Case Name: In the Matter of the Estate of William J. Van Duzer
Court: New York Surrogate's Court
Jurisdiction: New York
Decision Date: 1876-08
Citations: 51 How. Pr. 410
Docket Number: 
Parties: In the Matter of the Estate of William J. Van Duzer.
Judges: 
Reporter: Howard's Practice Reports
Volume: 51
Pages: 410–412

Head Matter:
SURROGATE’S COURT.
In the Matter of the Estate of William J. Van Duzer.
New York,
August, 1876.
Liability of executrix for trust funds, after being commingled with other funds.
Where an executrix wrongfully commingles trust funds, arising from trust property sold by the testator, with other funds of the estate, such wrongful act of the executrix cannot prevent the payment by her to the cestui que trust of the amount of the trust fund in preference to an ordinary debt of the estate; and if needs be in preference to funeral and other expenses.

Opinion:
Calvin, Surrogate.
— The question submitted in this matter is, whether John R. Graham, the petitioner, is entitled to a preference over the ordinary creditors of the estate under the following circumstances: The testator received a wagon of the petitioner to sell on commission with instructions to sell the same for $250, and that the balance, over and above that sum, should be retained by the testator for his commission. A sale of the wagon was made by the testator in his lifetime, in payment of which he took a check or draft, payable to his order; which draft, after his decease, was collected by the executrix, and the proceeds of which have been retained by her. On the part of the claimant it is urged that the wagon in question and the purchase-price to the amount of $250 was a trust in the hands of the testator, and that he had no power, by any act of his, to divest the trust impressed upon it by the parties, and that the representative of the estate could take only the property belonging to the testator, and had no right or power to divest the claimant of his ownership of the money received for his property. This claim is sought to be resisted on the ground that the specific money having been deposited to the credit of the executrix with other funds, cannot be traced by any ear-mark, and that thereby the trust is changed to an ordinary obligation against the estate.
The surrogate in his decision says: " In Moses agt. Murgatroyd (1 Johnson Ch. R., 118) it is decided that property held in trust does not pass to the representatives of the trustee, but as long as it can be traced and distinguished it enures to the benefit of the cestui que trust." To the same effect see Kip agt. Bank of N. Y. (10 Johnson, 63). In Van Alleyn agt. Com. Am. Nat. Bank (52 N. Y., 1), after an examination of several authorities, it is held, substantially, that the deposit of trust funds commingled with others does not divest the fund of its trust character or prevent the cestui que trust from enforcing his right thereto ; and in that case chief justice Church cites with approbation, on page 8, the decision of the court of appeals in chancery reversing the master of the rolls in Pennell agt. Dessell (4 De Gex, M. & G., 372), in which lord justice Knight Bruce says: " When a trustee pays trust money into a bank to his credit, the account being a simple account with himself, not marked or distinguished in any other manner, the debt thus constituted from the bank to him is one which, as long as it remains due, belongs specifically to the trust as much and as effectually as money so paid would have done had it specifically been placed by the trustee in a particular repository and so remained ; that is to say, if the specific debt shall be claimed on behalf of the cestui que trust, it must be deemed specifically theirs. This state of things would not, I apprehend, be varied by the circumstances of the bank holding also for the trustee, or owing also to him, money in every sense his own."
Lord justice Turner in considering the same case, after stating that if trust funds be paid into a bank to the credit of the trustee it would belong to the trust and not to the private estate of the trustee, makes this inquiry: " Then suppose the trustee subsequently pays in moneys of his own, not belonging to the trust, to the same account, would the character of the moneys which he had before paid in of the debt which had before accrued be altered ? "
The principle involved in this case is, it seems to me, whether by a wrongful act in comipingling the trust fund with the others by the executrix, can divest the cestui que trust of his right to the money as such.
The rights of the creditors, in whose interest the executrix resists a preferential claim of the cestui que trust, are not affected by the enforcement of the rights of the cestui que trust, because neither the property nor its proceeds ever belonged to the testator or to the creditors; and to hold that by the commingling of the trust funds with others the character of the trust was lost and the fund made applicable to the payment of the ordinary creditors of the estate, would be to allow the representative of the estate, by his wrong, to vest the trust fund in the trustee or -his representative — a principle hostile to well settled law and repugnant to every principle of justice; and I am of opinion that the claimant, cestui que trust, is entitled to be paid in full the amount of his claim in preference to any ordinary debt of the estate, and if need be in preference to funeral and other expenses.