Seger v. Farmers' Loan & Trust Co.

Hatch, J.: By the will of Caroline Wildberger, admitted to probate by the surrogate of the city and county of Few York on Fovember 13, 1890, a trust was imposed upon a portion of her estate for the benefit of the children of her deceased son, which was to be terminated upon the youngest of such children attaining majority. The executor’s accounts were judicially settled in July, 1892, and the defendant herein, The Farmers’ Loan and Trust Company, was appointed substitute trustee in May, 1893. Among the children benefited by the said trust was Louisa Barry, who, in October, 1892, for valuable consideration, transferred, assigned and set over to Louisa Schaeffler, by written instrument, all her right, title and interest in the said estate. In May, 1893, after the defendant had been' made trustee, notice that Louisa Barry had assigned, her interest in the estate of Caroline Wildberger to Louisa Schaeffler was given to the trust company by one F. Schaeffler. This notice was acknowledged by the defendant company, with a request that the assignment in question be forwarded to it, in order that the sufficiency of the same, to cover any fund in its possession, might be passed upon by its coun [295] sel. No attention was paid to this request, and no further inquiry was made concerning the fund until 1899, when plaintiff discovered that the fund had already been distributed. It appears that in March, 1898, the trust under the will had terminated, and upon a judicial settlement of the trust company’s accounts the several beneficiaries received their respective shares, including Louisa Barry, the assignor of the said Louisa Schaeffler. Louisa Schaeffler died in 1894, intestate, and the plaintiff was duly appointed her administrator. No notice was ever given the plaintiff, as assignee or otherwise, of the settlement of the trust company’s accounts, and he knew nothing about the same until 1899. The point presented in this case is as to whether the notice which was given of the assignment to the trust company was sufficient to require it, before the settlement of its accounts and the distribution of the fund, to cause notice of such proceeding to be given to the assignee of the Barry interest. It is a well-settled rule of law that whatever is sufficient to impose a duty upon a person to inquire concerning the rights of others is regarded as legal notice of such rights, and if it be sufficient to put the person upon inquiry as to such rights, he is chargeable with whatever facts diligent inquiry would have disclosed. (Ellis v. Horrman, 90 N. Y. 466.) In a sense, the question becomes one of good faith of the party receiving the notice, and he may repel the presumption which arises therefrom by showing that he diligently prosecuted the inquiry and was unable to ascertain the existence of any right or title in the party making the claim. (Auburn Button Co. v. Sylvester, 72 Hun, 498.) In the present case there is no'question but that actual notice was given to the trust company of the existence of the assignment of this interest. The only steps which it took to inform itself concerning whether a valid legal assignment was in existence was to request that the claimant exhibit the same for the purpose of determining its validity. It took no further step to inquire into the legality of the claim. It was not a prerequisite to the validity of the notice that the claimant should have exhibited the assignment at the time when he notified the trust company. (Davenport v. Woodbridge, 8 Me. 17; Bean v. Simpson, 16 id. 49.) Under these circumstances, we do not think that the trust company was justified in ignoring the notice and procuring a settlement of [296] its accounts and distribution of the trust fund without making the claimant a party thereto. A diligent observance of its duty as trustee required that it preserve the notice which was served upon it, and it could protect itself at all times by causing a citation to-issue to bring in the claimant upon the settlement of the accounts. Undoubtedly a duty would then devolve upon the assignee to show a valid assignment of the interest, but up to that time there is no-such settled rule as requires a party to establish by proof the validity of his claim, nor did the trustee need for its protection to have it-established prior to the time when it asked for a settlement of its-accounts and a distribution of the fund. The law furnishes an ample remedy for the trust company and it could relieve itself from responsibility by submitting or causing to be submitted, before the court, the instrument under which the claim was asserted, and it. would be protected by the determination of the court thereon. It was its bounden duty to see that the fund was distributed to those entitled thereto, and having notice of the assignment it could not disregard it and procure a settlement of its accounts without notice-to the assignee. If the trustee were called by some process into, court, where the subject-matter of the investigation involved the validity of the assignment, the assignee would then be bound to-furnish the trustee with the full particulars of his claim. Such was. the case of Wood v. Partridge (11 Mass. 488), but where no suck condition arose and the trustee assumed no burden or risk and could in nowise be prejudiced by the omission to produce the assignment, no such obligation was imposed. Having notice thereof, the trustee: procured a settlement of its accounts and distribution of the fund at its peril, and may not complain if by such act it is required to make good the loss occasioned by its disregard of the actual notice which it received. It follows that the interlocutory judgment should be affirmed., with costs. Van Brunt, P. J., and Patterson, J., concurred; Ingraham and. Laughlin, JJ., dissented.