
    WICKENHEISER et al. v. COLONIAL BANK et al.
    (No. 7369.)
    (Supreme Court, Appellate Division, First Department.
    June 18, 1915.)
    1. Trusts ©=>357—Following Trust Property—Constructive Notice.
    O., loaning money to H., on the security of a savings bank passbook in the individual name of H., is not put on notice that the funds were trust funds merely because the account was opened only four days before.
    [Ed. Note.—For other cases, see Trusts, Cent. Dig. §§ 539-552; Dec. Dig. ©=>357.]
    2. Executors and Administrators ©=>169—Pledge of Property—Bona Fide Purchaser.
    C., loaning money to H. individually, on the security of a savings bank passbook, in the name of H., individually, in good faith and without notice, got good title, though the funds deposited were of an estate of which H. was executor.
    [Ed. Note.—For other cases, see Executors and Administrators, Cent. Dig. § 647; Dec. Dig. ©=>169.]
    3. Judgment ©=>208—Relief as Between Codefendants—Pleading.
    While, in an action against C. and D. to have a trust impressed in plaintiff’s favor on a fund in D.’s possession, the court can determine the rights of the parties therein, D. praying therefor, C. is not entitled to an affirmative judgment against D., not having prayed therefor.
    [Ed. Note.—For other eases, see Judgment, Cent. Dig. § 381; Dec. Dig. ©=>208.]
    4. Banks and Banking ©=>301—Trust Funds—Transfer to Executor Individually.
    A savings bank, in which testator had a deposit, has a right to transfer the account to the executor, individually, on his producing the neces-
    ¡gmoFor other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes sary papers, and is not liable because of bis using the funds for Ms individual purposes.
    [Ed. Note.—For other cases, see Banks and Banking, Cent. Dig. §§ 1159, 1162-1164, 1166-1168, 1172-1176; Dec. Dig. <®=»301.]
    <g^>For other cases see same topic & KEY-NUMBER, in all Key-Numbered Digests & Indexes
    Appeal from Special Term, New York County.
    Action by Emma E. Wickenheiser, as general guardian, and others, against the Colonial Bank and the Dry Dock Savings Institution, impleaded with another. From a judgment for plaintiffs, entered on a decision after a trial at Special Term, said defendants appeal.
    Modified and affirmed.
    Argued before INGRAHAM, P. J., and McLAUGLIN, LAUGHLIN, DOWLING, and HOTCHKISS, JJ.
    Jesse S. Epstein, of New York City, for appellant Colonial Bank.
    Frank M. Tichenor, of New York City, for appellant Dry Dock Savings Institution.
    Artemas B. Smith, of New York City, for respondents.
   DOWLING, J.

Charles F. Wickenheiser died at the city of New York on January 26, 1908, leaving a will thereafter duly admitted to probate, whereof George Herring, his brother-in-law, was executor, to whom letters testamentary were issued February 27, 1908. By his will, after the payment of $2,000 to his mother, all the residue of his property was left to his widow and two children by a prior marriage, to be divided between them equally. Forming part of his estate was a deposit of $2,494.40 in the Dry Dock Savings Institution. On March 2, 1908, four days after the letters were issued to him, Herring presented tire passbook of the deceased, numbered 440,015, and representing said account, to said Institution, surrendered it, and opened a new account in his own name, represented by passbook No. 489,054, wherein he was credited with the amount of money that remained in decedent’s account ($2,494.90) and with all interest thereon down to the date of such surrender; the new deposit including interest allowed on the decedent’s account from January 1, 1908, which would not have been credited upon a new account but was only credited because it was a transfer of an old account. At the time that the transfer was made, he presented to the Institution the surrogate’s certificate of his qualification as executor, and also a waiver from the attorney for the state comptroller. It was upon these papers that the transfer was made. On the next day, March 3d, he called at the Colonial Bank, wherein he was a depositor, and obtained a demand loan of $1,000, giving an assignment of the new passbook in his name in the Institution as security, and on October 28, 1908, he again obtained a loan from the same bank on the same security. Both of these loans were repaid by him January 3, 1910, whereupon the passbook was returned to him. Thereafter the Colonial Bank made loans of $1,000 to Herring, secured by his passbook in the Union Square Savings Bank at March 18, 1909, and November 26, 1909, repaid, respectively, April 4, 1910, and January 3, 1910. On December 15, 1909, the bank again loaned him $1,000, payable on demand, secured by the passbooks in the Institution and the Union Square Bank, and the loan was repaid on December 24, 1909. On March 16, 1911, his loans having been repaid, and the bank books being in his possession, the Colonial Bank loaned Herring $2,000, and he again delivered to it the passbook, with an assignment of the moneys due him by the Dry Dock Savings Institution, as evidenced by said book, and also a collateral note for $2,000 and a draft on the Dry Dock Savings Institution chargeable to said account. Notice of the assignment to the extent of $2,000 was given the Dry Dock Institution, which acknowledged receipt of it the same day. No part of this loan has been repaid. Herring having rendered an account of his proceedings as executor, a decree was made by the Surrogate’s Court on May 25, 1911, settling and allowing the same, whereby a balance was found to be due by him of $22,379.75, including the amounts payable to the widow ($3,186.03) and to each of his two sons ($9,281.03). The legacy to decedent’s mother has been paid by the executor. The sums due the sons (who were still minors) were directed to be paid to their mother on her furnishing certain bonds, which she has done, and she has been appointed their general guardian. Demand was made upon the executor to pay the moneys so directed to be paid, with which he has failed to comply; and, a transcript of the decree having been duly filed in the county clerk’s office of New York county, three certain writs of execution against the property of Herring for the collection of said respective amounts were issued to the sheriff of New York county on July 3, 1911, and upon them was realized the sum of $10,000, the balance still unpaid being $11,748.10. Herring is insolvent. Plaintiff, suing on her own behalf and as general guardian of the two sons, has recovered judgment upon the theory that, as the funds in the Dry Dock Savings Institution were the property of her husband’s estate, the unpaid legatees thereof are entitled to have a trust in their favor impressed upon those funds prior to the claim of the Colonial Bank, which loaned upon the faith of the account. The judgment decrees that the sums represented by the passbook is held by the Dry Dock Savings Institution in trust for the use and benefit of plaintiff and the sons, and the Institution is to account to them therefor; payment thereof to be applied on account of the several sums of money decreed to be paid them by the Surrogate’s Court. The complaint has been dismissed as against the Colonial Bank, but without prejudice to its right'to commence an action at law against the Institution. The Colonial Bank had not served a copy of its answer upon the Institution, nor did its answer, as served upon the plaintiff, ask for any judgment against the Institution, nor was any issue presented by the pleadings as between the two banks. The answer of the Institution asked that the court make such judgment herein as the facts in the case will warrant; it holding the said money to the credit of account No. 469,454 until the judgment of the court herein. No question has been raised either upon the trial or upon this appeal as to the right of the legatees to bring such an action as this, instead of having suit brought on behalf of the estate by a successor in interest of the recreant executor.

