26 S.C. 538 | S.C. | 1887
Lead Opinion
The opinion of the court was delivered by
This was a controversy submitted without action under the provisions of the code. The facts, as agreed upon, are as follows : The late Martin W. Gary deposited in the People’s National Bank $8,861.65 to his credit as guardian, which deposit was in fact made by said Gary as guardian of N. George Evans, John Gary Evans, Barnard B. Evans, and Mary Evans. On April 9, 1881, M. W. Gary died, leaving a will of which the plaintiff is the duly qualified executor. On June 1, 1881, the plaintiff duly notified the bank of his qualification as executor of M. W. Gary, and demanded payment of the money deposited to the credit of M. W. Gary as guardian. The bank declined to pay, on the ground that the money could only be drawn by the official successor of M. W.' Gary, guardian, and that the check of the plaintiff, as executor, would not be a sufficient discharge of the bank. On January 2, 1886, four thous- and dollars of the deposit was paid to the joint order of W. T. Gary, executor, and two of the wards, with the express understanding that such payment was to be without prejudice to any of the questions involved in the present controversy.
It seems to us that due regard was not had to the fact that, in the eye of the law, M. W. Gary, as an individual, and M. W. Gary, as guardian, are two distinct and different persons, possessed of distinct and different rights. This distinction is important, and must be kept in mind throughout this discussion. Under this view, while the plaintiff is the executor of M. W. Gary, and as such has become the legal owner of all the personal assets of his testator, he is not the executor of M. W. Gary, guardian, and therefore has acquired no legal title to any assets which may have been in the hands of the said M. W. Gary as guardian during his life-time. Such assets belong to his wards, and do not descend to his executor.
It seems to be conceded in the authorities cited in the Circuit decree that if M. W. Gary had, in his life-time, undertaken to draw this money on his own individual check, the bank would have been justified in refusing payment, and could have required him to draw the check in his name as guardian; and this clearly recognizes the distinction above pointed out. Now, if M. W. Gary could not, in his life-time, have drawn this money upon his
From what source the money in question was derived does not appear, but it does appear that M. W. Gary himself separated it from his own money and designated it as the money of his wards, by depositing it to his credit as guardian. He thereby distinctly declared that this money was not a part of his own assets, but was a part of the assets of his wards, in his hands as guardian; as much so as if he had sealed up the money in a bag and so marked it, which was afterwards found in his own safe, in which case it is clear that the executor would have no legal right to the money, as it constituted no part of the assets of his testator’s estate, as shown by the testator’s own act and declaration.
It is urged, however, that a deposit in a bank is in the nature of a loan to the bank, and the rights of the parties must be considered in that respect. Assuming this to be so, and looking at the transaction here brought in question, as if M. W- Gary had loaned this money to the bank and taken its note, payable to himself as guardian, let us inquire who, upon the death of M. W. Gary, would be entitled to the note — his executor or his successor as guardian. In 2 Williams on Executors, 1192 (2d Amer. edit.), it is said : “The absolute property of the goods must have been vested in the testator in order to make them assets in the hands of the executor. Therefore if testator takes a bond for another in trust, and' dies, this is not assets in the
It is true that it was at one time held, or rather stated (for the point was not really necessary to the decision of the ease), in the case of Smith v. Carrere (1 Rich. Eq., 123), that an administrator de bonis non could only recover from the personal representative of the deceased executor or administrator, such chattels or personal estate of the testator or intestate as remain in specie, and has no right to call him to account for any part of the estate which has been wasted or converted into money or other property by the deceased executor or administrator. But this doctrine was entirely repudiated by the Court of Errors, in the subsequent case of Villard v. Robert (1 Strob. Eq., 393); and this case has been subsequently recognized by the Court of Errors in the case of Rhame v. Lewis (13 Rich. Eq., 318), and repeatedly in other cases since that time. The rule thus settled rests upon the theory that although the legal title to a decedent’s personal property passes to his executor or administrator, yet such title is not absolute, but is in trust, and hence upon the death of such executor or administrator, the property thus held in trust does not go to the personal representative of such executor or administrator, but goes to the administrator de bonis non of the original decedent, who may sue for and recover not only that which remains iu specie, but also the proceeds of that which has been converted by the original executor or administrator, for the reason that such property does not constitute a part of the assets of such deceased executor or administrator, but is a part of the assets of the original decedent.
As is said by Inglis, J., in Rhame v. Lewis, supra, at page 317: “If an administrator convert the whole of his intestate’s
Upon the principles settled by these authorities, it seems clear that the money deposited in the bank to the credit of M. W. Gary, guardian, whether considered in the light of a loan to the bank, secured by a note payable to M. W. Gary, guardian, or as money separated and set apart from M. W. Gary’s own individual money, and designated as that of his wards, cannot be regarded as any part of the assets of testator’s estate which would pass to his executor, and cannot therefore be by him drawn from the bank.
