Summers v. . Reynolds

Smith, C. J. (after stating the facts): I. The circumstances attending the sale of the house and lot in Statesville, the plaintiff’s answer to inquiries from persons intending to bid as to what currency payment would be required to be made in, which prevented them from bidding, and the private arrangement between himself and partner, H. B. Reese, to buy in the property for themselves, carried into effect through the agency of Boger, so strongly mark the mala fides with which the sale was conducted, and the utter disregard of fiduciary duty on the part of the plaintiff, as to fully warrant the ruling of the Judge in charging him with the real value of the lot in the present currency. And so far as he has paid out portions of the Confederate money, received from his own firm in discharge of the bid, to the ■legatees, he should be credited with the scaled value of such payments in his separate accounts with each. II. The next exception, numbered 4 in the series, is taken •to the ruling by which the plaintiff is charged with the debt ■of $252, and interest, due by T. R. Watts to the testator’s estate. N. P. Watts, a son of the debtor, proposed to compromise the claim, which the plaintiff declined, saying that Watts could attend the sale and buy the judgment. The judgment was accordingly sold, and bought by Watts for $1.00, and he afterwards, in compromise, obtained $150.00 for it. It was a culpable indifference to fiduciary duty to entertain no proposition, and not even to inquire what sum would be *413 offered, and with this information of the debtor’s desire to-settle the claim, permit it to be bought for so inconsiderable-a sum. While he had authority to dispose of the debt at ■ public sale, his general obligation remained to see that the assets of the estate were not thrown away and lost. But we do not concur in the opinion of the Court, that the plaintiff should be held responsible for the entire amount. Assuming that the sum paid the assignee was the full measure of its value, and that the executor could have obtained that sum, he ought to be held liable for $150, instead of $1; but not for the excess of the debt above that limit. III. The next exception is to the plaintiff’s being charged with the full amount of the deposits in the bank. The first of the certifications, and,the others are substantially in the-same form, is as follows: BANK OP STATESVILLE, No. 1019. Statesville, N. C., January 8th, 1874. O. L. Summers has deposited in this bank five hundred dollars, payable ten days alter notice is given to R. P. Simonton, Cashier, on the return of this certificate properly endorsed, with interest at the rate of eight per cent, per annum, on call. §500.00. R. P. SIMONTON, Cashier. The facts all show entire good faith, and a purpose to preserve the fund for distribution among the legatees, and not - to derive any personal benefit from the deposit, and the executor is charged with the full amount, because his fiduciary character is not annexed to his name, so as to mark the moneys as belonging to the trust estate, and this, in the opinion of the Court, is an act of maladministration, and a devastavit. The liability is adjudged solely upon the ground that the certificates were issued to the plaintiff, not designating the representative character in which, as declared to the cashier, the deposit in fact was made, and this, we suppose,, upon the authority of the case of Peyton v. Smith, 2 D. & B. Eq., 325. In that case, the deposits were to the credit of the- *414 ■depositor, and were not distinguishable from those of his own, not held intrust. “From these accounts, then,” says GastON, J., speaking for the Court, “ it is to be collected that the trust funds went into the mass of the executor’s property, and, by no visible marks or signs, were in any respect distinguished from his private moneys. They swelled the executor’s personal credit at bank; upon his death they become assets in the hands of his personal representative; and could not have been claimed as the assets of the testator by a representative of that estate; — they were liable to his creditors, were in all respects his property, he charging himself with the amount thereof in account with his cestui qui trusts.” Such an intermixture of funds held in trust, with his own, so as to constitute one aggregate credit, it must be admitted, is an appropriation of the former to his own individual use, for which he at once becomes liable. If the executor pays the money of the testator into ^a bankers, not on any distinct account, but “ mixing it with his own money,” (the italics are those of the author), “ it should seem that the executor will be answerable for the loss sustained by the failure of the banker.” 