Harrison v. Egan

Crane, Ch. J. This action has been brought by the beneficiary of a trust to recover the principal trust fund diverted by the trustee and devised or bequeathed to George Schultz for whose estate the public administrator is the representative and party defendant in this action. As we are to modify the judgment merely as to the item of interest the facts may be briefly stated. Daniel B. Harrison, the plaintiff’s father, died April 21, 1887, when the plaintiff was about three years of age. Harrison left a will which in effect left all his property to his wife in trust for his child, this plaintiff. Eliza M. Harrison, the wife, having been duly appointed executrix and trustee, received the sum of $4,173.40 in March of 1894 as the corpus of the trust. Three thousand dollars of this money was invested in property known as 242 East Twenty-third street, New York city, title to which was taken in the name of Mrs. Harrison, who by that time had become Eliza M. Schultz. George Schultz, her husband, named as one of the grantees, subsequently conveyed all his interest to the wife. Eliza Schultz died on the 13th day of January, 1921, leaving a will whereby she bequeathed her entire estate, both real and personal, to her husband, George Schultz, who subsequently qualified as executor on the 14th day of May, 1923. *391 The estate of Mrs. Schultz, including the said parcel of real property, was of the net value of $34,091.50. Neither Mrs. Schultz nor her husband ever accounted for the trust fund of $3,000 invested in this real property which was subsequently turned into cash and purchase-money mortgage by George Schultz after his wife’s death. George Schultz died intestate on the 5th day of October, 1932, leaving an estate of real and personal property of a net value of $59,352.72. The public administrator, the defendant in this action, now represents this estate. The trial justice found as a fact that Eliza M. Schultz, formerly Eliza M. Harrison, fraudulently misappropriated this portion of the corpus of said trust consisting of $3,000 which rightfully belonged to the plaintiff; and that the plaintiff, now a man of mature years, at no time had any knowledge or information prior to May of 1933 regarding the trust in his favor created by his father, or of the fraud which had been practiced upon him. The justice also found that, prior to the death of his wife, George Schultz knew that a portion of the trust fund in the sum of $3,000 had been invested in the Twenty-third street property, but that he did not assist the trustee in the fraudulent and dishonest disposition of this fund. The court was justified in holding that this real property was impressed with a trust in favor of this plaintiff in the sum of $3,000, and that George Schultz took the devise under his wife’s will impressed and incumbered with this trust. The finding made by the judge was quite specific. It reads as follows: “ That the said real property, which was acquired by the said George Schultz, as Executor and sole devisee and legatee of the said Eliza Schultz, at the time of her death, was thereafter fraudulently retained by him with knowledge that it was so impressed with the said trust for the benefit of plaintiff.” Upon the mere recital of these facts it is apparent that the estate of George Schultz cannot withhold this $3,000 fund from the plaintiff. It never became his property, *392 and he and the estate were never entitled to it. Whether we consider him the successor trustee of an express trust (Soar v. Ashwell, [1893] 2 Q. B. 390), against whom there was no time limit for recovery (Lightfoot v. Davis, 198 N. Y. 261), or as a trustee in invitum, in whose favor the ten-year Statute of Limitations applicable to equitable actions (Civ. Pr. Act, § 53) would apply, is at this time immaterial, as this action was brought within the ten years’ limitation extended by section 21 of the Civil Practice Act on the death of George Schultz, October 5, 1932. The judgment of the Special Term charged interest on this fund from the 26th day of January, 1905. The Appellate Division modified the judgment in this particular by directing that interest on the $3,000 must rim from the 20th day of September, 1898. The latter date is the time of the conversion or misappropriation by Mrs. Schultz; January 26, 1905, is the day the, plaintiff-beneficiary became twenty-one years of age and entitled to the trust principal. The trust provision in his father’s will reads: “ The said Trustees shall invest and keep invested all of my estate, as aforesaid, in such safe security consisting either of improved real estate or good Bonds secured by first mortgages on good real estate, as in their discretion shall be secure, and they shall pay the income arising from such investments to my said beloved wife, Eliza M. Harrison during the period of her natural life, or until her remarriage after my death. She shall use the same for the support of herself and of any of my children during the minority of the latter. In case of the remarriage of my said wife after my death, then the entire income of my said estate shall be applied and devoted to the support of my children, if any me surviving, during the period of their minority and the principal of my said estate shall be paid to my said children in equal proportions if there be more than one, or the whole thereof when they or it attain the age of twenty-one years.” *393 The plaintiff should have been paid the $3,000 at his majority but up until that time his mother could use the income for his support. He lived with his mother during his minority and was supported by her. The income on $3,000 would not go very far for this purpose. Under these circumstances we are justified in assuming that the mother spent more than such income upon her boy while he was growing up in the home. The trial justice was quite right, therefore, in starting the interest period with the plaintiff’s majority, January 26, 1905, at which time the mother should have paid over to him the trust fund left by his father. If George Schultz had received no more than the $3,000, he and his estate would be charged with interest only from the time that he took the money or property and failed to turn it over. However, this action is for much more than to recover for his illegal acts. He received as legatee under his wife’s will over $34,000 net estate, and was also executor of her will. What was her liability for which all of her assets should respond at the time of her death? She had $3,000 in cash which she misappropriated in 1898. The findings are that she never accounted nor paid any money to the plaintiff as she should have done in the execution of the trust. At the time of her death she would have been liable for this $3,000, with interest from 1905 at least. Her estate, represented by George Schultz, her executor husband, would have been liable for this claim. The whole claim, with interest from 1898, amounts to only $9,799.65 and, with interest from 1905, something less. Her net assets, which passed to George Schultz, both as executor and as legatee, were $34,091.50. How can this amount escape in equity the payment of' the plaintiff’s claim? How can George Schultz’s estate receive and keep money which Eliza M. Schultz could not keep and which she, therefore, could not pass on to others who took with guilty knowledge? This action is brought in equity to reach these assets for the payment of this claim in full. *394 If George Schultz were still alive, being executor of his -wife’s will, he could be forced to account for every dollar coming into his hands from his wife’s estate and on the accounting he would be charged with this claim of the plaintiff. George Schultz, however, died in 1932, leaving a net estate of $59,352.72. This includes the $34,091.50 received from his wife’s estate, which was net, so that there are no outstanding claims of creditors. The dispute in this case is merely between the plaintiff and George Schultz’s relatives as to who is entitled to the money that came from Eliza M. Schultz, at least to the extent of the $3,000 and interest. In this state of affairs I can see no reasonable objection to equity taking jurisdiction (Newton v. Porter, 69 N. Y. 133) and compelling the public administrator to pay over to the plaintiff the money concededly due him. There can be no question on the facts as stated and found by the trial judge that this money belongs to the plaintiff and not to the next of kin of George Schultz. Is there anything in our law, barring the Statute of Limitations, which prevents a court of equity from doing equity and making the public administrator turn over from the funds in his hands money which does not belong to any person he represents, and which is the property of the plaintiff? Relief in equity was also required as the real property — the Twenty-third street property — in which the trust funds were placed, came to George Schultz as devisee and was converted by him into personalty, part mortgage, part cash. It was necessary to trace these funds. The $3,000 plus the interest from 1905 was the amount due the plaintiff when Mrs. Schultz died, against which no statute of limitations had run, as she was the trustee of an express trust. As before stated, the property of Eliza M. Schultz -— her interest in the Twenty-third street property as well as other assets — was more than sufficient to pay this plaintiff the full amount due. *395 The modification as to interest made by the Appellate Division should be stricken out, and the judgment of the Special Term affirmed, with costs in this court and in the Appellate Division.