State ex rel. Gable v. Coale

Miller, J., delivered the opinion of the Court. In this case suit was brought upon the bond of Isaac Coale, Jr., as one of the executors of John Gable whose will was admitted to prohate in February, 1856. By this will the testator devised all the residue of his estate, real and personal, after payment of debts and funeral expenses, to his wife, Louisa M. Gable, George Neilson and Isaac Coale, Jr., and the survivor of them, in trust for the purposes therein stated, and appointed the same parties his executors. All the executors qualified as such, and gave separate bonds. Coale, who had married one of the daughters of the testator, appears to have taken upon himself the principal mangementof the estate, and died in December, 1873. Neilson died in October, 1876, and Mrs. Gable is still living. The bond sued on was executed on the 6th of March, 1856, and the suit was instituted on the 6th of November, 1877, more than twenty-one years after the date of the bond. The equitable plaintiff's are parties who were appointed trustees under the will in place of Mrs. Gable, the surviving trustee, who asked to be relieved from discharging the duties of the trust. The order appointing them, passed two days prior to this suit by the Circuit Court of Baltimore City, upon application — 373 — therefor, authorized them to bring suit upon the bond of Coale, in order to recover from the sureties therein a large amount of money alleged to be due by him as executor. The sureties pleaded limitations, and also relied upon the defence that the assets of the estate received and collected by Coale as executor, had, long prior to his death been transferred by operation of law, to himself and his co-trustees under the will. The case was submitted to the Court without the intervention of a jury upon an agreed statement of facts, and upon the evidence which appears in the record. The effect of the Court’s rulings upon the several prayers offered on both sides, was to overrule the defence of limitations, and to sustain that of transfer by operation of law. The judgment was consequently in favor of the defendants, and the plaintiffs have appealed. The only question, therefore, for review is whether the rulings of the Court in favor of the defendants were correct. The first inquiry looking to a solution of this question is, what were the duties of the executors under the will, and how long did their functions as such continue? This depends upon the construction of the will itself. The testator first makes an absolute devise to these parties, and the survivors or survivor of them, of all the rest and residue of his estate, real, personal and mixed, after payment of debts and funeral expenses in trust to allow his wife to take and receive out of the rents, income and profits of the same, the sum of $2400 annually during her life, or as long 'as she continues unmarried, and after her death he divides his estate into three parts, and devises each of these parts to Neilson, one of the same parties, in trust for his two daughters and his son, with contingent limitations over, and then appoints the same parties his executors, with power to sell or dispose of any portion of his real or personal estate, and to convey the same at their discretion for the purpose of carrying out his will. — 374 — Now intermediate the devise in trust in favor of his wife, and that in favor of his children after her death, is this clause: “And whereas a considerable portion of my personal estate consists of the capital invested by me in the commercial house of McDowell & Gable, in the City of Baltimore, I do hereby order and direct that the business of the said house shall he continued after my decease, for the benefit of my estate, upon such terms and for such periods as may be agreed upon between my executors and the surviving partner, and that my executors shall regularly receive and take out of the profits of said house, the share thereof to which my estate will be entitled, and after paying to my wife the aforesaid provision for her support, that they shall safely invest the excess of said profits for the benefit of my estate, and whenever the said business shall be closed and my capital therein withdrawn, I do order and direct that as fast as the said capital shall be received by my executors, they shall invest the same in good and safe securities that it may yield the means of paying the said annuity, and increasing my estate for final distribution.” It seems very manifest that the intent which pervades this entire clause and controls its construction is, that the business of the firm should be carried on after the testator's death, by an arrangement between his executors and the surviving partner. The language used and the provisions made are all plainly referable to this continuation of the firm business. The profits to be made and the capital when withdrawn, upon the closing of the business so to be conducted, as well as the duty of conducting and managing the business itself, are confided to the care of the executors. The duty of carrying out an arrangement by which his commercial business was to be continued as it had been conducted by the testator himself, is one that pertains more appropriately to the office of executors than to that of trustees, and the whole clause is founded upon that idea. If the business was not to be so continued, there — 