Bassett v. Fidelity & Deposit Co.

Loring, J. The principal exception of the defendant corporation is to the refusal of the judge to recommit the case to the assessor to take evidence as to the insolvency of the executor, — 212 — and of the firm of which he was a member at the date of the testatrix’s decease. The contention which has been made in support of this exception is that the obligation, of a surety on an executor’s bond goes no farther than to guarantee that the executor will lawfully administer the assets of the testatrix which had an existence in fact and which came to his hands or knowledge, and that it is beyond the scope of such a bond to create assets which the testatrix never had by making the surety guarantee debts due from insolvent debtors; and for that reason it cannot be made liable for the full amount of the notes held by the testatrix made by the executor’s insolvent firm. But there is another side to the case. An executor or administrator is appointed for the sole purpose of enforcing in behalf of those interested in the estate the rights of the estate against others. When the estate has a claim against the executor or administrator himself, he is incapacitated from performing that duty and taking to himself that office. For that reason, on broad principles of policy it was laid down by the common law of England that he must yield all controversy as to the debt due from himself and treat it as an asset of the estate. No one is bound to accept the office, and if he elects to do so he thereby tacitly assents to this condition. The common law did not allow him to accept the office and keep his rights in a controversy when his duty and his personal interest were in a direct conflict. To allow him to accept the office and then to settle the amount which the creditors and others interested in the estate would have got had he not taken the office but had allowed some disinterested person to be appointed to enforce these rights would not be doing justice to those whose rights the law undertakes to preserve. Take the case at bar as an example. The executor’s firm was going on with its business when the testatrix died, and went on in business for some fourteen months after that time. The law could hardly be said to have fully preserved the rights of those interested in the estate if it allowed this creditor of the estate to accept an office where it became his duty to collect the amount due from his own firm by pressing for payment and after fourteen months of inaction on his part to settle the rights of the — 213 — beneficiaries by a judicial inquiry as to what would have happened had a disinterested person been appointed to perform the duty owed to these beneficiaries. But it is not necessary to discuss the question further. It is concluded by authority in this Common wealth. The rule was originally laid down in 1814, in Stevens v. Gaylord, 11 Mass. 256. The history of the rule and the cases, both in England and in this country, are given in Winship v. Bass, 12 Mass. 199, and in Tarbell v. Jewett, 129 Mass. 457. The rule is one of general application and has been held to be applicable not only in case of executors and administrators, but also in case of assignees in insolvency, Benchley v. Chapin, 10 Cush. 173, guardians, Mattoon v. Cowing, 13 Gray, 387, and receivers appointed to wind up insolvent corporations. Commonwealth v. Gould, 118 Mass. 300. It has been recognized and applied in the following cases in addition to those cited above: Hobart v. Stone, 10 Pick. 215; Kinney v. Ensign, 18 Pick. 232 ; Ipswich Manuf. Co. v. Story, 5 Met. 310; Sigourney v. Wetherell, 6 Met. 553; Willey v. Thompson, 9 Met. 329; Chenery v. Davis, 16 Gray, 89 ; Leland v. Felton, 1 Allen, 531; Chapin v. Waters, 110 Mass. 195; Hazelton v. Valentine, 113 Mass. 472; Choate v. Arrington, 116 Mass. 552; Pettee v. Peppard, 120 Mass. 522; Martin v. Smith, 124 Mass. 111; Choate v. Thorndike, 138 Mass. 371; Stetson v. Moulton, 140 Mass. 597. And, finally, it was held in Leland v. Felton, 1 Allen, 531, that an executor should be charged with the full amount of notes belonging to the testator made by a firm of which he was a partner, although it was insolvent when the testator died, as well as with the full amount due on notes made by himself, who also was insolvent at that time. The defendant in the case at bar asks us to hold that although an insolvent executor is to be charged with the debt due from him the sureties on his bond are not to be held liable therefor. But that is out of the question. That contention flies directly in the face of the elementary principles governing the effect of a decree allowing a probate account, and the elementary principles as' to the obligation of a surety on a probate bond. In the first place, a decree of a Probate Court allowing an account of an executor or other official is binding on all inter — 214 — ested in the estate including sureties on the bond of the accountant. If there is error, the error must be corrected in the Probate Court, as it may be if there was fraud or if the party in question had not such notice as to be concluded by the decree. Jennison v. Hapgood, 7 Pick. 1. Sever v. Russell, 4 Cush. 513. Parcher v. Russell, 11 Cush. 107. It is settled that a surety on a probate bond is a party interested in the accounts of the principal, and for that reason has a right of appeal to the Supreme Judicial Court. Farrar v. Parker, 3 Allen, 556. In the second place the obligation of a surety on a probate bond is the obligation of the principal. The bond is a joint bond and the judgment necessarily must be the same against both. This is more than a technical rule of law, it is an instance