Case Name: Hermine Gerschon et al., Infants, by Fanny Spiro, Their Guardian ad Litem, Plaintiffs, v. Travelers Insurance Company, Defendant. Alvin Gerschon, Respondent; A. A. Berle, Jr., as Chamberlain of the City of New York, et al., Appellants
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1937-11-23
Citations: 276 N.Y. 53
Docket Number: 
Parties: Hermine Gerschon et al., Infants, by Fanny Spiro, Their Guardian ad Litem, Plaintiffs, v. Travelers Insurance Company, Defendant. Alvin Gerschon, Respondent; A. A. Berle, Jr., as Chamberlain of the City of New York, et al., Appellants.
Judges: 
Reporter: New York Reports
Volume: 276
Pages: 53–64

Head Matter:
Hermine Gerschon et al., Infants, by Fanny Spiro, Their Guardian ad Litem, Plaintiffs, v. Travelers Insurance Company, Defendant. Alvin Gerschon, Respondent; A. A. Berle, Jr., as Chamberlain of the City of New York, et al., Appellants.
Argued September 28, 1937;
decided November 23, 1937.
Paul Windels, Corporation Counsel (William S. Gaud, Jr., Paxton Blair and Bernard Newman of counsel), for A. A. Berle, Jr., as Chamberlain of the city of New York, appellant.
The petitioner’s moneys were properly invested under section 44-c of the State Finance Law (Cons. Laws, ch. 56). (County of Tompkins v. Ingersoll, 81 App. Div. 344; 177 N. Y. 543; Barone v. Ætna Life Ins. Co., 260 N. Y. 410; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; Matter of Stillwell, 139 N. Y. 337; People ex rel. Ryan v. Green, 58 N. Y. 295.)
Copal Mintz and Hyman Korn for Charles A. Buckley, appellant.
Murray D. Welch for Hartford Accident and Indemnity Company et al., amici curiæ.
The investment of the petitioner’s funds by the Chamberlain was authorized by the court order of November 29, 1926. (Chesterman v. Eyland, 81 N. Y. 398; Matter of Schmidt v. Chamberlain, 266 N. Y. 225; Matter of Doheny, 157 Misc. Rep. 735; County of Tompkins v. Ingersoll, 81 App. Div. 344.)
Nelson David Spiro for respondent.
The original order of deposit was a specific direction of a court having jurisdiction of the subject-matter. The Chamberlain, therefore, had no power or authority to withdraw the funds from the petitioner’s account and invest them without further order of the court. (Mills v. Bluestein, 275 N. Y. 317.) Section 44-c of the State Finance Law is unconstitutional in that it is an attempt by the Legislature to encroach upon and abridge the existing judicial powers and functions of the Supreme Court granted by the Constitution over the property and property rights of infants as wards of the court, and lodge such powers and functions in a ministerial officer who is a mere custodian of moneys deposited with him by court order, and permitting him to invest such moneys without hearing or notice to the parties interested. (People ex rel. Mayor v. Nichols, 79 N. Y. 582; Matter of Steinway, 159 N. Y. 250; Wilcox v. Wilcox, 14 N. Y. 575; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; Civ. Prac. Act, § 64.)

Opinion:
Hubbs, J.
Alvin Gerschon, the respondent herein, upon coming of age, made a motion based upon a petition for an order directing the Chamberlain of the City of New York to pay to him $1,000, the balance of moneys deposited in his office on December 14, 1926, pursuant to a court order entered upon the settlement of an action instituted in his behalf while an infant. The order, pursuant to which the money was deposited, provided that it " be deposited with the Chamberlain of the City of New York for the benefit of the infant and said sum be. withdrawn only upon order of the court." ' The order did not contain any direction as to how the money should be handled by the Chamberlain as it might have under section 136 of the Civil Practice Act.
The Chamberlain submitted an answering affidavit setting forth that in September, 1929, the sum of $1,000 out of the petitioner's money was invested by the then Chamberlain in an undivided share of a bond and mortgage, which investment was made under authority claimed to be vested in the Chamberlain by section 44-c of the State Finance Law (Cons. Laws, ch. 56). He also furnished, in accordance with rule 32 of the Rules of Civil Practice, a certificate which contained the following statement: " Invested — S1000-B of M mtg. Of this investment $1000 is not available for payment at this time."
It appeared on the hearing at Special Term that if the balance of moneys deposited to the credit of the petitioner had remained on deposit, the present value thereof at bank interest would have been in the net amount of $936.06, which amount the petitioner agreed to accept. The Special Term directed the Chamberlain to pay to respondent that sum, with interest. The order was affirmed by the Appellate Division on the ground that the investment was illegal. Leave was granted to appeal to this court on the following certified question: "Is the petitioner entitled to receive from the present Chamberlain in cash the sum of $936.06, together with interest? "
It appeared from the affidavits submitted on the motion that the former Chamberlain had purchased a mortgage for $70,000 and had assigned to this infant an interest in that mortgage; that the mortgage was subsequently reduced by payments to $50,000, and that it was foreclosed and title to the property was taken by the Chamberlain. The claimed authority for the investment by the Chamberlain of the moneys deposited for the benefit of the petitioner is section 44-c of the State Finance Law, which provides: " All moneys so paid into court may be invested by the several county treasurers and in the city of New York by the chamberlain, without a specific direction of the court having jurisdiction, in securities that are legal investments for trustees, when the said county treasurers or chamberlain deem it for the best interests of the funds to make such investments."
