Case Name: The People of the State of New York, Plaintiff, v. The American Loan and Trust Company, Defendant; In the Matter of the Application of Lorenzo Burrows, as Receiver of the Estate of Roswell S. Burrows, Deceased, Respondent, for an Order Directing J. Edward Simmons, as Receiver of The American Loan and Trust Company, to Pay Claim, etc., Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1896-03
Citations: 2 A.D. 193
Docket Number: 
Parties: The People of the State of New York, Plaintiff, v. The American Loan and Trust Company, Defendant. In the Matter of the Application of Lorenzo Burrows, as Receiver of the Estate of Roswell S. Burrows, Deceased, Respondent, for an Order Directing J. Edward Simmons, as Receiver of The American Loan and Trust Company, to Pay Claim, etc., Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 2
Pages: 193–204

Head Matter:
The People of the State of New York, Plaintiff, v. The American Loan and Trust Company, Defendant. In the Matter of the Application of Lorenzo Burrows, as Receiver of the Estate of Roswell S. Burrows, Deceased, Respondent, for an Order Directing J. Edward Simmons, as Receiver of The American Loan and Trust Company, to Pay Claim, etc., Appellant.
Wrongful pledge of stock by an executor—the estate is entitled to recover it specifically— tlie substitution of orwney for the securities does not alter the rights of the parties.
Upon an appeal from an order directing JV Edward Simmons, as receiver of the American Loan and Trust Company, to pay from the fund in his hands to Lorenzo Burrows, as receiver of Boswell S. Burrows, a certain sum of money, it appeared that on the 15th day of March, 1884, the trust company loaned §25,000 to Mary Burrows Smith, who gave to the trust company a note for that amount made by her and by Albert S. Warner, executor of Boswell S. Burrows, Warner pledging as collateral security for the payment of the note 300 shares of a bridge company’s stock which belonged to the estate of his testator, the ownership of which was known to the trust company.
The loan having been paid in part, some of the stock was returned to Warner, who was subsequently removed as executor, and Charles H. Moore was appointed receiver of the estate of Boswell S. Burrows.
Moore brought an action on behalf of his estate to recover of the trust company such certificates of the stock as were still in its hands on the ground that the said certificates of stock had been illegally pledged by Warner. Upon the trial of that action a judgment was rendered in favor of the trust company, and. pending an appeal the parties, under the authority of the court, entered into a, stipulation under which Moore paid the trust company its loan in full and. received the shares of stock which were in its hands, and the trust company, upon its part, agreed to hold the cash thus received by it in lieu of such stock to abide the final judgment in the action. It was further stipulated that if Moore was ultimately successful^; would return to him the amount of his payment, hut without interest. Moore having died, Lorenzo Burrows was substituted in his place as receiver of the estate of Boswell S. Burrows, and J. Edward Simmons, as receiver of the American Loan and Trust Company, was. substituted as defendant in place of the trust company. The final judgment in that action decided that the act of Warner in pledging the stock of his testator for the debt of Mary Burrows Smith was in violation of his duty as. executor; that the trust company obtained no title to the stock, and that, Lorenzo Burrows, as receiver of the estate of the testator, was entitled to receive the stock in question from J. Edward Simmons, as. receiver of the .trust company. - ,
Held, that Simmons was bound by the judgment and must pay the money which represented the stock to Burrows as receiver;
That although the trust company had succeeded in the court below in the action brought against it by Moore, it could not, pending the appeal in that action, lawfully dispose of the money until final judgment;
That the transaction under which the money was received, and was to be held by the trust company in place of the stock, did not alter the rights of the • parties;
That the fact that the money was deposited in the trust company’s general account; was not material. -
It appeared that money sufficient to pay the claim was on hand at the time of the " appointment of the receiver of the trust company.
Held, that this money was- to be regarded as held by him as a specific pledge; to-be returned to the estate of Roswell S. Burrows, if it was'finally successful;,
That the receiver of the Burrows estate was entitled to the money in question in preference to any creditors of the trust company, whether general or preferred;
O’Brien, J., dissented.
Appeal -by J. Edward Simmons, as receiver of The American Loan and Trust Company, from an-order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the. 9th. day of December, 1895, directing said receiver to pay from the funds in his hands as such receiver to Lorenzo Burrows, the receiver of the estate of Ros^well S. .Burrows, deceased, of his 'attorney, a sum of money deposited with the American Loan and Trust Company by. the said Burrows as sucli receiver.,. '
, David Wilcox, for the appellant.
v John Gunneen,. for the respondent.

