Case ID: va_62/html/0788-01.html
Source: Caselaw Access Project
Author: {"author": "CHRISTIAN, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Davis, Comm’r, v. Harman & als.
    June Term, 1871,
    Wytheville.
    Absent, Anderson, J.
    1. Commissioner’s Liability — Confederate Honey. — A commissioner who, under the direction of the court, collects and disburses Confederate money, and, by order of the court, retains the balance, which is in controversy between disputing lien holders, until the rights of the parties are litigated, cannot be held personally liable for any loss that may be incurred in consequence of the fund perishing on his hands, by the result of the late civil war.
    2. Same — Fiduciaries Generally. — For the principles upon which trustees and other fiduciaries will be held to account for the trust fund, see the opinion of Christian, J.
    In 1859 Mary Hannan instituted a suit in equity in the Circuit court of Smythe county, to subject the land of her late husband, Jezreel Harman, to satisfy a decree for $2,860 and interest, made in April 1858, which she had recovered against him. In her bill, after setting out her lien under the decree, she referred to deeds of trust on the lands which were prior liens to hers. The first of these was to Joseph W. Davis, in trust to secure a debt to Peter G. Snavely of $1,962.77, with interest from September 19th, 1843; the other was to secure to V. S. Morgan a debt of $3,000.
    The bill having been answered by Snavely and taken for confessed as to the other parties, the court on the 6th of April 1860, made a decree appointing Joseph W. Davis a commissioner to sell the land, upon the terms of a sum in cash sufficient to pay the expenses, and the balance of the purchase money to be payable in twelve, eighteen and twenty-four months. Davis reported that *he had sold the land to V. S. Morgan for $11,600. This report was excepted to bjr the defendant, Harman, and he asked that the sale might be set aside for inadequacy of price. And at the September term, 1860, the cause was continued.
    In April 1861 Davis made another report, stating the facts in relation to the sale; and at the April term of that year, the court overruled the .exception of Harman, and confirmed the report and sale; and Davis was directed to proceed to collect the purchase money of the land as it would fall due; and that he report his proceedings to the court from time to time.
    At the April term of the court for 1863, Davis made his report. He refers to the fact that this was the first regular court held since the rendition of the last decree in the case. He reports that Morgan had paid all the purchase money; and that he had paid Snavely his debt, amounting principal and interest to $4,163; $3,000 of. Morgan’s debt, and some small sums for expenses, taxes and commissions; and leaving a balance in his hand of $3,847.04, which was on deposit in the Abingdon bank, subject to such order as the court might make. At this time it appears that there were three persons claiming this fund beside Mrs. Harman, viz: Morgan, for the balance pf his debt, $1,246.66; John B. Straw, a creditor by judgment tor §1,200.27, which was contested, and 'Thomas M. Tate, under a deed of trust for §474.39; and these claims not amounting to the sum in the hands of Davis, the commissioner, by $925, the court made a decrée directing him to pay to Mrs. Harman, out of the balance in his hands, eight hundred dollars; and by another decree, at the same term, he was directed to pay to Morgan the $1,246.66 still due to him.
    At the time the foregoing decrees were made, Tate was not a party in the cause; but at the next September term of the court, he was, upon his petition, made a defendant ; and he filed his answer setting up his claim.
    *At the April term 1864, the court appointed a commissioner to convey the land to Morgan, the purchaser. This was the last term of the court held before March 1866. In March 1866, Davis made another report, showing that after the payments to Mrs. Harman and Morgan, and of taxes and commissions, there was a balance of $1,208.88 in Confederate money. He says he was anxious to pay over the balance in his hands at the time of the last decree, but owing to the contest among the creditors he was not able to do so, it not being ascertained to whom said balance should be paid. He paid the sums mentioned in Confederate money, and had the fund on deposit in the bank of Abingdon, and so reported, subject to such order as the court might make, and he still has the amount on hand in Confederate money, though he had felt it his duty under the then existing laws, to invest the fund on deposit in four per cent. Confederate certificates, which he holds subject to the order of the court. This report was excepted to by Tate, on the ground that Davis was not authorized by any decree or order of the court, to receive Confederate money from the purchaser of the land or to invest it.
    At this term of the court, a commissioner was directed to ascertain and report upon the priority and amount of liens between Straw, Tate and the plaintiff, and the consideration of the exception to Davis’ report was postponed. In July 1866, the commissioner reported in favor of Tate as first entitled to the amount, up to that time, of S505.26; and next to him that Mrs. Harman was entitled.
    On the 22d of November 1870, thé cause came on to be heard, when the court sustained the exception of Tate to the report of Davis; and Davis was decreed to pay the sum of $1,208.48, with interest from the date of the decree; “not charging him with interest prior to this time, as he was ordered to hold the fund to await the decision of the court:” Tate’s debt to be first paid, '*and the balance to be paid to Mrs. Harman. And from this decree, Davis obtained an appeal to this court. Dor other facts in the case, see the opinion of Judge Christian.
    James W. Shelley and John A. Campbell, for the appellants.
    Gilmore, for the appellee.
    
