Case ID: sc-eq_11/html/0208-01.html
Source: Caselaw Access Project
Author: {"author": "O’Neill,, J.*", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Francis Thackum and Wife, and others, v. Joseph Longworth.
    How far the Court will interfere to prevent the negotiation by an executor or administrator, of notes or bonds taken by him on sale of the deceased’s effects. [*274]
    An executor being indebted to the defendant the executor of another estate, by bond secured by mortgage, while solvent, transferred to the defendant in payment of his own debt, bonds taken on a sale of his testator’s estate, and defendant gave up his bond and mortgage, and paid over his money to the legatees. The executor became insolvent, and on a bill by the legatees of his testator, it was held that the defendant was not liable for the money received by him on the bonds— the equities being equal the law must prevail. [*275]
    ■ The following brief of the appellant’s counsel is the only statement of the case which the reporter can present:—
    The bill states that Thomas Milliken died in the year 1719, having *2681 *PrCTiously executed his will, in which he appointed John M’Nish J his executor, and by which, after the death or marriage of his widow, he bequeathed all his estate to the plaintiffs — that N’Nish qualified, and in 1819 sold all the estate of his testator on credit, and took bonds for the purchase money — among others, one of James Cole for $900, one of Pearson Hardie for $850, and one of Isaac Hardie for $600. That the plaintiffs, being young, did not for a long time look after their rights; and in the mean time the executor, being deeply involved, wasted the estate and became insolvent. That he entered into a negotiation with the defendant, Joseph Longworth, who well knew his situation, for the purchase of a plantation called Stock Farm; and that Longworth, knowing the said bonds to be of the assets of the estate of Milliken, sold plantation to M’Nish, and took the bonds in payment and applied them to his own use — that M’Nish is totally insolvent, and the plaintiffs have not received one cent of their father’s estate. The bill prays that Joseph Longworth may account to them for the money so received.
    The answer of Joseph Longworth states, that as executor of his brother, Archibald Longworth, he sold to John M’Nish, in the year 1818, the plantation mentioned in the bill, for $7500, and received in cash one-third of the purchase money, and took the bonds of M’Nish, payable in 1819 and 1820, with a mortgage of the premises, for the residue. That M’Nish afterwards paid $2000, and he considered the debt amply secured by the mortgage. That in 1820, M’Nish offered the defendant the bonds of Cole and Hardie, in payment of his own, which he refused. That M’Nish then requested him to collect them for him, which he agreed to do, and M’Nish delivered them to him endorsed in blank, and the defendant gave him a receipt for them, stating that he had received them for collection. That he called on the parties and received the money due thereon, which he considered himself as holding for M’Nish, and offered to pay it to him, but M’Nish requested him to credit his bond with it, which he accordingly did, upon which M’Nish gave him a paper, which he has unfortunately not kept, in the following terms:—
    Received, 29th January, 1823, of Joseph Longworth, $2800.11, being the amount collected by him for me, from Messrs. Hardie and Cole, on account of the estate of Thomas Milliken.
    (Signed) J. M’Nish, Ex’or.
    *He denies that he knew the situation of the estate, or that r^9fiQ M’Nish had no right to pay him the money. That he did not eon- L sider the money his until his settlement and accounting with M’Nish as aforesaid. That M’Nish afterwards paid him the balance due, and he gave him up his bond and mortgage to be cancelled. That M’Nish was then in good credit, and continued so till 1821, when his property was sold by the sheriff; and he believes it would then have paid his debts, if it had not been bought up by his friends. That the farm was bought at this sale for $800, and a part sold soon after for $2500, and the negroes sold for §100 per head. That in 1825 the plaintiffs sued M’Nish, and by diligently prosecuting their suit, might have recovered their money — and that the defendant was never called on by the plaintiffs to account to them, or had notice of their claims till the filing of this bill.
    In January, 1833, the cause came on before Mr. Justice Harper, sitting for Chancellor De Saussure.
