CARDOZO, J.
The action is in equity, brought by a surviving executor to follow and reclaim trust moneys converted by a deceased fiduciary.
In September, 1915, John C.R. Eckerson had an account in his own name with the defendant, the Hudson Trust Company. He told Mr. Purdy, one of the defendant's officers, that he wished to open a second account, which for his own bookkeeping reasons was to be kept separate from the first. This account, it was agreed, would be designated "special." A day or so later he opened the new account with a deposit of $7,000. He brought with him a certified check for that amount upon the United States Mortgage and Trust Company. The check was signed "Wm. R. Denham by John C.R. Eckerson, att'y. in fact," and was drawn to the order of "John C.R. Eckerson, Trustee." Some comment was made by Mr. Purdy upon the use of the word "trustee" instead of the word "special." Mr. Eckerson said that he supposed the words to be interchangeable, that in fact there was no trust, and that the deposit was his own. Upon his indorsement of the check, an account described as "special" was opened in the defendant's books. At that time the standing of the depositor with banks and in the business community generally was high. His reputation went far to disarm suspicion of wrongdoing.
William R. Denham, the drawer of the check through Eckerson as agent, had signed a power of attorney in April, 1915. The power was a broad one, conferring authority on the agent for and in the name of the principal to make and indorse negotiable paper; to borrow money; to keep one or more banking accounts; and to draw against the accounts and make deposits therein. Mr. Denham was ill when the special account was opened, and died a few days later, September 21, 1915. His will named two executors, Eckerson and the plaintiff. Letters were issued to both, but the plaintiff took little part in the administration of the estate. Securities which had belonged to Mr. Denham were kept in a box of the United States Safe Deposit Company. Eckerson removed them, brought them from time to time to McCurdy, Henderson Co., stockbrokers, and caused them to be sold. Checks of McCurdy, Henderson Co., aggregating $18,817.36, drawn to the order of J.C.R. Eckerson and J.C.R. Eckerson, "special," were deposited in the special account in April, 1916. They were for the proceeds of sales. Checks of the same firm, aggregating $22,468.54, drawn to the order of J.C.R. Eckerson, "executor," were deposited in the same account in May, 1916. They were for the proceeds of other sales.
Eckerson at these times was the executor and trustee of another estate, that of Joseph H. Snyder. He kept an account as the representative of that estate with the Hudson Trust Company. A judgment of the Supreme Court made in April, 1916, in an action for an accounting directed distribution of $188,089.35, adjudged to constitute principal, and $52,999.81, income. The assets held by the trustee were not sufficient to permit the payments to be made. His embezzlements had brought about a deficit of $166.166.38. In this emergency, he made good his thefts from one estate, or part of them, by stealing from the other. He drew three checks aggregating $29,195 upon the "special" account, which contained the proceeds of the securities belonging to the estate of Denham. The checks, dated in May, 1916, were to the order of the estate of Joseph H. Snyder, and were placed to the credit of Eckerson, as executor. He distributed the moneys thus obtained among the Snyder legatees.
Eckerson died in October, 1916, and his thefts were then discovered. The surviving executor of the Denham estate now looks for reimbursement both to the Hudson Trust Company and to the estate of Joseph H. Snyder, represented by the defendant Taylor, who on the death of Eckerson was appointed the agent of the Supreme Court to execute the trusts. The Appellate Division has held that in accepting the check for $7,000, which opened the account, and in accepting the three checks for $22,468.54, drawn by McCurdy, Henderson Co. to the order of "Eckerson, executor," the Hudson Trust Company had constructive notice through the form of the checks that the deposit was a breach of trust. Judgment has gone against the trust company for the total of these items, less, however, the balance remaining in the special account on the death of the depositor. The result is to charge the trust company with liability for $18,448.87 principal, and interest $6,008.88, in all $24,457.75. The Appellate Division has held that the defendant Taylor, as agent or trustee, must refund $29,195, principal, and $9,340.40, interest, in all $38,535.40, moneys withdrawn from the estate of Denham and turned over without right to the trustee of the estate of Snyder. Both the Hudson Trust Company and Taylor appeal.
