Wilmerding v. McKesson

• Decision Date: 12 October 1886
• Citation: 8 N.E. 665,103 N.Y. 329
• Parties: WILMERDING v. McKESSON, impleaded, etc.
• Court: New York Court of Appeals Court of Appeals

103 N.Y. 329

8 N.E. 665

WILMERDING

v.McKESSON, impleaded, etc.

Court of Appeals of New York.

October 12, 1886.

Appeal from judgment of the general term of the supreme court, in the First department.

EXECUTORS AND ADMINISTRATORS-LIABILITIES OF CO-EXECUTORS-DEVASTAVIT.

Where the funds of an estate have been lawfully invested, and loss is caused by the wrongful acts of one executor withoug the knowledge of his co-executor, there being nothing to excite the latter's suspicion that his associate would be guilty of misappropriating the funds, such co-executor is not responsible for the devastavit of the other executor.¹

Stephen P. Nash, for appellant, Wilmerding.

Am. Allen Butler, for respondent.

MILLER, J.

This action was instituted by the plaintiff against the defendants for the purpose of making them liable as executors and trustees of the estate of William E. Wilmerding, deceased, who was the father of plaintiff, and as guardians of his minor children, upon rendering an account of their proceedings, for an alleged loss incurred to the plaintiff's interest in said estate. Two other persons were named as executors and trustees in the will in addition to the defendants, one of whom is dead, and the other has taken no part in the administration of the estate.

At the time of the testator's death he was the senior member of the auction house of Wilmerding & Mount, an old-established firm of high credit and repute, and a considerable portion of his estate was the interest which he had in this firm; which interest was valued, upon the inventory of the executors, at $140,909.14. The survivors of the firm, after the testator's death, consisting of his three sons and William S. Mount, continued the business under the same firm name. The new firm failed in 1874, and there was a loss to the estate by reason thereof of about $150,000, which was entirely attributable to the fact that the trust moneys were allowed to be intermingled with the moneys of the firm and used in the business, and thus exposed to its hazards; and also to the fact that the securities of the estate were left under the individual control of the defendant George G. Wilmerding, one of the executors and trustees, who was a half-brother of the plaintiff, and were appropriated by him for the benefit of the firm of Wilmerding & Mount, of which he was a member.

The plaintiff, at the time of the death of the testator, was 12 years old. The complaint alleged that the interest of the plaintiff in her father's estate was- First, one equal undivided third part of the separate estate of plaintiff's deceased mother in her father's possession; second, a legacy under her father's will of $10,000, to be invested by the trustees in the same manner as her share of the residuary estate; third, a life-interest in the income of one-thirteenth part of the residuary estate of her father, which, together with the legacy of $10,000 aforesaid, was to be kept invested by the trustees for her benefit, and the income paid to her for life.

Plaintiff's right to maintain this action is based upon the ground that her interest was not kept separately invested, so as to be distinguishable, and that the funds of the estate were permitted to be used by the firm of Wilmerding & Mount. The proof upon the trial established, and the judge found, that during the entire administration of the estate, until the failure of Wilmerding & Mount, the executor George G. Wilmerding had the custody and control of the securities belonging to the estate; that he had two tin boxes, in one of which he kept the bonds, mortgages, stocks, and other securities, and in the other the account-books and vouchers for payments;which boxes were kept in the safe of the firm, and the defendant McKesson had no access to the boxes, or the safe in which they were kept; that he never saw them, except when they were occasionally produced by the defendant Wilmerding at the office of the accountant; that he never examined them, having full faith and confidence in the integrity and fidelity of his co-executor Wilmerding.

Moneys which were realized from the estate in the course of administration were paid to the firm of Wilmerding & Mount under the authority of the executor George G. Wilmerding, and the evidence shows that these moneys were used from time to time, while they remained in the possession of the firm, in the transaction of its business, and that the firm paid interest on said moneys, which was credited, from time to time, on the account books of the estate. This continued down to and including the time of the failure of the firm.

The loss to the estate clearly arose from the unlawful act of George in intermingling its funds with those of the business in which he was engaged, and no question is raised as to his liability. The trial court also found that the defendant McKesson had knowledge at the time he filed his accounts as executor, and afterwards, down to the time of the failure of the firm of Wilmerding & Mount, that the moneys of the estate were, from time to time received by said firm as depositaries or bankers; that cash balances accumulated in their hands, and were left with them, on which they allowed interest; that he could at all times, by inspecting the books kept by the accountant of the estate, have ascertained the particulars in respect to such balances, and that he was negligent in not keepting himself informed of the contents of said books, and in allowing said balances so to remain with said firm; that he was also guilty of negligence, as executor and guardian, in allowing the moneys of the estate to accumulate in the hands of his co-executor and co-guardian George G. Wilmerding after the first of January, 1870, as securities found that after the failure of Wilmerding & Mount the total loss to the estate of the testator, as shown by the indebtedness of said firm to the guradians, and to the executor's accounts, and to the special funds, was by the direction of the defendant McKesson, ascertained and apportioned ratably upon the interests of the several beneficiaries, which were still in the hands of the defendants as executors and guardians; and the amount so charged against the plaintiff was, in respect to the property she is entitled to absolutely, $16,177.25, and, in respect to the property in which she has an interest for life, $22,686. 20 as of the thirty-first day of December, 1874. It was also found that the account between the guardians and trustees and the plaitiff, brought down to October 15, 1880, stood as follows: Amount of principal of life-estate on hand, December 31, 1879, $14,289.19; amount of loss admitted on said life-estate, $22,686.20,-making a total of $36,975.39; also that the amount on hand of the account current was, on January 1, 1880, $6,303.56; amount of loss admitted under term ‘contingent,’ $16,177.25; interest on $38,863.45, on aggregate of losses from January 1, 1875, to January 1, 1880, $12,653.94; payments since January 1, 1880, deducted, $964.64; interest from January 1, 1880, to October 15, 1880, on $71,145.50, $2,816.67, -making a total of $36.986.78; and judgment was rendered in favor of the plaintiff for the sum of $36,986.78, with interest thereon from October 15, 1880, due to her absolutely, and for the sum of $36,975.39, with interest thereon from October 15, 1880, due from defendants in respect to the lifeestate; and that the last-mentioned sum be paid over to a trustee to be appointed in the place of the defendants.

This judgment was modified by the general term by reducing the firstnamed sum of $36,986.78 to $11,300.26, and the last-named amount of $36,975.39 to $17,033.34. The decision of the general term exempted the defendant McKesson from all the loss of $16,177.25 except $1,915.82, with which it charged him, and from all the loss of $22,686.20 except $2,744.65, with which it charged him. The sum of $17,315.12 was the amount due the estate from Wilmerding & Mount, December 31, 1871, as appears from the findings; which also show that there was due December 31, 1872, from the firm to the estate, $102,176.95, and on December 31, 1873, $111,992.01.

The opinion of the general term holds that the evidence justifies the finding that the defendant McKesson was liable for the balance due the estate at the close of the year 1871, but that he was not chargeable with the increase of the balances due the estate as shown in 1872 and 1873; which was owing to the receipt by the firm of the proceeds of investments paid off, which at once went into their business, as well as to the misappropriation made by George during that period. The deposits with the firm of moneys received, included moneys realized in the due course of administration of the estate.

While the use and conversion of the securities was a dishonest and unlawful misappropriation of the funds, which constituted a devastavit upon the estate committed by the defendant Wilmerding, the liability of the defendant McKesson for the loss incurred by the estate rests upon the...