    John M’Nish, sworn on the part of the plaintiffs, says : — Longworth was pretty hard on me for the money I owed him — wrote to me several times [some of the letters produced] — I went to him and asked him to take the bonds, as he was more in the habit of collecting than I was, and if he could collect the money before I could pay him, he should have it. I took a receipt for them. I gave him a receipt for the money just before the last Court, as a memorandum of the settlement which took place in 1823. I have not the receipt which Mr. Longworth gave me ; the purport was that he had received the bonds, and when collected would account to me for them. The debt to Longworth was for a plantation of the estate of Archibald Longworth, at the price of $1000 ; the stock was $500 more, — $2500 were paid at one time, $2000 at another. The money received on account of these bonds was $2800. I sold negroes to Col. Martin to pay the residue, and he took up the bond and mortgage, which are now in his hands. I proposed to Mr. Longworth to collect the bonds and account to me for them, and had no idea of. insolvency at this time; and I believe Longworth thought the debt well secured. He said his brother’s estate wanted the money. My settlement with him was after May, 1823. My insolvency is to be dated from 1824 or 1825, by the loss of crops by caterpillars. My negroes were all sold in 1826 or 1821, except those I sold to Col. Martin — at the time of the transaction ^th *L°ngworth, I paid taxes for forty or fifty, probably more, plantation sold at sheriff’s sale for $800.
    Sundry executions in the sheriff’s office against M’Nish were given in evidence.
    His Honor decreed that the defendant shpuld account for the $2800 received by him, with interest.
    From this decree the defendant appealed, and now moves to reverse the same.
    
      Petigru, for the appellant,
    argued, that the conduct of the defendant was free from artifice or design. He, too, was an executor, acting not for his own, but the benefit of others. The money was due to him as such, it was amply secured. In the first instance he acted as the naked agent of M’Nish, in collecting’the money on these bonds, and after collection, while he was still in good credit, and the affairs of Milliken’s estate unknown to him, lie had a settlement with M’Nish, in which he gives up the security he had, on receiving the money collected, and has since paid it over. The complaint really ,is, that the defendant has been more diligent in obtaining money than the plaintiffs. The law favors the vigilant — every one who collects money from a man in failing circumstances, may be said to get another’s money; nor can it be material whether in receiving payment of a just debt, if it be paid by the executor with his own money, or with money over which he has a legal control. 1 Some one must lose. Shall it be the defendant or the plaintiffs ? ' There may be great hardship on their part, but equal hardship on that of the defendant. The equities are at least equal, and in such case the law must prevail.
    Under the circumstances, can the plaintiffs follow these funds ? Whose were they ? In law, beyond all question, they were M’Nish’s ; if he had died, the bonds would have been his assets. Seabrook v. Williams, 3 M’C. 311. Suppose he had been sued by the defendant, and arrested on a ca. sa., and the ca. sa. paid by these funds, could he have been detained in custody, although it might be known that they were Milliken’s funds ? The defendant is chargeable, if at all, for having collected the money on these bonds and applied it to M’Nish’s debt, knowing it to be the funds of Milliken’s estate; but there is no case to be found in which money has been followed into the hands of a bona fide creditor, nor any principle on which a creditor can be called on to refund *money received in J payment of a just debt, without fraud. He reviewed and commented on the cases cited by the plaintiff’s counsel, and thence insisted that the extent of the rule on the subject is, — that if one by fraud or collusion with the executor, obtain- the assets, or the payment of a desperate debt of the executor, relief will be granted — and that the facts of this case did not show such fraud or collusion to justify the application of this principle. — Cited Tañer v. Ivie, 2 Yes. sen. 466, Ewer v. Corbett, 2 P. W. 148; Nugent v. Gifford, 1 Atk. 463; Elliot v. Merriman, 2 Atk. 41.
    
      Elmore, contra.
    The first question is, did Longworth receive the bonds on a mere naked trust to collect the money, or to Collect and apply to his debt. Although he states in his answer that he received them merely in trust to collect and pay over, that he did not, will be seen from the circumstances. The bonds are endorsed in blank by M’Nish, shewing an absolute transfer In his letters to M’Nish, he speaks of having received money on these bonds, as applicable to M’Nish’s bond 'to himself. From the evidence of M’Nish and the statement of the settlements, it appears that the defendant had actually given M’Nish credit on his bond for the amount of the bonds of Milliken’s estate, a year before the final settlement in 1823, when he got M’Nish’s receipt. [He here went into a detailed statement of the dealings of these parties to show this fact.] Lastly, the explicit evidence of M’Nish, that the understanding under which the bonds were delivered to him was, that the money, when collected, should be applied to his bond, if it was not paid sooner. Besides, it is not a little remarkable that he should gratuitously undertake the trouble of collecting these bonds, as the mere naked agent of M’Nish, expecting to derive no benefit from them. There cannot be a doubt that he received these bonds with the understanding and intention of further securing his debt — to be applied to its payment, and not merely to collect. But conceding that he received them merely as agent of M’Nish, the result must be same. He knew they were assets of Milliken’s estate, and applied them to his own use in fraud of the legatees.