(1) The liability of the trust company will be the first subject of inquiry.
We begin with a consideration of the check for $7,000, which opened the account. The check was drawn, as we have seen, by Eckerson, attorney, to the order of Eckerson, trustee. The argument is that the trust company made itself a participant in the wrong when it placed the description "special" rather than "trustee" in the title of the account. Rights and wrongs are not built upon distinctions so inconsequent. If the word "trustee" had been added, Eckerson would have been equally free to draw the money out and use it as he pleased ( Gray v. Johnston, L.R. 3 Eng. Ir. App. 1). The style of the account, the term of description attached to it, had no bearing on the result, no relation to the consequences. A different question would be here if the trust company had received the check for its own use, as, for example, in payment of a debt ( Bischoff v. Yorkville Bank, 218 N.Y. 106, 112; Ward v. City Trust Co., 192 N.Y. 61). What it did was to accept the check for the use of the depositor upon an agreement that the proceeds should be subject to his order. When the order was given and the money disbursed, the situation was the same as if cash had been delivered for safekeeping and afterwards returned. In such a situation, the defendant is to be held liable, if at all, only upon a showing that by the form of the account it has facilitated a conversion and made itself, in so doing, a party to a tort ( Allen v. Puritan Trust Co., 211 Mass. 409, 422; Squire v. Ordemann, 194 N.Y. 394). But nothing that was done by the defendant did facilitate a conversion. Eckerson was the payee of the check with power to collect it. His power was neither increased nor diminished by the form of the deposit. He was the owner of a chose in action whether subject to a trust or free from one. Under the law as it then stood, a trustee did not convert the moneys of the trust by the mere act of depositing them in a bank in his individual name ( Bischoff v. Yorkville Bank, supra; Sagoney v. Mackey, 225 N.Y. 594, 599; Wickenheiser v. Colonial Bank, 168 App. Div. 329, 333; 224 N.Y. 650). Whether any change in this respect has been brought about by later statutes (Code Civ. Pro. § 2664a, as amd. by L. 1916, ch. 588, in effect Sept. 1, 1916; Surrogate's Court Act, § 231), we need not now determine. The defendant did no more to facilitate the conversion than it would have done if it had accepted a deposit of cash with notice that there was a question whether the cash belonged to the depositor in his own right or as fiduciary. The fact that the check described the payee as trustee, though suggestive of a trust, was not conclusive ( Manhattan Savings Inst. v. N.Y. Nat. Exch. Bank, 170 N.Y. 58, 67; Matter of Totten, 179 N.Y. 112). Whether a trust did in truth exist, the defendant could not be sure. What it could be sure of was that the style of the account would neither change the quality of ownership nor work injury to any one.
The plaintiff makes a point that the deposit, if not wrongful because of the description of the payee, is to be deemed wrongful, none the less, because of the description of the maker. The payee was described as trustee, the maker as an agent. One answer to this point suffices, though others may be available. The payee of the check, before delivering it to the defendant, had caused it to be certified. The legal result was the same as if he had received the cash over the counter ( Freund v. Imp. T. Nat. Bank, 76 N.Y. 352; Carnegie Trust Co. v. First N. Bank of N.Y., 213 N.Y. 301; Meuer v. Phenix Nat. Bank, 94 App. Div. 331; 183 N.Y. 511). Between the drawee bank and its depositor, the check had been paid (Neg. Inst. Law, § 324; Consol. Laws, ch. 38; Gallo v. Brooklyn Savings Bank, 199 N.Y. 222). The payee was the owner of a chose in action, the drawee's promise to pay, just as much as if he were the holder of a cashier's draft ( Goshen Nat. Bank v. State of N.Y., 141 N Y, 379; Justh v. Nat. Bank of the Commonwealth, 56 N.Y. 478, 480). What the defendant turned into money was not the obligation of the maker, but that of the drawee. In such circumstances, the act of collection for the account of the depositor was neither a conversion nor anything that had a proximate relation in aiding a conversion. The drawee would have paid in discharge of its own promise if Eckerson rather than the defendant had come to it with the check and demanded payment of the money. If this had been done, and the money then handed to the defendant, there would hardly be a claim that a tort would have resulted, though the money was received with knowledge of its origin. The intervention of a cashier's draft or its equivalent changes the transaction in form, but not in substance ( Goshen Nat. Bank v. State of N.Y., supra).
