Court Opinion

ID: 5348755
Source: CourtListenerOpinion
Date Created: 2022-01-08 06:30:01.633753+00
Date Added: 2024-06-11T08:29:41.999705
License: Public Domain

Hagarty, J. (dissenting).
I dissent.
This is an appeal by the Administrator of Veterans* Affairs from an order denying his application to direct the committee of the estate of an incompetent and disabled veteran to invest surplus funds belonging to the incompetent in securities as provided by law. Those funds now amount to approximately $13,000, and are deposited in four savings banks, with the exception of a small amount represented by a checking account and cash on hand.
The facts are not in dispute, since the application is made on the uncontradicted affidavit of an attorney for the administrator and on the last annual inventory and account filed by the committee for the fiscal year ending November 12, 1935.
The account discloses that the estate has been conservatively administered. During the year 1935 there was received by the committee a total of $1,521.31, $1,200 of which was received as compensation from the United States government, and the balance, $321.31, represents the interest on the savings bank accounts. There was expended for the maintenance, support and small luxuries of the incompetent the sum of $630.79; so it is quite obvious that the estate is rapidly increasing by virtue of these accumulations.
I think the question is properly here, and need not await an accounting. The petitioner, Administrator of Veterans’ Affairs, is charged with responsibility for the welfare of incompetent veterans (U. S. Code, tit. 38, § 434) and is specifically recognized as a proper party in interest for the purpose of “ appearing, in behalf of a ward of the administration.” (Civ. Prac. Act, § 1384-t.) The committee is appointed by the Supreme Court and accounts to it, and is subject to removal by the court in its discretion. When the administrator brings to the attention of the court that its appointee is violating the express provisions of a statute governing his conduct, it is incumbent upon the court, of which in effect the *494incompetent is a ward, to act by direction to the committee rather than to await an accounting and endeavor to recoup losses which may eventuate by a surcharge upon the committee.
The care and custody of persons of unsound mind and the possession and control of their estates are vested in the State. (Hughes v. Jones, 116 N. Y. 67, 74; Sporza v. German Savings Bank, 192 id. 8, 14, 15.) When the State, through the Legislature as parens patriae, directs the conduct of a committee, which is but a custodian, the latter has no alternative but to obey. The Legislature enacted article 81-A of the Civil Practice Act, which, as stated in the heading thereto, has to do with “ Proceedings relative to incompetent veterans and infant wards of the United States Veterans’ Bureau.” Section 1384-1 under that article, entitled “ Investments by guardians,” reads: “ Every guardian shall invest the funds of the estate in the same kind of securities as those in which savings banks of this State are by law authorized to invest the money deposited therein, and the income derived therefrom, and in bonds and mortgages on unincumbered real property in this State worth fifty per centum more than the amount loaned thereon.”
It is important to observe that the imperative word “ shall ” is used in the section quoted, as distinguished from the word “ may ” in section 21 of the Personal Property Law, entitled “ Investment of trust funds,” and in section 111 of the Decedent Estate Law, both of which have to do with investments by trustees, executors, administrators or other persons holding trust funds. Section 85 of the Domestic Relations Law, having to do with investment of trust funds by guardians, provides that a guardian has the powers provided by section 111 of the Decedent Estate Law for the investment of trust funds, “ and must not invest the funds in any other securities.”
A deposit in a bank is not an investment of funds. (Erie County Savings Bank v. Coit, 104 N. Y. 532; Matter of Patterson, 18 Hun, 221; affd., 78 N. Y. 608; Upton v. New York & Erie Bank, 13 Hun, 269.) In any event, the law does not provide for the deposit of money in savings banks by a committee, as it should if that were the intent of the Legislature, but directs that the funds “ shall ” be invested “ in the same kind of securities as those in which savings banks of this State are by law authorized to invest the money deposited therein.” No doubt the Legislature had in mind the receipt by the guardian of the net proceeds of the investment rather than a rate of interest declared on a deposit by a savings bank,
*495My opinion is that the word “ shall ” in section 1384-1 of the Civil Practice Act is tantamount to a command, and leaves in the committee no discretionary power as to the character of the investment. (Rosenblum v. Gorman, 21 App. Div. 618, 620.) Such investment, under the section, must be in those securities in which savings banks may invest their own money, as provided in section 239 of the Banking Law. That law, however, among others, provides for investment in mortgages secured by real estate up to sixty per cent of the appraised valuation, whereas the veteran’s guardian is limited, by section 1384-1 of the Civil Practice Act, to such mortgage loans on unincumbered real property as may be worth fifty per cent more than the amount loaned thereon. With that exception, it appears that the Banking Law controls the investments. Discretion in the selection of investments enumerated in the Banking Law is vested in the guardian.
The order should be reversed on the law and the motion granted, without costs.
Lazansky, P. J., concurs with Hagarty, J.
Order denying application to compel the committee of an incompetent veteran to invest surplus funds in securities legal for trust funds pursuant to section 1384-1 of the Civil Practice Act affirmed, without costs.