81 N.C. 208 | N.C. | 1879
This was an action brought by the sureties upon the bond of C. B. *158 Harrison, guardian of Lee A. Jeffreys (now Brown), against Harrison and the sureties upon his bond as administrator of McKnight, and also against Mrs. Harrison and other purchasers of the land of McKnight, sold by Harrison, as administrator, to make assets. Pending the action, Harrison died, and his administrator was made a party.
The sureties upon the guardian bond having been declared by the Court inState ex rel. Harris v. Harrison and others,
The case was referred to R. H. Battle, Jr., and was heard (210) upon exceptions to his report. The facts necessary to an understanding of the case will be found in the opinion, and in the case of Harris v. Harrison,
The exceptions to the report were overruled, and both sides appealed. By a decree of the Court of Equity of Franklin County, rendered at Spring Term, 1868, Lee A. Jeffreys, an infant, was adjudged the sum of $5,997.86, and interest on $5,895.65, principal money thereof, from 6 April of the same year, due from her deceased guardian, Alexander McKnight, and recovered the same against Carter B. Harrison, his administrator with the will annexed. The personal estate of the testator being insufficient to discharge his indebtedness, the administrator filed a petition in the Superior Court of Franklin against the devisees under the will, and the said Lee A. Jeffreys and other creditors to have the debts ascertained and determined, and for license to sell and convert the devised lands into assets for the payment thereof. There was an order of reference and report made, and a decree ordered confirming the same at Fall Term, 1872. The decree declared the testator to be indebted to: *159
1. Lee A. Jeffreys, in the sum and with the interest specified in the said decree of the Court of Equity.
2. Mary L., wife of O. L. Ellis, in the sum of $1,822.19, and interest on $1,013.65 from 11 September, 1871.
3. The said Mary L. and Penelope Egerton in the joint sum of $3,762.78, and interest on $2,678.14 from same date, the former being entitled to one-third and the latter to two-thirds thereof; (211) and,
4. Margaret F. Harrison in the aggregate amount of $2,363.73, and interest in $1,932.50, as above. The said indebtedness being incurred in the management of several trusts committed to the testator, and that there was in the administrator's hands $1,773.01 of the unadministered personal estate applicable to the debts.
The Court thereupon granted license to sell the lands, and directed "that the debt due to the defendant Lee A. Jeffreys be first paid in preference to all other debts herein declared," and the other creditors to be paid pari passu out of the residue.
On 28 October, 1871, the administrator made sale of a large part of the testator's lands, on a credit as to most of the purchase-money, and applied what was received in cash to the costs and charges attending the proceedings. Under a subsequent decretal order, he sold the remaining lands, except the dower estate allotted to the widow, and appropriated the proceeds to the other unpreferred debts recited in the decree.
On 7 November, 1871, the said C. B. Harrison was appointed guardian to the infant Lee A. Jeffreys, and gave bond in the usual form with the plaintiffs as his sureties. He continued to act as such until his removal by the Probate Judge for default in not renewing his bond. During the interval between his appointment and removal, divers large sums of money came into his hands from the sale of the land, which, with the balance due upon the administration of the personal estate, were more than enough, ifso applied as so directed by the decree, to discharge the entire debt due his ward.
The guardian charges himself as such with the moneys collected by him as administrator in the successive returns made next thereafter, as well as with certain other sums, in exoneration of his administration bond. The referee allows a credit for $1,773.01 upon the ground that he had more than this sum on deposit in bank, both (212) when the decree was made and when he elected to hold the same as guardian in his first official return. But he refuses to give this effect to moneys afterwards received from sales of the land and so charged in subsequent returns, because he had not then the funds to make the attempted transfer valid and operative. *160
If the legal consequences of receiving assets of the testator, as his administrator, applicable, and by the decree ordered to be applied, to the debt due the infant, of which the right and duty of collection devolved upon the same person, as guardian, is ipso facto a payment of the debt, the liability for subsequent mismanagement and waste is shifted from the administration to the guardian bond, and the sureties to the former are discharged. The refusal of the referee so to hold furnishes the principal exception to the report, the decision of which may dispose of all others, since if the loss primarily falls upon the sureties to the guardianship, and examination into the equities subsisting among the other parties becomes wholly unnecessary. The question is one strictly of law, and we proceed to consider it.
The decree, ascertaining what was due the infant from the testator, closes the trusts of the prior guardianship and definitely fixes the sum due from the testator to his ward. The subsequent suit to make the real estate assets reaffirms the indebtedness, and requires it to be paid out of the first moneys coming into the administrator's possession. When Harrison became guardian, the debt was payable to him, as representing his ward. Thus the obligation to pay and the right to receive were united in one and the same person, and in such cases the law makes an appropriation of the funds when received to the discharge of the debt and the enlargement of the creditor's estate.
