(123 N.E.) v. Dutchess County Mutual Insurance Co., counsel), for appellant. David J. Wagner, of 64 App. Div. 9, 71 N. Y. Supp. 670; Benner | New York City, for respondent. v. Fire Association of Philadelphia, 229 Pa. 75, 78 Atl. 44, 140 Am. St. Rep. 706; American Central Insurance Co. v. Hardin, 148 Ky. 246, 146 S. W. 418; Underwood v. Penn Fire Insurance Co., 134 N. Y. Supp. 105. We do not consider the case of Trustees of the First Baptist Church v. Brooklyn Fire Insurance Co., 19 N. Y. 305, an authority to the contrary. The agreement in that case was apparently made by the company itself, and involved no question of an agent's authority. Besides, the plaintiff offered to prove a usage of the defendant to make verbal agreements to renew policies until further notice. For these reasons, and without discussing the other questions and points which have been raised, the judgment in this case must be reversed, and a new trial granted, with costs to abide the event. COLLIN, CUDDEBACK, CARDOZO, POUND, and ANDREWS, JJ., concur. HISCOCK, C. J., not sitting. Judgment reversed, etc. (226 N. Y. 453) PEOPLE ex rel. BRIGGS ▼. HANLEY, (Court of Appeals of New York. June 6, 1. RECEIVING STOLEN GOODS 4-GUILT. A clerk of a trust companw, who fraudulently obtained possession of certificates of stock, forged the necessary signatures thereon, and procured a loan and the entry of a credit with another trust company to the amount of the loan, and drew on such credit, committed larceny as to the amount so drawn. MCLAUGHLILN, J. On the 24th of July, 1917, upon a charge of criminally receiving stolen property, the relator was committed by a magistrate of the city of New York to the city prison to answer to the Court of General Sessions. She procured a writ of habeas corpus, and after a hearing thereon an order was made sustaining the writ and discharging her from custody. On appeal to the Appellate Division the order was affirmed, one of the justices dissenting, and the people now appeal to this court. The facts upon which the warrant was issued for the arrest of the relator, and upon which she was held to await the action of the grand jury, were not controverted upon the hearing which resulted in her discharge in the habeas corpus proceeding. The question presented on this appeal, therefore, is whether, upon such facts, the magistrate erred in committing the relator. The determination of this question necessitates a. statement of the facts involved in or immediately connected with relator's arrest, commitment, and discharge. In this connection it appeared that in October and November, 1913, one Foye, who was a clerk employed in the transfer department of a trust company in the city of New York, fraudulently obtained possession of and forged the necessary signatures to certain certificates of stock of a corporation, by means of which he obtained from Charles T. Brown & Co., of Philadelphia, three loans aggregating $100,000. The transaction which resulted in the loans was by correspondence; Foye giving his promissory notes and putting up the forged certificates of stock as collateral security for their payment. Charles T. Brown & Co., upon receipt of the notes and certificates of stock, paid to certain banks or trust companies in Philadelphia the amounts called for, and they in turn telegraphed their correspondents in New York to place such amounts in the Knickerbocker Trust Company of New York to the credit of Foye, which they did by means of checks payable through the clearing house. When the transaction was completed, Foye thus had to his credit in the Knickerbocker Trust Company, by reason of the fraud practiced upon Brown Appeal from Supreme Court, Appellate Di- & Co., $100,000, less commissions and intervision, First Department. Habeas corpus by the people of the State of New York, on the relation of Elizabeth D. Briggs, against John J. Hanley, Warden, etc. From an order of the Appellate Division (185 App. Div. 667, 173 N. Y. Supp. 693) affirming an order of the Special Term sustaining the writ and discharging relator, the People appeal. Orders reversed. Edward Swann, Dist. Atty., of New York City (Robert C. Taylor, of New York City, of est, and this is all the credit he had. No other moneys were ever paid to the trust company or mingled with the credit thus given. Some time prior to Foye's obtaining this credit he had formed an acquaintance with the relator, which had ripened into relations which it is unnecessary to state, it being sufficient to say that he had told her how he could "steal" from $10,000 to $100,000, but to do so might result in his being sent to prison. She urged him to do it, and when he had obtained the loan of the first $10,000, he in For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes formed her. She congratulated him on his success and suggested that they elope to California. This he declined to do until he had gotten "some more of this easy money." He told her he expected to get