Opinion:
Ingraham, J.:
The American Loan and Trust Company was a trust company ' incorporated under an act of the Legislature of this State, passed June 1, 1872, and known as chapter 868 of.the. Laws of 1872, doing business in the .city of New York. On the 15th day of "March, 18'84, it made a loan of $25,000 to one Mary Burrows •.Smith'; and said Mary Burrows. Smith delivered to the said trust company a certain promissory note wherein- it was stated that, for value received, the said Mary Burrows Smith and one Albert S. Warner, as executor of Roswell S. Burrows, jointly and severally promised to pay to the American Loan and Trust Company $25,000, with interest; and to secure the payment of the said, note the said Warner delivered to the trust company certificates of 300 shares of the stock of the Niagara Falls International Bridge Company, the property of the said estate held by him in trust as such executor; and at the time the said trust company received the said stock it was well known to said trust company that the said certificates of stock were the property of the estate of the said Burrows, deceased, and were held by said Warner in trust, us executor of said estate, and as part of the assets of said estate. Subsequently there was repaid of the said loan certain sums of moiiey, reducing the' principal of the said loan to $17,067.64 ; and upon such payment there was returned to said Warner by said trust company certificates for 100 shares of the capital stock of the bridge company; and on October 21, 1887, the said trust" company held 200 shares of the capital stock of the bridge company, and there was due upon said loan the said sum of $17,067.64. Warner was removed as executor, and one Moore was appointed receiver of the property of the estate, who, on the 4th day of September, 1884, filed his bond and entered upon the discharge of his duties as such receiver. Moore subsequently died, and the respondent was appointed in his place as receiver, and qualified on the 9th of January, 1894. Subsequent to the appointment of Moore as receiver he demanded of the trust company the return of the certificates of stock held by it as security for the said loan as the property of the estate; and the trust company having refused to return such stock, an action was commenced in the Supreme Court by Moore as receiver against the trust company to recover the possession of the said stock as the property of the estate, it being claimed by said Moore that the said certificates of stock had been illegally pledged by Warner to secure the payment of the debt of the said Mary Burrows Smith.
It seems that while such action was pending, and before it was finally determined, and on or about the 2-lst of October, 1887, an order was entered in the action in which said Moore was appointed receiver, whereby he was authorized and directed to enter into a stipulation with such of the persons or corporations who held the bridge stock ".to exchange cash to the amount of their respective claims against- the estate for the bridge stock held by them as pledgee to secure payment of the same, such cash to be held by them subject to. the same lien, if any,' that it may be ultimately decided in .the suit now pending between such pledgee and the receiver that .the pledgee has on the stock, and in case such is estab-. lished that the pledgee may apply such money in discharge of the-lien, but otherwise to return the same to the receiver, such exchange* to'be without prejudice to, and in riOwise to affect, such, suit, but that the same may be conducted to final judgment, and on appeal, if an appeal be taken by either party, with the same force and effect, and in the same manner in all respects, as if such exchange was not made." And in pursuance of such order the said Moore and the said' trust company entered into a stipulation entitled in the aCtion- • wherein Moore was plaintiff and the trust company defendant, by which it was agreed that the said Moore, as receiver, " shall exchange with said trust company cash to the amount of the claim of said-defendant, as established by the judgment herein, with interest and all the costs awarded at Special or General Term, for the- certificates of bridge' stock, and the power of sale .and transfer accompanying the same, now held by the said trust company; 'Said cash tó be held by the said trust company subject to the same lien, if any, that.it may be ultimately decided in this suit, that the trust company bason the said stock, and that in case judgment herein is affirmed by the Court of Appeals, that the said trust company. may apply such-money to the payment of its "said claim and costs to the discharge of said loan, And that if • the plaintiff shall succeed in this suit and obtain the judgment of" this court, determining that he is entitled" to said stock, then that the said trust company, upon the entry of such judgment and upon demand, will return said cash without interest to the receiver." And in pursuance of such stipulation the said, Moore,- as receiver, paid to the trust company the sum of $17,067.64. and $185.44, and took from the said- trust company a receipt, as follows: ,
" Charles H. Moore, as Receiver of the Estate of R. S. Burrows, v. The American Loan, and Trust Company. Received, New York, October 21, 1887, from the plaintiff in the above-entitied action, $17,067.64, deposited in lieu of two hundred shares (200) of the stock of the Niagara Falls International Bridge Company, and $185.44 costs, pursuant to the stipulation bearing date this day, made, signed and delivered in this action.
" AMERICAN LOAN AND TRUST COMPANY,
" By W. D. Snow,
" Secretary."