375 — was no reason for the existence of this provision. If the executors were simply to collect the interest of the testator in this firm, as any other asset of his estate or debt due to it, there is no reason why it should not pass to the trustees with, and at the same time the other portions of the estate passed to them, under the devise of all the rest and residue of his property. Now this’ is precisely what the executors did. It is admitted the business was not carried on after the testator’s death by his surviving partner and the executors. The latter either declined to carry on the business, or the surviving partner refused to enter into any such arrangement with them. The executors therefore proceeded at once to collect and receive from McDowell, their testator’s interest in this firm. The continuation of the business according to the testator’s wish having thus failed, we are clearly of opinion that all the duties imposed upon the executors under this clause of the will, ceased to be obligatory upon them. In other words, the whole clause fell with the failure of the main object it was its purpose to effect. Such being in our opinion the true construction of this will, the duties which it, as well as the law imposed upon these parties in their two-fold capacity of executors and trustees are too plain to admit of controversy. As executors it was their duty simply to collect the assets, pay the debts, and then transfer the balance to themselves as trustees. In the latter capacity it was their duty to administer the trust according to the provisions of the will, during the life of the widow, and upon her death to transfer the estate to the single trustee for the children. Now what was done? The debts were few, of small amount, and were promptly paid. Two accounts were then passed in the Orphans’ Court, the first, on the 22nd of April, 1857, showing a balance due the estate of $25,657.34, of which $22,786.49 consisted of cash, and the second, on the 29th of June, 1858, showing a balance of $45,223.44, of — 376 — which $42,352.29 was cash. These accounts were passed, by the three executors and were sworn to by all of them, but we shall assume as the proof seems to establish, that, the money was collected and received by Coale alone. We shall not stop here to notice the fact that a portion of this money was invested in the purchase, of property, or to follow the evidence that traces out the final disposition of a part of the property so purchased, and the amount ultimately realized from various sources to the estate of the testator. After the passage of these accounts it is admitted that Coale received the additional sums of $4347.68- and $3862.63, the first, on the 4th of July, 1859, and the second, about the 1st of January, 1860. It thus appears, that a very long period after the debts had been paid and the time allowed by law for the settlement of the estate by the executors, and their receipt of all assets, for which the executor’s bond sued on is sought to be held responsible, had elapsed before this suit was instituted. If, therefore, the doctrine of transfer by operation of law, has any foundation in reason and justice, this is a case which calls, for its -application, and very stringent and satisfactory objections to its operation must be adduced and established. The reasons upon which the doctrine is founded have been so clearly stated by this Court, and the instances of its application have been so numerous, that it is quite unnecessary to refer to other authorities either for its support or its illustration. In fact, it has for nearly a century been accepted in this State as established and familiar law. The cases have all been cited in argument, and we shall refer to a few of them only. The first is that of State vs. Jordan, 3 H. & McH., 179, where a testator gave legacies to his grand-children, and made his executors their guardians, and.in a suit by one of these legatees upon the bond of the executors, it was held, that the bond was-not liable, because the legacy by operation of law had — 377 — passed to the guardians. In this case, which was decided by the General Court, the question arose on the pleadings which are set out in 2 Harr. Ent., 326 to 329. This was followed by the case of Downes vs. The State, 3 H. & J., 239, where the same question was decided in the same way by the Court of Appeals. In neither of these cases was any opinion filed, but in Seegar vs. The State, 6 H. & J., 162, an opinion was delivered and the Court say: “it is an established principle of law, that where the same person who acts as the administrator of a deceased party is appointed guardian to the representatives, that whatever balance is in his hands at the rendition of the final account, (and perhaps, even prior to that time) is in his hands and possession not as administrator to the deceased, but as guardian to the representatives. This transfer is by operation of law. The administrator having in his hands a balance that ought to be paid over to the guardian, and one person representing both these characters, he cannot pay the money over to himself, nor, if the payment was refused, is there any person who could enforce it. Under these circumstances, the law, by implication, considers it in the hands and possession of the party in that representative character that ought to receive it.” The reason of the rule thus stated, is