      
      
         Commissioner’s Liability — Confederate Honey. — For the proposition, that a fiduciary who, under the direction of the court collects and disburses Confederate money, and by order of the court retains the balance in his hands, until the rights of the parties are litigated, cannot be held personally liable for any loss that may be incurred in consequence of the fund perishing on his hands, by the result of the late civil war, the principal case was cited as authority in the following cases: Fugate v. Honakers, 22 Gratt. 413; Hale v. Wall, 22 Gratt. 435; Mead v. Jones, 24 Gratt. 364; Parsley v. Martin, 77 Va. 383; Le Grand v. Fitch, 79 Va. 640; Barton v. Ridgeway, 92 Va. 172, 23 S. E. Rep. 226. See also, excusing the fiduciary from liability, Dixon v. McCue, 21 Gratt. 373; Walker v. Page, 2 Gratt. 636.
      That the fiduciary must exercise good faith and act within his powers in such cases, as well as in all other cases, see the principal case cited as authority in the following cases: Mead v. Jones, 24 Gratt. 358; Douglass v. Stephenson, 75 Va. 749; Cooper v. Cooper, 77 Va. 204; Reynolds v. Pettyjohn, 79 Va. 331; Wayland v. Crank, 79 Va. 607; Le Grand v. Fitch, 79 Va. 640; Turpin v. The Chesterfield C. & I. M. Co., 82 Va. 78; Jones v. Jones, 86 Va. 852, 11 S. E. Rep. 426; Barton v. Ridgeway, 92 Va. 171, 23 S. E. Rep. 226; Myers v. Zetelle, 21 Gratt. 760. See, in accord, Elliott v. Carter, 9 Gratt. 559; Elliott v. Howell, 78 Va. 297; 2 Bar. Ch. Pr. 702 ; 1 Min. Inst. 448.
      In McVeigh v. Bank of O. D., 26 Gratt. 201, where the president of the bank collected Confederate money as agent of the bank and invested it together with his own funds in tobacco intending it to be at his own risk, which was afterwards burned, the court, in distinguishing the principal case from this case,said: “The case is wholly unlike that of Davis v. Harman, 21 Gratt. 197. There the fund was in the hands of the commissioner acting under the order of the court of chancery. He did not appropriate a dollar of it to his own use; but deposited it in bank, where it perished by the fate of Confederate government. Vaidenv. Stubblefield is distinguished from the principal case on similar grounds. The principal case is also cited and distinguished in Key v. Hughes, 32 W. Va. 184, 9 S. E. Rep. 77, which holds that where an executor is directed by will to invest a specified sum in interest bearing bonds, and the executor applied to the cashier of a bank, who agreed to sell him U. S. bonds, but without seeing the bonds or knowing that they were in bank, paid the cashier for them with the understanding that they were to be held by the bank subject to his order. No bonds were in fact ever put in bank but the interest was paid, and upon the failure of the bank the executor was liable for the trust fund..
      The principal case is cited and distinguished in Williams v. Skinker, 25 Gratt. 521, on the ground that the debt due to the estate being an ante-war debt, well secured on real estate, and it not being necessary for the payment of the debts of the estate, the executor, though he acted in good faith, yet exceeded his powers, and committed a devastavit in receiving Confederate money in November 1862 in payment of the' debt without the consent of one of the devisees, and he is liable to her for the amount of her interest so received by him.
    
