Crane v. Moses

13 S.C. 561 | S.C. | 1880

Lead Opinion

The opinion of the court was delivered hy

McGowan, A. J.

This was a complaint in the nature of a creditor’s bill to marshal the assets of the estate of Napthili Phillips, deceased, against F. J. Moses and M. Moses, executors,, the legatees, and C. C. Law and other creditors. Phillips, the testator, died in March, 1864, leaving a will. He died in Marion county, where he lived, and where his property was situated, but the executors lived in Sumter county, where these proceedings were instituted. y

The history of the litigation, including a claim of exclusive jurisdiction in Marion county, would be long, but all the facts are so fully and clearly set forth in the Circuit decree that it will not be necessary to re-state them here. The plaintiffs are judgment creditors, having obtained their judgment in 1871, against the executors upon a demand due by Phillips in his lifetime. They levied and sold personal property of small value — law library, furniture, &c. — but, finding obstacles in the way of collecting their debt, they filed this complaint in 1872 for an account against the executors, to sell land, pay debts,, and to marshal the assets. The questions were referred to a referee, who stated the account and reported in favor of certain other claims presented. The Circuit Court rendered a decree, and the case comes up on exceptions.

One of the exceptions makes the point that the judgment of the plaintiffs was not sufficiently proved for lack of an affidavit of plaintiffs as to the amount due. This is the claim upon which the complaint (which, as it asked for an injunction, must be presumed to have been sworn to,) is based, and if the objection is well taken the whole proceeding must fall to the ground. There is no allegation that the debt is not due, nor is it denied that it has gone into judgment against the executors, but the objection is that, as matter of proof, the claim was not established by affidavit, which' it is insisted was necessary. This court has lately held, in the case of Westfield v. Westfield, ante p. 482, that “a creditor presenting his claim to the commissioner or master, under notice, should make an affidavit of the debt, and that he is aware of no discount,” &c.; but the practice indicated in that case was intended to protect the estate of an insolvent debtor against claims presented under the call for creditors, and does not necessarily include the demand upon which the proceeding is instituted, especially when that is a judgment entered upon the verdict of a jury. This claim of plaintiff was specifically set forth in the pleadings. The complaint, which, as we have seen, must be presumed to have been sworn to, charged that, there was such a judgment, and set forth particularly the amount of it. The answers did not deny the statement, and, therefore, by the rule of the code, without further- proof, “ it must be taken as true.” Besides, both the referee and the Circuit judge held that there was sufficient proof of the judgment which was ■obtained against the executors after the death of the testator. This exception is overruled.

In reference to the exception as to the alleged devastavit of the -executors in paying legacies to Ellen and Emily Phillips, leaving debts unpaid, the general facts are as follows: “ The testator died in. 1864, having given, his entire property to his executors in trust for his sisters, Ellen and Emily, during their lives, and the survivor of them, and after the death of both of them then over to his surviving brothers and sisters. The testator seems to have considered that he owed no debts, as his will makes no reference to debts; but that omission could not excuse the executors as to their first duty of providing for creditors. The executors qualified immediately, M. Moses, March 11th, 1864, and F. J. Moses, April 1st, 1864, and advertised according to law for creditors to present their demands. It seems that no claim was presented, and the executors, having assets in hand, made payments to the legatees, as follows: To Ellen and Emily Phillips, $2500; to same, September 29th, 1866, $1500; to same, December 20th, 1866, $1990; to Henry M. Phillips, December 2d, 1867, $1000; and to Ellen and Emily Phillips, May 14th, 1869, $1000, making the aggregate sum of $7990. At that túne the assets were ample for the payment of any debts of which they had knowledge or which were likely to come against the estate. The judgment of plaintiffs was not recovered until 1871, and this suit was not instituted until 1872. Were these payments wrongfully made, and should the executors be required to account for the same as assets to pay creditors whose claims have since come to light? No question is here made as to the right of the creditors to pursue the legatees who received the money. We have only to consider whether, in making such payments, the executors committed a devastavit, and are liable to account for the same. The law allowed the executors twelve months, reckoning from the probate of will, to ascertain the debts due by the testator. Within that time they were required to give three weeks’ notice, by advertisement, for creditors to present their demands duly attested. “ If any creditor shall neglect to give in a statement of his debt within the time aforesaid, the executors or administrators shall no.t be liable to make good the same.” Gen. Stat. 457. The proof shows that when they made the payments, no claim of any creditors had been made, although the notice had been given, and several years had elapsed before the first payment was made. We think the executors are not liable for the legacies-paid, and the account should be corrected accordingly. If the executors were now sued on their legal liability as the personal representatives of the testator, the plea of “plene administravit could be maintained to the extent of these payments. Walker v. Gill, 2 Bail. 105; Sebring v. Keith, 2 Hill 340; Lanier v. Griffin, 11 S. C. 581.

