Opinion
09-11-1851
PINCKARD v. WOODS & c.
Boyd and Patton, for the appellant, Cooke, for the appellee,
(Absent Cabell, P.)
An executor who is also a legatee of one moiety of his testatrix's estate, sells the property and purchases about one half of it himself. He takes bonds from the purchasers of the other part of the estate, which shew upon their face that they are executed to him as executor. Afterwards he sells these bonds at a discount of from eighteen to twenty per cent., the purchaser knowing that the liabilities of the estate of the testatrix were very inconsiderable, and that the sale of the bonds was not necessary for any purposes of the administration. At the time of the sale the executor was solvent and his solvency was not questioned; but he afterwards failed, without paying the legatees of the other moiety of the estate. HELD: That the sale of the bonds at such a discount when the circumstances of the estate did not require it, was a devastavit by the executor; and that the purchaser having purchased with a knowledge of the fact will be compelled to pay the amount of the bonds (if they do not amount to more than the devastavit of the executor,) to the legatees. Or if they have been paid by the sureties of the executor, the sureties are entitled to be substituted to the rights of the legatees.
Some time in the year 1836 Mary Crafton died, having first made her will which was admitted to probat in the Circuit court of Franklin county. No executor being named in the will, Tyree G. Newbill qualified as administrator with the will annexed, and entered into a bond in the penalty of 7000 dollars, with Wiley P. Woods and Joseph Rives as his sureties. By her will after directing her debts to be paid, she gave one half her estate to Newbill, and the other half to Mary and Catharine Phillips, in equal proportions.
In November 1836 Newbill sold the whole property, all of which was personal, and nearly all of it slaves, upon a credit of twelve months. The sales amounted to 5014 dollars 8 cents, of which Newbill purchased to the amount of 2335 dollars 25 cents. One of the slaves was bought by Hopkins Nowlin at the price of 1200 dollars, and another was purchased by Robert T. Woods for 1250 dollars, and each of them gave his bond with security to Newbill as administrator for his purchases: And on the 10th of February 1837, these bonds were sold by Newbill to Charles Pinckard at a discount of between eighteen and twenty per cent. The debts due from the estate amounted to but about 185 dollars, all of which seems to have been paid off at an early day by the administrator.
Newbill not having paid to Mary and Catharine Phillips their proportion of Mrs. Crafton's estate, they instituted a suit against him and his sureties Woods and Rives, and in May 1844 they obtained a decree for the sum of 2391 dollars 85 cents, with interest thereon from the 28th day of October 1837 until paid and their costs. Although Newbill seems to have been in 1836, and for some time afterwards, entirely solvent, and although he was in good credit until the year 1840, yet when this decree was obtained he had become insolvent, and had absconded from the country; and the amount of the decree was paid by the sureties Woods and Rives in August 1844.
A few days after the decree in favour of the Phillips had been paid by them, Woods and Rives instituted a suit on the chancery side of the Circuit court of Franklin county against Newbill and Charles Pinckard, seeking to set aside the sale by Newbill to Pinckard of the bonds of Nowlin and Robert T. Woods. In their bill, after stating substantially the foregoing facts, they charged that the condition of the estate of Mary Crafton did not render a sale of the bonds necessary: That Newbill was not in advance to the estate, and that he had purchased at his sale of the property to about the amount of his legacy. They charged that at the time of the purchase of these bonds by Pinckard he knew that he was dealing with an administrator for the assets of his testatrix's estate; and that by the sale the administrator was committing a devastavit and a fraud upon the legatees of the testatrix and upon his own sureties; and that independent of this personal knowledge on the part of Pinckard, the bonds shewed on their face that they were due to Newbill in his character of administrator of Mary Crafton deceased; and were thus notice to Pinckard that they were assets of her estate; and that by buying the bonds at a discount he was aiding Newbill to convert the same to his own use, and to commit a devastavit and a fraud upon the legatees of his testatrix as well as the sureties of Newbill.