   CHRISTIAN, J.,

delivered the opinion of the court.

The single question presented for our consideration, is whether, under the circumstances of the case, a commissioner, who, under the direction of the court, collects and disburses Confederate money, and by-order of the court retains the balance which is in controversy between disputing lien holders, until the rights of the parties are litigated, can be held personally liable for any loss that may be incurred in consequence of the fund perishing on his hands, by the result of the late civil war.

The appellant, as the commissioner of the court, sold the tract of land in the bill and proceedings mentioned, on the 22nd May 1860, for the sum of $11,500, and took from the purchaser three bonds, payable respectively at twelve, eighteen and twenty-four months. This sale was confirmed by the court at its April term 1861, when the court made an order directing the said commissioner “to collect the purchase money for said land as it falls due, and report his proceedings to this court from time to time for its further order,” &c.

After the April term 1861, there were no regular courts held in the county of Smythe until 1863, owing to the disturbed condition of the country consequent upon the breaking out of the late civil war. No Circuit court was held between April term 1861, and April term 1863, the judge of that court being in command of a regiment in the service of the Confederate States, and was killed in battle.

At the April term, 1863, the commissioner made his *'report, by which it appeared that in accordance with the direction of the court he had proceeded to collect the purchase money, and paid out to the parties entitled thereto the sum of $7,422.00, leaving a balance in his hands of $3,847.04, which last named sum he reported to be “on deposit in the Abingdon bank, subject to such orders as the court may make.”

Upon the coming in of this report, to which there was no exception, the court on the 6th of April 1863 entered the following decree: “Jos. W. Davis, trustee and commissioner appointed to sell the land of Jez-reel Harman, under decree in this court, filed his report showing a balance in his hands of the proceeds of the sale, of $3,847.04, after paying the amount in full of Peter G. Suavely, deed of trust, and to Vincent S. Morgan the sum of three thousand dollars, the date of which payment is not stated, &c., &c., and it appearing by a statement filed in the case, that there is a balance in the hands of said Commissioner Davis of $925.62, after paying all contested liens asserted against the fund; it is adjudged, ordered, and decreed, that the said Jos. W. Davis pay to the complainant or her attorney, out of said balance, the sum of eight hundred dollars on account of her decree ; the court reserving the adjudication hereafter, of said contested liens asserted by V. S. Morgan, John B. Straw, and Thomas M. Tate.”

The decree, though not formally confirming the report of Commissioner .Dawis, did in effect adopt and confirm it. There was no exception to said report, and the decree above referred to was evidently based upon it; and all the directions of that decree are based upon the hypothesis that the report of the commissioner was free from objection ; and it was thus in fact, though not in form, adopted and confirmed by the decree.

It appears from the record that no other decree was rendered in the cause until after the close of the war, to wit: on the 28th of March 1866. On the 25th March *1866, the commissioner, Jos. W. Davis, filed his report sho.wing that after performing the decree of the 3d of April, and paying certain Confederate taxes, there remained in his hands a balance of $1,208.88, in Confederate money. He further reports that he had collected the whole proceeds of the sale of land ($11,269.04,) in Confederate money, (which he had paid out to the parties entitled, in the same currency, none of them objecting to receiving it,) leaving the above balance in his hands subject to the order of the court; that he was ready and anxious to pay over the balance in his hands at the date of the last decree, (April ’63,) but there being a contest amongst the creditors of Harman, under contested liens claimed by them, the court reserved the adjudication of these claims, and thereby prevented him from paying over said balance, it not being ascertained to whom it should be paid; that he kept this fund in bank at Abingdon ready to meet the order of the court, until he was compelled, under then existing laws, to vest the fund in four per cent. Confederate certificates, which he still holds subject to the order of the court.