The executors would be liable if they paid legacies with a knowledge of outstanding debts, even if those debts had not been rendered under the act; and it is insisted that these executors-had at least constructive notice of the trust claims represented by Jordan, trustee. It is said that, as executor, they had possession of the papers of Phillips, from which they might have ascei'tained the existence of at least the alleged trust debts. It is-more than doubtful whether they could have done so from the papers in the possession of Phillips. If they saw the cash book and papers referred to, they might well have supposed that the account had been discharged by investment, as now claimed, or in some other way, especially as no claim in reference thereto had been intimated to them. But, be that as it may, the surviving executor states positively that the executors had no knowledge of these claims until years after the payment. It is not the duty of executors to hunt up doubtful claims against the estate which they represent. The law makes it their duty to advertise for creditors, and, when presented, to make provision for their payment, but it makes it the duty of the creditors themselves to present their claims duly attested.

It is further urged that as the legacies to Ellea and Emil/ were for life only, with limitation over, the executors had no right to pay them more than the interest, reserving the corpus for the remaindermen, and that the release which the remainder-men executed of all their interest, not being under seal, was void. Assuming that some such question might possibly arise between executors and beneficiaries under the will, it is not perceived that it touches the point under consideration here. This exception is overruled.

Under the call for creditors, made in the proceedings in this case, Bichard Jordan, as trustee, guardian and administrator, presented these claims against the estate, which he insists are valid bond debts, and entitled to priority as such. If these claims are established they will absorb all the assets which remain. They are as follows:

First. One George M. Fairlee was appointed trustee in regard to certain negro slaves belonging to Mrs. Margaret E. McNeill and her children, and gave bond July 21st, 1860, to C. 3D. Evans, Esq., then commissioner in equity for Marion county, in the penal sum of $8000, conditioned for the performance of certain duties as such trustee, and upon this bond N. Phillips and Elly Godbold were sureties. Fairlee died in 1862. It is said his estate is being settled in the court, but neither his personal representatives nor any one interested in his estate are parties in this case. The referee could take no account of the estate of Fairlee or his liability as trustee, yet he charged as a bond debt against the estate of Phillips, one of the sureties, the whole amount claimed to be due by Fairlee, trustee, as taken from his returns, viz., $4067.95. The Circuit judge.ordered the claim to be recommitted, and the creditor excepts.