Reaching this conclusion, we are not required to determine to what extent the defendant would be protected by our ruling in Havana Central R.R. Co. v. Knickerbocker Trust Co. ( 198 N.Y. 422) though the check had been uncertified. There may be technical inaccuracy in describing the drawee bank as the depositor's agent for the purpose of making representations as to the fiduciary's powers ( Havana Central R.R. Co. v. Knickerbocker Trust Co., supra, at p. 430). The relation is one, not of agency, but of debtor and creditor. The bank is chargeable, however, with knowledge of the signature of the drawer, and of his authority to draw ( Nat. Park Bank of N.Y. v. Ninth Nat. Bank of N.Y., 46 N.Y. 77; cf. Neg. Inst. Law, § 112; Consol. Laws, ch. 38). Knowledge of its action in making payment of the paper may, therefore, take the place, within reasonable limits, of other investigation and inquiry by the collector of the proceeds ( Havana Central R.R. Co. v. Knickerbocker Trust Co., supra; Allen v. Puritan Trust Co., supra, at p. 423). Where the line is to be drawn, if the instrument is uncertified at the time of the deposit, we need not now inquire.
In thus disposing of the controversy, we do not forget such cases as Wagner Trading Co. v. Battery Park Nat. Bank ( 228 N.Y. 37) and Moch Co. v. Security Bank of N.Y. ( 176 App. Div. 842; 225 N.Y. 723). There, and in others like them, an officer of a corporation indorsed to himself checks received by the corporation and drawn to its order as payee. We held that such an indorsement was not within the power of the agent (cf. Bank of N YN.B. Assn. v. Am. D. T. Co., 143 N.Y. 559, 563; Manh. L. Ins. Co. v. F.S.S. G.S.F.R.R. Co., 139 N.Y. 146, 151; Ward v. City Trust Co. of N.Y., 192 N.Y. 61, 71; Porges v. U.S. Mortgage Trust Co., 203 N.Y. 181, 190), and that the consequences were those that follow where an indorsement has been forged ( Standard S.S. Co. v. Corn Ex. Bank, 220 N.Y. 478, 481). The bank receiving the deposits, collected paper for the account of its depositor, though the depositor had neither title to the paper nor power, in the existing situation, to confer title on another. In a very substantial sense it had facilitated the conversion, for the drawee bank, which would probably have refused payment to the delinquent agent coming in person and asking payment over the counter, might be expected to confide in the indorsement and warranty of a bank collecting for his account. This is so whether we view the latter bank as agent ( Nat. Park Bank of N.Y. v. Seaboard Bank, 114 N.Y. 28) or as purchaser ( Met. Nat. Bank of N.Y. v. Loyd, 90 N.Y. 530). The cases imposing liability in such circumstances lay down, however, a strict and at times a harsh rule, and are not to be extended. They do not reach a case where the instrument has been collected according to its tenor for the account of the very person who is there named as the payee. The transactions of banking in a great financial center are not to be clogged, and their pace slackened, by over-burdensone restrictions.
We pass to the checks of McCurdy, Henderson Co., amounting to $22,468.54, which were drawn to the order of Eckerson, "executor." Under our ruling in Bischoff v. Yorkville Bank ( supra), the defendant did not become a party to a wrong in crediting these checks to its depositor's personal account. We are told that the Bischoff case is to be distinguished upon the ground that there the account was general and that here it is special. The distinction is unreal. If we were to give it any effect at all, it would count in favor of the defendant's action rather than against, since the designation of the account as special suggests a separation of the items from those that are strictly personal. But in truth the label is unimportant. The executor was owner ( Matter of Heinze, 224 N.Y. 1, 8). Whether he deposited in his own name or with the addition of the name of the estate, the title was unchanged ( Bischoff v. Yorkville Bank; Sagoney v. Mackey, supra).