On the 27th March, the appellee filed an exception to this report, to the effect, that the commissioner was not authorized by any decree or order of the court, to receive Confederate money from the purchaser of the land, or to invest it. This exception was sustained by the Circuit court, and by its decree entered on the 22d November 1870, it was decreed and ordered that the appellant pay the sum of $1,208 48 with interest from the date of this decree. It is from this decree that an appeal is allowed to this court.

We are of opinion, that according to the well settled principles of courts of equity respecting the liability of trustee and other fiduciaries, where no mala fides can be imputed, this decree was manifestly erroneous. While the acts and omissions for which a trustee will be held responsible for violations of the trust reposed, *have not been classified or defined by the courts with such accuracy and precision as to furnish a rule without exception to be applied to the great variety of cases which grow out of this fruitful source of equity jurisprudence, yet it is easy to extract from the cases and the opinions of learned jurists and text writers, certain general rules which seem now to be universally recognized and established. One of these general rules is this, that nothing more should be required of a trustee than that he should act in good faith and with the same prudence and discretion that a prudent man is accustomed to exercise in the management of his own affairs. Elliott v. Carter & als. 9 Gratt. 541, 559, 560; Taylor & als. v. Benham, 5 How. D. S. R. 233. In Knight v. Earl of Plimouth, 3 Atk. R. 480; S. C. 1 Dickens’ R. 124, 126, Lord Hardwicke said: “If there is no mala fides, nothing wrongful, in the conduct of the trustee, the court will always favor him. Eor as a trust is an office necessary between man and man, and which, if faithfully discharged, is attended with no small degree of trouble and anxiety, it is an act of great kindness in any one lo accept it. To add hazard or risk to that trouble, and to subject a trustee to losses he could not foresee, would be a manifest hardship, and would be deterring every one from accepting so necessary an office.”

In Thompson v. Brown, 4 Johns. Ch. R. 619, 628, Chancellor Kent expresses his concurrence in these views; and he declares that where there is no just imputation of mala fides, and the fault is but at' most an error of judgment and a want of sharp-sighted vigilance, it would have the appearance of great rigor and be hardly reconcilable with the doctrines of a court of equity to hold a trustee responsible. See also, Hart v. Ten Eyck, 2 Johns. Ch. R. 62.

The cases of Wilkinson v. Stafford, 1 Ves. Jr. R. 32, and Vezo v. Emery, 5 Ves. R. 141, also strongly support the proposition that trustees acting with reasonable care and prudence, *and with the best judgment they can form upon the occasion, will be protected, notwithstanding the unforseen loss of the trust subject. See also, Powell v.Evans, 5 Ves. R. 439, in which the master of the rolls says that the court should act with great tenderness towards trustees, who are called upon often to execute onerous and difficult trusts, and are entitled to great indulgence unless neglect be fully proved. In the case of Taylor & als. v. Benham, 5 How. U. S. R. 233, the court uses the following language: “Persons acting in a fiduciary capacity stand in the same position as it regards liability for the property intrusted to their care, with bailees and agents generally, and are only answerable for actual or constructive negligence, or wilful misconduct. They are not, therefore, responsible for a loss unless it has been occasioned by their own wrong, or when they are in default for not having interfered to prevent it.” Many other cases and opinions of learned judges might be cited tending to the same conclusion ; and in the language of Judge Dee, delivering the opinion of the court in Elliott v. Carter & als., 9 Gratt. 559, “the fair result of the views which they present, and the reasoning they adopt, is, that where a trustee has acted in good faith in the exercise of a fair discretion, and in the same manner in which he probably would have acted if the subject had been his own property and not held in trust, he ought not to be held responsible for any losses accruing in the management of the trust funds. It is doubtful whether a wise policy should ever require more of a trustee than that he should act in good faith, and with the same prudence and discretion that he is accustomed to exercise in the management of his own affairs.

