295 Mass. 396 | Mass. | 1936
The respondent Wiley had been one of the trustees under the will of William H. Hill. He had also been a trustee under the will of Daniel Chamberlin. As trustee under the Chamberlin will Wiley gave a probate bond in the penal sum of $50,000 on which the respondent American Surety Company of New York was surety. The petitioners are the present trustees under the will of William H. Hill.
The petition which was brought in the Probate Court alleged among other things that the respondent Wiley, having earlier misappropriated funds of the Chamberlin trust, then misappropriated securities of the Hill trust, placed them or their proceeds in the Chamberlin trust and delivered the same in distribution of that trust to the beneficiaries thereunder; that a decree has been entered in the Probate Court on a final account filed by the trustees of the Hill estate charging Wiley with defalcations in an amount stated; that a decree has been entered in the Probate Court on the final account of Wiley as trustee under the Chamberlin trust charging him with the additional sum of $6,092.50 on account of an excessive credit in that amount, taken by Wiley in the account filed, in stating the value of certain bonds delivered to the beneficiaries in distribution; that the decree allowed the account as thus modified and further provided
The petition was taken as confessed against the respondent Wiley. A demurrer of the respondent surety company, on the ground that the allegations in the petition were insufficient to enable the petitioners to maintain the petition, was overruled. The probate judge who heard the petition on the merits filed a report of facts and entered a final decree which ordered the respondent Wiley and the respondent surety company jointly and severally to pay to the petitioners the sum of $41,849.42 without costs. The respondent surety company has appealed from the decree overruling the demurrer and from the final decree. The petitioners also have appealed from the final decree but solely on the ground that the decree did not allow interest from April 6, 1933, the date of filing of the petition. All the evidence has been reported.
The findings of the trial judge with respect to the defalca
The respondent surety company contends that the evidence did not warrant the findings of the trial judge that prior to the distribution to the beneficiaries of the Chamberlin trust Wiley had embezzled assets of that trust to a substantial amount and made good the embezzlement with securities of the Hill trust. The finding was warranted that Wiley used in making distribution to the Chamberlin beneficiaries negotiable bonds which the trustees of the Hill trust had bought and paid for and held. The books of the Hill trust at the time of the distribution showed those bonds to be the assets of that trust. They were taken from the safe deposit box where its securities were kept, without the consent or the knowledge of the two other trustees and without any consideration being given to the trust. Wiley was later charged on the adjudication of the accounts of the Hill trustees in the Probate Court with defalcations in an amount of over $150,000 which included the value of the bonds here in question. On all the evidence the judge was warranted in finding that Wiley stole the bonds in question from the Hill trust, The time came in the early
It is established law in this Commonwealth “that where a trustee of several estates steals money from one, with which to pay the debts of another, the latter, having been unjustly enriched at the expense of the former, may be required in equity to make restitution.” Bremer v. Williams, 210 Mass. 256, 257. Newell v. Hadley, 206 Mass. 335. Fitcher v. Griffiths, 216 Mass. 174. Ricker v. Ricker, 248 Mass. 549.
Property of the trustees of the Hill estate was stolen by Wiley to satisfy his obligations as trustee to the beneficiaries of the Chamberlin estate. Those beneficiaries were in a position analogous to that of creditors of the Chamberlin estate. The obligations of Wiley to them were fixed by the terms of his bond. The other respondent was surety for his performance of those obligations. The present trus
The second condition of the bond which the respondents gave expressed the most vital obligations of the relationship of Wiley to the beneficiaries of the Chamberlin trust: fidelity and honesty. It required that he “manage and dispose of all such estate, and faithfully discharge his trust in relation thereto, according to law and to the will of said testator.” Wiley broke that particular condition of the bond at the moment he embezzled the assets of the Chamberlin trust. McKim v. Glover, 161 Mass. 418, 421. Thayer v. Keyes, 136 Mass. 104, 107. McKim v. Williams, 134 Mass. 136, 137. From that moment he owed to the Chamberlin beneficiaries the duty to repair the breach of trust. By reason of that unrepaired breach there existed at the time when Wiley was proceeding to make distribution to the beneficiaries the enforceable obligation to restore to the trust what he had wrongly taken in violation of his bond. Newell v. Hadley, 206 Mass. 335, 351. First Taxing District v. National Surety Co. 97 Conn. 639. Hogan v. Cooney, 51 R. I. 395. The obligation of Wiley, the principal in the bond, was also the obligation of the respondent surety company. Blake v. Traders’ National Bank, 145 Mass. 13, 15. Bassett v. Fidelity & Deposit Co. 184 Mass. 210, 214.