It is doubtful whether that part of the decree which ordered the claim recommitted is appealable, but as it has been earnestly argued, and will have to be considered below, we will entertain it. The obligation on which the claim is founded is not an ordinary money bond, in which the terms are, we or either of us promise to pay a certain sum of money, but an official bond for the performance of certain acts. “Now the condition of the above obligation is such, that if the above bound George M. Fairlee shall hold the property (negroes) upon the trusts as above described, &c., * * * then this obligation to be void and of none effect, otherwise to remain in full force and virtue,” <fec. The penalty is for a sum certain, but that is not to be paid as such, but was only intended to secure the performance of the covenants. The sureties promised to pay no sum of money, but that their principal would perform the duties specified in the bond, or, if not, that they would pay the damages which might result from his failure to do so. That is the extent of the undertaking of the sureties, who are in no way responsible until it appears that the principal had failed to perform' the duties he had assumed. Originally it was held, in this state, that a surety upon an administration bond could not be sued until a breach of the bond had been shown; until the principal had been held to account, had been found to be in default, and had failed to pay the judgment. “ Sureties on administration bonds are in no respect to be considered as trustees or accountable in this court (equity) as such. They are only parties to a law undertaking, and to be held responsible in damages for the default of their principal. They can be sued only after default of their principal has been established.” McBee v. Crocker, McM. Eq. 488; Glenn v. Conner, Harp. Eq. 267; Teague v. Dendy, 2 McC. Ch. 209, and other authorities in the Circuit decree. Even after judgment had been rendered against the principal, the sui'ety, when sued, in certain cases had the right to surcharge and falsify the account stated against the principal, upon the ground that he was not a party to the proceeding. To avoid this seeming double litigation, and for other reasons, it was subsequently held in the case of Taylor v. Taylor, 2 Rich. Eq. 128, that in a suit for an account against the principal the surety might, and for certain reasons should, be included as a party, so that he might defend himself, and if a recovery was had, that the decree might run against both in the first instance and avoid the necessity of a second examination of the same accounts. We understand that the case of Taylor v. Taylor established the practice in equity that upon bonds for the performance of covenants the surety may be included in the original suit for account against the principal; but we know of no authority for going further. Phillips undertook that Eairlee should do certain things in regard to certain property. It does not appear that he failed to do his duty; that can only appear by an account against his representatives. There may be some defence to that account, and the executors of Phillips have a right to be heard upon that subject. No breach of the bond has been made to appear in that conclusive manner which is necessary before the estate of the surety will be charged with any amount. It is premature to hold that any debt has been established against the estate of Phillips, as one of the sureties of Fairlee. We concur with the Circuit judge in ordering this claim to be recommitted.

Second. George M. Fairlee died in 1862, and the testator, Phillips, was appointed his successor as trustee of Mrs. McNeill, and entered into bond to C. D. Evans, Esq., commissioner, in 1863, which was substantially a copy of the bond of Fairlee. Jordan, trustee, claims that the executors must account for the actings and doings of Phillips as trustee, and that this account is a direct liability covered by his bond. In this respect this claim does differ from the one just considered. But an objection is made to it that there is, in fact, nothing due under this bond. Phillips was appointed trustee in 1863, and never received anything from any source, except one item of $1800 in Confederate money. Soon after it was received he was conscripted into the Confederate service, and died in March, 1864, less than a year from the time he received the money. He committed no breach in receiving the money. He was entitled to a reasonable time to invest, and, in the midst of war, it was difficult, if not impossible, to invest Confederate money. He deposited the money, along with his own, with J. & J. D. Kirkpatrick, factors of good character in Charleston, who had been used by testator as his bankers, and, soon after testator’s death, it was lost, not from any negligence or want of care bn his part, or the subsequent failure of the Kirkpatricks, but'for the reason that the currency itself became worthless. We do not know any principle of equity which requires that the estate should be charged with this money, whether the Kirkpatricks’ exchanged it for Confederate bonds or not. In either case the result of loss would be the same. Waller v. Cresswell, 4 S. C. 353. If the testator had used the Confederate money in his own private business, the estate would be properly chargeable with its value at the time it was so received and so used. But there is no such allegation. The money, or Confederate bills, were never used in any way except to deposit them. This exception is overruled.