in the neighborhood of a quarter of a million dollars, and where and how easy it would be to get it. After he had obtained the loans of $100,000, he told her he had given his wife $20,000 to protect her in case he were arrested, and she thereupon suggested that he also give her $20,000 to protect her in case of his arrest. Thereupon he agreed to give her $20,000 to open a bank account and later to invest in stocks and a further sum of $1,000 for expenses and clothing for her use on their prospective trip to California. Having obtained the credit in the trust company in the manner indicated for nearly $100,000, he drew a check, payable to his own order, on the trust company for $25,000, which amount was paid to him. He then telephoned the relator, they met at a restaurant, and he told her he had drawn out $25,000 of the "easy money," $21,000 of which he had in an envelope in his pocket for her. After having lunch they entered a taxicab for the purpose of going to the Astor Trust Company, where she was to deposit the money under the name of Elizabeth B. Austin. On the way to the trust company she asked to see the money. He took it out of the envelope, showed it to her, counted it, and then gave it to her, telling her how to deposit it and after doing so to meet him at a place designated. She entered the trust company, made the deposit as directed, subsequently met him at the time and place agreed upon, and exhibited to him the passbook of the trust company with the $21,000 credited thereon. Shortly thereafter Foye was arrested on a warrant issued in the commonwealth of Pennsylvania, extradited to that state, and convicted of fraudulently making a written instrument, for which he was sentenced to a term of from five to ten years in the state penitentiary. [1] The facts presented before the magistrate clearly and unmistakably demonstrated that the relator knew when Foye gave her the $21,000 mentioned that it was a part of his credit in the trust company, obtained through his fraud upon Brown & Co. Did the relator's receiving this money, with such knowledge, constitute receiving stolen property within the meaning of the statute? I have no doubt it did. The statute (Penal Law [Consol. Laws, c. 40] § 1308) provides that: “A person, who buys or receives any stolen property, or any property which has been wrongfully appropriated in such a manner as to constitute larceny according to this article, knowing the same to have been stolen or so dealt with, or who corruptly, for any money, property, reward, or promise or agreement for the same, conceals, withholds, or aids in concealing or withholding any property, knowing the same to have been stolen, or appropriated wrongfully in such a manner as to constitute larceny under the provisions of this article, if such misappropriation has been committed Her act in receiving the money and appropriating it to her own use brought her fairly within the meaning of the statute. In criminal as well as civil cases the law looks to substance, and not to form. Thus it has been held in civil cases that whisky made from corn wrongfully and unlawfully taken from the owner may be seized by him (Silsbury v. McCoon, 3 N. Y. 379, 53 Am. Dec. 307); that the owner of negotiable securities stolen and afterwards sold by the thief may follow and claim the proceeds in the hands of the felonious taker, or his assignee with notice (Newton v. Porter, 69 N. Y. 133, 25 Am. Rep. 152); that where money is obtained from another by fraud and felony, the wrongdoer obtains no title, and the owner may reclaim it if found in the possession of the wrongdoer, or he may follow it into the hands of any person who received it without consideration, or with notice of the fraud by which the same was obtained; that, if such money be deposited in a bank, it still remains the money of the owner, the bank being a mere depository, and, while it so remains, the owner can compel the bank to restore it to him (Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511; Tradesman's Bank v. Merritt, 1 Paige, 302; Mechanics' Bank v. Levy, 3 Paige, 606; Pennell v. Deffell, 4 De Gex, M. & G. 372). In the present case, when the facts are stripped of legal fiction as to the identity of money, the transaction amounted to this: Foye, by means of a felonious act practiced upon Brown & Co., obtained a credit in the Knickerbocker Trust Company. This credit, however, as between him and Brown & Co., belonged to the latter. It was a stolen credit, and money drawn from the trust company by reason of it was stolen money. People v. Lammerts, 164 N. Y. 137, 58 N. E. 22; People v. Dimick, 107 N. Y. 13, 14 N. E. 178. The money, in fact, belonged, not to him, but to Brown & Co. (Rothschild v. Mack, 115 N. Y. 1, 21 N. E. 726), who could have retaken the same from him or any other person who took the same with notice. [2] When Foye drew $25,000 from the trust company, he committed a larceny. When the relator accepted $21,000 of the same