The question here is whether there was, at the time of the distribution to the Chamberlin beneficiaries in 1929, an existing obligation on the bond owed to those beneficiaries by Wiley and his surety by reason of his defalcations, rather than the method by which, or the forum where, they should properly proceed if compelled to act upon discovery of his misconduct. A probate accounting is not essential to
The principle governing these decisions is not affected by the decisions in cases like Green v. Gaskill, 175 Mass. 265, and Locke v. Old Colony Trust Co. 289 Mass. 245, 254, which hold that if a trustee reasonably asserts and does not waive such right (Allen v. Hunt, 213 Mass. 276, 279) he is entitled to have his accounts settled on the probate side of the Probate Court before he can be required to make an accounting of the property of the estate in a proceeding brought on the equity side of that court. These cases did not preclude the trial judge from holding as he did that at the time of the distribution to the Chamberlin beneficiaries the prior thefts of Wiley, although they were unknown, had created a then existing liability for a breach of the condition of the bond requiring honesty and fidelity, a liability which the beneficiaries could assert upon discovery and establish by whatever procedure was proper.
The distribution made by Wiley as trustee did not terminate the liability of the surety on his bond. It is manifest that Wiley tendered, and the beneficiaries accepted, the property distributed as a performance pro tanto of the trustee’s primary liability and not as a discharge of the collateral security of the bond. The effect on the surety was not the extinguishment of liability but the apparent reduction of any amount which the surety might be called on to pay in the event that Wiley did not perform the conditions of the bond. The property of the Hill trust
Since the property of the Hill trust was, without its volition, used to pay the obligation of Wiley and his surety to the Chamberlin beneficiaries, equity should enforce that obligation against Wiley and the surety for the benefit of the Hill trust unless the result is prejudicial to the interest of the Chamberlin beneficiaries. The doctrine of subrogation which rests “upon natural justice and equity” (Amory v. Lowell, 1 Allen, 504, 507) is not to be applied if the result is injury or prejudice to the person whose rights are sought to be used by another. The general rule is frequently stated that a surety for the payment of the debt of another has no right of subrogation until the claim for which he is surety has been paid in full or otherwise entirely satisfied. Westinghouse Electric & Manuf. Co. v. Fidelity & Deposit Co. of Maryland, 251 Mass. 418, 420. In the present case there was no debt in the sense of an obligation to pay a fixed sum of money or an amount calculable in advance. The obligation here was the performance of the conditions of the bond. The question to be considered is whether a finding was warranted that the subrogation of the petitioners to the rights of the Chamberlin beneficiaries on the probate bond would do injury or injustice to those beneficiaries.
The final account of Wiley as trustee under the Chamberlin will came on to be heard in 1933 on objections made by the beneficiaries. A credit of $61,780 was therein claimed by Wiley for certain described bonds which had been stolen from the Hill trust and distributed in 1929 to the Chamberlin beneficiaries. The probate judge who settled the account found that the amount claimed was $6,092.50 in excess of the market value of those bonds on the day they were dis
The final account as allowed showed a proper disposition of the principal and interest of the res with which the trustee was charged and an apparent termination of the trust. So far as respects the bonds described in the decree all rights of the beneficiaries against the surety were ended by their acceptance of $3,500 in full accord and satisfaction from the surety company and by the decree. The beneficiaries took no appeal from the decree. Nothing appears to indicate that they do not continue to be content with the final accounting made, or that they have sought to have the final account reopened for fraud or mistake or other ground. In the absence of such steps the decree stands as an accepted final determination of the rights of the beneficiaries against Wiley or his surety. We think the trial judge in the present case was warranted in finding that the application of the principle of subrogation would not result in injury or prejudice to the beneficiaries. The petitioners should not be denied the right of subrogation on the mere speculation that sometime something might be discovered which might lead the beneficiaries to assert a claim against the surety on the bond.
Before the allowance of the final account of Wiley as trustee of the Chamberlin trust the Hill trustees brought a petition having the same object as the present petition against the same respondents. The respondents’ demurrer thereto was sustained. By the terms of the final decree that petition, however, was dismissed “without prejudice to the
Although the final account of Wiley was adjudicated after the decree in the earlier case was entered and before the present petition was brought and any claims which the Chamberlin beneficiaries asserted at the time the hearing was had on the account were apparently fully satisfied and the satisfaction of such claims has not exhausted the liability of the surety company up to the penal sum of the bond, the surety company contends that it may in the future be called on to make further payments to the Chamberlin beneficiaries if further frauds of Wiley against the Chamberlin trust should be hereafter discovered.
On a reasonable interpretation of the language of the decree dismissing the earlier petition we think the conditions there prescribed were fulfilled. They were manifestly set to meet the requirement of the application of the doctrine of subrogation that prejudice or injury should not result to those to whose rights the petitioners sought to be subrogated. As earlier stated it could have been found that such would not here be the result. Nor would any rights of the surety be affected. The extent and the limit of its liability was the penal sum of the bond. Once having paid that amount its liability would cease.
The respondent surety company pleaded in its answer and here contends that the loss suffered by the Hill trust took place because of the negligence of the cotrustees of Wiley in the Hill trust and that therefore it is not equitable that the respondent surety company be held liable. The trial judge found that the cotrustees were lax in not inspecting and checking the securities at reasonable intervals.
The petitioners have also appealed on the ground that
The decree overruling the demurrer and the final decree were properly entered.
Decrees affirmed.