State ex rel. Wolff v. Berning

Sherwood, C. J.

Action on the first bond of the executor, Berning, the defendant, being one of the sureties therein. On application of relator at a period subsequent to the execution of the first bond, and under the provisions of section 36,1 "Wagner’s Statutes, 75, a second bond was given, defendant not being one of the obligors. The provisions of the statute in such cases are that: “ Such additional bond, when given and approved, shall discharge the former securities from any liability arising from any misconduct of the principal, after filing the same, and such former securities shall only be liable for such misconduct as happened prior to the giving of such new bond.” 1 W. S., p 76, § 39. The petitiona lieges that during the period, covered by the first bond, the principal converted to his own use all the assets of the estate amounting to $45,993.89, and the evidence establishes that Staehlin, after the execution of the first, and prior to the execution of the second bond., pledged as collateral to the Central Savings Bank notes belonging to the estate. This pledging was done for Staehlin’s individual benefit, and the notes were never redeemed or restored to the estate.

I.

The question which goes to the heart of this cause is: Are the sureties on the first bond responsible for the act aforesaid of their principal and the loss consequent upon such act ? Discussion is unnecessary as to whether the act of Staehlin was, as against relator, strictly speaking, an act of conversion. At all events, it was an act of conversion as against the estate which Staehlin represented. Any wrongful disposition of property constitutes a conversion. Williams v. Wall, 60 Mo. 318, and cases cited. And it is well settled law, that an executor or administrator can be guilty of converting the assets of the estate to his own use. 3 Wms. Extrs., 1797, and cases cited; and in this State, the fact of such conversion by the executor may be alleged as a breach of the conditions of the bond. State v. Flynn, 48 Mo. 413; State v. Drury, 36 Mo. 281. That the act complained of, and set forth in the petition, was a breach as well of the conditions of the executor’s bond, as of his fiduciary duty, none will deny; this is sufficient for the present purpose, and it is consequently unimportant by what name the act of the executor is designated. It is true that under our ruling, (Stagg v. Linnenfelser, 59 Mo. 336,) Staehlin could not convey, nor did he do so, any title to the notes he pledged to the bank, but it is equally true that but for his act in this regard, the loss which subsequently occurred to the estate would not have occurred.

ii.

The point has been much discussed, whethei’ Staehlin could have maintained an action for the recovery of the assets unwarrantably pledged to the bank, and as to whether he was estopped from doing so. In reference to this it may be said that the bank is conclusively presumed to have known the law; to have known that Staehlin had neither power, right nor authority to raise money by giving a note in his fiduciary capacity, nor by pledging, as collaterals, the choses in action of the estate. There exists but one way under our statute, in which an executor may assign or in any way whatsoever transfer the choses in action of an estate, and that is, he may assign them in discharge of the claims of creditors, legatees or distributees equal to the amount of the bond or note. 1 Wag. Stat., p. 89, § 40; Stagg v. Green, 47 Mo. 500; Stagg v. Linnenfelser, 59 Mo. 336; Chandler v. Stevenson, 68 Mo. 450; Weil v. Jones, 70 Mo. 560. This statutory restriction on the power of the executor, must, in legal contemplation, be held as well known to the bank, as if the words of section 40, supra, had been written across the face of the notes he attempted, to pledge; for whatsoever the law annexes as the incident of a contract, whether granting a privilege or announcing a prohibition, is as much part and parcel thereof, as though written therein or indorsed thereon. But Staehlin, as a matter of fact, practiced no deception on, and made no false statements to the bank; and if he had, the plain letter of the law would have flatly contradicted any such statements. Both parties thus dealt at arms’ length with each other, in full view of the stern legislative prohibitions, and so neither can complain of being ensnared, deceived, led astray or hoodwinked by the other. In these circumstances, it is but stating elementary law to say no estoppel could arise between Staehlin and the bank, (Stagg v. Linnenfelser, supra; Bigelow Estop., pp. 437, 473; Davenport v. Turpin, 43 Cal. 597. and cases cited,) and, therefore, no obstacle impeded Mm from recovering from the bank either the notes or their proceeds.

III.

But granting that Staehlin could have maintained his action during the period covered by the second bond, for the assets unlawfully pledged by him, during the period of the first bond; granting that it was a breach of duty on Ms part for him to fail to bring his action, does such breach of duty pending the second bond, cancel the legal effects and consequences of a dereliction of duty pending the first bond ? By no means. So that it is an all sufficient answer to the statement that Staehlin, pending the second bond, could have recovered the assets converted pending the first bond, to briefly reply that no such recovery was obtained by him. Whatever consequences there flowed from pledging the notes, remained unaltered and unaffected. A “ liability arising from the misconduct of the principal ” prior to the giving of the second bond, according to the express language of the statute under discussion, had been incurred, and the loss to the estate was directly attributable to the misconduct of Staehlin prior to the execution of the second bond — as but for such misconduct, no such loss could have occurred.,

These circumstances bring this case fully within the purview and principle of the rule as laid down in State v. Drury, supra. It is true, in that case the bond declared on was that of a curator, but the same provisions were applicable to curators as to administrators, (R. S. 1845, p. 68, § 37,) a point which is expressly adverted to-in the opinion in that case, and section 39, which we have been discussing, is but a literal copy of section 37, supra. The doctrine distinctly asserted in the case just cited, is, that if a conversion takes place during the' time of the first bond, whereby a loss occurs, the obligors therein must be held liable, notwithstanding a breach and a liability occurred also under the second bond.