Third. Rose B. Wheeler entered into a marriage settlement with John F. Quinn, of which "E. B. Wheeler was trustee; afterwards, Phillips, the testator, was appointed in his place, and gave bond, in 1860, to the commissioner, conditioned for the performance of his duties. Some of the property had been sold by order of the court, and the proceeds were paid to Phillips, the testator, in the year 1860. The Circuit decree states that it was “shown by his cash book and by the account of J. & J. D. Kirkpatrick, factors of Charleston, that the money was sent to them and deposited with them at seven per cent, interest, subject to his check, and in his own name; that it was not separated from his other deposits, but went to the general credit of his account. It is shown that for five years he had deposited all his own funds with these gentlemen, who were factors of the city of Charleston of high standing and credit, and that he had, in that period, had iarge sums of money in their hands. It is also shown by the evidence that in 1863, Phillips was drafted into the second class of the reserves of the Confederate army ; that he made his will at that time, and that he required his bankers and factors to purchase for him $5000 of Confederate States bonds, which were found after his death among his personal assets. J. &. J. D. Kirkpatrick appeared to be solvent until 1868, when the executors of Phillips sued them and recovered a large judgment for money in their hands, but they went into bankruptcy and the entire debt was lost. Upon this stale of facts, should the estate of Phillips be charged with this fund ?

This is not a case where the trustee has caused loss to his ■cestui que trust by calling in good and safe securities and accepting for them a depreciated currency. What he received was a payment on account of the trust. There is no breach of trust in receiving the money. We regard it established that he deposited the money with the Kirkpatricks, who were in good standing and continued so until after the testator’s death. The question must be determined by the inquiry whether that deposit, under the circumstances, was a prudent and judicious act. The money was received January, 1860, and February, 1861, when the war was imminent. The investments required in such cases could not then be promptly or safely made, if they could be made at all. The trustee had. a reasonable time to make the effort, and before that time expired, the country was in the midst of war. As was said by the court in the case of Waller v. Creswell, before cited : “ A civil war was raging fierce and devastating, when or how to terminate, human foresight could, with no approach to certainty, determine. Even if successful to the Confederacy, which was waging it, years of deprivation, toil and industry must probably have been endured to repair the broken fortunes of its people. Can we then say the act in question was an incautious or imprudent one?” So we say here, was the deposit with the Kirkpatricks, under the circumstances, whether we regard them as acting bankers or merely as factors in good standing, an incautious or imprudent act? The times made ordinary investments impracticable, and what was he to do with the money ? Even after the event — looking back at this distance of time — it is difficult to conceive how he could have acted more prudently. If he had placed the money in bank as wás done in the case of Fitzsimmons v. Fitzsimmons, 1 S. C. 413, and, also, in the case of Twitty v. Houser, 7 S. C. 164, the failure would have come only sooner. The proof is that Phillips was a good business man, and he placed this money where he placed his own. We cannot resist the conclusion that, this loss was one of the inevitable consequences of the war, and should not be shifted from the owner to the mere agent, who-was without fault in causing the loss.

It is urged that the trustee mixed the money with his own. That would have charged him if he had used it in his own-business and ventures, and that use had caused it loss. But that is not charged. His only use of it, mixed with his own, was the single act of deposit. It is said he did not keep it separate-as trust property, and return it as such. As was said in the* case of Nance v. Nance, 1 S. C. 209, “ the failure to report the-security is not in itself conclusive; it is only a circumstance to be considered among others.”

This court concurs with the Circuit judge. The decree is-affirmed and the appeal dismissed.

Willard, C. J., concurred.

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Concurrence Opinion

McIver, A. J.

As I cannot concur in so much of the-opinion of the majority of the court as exempts the estate of Phillips from liability for the money received by him as trustee for Mrs. Bose B. Quinn, deposited with the Kirkpatricks, and subsequently lost by their bankrupty, I propose to state, very briefly, the ground of my dissent.

It appears from the return of Phillips that much the larger part of this money was received by him in January, 1860, long-before the war between the states commenced, and that the-balance of it was received by him in February, 1861, several months before the actual commencement of hostilities. As-trustee, it was was his duty to seek a proper investment for the fund as soon as practicable; and while he might have been justified in depositing this money for safe keeping where he was-in the habit of depositing his own money for a similar purpose, and allowing it to remain there for a reasonable time to enable him to look around for a suitable investment, I do not think he was justified in allowing the trust funds to remain on deposit for so great a length of time without some proof that he had made unsuccessful efforts to find a suitable investment.

As I concur fully upon the other points considered in the opinion of this court it is unnecessary for me to say anything as-to them.

Appeal dismissed.