Court Opinion

ID: 5349937
Source: CourtListenerOpinion
Date Created: 2022-01-08 06:35:10.221657+00
Date Added: 2024-06-11T08:29:43.007703
License: Public Domain

Untermyer, J. (dissenting).
On December 14, 1926, under an order of the Supreme Court there was deposited with Charles A. Buckley, at that time chamberlain of the city of New York, to the credit of the petitioner, then an infant, the sum of $1,875. This sum represented the proceeds of the settlement of an action against the defendant, The Travelers Insurance Company. The order approving the settlement contained a provision that these funds “ be deposited with the Chamberlain of the City of New York for the benefit of the infant and said sum be withdrawn only upon order of the Court.” Subsequently, pursuant to further orders, various sums were withdrawn for the benefit of the infant *285plaintiff, which, deducted from the amount deposited with the chamberlain in 1926, would leave on deposit the sum of $936.06. The petitioner’s account, however, concededly, contains no such amount of cash, because, on September 19, 1929, $1,000 of the fund was invested by Charles A. Buckley, then city chamberlain, in an undivided share of a bond and mortgage which has since been foreclosed.
The Special Term concluded, and in that conclusion I agree, that the order under which the fund was deposited with the chamberlain in 1926 did not authorize any investment by him, but required the fund to be retained on deposit for the benefit of the infant. This would render hable the chamberlain who made the unauthorized investment even though it is quite evident that he acted in good faith but under a misconception of his legal rights. By chapter 186 of the Laws of 1908 (as amd. by Laws of 1927, chap. 185) the city of New York is also hable for the repayment of the fund, although at common law no such liability attached. (Gray v. Board of Supervisors of Tompkins County, 93 N. Y. 603.) Previous to the enactment of this statute the only remedy of a depositor whose funds had been illegally invested or misappropriated was against the defaulting chamberlain or the sureties on his official bond. (Board of Supervisors of Tompkins County v. Bristol, 99 N. Y. 316; County of Erie v. Diehl, 129 App. Div. 735; affd. on opinion of Spring, J., 196 N. Y. 501; Waydell v. Hutchinson, 146 App. Div. 448.)
In consequence of the unauthorized investment by Chamberlain Buckley made about five years before the present chamberlain assumed office, he never received the funds to which the petitioner now claims to be entitled and which the order erroneously recites are “ now on deposit with the said Chamberlain of the City of New York.” Instead, the present chamberlain, A. A. Berle, Jr., received only an investment in a bond and mortgage which has since been foreclosed and the proceeds of which he has offered to transfer to the petitioner. The Special Term, nevertheless, has held that the present chamberlain, who is in no way responsible for the investment, must repay the balance of the amount deposited with a predecessor in 1926, even though there is no fund in the chamberlain’s office out of which such a payment can be made.
This decision, it seems to me, is fruitful of unjust results. It imposes on the present chamberlain and the sureties on his official bond responsibility for all the derelictions of his predecessors in office. Even a successor trustee is not subjected to such a comprehensive liability, (Husted v. Thomson, 158 N. Y. 328; Farmers Loan & Trust Co. v. Pendleton, 179 id. 486; U. S. Trust Co. v. *286Stanton, 139 id. 531.) How much more must this be true where the trust devolves upon a successor by appointment or election without opportunity to examine or to challenge the condition of the accounts of his predecessors in office. Yet, if this order is to be sustained, it must be on the theory that the chamberlain and his sureties are hable for every dereliction, whether by unauthorized investment or even by intentional misappropriation of all his predecessors subject only to whatever statute of limitation may apply. I am not willing to concede that this is so nor, in my opinion, is such the law. (Manolt v. Odell, [General Term, 1st Dept.] 4 N. Y. Wlky. Dig. 536.)
