Bourne v. Maybin

WOODS, Circuit Judge. The defense of the statute of limitations set up in the answer cannot prevail. The evidence shows ■hat the petitioner was married to her present husband while an infant She has, therefore. from her birth been under the disability of either infancy or coverture, either of which suspends the statute of limitation under the Code of Mississippi: Code 1857, art 12, § 2, c. 57, p. 400, and Code 1871, § 2156. Nor is the petitioner concluded by the accounts as they are styled, filed in the probate court by Maybin, as guardian, and the action of the court thereon. Both were filed during the infancy and before the marriage of the ward, and were passed upon without any notice to her. Neither of them are final accounts, but are expressly stated to be annual accounts. Such accounts are not conclusive on the ward. The Code of 1857, art. 148, c. 60, provides for a final account by the guardian after his trust has ceased, either by the marriage or majority of the ward. “And the guardian shall also make a final settlement of his guardianship by making out and presenting to the court, under oath, his final account, which shall contain a distinct statement of all the balances of his annual accounts, either as debits and credits, and also all other disbursements, charges and amounts received and not contained in any previous annual account.” The Code then proceeds to declare that such account shall be open to — 1006 — the inspection of the ward, and the court shall fix a day for hearing the same, and shall cause notice thereof to be given to the ward to appear and show cause why the final account of the guardian should not be allowed and approved. At the appointed time the court shall proceed to examine the final account and to hear the proofs for and against it, “and if the court shall be satisfied, after full examination, that the account is just and true, it shall make a final decree of approval, ratifying and confirming the guardianship, or it may allow only so much of the account as seems right,” etc. These provisions make it perfectly clear that, on the filing of a final account, the whole administration of the trust and all the annual accounts and the inventories are subject to challenge and examination. The absurdity of binding an infant by an annual or partial account, passed upon by the probate court without notice, finds no place In the jurisprudence of this state, and so the supreme court of the state has repeatedly held: Austin v. Lamar, 1 Cushm. 189; Harper v. Archer, 9 Smedes & M. 71; Coffin v. Bramlett, 42 Miss. 194. It is next contended by the defendant that the claim of the petitioner is not of such a nature as to be provable against the bankrupt estate; that only debts, and debts which were in existence at the date of the bankruptcy, can be proven; and that, as between guardian and ward, the relation of debtor and creditor does not exist until there has been a final accounting in the probate court, and a balance found due the ward. If this proposition were true, then the claim' of every ward or other beneficiary of a trust whose guardian or trustee was adjudged a bankrupt before settlement of the trust, would be excluded from participation in the proceeds of the bankrupt-estate. A conclusive answer, however, to this theory of the defense is found in the Code of Mississippi, which declares (Code 1857, art. 148, c. 60, p. 462) that “the powers and duties of -every testamentary or other guardian over the person and estate of his ward shall cease and be determined when such ward shall arrive at the age of twenty-one years, or be lawfully married, and in either event the guardian shall forthwith deliver up to the ward or to the husband, as the case may require, all the' property of every description of said ward in his hands, and on failure shall be liable to an action on -his bond.” Clearly, this provision of the Code raises the relation of debtor and creditor between guardian and his late ward as soon as the guardianship ceases. Mrs. Bourne was married and the powers of the guardian, as such, ceased more than a year before the bankruptcy of the latter, and he was liable to suit in any court of competent jurisdiction for the recovery of the amount which might be due from him' to his ward. The relation of debtor and creditor must, therefore, have existed between them as soon as the guardianship was terminated by the marriage of the ward. Another objection to the proof of the petitioner’s claim, similar to the one just considered, is that the debt of the petitioner is not a provable one, because her claim is pending and undetermined in a court, to wit, the probate court, which has full jurisdiction thereof. We think this objection is fully answered by the case of Payne v. Hook, 7 Wall. [74 U. S.] 425. In that case, Anne Payne, a citizen of Virginia, filed her bill in the circuit court of the United States against Hook, public administrator of Callo-way county, Missouri, and the sureties on his bond, to obtain her distributive share in the estate of her brother Fielding Curtis. The bill charged gross misconduct on the part of the administrator and false settlements with the probate court, and It ap--peared from the bill that Hook had not yet made his final settlement with the probate court. The bill was demurred to because, among other grounds, the probate court had exclusive jurisdiction concerning the duties and accounts of administrators until final settlement, and the administration complained of was still in progress, and resort