money, knowing it had been stolen, she was guilty of receiving stolen property, and the magistrate action of the grand jury. did not err in committing her to await the The orders of the Appellate Division and Special Term should therefore be reversed, the writ of habeas corpus dismissed, and the relator remanded to the custody of the defendant. CHASE, COLLIN, CUDDEBACK, HOGAN, and CRANE, JJ., concur. HISCOCK, C. J., not voting. Ordered accordingly. (233 Mass. 321) (123 N.E.) an in so-called preferred shares of the Massachusetts Electric Companies at the market price then prevailing, and to the retention of this investment to the end of the period of the account in 1917. The case comes before us by report upon agreed facts. The facts now pertinent to the decision are that the Massachusetts Electric Companies was unincorporated association organized and existing under a written instrument entitled "Agreement and Declaration of Trust," dated in June, 1899. The general features of this agreement were similar to those which have come before the court in numerous cases. Property is transferred to trustees, who hold the legal title to all the assets belonging to the trust and exercise the exclusive management and control of it under the terms of the agreement. Certificates of part ownership, resembling shares of stock in a corporation, are issued to those who are the ultimate owners of the property. See Peabody v. Treas. & Recvr. General, 215 Mass. 129, 102 N. E. 435, and cases there collected, and Kennedy v. Hodges, 215 Mass. 112, 114, 4. TRUSTS 217(4)-INVESTMENT OF FUNDS 102 N. E. 432. -PARTNERSHIP. Investment of trust funds in preferred shares of the Massachusetts Electric Companies, a trust owning controlling stock interests in various public utilities, was not unwarranted as a matter of law, even if the electric companies' trust was a partnership. The Massachusetts Electric Companies acquired all or a large and controlling majority of the capital stock of thirty-six street railway and electric light corporations in Massachusetts, Rhode Island and New Hampshire. "The companies were merged from time to time and in 1906 consisted of the Boston & 5. TRUSTS 217(4)-INVESTMENT OF FUNDS Northern Street Railway Company, the Old -RETENTION OF FALLING SHARES. Trustee's retention of shares in the Massachusetts Electric Companies, and failure to sell them before the end of his period of accounting, held not improper as matter of law under all the circumstances, though the market had been falling. Colony Street Railway Company, and the Hyde Park Electric Light Company. Prior to 1912 the stock of the Hyde Park Electric Light Company was sold and the two other companies were merged, and the name of the consolidated company was changed to the Bay State Street Railway Company, of which Report from Supreme Judicial Court, Suf- the Massachusetts Electric Companies owned folk County. substantially all the common stock, being a large and controlling majority of all the Petition by Benjamin Kimball, trustee un- stock. The Massachusetts Electric Compader the will of Mary Bates, for allowance of nies did not act as an operating company exhis account, opposed by Harriet A. Whitney cept through its control of the subsidiary and by Mary E. Bates. From a decree allow-corporations, which operated the properties ing the modified first account, opponents ap- in question. pealed to the Supreme Judicial Court. On report by a single justice for the consideration of the Full Court. Decree of probate court affirmed. The business of the Massachusetts Electric Companies consisted of holding the stock of the subsidiaries and supervising their management by means of stock control, and assisting in their financing. * Previous to February 26, 1903, a large number of trustees in Massachusetts had invest John Noble, of Boston, for appellants. Warner, Stackpole & Bradlee, of Boston (John G. Palfrey and Howland Twombly, ed trust funds in the preferred shares of the both of Boston, of counsel), for appellee. Massachusetts Electric Companies and held those investments on that date. Before making the investment in question, the trustee RUGG, C. J. These are two appeals from made reasonable inquiry among bankers and a decree of the probate court allowing an ac- brokers to ascertain how they regarded the count of a trustee under the will of Mary investment, and received favorable opinions. Bates. The matters now in controversy re- He acted in entire good faith and so far as late to certain aspects of the propriety of an the financial and general business conditions investment made by the trustee in February, and prospect of earnings of the Massachu1903, of a part of the principal of the trustsetts Electric Companies and of the prop For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes erties controlled by it were concerned there was then no reason to believe the investment to be otherwise than financially sound." Regular dividends out of