It is not necessary to decide now whether such a proceeding as this can be maintained against the city of New York, which by statute (Laws of 1908, chap. 186 [as amd. by Laws of 1927, chap. 185]) is “ responsible for all funds or moneys deposited with the chamberlain and treasurer thereof,” or whether the petitioner must proceed by " action ” for that purpose, because this proceeding is not against the city of New York. Claims against the city of New York are not enforcible by proceedings against the chamberlain. Since the city is not a party (Greater New York Charter, § 1614) the order which has been entered against the chamberlain does not, nor could it, require the city to pay this sum. The proceeding is maintained against the chamberlain as the custodian for the petitioner of certain funds which concededly he has never received and, therefore, does not hold. If it were intended by this order to require the chamberlain to pay the claim out of such of the general funds of the city as may happen to be under his control then certainly the city, which is directly interested in the disposition of its funds, would be an indispensable respondent in the proceeding. An action cannot be maintained against an agent to require him to pay an obligation of his principal because the agent happens to be in possession of his principal’s funds. Especially is this true here, because section 195 of the charter prohibits withdrawal by the chamberlain of any funds of the city except on warrant of the comptroller countersigned by the office of the mayor, upon proper vouchers, and also prohibits payment by any depositary except in accordance with these conditions. Consequently, the chamberlain and his sureties must now at their own expense restore this deposit with such comfort as they may derive from the prospect that at some future time they may recover against the city in an action for indemnity, if indeed such an action can be maintained by them under the restricted provisions of chapter 186 of the Laws of 1908 (as amd. by Laws of 1927, chap. 185). (Compare Ward v. Iroquois Gas Corp., 258 N. Y. 124; Price v. Ryan, 255 id. 16.) In other words, a party not otherwise liable is to be required *287to pay this claim merely because, after payment, he may be able eventually to recover against those who, by law, are responsible for the loss.
I do not agree that the present incumbent would be protected by the amendment of 1927 to section 137 of the Civil Practice Act or in any other way against individual liability if the order appealed from is affirmed. If he fails to make the payment which the order requires, he will be guilty of contempt though he has no funds in this account out of which the payment can be made. (Dibartolo v. Guinto, 248 App. Div. 852.) Section 137 of the Civil Practice Act was amended in 1927 (Laws of 1927, chap. 185) to correct the situation which resulted from the decision in Youngs v. Goodman (202 App. Div. 690) by exempting the chamberlain from further liability where “ in good faith ” he has made a previous “ surrender ” of funds" in accordance with an order of the court. It does not exempt him from liability where, having made no previous “ surrender,” he fails to comply with an order which directs a payment to be made. If, however, as it is suggested, these provisions of section 137 exempt the chamberlain from individual liability under the circumstances here, then the order which imposes such a liability should not be permitted to stand, but the petitioner should be relegated to an action or proceeding, as the case may be, against the city or against the chamberlain by whom the investment was made and his sureties.
It is suggested that there may be no loss on this investment, title to which, it is said, is now held by the chamberlain “as an officer of the city and not individually.” I do not agree that he holds title as an officer of the city. On the contrary, he holds the title as trustee for the petitioner, so designated by law. In Gray v. Board of Supervisors of Tompkins County (supra) the court said of a county treasurer occupying the same position as the chamberlain, “ He did not receive it as the agent of the county, or in any way for it, or on its behalf. It did not, by deposit with the treasurer, become the money of the county, and the county could not, through its board of supervisors, in any way control or interfere with it. The treasurer was the custodian of the money, selected not by the county, but by the law.” However this may be, there is no basis for assuming that the chamberlain can convert this investment into cash equivalent to the amount received by his predecessor in 1926, nor is any such relief demanded nor was any evidence to that effect adduced by the petitioner. On the contrary, if the value of the petitioner’s interest in the property were equal to the cash deposited with the chamberlain, there is every reason to believe that there would have been no foreclosure and further*288more that the petitioner would have accepted the interest which was tendered to him. In any event, the purpose of this proceeding is not to require the chamberlain to convert into cash the real property which he now holds and to pay the proceeds to the petitioner, but to require him to pay in cash the exact sum deposited with his predecessor in December, 1926.
The conclusion which I have expressed would impose no undue hardship on persons whose funds have been illegally invested or misappropriated by the chamberlain. They have, of course, recourse against the officer who made the illegal investment and against his sureties. They also have recourse against the city of New York by chapter 186 of the Laws of 1908 (as amd. by Laws of 1927, chap. 185), enacted on the theory that the city should be liable for all funds deposited with the chamberlain. There is no reason for extending that liability to a party who is not responsible for the investment in either capacity.
The order should be reversed and the motion denied.
O’Malley, J., concurs.
Order affirmed, with twenty dollars costs and disbursements.