McPhillips v. McGrath

BBICKELL, C. J. The complaint, in which the appellees were plaintiffs, contains two counts. The first count complains of the breach of the official bond of one Joseph Hodgson as register in chancery of the chancery court of Mobile county, executed on the first day of December, 1893, in the execution of which the appellants joined as sureties. The second count complains of the breach of a like bond executed on the eleventh day of December, 1894. The facts from which a breach of the bond is deduced are the same in each count. The defendants pleaded several pleas, to the fourth and fifth of which demurrers were sustained, and sustaining the demurrers forms the matter of the first and second assignments of error. The error of the argument in support of the fourth — 562 — plea, lies in the hypothesis upon which the plea proceeds — that the immediate operation and effect of the decretal order made by the court on the ninth of February, 1887, was the conversion of Hodgson’into a trustee, relieving him from duty and liability as register, in respect to the money now the matter of suit. The money was paid into court on the thirty-first day of January, 1887, as the money of the plaintiffs, in the course of a pending suit to which they were parties. Of the duties of a register in chancery, one is that of receiving and safely keeping, until the court orders its disposition, money paid into court in the progress of pending causes. Coleman v. Ormond, 60 Ala. 328. During the interval .from the payment of the money into court until the rendition of the decretal order, the money was in the custody of Hodgson as register — there was no other repository of it. The true construction of the order is not that it was intended to change this - custody; but that it was intended upon the happening of future events to blend with his relation of register, that of trustee. Having received the money as register, and duty and liability in that capacity having attached, it was not contemplated that there should be displacement of it, until the trusts came into existence in accordance with the decretal order. The question, in principle, is not distinguishable from that'which occurs" when a personal representative — an administrator or executor— unites with his relation that of guardian for infant distributees or legatees. In such case, before he is relieved from duty and liability in the primary capacity of personal representative, and duty and liability as guardian attaches, there must be separation of the assets he intends to take and hold as guardian from the assets of the estate — there must be as to such assets a termination of authority as personal representative, and to them authority and duty as guardian must attach. Davis v. Davis, 10 Ala. 299; Whitworth v. Oliver, 39 Ala. 286. Until there was investment of the money in the purchase of real estate in obedience to the decretal order, the trust estate to which duty and liability as trustee would attach, could not come into existence; and until it came into existence, it was not contemplated that Hodgson should be relieved from duty and liability as register. In his reports to the court Hodgson may — 563 — have adopted the title of trustee in connection with that of register ; but it was not by the title he chose to adopt, it is determinable whether duty and liability as trustee had taken place ; this is determinable from the matter of the reports — from the facts they contained. The last of these reports showed an investment of a part of the money in the purchase of real estate, and having been confirmed, relieved him pro tanto from liability as register. This is now conceded, for the sum in controversy is the remainder of the money not shown to have been invested. The fifth plea differs from the fourth only by adding the averment “that there had been no settlement of the trust vested in Hodgson by said order and decree of said chancery court, and no ascertainment of the balance, if any, due from him on account of his administration of such trust; and that this court has no jurisdiction to entertain such settlement, and to ascertain such balance.” We agree that the liability of Hodgson as trustee'is not involved in this suit, and that a court of law has not jurisdiction to take an account of his administration of the trust. But we cannot conceive of what concern Hodgson’s administration of the trust, is to the defendants. So far as Hodgson may have invested the money in his hands as register in the creation of the trust estate, he was relieved from liability as register, and the sureties on his official bond were also relieved. For his administration of the trust estate, the defendants are not answerable — in no event, are they liable except for his delinquencies as register. — Mechem on Public Officers, § 285; Brandt on Suretyship, § 528; McKee v. Griffin, 66 Ala. 211. The money now in controversy, was not part of the trust estate — it was never in Hodgson’s keeping as trustee — and not having been invested in obedience to the decretal order, it remained as it was-paid into court, and as it was received by Hodgson ; the money of the plaintiffs. There was no error is sustaining the demurrers to these pleas. Hodgson held the office of register for several successive terms. The term continuing when the money was paid into court, and when he made the last report that he had the money in his hands, subject to the order of the court, expired six years before the execution of the bond mentioned in the first count of the complaint, and — 564 — five years before the execution of the bond mentioned in the second count. The general principle is, in the absence of statutes providing otherwise, or of express stipulations in the bond, that sureties on official bonds are not liable for the defaults or delinquencies of the principal occurring before the execution of the bond. Mechem on Public Officers, § 285; Brandt on Suretyship, § 526; Townsend v. Everett, 4 Ala. 607; Governor v. Gibson, 14 Ala. 326 ; Williams v. Harrison, 19 Ala. 277. With respect to this principle, there is general, if not unbroken