earnings at the rate of 4 per cent per annum were paid on these shares to and including July 1, 1904. After that none were paid until January, 1909, and since July 1, 1910, in general they have been paid at the rate of 2 per cent. In 1912 an issue of new preferred shares was made to take up 174 per cent of dividends then accumulated. The market value has much diminished. [1] The rule of law in this commonwealth governing the conduct of trustees in the investment of the principal of their funds was stated in these words in 1830 in Harvard College v. Amory, 9 Pick. 446, 461: "All that can be required of a trustee to invest is, that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of the capital to be invested." Good faith and sound discretion, as these terms ought to be understood by reasonable men of good judgment, were thus made the standard by which the conduct of trustees is to be measured. That is a comprehensive principle. It is wide in its scope. It is not limited to a particular time or a special neighborhood. It is general and inclusive, so that while remaining itself fixed, it may continue to be a safe guide under new financial institutions and business customs, changed commercial methods and practices, altered monetary usages and investment combinations. It avoids the inflexibility of definite classification of securities, it disregards the optimism of the promoter, and eschews the exuberance of the speculator. It holds fast to common sense and depends on practical experience. It is susceptible of being adapted to whatever conditions may arise in the evolution of society and the progress of civilization. Although more liberal to investing trustees than the law of some states and countries, it has frequently been reaffirmed and never doubted in this jurisdiction. Lovell v. Minot, 20 Pick. 116, 32 Am. Dec. 206; Brown v. French, 125 Mass. 410, 28 Am. Rep. 254; Pine v. White, 175 Mass. 585, 590, 56 N. E. 967; Green v. Crapo, 181 Mass. 55, 62 N. E. 956; Corkery v. Dorsey, 223 Mass. 97, 101, 111 N. E. 795. [2] In the application of this rule to varying facts it often has been held that, while some investment of trust funds in certain securities might be justified, a disproportionate amount of the total ought not to be embarked in a single kind of stock or bonds. Dickinson, Applt., 152 Mass. 184, 25 N. E. 99, 9 L. R. A. 279; Davis, Appeal of, 183 Mass. 499, 67 N. E. 604. That particular point is not within the present report and therefore is not before us. Several cases have arisen where the facts showed improper investments in improvements upon real estate. Brigham v. Morgan, 185 Mass. 27, 69 N. E. 418; Warren v. Pazolt, 203 Mass. 328, 89 N. E. 381. In Taft v. Smith, 186 Mass. 31, 70 N. E. 1031, a second mortgage upon real estate, and in Thayer v. Dewey, 185 Mass. 68, 69 N. E. 1074, land in another state were held not improper investments as matter of law upon the facts disclosed. It was decided in Kinmonth v. Brigham, 5 Allen, 270, 279, that the investment in a trading partnership could not be sanctioned. The precise point reported for our determination is "whether the organization of the Massachusetts Electric Companies was such on February 26, 1903, that the investment of any portion of the trust funds in its preferred shares was as matter of law improper." Put in another way, it is, whether a finding that such investment was proper as matter of fact must be pronounced wrong as matter of law. The form of the report imports a finding of all facts, so far as the facts can go, in favor of the investment. [3] Tested by the standard established by our law, it cannot quite be said that in February, 1903, the investment of any portion of trust funds in preferred shares of the Massachusetts Electric Companies was improper and unwarranted as matter of law. It might have been found from the nature of the properties held by the companies, the character of the agreement and the general purposes of the so-called trust, that it was designed as a permanent investment, that the combination in a single ownership of the stock of so many different public service corporations covering such extent of territory and serving as matter of common knowledge numerous populous communities, was expected to equalize fluctuations of earnings and to stabilize the rate of dividends. The corporations whose securities were held were not in process of construction but were completed properties in ac tual operation. The extent of their earnings is not shown, but regular payments in way of dividends were made until a considerable period after the present investment was made. The form in which the case is presented to us warrants and even requires the assumption that the earning power of the public service corporations whose securities were owned had been sufficiently tested so that at the time of the investment prudent and sagacious men of experience made purchases of these shares for permanent holding. [4] In the light of the