But again, suppose this money should be paid over to the plaintiff, and should afterwards through some fault on his part be lost, ■ how could the wards hold the sureties on the guardianship .bond responsible for such loss ? They undertook for the good faith and prudent management of the guardian, and not for that of his exe
It only remains for us to consider the cases relied on by the Circuit Judge, as well as by the counsel for respondent, in support of the decision below. The first and strongest case is that of McColl v. Weatherly, 5 Strob., 72. That was a ease in which, it became necessary to determine the conflicting claims of a ward and the administrator of her deceased guardian to the proceeds of a note taken by the guardian, during his life-time, payable to himself as guardian, for the hire of a slave belonging to his ward, which note had by some means passed into the hands of the ward after the death of the guardian. The court held that the administrator was entitled to the proceeds of the note, subject to a liability to account therefor to the ward. It will be observed that the note bore upon its face the evidence that it represented the income and not the corpus of the ward’s estate ; and this circumstance seems to have been one of the main grounds upon which the conclusion reached by the court rested.
In delivering the opinion, Evans, J., uses this language (the italics being ours): “The guardian is bound to maintain and educate his ward according to her estate and position in society; and to enable him to do this the law gives him, in virtue of his office, a right to receive the profits• of her estate to indemnify him for the expense of her maintenance and education. All the interest which the ward has in these profits is to have an account of the manner of the expenditure, in the proper forum.” From this the conclusion was drawn that as the guardian, in his life-time, would have had the right to receive “these profits," that is, the income of the ward’s estate, for the purpose of reimbursing himself for such expenditures as he would have been required to make for the proper maintenance and education of the ward, which right
Some stress was also laid upon the fact that the guardian was the legal owner of the note, and that at law his title passed to the administrator. It was conceded, however, that the rule in equity might be different, as was held in the case of Glass v. Baxter, 4 DeSaus., 158, which case wras subsequently recognized in Rhame v. Lewis, supra, where it was held that a note-payable to one Adams, which was shown to have been given to secure the payment of purchases made at a sale of the personal property of one Glass by Adams as his administrator, though not on its face made payable to him as such, was not liable to attachment as the property of Adams, but that the administrator de bonis non of Glass was. entitled to the note. But it must be remembered that the case of McColl v. Weatherly was decided when the jurisdictions of law and equity were kept entirely separate and distinct, and were administered by distinct and different tribunals. Hence itJnot unfrequently happened that a party was-deprived of the right to a claim or defence which was perfectly good in equity, simply because it could not be enforced in a court of law.
Now, however, under the reformed procedure, one of the prime objects of which was to abolish distinctions of mere form of proceeding, and to administer justice according to the substantial rights of the parties, regardless of the fact as to whether such rights are denominated legal or equitable, . a party cannot be turned out of court, or his defence be disregarded, merely because the facts upon which he rests his claim or defence do not entitle him to relief at law, or because he is not entitled to relief in equity, as the case may be; but as is said by Johnson, J., in Crary v. Goodman (12 N. Y., 266), and quoted with approval in Parker & Co. v. Jacobs, 14 S. C., at page 118: “Since the enactment of the code the question is, not whether the plaintiff has a legal right or an equitable right, or the defendant a legal or an equitable defence against the plaintiff’s claim, but whether, according to the whole law of the land, applicable to the case, the plaintiff makes out the right which he seeks to establish, or the defendant shows that the plaintiff ought not to have the relief sought for.”
The foregoing remarks dispose of the cases of Seabrook ads. Williams, 3 McCord, 371, and Miller v. Alexander, 1 Hill Ch., 26, also relied on in support of the decision below. For those cases, as shown i-n Rhame v. Lewis, supra, while recognizing the right of the administrator of the person holding the legal title to recover at law, at the same time recognize the right of the person entitled to the beneficial interest to recover in equity.