It is the contention of the respondent that the decision of this court in Matter of Schmidt v. Chamberlain (266 N. Y. 225) is conclusive and establishes that the investment made by the Chamberlain of the infant's funds was illegal, and it is upon that decision that the Appellate Division has relied. The order there under consideration provided: " and that the said special guardian pay the balance remaining in his hands to the Chamberlain of the City of New York to be held by said Chamber lain of the City of New York until the further order of this court."
In interpreting that order we construed the word " held " as indicating that the court intended that the money be held readily available for distribution in the manner to be determined by the court.
The order here involved does not contain the word " held " or equivalent direction as to the disposition of the moneys.
In Mills v. Bluestein (275 N. Y. 317) we had under consideration an order very similar in language to that here involved in so far as it provides for a deposit of the funds. That order required the defendant in the action to deposit the sum of $1,000 " with the City Chamberlain of the City of New York to the credit of the infant plaintiff William Mills there to remain on deposit until said infant shall have attained the age of 21 years, or until the further order of the court in the premises."
That order further provided: " and said City Chamberlain is hereby further authorized and directed to invest the said money so deposited with him to 'the credit of said infant plaintiff, in a guaranteed mortgage or guaranteed mortgage certificate or other similar securities, the net income therefor to be held for the account and benefit of said infant plaintiff."
In that case the order contained a specific direction for the investment of the money in a security of the class in which it was actually made and this court held that the Chamberlain could not be compelled to pay in cash the money deposited.
The two cases cited are clearly distinguishable from the case at bar on the ground that in the first there was a specific direction to hold and an absence of authorization to invest, and in the other there was specific authority for the investment and absence of a direction to hold. Neither case can be construed as answering the question as to whether, where there is an order for deposit subject only to the further order of the court with neither a specific direction to hold nor a specific authorization for an investment, the mere fact that the deposit is subject to the further order of the court places such a restriction upon the Chamberlain that he may not act under the authority granted by section 44-c of the State Finance Law. A decision to the effect that the Chamberlain is not permitted to invest court funds deposited with him in cases where the order of deposit fails to recite either that the funds so deposited are to be held or tobe invested, would nullify section 44-c of the State Finance Law. That section was enacted to provide for cases where there is no specific direction in the order to invest or not to invest funds deposited by order of the court. To hold that where, as in the instant case, no specific direction is given in the order che statute affords no protection to the Chamberlain who acts in reliance thereon would thwart the clearly stated purpose of the Legislature in enacting section 44-c. We may go far to sustain the power of the court to retain control of funds deposited by its order, where in the order specific direction is expressed as to how the fund is to be handled. That was the effect of our decision in Matter of Schmidt v. Chamberlain {supra), but an application of the rule laid down in that case to the facts in this case would be unwarranted because of the difference in the wording of the orders.
The Legislature by section 44-c of the State Finance Law has placed a discretion in the Chamberlain in cases where the court in the order directing the deposit of funds does not make a direction as to their disposition and we may not by judicial construction create a distinction where none exists from the fair import of the words of the statute and take from the Chamberlain the discretion so conferred upon him. The words " until the further order of the court," contained in the order in the case of Matter of Schmidt v. Chamberlain (supra) and in Mills v. Bluestein (supra), standing alone, do not constitute a specific direction within the meaning of section 44-c of the State Finance Law, that the funds shall not be invested. Neither do the words to "be withdrawn," when coupled with the words " only upon order of the court," constitute a specific direction to the Chamberlain to hold the funds and not to invest them in securities authorized by statute. There is no more a withdrawal of sums deposited when invested by the Chamberlain than there is when moneys paid over to the Chamberlain are deposited in a bank. The moneys or that which represent the moneys in either case remain under the jurisdiction and control of the Chamberlain. The word " withdrawn " refers to a removal of the moneys, or that which represents the moneys, from the custody and control of the Chamberlain.
At least three situations may arise when court funds are turned over to the Chamberlain by order of a court. If the court anticipates that some of the funds may be needed from time to time and it does not desire to have them invested by the Chamberlain, the order should provide that the money shall be held by the Chamberlain and not invested. It will then be the duty of the Chamberlain to deposit the money in a duly approved depositary. If, however, the court believes that the money will remain in charge of the Chamberlain for a considerable period, and that a higher rate of interest should be secured than paid by authorized depositories, the order should provide that the money be invested by the Chamberlain. If the court does not desire to give specific directions in the order, the money will be received by the Chamberlain subject to his discretion as to whether it shall be invested or kept on deposit in an approved depositary.
The respondent contends that section 44-c of the State Finance Law, as amended in 1928 (L. 1928, ch. 837), is unconstitutional in that it is an attempt by the Legislature to encroach upon and abridge the existing judicial powers and functions of the Supreme Court granted by the Constitution over the property and rights of infants as wards of the court and lodge such powers and functions in a ministerial officer who is a mere custodian of moneys deposited with him by court order. The statute is operative only where the court fails to direct a disposition of the funds. However, the court is not required to direct. Section 136 of the Civil Practice Act reads in part: " Each court may direct that money paid into that court may be invested
The statute operates only in the event the court fails to direct how the money shall be handled. The statute does not deprive it of any jurisdiction which it formerly possessed. It may act if it deems it advisable. It is only in case of its failure to act that discretion is vested in the Chamberlain.
The orders should be reversed as to appellant, Berle, Jr., as Chamberlain, etc., with costs in all courts, the motion denied, with ten dollars costs, and the question certified answered in the negative. The appeal by Charles A. Buckley should be dismissed, without costs.