agreed facts and the form of the report it is not necessary to determine whether the agreement and declaration of trust constituted a partnership among the shareholders as in Williams v. Boston, 208 Mass. 497, 94 N. E. 808; Frost v. Thompson, 219 Mass. 360, 106 N. E. 1009 (see Dana v. Treasurer & Receiver General, (123 N.E.) The agreed facts show that good faith and sound discretion, measured by the prevailing practice of men of experience and good judgment in such matters, was exercised in making the investment here assailed. That is the standard as established by the authorities to which reference has been made. Giving due weight to all the considerations affecting the trust agreement, no sufficient reason appears for declaring the investment unwarranted. The case is close, but falls within the rule of Harvard College v. Amory, ubi supra. [5] The retention of these shares and the failure to sell them before the end of the period of accounting cannot be pronounced improper as matter of law under all the circumstances. The decision of the question whether to sell an investment of trust funds on a falling market is a perplexing one. The agreed facts are that "except in so far as the propriety of retaining the investment was affected by the character of the organization in contemplation of law, there was nothing in the future outlook for the Massachusetts Electric Companies and its subsidiaries which required the trustee as matter of sound discretion to dispose of the shares." The case upon this point is governed in principle by Bowker v. Pierce, 130 Mass. 262. Decree of probate court affirmed. 227 Mass. 562, 116 N. E. 941), or a trust as in, resent only honest investment necessary for Williams v. Milton, 215 Mass. 1, 102 N. E. valuable use to the public. 355, where most of the earlier cases are reviewed. Assuming for the purposes of this decision that it was a partnership does not render the investment unwarranted as matter of law. On that assumption it was a partnership of a peculiar kind. It was not an ordinary business, commercial or trading partnership. The nature of its authorized investments seemingly removed it as far as possible from the common incidents of a copartnership adventure. Apparently it was guarded as fully as was practicable from speculative features and the oscillations of value incident to varying conditions of trade. There is nothing in the record to indicate that the amount of shares issued exceeded a conservative valuation of the securities owned. The rights of the shareholders were carefully guarded by the terms of the agreement. Their responsibility was reduced to a minimum so far as possible by written statement of obligations. It was expressly stated that the trustees had no power to bind the shareholders personally. All persons dealing with the trustees were confined by the agreement to the property of the so-called trust to the exoneration of shareholders. See Hussey v. Arnold, 185 Mass. 202, 204, 70 N. E. 87; Williams v. Boston, 208 Mass. 497, 501, 94 N. E. 808; Carr v. Leahy, 217 Mass. 438, 440, 105 N. E. 445; Rand v. Farquhar, 226 Mass. 91, 96, 115 N. E. 286. It was required of the trustees to stipulate in every obligation into which they might enter that the shareholders should not be held liable personally. Whatever may be held ultimately as to the force and effect of those terms in the trust agreement, they manifest an effort to reduce the liability of the shareholders to the lowest limit. In any event, such liability or shareholders was not greater STREET RAILROADS 93(4) — INJURIES ON than the liability of stockholders in manufacturing corporations at the time the investment was made, which was before the court in Harvard College v. Amory, 9 Pick. 446. See Child v. Boston & Fairhaven Iron Works, 137 Mass. 516, 50 Am. Rep. 328, for an historical review of our statutes respecting stockholders' liability for debts of the corporation. The exercise of sound judgment and good faith and a strict compliance with the terms of the agreement by the trustees would have a strong tendency to relieve the shareholders from all responsibility. The kind of corporations in which the trustees (233 Mass. 232) DRISCOLL v. BOSTON ELEVATED RY. CO. (Supreme Judicial Court of Massachusetts. Suffolk. June 24, 1919.) TRACK-LIABILITY. Where a pedestrian started to cross a welllighted street, not near a crosswalk in front of a trolley car moving about 10 miles an hour, 50 to 75 feet away, and the motorman rang his gong and braked the car down to 4 or 5 milea an hour, doing all he could to stop, the street railway was not liable for the death of the pedestrian, when struck by the corner of the car without walking in front of it. Report from Superior Court, Suffolk County; Lloyd E. White, Judge. were to hold stock were chiefly and primarily trix, against the Boston Elevated Railway verdict. Herbert A. Kenny, of Boston, for plaintiff. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |