
    BOONE v. CITIZENS’ SAVINGS BANK.
    [Reversing 21 Hun, 235.]
    
      N. Y. Court of Appeals ;
    
    
      February, 1881.
    Deposit nr Savings Bank in Trustee’s Name.—Payment to Trustee.—Stipulation as to Payments to Person Producing Pass-book.—Administrator op Trustee in whose name Deposit has been made.—Diligence Rquired op Savings Bank in making Payments.
    The executor or administrator of a deceased trustee of personalty, the fund being found separate from the decedent’s assets, succeeds to the trust; and, in the absence of an assertion of claim by the beneficiary, may take possession of the fund, and a depositary will be exonerated by payment or delivery to him.
    Although, in an action by a beneficiary against a savings bank and the trustee in whose name money has been deposited, the cestui que trust may be entitled to the delivery of the pass-book and to receive-the money from the bank, yet when no claim has been interposed by the beneficiary, the bank is bound to pay the trustee, as it received the money from him agreeing to return it on demand ; and such payment will discharge the bank from all liability, and it is not bound to inquire into the nature of the trust.
    A stipulation with a savings bank, that all payments to persons producing the pass-book shall be valid to discharge the bank, is lawful and binding, and hence a payment to a trustee, producing the . book, will be a bar to any after-claim of the cestui que trust.
    
    Upon the death of one in whose name, as trustee, money has been deposited in a savings bank, the property passes to the administrator as trustee, and he succeeds to the rights and is subject to the duties of the deceased trustee, and has therefore the same right to receive the deposit from the bank as the deceased trustee would have had.
    The rule, that a savings bank, which has agreed to use its best endeavors to prevent fraud, will not be protected by a payment to a person producing the bank-book unless it has used proper diligence, only applies to payments to persons not entitled to receive the deposit ; when the payment is to one entitled to receive it, the question of diligence or negligence cannot arise.
    A savings bank can only pay the beneficiary in a trust account at the peril of establishing his right, as against the trustee, to the possession of the fund. It may take this risk if it chooses, but it is not bound to.
    Appeal from a judgment of the general term of the supreme court in the second department, affirming a judgment in favor of the plaintiff, rendered upon the trial of the action by the court at special term.
    Eliza A. Boone, as administratrix of Christopher C. Boone, sued the Citizens’ Savings Bank of the city of New York to recover a deposit made by Susan Boone in her name, as trustee for the said Christopher C. Boone.
    The money originally belonged to Susan Boone.
    The entry in the bank-book was as follows :
    “Book No. 14,613.—The Citizens’ Savings Bank in account with Susan Boone, in trust for Christopher Boone, March 33, 1866, $500.00.”
    The rules of the bank were printed ip the pass-book delivered to Mrs. Boone at the time the deposit was made, and they provided as follows: “All deposits and all withdrawals shall be entered at the time they are made in the books of the bank, and also in a passbook to be given the depositors at the time the first deposit is made. The pass-book shall be the voucher of the depositor, and evidence of his property in the institution, and the presentation of the pass-book shall be sufficient authority to the bank to make any pay ment to the bearer thereof.
    “The officers of the bank will endeavor to prevent fraud upon its depositors ; but all payments to persona producing the pass-books issued by the bank shall be valid payments to discharge the bank. . . .
    “ On the decease of any depositor the amount standing to the credit of the deceased may be paid to his or her legal representatives when legally demanded.”
    On one occasion during the life of Susan Boone, she drew out the interest due on the deposit, and upon her death the bank-book came into the possession of Edward Funk, her administrator, who, upon presenting the bank-book and proof of his appointment as administrator, to the bank, received the entire deposit.
    
      The supreme court held, affirming the judgment of the trial judge, that the payment to Funk was unlawful, and did not discharge the defendant, and that the plaintiff was entitled to recover.
    
