Case ID: miss_15/html/0609-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Chief Justice ShaRKey", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James J. Pearson, Elmer & Briscoe, and the Bank of Port Gibson, vs. Lewis F. Moreland and Emily J. Moreland, Administrator and Administratrix of Josiah Willis, deceased.
    The creditors of an estate, have the first claim upon the property in the hands of the administrator, and it is his paramount duty to protect their interest by using every effort to make the property under his charge sell for the best price that can be had for it.
    An administrator cannot purchase at his own sale, either directly or indirectly, nor can he sell under a secret trust or private understanding, that he is to have an interest in the property; or derive a benefit from the sale; nor can he dispose of it for the benefit of his private friends.
    The property of an estate in the hands of the administrator, is devoted by law to particular purposes ; and it is a breach of trust in him to permit counteracting interests to divert it from its legitimate destination, or to diminish its value.
    M. and his wife, as administrators of W., sold a large amount of property, which was purchased by S., who was the sister of M.’s wife, and a member of his family; several creditors of the estate objected to the probate court confirming the administrators’ report of the sale, on the ground of fraud, and the administrators insisted on a confirmation of the report; it was proved lhat the property sold for less than one-third of its appraised value, and of what the witnesses proved it was really worth ; that there were only four persons present when the sale commenced; that it was proclaimed on the ground that persons were coming to the sale, who wished to buy property that was to be sold, and were expected to arrive very soon, and did get there immediately after the sale was over; that the administrator, upon hearing that such persons were coming, instructed the auctioneer to proceed forthwith with the sale ; that only one person besides S. bid at the sale, and he only on one lot of negroes ; that his bid seemed to produce great surprise, and he was immediately taken aside and informed that the claim of his brother, for whom he was acting, should be secured in full, if he would agree to bid no more, to which he assented, and the note of S. with security was given for the amount of his brother’s debt; that the claim which resisted the sale was also compromised, and the note of S., with security given for it; that a witness who attended the sale, with the intent of bidding, before the sale commenced, asked M. if the family wished to buy the property, and was told that S. expected to purchase it; that S. was crying during the sale, and appeared very much affected when the bid was made in opposition to her; that in a conversation before the sale with one who was expected to buy the property for M., said he did not think any person would bid for the property against the children or against him, and he wished and expected to buy it very low; and that the administrators reported to the probate court, when they applied to have the estate declared insolvent, that the debts against the estate, amounted to $14,504 and the assets to $9,110: Held, that the testimony showed, beyond a reasonable doubt, that M. and his wife were not acting in good faith towards the creditors, and that they had concocted a plan by which the property should be sold for a trifle, and bought in for their benefit; and that sales so made are fraudulent in fact, and in law, and it is the duty of the probate court to set them aside and order the property to be resold.
    The probate court may refuse to confirm an administrator’s report of a sale fraudulently made, set aside the sale, and order the property to be resold, without notice to the purchaser at such fraudulent sale.
    On appeal from the probate court of Claiborne county; Hon. William M. Randolph, judge.
    On the 24th day of October, 1843, Lewis F. Moreland and Emily J. Moreland, administrator and administratrix of Josiah Willis, deceased, presented to the probate court of Claiborne county, their report of the sale of the personal estate of their intestate, showing an aggregate amount of two thousand two hundred and six dollars and sixty-two and a half cents. The report was received and ordered to be continued for further proceedings. At the February term, 1844, the Bank of Port Gibson, Elmer and Briscoe, and James J. Pearson, filed the following exceptions to the confirmation of the report, to wit:
    “ Because said sale is fraudulent, and was managed and contrived by, and between said Lewis and Emily Moreland, and said Mary Seybourne, the purchaser, for the purpose of defrauding the creditors of the estate of said Willis; and that they combined together to. prevent bidders from attending the sale; and said Mary Seybourne personally urged bidders to stay atvay, in order that the property might be sacrificed and bought in for said Moreland. That they hastened the hour of sale, knowing that bidders were on the road, for the purpose of getting the sale over before the bidders arrived, and succeeded in doing so. That the only bidder on the ground at the time of sale, was paid or secured the debt due him by the estate, notwithstanding the estate has been declared insolvent, and that the same was done to prevent him from bidding, and to procure a sacrifice of the property. That by these and other unlawful and fraudulent practices of said administrators, and said purchaser, the property of said estate was sold at greatly inadequate prices, some portions for not over one-tenth of its actual cash value. And the whole of said property was bid off by said Mary Seybourue in trust for, and for the benefit of, said Moreland and wife, or some of their family, to the great injury of the creditors of said estate.”