    Had M’Nish the right to sell these bonds ? It is of great consequence that the question be clearly settled, how far an executor or administrator may dispose of the equitable assets of the estate. *The English law allows greater control to executors than ours. The Act of L ’89, (2 Brev. Dig. 95,) restricts their rights. It declares, “ that when it shall be requisite to make sale of any part of the personal estate, (for any purpose,) application shall be made to the Court of Ordinary which Court may “refuse or grant such order for sale, regulating the time, place and credit to be given, (Why?) so as to do impartial justice to all persons interested therein.’’ And when the will gives the power to sell — a mere naked power — it may well be doubted whether it is still not necessary to obtain an order regulating the important requisites of “ time, place and credit,” so as to do “ impartial justice to all concerned.” Such was clearly the leaning of the Court, in Saxon v. Barksdale 4 Eq. Hep. 528. The will gives the executors the right to sell such property as “ they may think proper, and to purchase such property as they shall judge beneficial.” The authority is to both executors — one only transferred the bond, although two were acting; one acting under authority, can only bind to the extent of his authority, 5 T. R. 606. If the defendant knew that under the will, M’Nish had power to dispose of the' funds, he also knew the purpose for which they were to be disposed of; and by taking the funds into his own hands, he becomes himself the trustee. 2 Eq. Rep. 318-9.
    Had the defendant notice at the time of the transfer, that these bonds were assets of Milliken’s estate ? He swears in his answer that he had no notice, except that the bonds on their face were payable to M’Nish as executor. This however is explicit notice, and supposing it were not, it was sufficient to put him on the inquiry. When defendant might, by diligence, have had notice, plea of want of notice shall not avail him.— Jackson & Wife v. Row, 2 Sim & Stuart, 412; Smith v. Low, 1 Atk. 490; Allen & Anthony, 1 Mer. 282; Daniels v. Davidson, 16 Yes. 249; Powell v. Dillon, 2 Ball & Beatty, 416. The bonds pointed the defendant to the Ordinary’s office, where he would have learned — from the will, the petition of sale and the accounts of the executor — that the executor ■#as always in arrears — that these bonds, by a special-provision of the will, were the property of these plaintiffs. In Saxon v. Barksdale, 4Eq. Rep. 528, and Franklin v. Creyón, Harp. Eq. Rep. 251, it was held, that the record of a will is notice of its contents to all the world; and by the same reasons, records of petitions, orders for sale, and executors’ accounts in the Ordinary’s ^office, are equally notices of their conJ tents. Longworth was living in the neighborhood, had access to 'these sources of information, and it is hardly credible that he had not full notice of all the facts.
    What is the effect of notice to the defendant ? Lord Hardwicke says, in Mead v Orrery, 3 Atk. 238, “If one will purchase with notice of another’s rights, he throws away his money.” It is settled in the English authorities, that where the assignment or pledge is for advances made to an executor or administrator at the time, it will be supported, unless it be apparent that it was upon collusion and not for the benefit of the estate. “ It is prima facie good, being presumed that the advance is to enable the executor to pay the debts.” — M’Leod v. Drummond, IT Yes. 154. Here there was no advance, but the bonds were assigned to be collected and applied to M’Nish’s antecedent debt. “ This is very material,” says Lord Eldon, in M’Leod v. Drummond. Longworth well knew that the funds were not to be applied to any of the trusts of the will, and this, Lord Eldon, in the same case, considers one of the strongest proofs of “fraud and collusion.” If one concerts with an executor to obtain the testator’s effects and apply them to his own behoof, or in ex-tinguishment of the private debt of the executor, or in any way contrary to the duty of the executor, such concert will involve the seeming purchaser and make him liable. — Scott v. Tyler, 2 Bro. Ch. Rep. 431; see also 2 Yern. 444; 1 Bro. Pari. Ca. II. And in Downes v. Power, 2 Ball and Beatty, 491, it is said, “ Whoever deals with an executor for assets for a purpose inconsistent with due administration, subjects himself to a devastavit. See also Hill v. Simpson, 1 Yes. 152; Bonney v. Ridgard, 1 Cox’s Ch. 145; Field v. Schieflin, I John. Ch. Rep. 150, to the same effect. The whole doctrine is strongly and concisely stated by Mr. Eden, in his note to the case of Andrew u. Wrigley, 4 Bro. C. R. 131.