      Albert Mathews (John W. Pirsson), for defendant, appellant.
    There was no valid gift in presentí, and the legal title remained in Susan Boone (Perry on Trusts, § 311; Day v. Roth, 18 N. Y. 453; Geary v. Page, 9 Bosw. 298; Young v. Young, 80 N. Y. 422). There was no such declaration of trust as could have been enforced in favor of' Christopher C. Boone (Heartley v. Nicholson, L. R. 19 Eq. Cas. 242 ; Field v. Lonsdale, 13 Beav. 78; Brabrook v. Bos. Sav. B’k., 104 Mass. 228; Stone v. Bishop, 4 Cliff. 593 ; Cummings v. Bramhall, 120 Mass. 556; Weber v. Weber, 58 How. Pr. 255). It does not help the matter to call it an executed trust, as that term, if it has any significance, is a word of definition, relating rather to the creation than to the performance of the trust (Bagshaw v. Spencer, 1 Ves. Sr. 152; Perry on Trusts, § 359 ; Otis v. Beckwith, 49 Ill. 129 ; 68 Id. 25; 18 Am. R. 541 ; 4 Kent Comm. 305). The trustee had entire control over the fund; the legal title was in her, and there were no relations in law between the beneficiary and the bank; they were entire strangers. Hence the bank was bound to surrender the fund to the trustee or her successors (Rogers v. Weir, 34 N. Y. 471). The administrator of the trustee succeeded to her rights, and was entitled to the possession of the fund. (De Peyster v. Ferrers, 11 Paige, 13 ; Dias v. Brunell, 24 Wend. 13 ; Kane v. Gott, Id. 661; Grout v. Van Scoonhoven, 1 Sandf. Ch. 341; Bank v. Wilkes, 3 Id. 99 ; Bucklin v. Bucklin, 1 Abb. Ct. App. Dec. 242; Bunn v. 
      Vaughan, Id. 253 Emerson v. Bleakely, 2 Id. 22 ; Re N. S. S. I. F. Co., 63 Barb. 556; Wheatley v. Purr, 1 Keen, 151).
    
      Edwin G. Davis, for plaintiff, respondent.
    As no agreement existed between the bank and the cestui que trust, it could not rely on any rule of its own to excuse a wrongful payment (Allen v. Williamsburgh Savings Bank, 69 N. Y. 314). The payment was in violation of the law providing for payment to the beneficiary on the death of the trustee (General Savings Bank Act, L. 1875, p. 408, § 24). The bank was bound to exercise ordinary care and diligence in making payments. It mistook, not the facts but the law, and is, therefore, not excused (Appleby v. Erie County Savings Bank, 62 N. Y. 12 ; Allen v. Williamsburgh Savings Bank, 69 Id. 314). The trust created by the deposit was executed, and therefore did not descend to the administrator of the trustee (Martin v. Funk, 75 N. Y. 134 ; Young v. Young, 80 Id. 422).
   Finch, J.

The case of Martin v. Funk (75 N. Y. 134) determined that the deposit made with the defendant by the plaintiff’s intestate, constituted her a trustee for Christopher Boone, and transferred the title to the fund from her as an individual, to her as a trustee. It further determined, that, in an action by the beneficiary against the administrator of the trustee, and the depositary, the cestuis que trust was entitled to a delivery of the pass-book, which constituted the voucher' for the deposit, and to receive the money from the bank. It did not, however, decide the question presented here, whether a payment by the bank to the administrator upon the production of his letters and of the pass-book, and in the absence of any notice from the beneficiary, was a good payment and effectual to discharge the bank.

It may not be doubted that if the intestate in her life-time had demanded the money of the bank and presented her pass-book, no claim by the beneficiary having been interposed, the bank would have been bound to pay. And this for the reason that such was their express contract. They received the money as bailees, agreeing to pay it on demand to Susan Boone, trustee. What the trust was, they neither knew nor were bound to inquire. That was a matter wholly between trustee and cestuis que trust, at least until the latter-gave notice to the bank of a hostile claim. They had received the money of the trustee, agreeing to return it to her as trustee, on demand. When she called for it they were bound to pay, and having done so, were discharged from all liability.