substantially the same as that which is more elaborated by Judge Story, in Taylor vs. Deblois, 4 Mason, 131. Again in Watkins vs. The State, 2 G. & J., 220, we have the emphatic declaration, that where an executor “sustains the two-fold character of executor and guardian, the laio loill adjudge the ward’s proportion of the property then in his hands, to be in his hands in the capacity of guardian, after the time limited by law for the settlement of the estate, lohether a final account has been passed by the Orphans’ Court or not; upon the principle that what the law has enjoined upon him to do, shall be considered as done, and from that time he holds the ward’s proportion of the property by operation of law, — 378 — in that character in which he would be entitled to receive it upon a final completion of his trust as executor.” So in Flickinger vs. Hull, 5 Gill, 60, we find the principle stated thus: “ where a person in one character is debtor, and the same person in another character is creditor, the .law regards the debt as paid by the debtor capacity to the creditor; and this is on the same principle which governs in the case where a man has several capacities, and is found in possession of property, the law wall attach the possession to the capacity in which, of right, it ought to be held.” And finally in Hanson vs. Worthington, 12 Md., 418, the same party was, as in the present case, both executor and trustee under the will, and it was not only decided, that by operation of law the fund would be considered in his hands as trustee after the time limited by law for the settlement of the estate, but, that the probate of the will, and the taking out of letters testamentary by the executor, was sufficient evidence of the acceptance by him, of the trust created by the will. It is plain, therefore, that the principle is one which has been established for the promotion of justice, and for that purpose it holds parties in such cases to the same responsibility, and requires of them the same discharge of duty in respect to their several capacities, as if those capacities were represented by different persons. If then, we are right in our construction of this will, and the duties of the executors thereunder, it is clear beyond controversy, that had the trustees been different persons, they would have been entitled to receive from the executors, and in case of refusal, to sue for, and recover from them the sum- mentioned in the second administration account, as due the estate, immediately after the passage of that account, if not before, and .the other sums subsequently received by Coale as executor, within a reasonable time after their receipt, as stated in the defendants’ first and second prayers. It follows, then, that the principle must be applied to the — 379 — exoneration of this bond, unless its application is prevented by one or both of the two objections, we are now prepared to consider. 1st. The first of these objections is that the executors, and Coale especially, continued to deal with the estate, and professed to act in respect thereto, as executors, long after the time when it is claimed the transfer by operation of law took place. Among the facts mainly relied on by the appellants as showing that the executors did so act, are the purchase of the leasehold and fee simple interest in the Monument street property, and taking the conveyances therefor to themselves as executors, and the subsequent sale and conveyance of the saíne to Carroll, the purchaser, by them in the same capacity; the purchase and taking title to the Eutaw street property in the same character; the keeping by Coale of accounts in bank as executor, and drawing checks thereon signed by him as executor; and the testimony of several witnesses, as well as papers and other documentary proof, showing that during all this time and up to a short period before his death, he professed to act, and openly acted as executor and not as trustee. Now giving to this proof the utmost weight that can be accorded it, and assuming that it establishes the fact that these executors thus continued to act in that capacity, the objection at last amounts to this, and if sustained it would result, that a party who is both executor and trustee under a will, can by his own election continue the office of executor long after his duties as such had in fact ceased, and the time allowed by law for the settlement of the estate had elapsed, and long after the arrival of the period when he ought to have acted as trustee, and discharged the duties pertaining to that capacity. This would make the transfer depend not upon the law, or any regard for the proper discharge of his duties, but upon the mere will and pleasure of the party, and, as has been well said by the appellees’ counsel, is utterly — 380 — inconsistent with the existence of the doctrine itself. The law operates the transfer because of, and in accordance with the duties devolved upon the same party in his several capacities, and to allow that transfer to he defeated by his mere choice and election, would strike down all the advantages of the rule, and it might as well cease to exist. No such interruption to its operation has been recognized or alluded to in any of the Maryland cases, and it would seem that its usefulness is best illustrated by applying it for the prevention of such conduct, and the injurious consequences that