Court Opinion

ID: 6129538
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:54:27.215012+00
Date Added: 2024-06-11T08:49:59.290759
License: Public Domain

Barker, J.:
At the time of the death of the late surrogate, as well as at the time of the commencement of this action, the only persons having any legal or equitable title to the funds derived from the sale of the real estate sold in pursuance of the order of the surrogate, were the creditors and heirs-at-law of Samuel Finley. The same persons have a like interest in the surplus moneys, subject, however, to such liens thereon as may exist in favor of any incumbrances subsequent in point of time to the mortgage which was foreclosed. The legal custodian of such funds is the present surrogate, the representatives of the late surrogate having neglected to pay over the same to the incumbent. This action is brought against the defendants, the sui’eties on his official bond, to recover the funds thus withheld. The trial court held that the action cannot be maintained in the name of the people as plaintiff, and upon this sole ground dismissed the complaint.
The proceedings to sell the real estate of the deceased were initiated under the provisions of the Revised Statutes prior to September 1, 1880, and are, therefore, excepted from the operation of the provisions of the Code of Civil Procedure relating to the sale of real estate of deceased persons for the payment of their debts. (Sec. 3347, subd. 11.)
The proceedings were in all respects regularly conducted up to and including the payment over of the money derived from the sale by the administrators to the then surrogate. Thereafter further proceedings were had in the matter, with a view of distributing the same among .the creditors of the deceased and his heirs-at-law, and before any final order was made passing upon the claims of creditors, the late surrogate died, and since then no other steps have been taken in the matter.
Until the claims of creditors are finally passed upon and a record made of the same, and the amounts due each creditor ascertained, there can be no order or decree of distribution made as required by the statute. On perusing the statute it will be observed that where a sale of the premises has been ordered, and has actually taken place, the administrators are required' to bring the avails derived from the *321sale into the office of the surrogate for the purpose of distribution, and to be retained by him for that purpose. (2 It. S., 106, § 35.) The surrogate is not authorized to make a distribution of the moneys arising from the sale, to and among the credi tors whose claims were passed upon and adjudged valid on the hearing had in the earlier part of the proceedings, with a view of determining whether it was necessary to lease, mortgage or sell the real estate of the deceased to pay his debts, as provided by section 13. (Id., p. 102.) If a sale is not ordered,but the premises aré required to be mortgaged or leased to secure the necessary sum to pay the debts, then the money realized by such mortgage or lease is not brought into the Surrogate’s Court at any time, but the same is to be paid over by the administrators to and among the creditors whose debts were passed upon and established on granting the order for making the lease or mortgage. (Secs. 21, 22, 35, Id., pp. 103,104, 106.) In cases of sale of the premises then it becomes necessary that further steps be taken to ascertain who are the creditors having claims on the estate of the deceased, and the list of creditors made and recorded by the surrogate on the prior hearing is to be regarded as correct and cannot again be controverted, unless upon newly discovered evidence. (Secs. 38, 39,40,41, 42, Id., pp. 106,107.) After the surrogate has paid all the charges and expenses incident to the sale, and has satisfied the widow’s right of dower, if one exists, the balance of the fund is to be divided to and among the creditors and the heirs-at-law of the deceased according to their respective rights and interests. (Secs. 36, 42.)
This reference to the statute has been made with so much particularity with a view of having it appear in this connection, that neither the creditors nor heirs-at-law have a legal title to any fixed or definite portion of the fund derived from the sale, so that either of them could maintain a suit at law in his own name, on the official bond of the surrogate, and recover damages for an ascertained sum. The claimant must establish his debt in the Surrogate’s Court in the mode and manner and within the time fixed by the statute, befoi'e he can maintain an action in another tribunal and recover a share of the fund.
As to the surplus moneys realized on the mortgage sale, they on being paid into the Surrogate’s Court, were subject to like distribution to and among the parties entitled thereto, in the same manner *322as the moneys derived from the sale of the real estate.. (Chap. 170, Laws of 1870.)
As both funds were in .the hands of the late surrogate at the time of his death, this action was properly brought in the name of •the people as the trustee of an express trust, as permitted by section 449 of the Code of Civil Procedure.