    It is urged that the equities are equal; and that being the case, the law must prevail. They are not equal. The plaintiffs were infants, ignorant of their rights and confiding in their father’s executor. The defendants knowing these funds to be theirs, concerts with Mm to misapply them. If he should sustain loss, it will be from Ms own wrongful appropriation of funds he knew to be of right the plaintiffs’. Nor is he so free from “ artifice and design,” as he is represented.. Why take a receipt lately, dated back in 1823 ? To supply the one which he lost? M’Nish says he gave none then.
   O’Neill,, J.*

*274] This case for the first time presents to this Court * J the question, how far it can interfere to prevent the negotiation by an executor or administrator, of notes or bonds taken by him for the 'proceeds of the sale of the 'goods of the deceased.

In such choses in action he has a clear legal right of property, independent of his character as exeeutor or administrator. For at his death they do not, by operation of law, pass to the administrator de bonis non of the testator or first intestate, but are, in point of law, the property of the deceased executor or administrator, and his administrator can alone maintain an action for their recovery. Seabrook ads. Williams, 3 M’C. 371. It is true that the proceeds of such choses in action are in Equity regarded as assets, and will be so treated and considered in the hands of the executor or administrator to whom they were made payable, or any of his immediate representatives. Miller v. Alexander, 1 Hill’s Ch. Rep. 25; Capehart and wife v. The Administrators of Huey. — 1 Hill’s Ch. Rep. 405. So, too, in all such cases, they would be protected from being made liable by the process of law, for athe debts of the executor or administrator. — Glass v. Baxter, 4 Sep. 154; Tolbert v. Harrison, 1 Bail. 599; and in all cases of fraudulent alienations, the Court would follow and' treat them as assets of the estate. But beyond this I am not prepared to go. For generally speaking, an alienee would have a clear legal estate in the chose in action to which, (unless it can be overreached by a superior equity, or be shown to be defeated by fraud;) a Court of Equity as well as a Court of law, is bound to give effect. If the equity of the alienee and that of the creditor, legatee or distributee, be equal, the legal estate must prevail. I have looked through the cases referred to in the decree and in the argument with as much care as I could, and I concede that they sustain the position tliat an alienation by an executor or administrator of chattels or choses in action belonging to the testator or intestate, in his lifetime, for the payment of the debt of the executor or administrator, would not in Equity generally be allowed to prevail against creditors, legatees or distributees — Scott v. Tyler, 2 B. C. R. 431; Andrew v. Wrigley, 4 B. C. R. 124; Bonney v. Ridgard, 1 Cox’s Ch. Rip. 145; Hill v. Simpson, 7 Ves. 152; M’Leod v. Drummond, 14 ves. 352, and 17 Ves. 152; Field v. Schieflin, 7 John. Ch. Rep. 150; Saxon v. Barksdale, 4 Eq. Rep. 522. All of these cases, in'wliieh relief was granted against alienations by an exeeutor or administrator in payment of his own debt, or in which the *Court thought that the party on that ground was entitled to relief, but denied it on some *-' ‘ other, such as lapse of time, (except Field v. Schieflin,) were cases of alienations of chattels belonging to the deceased in his lifetime. The case of Field v. Schieflin was an alienation by a guardian of a bond executed to him as guardian. The Chancellor, without adverting to the distinction, which, I think, exists between alienations of chattels, or choses in action belonging to the deceased in his lifetime, and such as are acquired by the executor or administrator with, or which are given to him for, the proceeds of the estate, gave relief.

