Court Opinion

ID: 3615766
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:58:57.046967+00
Date Added: 2024-06-11T09:18:57.567418
License: Public Domain

The plaintiff, in 1905, became entitled to the corpus of a trust established for his benefit under the last will and testament of his father who died in 1887. Eliza M. Schultz, the plaintiff's mother, was trustee of the fund. She married George Schultz after the death of the plaintiff's father and she never paid either the principal or income of the trust fund to the plaintiff or accounted to him. She died in 1921, and by her last will and testament she devised and bequeathed her entire estate to her husband, George M. Schultz, and appointed him her sole executor. Letters testamentary were issued to him in 1923. At the time of her death she held title to a parcel of real property which she and her husband had purchased in 1898. The justice at Special Term has found that she "misappropriated a portion of the corpus of said trust consisting of $3,000 in cash, which rightfully belonged to plaintiff," and that the sum so appropriated was illegally used as a part of the total consideration paid by her and her husband, George Schultz, for the conveyance to them of a parcel of real property to which they took title in their joint names.
There can be no doubt that the plaintiff might have demanded from his mother at any time during her lifetime an accounting of her proceedings as trustee under the will of his father and payment to him of the corpus of the trust and the income therefrom. At her death her executor might have been compelled to account in her place (Surr. Ct. Act, § 257), and upon such accounting the plaintiff would have been entitled to receive the corpus of the trust and the income derived therefrom. If it then appeared that the deceased trustee had misappropriated the trust fund the plaintiff might doubtless have *Page 396 
recovered from her estate damages for such misappropriation together with interest from the date of the misappropriation.
The plaintiff did not demand such accounting either from the trustee or her executor. The reason is clear; the plaintiff did not discover that under the will of his father a trust fund had been established for his benefit, or that his mother had misappropriated the trust fund, until after her executor, George M. Schultz, died intestate in 1932. We need not, now, consider whether the Statute of Limitations then barred the plaintiff's cause of action for an accounting of the proceeding of his mother, Eliza M. Schultz, as trustee under the will of his father; for the plaintiff has asserted no such cause of action against her executor. He has brought this action against the estate of the deceased executor and that estate may be held only for personal derelictions of the deceased executor and for the return of property which the administrator has no authority to take charge of or to control. (Surr. Ct. Act, § 266.)
I agree with the opinion of the Chief Judge in so far as it holds that the plaintiff has established a cause of action against the estate of George Schultz for the sum of $3,000 which was wrongfully taken by Eliza Schultz from the trust fund belonging to the plaintiff. So long as the moneys so taken can be traced they remain in equity part of the trust fund. They have been traced into the real property which George Schultz took under the will of the delinquent trustee, with knowledge that these moneys had been wrongfully used in payment of part of the consideration for the conveyance of that property. For the reasons pointed out in the opinion of the Chief Judge, Schultz had no right to withhold this trust fund so received by him from the plaintiff to whom it rightfully belonged and any cause of action against him to compel its restoration survives against his estate. I agree, too, that this cause of action is not barred by the Statute of Limitations. I disagree only as to the *Page 397 
date when interest which may be included in the judgment begins to run.
Here, distinction between the present action and an action against a delinquent trustee, or his executor, and the present action becomes important. In an action against the delinquent trustee, or her executor, the plaintiff, as Chief Judge CRANE points out, might have compelled an accounting and recovered all sums found due upon the accounting, regardless of whether the delinquent trustee spent those sums for her pleasure or retained them as her property; while in the present action the plaintiff can recover only the amount which, as part of the estate of the delinquent trustee, was wrongfully appropriated by the defendant's intestate and used as his own. Though the defendant's intestate received, under the will of the delinquent trustee, all her property, his estate is not liable for the wrongs committed by the testatrix as trustee, but only for the proceeds of such wrongs which can be traced into the property received by plaintiff's intestate.
The plaintiff succeeded in tracing $3,000 into the real property to which the delinquent trustee took title in her own name and which is now part of the estate of George Schultz. There is neither evidence nor finding that any net income was received from the property or found its way into the estate of Eliza Schultz. The conclusions of law made by the justice at Special Term which constitute the only basis for the equitable relief granted to the plaintiff are that upon the purchase of the real property it "became impressed with the trust which had been created for the benefit of the plaintiff to the extent of $3,000," and that upon the death of Eliza Schultz the plaintiff had "a right to have a lien impressed upon the said real property in his favor to the extent of the original trust fund, plus accretions thereto."
What are the accretions to the original trust fund of $3,000? Not the income from the property which was *Page 398 
not reinvested in the property nor, certainly, interest upon the fund which the delinquent trustee appropriated. Accretions to the fund can mean only increase in the fund which can be traced into the estate of the delinquent trustee and from there into the possession of the defendants acting as administrators of George Schultz, deceased. That part of the decision and judgment which provides that the plaintiff shall have a lien upon the proceeds of the real property not only for the sum of $3,000, but also for interest thereon from January 26, 1905, is erroneous. Interest against the estate of George Schultz should run only from the time when the benefit to George Schultz from that fund began,i.e., the death of the delinquent trustee in 1921.
It is true that such judgment might award to the plaintiff less than the amount to which he is entitled. Until the death of his mother, Eliza M. Schultz, the plaintiff, at his option, might have held her liable for the amount of his trust fund so misappropriated, together with interest thereon from the date of the misappropriation, or might have claimed the benefit derived from the investment of the trust fund when he traced it into the real property purchased by the delinquent trustee. Though there is no proof that the property in which the plaintiff's trust fund was invested had increased in value at the time of the death of Eliza M. Schultz in 1921, yet if, in fact, there was such increase, the plaintiff might have claimed from her or her estate that part of the increase which was derived from the original investment. George Schultz took the property from his wife impressed with the same trust. That property was thereafter sold for a profit over the original investment. Again the plaintiff must have the option to demand and receive from George Schultz, or his estate, either the amount of his trust fund with interest thereon at least from the date when George Schultz wrongfully appropriated it to his use, or to claim the benefit of the increase in its value as shown by subsequent sale. *Page 399 
In the decision at Special Term the plaintiff was accordingly granted the option of a judgment for the amount of the original trust misappropriated, together with interest thereon from 1905, or a judgment directing the defendants to account to the plaintiff for the trust fund and income and profits accrued thereon proportionate to the "percentage which the said portion of the said trust fund in the sum of $3,000, which was used in the original purchase thereof, bears to the total cash investment of $8,200." The plaintiff chose the first option and entered judgment accordingly.
That choice was based upon the comparative advantage of an accounting or of a money judgment with interest from 1905. The choice might well be different if the judgment is modified by fixing the date for the commencement of interest much later. The plaintiff should then be given an option of entering a judgment as so modified or a judgment for an accounting of income and proceeds derived by George Schultz, or his estate from the real property proportioned to the percentage which the sum of $3,000, "which was used in the original purchase thereof, bears to the total cash investment of $8,200."
O'BRIEN, HUBBS, CROUCH and LOUGHRAN, JJ., concur with CRANE, Ch. J.; LEHMAN, J., dissents in part in opinion; FINCH, J., taking no part.
Judgment accordingly. *Page 400