Applying these principles of equitable jurisprudence to the case before us, we are constrained to say, that Davis, the trustee and commissioner of the court, ought not to be held responsible because the Confederate money which the court, by its decree, left in his hands, has perished, ^'before it could be distributed by the court. In this case, there is not the slightest ground to impute to him anything like mala tides in the transaction now called in question. The amount which he collected was in Confederate money. When the bonds fell due it was notorious that there was no other currency in circulation. When he made his report to the April term 1863, the court knew and the parties knew that the balance reported in his hands was Confederate money. It is proved that the payments amounting to upwards of seven thousand dollars, were made in Confederate currency, and was received without objection by the parties entitled to receive it. The party now seeking to hold him responsible had filed his petition in the cause asking for his proportion of the fund in the hands of the trustee, knowing that it was Confederate money. And it would have then been paid but for the fact that his claim was not then adjudicated, but expressly reserved for further adjudication of disputed liens with other claimants.

The effect of the decree of the 6th of April 1863, was to direct the appellant to hold the fund until called for by the court. That such was the effect of that decree is recognized by the court in the decree of 22d November 1870, which is the decree appealed from, where the court says he is not chargeable “with interest prior to this time, because he was ordered to hold the fund to await the decision of this court,” &c. Suppose he had kept the money in his pocket or in an iron safe in his own house or at his place of business, and it had remained there until the collapse of the Confederacy, when its currency perished; could it be maintained, that he ought to be held responsible to make that good, which, without any default of his, had become worthless trash by the fate of war. What boots it that he deposited it in bank instead of keeping it in his pocket or his iron chest? Does that change the dase so as to affect his liability. The fund was left in his hands by the court to be held by him *until called for to be distributed. He deposited it in bank. It was certainly more safe there, especially in a time of war when raiders and marauders were harrj'ing the country, than it would have been, kept about his person or in his house. This was certainly not an act for which he ought to be censured. It was rather an act of prudence and forethought on his part. But the court was informd by his report that the fund was deposited in the bank at Abingdon; and the court directed no other disposition to be made of it. It is shown by the proof in the cause, that he never drew out a dollar except to pay to parties to the cause, upon the order of the court. He never appropriated a dollar of the fund to his own use, but kept it in bank until by the laws of the Confederate states he was compelled to fund it. It is true it was deposited in his own name. And it is argued by the learned counsel for the appellee, that as the fund was not deposited to the credit of the cause, but was mixed with his own funds, therefore, he must be held responsible for the loss. We would not be understood as at all disputing the authority of the cases relied upon to show, that where a trustee deposits the trust fund with a banker, or in a bank, and does not separate it from his own funds by designating it as the trust fund, and a loss occurs in consequence of such deposit, that loss must fall on the trustee; as for instance, where the the bank fails, or the banker becomes insolvent. But in this case these authorities have no application. The loss here was not in consequence of the deposit.

It was not the failing of a bank, or the insolvency of a banker, but it was the sudden and irretrievable destruction of the whole currency of a country, by the termination of a civil war which had destroyed the very power that created it. The thing deposited for safe keeping, which was the thing received, to wit: Confederate money, had perished without any default, any where, but had perished with the overthrow of the government *which had spoken it into existence. Neither the authorities relied upon, nor the reason upon which they are founded, can have any application to a case like this.

It would be too rigorous and too unjust; it would be in violation of those well settled principles, founded in reason and in conscience, which control the action of courts of equity, to hold that though the appellant has been guilty of no mala fides, no misconduct, no negligence, yet he is to be held responsible for a loss which he had no part in creating and no power to prevent. But that loss, we think, ought to fall upon those who were entitled to the fund that has perished.

We are, therefore, of opinion that the decree of the Circuit court of Smythe county must be reversed.

The decree was as follows:

The court is of opinion, that the said decree of the said Circuit court is erroneous; therefore it is decreed and ordered that the said decree be reversed and annulled, and that the appellant recover of the appellee, Tate, his costs about his appeal in this behalf expended; and this court proceeding to render such decree in the premises as the said Circuit court ought to have rendered, it is further decreed and ordered that the exceptions of said Thompson M. Tate, by his counsel, to the report of said Joseph W. Davis as commissioner, filed 26th March 1866, be overruled, and that the said report be confirmed, and the cause remanded to said Circuit court of Smythe county for further proceedings.

Decree reversed.