The record herein discloses absolutely no testimony tending to show bad faith on the part of the Colonial Bank. It is claimed that the fact that Herring sought a loan on.his savings bank account only four days after his passbook showed he had opened it should have put the Colonial Bank upon its guard. But there is no proof that the transaction was an unusual one, or that any other circumstances were present to rouse the bank’s suspicions. Had it inquired, it could have learned only that Herring did have such an account there as he represented he had. They were bound to go no further than that. There is no finding, nor any proof warranting one, that the Colonial Bank acted otherwise than in good faith, or that it had notice, actual or constructive, that the passbook on which it loaned its money represented trust funds. The complaint set forth that the bank had such knowledge when it received the book, but there is not a scintilla of proof in support thereof. Therefore, even conceding that the bank account was only a chose in action, the Colonial Bank being a bona fide purchaser for value, had a valid title. Moore v. Metropolitan Bank of New York, 55 N. Y. 41, 14 Am. Rep. 173; Greene v. Warnick, 64 N. Y. 221; Spencer v. Weber, 163 N. Y. 493, 57 N. E. 753. Therefore the dismissal as to it was proper.

And, in the absence of any; prayer for relief by it as against the Institution, it was not entitled to an affirmative judgment as against the latter, since, in so far as it might be able to establish a claim to or upon the account in question, the main issue before the court was the right of plaintiffs to have! a trust impressed in their favor upon the fund in question. But, inasmuch as the Institution prayed to have the rights of the parties in the fund in question determined, the-court had the right to so determine them, but to give no further relief against the Institution in favor of the bank.

The plaintiffs not being entitled to have a trust in their favor impressed upon the deposit in question, which shall take precedence over the Colonial Bank’s claim, what are their rights as against the Dry Dock Savings Institution? They are not suing here upon any theory of negligence upon'its part, but simply upon the ground that the deposit in question represents funds of the estate which should be applied to the discharge of their claims against it. Against this contention neither appellant seeks to argue, save in so far as the Colonial Bank contends (and as we have indicated, properly) that such fund is-first chargeable with the amount of its own advance to Herring. The Institution had the right to transfer the account to Herring individually, upon his demand that it do so and the production of the necessary documents establishing his title.

“An executor, as such, takes the unqualified legal title to all personalty not specifically bequeathed, and a qualified legal title to that which is so bequeathed.” Blood v. Kane, 130 N. Y. 514, 29 N. E. 994, 15 L. R. A. 490. “He-is the owner o£ the personal property o£ the testator; the absolute title vests in him; and he possesses the jus - disponendi in its full force. The honest purchaser is under no duty to see that the moneys are faithfully applied by the executor.” Leitch v. Wells, 48 N. Y. 585.

Being bound to transfer the funds of the estate in its possession to-Herring upon his demand, it was immaterial whether they paid him over the cash or allowed him to open a new account in his own name. Having turned over to him the amount represented by the passbook, and concededly not having profited in any way by the advances made by the Colonial Bank to Herring, no tenable theory is suggested for its liability, and no claim in negligence is predicated upon its failure to advise the Colonial Bank of the fact that the Herring account represented trust funds, or to notify the legatees of the estate of the fact that the executor was borrowing money upon the account. The only relief to which plaintiffs can be entitled in this action, therefore, is a judgment impressing a trust in their favor upon the balance of the Herring account in the Institution, after the lien of the Colonial Bank has been paid.

The judgment appealed from should be modified (1) by awarding the Dry Dock Savings Institution, which was merely a stakeholder, costs of the trial below, and striking out the direction for costs against it; (2) by decreeing that the Colonial Bank has a lien on the account in question to the extent of the amount proved, $2,192.35, with interest from the date of the trial, February 25, 1913; (3) by decreeing that the balance, if any, of the account, is impressed with a trust in favor of plaintiffs. Costs of the appeal are awarded to both appellants against respondents. The following findings of fact are reversed, as not warranted by the evidence: XV, XVI, XVII, XXII, XXIV, and the conclusions of law numbered I to V, inclusive. For the finding of fact numbered XII, which is reversed, as should be substituted the Institution’s proposed finding of fact numbered I, which correctly states the facts as warranted by the evidence. The following findings of fact proposed by the Colonial Bank are found: VI to XXV, inclusive, also its conclusions of law numbered I and III. All concur.  