Summary
holding that action may be maintained against principal alone
Summary of this case from U.S. v. Union Indem. Ins. Co. of New YorkOpinion
14798
January 3, 1939.
Before GASTON, J., Williamsburg, March 1938. Affirmed.
Action by A.B. McKenzie and another against the Standard Accident Insurance Company on an administrator's bond. From an order overruling their motion to strike the allegations of defendant's answer, plaintiffs appeal.
The order of Judge Gaston requested to be reported follows:
On the call of this case at Kingstree, S.C. on March 22, 1938, the right of the defendant to defend the action was argued by the attorneys for the parties as though the plaintiffs were demurring orally to the affirmative defense set up in the answer, and moving to strike the allegations of the answer.
These defenses are:
(1) That Probate Court had no jurisdiction of the real estate matters passed on in its judgment, and such judgment is absolutely void with respect to them. The allegations of the second defense are that the Probate Court in the judgment sought to be enforced in this action adjudicated matters concerning real estate over which it could not have any jurisdiction, by consent or otherwise; that the Probate Court undertook to pass on real estate transactions, which constitute a subject-matter that is beyond the jurisdiction of any Probate Court; and that the judgment of the Probate Court is absolutely void.
(2) The answer alleges that all of the funds with which the administrator was charged by the judgment in the Probate Court except $379.61 were derived from a real estate contract made with M.L. McKenzie to handle the lands that had descended to the heirs of Mrs. A.V. Collins.
(3) The answer raises the issue as to the defendant surety company's right in this action to contest the validity of the judgment rendered by the Probate Court. The defendant contends that a person cannot be held liable without a hearing; as commonly stated, every man is entitled to his day in Court, and unless he has had such day, the judgment of the Court is not binding on him.
(4) The defendant contends that the judgment of the Probate Court that the plaintiffs are seeking to collect out of the defendant surety in his action is not res judicata against such surety.
(5) The defendant contends that the jurisdiction over these real estate matters was attempted to be conferred on the Probate Court by consent of the parties and as a fraudulent scheme to defeat the claims of the mortgagee.
On the other hand the plaintiffs stoutly insist upon the contention on their part that the defendant Surety Company is now liable for the balance remaining unpaid upon the account of said administration as fixed and determined by the judgment of the Probate Court, and that the full amount of the bond in the sum of $2,000.00 is due and owing to the plaintiffs and other distributees of the estate, except M.L. McKenzie. The plaintiffs base their contention upon the following grounds, to wit.
(1) The extent to which the administrator of the estate of Mrs. A.V. Collins is responsible is res adjudicata by the Probate Court for Florence County; and the judgment of that Court, not appealed from, is good and effectual against the binding upon the surety on the administrator's bond.
(2) There can be no question as to the jurisdiction of the Probate Court concerning the estate of the decedent.
(3) The effort made by the defendant through the affirmative defense in its answer is to attack collaterally the judgment of both the Probate Court and the Court of Common Pleas.
(4) That a judgment against the administrator is not a prerequisite to action on the bond. Therefore, in the present instance, regardless of the jurisdiction of the Probate Court and the validity of its decree, the surety is bound by the statements and by the return and accounting of the administrator and his testimony on the hearing. The administrator would be estopped thereby and his surety, who is in privity with him, cannot go behind the words of the administrator.
(5) Aside from the effect of the decree of the Probate Court, the matter is res adjudicata by the Court of Common Pleas for Florence County. The judgment entered in the Probate Court for Florence County on the decree which has been referred to was transcribed as provided by statute to the Court of Common Pleas for Florence County and thereby became a judgment of that Court against the administrator in favor of the heirs-at-law for the sum of $3,273.03. Execution was issued on the judgment in the Court of Common Pleas, returned by the Sheriff of Florence County nulla bona, and supplementary proceedings instituted as provided by statute.
(6) In view of the rulings of the Court of Common Pleas for Florence County concerning approximately one-third of the identical fund with which the administrator was charged, the Circuit Court cannot at this time determine that the matter was not res adjudicata.
(7) The affirmative defense in the answer should not be allowed to stand because it attempts to collaterally attack the judgments of the Probate Court and the Court of Common Pleas hereinabove referred to.