It appears that subsequent to the death of Moore and the appointment of the respondent as receiver, the said respondent was substituted as plaintiff in the action between Moore and the trust company, and that final judgment was entered in that action, whereby it was adjudged that the delivery of the certificates of stock of, the bridge company by said Warner to the trust company as a pledge to secure the payment by said Mary Burrows Smith to the said trust company of the moneys that it loaned and advanced to her, was a violation of his duty as executor; that the said trust company by receiving from the said Warner as executor the said stock of the bridge company, assets of his testator, knowing, that he ivas depositing the same in pledge for the payment of the debt of a third party and in violation of his duty, is to be adjudged as conniving with the said executor, and that the said trust company acquired no title to or lien upon the said certificates ; and that the plaintiff was entitled to judgment directing that the defendant Simmons, as receiver of the trust company, deliver to the plaintiff, as receiver of the estate of Burrows, the said certificates for 200 shares of the capital stock of the bridge company. And it was thereby adjudged that' the American Loan and Trust Company acquired no title to nor lien upon the said certificates, and that the plaintiff, as receiver of Burrows, was entitled to the said certificates, and to the said sum of money deposited in lieu thereof, and that plaintiff recover of the defendant Simmons, as receiver, his costs. This latter judgment was entered after the appointment of .Simmons as receiver of the trust company, and he seems to have been substituted before the entry of judgment as the defendant in the action in place of the trust company that had been dissolved.
It having thus been adjudged in an action in which the appellant, as receiver of the trust company was a party, that the trust company never acquired any title to or lien upon the said bridge stock, it would seem to be clear that if the bridge stock had remained in the possession of the trust company and had been received by Simmons upon his appointment as receiver of that company, the respondent would have been entitled tó an order directing Simmons to deliver that stock to him as receiver. • From this judgment it conclusively appears that the trust company never was the owner of the' stock, and never had acquired a lien thereupon, or right to the possession thereof ; that it at all times remained the property of'the estate of which the respondent is receiver, and that such estate at all times was the owner, arid entitled to the exclusive possession thereof; that the possession of the trust company was wrongful and without right. The fact that a judgment had been entered, by which it was held that the trust company had such an interest in the stock that it was entitled to retain pos7 session thereof, which judgment was subsequently reversed, gave the trust company no title to the stock while such judgment remained in force, so that during that time the trust company could lawfully dispose of the stock; for the final judgment that was entered adjudged that no such title or right to possession had ever vested in the trust company. . Such erroneous judgment was absolutely without force, and as no proceedings took place under. it, it ' was ineffectual for any purpose to affect the rights of the parties. The trust company thus being in possession of the stock, the property of the estate of which the. respondent was receiver, and to the'possession of which such estate was entitled, the representative of the estate and the trust company entered into the stipulation before mentioned, by which a sum of money was exchanged with said trust company for the certificates of the bridge stock, and said sum of money was held by the said trust company subject to the same lien if any, that it might be ultimately decided the trust company had on the stock, with the further agreement that, in case the judgment of the court should ultimately decide that the trust company had no lien or right of possession to said stock, the said trust company would " return said cash, without interest, to the receiver."'
This delivery of money to the trust company gave to the company no greater title to that money than it had to the. stock. It had no right to apply such sum of money to the general uses of the company. On the contrary, it was clearly bound to hold it as a trust fund and subject to the determination by the final judgment in the action between the receiver of the estate of Burrows and the trust company as to the right of possession of the stock. Such money no more became the property of the trust company than did the stock that it held, the title to which was in dispute. Nor is there any evidence to show that the trust company violated this covenant and actually used this moneyfor at the time the receiver took possession a sum of money in cash, largely in excess of that substituted for the stock, came into the-possession of the receiver, and it does not appear that at any time prior to the appointment of a receiver the trust company did not have in its actual possession this, sum of money. The mere fact that it was deposited in the trust company's general account and was not kept separate is unimportant". It was bound to keep this specific sum of money to await the determination of the final judgment in the action between the receiver of the estate and the trust company, and that sum 'of money was on hand and in its possession when the appellant was appointed receiver. The relation of debtor and creditor never existed as between the respondent, as receiver, and the trust company. The trust company was never a debtor to the respondent for this sum of money, but the trust company had held this bridge stock, claiming a lien upon it, and subsequently held this sum of money that had been exchangéd for the bridge stock, claiming a lien upon it-; and the fact that the trust company was not to pay interest upon this sum of money if it should be ultimately determined that it had no lien upon the bridge stock or its substitute (this sum of money), shows clearly that it Was never the intention of the parties that .the money was to be used by the trust company, but rather that it was to be held by' it as a specific pledge, to be returned in casé the estate should ultimately succeed. It seems entirely clear, therefore, that neither the trust company nor the appellant, as receiver, has acquired any interest in or right to this, sum of money, and that as between the respondent, as receiver, and the trust company or its creditors, either general or preferred, the respondent was entitled to the money. •
We think, therefore, that the order was clearly right, and that it should be affirmed, with ten dollars costs and disbursements.
Van. Brunt, P. J., Barrett and Rumset, JJ., concurred; O'Brien, J., dissented.