of the funds of the estate to and the crediting of them by the defendant to the trustee or executor in his individual account did not overpass the legal right of the executor or the defendant. “A fiduciary may legally deposit the trust funds in a bank to his individual account and credit. Knowledge on the part of the bank of the nature of the funds received and credited does not affect the character of the act. The bank has the right to presume that the fiduciary will apply the funds to their proper purposes under the trust.” In that case it was further held that the moneys transferred to the individual account of the executor or
The plaintiff has drawn his complaint in this case in order to meet the decision in the Bischoff case, but in my opinion he has failed to allege the necessary facts. The complaint does not allege that the defendant had notice or knowledge that the trustees drew checks upon the trust estate to the order of the individual trustee with any intent to misappropriate the proceeds. Consequently up to that time it had committed no wrong and the estate had suffered no injury for the moneys deposited in the trustees’ account still retained their fiduciary character. The trustee was still bound to use these moneys for the purposes of his trust and the defendant was not bound to inquire as to the purposes for which each check on this account was drawn but had a right to presume that the trustee would act honestly. If thereafter it had notice or knowledge that.the trustee was diverting the money to other purposes and joined in such diversion, it would be liable, but there is no allegation that the defendant knew that the trustee was drawing or using such moneys for his own purposes and, in the absence of such allegation, it certainly cannot be inferred that
It follows that the motion for judgment must be granted, with ten dollars costs, and the demurrer sustained with the right to the plaintiff to serve an amended complaint within twenty days after the notice of entry of order herein.
Motion granted, with costs.