(2) Our final subject of inquiry is the liability of the defendant Taylor as agent or representative of the Supreme Court in the execution of the trusts created by the will of Snyder.
When Eckerson took the money which he held as executor of one estate, and paid it to himself as the representative of another, he had notice in the act of transfer and acceptance that the money was stolen and ought not to be received. The notice was actual. It was not, as in Henry v. Allen ( 151 N.Y. 1) and like cases, imputed or constructive. Eckerson, trustee under the Snyder will, was not an agent identified with some one else, a principal, as the result of legal fiction. He was the principal himself. It is only a form of words when we speak of him as the representative of an "estate." The "estate" had no separate existence. It was not a legal person. The only person was the trustee. His acceptance with guilty knowledge charged him as trustee with a duty to restore ( Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268; U.S. v. State Bank, 96 U.S. 30; Newell v. Hadley, 206 Mass. 335, also dissenting opinion in same case at p. 358; cf. Weston, Money Stolen from One Trust for Another, 25 Harv. Law Rev. 602 at p. 610). The trustee of an express trust under our statute (Real Property Law, § 100; Consol. Laws, ch. 50) has the whole title and estate. The beneficiary has a chose in action, the right to enforce in equity the performance of the trust ( Schenck v. Barnes, 156 N.Y. 316, 321). Money accepted by a trustee with knowledge that its acceptance is a theft never becomes of right a part of the trust estate. The beneficiary will not be heard in equity to insist that it shall be so regarded. The trustee's duty to restore is not ended by his death. It devolves upon the Supreme Court, the successor to the trust (Real Property Law, § 111; Consol. Laws, ch. 50; Pers. Prop. Law, § 20; Consol. Laws, ch. 41), and now rests upon the agent by whom the trust is to be executed.
We are reminded that the stolen money after the receipt by the trustee was paid out to legatees, to whom distribution was due under a judgment of the court. The distribution may render it impossible to identify or earmark the money in the hands of the trustee to-day. The impossibility affects the nature and scope of the relief. It does not involve as a consequence a refusal to give relief at all. The equitable lien is destroyed by the dissipation of the fund ( Falk v. Hoffman, 233 N.Y. 199; Roca v. Byrne, 145 N.Y. 182; Schuyler v. Littlefield, 232 U.S. 707). There may still be a personal judgment enforcible against the trust estate, to the extent of the unjust enrichment, out of the assets that remain ( Lightfoot v. Davis, 198 N.Y. 261, 272, 273). A different question is presented where the attempt is, not merely to establish a debt, but to prefer one creditor over others ( Lightfoot v. Davis, supra, distinguishing Matter of Cavin v. Gleason, 105 N.Y. 256, and Matter of Hicks, 170 N.Y. 195). That is not the situation here. If a trustee has two bank accounts and stolen moneys are paid into the first, the beneficiaries are not prejudiced because the trustee in making restitution draws his check upon the second. The unjust enrichment is the same whether the increment is left in one compartment or another. We see no reason why judgment, if kept within these limits, may not run against the wrongdoer as trustee as well as individually. There is little analogy between the situation before us here and cases where the attempt is made to charge a trustee in his representative capacity for goods bought and used for the benefit of the trust. At such times the primary remedy is against the trustee individually if the seller has chosen to make the sale upon his credit ( O'Brien v. Jackson, 167 N.Y. 31). Even then a a secondary remedy may exist by subrogation to the right of the trustee to be indemnified for his expenses out of the assets of the trust ( Willis v. Sharp, 113 N.Y. 586, 591; Hewitt v. Phelps, 105 U.S. 393, 400; Stone, Liability of Trust Assets for the Contracts and Torts of the Trustee, 22 Col. Law Rev. 527; Scott, Liabilities in the Administration of Trusts, 28 Harv. Law Rev. 725, 735). There are cases which hold that this remedy will fail to the extent that the trustee as between himself and his beneficiaries is in arrears in his accounts ( Matter of Johnson, L.R. 15 Ch. Div. 548: Matter of Evans, L.R. 34 Ch. Div. 597; Stone, supra, p. 528; but cf. Wylly v. Collins Co., 9 Ga. 223). In such circumstances, unjust enrichment, it is thought, does not result, since the seller has himself to blame if he has sold upon the personal credit of the buyer. A larger security might have been attained by stipulating in advance for a charge or lien upon the fund ( Jessup v. Smith, 223 N.Y. 203). How far the right of recourse in such conditions is affected by the state of the accounts between trustee and beneficiaries, we need not now inquire. We are dealing in the case at hand with a very different situation. The defendant's enrichment is a direct and immediate, not an indirect or collateral, consequence of the act of the trustee. It is an enrichment independent of the volition of the defrauded plaintiff or of those for whom he acts. The fruits of the tort are profits in the coffers of the estate. We cannot characterize enrichment so procured as other than unjust (Stone, supra, at pp. 528, 538, 539, 543; Scott, supra, at p. 741). The trust is still augmented by assets unconscionably retained.
