Brooks v. Brooke

Dorsey, J., delivered the opinion of this court. Much time has been spent in discussing the question, whether this be a supplemental bill or a bill in the nature- of a bill of review, seeking to alter or amend some decree or order, — 317 — passed in a cause heretofore depending in court. In neither of these aspects can it be sustained; nor is it so regarded by us. We deem it an original bill, stating the previous proceedings of the court, not with a view to their alteration or amendment, but as a portion of the facts out of which the complainant’s equity arises. The case of Boteler and Belt, 7 Gill and John. 143, has been relied upon as a clear adjudication against the rights now asserted by the appellant, and as settling the doctrine, that a Court of Chancery has no power over the securities of a trustee, their responsibility existing only at law. As a general rule, this doctrine is undeniably true; but like other general rules, it is obnoxious to some exceptions, of which we think the case before us is one. The case referred' to, in our view of it, contains nothing adverse to the appellant’s right to recover in the present form of proceeding; on the contrary, the court explicitly declares, that it means to express no opinion upon that subject. Where property is sold under a decree of a court of equity, the proceeds of sale are considered in the custody of the court; and no person, whether a party to the suit or otherwise, can maintain a suit at law for the recovery of any portion thereof, until payment of the claim thus prosecuted shall have been awarded by the court, and (according to the case of Oyster and Annan, 1 Gill and John. 450,) notice of such award, and a demand of payment, shall have been made of the trustee, or other officer in whose hands the fund may have remained, as the fiduciary agent of the court. This court, in the case of Boteler and Belt vs. State, use of Chew & Co., 8 Gill and Johnson, 360, having, in effect, declared the order in favor of the creditors of Henry M. Chew & Co. a nullity, no order of court has been passed for the payment of the judgment owned by the appellant, in virtue of his having paid it as one of its .superseders. Nor can such an order now be passed — the delinquent trustee, after wasting the fund, having died intestate, without any administration or estate on which an administration could be had. To place himself in a condition to prosecute at law, his claim against the sureties, on the trustees — 318 — bond, is, to the appellant, wholly impracticable; and if relief be denied him, in the mode in .which he now seeks it, he is remediless, indeed, both at law and in equity. The search, proved to have been made for the original bond, is, we think, sufficient evidence of its loss to warrant the interposition of a court of equity, as far as that fact would give it jurisdiction. But, in our opinion, the question of jurisdiction-does not depend upon the loss of the bond. If the bond were in existence, the jurisdiction is sustained, if sustainable at all, by the other facts in the cause. It has been insisted, that E. M. Dorsey, the trustee, having been ordered to pay off the prior incumbrancers, such incumbrancers thereby became creditors of the fund in Dorsey’s hands, and were bound to abide its loss by Dorsey’s insolvency, so far as the residue of the proceeds of sale and the other claimants thereof, were concerned. And consequently, that the order on Mundel to pay off the prior incumbrancers with the fund to which the appellant and other subsequent incumbrancers were entitled, is erroneous. Without stopping to inquire what benefits would ultimately result to the appellees if the positions thus urged in their behalf were established 5. and whether, under the well settled principles of substitution, a Court of Chancery would not subrogate the appellant to all the rights of the prior incumbrancers, whose claims being ordered by the court to be paid by the trustee, for whom the appellees were securities, stand exempt from one of the strongest grounds of defence, which has been relied on in bar of the relief sought by the appellant; let us examine whether the incumbrancers were in the predicament which has been ascribed to them. Had they been parties to the proceedings before the court, the consequences asserted by the appellees might have been urged with much plausibility. But these incumbrancers were never before the court, nor made parties to its proceedings, and were in no wise bound to seek payment of their claims out of the proceeds of sale in the hands of the trustees, and if not paid off, might have prosecuted their liens upon the lands sold after their conveyance to the purchaser, — 319 — notwithstanding he had paid the whole purchase money, and the land had been sold to him by the trustee free from all incumbrances. To rescue the purchaser from such glaring injustice and oppression, the court very properly, on the failure and inability of Dorsey to pay them out of the funds in his hands, ordered their payments by Mundel, the second trustee. It has been stated by the appellees solicitor, that there was no breach of the bond in the lifetime of the trustee, he having •complied with every order of the court obligatory upon him. This statement, we conceive, is not warranted by the proofs and proceedings before us. By the original decree, under which the sale was made, the trustee was ordered to report the sale and to bring the proceeds of sale into court; the latter branch of which order he has wholly disobeyed, and thus broken the condition of his bond. For the consequences of which breach, both he and his securities are liable to be sued at law by any person who can shew himself damnified thereby, and clothed with the requisite authority to sue. A forfeiture of the bond, attended with similar consequences, occurred when the trustee Tailed to comply with the order of the court of the 26th of October, 1830, commanding him to pay off the prior incumbrances, and to bring into court the residue of the purchase money in his hands. At law, then, the securities were not only not absolved from their contract, but were liable to be sued thereon, the moment the requisite sanction to the •claims should be given by the court in which the proceedings were pending. Is it then consistent with reason or equity, that a violated contract, in full force and operation at law, should be discharged by the mere accidental circumstance of the trustee’s death, before the final adjudication of the court, upon the claims before it? But it is said, that the order of the 26th of October, 1830, to pay off prior incumbrances, is a rescission of that part of the original decree, requiring the