    The court overruled the exceptions, and ordered the report to be confirmed, to which the above-named creditors filed a bill of exceptions, setting out all the evidence, which was in substance as follows : The creditors, in support of their exceptions, read the inventory of appraisement, showing that the property sold by the administrators on the 14th day of October, 1843, waá appraised by five disinterested persons on the 10th day of December, 1834, at six thousand six hundred and fifty-four dollars. They also read the schedule of the liabilities and assets of the estate, filed by the administrators under oath, on the 29th day of June, 1843, with their petition to the court to have the estate declared insolvent, showing liabilities to the amount of fourteen thousand five hundred and four dollars and thirteen cents, and assets to the amount of nine thousand one hundred and ten dollars. They then introduced Henry O’Kelly, who testified, that at the request of his brother William, who held a claim against Mr. and Mrs. Moreland, he attended the sale made by them as administrators of the estate of Josiah Willis, deceased, on the 14th day of October, 1843. The sale commenced about five minutes after twelve o’clock, he arrived about half an hour before that time. When the first lot of negroes was offered, five in number, he bid one thousand dollars for the lot, which appeared to create much surprise among those present. Mary Seybourne then bid one dollar more, and became the purchaser ; she cried, and appeared to be very much affected. That before another lot was offered for sale, John Taylor Moore held a conversation with him, and agreed to secure his brother’s claim, and did hand him a joint note of Mary Seybourne and John Taylor Moore, for the debt due his brother. The other negroes were then sold in lots at much lower prices than he thought they ought to have sold for; that he did not wish to purchase, and stated, on the ground, that he only attended the sale to make the property bring its value, so that his brother’s claim might be secured ; he bid on the balance of the property very small prices, but he did not attempt to force it-to bring its fair value; that the sale occupied about half an hour; the auctioneer dwelt a very short time, there being only three persons present to bid besides himself, the family, and James T. Marye, though there was enough time given to persons to bid had they wished to do so. On cross-examination, he stated that the claim of his brother against the estate consisted of a note made by Lewis F. Moreland and wife.
    William O’Kelly testified, that he sent his brother to the sale to make the property bring its value, or secure his claim : that his claim against the estate consisted originally of an open account contracted by the administrators, and he took the note of Lewis F. Moreland payable on a certain day, which, if paid, would be a satisfaction of the account, if not, the account was to stand as a claim against the estate ; that he afterwards took the note of Moreland and wife for the amount due, and stated on its face that the debt was contracted since the death of Josiah Willis, for the benefit of the estate; that the account was for goods ; and that on the day of the sale his claim was taken up by the note of John Taylor Moore and Mary Seybourne, according to the agreement made with his brother at the sale. James T. Marye testified that he wished to purchase a negro, and attended the sale, in company with Henry O’Kelly, for that purpose; that when they arrived, only three persons, besides the family, were present. He asked Moreland if the family Wished to purchase the property, and was told'that Mary Sey-bourne expected to buy it; that he knew Mary Seybourne was one of the family, and if the family wished to purchase the property, he would not bid; Mary Seybourne and Mrs..Moreland were sisters. No person bid for any of the property except O’Kelly and the purchaser. That he told the persons present that there were several gentlemen coming out from Port Gibson with the intention of bidding on the property, and would be there very soon; Moreland then asked if it was twelve o’clock, and being informed it was, he told the auctioneer to go on with the sale, which was done immediately, and the negroes were all sold before the gentlemen from Port Gibson arrived. When they arrived, it was about half after twelve o’clock. That Mary Seybourne appeared very much affected when O’Kelly bid on the property, but she purchased the whole of it, and it did not bring more than one-third of its value.
    Albigence W. Putnam, testified that as one of the executors of Israel Loring, deceased, he held a bond, executed by Josiah Willis in his lifetime, in the penalty of two thousand dollars, to make a title to a tract of land; that Loring, in his lifetime, after the execution of the bond, purchased the same land from the lawful heir, and instituted an action of ejectment to recover it from Lewis F. Moreland and his wife, and Mary Seybourne, who claimed it; that at the December term, 1843, of the probate court, he filed exceptions to the report of sale of the personal property of Josiah Willis, deceased, which continued from term to term till the February term, 1844, when he compromised with Moreland all matters in controversy between them, dismissed the action of ejectment, gave up the title bond, and released the parties from all liability to the estate of Lor-ing; and, as executor of the estate of Loring, executed a release of all claim to the land, in consideration that the purchase-money which had been paid by Loring should be refunded; and Mary Seybourne’s note, with John Taylor Moore as surety, was given to him for fourteen hundred dollars, being the amount paid by Loring, payable in one, two, and three years, with interest from date ; that the controversy in relation to the title bond had been the subject of much litigation ; that he opposed the confirmation of the report of sale by the administrators, so that the properly might be resold and bring its value; and inasmuch as he had no further interest in the estate of Willis, after the execution of the notes by Mary Seybourne and John Taylor Moore, he withdrew his exceptions to the report of sale.
    John B. Thrasher testified, that as counsel for Moreland and wife, he prepared their report of the insolvency of the estate of Josiah Willis, deceased, and advised them as to the mode of conducting the sale of the property; that being informed More-land expected him to buy in the negroes of the estate at the sale and hold them until Moreland could return him the money, he called on Moreland for the purpose of undeceiving him, and letting him know that he, witness, would not buy any of the property for him, and he then informed Moreland the negroes would have to bring their value, as there were several persons in Port Gibson who wished to buy negroes, and had the money to pay for them, and they would attend the sale and bid for the property; but Moreland said he did not think any one would bid against the children or himself for the negroes; that he wished and expected to buy them very low. Witness knew some of the negroes, one by the name of Tom, and wished to purchase him, and would have paid $600 for him, but did not attend the sale in consequence of Moreland’s wish to buy them all himself, or to have them bought in for him; that on the day before the trial in the probate court, Mrs. Moreland came to him in the streets of Port Gibson, apparently in great distress, and wished to know if he was their friend; she appeared surprised that he should appear against them in (he probate court, and stated that she did not want the sale set aside; that she had raised the negroes, and Mr. Moreland would lose if the sale was set aside, because he had paid debts as administrator of the estate, and the property had not sold for enough to pay him back.