The rule is well established in its application to the relation of debtor and creditor, as we think an examination of the authorities (213) referred to in the able and exhaustive argument of counsel will abundantly show. We propose to examine the cases somewhat in detail as most conductive to a satisfactory solution of the question involved.
In Muse v. Sawyer,
Thus it was decided that the debt was satisfied and the plaintiff could not recover, notwithstanding the funds, which should have been used in payment, were not thus disposed of, and had been (214) delivered over to the administrator de bonis non of the debtor.
This case was followed by Chaffin v. Hanes,
In the case before us, it is proposed to continue in force the obligation of the testator, determined by the decree, and the liability of the sureties to the administration bond therefor, after assets of the principal debtor sufficient to pay the same have gone into the hands of the guardian, not only applicable but required by the decree itself to be applied to the debt. In this common feature the (215) cases are scarcely distinguishable in principle.
In Moore v. Miller,
In Smith v. Watkins, 8 Hump., 331, the same doctrine is strongly asserted, and the Court, after quoting from 3 Bl. Com., 18, and other elementary works, say: "These authorities establish that the reception of assets by an executor extinguishes his debt. He holds the goods in satisfaction of his debt, and not as executor. The debt is paid, the operation of law being equivalent to a recovery by execution." * * * "If he pay out the assets and do not actually retain for his own debt, it is his folly, for by a conclusion of law he is held to have retained. For, as the Court say in Dorchester v. Webb, Cro. Car., 373, as he may retain he shall do so. There is no act to be done by an executor to constitute a retainer, no volition on his part as to whether he will retain or not; but the moment he receives assets sufficient to discharge his debt, the law applies them in payment and the debt becomes extinct instanter."
The rule has been so far extended as to embrace the case (216) of an administrator durante minore aetate, who may retain alike to satisfy a debt due the infant and one due to himself personally. Williams Ex'rs., 942; Hosack v. Rodgers, 6 Paige, 415.
The cases relied on mainly for the plaintiffs are cases of double trusts resting upon the same person, and do not impugn the principle as effecting the same relations of creditor and debtor, to which class that now under consideration belongs.
In Dozier v. Sanderlin,
In Clancy v. Dickey,
In Harrison v. Ward,
The proposition meets the necessities of the present case. Harrison, as administrator, receives the fund, and the law requires its immediate appropriation to the testator's debt. The debt is to be paid to Harrison as representing the creditor to whom it is due. The law presumes this transfer to have been made and thereafter the guardian charged with the amount as part of the trust estate of the ward. This is a fair deduction from the rule, and is supported by the maxim which assumes an act to be rightful rather than wrongful when it admits of either interpretation.
It is to be remarked that it does not appear in the case as reported that the administrator had the trust fund to pay over when he rendered his account; if he did not have it at the time, the guardian bond could not, upon any reasonable principle, be made responsible upon a presumed transfer of what did not exist to be transferred. To charge the bond under such circumstances would be to shift the consequences *164 (218) of a devastavit committed by him in one capacity to the sureties for his official fidelity in another.
In Graham v. Davidson,
The plaintiff's counsel cites and strongly relies on three cases, two of which, in the Circuit Court of the United States, were decided by Mr. Justice STORY, and the other in the Supreme Court of Massachusetts. We propose to examine and see their bearing upon the matter in controversy.
In Taylor v. Deblois, 4 Mason, 131, the administratrix, who was also guardian to a minor entitled to a distributive share of the intestate's estate, caused her administration account to be settled in the Probate Court, and the amount of each share ascertained. To some of the distributees the sums due them were paid, and the administratrix retained the share of her ward. It was declared that this share was held by her, not as administratrix, but as guardian, and the Court, in discussing the general subject of retainer, say: "If, then it be a right of the administrator to retain a debt due to him in his own right, or in right of another, the doctrine equally applies when he unites in himself the character of guardian and has assets in his hands to discharge the debt due to his ward. I go further, and consider it the duty under suchcircumstances to retain, and if he were to yield up the assets without such retainer, it would, in my judgment, be a maladministration of hisguardianship, for which, in case of loss, he and his sureties might justly be held responsible upon the guardianship bond." He states the general rule to be "that when the party unites in himself, by representation or otherwise, the character of debtor and creditor, inasmuch as he (219) can not sue himself, he is entitled to retain, and the law will presume a retainer in satisfaction of the debt, if there are assets in his hands."