might result therefrom. It is apparent that if such an objection should be sustained, it would open the door to fraud and combinations between the party and the sureties upon the bond which ought to be held responsible, and in many cases lead to gross and flagrant injustice. Nor is the appellants’ case helped by the fact that the investment of part of these funds in the Monument street property was, on application, authorized and directed by an order of the Orphans’ Court, or that as late as 1870 and 1871 citations were issued by that Court to the executors to state a further account. We have shown that the executors had no power to make investments. That duty was devolved upon the trustees, and the Orphans’ Court had no jurisdiction over the administration of that trust; and, as we have seen, the operation of the transfer is not dependent upon the passage of a final account by the executors. It may not be necessary to decide the point in this case, but we find no difficulty in regard to the title to the real estate thus taken and transferred by the executors. The same parties were authorized to purchase and sell as trustees, and the fact that they took and executed conveyances as executors, would seem to make a case covered hy what is said in Flicldnger vs. Mull, viz.: where a party has various capacities, and executes an authority delegated to him in one of those capacities, the law will attribute the act to the proper authority, although — 381 — lie does not profess to execute it in virtue of that particular power. It follows that this first objection cannot be sustained. 2nd. The next objection is, that prior to the time when the transfer by operation of law could have taken place, Coale had wasted the assets so that there was nothing then in his hands as executor to be transferred to or held by him as trustee, and consequently the liability of his bond as executor, notwithstanding the admissions in his administration account, was then fixed and so remained until his death. Whether in such a case there can be such a wasting of assets as will prevent the operation of the rule, is a question not settled by the Maryland authorities. It was alluded to but not decided in the case of Seegar vs. The State. In that case it appears that Seegar married the administratrix of a deceased husband, and afterwards became guardian of the children of the deceased, and itvras contended the widow had wasted a portion of the assets before she married Seegar, so that the whole did not come into his possession as administrator by virtue of his marriage, and it could not therefore bo transferred to him as guardian by operation of law. It was in view of that state of facts that the Court said: “ If the amount of property wasted by the wife had been more than she was entitled to receive upon the settlement of her deceased husband’s estate, a question might arise tvhich is not necessary to he considered in this case, as it is not brought into view by the testimony in the record.” It was then held, that as it appeared that the sum wasted by the wife was less than what she was entitled to retain as widow, it clearly followed that Seegar, when he rendered his final account with his wife, as administrator, was in possession of the whole amount due the children of the deceased, and consequently the sureties on the administration bond were released by the transfer by operation of law, of that •amount to the guardian. But assuming the proposition to — 382 — be true, that if the assets are wasted by the executor, before his duties as such have ceased, so that nothing then remains in his hands upon which the transfer can operate, his bond as executor will remain liable, we are very clearly of opinion there is no sufficient evidence in the record, that Coale had so wasted the assets at any date prior to the time when by operation of law, they would be considered in his hands as trustee. It is not a mere technical devastavit, such as failing to keep the funds of the estate ear-marked and separate from his own, or mingling them with his own, that will amount to such wasting. But this is all that the evidence shows was done by this executor. He did not keep the money of the estate separate from his own, hut opened .an account in hank, as executor, in May, 1856, which was continued until July, 1862, and with the deposits thus made mingled a large amount of his own money, and drew checks upon the same indiscriminately, for his own purposes as well as for the estate. But there is nothing to show that at any of the periods when the law would effect the transfer, he had not in hand, or under his immediate control, a sufficient sum to meet all his liabilities as executor, and above all, there is not a particle of evidence that at these times he was not perfectly solvent, or that he was even embarrassed, and not perfectly ready and able to meet promptly every demand that could lawfully be made upon him as executor or otherwise. In this state of case, we have no hesitation in deciding there was nothing to prevent the transfer, and being of that opinion, we cannot sustain this objection. (Decided 27th March, 1879.) These views cover all the material questions presented by this appeal, and if they are correct, there was no error in the rulings which sustained the defence of transfer by operation of law, and it follows that the judgment must be affirmed. Judgment affirmed.