And this was all the more certainly true because of the peculiar provisions of the contract. It was one of the stipulated terms of the deposit, expressly agreed upon at the time, that “the pass-book shall be the voucher of the depositor, and evidence of his property in the institution, and the presentation of the pass-book shall be sufficient authority to the bank to make any payment to the bearer thereof ; that the officers of the bank will endeavor to prevent fraud upon its depositors ; but all payments to persons producing the passbook issued by the bank shall be valid payments to discharge the bank.”

We held, in Allen v. Williamsburgh Savings Bank (69 N. Y. 317) that such a stipulation was lawful, and both parties were bound by its terms. If therefore, Susan Boone, trustee, to whose credit the deposit stood, had appeared at the bank and demanded the fund, producing the pass-book as her voucher, and the bank had paid her the money, it is certain that the payment would have been good, and no liability would remain on the part of the bank to any after-claim of the cestxtis que tnost. The payment would have been made to the right party, to the person lawfully entitled.

But Susan Boone died before withdrawing the money. If now her right to demand and receive the deposit devolved upon her administrator, no change came over the right and duty of the bank, as it respected a payment to him. All the right of the deceased to demand and receive the money would pass to him, and such payment by the bank to him would be as effectual a discharge as if paid to the intestate in her life-time.

We are of opinion that, upon the death of Susan Boone, her rights as trustee devolved upon her administrator (Banks v. Wilkes, 3 Sandf. Ch. 99 ; Bucklin v. Bucklin, 1 Abb. Ct. App. Dec. 242 ; Bunn v. Vaughn, Id. 253 ; Emerson v. Blakely, 2 Abb. Ct. App. Dec. 22; Trecsethick v. Austin, 4 Mas. 16, 29). He took the property, which, although money, was a distinct and separate fund and not mixed with the money of the estate, as trustee and not as assets, and held it with all the rights and subject to all the duties of the deceased trustee, whom he succeeded. When, therefore, he appeared at the bank and produced his letters of administration, and the pass-book, which by the contract was evidence of his right to withdraw the deposit, and demanded its payment, the bank had no alternative. It had no right to inquire into the character of the trust, and owed no duty to the beneficiary until the latter by notice, or forbiding payment, or demanding it for himself, created on the part of the bank such right and duty. Until then the character of the trust did not concern the bank. Whatever it was in fact, was immaterial, and could n-ot affect its right and duty to pay the person to whom it owed the debt.

It is true that payment to the person presenting the pass-book is not always and absolutely a discharge to the bank, if paid to one who is neither the depositor nor, in case of death, the legal representative of the depositor. The bank, if it has agreed to use its best endeavors to prevent fraud, must exercise diligence, and is put on inquiry by circumstances of suspicion (Allen v. Williamsburgh Savings Bank, supra). But that rule only applies to prevent payment to the wrong person, to one not entitled to receive the deposit. If the right person applies and payment is made to him, the question of diligence or negligence cannot arise, for nothing has occurred to call it into play.

Nor does it alter the situation to call this an “ executed trust” and insist upon the right of the beneficiary to have the pass-book and the fund. If he has such right, it reaches the bank through the trustee, and the bank can only pay the beneficiary at the peril of establishing the latter’s right, as against t,he trustee, to the possession of the fund. It may take the risk if it chooses, but is not bound to take it. It may be compelled by the action of the cestui que trust to hold the fund as against the trustee, and pay the money into court to await an adjustment of their respective rights ; but in the absence of any claim or interference of the beneficiary, it can recognize no one but the depositor or his representative having possession of the pass-book as the agreed voucher, and evidence of title and payment to him is good. What else remains is wholly a question between trustee and cestui que trust.

The recovery, therefore, in this case cannot be sustained, and the judgment should be ’ reversed, with costs.

All the judges concurred except Sapallo, J., absent. 
      
       See note on p. 41 of this vol.
     