(8) Whatever legal right the surety may have had to question the binding effect upon it of the judgments against the administrator, it is certainly now estopped from asserting them. Plaintiffs say that "on the final hearing in connection with the matter before the Probate Judge for Florence County, the attorney for the surety, Standard Accident and Insurance Company, having been notified by counsel for the administrator, was present. It is true that he did not participate in the hearing, but it is undisputed that the surety whom he represented had notice of the proceedings at that time and of the decree and other proceedings hereinabove referred to holding the administrator responsible in a definite sum. Subsequent to this hearing and after such notice to the Surety Company, the funds actually in the hands of the administrator amounting to nine hundred sixteen and 60/100 ($916.60) dollars were paid out under the order of the Court of Common Pleas, consented to by the attorneys for the administrator, in accordance with the original decree of the Probate Court. The surety took no step to prevent the payment of the funds in this manner and they were applied, first, to the payment of the remaining claims against the estate of the decedent, and to the costs of the administration of the estate. The heirs-at-law received only such amount as was left after the payment of these items. The Surety Company having sat idly by with notice of what was going on, and permitted such funds to be applied as part of the assets of the estate, will not now be permitted to say that the estate was not the owner of the funds and that it is not liable on the bond for the deficiency in the accounts of the administrator."
The attorneys for both parties have filed able and exhaustive written arguments, on the hearing before me. I understand, therefore, that all contentions and issues raised orally and set forth in written arguments are properly submitted to the Court at this time, and in this manner, for determination and adjudication. I am to decide the case upon the pleadings and upon the legal questions raised. No objection has been raised in respect to the manner or procedure by reason of which the case is presented to the Court for final disposition. I am to pass upon each issue unhampered by any question as to procedure or technicalities in regard to the method employed in raising these issues.
By reference to the complaint and the answer the facts appear to be confined within a narrow compass. It is undisputed that Mrs. A.V. Collins died intestate, and that on October 18, 1934, M.L. McKenzie was appointed administrator of the estate of Mrs. A.V. Collins, by the Probate Court for Florence County; and that the Standard Accident Insurance Company, as surety, executed a bond, dated October 15, 1934, in the sum of $2,000.00, with M. L. McKenzie, as principal, conditioned for the faithful discharge of his duties as administrator as required by law. It also further appears that M.L. McKenzie, as administrator, made his final return to the Probate Court for Florence County, and was charged with the sum of $3,237.03 by decree of said Probate Court, dated October 29, 1936; that judgment was entered for said sum on February 26, 1937, in the Probate Court against M.L. McKenzie, as administrator, and in favor of the heirs-at-law and distributees of the estate of Mrs. A.V. Collins, except the said M.L. McKenzie, and that said judgment was transcribed to and became a judgment of the Court of Common Pleas for Florence County. Thereafter certain orders were granted by Judge Stoll and by Judge Dennis against M.L. McKenzie on motions and hearings for the enforcement of the judgment, which resulted in the enforcement of the payment by M.L. McKenzie of $916.60, on December 11, 1937, upon said judgment; and that the balance remains unsatisfied. Also that all claims filed against the estate have been paid to creditors, and all costs of administration are paid.
This suit is brought in behalf of and for the benefit of all of the heirs-at-law and distributees of Mrs. A.V. Collins, deceased, except M.L. McKenzie, who as administrator is indebted to the estate for the balance unpaid on the said judgment, under his bond. One of the plaintiffs resides in Williamsburg County and this suit is pitched for battle in the kingly County of Williamsburg as no doubt being a kindly place to settle the dispute.
The answer denies the alleged liability of the Surety Company as the defendant herein, for any part of said unpaid judgment, heretofore rendered against the said M.L. McKenzie on his bond as administrator. The answer alleges by way of defense, that Mrs. A.V. Collins died seized and possessed of certain real estate, to wit, two farms in Florence County and several lots of land in Lake City, which passed to her heirs-at-law, and were not subject to the jurisdiction of the Probate Court. Also that M.L. McKenzie had been farming said lands prior to the death of Mrs. A. V. Collins and continued to do so after her death, under a contract with the heirs.
The answer furthermore alleges that all of the funds, amounting to $3,237.03, except $379.61, set forth in the Probate Court decree were derived from such farming operations of M.L. McKenzie, under his contract with the heirs, and that not a dollar of it belonged to the estate of Mrs. A.V. Collins; and that the Probate Court decree insofar as it affects the funds derived from such source is null and void. The answer alleges that the defendant has not had its day in Court and is now entitled to make this defense, that the funds were derived from real estate transactions aforesaid not covered by the administrator's bond, and that the defendant is not liable as surety on the bond for the said amount included in the Probate Court decree, except $379.61, and is not bound by the Probate Court decree.
A discussion of the legal principles involved before the Court will not be made.
The character of the liability of the sureties on the bond of an administrator and how such liability can be ascertained is well settled by our decisions as pointed out by Mr. Chief Justice Stabler in Bourne, Probate Judge, et al. v. Maryland Casualty Company. 185 S.C. 1, at page 12, 192 S.E., 605, 118 A.L.R., 1, citing Wiley v. Johnsey, 6 Rich., 355, and Jennings v. Parr, 62 S.C. 306, 40 S.E., 683. It is true that in the Bourne case no issue arises as to the right of the surety to plead by answer all or any defenses sought to be made available. The guilt of forgery by Frierson as administrator was admitted, but the Surety Company contended that the surety on the bond cannot be held liable for the loss to the estate, due to the alleged individual acts of Frierson. The surety company was held liable, but its right to defend the suit was not questioned. The practice in this State is well established that a joint suit against the administrator and against the surety on the bond is the appropriate remedy for a breach of the bond, and that the surety has the right to defend and is entitled to a day in Court. In fact it is not necessary to make the administrator or guardian a party, but the suit may be instituted against the surety alone.