Before a surrogate enters upon the discharge of his official duties he is required to give a bond, with two sureties, running to the people, “ conditioned for the faithful performance of his duty and for the application and payment of all monies and effects that may come into the hands of such surrogate in the execution of his office.” (2 R. S., 382, § 87, m. p.) The purpose of exacting from the surrogate a bond of this nature is to indemnify all persons against loss, which otherwise might happen by the official misconduct of the surrogate. Individuals having a pecuniary interest in the honest and faithful performance of the official duties of a surrogate have no right to demand security for their protection. All moneys collected on the official bond, in an action in the name of the people, is for the benefit of the persons entitled to indemnity, and is, as a matter of course, when collected, ordered by the court to be paid over to such persons, when their interests are ascertained, or to the incumbent of the office for his official administration. The form and condition of the undertaking, as well as the object and purpose of the same, brings the case within the letter of the statute, which is worded, viz.: “A person with whom or in whose name a contract is made for the benefit of another is a trustee of an express trust, within the meaning of this section.”
The creditors and heirs-at-law are entitled to all the moneys which came to the hands of the late surrogate belonging to the estate of Finley. They are the eestuis que trust, for whose benefit the people hold the bond given for the faithful discharge of his duties. This provision of the Code, concerning parties to actions, should receive a broad and liberal construction in all instances where the action is founded on an official bond to recover money for the benefit of those who are entitled thereto.
The coven ants contained in the bond are to and with the people. A recovery in this action of a sum equal to the amount of the sum belonging to the estate of Finley, which the late surrogate received *323and which has not been accounted for, would be in strict conformity with the letter of the undertaking. It has been frequently adjudicated that bonds running to the people, executed by the obligors for the benefit of others, may be prosecuted in the name of the people as the trustee of an express trust, without joining the person for whose benefit the action is prosecuted.
In the case of The People v. Norton (5 Seld., 176), a bond was given by a trustee in the matter of a private trust, running to the people, and in an action against the sureties on such bond to recover moneys misappropriated, by the trustee, it was held that the action was properly brought in the name of the people and was authorized by section 113 of the old Code, the provisions of which are exactly the same as those of section 449 of the present Code.
In People v. Townsend (37 Barb., 520), the action was against the sureties, on an administrator’s bond, and the sum recovered was the sum which had been previously decreed by the surrogate to be paid by the administrator on his final accounting, and it was held that the action was properly brought in the name of the people.
The statutes require an administrator’s bond to be “ conditioned that such administrator shall faithfully execute the trust reposed in him as such, and also that he shall obey all orders of the surrogate touching the administration of the estate submitted to him.”
In the case last cited by the final decree the balance found for distribution was a very large amount, aud the same was directed to be paid to and among several persons entitled thereto, and the particular sum given to each was fixed and determined by the decree, and the whole sum was ordered to "be distributed., These cases have never been overruled so far as I can discover, but have been frequently referred to with approval. (See Cridler v. Curry, 66 Barb., 336; Dayton v. Johnson, 69 N. Y., 428; People ex rel. Becar v. Struller, 16 Hun, 234; People v. Groat, 22 id., 166.)
In the case before us the present surrogate is the proper custodian of the fund, the corpus of which cannot be immediately paid over to any of the claimants. It must be kept and cared for until some future time, when in the course of due procedure it should be distributed among the real owners. A recovery in this action will result in restoring the fund to the proper custodian, for the benefit of the beneficiaries, and will bar any action which may be brought *324by them, or either of them, on the official bond of the late surrogate, founded upon the breach of duty set forth in the complaint in this action.
It was held by the learned judge at Special Term, that the right of action under the provisions of the present Code (§ 1886) was limited to the person injured by the default or misconduct of the surrogate in office. This provision is not new in any sense, and is but a re-enactment of certain provisions of the Revised Statutes on the same subject found in sections 19 and 20, 2 Revised Statutes, marginal page 479.
The phrase in the Revised Statutes, “ the party aggrieved thereby may apply to the Court of Chancery for leave to prosecute the official bond,” and the one “ the person injured thereby may apply for leave to prosecute the delinquent’s official bond,” have the same meaning and is a change of verbiage only and not of substance.
There is no provision of law prohibiting actions being prosecuted in the name of the people on official bonds or limiting the right of recovery thereon, to parties injured by a breach thereof. If funds in the custody of a surrogate are lost or misapplied by his negligence or malfeasance, the remedy upon his official bond should not be suspended to await the determination of other proceedings, pending or to be instituted with a view of determining the rights of claimants to the fund ; but there should be a prompt and vigilant pursuit of the defaulting officer and his sureties for the benefit of those having an interest in the same. Cases may arise where claimants to the funds are unknown, and it would be a reproach to the laws if' dishonest and corrupt-officials could not be prosecuted and compelled to account for misapplied moneys, until such parties appear and establish their title.