should be had to that court to correct the accounts of the administrator, if fraudulent or erroneous. In reply to this objection to the bill, the supreme court said: “The circuit court of the United States for the district of Missouri had jurisdiction to hear and determine this controversy, notwithstanding the peculiar structure of the Missouri probate system, and was bound to exercise it.” “The equity jurisdiction conferred on the federal courts is the same- that the high court of chancery in England possesses, is subject to neither limitation or restraint by state legislation, and is uniform throughout the different states of the Union.” These remarks apply with pertinency to the jurisdiction of the bankrupt court, and to the facts of this case. The jurisdiction of the bankrupt court depends upon the act of congress. It cannot be controlled or limited by state legislation. It is uniform, and is required by the constitution to be uniform throughout all the states. Section 711 of the U. S. Revised Statutes declares, “that the jurisdiction vested in the courts of the United States of all matters and proceedings in bankruptcy, shall be exclusive of the courts of the several • states,” and section 4972, “that the jurisdiction conferred upon the district courts, as courts of bankruptcy, shall extend to all cases and controversies arising between the bankrupt and any creditor or creditors who shall claim any debt or demand under the bankruptcy.” Section 5106 declares, “that no creditor whose debt is provable shall be allowed to prosecute to final judgment, any suit at law or in equity therefor against the bankrupt, until the question of the debtor’s discharge shall have been determined, * * * provided, that if — 1007 — the amount due the creditor is in dispute the suit may, by leave of the court in bankruptcy, proceed to judgment for the purpose of ascertaining the amount. *due.” These citations from the statutes clearly show the jurisdiction of the bankrupt court to ascertain the amount of a claim against the bankrupt estate, and the fact that the claim may be in suit in another court does not divest it of that jurisdiction. It is true, that the bankrupt court could not arrest a suit brought against the debtor to recover a debt which the bankruptcy would not discharge, but it dearly has the jurisdiction to ascertain for itself the amount of the debt, where it is called on to apply towards its payment a part of the assets of the bankrupt estate. Where a bankrupt is liable for unliquidated damages arising out of any contract or promise, or on account of any goods wrongfully taken, converted or withheld, the court may cause such damages to be assessed in such mode as it may deem best, and the sum so assessed may be proved against the estate: Rev. St § 50C7. It seems clear, then, that the petitioner had a provable debt against the estate, for immediately on her marriage she might have maintained a suit against her guardian, upon his bond, in any court of competent jurisdiction, to recover whatever might be due her from him, and the fact that the probate court had jurisdiction to ascertain the amount did not oust the jurisdiction of the bankrupt court to do the same thing. . It is next objected to the claim of petitioner, that in November, 1869, she commenced a suit against her late guardian Maybin, in the chancery court of Warren county, Mississippi, for a final settlement of his guardianship, and, on April 22, 1873, obtained a decree against him for $20,609, and it is claimed that the debt being merged in the decree, neither the decree, nor the original debt on which it was founded, can be proven against the bankrupt estate. Many authorities are cited to show that the debt or claim on which a judgment is based is merged in the judgment. This is, of course, the general doctrine, and is not disputed. The rule of merger is that no further action can be prosecuted between the same parties upon a matter already ripened into judgment. There is no offer in this case to establish the debt by proof of the decree against Maybin, rendered by the state court. The proof offered is evidence to establish the claim upon which that decree was founded. Can this be admitted? I think it clear that the claim presented against the bankrupt estate is not merged in the decree against the bankrupt. The decree is against the bankrupt, founded on a fiduciary debt which his bankruptcy does not discharge. The claim sought to be established in this case, is a claim against the estate of the bankrupt. There can be no merger unless both the bankrupt and the assignee are concluded by the decree of the state court It is clear that the assignee is not concluded, for he was not a party to the decree. As to him the proceedings and decree of the state court were res inter alios acta. When the decree is presented as a claim against the bankrupt estate, he clearly has the right to contest it, and insist that he is not bound by it, and to require the creditor to make good his claim by proof. He • can not be bound by a decree to which he was not a party. So, neither is the bankrupt, in a suit brought against him to recover the amount of a fiduciary debt which is not discharged by the bankruptcy, bound by the allowance of the claim by the bankrupt court So far as such a debt is concerned, the assignee in no degree represents the bankrupt, and when suit is brought against the latter to establish the claim against him, and to be enforced against his subsequently acquired property, he may well say, I have had no day