The usual procedure is to sue both the administrator and the surety on the bond as parties defendants, but this is not obligatory.
The case of Witherspoon v. Stogner, 182 S.C. 413, 189 S.E., 758, is a recent one and went up from Lancaster. Mrs. L.K. Witherspoon died survived by her children, who are each a plaintiff respectively in three separate cases. The plaintiffs sue as heirs-at-law and distributees of their father, Marion S. Witherspoon, who died intestate in 1916.
His estate was administered by his widow, Mrs. L. K. Witherspoon, with John T. Stevens and W.T. Stevens as sureties on her bond. These suits were originally brought against Mrs. L.K. Witherspoon, and these sureties. She died pending the trial of the suit and her administrator, John F. Stogner, was made a defendant, by a consent order of Court, on plaintiff's motion. The right of the heirs-at-law to maintain the suit for an accounting, as beneficiaries of the estate of Marion S. Witherspoon, is fundamental. It is held that the sureties are proper parties as defendants. The case also refers to the case of Beatty v. National Surety Co., 132 S.C. 45, 128 S.E., 40, which is an action at law against the surety alone, for a definite sum of money which had been heretofore fixed and determined. Also the case of Anderson v. Aetna Casualty Surety Company, 175 S.C. 254, 178 S.E., 819, is referred to. It is pointed out that in the Anderson case the plaintiff sues upon an action at law for a sum certain, upon the alleged negligence of the defendant, in keeping a bank deposit. In the case of Anderson v. Aetna Casualty Surety Company, 175 S.C. 254, 178 S.E., 819, 826, the Supreme Court by Mr. Justice Bonham, in his usual gifted and eloquent style, holds that the action upon the bond is an action at law. "A bond is an obligation — a contract. * * * `An agreement * * * to pay money, "or to do some other thing."' * * * "Sureties upon the bond" are liable "solely out of their undertaking as sureties on the bond," and "their liability, if any, * * * can ordinarily only be ascertained in a common law Court by an independent action in which they have a right of trial by jury," and may interpose "any defense which would have been available in any prior suit or proceeding in the Court of Probate or in the Court of Common Pleas." Beatty v. National Surety Company, 132 S.C. 45, 128 S.E., 40, quoted with approval in Anderson v. Aetna Casualty Surety Company, 175 S.C. 254, at pages 276 and 277, 178 S.E., 819, at page 826.
The case of Cohen v. Maryland Casualty Company of Baltimore, Md., D.C., 4 F.2d 564, is in point and fully discusses the law of South Carolina in regard to a suit against the surety alone on the bond, of a Sheriff.
An action may be maintained against the sureties, or one or more of them without joining the principal, or against the principal alone, as well as against both. Cohen v. Maryland, etc., Co., D.C., 4 F.2d 564, and South Carolina cases cited.
But the Court permitted on motion the principal to be made a party, but held that he was not an indispensable party.
This procedure was followed in the case of Andrews v. U.S.F. G. Co., 154 S.C. 456, as appears at page 527, 151 S.E., 745, at page 769. The attorney for the plaintiff was Hon. J.H. Marion, who took the position that the surety was liable to suit under the case of State, etc., Soc. v. Taylor et al., 104 S.C. 167, 88 S.E., 372. It will be observed here that Mr. Justice J.H. Marion is the writer of the opinion of the Supreme Court in the case of Beatty v. National Surety Company, 132 S.C. 45, 128 S.E., 40, which holds that the suit by an heir-at-law and distributee against the surety upon an administration bond is proper.
It is well established in this State that the obligation of the sureties rests solely in contract and they cannot be held liable contrary to or beyond the condition of the bond. Kennedy v. Adickes, 37 S.C. 174, 156 S.E., 922.
In this State the sureties are not liable on the general bond required by statute for the proceeds of sale of real estate that came into the hands of the administrator. Wiley v. Johnsey, 6 Rich., 355.
As to rents and profits from real estate, although the administrator is liable personally to the heirs as trustee, the sureties on his bond are not liable under the general statutory bond. Jennings v. Parr, 62 S.C. 306, 40 S.E., 683.
The failure or refusal of an administrator to pay over or distribute the estate as required by the order or decree for final distribution of the Probate Court is a breach of the bond for which he and his sureties are answerable or liable. Burnside v. Robertson, 28 S.C. 583, 6 S.E., 843; Beatty v. National Surety Company, 132 S.C. 45, 128 S.E., 40.