The prayer of the bill was that Pinckard should be compelled to account for and pay to the plaintiffs the amount of money due upon the bonds and received by him, with interest thereon, or so much as should be sufficient to satisfy the plaintiffs for what they had been compelled to pay to Mary and Catharine Phillips, with interest; and for general relief.
The defendant Pinckard in his answer admitted that the bonds of Nowlin and Robert T. Woods were given for purchases of the slaves of the testatrix of Newbill, and were payable to Newbill as administrator with the will annexed of Mary Crafton; and that he purchased the bonds from Newbill at a discount of from eighteen to twenty per cent., which he considered their fair cash value. He said that at the time of purchasing the bonds he knew nothing of the state of the assets of the testatrix's estate, nor of any waste or mismanagement committed by Newbill. He knew that after paying the debts of the testatrix which he believed to be inconsiderable, that the residue of the estate was to go by one moiety to Newbill and by the other to Mary and Catharine Phillips; and he considered that the bonds purchased as aforesaid would not overgo the part of the estate bequeathed to Newbill. In making the purchase he had no idea of committing a fraud, or of being instrumental in aiding the administrator in committing a devastavit.
It is unnecessary to detail the proceedings in the cause. It is enough to say that a commissioner's report ascertained that after crediting on the amount paid by the plaintiffs to the Phillips some small sums of money received by them from the property of Newbill, there remained of that debt the sum of 3542 dollars 66 cents due on the 10th day of June 1847. In August 1848 the Court made a decree against Newbill and Pinckard, in favour of the plaintiffs, for this sum, with interest on 3397 dollars 20 cents, a part thereof, from the 10th day of June 1847 until paid, and their costs. And liberty was reserved to Pinckard, if he should pay the said debt to the plaintiffs, hereafter to apply to the Court for a decree against Newbill for the amount so paid by him. From this decree Pinckard applied to this Court for an appeal, which was allowed.
Boyd and Patton, for the appellant, insisted that the only ground upon which a purchaser from an executor can be held liable to creditors or legatees, is that the executor was guilty of a fraud in the sale, and the purchaser had with knowledge participated in it. That a fraud by the executor was not enough, but that there must have been a participation with knowledge in the execution of the fraud. And they went into an examination of the facts to prove that Pinckard was not a participator in any fraud in the purchase of the bonds, even if Newbill intended to commit a fraud: which they did not admit. They referred to Nugent v. Gifford, 1 Atk. R. 463, and note; Mead v. Lord Orrery, 3 Atk. R. 235; McLeod v. Drummond, 14 Ves. R. 352; S. C. 17 Ves. R. 153; Field v. Schieffelin, 7 John. Ch. R. 150; 1 Story's Equ. Jur. § 422-23, 580; 1 Lomax Ex'ors 346-7-8, and note.
Cooke, for the appellee, admitted there was no doubt of the administrator's right to sell, and that the purchaser was not bound to look to the disposition of the purchase money; but with the exception that if there is anything unfair in the sale, the purchaser is liable for the amount of the property. And he referred to 2 Wms. Ex'ors 611; 1 Story's Equ. Jur. § 422; Scott v. Tyler, 2 Dick. R. 712. And he reviewed the facts and insisted that according to Fisher v. Bassett, 9 Leigh 119, the sale of the bonds at a discount of eighteen per cent. was itself a fraud in the administrator, and that Pinckard participated with knowledge in the fraud.
OPINION
BALDWIN, J.
It is the duty of an executor, not to sell, but to collect, the debts due to the estate of his testator, including those arising out of sales of goods made by the executor in the course of his administration; and if he sells such debts at a price below their value he thereby commits a devastavit, unless he makes it appear that such sale was manifestly required by the interests of the estate: And this he can never do without shewing, in the first place, that the proceeds thereof have been applied to the purposes of the estate. The appropriation by the executor of the proceeds of such a sale to his own individual uses, presents the case of a fraudulent breach of trust on his part, for which of course he is personally liable to creditors, legatees and others, injuriously affected by such improper diversion of the assets. And the purchaser himself, so acquiring such debt at a profit, if he has reason to believe at the time that the same belongs to the estate, and is so disposed of by the executor, for his individual uses, thereby concurs in such fraudulent breach of trust by the executor, and therefore incurs the like liability.