2 Williams on Ex., 1292. In Shipp v. Hettrick, 63 N. C., 329, where the executor sought to bo delivered from the loss of Confederate money which came into his hands, but which he did not separate and set apart, so that it could be identified, the Court say: “If he, (the executor), had separated the money from all other moneys in his hands, and retained it as a special deposit for Louisa E. Hettrick, the case would have been different, notwithstanding the fact that it became worthless. But he did none of these things; pn the contrary, he kept it with his own moneys. If he had made a general deposit of this money in bank in his own name, it would not have relieved him; but if he had made a special deposit of a particular parcel for this particular purpose, it would have been otherwise.” *415 The trastee is responsible, “if he deposits it at his banker’s mixed np with his own moneysAdams Eq., 60, and such is generally the language employed by the authorites. We do not suppose it is necessary that there should be personal funds of the trustee to his credit when those held in trust are deposited. It is sufficient to make the conversion, that the account is opened with the depositor in his individual name, and would blend with money of his own, when deposited, and thus a common credit be secured. In Brown v. Durham, 2 Gray, 42, a guardian sold property belonging to his ward, and took therefor promissory notes, payable to himself or bearer, on some of which payments had been made. The guardian died, and his estate was insolvent. The minor, through a succeeding guardian, sued the administrator of the former for these notes, as the property of the ward. Delivering the opinion, Thosias, J.,,says: “ They were retained by the guardian, not negotiated nor pledged, nor in any way used for his own business. They are clearly identified and traced. The fact that they were made payable to the guardian, in his own name, and negotiable, without any evidence of appropriation, or of any attempt to appropriate them to his own use, is not sufficient evidence of his conversion of the money, and mingling it with his own. Such breach of duty is not to be presumed, and the mere form of the notes fails to establish it.” This ruling establishes the right of the equitable owner of the fund, where the guardian is insolvent, to pursue and recover it, where its identity is clearly shown, but it does not decide that he may not elect to hold the guardian personally liable, when the fund has been rendered valueless, as in our case. In Parsley v. Martin, 46 Amer. Rep., 733, money held in trust, was deposited by the guardian in a Richmond bank, and a certificate taken in his individual name. He had no money of his own on deposit. The bank went down in the *416 financial catastrophe which attended the downfall of the Confederacy, and the fund was lost. The guardian was relieved of the loss, the Court remarking that “ a bona fide deposit of the money of his ward by the guardian in his. individual name, provided that it can be shown that it was in fact the money of his ward, will acquit and protect the guardian from the responsibility for loss which ensues, not by the form or designation of the deposit, but which Has been lost by the general and universal destruction of the whole currency, and all the banking and financial interests of the State.” This ruling, contrary to the current of the decisions, may perhaps find a support in the extraordinary circumstances attending the conduct of the guardian, and his inability to take any better care of the trust estate, and when perhaps any other disposal of the money would have shared a like fate. We have been referred to a recent case in our own reports, Syme v. Badger, 92 N. C., 706, where an exchange was made by an executrix, of a note that came into her hands, and a new security taken, payable to herself. This was done under the belief (from advice of counsel perhaps) that the testator’s entii’e estate belonged to herself, and in effect to render it more secure. It was not an intended interference with the funds of the estate, but the management of what was supposed to be her own. In this respect that case is distinguishable from the present, for here the executor was dealing with a fund not his own, nor supposed to be his own, but as a trustee with the trust estate. At least, we cannot carry the ruling in that case so far as to cover and protect the plaintiff in this transaction. Harsh as may seem, the rule of responsibility in the case before us, where any element of wrong is absent, and the penalty is incurred solely in consequence of the form of the certificate, it is too well founded for us to disregard it. The case of Williams v. Williams, 15 Wisc., 300, is so full and exhaustive a discussion of the doctrine, with an examination *417 of the adjudications from early times, and the reasoning so conclusive, as to dispense with a further discussion. The deposit was upon a similar certificate, and realizing the harshness of the operation of the rule, the Court thus speaks: “To hold the administrator answerable in this case, is undoubtedly a great hardship; but to exonorate him from liability is to encourage the mismanagement of trust funds, and to open the door to frauds innumerable against those whose age and weakness entitle them to the most rigid protection of the law. The rule, therefore, should not be slackened, even if the question were a new one, much less in view of the authorities cited.” We therefore concur with the Court in the disposition made of this exception. The plaintiff’s last exception must be upheld, and he should be allowed commissions upon the amount of the increased interest also. There must be a reference to the clerk, in order to a reformation of the account in accordance with this opinion, unless by consent, the reference be made to the former referee, whose familiarity with the case will render its execution less laborious, and with such consent, to said referee, to the end that judgment final may be entered. Error. - Modified.