in court on this claim, and insist on his right to contest. The great majority of claims against a bankrupt estate are not contested; they are allowed upon the ex parte proof of the creditor. To say that such an allowance would be binding upon the bankrupt, in a suit brought to recover a fiduciary debt not discharged by the bankruptcy, seems clearly untenable. The decree in the state court against the bankrupt, and the allowance of the claim for the sum demanded by the bankrupt court, are entirely independent of each other. They are proceedings instituted for different purposes, and against different parties. The doctrine of merger does not apply. The bankrupt is not bound by the allowance of the claim by the bankrupt court, and the as-signee is • not bound by the decree of the state. court. It is true that there are authorities of the highest respectability which have held that, if after the institution of proceedings in bankruptcy, judgment is recovered on a provable debt, the original debt is merged and extinguished in the-judgment, and the judgment is not provable against the estate of the debtor, nor discharged by the certificate: Bradford v. Rice, 102 Mass. 472; Cutter v. Evans, 115 Mass. 27; In re Gallison [Case No. 5,203]; In re Mansfield [Case No. 9,049]; Holbrook v. Foss, 27 Me. 441; Pike v. McDonald, 32 Me. 418; Sampson v. Clark, 2 Cush. 173. These decisions are placed on the doctrine of merger, which we have seen does not apply here, and because the creditor, by taking judgment and so changing the form of the debt and securing to himself the benefit of conclusive and permanent evidence of it, and an extension of the period of limitation thereon, is held on his part to have elected to look to the debtor personally and to abandon his right to prove against the estate, and the debtor, on the other hand, who might have protected himself by moving the court in which the action was pending for a continuance, in — 1008 — order to afford him an opportunity to obtain and plead a certificate of discharge, is held, by omitting to mate such a motion before judgment, to have waived the right to set up his certificate against the plaintiff’s claim, and, therefore, the rights of the parties must be governed by the judgment which one has moved for and the other has suffered to be rendered. It is evident that these reasons do not apply to a claim based on a fiduciary debt which is not discharged by the bankrupt act. The bankrupt law expressly provides (Rev. St § 5117) that “no debt created by the bankrupt * * * while acting in a fiduciary capacity shall be discharged by proceedings in bankruptcy, but the debt may be proved and the dividend thereon shall be a payment on account of such debt” Here seems to be a dear authority to such a creditor to pursue both remedies, to prove his debt and to prosecute his action against the bankrupt And in New Lamp Chimney Co. v. Ansonia Brass & Copper Co.,* 91 U. S. G56, it was held that proof of a debt not barred by the bankruptcy does not predude an action against the bankrupt thereon, and the converse seems to follow inevitably that suit brought against the bankrupt does not predude proof of such a debt against the' bankrupt estate. It cannot, therefore, be said that, by electing to pursue one remedy, he abandons the other, when the law gives him both. Nor can it be said that the debt- or, by not interposing his discharge as a defense to the action against him, waives his right to set up his certificate against the plaintiff’s claim, for he has no such right, and therefore cannot be said to waive it On the other ¿and, the weight of authority seems to be in favor of the proposition that the taking of judgment by a creditor pending proceedings in bankruptcy, does not prevent the plaintiff in any case from proving his daim: Clark v. Rowling, 3 N. Y. 216; Monroe v. Upton, 50 N. Y. 593; Harrington v. McNaughton, 20 Vt. 293; Downer v. Rowell, 26 Vt. 397; In re Brown [Case No. 1,975]; In re Vickery [Id. 16,930]; In re Stevens [Id. 13,391]; In re Rosey [Id. 12,066]. But whichever way the authorities may preponderate on this question, no case can be found which decides that a judgment after bankruptcy, on a debt not barred by the bankruptcy, predudes proof of the claim in the bankrupt court My conclusions are, therefore, (1) that the decree rendered against Maybin after his adjudication upon a fiduciary debt which is not barred by the bankruptcy, does not bar the proof of the claim in the bankrupt court; and (2), that the daim of the creditor against the bankrupt estate is not merged in the decree in his favor against the bankrupt; and (3), that as the assignee was not a party to the decree against the bankrupt, he is not conduded by it, and may insist that the creditor shall prove his claim by other evidence than the record of the decree, and as the assignee has insisted on such proof in this case it was properly offered and received. These conclusions being reached, it only remains to consider whether the report of the master, finding the amount of the claim in favor of the petitioner to be $30,492.95, should be sustained. Upon this finding three questions of law arise: 1. Whether Maybin should be credited with any paj'ments made by him for the support and education of his ward, she being his daughter; and 2. May-bin being a tenant by the curtesy of certain lands, the fee of which was in his ward, and having made certain payments to discharge a mortgage incumbrance thereon, what credit should he be allowed for such payments in his accounts