In the case of National Bank v. Insurance Company (104 U. S., 54), one Dillon, who was the general agent of the insurance company, entrusted with the collection of premiums on policies issued in the territory for which he was appointed agent, deposited the money so collected in the bank to his credit as agent, and made remittances to said company by his checks drawn against said account. There being a large balance to the credit of the account opened in the name of Dillon, agent, and Dillon having become indebted to the bank on his own individual account, the bank undertook to liquidate this indebtedness by charging the same to the deposit account standing in the name of Dillon, agent. The insurance company filed a bill in equity against the bank, to recover the balance which it alleged remained to the credit of Dillon, agent, repudiating the right of the bank to charge up the individual indebtedness of Dillon to such account, and .claiming the deposit as a fund received by Dillon in his fiduciary character as their agent, which it had the right to follow and reclaim as against the bank. The court sustained the claim of the insurance company, holding, in substance, that while the relation between the bank and its depositor is that of debtor and creditor, yet if the money deposited is held in a fiduciary character by the depositor, it does not change its character by being placed to
It seems to us that this case, so far from lending any support to the decision below, tends to favor the view which we have adopted. It'is true that it is not directly in point either one way or the other, for there was no question raised or discussed as to whether the funds could have been paid out by the bank upon the check of the executor of the person who actually made the deposit of the trust funds, or whether the person entitled to the beneficial ownership was entitled to draw'the money. The real question in the case was, whether the bank, having notice of the trust character of the money deposited, could, by its lien on such deposit, enforce the payment of an individual debt of the trustee, who actually made the deposit. And the court not only decided that the bank could not thus pay itself out of the trust fund, but also rendered a decree for the payment of the money to the insurance company, which, though not the legal, was the equitable owner of the money, thereby recognizing the superiority of the equitable claim of the insurance company over the legal title of Dillon, the person who made the deposit. The plain inference from this is, that if Dillon had died and his executor had attempted to claim the money from the bank, his claim would not have been recognized in the face of the superior equitable claim of the insurance company, for the bank certainly could not be held liable to both. v
Without undertaking to consider in detail the various cases cited in the opinion of Mr. Justice Matthews, in the case of National Bank v. Insurance Company, it seems to us that-those cases clearly show that where a trustee deposits trust funds in a bank to his credit as trustee, the same can only be drawn out upon checks signed by the trustee in proper form; and that while the bank may safely assume, without notice to the contrary, that when the checks are so drawn, the trustee is in the course of lawfully performing his duty, and may be honored accordingly, yet when the bank has notice that such is not the case — as, for instance, when it appears that the check is to be used in payment of the individual indebtedness of the trustee — the bank cannot
From this it follows, that when trust funds are deposited in bank to the credit of the trustee as such, and the trustee dies, the bank cannot be compelled to pay such funds to any but the real owners of it, or one duly authorized to represent them; and as we have shown, the executor of the trustee is not such a representative. For, as is said by Lord Justice Knight Bruce in the case of Pennell v. Deffell, 4 DeG. M. & G., at page 383, as quoted by Mr. Justice Matthews in National Bank v. Insurance Company, supra: “When a trustee pays trust money into a bank to his credit, the account being a simple account with himself, not marked or distinguished in any other manner, the debt thus constituted from the bank to him is one which, as long as it remains due, belongs specifically to the trust, as much and as effectually as the money so paid would have done had it specifically been placed by the trustee in a particular repository and so remained; that is to say, if the specific debt shall be claimed on behalf of the cestuis que trustent, it must be deemed specifically theirs as between the trustee and his executors, and the general creditors after his death on one hand and the trust on the other.”
In the case of Bailey v. Finch (7 Law Rep., Q. B., 34), Finch had three deposit accounts with a banking house — two in his individual name, both of which were overdrawn, and one in his name as executor of Mrs. Alexander, upon which there was a balance in his favor. In an action to recover the amount overdrawn on his individual accounts, he sought to set off the balance due on his account as executor, and the court allowed him to do so. The case, as thus stated, would seem to be clearly in conflict with what is said in the case last considered, as well as in the authorities there cited. But there was a circumstance appearing in the case which relieves it from such conflict, and that was the fact that Finch, as residuary legatee of Mrs. Alexander, was not only legally, but equitably entitled to the whole balance appearing to be due to him as executor, and hence there being no one else
Indeed, this equity on the part of the persons beneficially interested in the fund to interpose and prevent the payment of it to one claiming merely as legal owner, seems to be conceded; but it is urged that, in the absence of any such interposition, the bank having no equity of its own, cannot resist the claim of the legal owner. This concession, it seems to us, is fatal to the plaintiff’s claim in this case; for it involves an admission of the superior right of the equitable to that of the merely legal owner, and the fact that the equitable owners have not interposed in this case, cannot affect the question, inasmuch as they are minors and their rights cannot be forfeited by laches or non-claim, as it is one of the duties of the court to protect the rights of infants.
It appears to us, therefore, that in no view of the case is the plaintiff, as executor of M. W. Gary, entitled to the money deposited in bank to the credit ofM.W. Gary, guardian; that such money, set apart from his own by the testator and designated specifically as the money of his wards, constitutes no part of the assets of the testator’s estate, and cannot lawfully be paid to his executor. Suppose the estate of M. W. Gary had proved to be insolvent; then, if this money were paid over to the executor, it must, of course, go into the general assets of the testator’s estate, though specially, designated by the testator as the money of his wards, and would be applied pro rata to the claims of creditors generally, to the loss and prejudice of the wards, or the sureties on the guardianship bond, whose rights are entitled to be respected.
Under this view' of the case, the other question as to interest cannot arise, and need not, therefore,- be considered.
The judgment of this court is, that the judgment of the Circuit Court be reversed, and the complaint be dismissed.
Concurrence Opinion
I cannot concur in the opinion of the majority, for reasons hereafter to be given in a dissenting opinion.
Judgment reversed.