Court Opinion

ID: 3604310
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:50:11.975846+00
Date Added: 2024-06-11T13:46:52.387748
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 606 
We have examined this case with care as it presents features of apparent hardship upon the defendant. He appears to have acted in good faith, and the loss for which he has been held responsible originated not from any pecuniary default on his part, but from a misapplication by some of his predecessors in office, of a portion of the surrogate's fund. How or when this diversion of the fund occurred, whether through mistake or wrong, does not appear. All that is certain is that a deficiency exists, and that the plaintiff's money has been applied by the defendant to supply that deficiency. There is no just ground upon which the plaintiff can under the circumstances be made to bear this loss. The money which she claims is clearly traced into the possession of the defendant. It was paid to Surrogate Coles, and by him invested in a note of Thaddeus Davids  Co., for the precise amount received $2,653.19. In 1862, after the death of Surrogate Coles, his administrators transferred this note to his successor in office, Surrogate Gifford, who immediately collected it, and deposited the specific proceeds to his own credit as surrogate, in the Life and Trust Company where they remained until the expiration of his term of office. Thereupon, on the 1st of January, 1863 the whole balance standing to his credit in the trust company was transferred to the credit of his successor, the defendant.
It does not appear in the case that the defendant had actual knowledge that the balance transferred to him by his predecessor included this particular amount now belonging to the plaintiff. The defendant appears to have accepted the transfer without inquiry as to who were the owners of the fund which he received, and to have gone on paying all orders presented to him on the assumption that the surrogate's fund *Page 609 
was intact, and sufficient to meet the demands of all just claimants, until it was discovered that the fund was insufficient to pay all, and that there was not enough remaining to meet even the amount belonging to the plaintiff. The defendant had therefore paid out to other parties a portion of the money which belonged to the plaintiff. The defendant's ignorance of the fact that the fund was insufficient to meet the demands of all, and that he was encroaching upon moneys belonging to the plaintiff, does not in our judgment absolve him from legal responsibility for this misapplication of the plaintiff's money. We think that a proper regard for the rights of parties interested in these trust funds deposited with surrogates requires that accounts should be kept in such manner as to show to what estates or parties the fund in the hands of a surrogate belongs, and that on entering upon that office and receiving from his predecessor what purports to be the surrogate's fund, he should before paying out any part of it ascertain from what sources it is derived and who are the parties entitled to it. If without any such inquiry the surrogate receiving the fund goes on blindly paying all orders of his predecessors which may be presented to him, until the fund is exhausted, he acts at his own peril; and if as in the present case it turns out that through the omission of such inquiry he has paid out to one or more parties moneys belonging to others, he ought to be held responsible. It is obvious that unless such responsibility is enforced, these funds are left in a most insecure condition. Each surrogate going out of office may simply turn over to his successor in gross the balance standing in bank to his credit as surrogate, drafts may be drawn against it as orders are presented and this process may be repeated from time to time as often as changes in the office occur. Many years may elapse before it is discovered that a deficiency exists in the fund and when discovered it is impossible to ascertain who is the delinquent, or whose funds have been misapplied, and the loss, necessarily but unjustly, falls upon the parties last applying for payment. This evil can only be prevented by holding every surrogate *Page 610 
responsible for the fund which he receives, and for its proper application, or at the least for a reasonable degree of diligence in ascertaining whose funds he receives, and that he pays to the proper parties. This would require that the transfer of the fund should be accompanied with an account showing the estates or persons to whom it belongs, and one who receives the fund without such an account or who receives the account neglecting to properly examine and test it, incurs the risk of any errors which may occur in consequence of such neglect. In the present case it appears that there was a book kept in the office, an examination of which would have disclosed a credit to the Disbrow estate of sums amounting in the aggregate to the precise amount now in dispute, and a comparison of that credit with the account kept with the Trust Company would have shown a deposit of that same amount, $2,653.19, to the credit of Surrogate Gifford, and that it was included in the balance transferred to the defendant. All these books were accessible to the defendant, and it is therefore evident that if he had used due diligence to ascertain the sources from which the fund he received was derived, he could have learned at least the history of the particular money now in controversy and avoided the mistake which has occurred.
For these reasons we concur in the conclusion of TALCOTT, J., at General Term, and, on substantially the same grounds stated by him, affirm the judgment.
All concur; except ALLEN, J., not voting.
Judgment affirmed. *Page 611