It is argued that the legatees when they received the stolen money on account of a valid debt became holders for value, and acting without guilty knowledge may retain in good conscience the benefits received. Many cases are cited in support of this conclusion ( Stephens v. Bd. of Education, Brooklyn, 79 N.Y. 183; Ball v. Shepard, 202 N.Y. 247; Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N.Y. 137; Newhall v. Wyatt, 139 N.Y. 452; Holly v. D. F. Missionary Society, 92 Fed. Rep. 745; 180 U.S. 284; cf. Edgar v. Plomley, 1900 A.C. 431). These cases might be applicable if the plaintiff were suing a legatee, who, by force of the payment so made, would hold the legal title. They do not touch a case where he is suing the trustee. The plaintiff is not holding the legatees accountable for anything. He does not attempt to follow the money into their hands on any theory of constructive notice of the fraud of the trustee. What they have, they may retain, though it prove to be far in excess of what is left in the estate. It is one thing to hold that equity will divest a legal title acquired by legatees without notice of defects. It is another thing to hold that equity will affirmatively intervene to clothe them with a title still retained by the trustee. The fact that the present trustee is a successor is unimportant. The transaction is guilty or innocent according to the presence or absence of notice at the time when payment was accepted. A legatee, if guilty, would charge his executor with liability though the executor were innocent. A trustee, if guilty, charges his successor, who assumes the trust cum onere. Nothing to the contrary was held in Case v. James (29 Beav. 512; affd., 3 DeG., F. J. 256); Thorndike v. Hunt (3 DeG. J. 563), and Taylor v. Blakelock (32 Ch. Div. 560). There the money did not reach the trust at all till it was paid to a new trustee who had no knowledge of its origin. Here the taint attached at the moment of acceptance.
It is argued that the effect of the judgment against the trustee under the Snyder will is to make the remaindermen suffer to a greater extent than the beneficiary of the trust for life or her personal representatives. Equity requires, it is said, that the burden of Eckerson's thefts be distributed proportionately between the life interest and the remainders. This, the brief tells us, has not been done. The life beneficiary or her estate has been paid in full; the judgment must be satisfied, it is said, out of assets that are held for the benefit of the remaindermen.
The point, if it is in the record at all, is not there with the clearness essential to make it the basis of our judgment. We do not know the terms of the will. There is no copy of it in the findings or even in the testimony. Possibly the cestui que trust for life had equities superior to those of the remaindermen. We do not even know whether the money that was paid to her was part of the stolen money, or was derived from other sources. A deficit existed, but the estate had not been looted altogether, and its own assets were more than adequate to pay the cestui que trust in full. The question is not before us whether if she has in fact been overpaid, a remedy against her or her estate is available hereafter at the suit of the remaindermen for a readjustment of the burden.
The judgment against the Hudson Trust Company, both at the Appellate Division and at the Special Term, should be reversed, except as to the conceded balance of $12,064.44, and the complaint dismissed except as to said balance, with costs in the Appellate Division and in this court. The judgment against the defendant Taylor as the agent of the court to execute the Snyder trusts should be affirmed with costs.
HISCOCK, Ch. J., HOGAN, POUND, McLAUGHLIN, CRANE and ANDREWS, JJ., concur.
Judgment accordingly.
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