Court Opinion

ID: 5737537
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:36:19.023746+00
Date Added: 2024-06-11T08:40:59.791487
License: Public Domain

Bergau, J. (dissenting).
When the settlor of a trust gives it knowingly into the trusteeship of one having interests which conflict with the ends of the trust, the conflict does not itself, of course, result in a breach of the fiduciary duty which usually would follow automatically as it was held in Matter of Balfe (245 App. Div. 22). But this is not to say that the trustee has no fiduciary obligations; that the trustee may pursue its own best interests even though the interests of the trust suffer; nor does it mean that the trustee may exercise every technical legal right it has in all respects as though it had no higher obligation to guard and protect.
The trustee takes such an obligation with knowledge of the conflict and it ought in good faith first to honor its trust obligation and next to protect itself. Nothing in the discussion of “ honesty and good faith ” by Carswell, J., in Matter of Balfe would suggest that the court should uniformly and as a consistent rule of law sanction a course of conduct by a trustee under a permissible condition of divided loyalty to help itself first and think about the trust later.
Here the trustee refused an altogether reasonable request by the executrix to exhaust remedies against its prime debtor before making claim against the estate, the residuary of which it was bound in good faith to protect. If such remedy, pursued with diligence against the debtor had failed, the present remedy would exist; but the estate was treated by the bank as it might treat any stranger who had bound himself to secure a third party’s obligation to the bank. The trustee had a minimal *114obligation at least higher than this. (Meinhard v. Salmon, 249 N. Y. 458; City Bank Farmers Trust Co. v. Cannon, 291 N. Y. 125.) I would affirm the Surrogate’s decree.
Breitel, J. P., Eager and Steuer, J J., concur in Per Curiam opinion; Bergan, J., dissents in opinion in which McNally, J., concurs. . >
Decree voiding the claim of appellant reversed on the facts and the law and the claim allowed, with costs. Settle order on notice.