In Pratt v. Northam, 5 Mason, 95, the administrator cum testamentoannexo, who also became guardian to his two infant daughters, legatees, substituted in place of their mother, who died, received assets of his testator, after his appointment as guardian, which were fraudulently suppressed and no return thereof made, and the bill sought to charge the sureties to the guardian bond with the devastavit and waste, the Court say: "It was plainly his duty to inventory them (the assets) and account for them as part of the testator's estate in his hands and possession, and upon settlement of his accounts in the probate office, he *165 ought to have procured a decree directing a distribution of the balance between his wards in equal moieties. Had he done so, there would have been no question upon the principles settled by the Court in Taylor v. Deblois,supra, that the administration bond would have been discharged, and, byoperation of law, he would have been deemed to possess the balance in hischaracter as guardian." And it was declared that the "act or election to hold the property in a different capacity from that in which it was received, may justly be insisted on before the responsibility is shifted from one class of sureties to another. Besides, here the administrator never admitted the assets to be in his hands. He held them secretly as his own, without acknowledgment and settled his probate account without anadmission of them." It is apparent this is in entire harmony with the current authorities referred to, and not opposed to the doctrine of retainer as applied to the present case. If there had been an ascertained amount, a definite sum arising from a legacy, as in the present case, there is a distinct debt due the infant, the law would interfere and transfer the fund from one to the other trusteeship.
In Conkley v. Dickinson, 13 Met., 51, the action was brought on a guardian bond, and it was proposed to charge the guardian (220) with a residuary legacy given the ward in the will of one Sally S. Dickinson, who died after the defendant's appointment and during the ward's minority, wherein the guardian had been appointed executor and qualified as such. The Court say: "We consider the law to be well settled, that if a legacy is given by will and the same person is executor and trustee or guardian for the legatee he is not bound to account for the legacy as executor, if he has sufficient assets, unless he has rendered an account in the probate office charging himself as trustee or guardian, andthat account has been allowed by the Probate Court."
The decision rests upon the ground that until there is a legally ascertained balance, nothing remaining to be done except to pay over, the fund continues without change in the hands of the executor as such and is not transferred.
In a recent work, the author sums up the results of his investigation in these words: "The better opinion is, that after the time limited by law for the settlement of the estate has elapsed, and there is no evidence of an intent to hold longer, as executor, he shall be presumed to hold as guardian, on the principle that what the law enjoins them to do, shall be considered as done." Schouler on Dom. Rel., 441.
We do not consider the cases of Winborn v. Gorrell,
We think the following conclusions may be fairly deduced from the adjudged cases:
1. When the simple relation of debtor and creditor exists, and the same person representing both, is to pay and to receive, the possession of assets which ought to be applied to the debt is in law an application.
2. When one is clothed with a double fiduciary capacity, and the balance remaining upon a full execution of one trust belongs to the other, if the amount has been definitely and authoritatively ascertained, and the fund is then in the trustee's hands, the law makes the transfer.
3. If the first trust is not closed, although the trustee may have rendered an account which has not been passed on by a competent tribunal, the fund remains unchanged, and is held as before.
4. The trustee may, by an unequivocal act indicating the intent, elect to hold the fund in possession in another capacity, and it will be thereby transferred.
The present case clearly is embraced in the first mentioned class, and is distinguished from the others.
The result is, that the assets of the testator, McKnight, which came into the possession of Harrison from the administration of the personal estate and the sale of the lands, were instantly applied to the debt due the ward, and he then held the same as a part of the trust estate which is secured by the guardian bond. The payment of the debt relieved the sureties to the administration bond. It would be a hard and oppressive rule that holds these sureties responsible after such payment was made to the guardian for his subsequent mismanagement and waste. Between the two sets of sureties, the loss must fall on those who undertook for the fidelity of his administration as guardian of the ward's estate.
The conclusion to which we have come in sustaining the (222) exception renders unnecessary the consideration of others dependent on it.
While the assets received by the administrator are sufficient to discharge the entire indebtedness to the infant, and were by law at once appropriated thereto, the report of the referee shows that a portion of them, for which the guardian bond is responsible, were paid over to *167 the testator's other creditors. On 15 May, 1875, the administrator received $1,555.23, raised by a mortgage of some of the lands bought by his wife, and, with her consent, paid the money to the other creditors, including herself. A part of this sum was, or may have been, needed to pay the balance then due the infant, and if so, has been misapplied, and may be followed by the plaintiffs into the hands of those who participated in this misapplication and recovered for their partial exoneration. In order to ascertain whether any and how much of the preferred debt remained due and was paid out of the fund then received, and what are the several liabilities of the creditors to whom it was paid, a reference is necessary, and if the plaintiffs so desire, will be ordered, and meanwhile the cause will be retained. A decree may be drawn in accordance with this opinion.
PER CURIAM. Judgment Accordingly.
Cited: Ruffin v. Harrison,