where the true character of a surety’s liability comes to the surface. The ground on which it was held that a surety has a right of appeal in such a case was that the decree settling the account of the principal “ if once properly established, fixes the amount of liability of the sureties on their bond.” Farrar v. Parker, 3 Allen, 556, 558. And Endicott, J., in Tarbell v. Jewett, 129 Mass. 457, 468, speaking of Leland v. Felton, 1 Allen, 531, said that it was held that the executor would be charged for his own notes and for the notes of his firm held by the testator, although both he and the firm were insolvent, “ which of course rendered his sureties liable.” Again', in Choate v. Arrington, 116 Mass. 552, 556, Wells, J. said: “The surety is liable for whatever is properly chargeable to his principal in the official capacity on account of which the bond was given.” To the same effect see Ames, J. in Chapin v. Waters, 110 Mass. 195, 197. It is apparent that this was assumed to be the case in Leland v. Felton, 1 Allen, 531. In that case the executor had resigned and the plaintiff Leland had been appointed administrator with the will annexed de bonis non. The main contention of the defendant Felton (the executor who had resigned) was that the debt due the testator was suspended, not extinguished, by his being executor, that it was revived by his resignation and that the remedy of the administrator was an action on the notes against him and his partners in which he could recover a personal judgment, but that he could not be charged with the — 215 — amount by the Probate Court in his executor’s account. If the liability of the surety was different from that of the executor, there was no possible object in this defence. The sole purpose of the defence was to protect the sureties, and from an examination of the court records it appears that after the decision in Leland v. Felton, judgment was recovered in an action brought against the principal and sureties in the Supreme Judicial Court, in the October Term, 1863, no defence being interposed by the sureties. It further appears from an inspection of the records of the Probate Court that several payments were made on account of that judgment by one of the sureties. The defendant’s request, therefore, is a request that we overrule the case of Leland v. Felton, 1 Allen, 531. But after a careful consideration of Baucus v. Stover, 89 N. Y. 1, Baucus v. Barr, 45 Hun, 582, affirmed in 107 N. Y. 624, Lyon v. Osgood, 58 Vt. 707, Garber v. Commonwealth, 7 Penn. St. 265, McCarty v. Frazer, 62 Mo. 263, State v. Gregory, 119 Ind, 503, 509, Harker v. Irick, 2 Stockton, 269, Spurlock v. Earles, 8 Baxter, 437, cited and relied on by the defendant, we are of opinion that for the reasons given the true rule was laid down in Leland v. Felton, and that it is now too late to question the practice which was then adopted and has been in force for over forty years. There is nothing in the other points taken by the defendant in defending its liability. There was evidence which warranted the finding made by the assessor that the sums advanced by the testatrix resulted in a debt due to her, the time for payment of which had arrived. Even if a demand had been necessary, the defendant cannot set up that no demand was made, as he seeks to do. It was his duty as executor to make a demand and he could not set up that he could not make a demand on himself. See Stevens v. Gaylord, 11 Mass. 256, 270, where Jackson, J. says: “ In the case of his own debt, which he admits to be due, it is obvious that he can never prove a demand and refusal.” In the case at bar there was a breach of the bond in failing to account, an agreement for judgment in favor of the plaintiff, and the case was sent to an assessor to fix the amount for which execution should issue. He charged the executor with interest on the demand notes of his firm amounting to $18,453, and with interest on $3,500, the value of the Glendale stock, with annual — 216 — rests at six per cent, to the date of his report; and as this sum exceeded, the penal sum of the bond he reported that execution should issue for the penal sum of the bond with interest from the date of the writ. The Superior Court directed that execution should issue for the full amount of judgment and interest from the date of the rendition thereof. The defendant contends that in contemplation of law these two sums have been in.the hands of the executor since the death of the testatrix, and that on the authority of Wyman v. Hubbard, 13 Mass. 232, Stearns v. Brown, 1 Pick. 530, Boynton v. Dyer, 18 Pick. 1, 7, an executor is not chargeable with interest on funds, in his hands. But the rulé laid down in the last of those cases is that an executor is not chargeable with interest “ except where they actually receive it or make some profitable use of the funds, or are guilty of negligence in accounting for them.” This defendant was guilty of negligence in not accounting for these two amounts. It appears that the parties made an agreement that judgment might be entered for the penal sum of the bond, but it would seem from the record before us that no judgment has in fact been entered. The plaintiff is at least entitled to judgment for interest on the penal sum of the bond from the date of the writ, Harris v. Clap, 1 Mass. 308, Pitts v. Tilden, 2 Mass. 118, Warner v. Thurlo, 15 Mass. 154, Bank of Brighton v. Smith, 12 Allen, 243, and the amount of that judgment bears interest. We understand that the Superior Court’s order was intended to be made in conformity with this. On a judgment being entered nunc pro tune, execution may issue as ordered by the Superior -Court. Exceptions overruled.