It quite often may happen that a breach of a bond is a continuing breach, commencing during the period of the first bond and extending down to and through the period covered by the second bond; where the maladministration would be a breach of both bonds; and this seems to have been the case here. In such ease the relator might well have judgment on both bonds, but of course could have but one satisfaction. State v. Drury, supra; and, doubtless, in such circumstances, contribution would be justly allowable between the sureties of the respective bonds, since the doctrine of contribution does not spring from the contract of the parties nor from any privity between them, nor does it depend upon whether their suretyship arises under the same instrument or under divers instruments, if all the instruments are designed to secure the same subject matter and the sureties have a common interest and a common burden to bear; but the doctrine is founded on principles of natural justice independent of contract. Deering v. Winchelsea, 2 Bos. & Pul. 270; Craythorne v. Swinburne, 14 Ves. 160; 1 Story Eq. Jur., §§ 470, 495, and cases cited.

'IV.'

The judgment' recovered in dhis action was for. $23,-029.22. This sum was the amount of the notes and interest converted by Staehlin to his own use, and was a part of the assets of the estate, and the. second declaration of law correctly defined the measure of damages — if the notes, in the absence of anything to the contrary, are presumed to be worth their face — and we think this fact may be fairly assumed, as it was the theory upon which the case was tried, and no objections were urged then to this view. It is too late to urge such objections now. Besides, the rule is, that in actions of this nature, prima fade, the value of the chose in action alleged to be converted, is the sum which appears to be due on it. Bredow v. Mutual Savings Inst., 28 Mo. 187; Menkens v. Menkens, 23 Mo. 252.

Y.

In relation to the point made by defendant, that it does not appear that relator is the only party interested in the estate, it is sufficient to say that no such objection was made in the court below; that if there, was any such defect of parties plaintiff, advantage should have been taken of it by demurrer or answer; Reilly v. Tenbroeck, 63 Mo. 563, and cases cited; that even if this defect existed, it is too late to raise the objection and take advantage of it in this court for the first time.

YI.

And that the probate court, on final settlement, having ordered the executor to pay to relator $30,614.74, this judgment was conclusive against the sureties in the bond sued on, that she was entitled in her own separate right to maintain her action; State v. Creusbauer, 68 Mo. 254, and cases cited; and negatives the right of any other legatees; and the judgment recovered was for only a portion of the sum which the probate court ordered the executor to pay relator.

VII.

There was no error in excluding the order of partial distribution offered in evidence by defendant. The accounts between the parties were open until final settlement, and there was no admission by relator that no more was due her, because she applied for less than was”due her.

YIII.

Nor was error committed in rejecting the evidence of a recovery had by relator against Schaeffer, a surety on the second bond, and this, because the second bond did not discharge the sureties on the first bond for any misconduct occurring prior to giving the second bond. State v. Drury, supra.

IX.

Defendant claims that the recovery was excessive, because no credit was given Staehlin for his commission on the notes converted by him. This claim is one which, if allowable at all, should be made and adjusted in the probate court. It is a claim, too, which comes with a very bad grace from the surety of a principal who has been guilty of a breach of trust in converting the assets of the estate to Ms own use. Commissions are incident to and belong to a faithful administration of the estate, and should not be allowed in an instance like this. The cases cited by defendant are not similar to this one; they do not show flagrant conduct on the part of the defendants in them, such as this record discloses. And in Clyce v. Anderson, 49 Mo. 37, one of these eases, the instruction is broadly given, that in a ease disclosing willfully wrong conduct on the part of the executor, commissions should not be allowed.

X.

The foregoing remarks have sufficiently shown that the motion for a new trial was properly overruled; and as to the motion in arrest it suffices to say that the objection therein came too late; that the notes alleged to have been converted, were not described in the petition — even conceding such objection would have been valid in the first instance. The petition certainly stated a cause of action, though it failed to describe the particular assets charged to have been converted, since it alleges that Staehlin converted to his own use all the assets of the estate, and under this broad allegation evidence was certainly admissible to show that certain particular assets were converted.

XI.

As to the further point made by the motion that three breaches of the bond were alleged, but no specification on which breach the finding was made and judgment rendered, it is enough to say that there was but one cause of action alleged, as all the breaches constituted one cause of action. State v. Davis, 35 Mo. 406; State v. Henslee, 54 Mo. 518. For these reason we affirm the judgment.

Norton and Ray, JJ., concur; Hough and Henry, JJ., dissent.

Case Details

Case Name: State ex rel. Wolff v. Berning

Court Name: Supreme Court of Missouri

Date Published: Oct 15, 1881

Citation: 74 Mo. 87

Court Abbreviation: Mo.