Purdy v. Lynch

• Decision Date: 09 April 1895
• Citation: 145 N.Y. 462,40 N.E. 232
• Parties: PURDY v. LYNCH et al.
• Court: New York Court of Appeals Court of Appeals

145 N.Y. 462

40 N.E. 232

PURDY

v.LYNCH et al.

Court of Appeals of New York.

April 9, 1895.

Appeal from supreme court, general term, First department.

Action by Randolph F. Purdy against Agnes Lynch, executrix of James Lynch, and Charles E. Miller, executor of John Develin, impleaded with Jeremiah Quinlan and others. From a judgment of the general term (25 N. Y. Supp. 585) modifying and affirming a judgment for plaintiff for a designated sum, and directing a conveyance of certain lands, defendants Agnes Lynch and Charles E. Miller appeal. Reversed.

LIABILITIES OF TRUSTEES-MISAPPROPRIATIONS BY COTRUSTEES.

1. Trustees in a trust deed for the benefit of the depositors of a savings bank are not personally liable for a part of the proceeds of the lands sold by them, which they turned over to their cotrustee, to be paid to the depositors as fast as they presented their claims, as provided by the trust deed, and for which he failed to account, where he was also the receiver of the bank, and had the only conveniences for listing and paying the depositors, and the sums transferred to him were not disproportionate to his probable needs for making such payments. 25 N. Y. Supp. 585, reversed.

LIABILITIES OF TRUSTEES-MISAPPROPRIATIONS BY COTRUSTEES.

2. Nor are such trustees liable for the proceeds of sales which came directly into the co-trustee's hands, without ever coming into their possession or control, nor for rents of portions of the lands collected by their agent, and by him paid over, without their direction or knowledge, to the cotrustee, by whom they were converted. 25 N. Y. Supp. 585, reversed.

Charles E. Miller, for appellants.

David Thomson, for respondent.

PECKHAM, J.

This action was brought to obtain an accounting from the defendants Quinlan, Lynch, and Develin, as trustees under a deed of trust executed by Walter Roche to them in 1872. The action was commenced in 1875, and John T. McGowan, who subsequently died, was at that time plaintiff. The defendant John Develin died February 23, 1888, and the defendant James Lynch died August 5, 1888. The action was continued against the respective executors of the deceased defendants. The material facts in regard to the action are these: For some time prior to November 17, 1871, Walter Roche had been vice president of the Guardian Savings Institution. The bank was doing business in the city of New York, and on the date mentioned it was insolvent. Mr. Roche had been one of the managing officers of the bank, and through his influence quite a number of individuals and institutions had become depositors therein, among them being the Foundling Asylum, which had a deposit of nearly $100,000 on that day. Mr. Roche being desirous of securing, as far as possible, the depositors in the bank, went, in company with a friend, to the office of the defendant Develin for the purpose of consulting as to the course to be pursued. Upon such consultation it was decided that a receiver ought to be appointed at once for the savings bank, and it was the subject of discussion as to who should be chosen. Finally, it was determined that Jeremiah Quinlan, a friend of Mr. Roche, should be the receiver, and then the question of Mr. Roche's individual action was discussed. Ultimately, he decided to execute a trust deed to the defendants, Develin, Lynch, and Quinlan, by which a large amount of real property owned by him was to be conveyed to the trustees, who were to sell the same, and with the proceeds pay the depositors of the savings bank that proportion of their de posits which might be owing to them, and which would not be paid by the receiver of the bank. Payments were only to be made to those who would execute subrogations to Mr. Roche of their rights against the bank to the extent of such payments, and they were to be executed by a time specified in the trust deed. Mr. Quinlan, the receiver and one of the trustees, was well known to Mr. Roche, and was entirely acceptable to him, both as a receiver and as a trustee. He was a well-known business man, of high character and considerable financial ability, residing and doing business in the city of New York. Mr. Lynch was also a resident of the city, engaged in business there, and a man of integrity and good business capacity. Mr. John E. Develin was a well-known lawyer, of good standing in his profession, and he was also the general counsel and adviser for the Foundling Asylum. The trust deed conveyed to these trustees a large amount of real estate situated in the city of New York, and it was conveyed to them upon a trust to sell and convey the same, or so much as might be necessary, and with the proceeds pay the depositors of the bank as already stated. By the terms of the deed, the time within which the payments were to be made was stated, but it was subsequently extended until some time in October, 1874. This trust deed was not joined in by Mrs. Roche, and subsequently, and on the 24th day of January, 1872, the trustees reconveyed the real estate mentioned in that November trust deed back to Roche, and received at the same time another deed, substantially the same as the November deed, in the execution of which Mrs. Roche joined. The present plaintiff, Randolph F. Purdy, is the successor of McGowan, the original plaintiff, who was made the grantee under a deed subsequently executed by Roche, conveying to McGowan his remaining interest in the property conveyed to these three trustees, and which might remain after their performance of the duties devolved upon them by that deed. The plaintiff claims a right to call these trustees to an account, because, by the terms of the trust deed to them, they were to pay only such depositors as gave subrogations within the time limited in the trust deed, and after such time no payments could be made, and the property was then to be conveyed back to the grantor, whose residuary interest the plaintiff represents. We do not deem it necessary upon this appeal to decide upon the objections raised by the defendants as to the right of the plaintiff to maintain this action for an accounting. We assume he has such right, and the question remaining is whether any cause of action has been proved against the defendants Develin and Lynch to account for moneys which were turned over to Quinlan under the circumstances hereinafter referred to.

The trustees sold a large amount of real property, and realized large sums from such sales. Part of the proceeds of the sales they deposited with a trust company in the city of New York, but subsequently, and from time to time, drew it from such company, and transferred it to Mr. Quinlan, for the purpose of having him at once proceed and pay the depositors and take the subrogations as provided for in the trust deed. The trustees also appointed an agent for the purpose of collecting the rents of the real estate while it was in their hands, and before it was sold by them, and such agent collected a little over $18,000, and turned it over to Mr. Quinlan, as one of the trustees. Several sums, amounting in the aggregate to over $17,000, being the proceeds of sales of a portion of the real estate, came into Mr. Quinlan's hands directly, and were never in the possession or under the control of the other trustees. Altogether there came into Mr. Quinlan's hands, including the items of $18,000 for rents, and the $17,000 proceeds of sales of real estate above mentioned, a total of $262,254.25, being the whole amount of the trust fund converted into money; and he is credited with having paid out $229,291.29, leaving a balance of $32,962.96 of the trust fund to be accounted for. The referee to whom the action was referred found these facts, and charged all three of the trustees with the total amount that had come into Quinlan's hands, and credited them with the amount paid out by him, and charged them with the balance as due by reason of their position as trustees. The referee charged the trustees with interest on the balance unaccounted for from the time when the demand was made for it up to the date of his report, in January, 1880, which interest amounted to a little over $10,000; and upon the whole sum, amounting to over $43,000, interest was cast from the date of the report until the day of the entry of judgment, February 10, 1883, amounting to over $8,000; and these items, together with over $1,800 costs, made a total of $53,420.58, for which judgment against these defendant trustees was entered February 13, 1883. The ground of liability upon which the referee proceeded was that the defendants Develin and Lynch were guilty of negligence in transferring to their cotrustee, Quinlan,the moneys arising from the sales of the real estate, which had come into their hands, and which had been deposited in their names to their joint credit with a city trust company, although such transfer was made for the purpose of immediate distribution by Quinlan; and the referee...