Would it be allowed in England, if it could be shown that the money received for a chattel aliened by the executor had been vested in bonds or stock, and these had been aliened in payment of the executor’s own debt, that these last should be followed into the hands of the purchaser, and his legal title be defeated 1 That no such case is found in the English books is strong evidence that such a case is regarded as too desperate of even a chance of success to be presented to a Court The sale of the .testator’s or intestate’s goods and chattels, is made according to law, ends the equitable rights of the creditor, legatee or distributee, to be paid out of them. The proceeds are at law, as we have already seen the executor’s or administrator’s property; so, too, it must be conceded, are the goods, chattels and credits of the deceased generally. At law, prior to the Act of 1824, he had no absolute right of disposition, and where the will directs a sale, he still has that right. Jones v. McNeill, 1 Hill, 84. But to some extent, the goods and chattels, of which the deceased died possessed, are still regarded as not the absolute property of the executor or administrator : in a contest between an execution creditor of *27 6] the deceased and of the executor or administrator, the goods would be held liable to the former and not the latter. Jones v. McNeill, 1 Hill, 84. Such a distinction could not, however, be made in favor of a creditor of the deceased, in a contest at law for payment out of the proceeds of choses in action, payable to the executor or administrator. When the goods and chattels of the deceased are sold, or his choses in action collected, the liability of the executor or administrator to account for the proceeds to all parties interested, is generally that to which they must look. The right to collect these proceeds is indispensable to the excutor’s or administrator’s now safety. The right to use the fund as his own, is also a necessary ^consequence from his liability to account. For after he sells, he is not charged with the proceeds as he receives the money on the notes or bonds, but with the amount of the sales as cash received. Wright v. Davis, 2 Hill, 560, decided at Columbia, last term. Hpon this sum (the amount of the sale bill) he is chargeable with interest, which shows that he is regarded in contemplation of law as in the use of the money. He cannot be discharged from his liability to account for the proceeds of the sale, but by showing that without any fault of his own he has been unable to make them available. If he was not allowed to alien the notes or bonds taken for the proceeds of the sale, (without any other restriction than it should be done without fraud,) it would subject him to the consequences of general liability, for the proceeds of the sale, without any corresponding advantage. For after he made a sale, and charged himself in the sale bill with the value of the goods, yet he would stand in relation to the proceeds as if they were the goods and chattels and credits of the deceased. Such cannot be the case. If it was, the executor or administrator ought to return to the ordinary, the bonds or notes so by him taken. There is no difference in respect to this question between an administrator or executor ; yet, if it be true that when an administrator transfers the bonds taken by him for the goods of the deceased in payment of his own debt, such transfer would be void, it would follow that his securites for the administration would, as well as creditors, legatees or distributees, have the right to follow the fund; yet, I apprehend, such a consequence ought not generally to be allowed. I have already said that an alienation of the bonds or notes, payable to an executor or administrator, ought not to be over reached or defeated but by a superior equity, or by fraud. In the transfer of a chose in action by a solvent executor or administrator, in payment of his own debt, it would seem to me that the equity of the creditor of the executor or administrator is fully equal, if not superior, to that of the creditor of the testator or intestatate, the legatee or distributee. In such a case, he parts with the precise money value of the thing acquired. For the debt of the solvent executor or administrator, which might have been otherwise collected, is given up. The question is, who, of two innocent persons are to be losers ? It cannot be answered, that he who has the legal interest is to be the man, and yet this would be the case, if the rights of the alienee were defeated. If *the executor or administrator were insolvent, and should transfer the chose in action L "■'< in payment of his own debt, in such a case the equities would not be equal: for there the alienee would have paid nothing, and his legal estate would be over reached by the equity of the creditor, legatee or distributee of the testator or intestate, and the alienee would be turned into a trustee. So, too where there has been a fraudulent alienation, there the fraud defeats the title conveyed, and the alienee holds by a constructive trust for the uses of the creditor, legatee or distributee of the testator or intestate. From these views these plaintiffs are not entitled to recover. The executor, Me Nish, after his testator’s death, legally sold his estate according to the will. The bonds now in controversy were given to him, as executor, for the proceeds of that sale. He was indebted to the defendant as executor of Archibald Longworth, deceased — this debt was secured by a mortgage. In payment and discharge of this debt, he, when solvent, paid and delivered to the defendant, the bonds and notes now in dispute, and thereupon the defendant gave up to him his bond and mortgage and, has subsequently accounted for and paid the amount to the devisees of his testator.

According to this statement, his equity is fully equal, if not superior to that of the plaintiffs, and hence his legal title must prevail.

It is ordered and decreed, that the Circuit decree be reversed, and the plaintiff’s bill dismissed.

Johnson, J., and Evans, J., (sitting for Harper, J.,) concurred.