concurrence of authority. Nor is there departure from it, because for successive terms, the principal was the incumbent of the same office. The sureties upon the last bond, so far as is practicable, must be treated and considered, and the extent of their obligations determined, as if the principal had not been the incumbent for the preceding term — as if he was not his own successor. — Townsend v. Everett, supra; Farrar v. U. S., 5 Peters, 373-389 ; U. S. v. Boyd, 15 Peters, 187 ; Bissell v. Saxton, 66 N. Y. 60 ; Detroit v. Weber, 29 Mich. 24 ; Vivian v. Otis, 54 Wisc. 518 ; s. c. 1 Am. Rep. 199 ; Rochester v. Randall, 105 Mass. 295 ; s. c. 7 Am. Rep. 519. This principle is substantially embodied in the eighth instruction requested by the defendant, and the instruction, if not abstract, should have been given. The instruction was not abstract, if there was evidence having a reasonable tendency to support the hypothesis on which it proceeds. Hodgson was without authority to employ the money otherwise than in the purchase of real estate, or in the improvement of the real estate he had purchased. This was the scope and extent of the authority conferred on him by the decretal orders of the court, which was the measure of his authority and duty. If the money was not so employed, the only duty resting upon him was the keeping of it safely, subject to the orders of the court. He was without authority, as he was without duty, to lend the money, or invest it otherwise than as the decretal order's prescribed. The want of authoxnty to lend, he recognized in one of the reports made to the court, stating that he made a loan of the moxxey, pending xiegotiations for its investment in real estate, and accounting for the interest received. Though the loan was unauthorized, he was bound' to account for the in — 565 — ter'est received. Public officers, like other trustees, can not make profit for themselves by the use of trust moneys. — Brandt on Suretyship, § 534. Confined in authority and duty to the investment of the money in the purchase and improvement of real estate, a loan, or any other investment of it, of itself, and in itself, would constitute a conversion, involving him and the sureties on his existing official bond in absolute liability. — Gerald v. Bunkley, 17 Ala. 170. That Hodgson had not employed the money, now the subject matter of suit, in the .purchase and improvement of real estate, is not matter of controversy. If the money had been so employed, it could not have remained in his keeping as register, and that it so remained, is the fundamental fact on which the plaintiffs base a right of recovery. There was evidence of an admission or declaration made in June, 1895, that he had the money invested, but the character of the investment, or the time of making it, does not seem to have been matter of inquiry, and was not stated. The material inquiry is, whether the investment was made prior or subsequent to the execution of the bonds mentioned in the complaint, and upon this inquiry, the declaration or admission, sheds but a feeble if any light — it is consistent with an investment made at any past time. Hodgson had not at any time prior to 6th December, 1888, suffered the money to lie continuously in his hands a barren and unproductive fund— he had made investment of part of it, and pending negotiations for the investment had loaned the money acquiring interest, and for interest received on a loan, increasing the fund to the sqm now sued for, he charged himself in the last report to the court. In Governor v. Robbins, 7 Ala. 79, a suit against the sureties on an additional or renewed bond of a sheriff for moneys collected by the principal prior to the execution of the bond, it was said by Collier, C. J.: “All reasonable presumptions favorable to a performance of official duty are indulged, and it can not be inferred from the receipt of money on an execution by a sheriff, that he has converted it. If it had been shown that previous to the execution of the bond in suit,'the principal of the. defendants had appropriated the amount collected by him, then the first set of sureties only would have been liable. But the proof does not show such to have been the case ; — 566 — the liability to an action does not appear to have been fixed until after the renewed bond was executed.” It must be observed of this case, as was explained in the subsequent case of Dumas v. Patterson, 9 Ala. 484, that the sheriff was not in default for failing' to pay over the money, until there was demand of it, or of some evidence that he had converted it to his own use. In Townsend v. Everett, supra, an action on the bond of a defaulting county treasurer, it was said, that the fact that the principal had not made annual settlements as required by law, and did not make a settlement until after the execution of a second bond, was not conclusive that there was a misappropriation of the money of the county previous to that time. Ormond, J., said : “Nor does it follow, that because the treasurer may have faithfully disbursed all the monies received by him, since the date of the last bond, that he had before that time wasted or misappropriated the monies previously received by him; non constat, but that tire monies previously received, were in the county treasury at the time the last bond was executed. A strong presumption that such was the fact arises from his report a few days afterwards, in which he admits a larger sum to be in the treasury of the county, than the defalcation fixed by the jury at the trial.” In Williams v. Harrison, supra, in considering whether there was a presumption that a guardian had on hand, at the execution of a second bond, moneys which he ought to have had, Dargan, C. J., after reference to the case of Myers v. United States, 1 McLean, 493, in which McLean, J., denied that there was any presumption as against the sureties on a second official bond, that moneys which came to the possession of the principal while a former bond was of force, was in his hands when the second bond was executed, said : "I do not, however, intend to -assert the rule as broadly as