Forrester v. State ex rel. Kernan

Grason, J., delivered the opinion of the Court. This suit was instituted on a trustee’s bond to recover the balance of a sum of money arising from a trustee’s sale made by Forrester, and audited to the appellee, then a minor. The sureties filed nine pleas, the seventh of which was demurred to, and the demurrer was sustained, and the first question presented in the case is whether the ruling in this respect was correct or not. The plea, alleged that without their knowledge, but to the knowledge of Kernan, Forrester became embarrassed pecuniarily in the fall of 1872, and that Kernan, thus knowing Forrester to be embarrassed, asked him what investment he had made of the money of said Kernan, and was told that he had invested it, or part of it, in property on Hoffman street, and that Kernan declined to accept the same, but did not then, or afterwards, inform the defendants either that Forrester was pecuniarily embarrassed, or that such, investment had been made by him, and that by reason of such information not having been imparted to them, they had lost the opportunity of securing themselves against any loss they might sustain on account of their suretyship on the bond mentioned in the declaration, and protest that at that time, their liability on the bond ceased. [161] Kernan was under no legal obligation to inform them that Forrester had become embarrassed in the fall of 1872, or that he had invested Kernan’s money as before stated, or that Kernan had declined to accept such investment. It became Forrester’s duty to pay over the money as early as 1869, and he had been in default from that time. It was the duty of his sureties to make inquiries, and see to it that their principal discharged the obligation resting upon him, whether he was then solvent or insolvent. Therefore, even if the facts alleged in the seventh plea were all true, as they are admitted to be by the demurrer, they furnish no legal defence to the plaintiff’s recovery, and the demurrer was properly sustained. The evidence set out in the first exception, was clearly inadmissible. It consisted of declarations of Shipley, not a party to this suit, without any evidence having been previously introduced, and without any offer to follow it up with evidence to shew that he was Kernan’s attorney or agent, or in any manner authorized by him to make such statements or declarations. . The statements thus sought to be introduced consisted of hearsay simply, and were properly excluded from the jury. The defendants filed a motion to have withdrawn from the jury evidence offered by the plaintiff, to prove that the deed from Forrester and wife to Kernan, of the Garden street property, was given as collateral security for the debt due the latter, said evidence, as they allege, having been received subject to exception and being inadmissible. The record nowhere shows that such evidence was admitted subject to exception, nor does it appear that the Superior Court passed upon the motion, nor is there any exception in the record with respect to this matter, and we must therefore presume that the evidence was admitted without objection from the defendants. The second exception is taken to the granting of the plaintiff’s two prayers, and to the refusal to grant all the [162] prayers of the defendants, except the sixth, which was granted. The plaintiff’s second prayer asked the Court to exclude from the consideration of the jury all the evidence which had been admitted, subject to exception, to show the state of accounts between Forrester and Mrs. Willoughby individually, and Shipley. The accounts between these parties could have no relevancy to the issue before the jury, as they did not tend to prove what sum, if any, was due by Forrester, trustee, to Kernan, or to prove or disprove the liability of the sureties in the bond to pay the sum for which their principal was in default. They were therefore inadmissible, and were correctly withdrawn from the jury under the plaintiff’s second prayer. When the auditor’s account was ratified, Forrester, as trustee, became liable to pay on notice thereof and demand, and Kernan entitled to receive the sum of money audited to the latter. Whether Forrester’s sureties would have been released from their liability if Kernan after he came of age, had authorized and directed the trustee to invest the said money for him, and it had been so invested, it is unnecessary now to consider, because it is not contended, nor is there any proof to show that it was so invested. On the contrary, it appears in proof that Forrester invested it in the Hoffman street property, and upon Kernan declining to assent to that investment, he purchased the Garden street property, which was then subject to a mortgage, took the title in bis own name and afterwards mortgaged it for his own purposes. Until the money due Kernan was either paid to him, or invested for his benefit according to bis directions, Forrester’s sureties remained liable to Kernan on the bond. It was contended, however, that as Kernan bad received a deed for the Garden street property from Forrester and wife, the consideration for which was stated to be six thousand dollars, and because the deed is absolute upon its face, it must be taken [163] and held as payment and satisfaction of the debt due by Forrester, trustee, to Kernan, and that the sureties are consequently released. The deed, however, was executed and recorded without Kernan having been consulted with respect to it, and without any knowledge on his part of the fact of its having been done until some time afterwards, and after Forrester is shown to have been in very embarrassed circumstances. When the property was sold under the mortgages, Kernan applied by petition to the Court having the distribution of the proceeds of sale, to have the balance of the purchase money, after the payment of the mortgage debts, applied to the payment of his debts, which was accordingly done. The petition did not state whether he had accepted the deed in satisfaction of his debt or as collateral security for its payment. It was only necessary to show the Court that he held the title to the property, subject to the mortgages, in order to entitle him to receive the surplus proceeds of sale. He is not therefore estopped from now denying that he accepted the deed of the property in satisfaction of his debt, or showing that he accepted it only as security for its payment. The proof shows that he did accept it as collateral security, as he had the legal right to do, and the defendants have no cause to complain that he did so, as it has diminished pro tanto their liability on the trustee’s bond. The use that Kernan made of the deed upon his petitioning to have the surplus of the proceeds of the property, thereby conveyed, applied to the payment of his claim against the trustee was perfectly consistent with the fact that he had accepted it as collateral security for its payment ; and such acceptance in no manner affected or altered the liability of the sureties on the bond. Brengle vs. Bushey, 40 Md., 149. They were still liable on the bond for the balance of the debt due by their principal to Kernan, after deducting the payments made to him by the trustee, and the sum realized from the proceeds of the [164] Garden street property. Mrs. Willoughby, who was the guardian of Kernan during his minority, had no right without authority from the Orphans’ Court for that purpose, to invest her ward’s money, and certainly none to confer such right on the trustee; and, as we have before said, even if the trustee had received such authority from Kernan himself after he was of full age, neither the trustee nor his sureties would be released from their liability on the bond, unless the authority to invest had been executed in good faith for the benefit of Kernan, which the proof shows has not been done. It follows, therefore, that the appellee’s prayers were properly granted, and the appellants’ rightly rejected. (Decided 1st March, 1877.) Judgment affirmed.