with his ward. 3. Whether Maybin should have been charged with interest on any balances which might be found in his hands. Of these three questions in their order: 1. The evidence shows that Maybin, during the greater part of the time while he was guardian for his ward, was a man of large means. The general rule is, that if a father be guardian, he must support his child, if of sufficient ability to do so: Reeves, Dom. Rel. 283. It is, however, within the discretion of the court to allow the father who is guardian a sum out of his ward’s estate in payment of his support of the ward. It appears from the record that the probate court, in 1861, consented to allow Maybin his expenditures in behalf of his ward out of her estate. Although the safe and proper course for the guardian would have been to obtain the consent of the court to this arrangement in advance, yet the court having sanctioned the expenditure afta* it was made, I am of opinion that Maybin should be allowed all the expenditures in behalf of his ward which the testimony satisfactorily establishes. Maybin’s own testimony on this subject is loose and unsatisfactory. He produces no vouchers and gives no dates. In my judgment, the only money expended for his ward which he proves is a payment of $500, made to his ward’s grandfather in her behalf. This payment is corroborated by the witness Brian, otherwise I should not consider it as satisfactorily proven. I think, therefore, that Maybin should be allowed a credit for $500, as of the 31st day of December, 1857, the latest date to which the testimony of the witness Brian could apply. No other payments _ are shown by Maybin to have been made on behalf of the ward, and no other credits ought to be allowed him by reason of alleged expenditures in her behalf. 2. The evidence shows that Maybin was the tenant by the curtesy in a tract of land of which his daughter and ward was seized in fee. At the time Maybin’s life estate commenced he was about twenty-three years of age. Within a year or two after the inception of said life estate, Maybin, as reported by the commissioner, paid to relieve said real — 1009 — estate of a mortgage incumbrance left upon it by the ancestor of his ward the sum of $9,250, to which the commissioner added interest in the sum of $11,402.95, making the principal and interest $20,652.95. Half of this sum, to wit, $10,326.47, the commissioner allowed as a credit to Maybin. His counsel claims that he is entitled to a credit for the whole sum, principal and interest It is true that the personal property is the primary fund for the payment of the debts of a decedent’s estate, and that in general the heir of a mortgagor or the devisee of his real estate may call upon the executor or administrator to discharge the mortgage on the real out of the personal estate, and this rule is extended to a widow in favor of her dower in an estate mortgaged to secure the purchase money: Crabb, Real Prop. 914; Cope v. Cope, 2 Salk. 449; Brown, Max. 560; Henagan v. Harllee, 10 Rich. Eq. 285; Cumberland v. Codrington, 3 Johns. Ch. 229. But the principle is adopted in favor of the heir devisee and doweress alone (Coote, Mortg. 467, 468; Cope v. Cope, supra; Torr’s Estate, 2 Rawle, 250; Mansell’s Estate, 1 Pars. Eq. Cas. 367), and has no application to the respective rights of the remainder man and tenant for life or for years. The general rule in equity is, that where land is charged with a burden, each portion of the estate should bear its equal share of such charge: Stevens v. Cooper, 1 Johns. Ch. 425; Story, Eq. Jur. § 477; Cheeseborough v. Millard, 1 Johns. Ch. 409; Gibson v. Crehore. 5 Pick. 145. Where the incumbrance is on the entire estate, and there is a tenant for life, he is bound to keep down the interest, but not to pay any part of the principal. If, for example, there is a tenant for life and a remainder man in fee of an estate, subject to a mortgage which is due and must be paid at once to save foreclosure, and the remainder man, to save the estate, pays the mortgage, he is not obliged to take the share of the tenant for life in annual installments of interest, to continue as long as he shall live. He is entitled, as equitable assignee of the mortgagee, to immediate payment, and the sum which he thus has a right to claim is the present worth of an annuity equal to the amount the annual interest would be, computed for the number of years which the tenant will live. This is assumed by the courts to be fixed for this purpose by the tables of longevity. Whatever this sum may amount to is deducted from the gross amount paid for redemption, and the balance is the proportion to be paid by the remainder man. Of course the same rule of computation is applied if the tenant redeems and calls on the remainder man for contribution: 2 Washb. Real Prop. 197; Swaine v. Perine, 5 Johns. Ch. 482; Gibson v. Crehore, 5 Pick. 145; Houghton v. Hapgood, 13 Pick. 154; Squire v. Compton, 2 Eq. Cas. Abr. 387; Foster v. Hilliard [Case No. 4,972]; Carll v. Butman, 7 Me. 102, 105; Jones v. Sherrard, 2 Dev. & B. Eq. 179. This is the rule applicable to this case. The proposition that a tenant by the curtesy, who happens to be the guardian of the remainder man, can apply his ward’s estate to remove an incum-brance from the property in which he holds by the curtesy, and charge his ward with both the principal and interest of the sum so paid, is entirely without foundation, and has no support in any adjudicated case. Applying the rule above laid down, to ascertain what portion of the $9,250 paid by Maybin to remove the incumbrance on the land in which he held a life estate he was bound to contribute, and taking his age at the time of payment to be twenty-three years, and computing interest at six per cent., the rate fixed by law in this state, it turns out that Maybin’s proportion of the sum paid was $5,772, and his ward’s portion $3,478. For this latter sum, with interest from the date of its payment, Maybin is entitled to a credit. As the commissioner has allowed a sum considerably larger than this, he cannot complain. 