The rule of law as to the conclusiveness of an adjudication against the principal is by the weight of authority, that a judgment or decree against the administrator is in the absence of fraud or collusion, conclusive against the sureties on the bond, although they were not parties to the proceeding, and that such judgment cannot be collaterally questioned by them in an action on the bond their only remedy being by way of appeal or application for a new trial, or by direct proceedings in equity. But under this general rule the sureties are not precluded from showing that the decree was procured by (1) fraud or collusion, Norton v. Wallace, 2 Rich., 460; Boyd v. Caldwell, 4 Rich., 117, or (2) that the Court exceeded its jurisdiction. Buckner v. Archer, 1 McMul., 85.
In South Carolina the authorities are said to be conflicting. In some cases the judgment or decree has been held not to be conclusive, but prima facie evidence only. Kaminer v. Hope, 9 S.C. 253.
In other cases in this State it has been held to be conclusive. Norton v. Wallace, 2 Rich., 460, qualifying Norton v. Wallace, 1 Rich., 507.
In this State it has been held that the order of judgment is subject to impeachment by the surety only on the ground of fraud or collusion. Boyd v. Caldwell, 4 Rich., 117. But see Norton v. Wallace, 2 Rich., 460.
A judgment against the administrator establishing a devastavit by the administrator is conclusive against the sureties. Lowe v. Carlisle, 33 S.C. 597, 11 S.E., 438; Stovall v. Banks, 10 Wall, 583, 19 L.Ed., 1036.
In conclusion I think it is clear from a careful reading of the foregoing cases that the surety on the bond of an administrator is not bound by the judgment of the Probate Court, when he was not a party to the proceeding therein in a case or proceeding where the Probate Court exceeded its jurisdiction, or where the Probate Decree was procured by fraud or collusion, or where the obligation of the bond contract does not cover the alleged liability.
Therefore, the defendant has the right to raise these issues by its answer, and to set up its affirmative defense in the present suit and is entitled to proceed with its defense. The motion of the plaintiff must be, and hereby is overruled.
Mr. M.L. Meadows, for appellants, cites: Res adjudicata: 132 S.C. 45; 128 S.E., 40; 118 S.C. 470; 111 S.E., 15; 70 S.C. 362; 11 R.C.L., 315. Collateral attack: 156 S.C. 45; 152 S.E., 721; 193 S.E., 633; 28 S.C. 281; 5 S.E., 718; 6 Rich. Eq., 384; 47 S.C. 525; 25 S.E., 65; 106 S.C. 486; 91 S.E., 796; 183 S.E., 145; 180 S.C. 317; 185 S.E., 619; 56 S.C. 1; 33 S.E., 731; 83 S.C. 165; 65 S.E., 257; 153 S.C. 78; 150 S.E., 473; 11 L.R.A., 160; 123 S.C. 252; 116 S.E., 279; 150 S.C. 125; 147 S.E., 646. Jurisdiction: 115 S.C. 469; 106 S.E., 470; 40 S.C. 16; 18 S.E., 224. Estoppel: 67 S.C. 432; 46 S.E., 39; 141 S.C. 265; 139 S.E., 625. Liability of surety coextensive with principal: 11 R.C.L., 303; 10 Wall, 583; 19 L.Ed., 1036; 115 S.C. 469; 106 S.E., 470; 2 Rich., 379; 1 Rich, 507. Mr. Henry E. Davis, for respondent, cites: Demurrer: 97 S.C. 413; 81 S.E., 657; 144 S.C. 205; 142 S.E., 496; 148 S.C. 446; 146 S.E., 420; 149 S.C. 163; 146 S.E., 818; 150 S.C. 476; 148 S.E., 476. Jurisdiction of Probate Court: 10 S.C. 317; 49 S.C. 505; 161 S.C. 450; 159 S.E., 805. Jurisdiction of subject matter: 5 Strob, 207; 114 S.C. 164; 103 S.E., 564; 170 S.C. 304; 170 S.E., 449. Liability of surety: 62 S.C. 306; 37 S.C. 174; 6 Rich, 355; 182 S.C. 413; 189 S.E., 759. Rights of surety: 7 Rich, 176; 3 McCord, 413; 2 Bail, 199; 2 Hill, 313; 1 Rich, 460; 2 Rich, 379; 2 Rich, 460; 2 Rich, Eq., 123; 5 Rich, 80; 11 S.C. 392; 13 S.C. 561; 22 S.C. 425; 37 S.C. 176; 15 S.E., 922.
January 3, 1939.
In our opinion the conclusions reached by his Honor Judge Gaston are correct, and we approve the result of his decree.
The order of the Circuit Court, which will be reported, is affirmed.
Mr. JUSTICE CARTER did not participate on account of illness.