Opinion
Argued October 6, 1885
Decided October 27, 1885
P.C. Ford for appellants. Edward Fitch Bullard for respondent.
The argument on this demurrer concedes, as a general rule, that the sureties upon the bond of an executor or administrator are not liable until the default of their principal has been established before the surrogate. ( Hood v. Hood, 85 N.Y. 561. ) The respondent, however, claims that the rule is not universal and admits of exceptions, and is not to be applied in a case where the Surrogate's Court has no jurisdiction to redress the specific wrong which forms the subject of complaint. The causes of action asserted by the plaintiff were in substance that an executor, empowered and directed by the will to sell real estate, had been guilty of gross neglect and bad faith in failing to sell and invest the proceeds; and the action to redress this grievance is brought in the Supreme Court and seeks damages for a breach of the bond. The plaintiff insists that for this injury the surrogate can give no redress, and, therefore, to require his preliminary adjudication would involve an impossible condition and leave the injury inflicted without a remedy. If such a case should occur, equity would be quite sure to furnish a remedy, the specific need of its intervention being disclosed and all necessary parties being brought before the court, and that would be the appropriate remedy to charge the executor instead of an action at law upon the bond. Trust duties are peculiarly the subject of equity jurisdiction, and those of an executor or testamentary trustee are in the main subjected to the surrogate's control. We have quite recently considered the scope and boundaries of the jurisdiction conferred upon that tribunal. ( Hyland v. Baxter, 98 N.Y. 610.) Within the principles there established we discover no reason for doubting the power of the surrogate upon an accounting to charge the executor with any loss to the estate resulting from negligence or bad faith. While it is true that in the first instance that court could not order the sale of the real estate, and take upon itself the discretion and judgment committed to the executor, it could certainly reach the justice of the case by its power of removal and its authority upon an accounting. For gross neglect, and especially for bad faith on the part of an executor in refusing to perform the duties of his trust the surrogate may remove him and settle and adjust his accounts, and charge him with any loss to the estate which has resulted from his misconduct. (Code, §§ 2685 and 2605.) Such gross neglect or positive bad faith as would justify his removal would equally justify a redress of the injury in the adjustment of his accounts. It is no answer to say that such remedy has been tried and failed. It did not fail for lack of jurisdiction, but from a judgment adverse to the application upon its merits. ( Haight v. Brisbin, 96 N.Y. 132.) We do not think this case comes within any of the possible exceptions referred to in Hood v. Hood ( supra). If the present action can be deemed one in equity so also was that, and it expressly decided that no equitable action could be maintained to charge the sureties until the principal's default had been adjudged by the surrogate, unless in certain exceptional cases in which the special circumstances requiring the aid of equity are disclosed. No such special circumstances here exist, unless it be held that the surrogate, upon a proceeding ending in a removal of the executor, and as a consequence the adjustment of his accounts, could not charge him with a devastavit produced by his omission to sell when he might have done so, under circumstances showing gross neglect and bad faith, and establishing a definite consequential loss to the estate. Where there has been a failure to sell personal property by an executor without adequate excuse it is quite common to charge him with the resultant loss, and we can see no good reason why in a proper case the same remedy might not be applied as to the disposition of real estate. In each case there is a wrong and a loss and, therefore, a devastavit. Where the executor, in bad faith and with gross negligence, has withheld land from sale until it has depreciated in value, he has just as completely wasted assets as if he had willfully destroyed them or negligently permitted their injury. How, then, does he completely account when he accounts for but a part in its value of what he received? And why does not an authority to make him account justly involve the right to charge him with a willful or negligent loss which his own misconduct has brought upon the estate? It does not help the appellants to call the defendant a testamentary trustee. In that character the surrogate's jurisdiction remains. He may settle the accounts and is vested with power of removal, (Code, §§ 2807, 2817); and that in any case where the trustee has "improvidently managed or injured the property committed to his charge," or been guilty of "other misconduct in the execution of his trust."
Section 814 of the Code has no application to the case.
The judgments of the Special and General Terms should be reversed, and the defendants appealing have judgment on the demurrer, with costs.
All concur.
Judgment accordingly.