In Re the Accounting of Hicks

Cullen, J. On January 23, 1872, under a decree of the surrogate of Queens county settling the estate of Thomas B. Remsen, the father of Carrie A. E. Remsen, the respondent herein, one John R. Remsen, received as guardian for said Carrie, then an infant about seven years old, the sum of $2,726.81. In the same year said John R. Remsen, as executor of Jacob Remsen the grandfather of the respondent, held the further sum of $1,000, bequeathed by said Jacob Remsen to the respondent. On the death of her father the respondent ' went to live in the family of said John R. Remsen. She was *197 supported by her guardian, but he never accounted to her for either sum of money. In April, 1893, John E. Eemsen died, leaving a will of which the appellant, Joseph W. Hicks, is the executor. In 1894, the respondent filed a claim against the estate of her deceased guardian for the amount due to her, which claim was referred under the statute. The referee made a report in her favor for the sum of $2,105.89, being the balance found due to her after charging the guardian’s estate with the amounts received by him and interest thereon and crediting the estate with the amount paid for the respondent’s support. On the report of the referee judgment was entered in the Supreme Court. The appellant was called to account for his proceedings as executor. Pending the accounting the respondent applied for an order under section 2606 of the Code of Civil Procedure to compel the appellant to pay over to her the amount due on her judgment. The application was based on affidavits stating the nature of the plaintiff’s claim, that it was for a trust fund and that the amount of the estate received by the appellant was more than sufficient to satisfy it. The appellant, in answer to the application, tiled an affidavit stating that he had claims against the estate amounting to some $6,000, which were then before the surrogate awaiting his decision; that as to $1,000 of his claim it was of the same nature as that of the respondent, to wit, for a trust fund; that one Walters held a claim for $500 of a similar character; that as executor he received in the estate of his testator but $1,700 in cash and debts due to the deceased, out of which he had paid over $800 in funeral expenses and expenses of administration; that $3,500 was received by him from insurance on the life of his testator. He denied that any of the trust fund belonging to the respondent had come into his hands. No testimony was taken by the surrogate, but on these affidavits he ordered that the appellant, as executor of John E. Eemsen, pay to the respondent or her attorney within fifteen days the sum of $2,130.11, with interest thereon from October 9, 1896, or in default thereof be punished as for contempt. The Appellate Division modified this order so as to *198 direct the payment to be made into the Surrogate’s Court and affirmed the order as modified. The theory on which the courts below have proceeded and for which the respondent contends on this appeal is that as her claim was for the appropriation of a trust fund and the estate of her guardian which passed to the executor was greater than her claim, her trust fund must be presumed to be part of such estate and that she is entitled to payment over other creditors. The rule in equity is “ that as between oestui que trust, and trustee, and all parties claiming under the trustee otherwise than by purchase for a valuable consideration, without notice, all property belonging to a trust, however much it may be changed or altered in its nature or character, and all the fruit of such property, whether in its original or altered state, continues to be subject to or affected by the trust. This settled doctrine of equity has its basis in the right of property. * * * But it is the general rule as well in a court of equity as in a court of law, that in order to follow trust funds and subject them to the operation of the trust, they must be identified.” (Andrews, J., Matter of Cavin v. Gleason, 105 N. Y. 256.) In that case the application for payment was denied and it was further said : “ It is clear, we think, that upon an accounting in bankruptcy or insolvency, a trust creditor is not entitled to a preference over general creditors of the insolvent, merely on the ground of the nature of his claim,- that is, that he is a trust creditor as distinguished from a general creditor.” So in Ferris v. Van Vechten (73 N. Y. 113) it was held : “ To follow money into lands and impress the latter with the trust, the money must be distinctly traced and clearly proved to have been invested in the lands. * * * It does not suffice to show the possession of the trust funds by the trustee, and the purchase by him of property — that is, -payment for property generally. by the trustee does not authorize the presumption that the purchase was made with trust funds.” In Holmes v. Gilman (138 N. Y. 369) the premiums paid on the insurance policies, the proceeds of which were subjected to the plaintiff’s claim, *199 were clearly shown to have been paid out of moneys fraudulently taken from the partnership. There Judge Peokham said that the plaintiff had the right to follow the fund and appropriate the property into which it had been changed, u provided the trust fund can be clearly ascertained, traced and identified.” I know of no case bearing on this subject that does not prescribe the limitation tliat the trust fund must be “ ascertained, traced and identified,” and the respondent’s proof entirely fails to comply with this requirement. Twenty years elapsed between the receipt by the guardian of the respondent’s funds and his death. During that period there is no trace of the fund. He never paid the respondent interest on it and it does not appear that he ever invested it; nor is there anything to show what was the guardian’s financial position during that time. He may at some intermediate period have been without property, and the estate which he left at his decease may have proceeded entirely from money or property obtained from other creditors. A presumption without any proof to support it can no more be indulged in in favor of the respondent’s claim than in favor of that of any of the other creditors. To do so would in effect be simply holding that because the plaintiff’s claim is for a breach of trust it is entitled to a preference. There are further objections in this case to the order that has been granted. At the time of the testator’s death the amount of money in his estate was only $1,700. The other sums received by his executor were the proceeds of an insurance policy on the life of the deceased. Yet he has been directed to pay over a sum in excess of $2,100. He swears that there are two' other claims against the estate also for the conversion of trust money amounting to $1,500. If these claims should be allowed they would stand on exactly the same footing as that of the respondent, and surely the respondent can be entitled to no preference over those creditors. Therefore, in no aspect of the case was the surrogate, on the evidence before him, justified in directing the payment of the respondent’s claim. It may be that if the respondent had *200 produced her proofs she might have succeeded in tracing her moneys and also in disproving the rival claims. But the summary disposition of the application made hy the surrogate cannot be sustained. The order appealed from should be reversed, without costs, and the proceeding remitted to' the surrogate to take such proofs as the parties may produce.