In this case the bonds purchased by the appellant from Newbill, the administrator with the will annexed of Mary Crafton deceased, were executed by the obligors for the prices of certain slaves belonging to the testatrix's estate, and sold by the administrator under the authority of her will; which bonds are on their face payable to Newbill in his character of administrator. The appellant had therefore the best reason to believe that the bonds belonged to the testatrix's estate, when he purchased them from the administrator at a discount of 18 or 20 per cent., and from the profit he was thus allowed to make, he had good reason to believe that the administrator was selling them for his own individual uses; a fact which the result and the condition of the estate have abundantly shewn. Under these circumstances, it was incumbent upon the appellant to stay his hand, until he should ascertain by the requisite enquiries, that the sale was to be made for the purposes of the estate, and the sacrifice to be incurred indispensably necessary to prevent some still greater sacrifice. He must have known that it was not in the usual course of administration for an executor to sell debts due the estate at a sacrifice, and he was bound to know that such a sale cannot be tolerated unless under very peculiar emergencies of the estate. If he had made the enquiry, he would have ascertained that the condition of the estate did not require the sale of the bonds. But in truth he knew it without the necessity of enquiry; for he says in his answer that " he was aware that after satisfying the debts of the testatrix, which he believed to be inconsiderable, and the specific legacy of the bed and furniture, the residue of her estate was to go by one moiety to the said Newbill, and by the other to Mary and Catharine Phillips, and he considered that the bonds he was purchasing would not overgo the part of the estate bequeathed to Newbill; " and so defending himself upon the ground that his speculation was warranted, as he believed, by the administrator's individual interest in the estate. But he ought to have known that the administrator had no right to appropriate the assets to the satisfaction of his own legacy, to the entire exclusion of the other legatees; and he was bound to ascertain that Newbill's legacy had not already been satisfied, as in fact it was by his individual purchases at the public sale of the property of the estate; unless indeed he chose to apply them by actual payment to the satisfaction of his co-equal legatees.
It is no valid defence for the appellant that at the time he purchased the bonds, it was his belief and that of the public generally that the administrator was then in solvent circumstances. Such belief may have induced him to look to the individual responsibility of the administrator as a guarantee against the failure of his speculation, and to that responsibility he must still look, and its having proved abortive furnishes no reason for throwing the consequent loss upon those whom he has aggrieved by his intermeddling with the affairs of the estate, from no other motive than the desire of gain to himself, and careless as to its effects upon the rights of others.
Nor does the statute of limitations afford protection to the appellant, for the appellees have no remedy but in equity, which will not allow its application to such a case as this.
The decree therefore of the Circuit court is proper, in holding the appellant responsible to the appellees for the money paid by them as sureties of the administrator to Mary and Catharine Phillips, in discharge of the decree of the Circuit court of Campbell county. But there is error therein to the extent of 38 dollars 75 cents, the costs recovered against the appellees, in their unsuccessful injunction suit with Garland's ex'or & c. there being no propriety in subjecting the appellant therefor. This error is, however, more than counterbalanced by another against the appellees to the extent of 136 dollars 81 cents, by crediting the appellant twice with that sum on account of the funds received by the appellees for their indemnity as sureties in the administration bond, under the deed of trust from Newbill in the proceedings mentioned, which error is made to appear by a note of appellees' counsel filed with the record, and marked J. R. C.
And the appellees, by their counsel, not desiring to disturb the said decree because of the said error to their prejudice; and the Court being of opinion that there is none to the prejudice of the appellant; it is adjudged, ordered and decreed that the same be affirmed, with costs to the appellees.