proceeds of sale to be brought into court. This is not the fact. The funds being retained by the trustee, instead of being brought into court, no other order could well be passed, consistently with the existing condition of things. The order — 320 — too of the 26th of October, was not confined to the payment of prior incumbrances, but enjoined the trustee to bring into court the residue of the proceeds of sale remaining in his hands, alter the making of such payment. Thus, in respect to such residue, reiterating the order in the original decree, as to the bringing into court of the proceeds of sale. Upon both branches of this latter order, was the bond of the trustee forfeited in his lifetime: and the liability of him and his sureties, to be sued at law for such forfeiture, fixed and undeniable; the commencement of suit being delayed only until the damnified party should have been recognized as such by the court; and he should have gone through the -form of notice to the trustee and demand of payment. If relief in the mode in which he has now sought it, be denied to the appellant, he is wholly without remedy. And what is it that has placed him in this lamentable condition ? The simple accident, that before payment of his claim has been ordered, and notice given and demand made, the trustee has departed this life. To place himself in a condition to assert his rights in a legal forum, has, by this accident, become impracticable. Can a stronger case than that now before us, for the interposition of a court of equity upon one of its well established heads of equitable jurisprudence, be well imagined, unless indeed the objection to relief set up by the appellees, on the ground of their surety-ship, can be sustained. The appalling consequences resulting from such a defence, are such, that before it would be sanctioned by any court, much less a court of equity, the most imperative and unanswerable authorities must be adduced to support it. To none that we regard as such, have wre been referred. It, in fact, establishes the principle, that whenever a trustee, having funds in his hands arising from property sold under a decree, dies before the appropriation of the fund amongst the claimants has been ordered by the court, and a demand of payment, accordingly made of the trustee, his securities in his bond are absolved from all liability thereon. In support of this startling proposition, the solicitor of the appellee asks, “ Will you do any thing to enlarge the liabilities of — 321 — securities ?” A court of equity will do nothing to extend the liability of securities beyond the clear intent and import of their contract. But if to such an extent they cannot at law be held liable, by reason of fraud, accident or mistake, a court of equity, to prevent a failure of justice, will interfere, and enforce the execution of their contract according to its obvious meaning and design. As authorilies for this, see the cases of Crosby vs. Jonathan Middleton Colleson, and al, Pre. Ch. 309; Skip vs. Husy and al. 3 Atk. 93, and Berg vs. Radcliffe, 6 John. C. R. 302. The death of E. M. Dorsey, under the circumstances in which it took place, is such au accident as would entitle the appellant to relief in a court of equity in the manner in which he seeks it. But suppose, that we are wrong in sustaining, under the circumstances of this case, the jurisdiction of the Chancery Court on the ground of accident, it ought to be sustained upon that great principle in which chancery jurisdiction was originally assumed — that without it, there would be a total failure of justice, a court of law being incompetent to grant any adequate relief. This doctrine is fully supported by the Supreme Court of Appeals of Virginia, in the case of Spotswood vs. Dandridge and others, 4 Munford’s Rep. 289. A case in principle not distinguishable from that before us. In Virginia, if an executor commits a devastavit, suit upon his bond, against his securities, cannot be maintained, until the devastavit against the executor be established in a suit at law. In the case cited, the executor died without any personal representation after a devastavit, but before its establishment by suit. Relief was granted against the sureties on their bond by a bill in Chancery. Speaking in reference to proving the devastavit otherwise than by a suit at law, the court say, “if this cannot be done in one tribunal, owing to its particular forms of proceeding, it may be done in another, for it is a fundamental principle, that there is no right without a remedy.” This case is cited with approbation in the case of Carow, Ex’r. of Mowatt, vs. Mowatt’s Adm’r, 2 Edwards’ Ch’y. Rep. 57, where it was decided, that an administrator committing a devastavit, — 322 — being dead, before action establishing it at law, a court of equity will take cognizance of a suit against his sureties or their representatives, and the persons interested in any estate he may have left, and make them liable for waste or misapplication of assets. But this would not be done in an ordinary case, where the administrator is in full life and within the reach of a court of law. The same principle is settled in Moore and al vs. Armstrong and al, 9 Porter's Reports, 697, where the administrator being dead and insolvent, a bill in Chancery was filed against his surviving surety and the executors of his deceased surety. The right thus to proceed in Chancery was fully recognized, although no previous judgment was obtained at law against the administrator; the court, at the same time, declaring, “that no one can proceed against the sureties in the administration bond, at law, who has not first recovered a judgment against the administrator.” That “ there is nothing in the constitution of a court of equity which should induce it, in an ordinary case, to depart from the rules of laws in the administration of justice, yet, as its mode of procedure is materially different, more enlarged and liberal, it must of necessity take jurisdiction of cases which the ordinary forums cannot reach.” And the court further add, that if it were not allowable to proceed against the sureties alone, “the plaintiffs, though they had just ground of complaint, would be remediless. This cannot be, for it is the just boast of the common law, that every right has its appropriate remedy, if not in the ordinary forum, at least in Chancery, which exercises an extraordinary jurisdiction.” This court will sign a decree reversing, with costs, the pro forma decree of the Chancellor, and making such provision for the final adjudication of the rights of the parties in this cause as is in accordance with their agreement in the record. DECREE REVERSED WITH COSTS AND CAUSE REMANDED.