3. It is next to be considered whether May-bin was chargeable with interest upon the amounts realized from the estate of his ward. The general rule on this subject is thus laid down in Perry on Trusts. “If a trustee retains balances in his hands which he ought to have invested, or delays for an unreasonable time to invest, or if he mingles the money with his own, or uses it in his; private business, or neglects to settle his account for a long time, he will be liable to pay simple interest at the legal rate:” Volume 1, § 468. The report of the commissioner shows that Maybin received slaves of his ward, in September, 1851, whose dear-yearly hire amounted to $1,325, and other1 personal property of the gross value of $4,-350. Maybin’s report, filed in August, 1861, shows that up to that time he had filed neither inventory nor account, but had used his-ward’s property as if it were his own, and employed it in his own business. Under this-state of facts he is clearly liable for interest on the hire of the slaves as it accrued from year to year, and for the interest on the value of the other personal property, unless relieved by the law of this state. The Code of Mississippi of 1857, pages 461, 462, provides (after requiring the guardian to file annual accounts) as follows: “And for no balance of money in his hands on such accounts, shall a guardian be charged with interest, but the court may direct him to place the same at interest” It is perfectly apparent that this provision was not intended to apply to a case like the present. Here the guardian, who is in receipt of a yearly income from the estate of his ward, files neither inventory nor account for ten years, and then makes a grossly false statement of the condition of his ward’s estate, giving no detailed account of the assets of his ward, or of his expenditures in her behalf, falsely — 1010 — stating the amount of her property at less than one-half what it really was, and giving a palpably false and exaggerated statement of his expenditures in her behalf, thus making it appear that there was nothing due her, when in fact a large sum was due. Clearly, this is not the case in which the Code intended to relieve the guardian from the liability for interest, and the commissioner was right in charging interest. It remains to pass upon the correctness of the sum found due from Maybin to his ward by the commissioner. “A trustee is bound to keep clear, distinct and accurate accounts. If he does not all presumptions are against him, and all obscurities and doubts are to be taken adversely to him." Blauvelt v. Ackerman, 23. N. J. Eq. 495. “Trustees cannot use trust moneys in their business, nor embark it in any trade or speculation. If a trustee makes such use of the money he will be responsible for all loss, and he may be compelled to pay the highest rate of interest:” Perry, Trusts, § 464. Applying these rules to the case in hand, it is impossible to say that the commissioner has reported too large a sum against the guardian. The estimate made by the commissioner, of the amount which should have been received for the hire of slaves, seems to be supported by the testimony which would have justified a much higher valuation. His estimate of the value of the personal property, other than slaves, which come to the hands of the guardian, and was appropriated by him as his own, is also borne out by the evidence. Besides, the commissioner has allowed the guardian $1,641 more than he should for removing the mortgage incumbrance on the property subject to his life estate, and he has omitted to charge interest against the guardian for the four years of the war. As the guardian had appropriated the trust estate to his own use, and treated it from the beginning of his guardianship as his own, there is nc ground for this omission. He is chargeable with interest from the time he appropriates his ward’s property until he accounts and pays for it. I do not go into a minute discussion of the evidence on which tne commissioner based his conclusions, because his report is presumed to be correct until error is made to appear. This has not been done. Even allowing the guardian a credit for the $500 which it is shown he paid towards the maintenance and education of his ward, and interest on this sum, the balance found by the commissioner is too small when his mistake in the amount allowed for satisfying the mortgage on the ward’s lands, and his failure to charge interest during tne war, are taken into consideration. The amount actually due the petitioner is considerably larger than the amount reported. As the sum reported will more than absorb all the assets of the bankrupt estate, the petitioner does not ask for any modification of the decree. In my judgment, the claim of the petitioner against the bankrupt estate of May-bin, for the amount found due by the district court, is according to law, is sustained by the evidence, and the finding and allowance of the district should be affirmed. Ordered accordingly