was done by Justice McLean, for the inference of one fact from another is a question for the jury, and if the jury were to find even as against a security, that a sum of money was on hand at a particular time, and this by inference from the fact alone, that it had been received by the principal at a time prior, I should not be disposed to disturb their verdict, if there was no proof to weaken or rebut the presumption. But if the money had been received a — 567 — considerable time prior to the point of time at which it was sought to show that the money was in hand, and they were to refuse to draw the inference that it was on hand at this subsequent time, I should be entirely satisfied with their verdict, and would not set it aside. ' But when there are other circumstances in evidence tending to weaken this presumption, and showing a probability that the money had been used by the principal before the surety became bound, it would be very wrong for a court or jury to draw the presumption against the probabilities of the case, for the purpose of charging a surety.” This seems to us the better doctrine in reference to this question, embarrassed by much of conflict and dissension of judicial decision. . Each case must be governed by its own particular facts and circumstances. The number of years elapsing after the report by Hodgson that he had the money in keeping, taken in connection with the prior loans of it, manifesting a disinclination to hold it as an idle, unproductive fund, have a reasonable tendency to prove the facts hypothesized in the eighth instruction, and free the instruction from the objection of being abstract. It was for the jury to determine whether the money remained in Hodgson’s hands at the time of the execution of the bonds, or either of them, on which the defendants became sureties. If it did not — if in the interval it had been loaned, or otherwise invested than in the purchase or improvement of real estate — the defendants are not liable. However he may have invested it, whether by loan or otherwise, if he subsequently, after the execution of the later bonds collected it, the defendants are liable ; and this by fair intendment, the instruction concedes. We do not deem it necessary to say more in reference to the first instruction requested by the defendants, than that there is no aspect of the case in which it would have been justified. There is no legal presumption that the fund was converted or misappropriated by Hodgson, ■before the execution of the bonds on which defendants are his sureties, as there is no such presumption that until the execution of the bonds it remained in his keeping. The time of the conversion or misappropriation, is matter of inference to be drawn by the jury from all the facts and circumstances in evidence. When this is the state of the evidence, such an instruction would be — 568 — an invasion of the province of the jury. — 1 Brick. Dig., 335, §3. The second instruction requested is obnoxious to the like objection. The matter of the remaining exceptions relates to instructions given or refused, as to the liability for interest on the fund in controversy. The general rule is, that a public officer is liable for interest from the time of a conversion or misappropriation of moneys entrusted to his keeping, and he is liable, also, if he unlawfully retains moneys in his hands, during the period of the unlawful detention. — 11 Am. & Eng. Encyc. of Law, 398, note. As in the case of trustees, there must be some element of a breach of trust in the transaction, or a breach of duty. — Perry on Trusts, § 468. As we have already said and repeated, any other employment of the money than in the purchase or improvement of real estate, was a conversion, and that if such conversion occurred before the execution of the official bonds on which defendants are sureties, they are not liable. The instruction given by the court ex mero motu, authorizes the jury to award interest against the defendants from the time of such conversion, from the time he had invested the money by loan or otherwise, if such loan or investment was continued after the execution of the first of the bonds on which defendants are sureties. Doubtless, Hodgson is liable for interest from the day of the conversion — from the day of the unauthorized loan or investment — but such liability cannot be visited on the defendants because the investment was continuing at the time they became Hodgson’s sureties. The investment was a past act — a past .breach of official duty — for which the defendants are.not liable. The fourth instruction requested by the defendants, is predicated upon the hypothesis that Hodgson could have accounted for the principal only to his successor, and that of consequence liability for interest would attach only on the appointment of a successor. Hodgson’s liability was to the plaintiffs only, and whatever of duty he was bound to perform was owing only to them. The duty, and the only duty Hodgson owed his successor, was that owing by every public officer, as prescribed by the statute (Code of 1886, § 301) ; the delivery on demand of all books, papers, property and money, belonging or appertaining to the office. — 569 — The fifth instruction, requested by the defendants proceeds on the hypothesis that a demand of payment, and a failure or refusal to pay, without legal excuse, was necessary to create a liability for interest. As a general proposition, a demand of payment is necessary to fix upon a public officer a liability for interest. But if there has been a conversion or misappropriation of the money, a demand is not necessary ; the presumption is, it would be unavailing if made. The sixth and seventh instructions, in the view we have expressed of the liability of the defendants, should have been given. If Hodgson had the money in his keeping at the execution of the first bond, the liability of the defendants for it then accrued, and in no event could they be liable for interest at any earlier period. For the errors pointed out,' the judgment of the court below must be reversed and the cause remanded. Reversed and remanded.