As we hold that this action is properly brought in the name of the people, the defense interposed as a bar to a recovery must be examined, although the trial court dismissed the complaint, upon the sole ground, that the plaintiff had failed to establish a cause of action.
The appeal book does not contain any of the evidence ; the case states that proofs were given, tending to establish all the facts set forth in the decision of the court. In disposing of this question we shall confine our examination to the subject of the surplus moneys arising on the sale in the foreclosure suit. The money *325realized on the sale of the lands ordered by the Surrogate’s Court was, in the first instance, paid over to the then acting surrogate, the district attorney for Livingston county, and the certificate of deposit which is mentioned in the statement of facts was issued to him, and made payable to his order as acting surrogate, and by him indorsed and delivered to the surrogate on his assuming the duties of his office. The findings of fact on this subject by the trial court are so stinted, and as the legal questions involved do not appear to have been specifically passed upon, the question of the surrogate’s liability for the loss of these moneys can with propriety, be deferred for consideration on the trial to be ordered.
The defendants’ claim that upon the facts as found and set forth in the decision, a perfect and legal defense was made out and their principal was exonerated from all liability on account of the loss of the funds. It is argued in support of this proposition, that the .liability of the surrogate for the loss of the money in his custody is to be measured by the rules of law applicable to a case of loss of property by a trustee or bailee, and that he is only chargeable for his own negligent and careless acts or malfeasance in office. This in substance is the rule of the common law in determining the liabilities of public officers for breach of official duty.
In United States v. Thomas (15 Wall., 337), the learned judge who prepared the opinion of the court states the rule as follows, viz : “ The general rule of official obligation, as imposed by law, is that the officer shall perform the duties of his office honestly, faithfully and to the best of his ability. This is the substance of all official oaths. In ordinary cases to expect more than this would deter upright and responsible men from taking office. This is substantially the rule by which the common law measures the responsibility of those whose official duties require them to have custody of property, public or private. If in any case a more stringent obligation is desirable, it must be prescribed by statute or exacted by express stipulation.” (Story on Bailments, 620.)
If this rule be accepted as the measure of the obligations of the late surrogate concerning the loss of funds, then on the facts as found no defense is established. The finding on the subject is this' and no more, that Cone was a banker in good standing and credit, doing a general banking business at G-eneseo; that the .several *326deposits of money so made as aforesaid, were made in good faith and with the intention of benefiting the creditors of the estate of Finley, and that the surrogate had no knowledge of the insolvency of Cone before his failure or assignment.
The default of the surrogate having been fully established, the burden of proof was cast on the defendants, to establish that the loss of the funds occurred under such circumstances as to exempt their principal from liability; that he had acted in the management of the fund without fault and was free from all negligence. No such fact is found, nor any which in legal effect is the equivalent of such a finding.
Persons in a private or official capacity may act in entire good faith and with a purpose of benefiting those to be affected by their acts, and yet be guilty of negligence and carelessness in the performance of the act in question. Where the interests of parties depend upon the intelligent, cautious and vigilant action of another, who holds towards him the relation of trustee or bailee, the latter, in case of loss or destruction of property while in his custody, cannot escape liability to the injured party by the plea that he acted in good faith.
The defendants’ liability is not, however, limited by. the rule of the common law, but is fixed and measured by the condition of their bond, which is, “ that their principal will faithfully perform the duties of his office and make application and payment of all moneys and effects that may come to his hands in the execution of his office.” This is a positive and unequivocal promise made by the defendants as obligors, mentioned in a bond, that the surrogate shall pay over all moneys -which may come into his custody in his official capacity. This obligation was assumed in compliance with a legal requirement exacted by the State from a public officer, and nothing will excuse its performance but a loss or destruction of the money which may have come to the hands of the surrogate by the act of God or of the public enemy. (U. S. v. Prescott, 3 How. [U. S.], 578; U. S. v. Morgan, 11 id., 154; U. S. v. Dashiel, 4 Wall., 182; U. S. v. Thomas, 15 Wall., 337; State v. Harper, 6 Ohio St., 607; Muzzy v. Shattuck, 1 Denio, 233; Inhabitants of Hancock v. Hazzard, 12 Cush., 112.)
New trial granted, with costs to abide the event.
Smith, P. J., and Hardin, J., concurred in the result.
Judgment reversed and new trial ordered, costs to abide event.