    This was all the evidence offered on either side. From the decree of the probate court overruling the exceptions to the report of sales, and ordering the report to be confirmed, the creditors, James J. Pearson and others, prayed an appeal to this court.
    
      Thrasher and Sillers, for appellants.
    An administrator is a trustee for the creditors and distributees of the estate, and the assets constitute a trust fund in his hands to be applied in the first place to the payment of debts. Cable v. Martin & Bell, 1 How. 561; 1 Story’s Eq. 506; Planters Bank v. Neely, 7 How. 95.
    In adverting to the cases on the subject of trusts, we find that trusts are enforced, not only against those persons rightfully posessed of the trust property, as trustees, but also against all persons who come into possession of the property bound by the trust with notice of the same, and to no persons, says Judge Story, can these considerations more appropriately apply, than to administrators and those claiming under them with notice of the administration and assets. 1 Story’s Eq. 507. In the case under consideration the purchaser was the sister of the admin-istratrix, living in the family with the administrator and wife, and was evidently used as an instrument in their hands to carry out the stupendous fraud which they had concocted to purchase in the property, without competition, at a reduced price, and on their own account.
    The testimony is that the sale commenced five minutes after 12 o’clock, that the bidders arrived from Port Gibson at half past 12 o’clock, and that the negroes were all sold before they arrived. Notwithstanding that the administrator had been informed that bidders were on the road, and would arrive very soon, yet he hurried on the sale, and had twenty-two likely negroes sold, at an average of seventy-eight dollars per head, in fifteen or twenty minutes, being an average of but about one minute to the negro, in point of time, and all before the bidders could arrive. Such indiscreet haste and ruinous sacrifice demand that a corrective should be applied. 7 How. 9.
    But this was not all: no sooner did H. O’Kelly bid on the first lot of negroes put up for sale, than’Mary Seybourne, the purchaser, commenced crying, and appeared much distressed, and the sale was suspended until H. O’Kelley could be bought off from bidding at the sale, by the note of Mary Seybourne and John Taylor Moore.
    But the testimony does not stop here. W. Putnam, being a creditor, as one of the executors of J. Loring, filed exceptions to the report of the administrator’s sale, and the<exceptions were to be tried in the probate court. Moreland in person settled his claim, amounting to $1400, to get him to withdraw them ; and again the joint note of Miss Mary Seybourne and John Taylor Moore was executed for the full amount of his debt, notwithstanding the report of insolvency, for no other conceivable consideration, but that of withdrawing his exceptions to the sale.
    That the administrator and administratrix, in connection with the purchaser, in this case acted in bad faith, and combined and confederated together for the purpose of defrauding the creditors, we think most manifest from the evidence. In fine, that in the language of this court, “it is not possible to wink so hard as not to see the true character of this transaction, and not to perceive in it a contrivance to secure the property to the family,without the slightest regard to the rights of creditors, who had the first claim upon it.” 7 How. 95.
    The appellees contend that the order conferring the sale'ought to be confirmed. First, because it does not appear that Mary Seybourne was made á party to the proceedings. And secondly, that there was no evidence showing any collusion or combination between the purchaser, Miss Seybourne, and the administrators or persons present, to prevent bidding. It is true that there is appended to the bill of exceptions, such an extra-judicial statement; but it is equally true, that the record proves the converse of the proposition. This extra-judicial statement can have no influence with this court; it would be an idle ceremony to embody the testimony in a bill of exceptions for the benefit of this court, if the inferior tribunal had the power to decide for this court, what had or had not been proved by such testimony.
    If Mary Seybourne was not before the probate court, defending the sale, and if she is not before this court defending the same, then the administrators are defending it on their own account, and Mary Seybourne falls within the rule decided in case of The Planters Bank v. Neely, 7 How. 94. In that case no notice was deemed necessary. The sale was inchoate, and no title passed until it was confirmed. Courts, however, will not permit parties to hold property acquired through the fraud of third persons. Story’s Eq. 258. It is sufficient that Mary Sey-bourne knew that she was purchasing at administrator’s sale. 1 Story’s Eq. 507.
   Mr. Chief Justice ShaRKey

delivered the opinion of the court.

The appellants filed exceptions in the probate court to the report of sales of the personal property of Josiah Willis, deceased, on the ground of fraud committed by the defendants in error in making the sale. Mrs. Moreland was the wife of Willis, and after his death intermarried with Moreland. They reported the estate insolvent, and obtained an order of sale, and proceeded to sell the slaves at very low prices, not one-third of their value, to Mary Seybourne, a sister of Mrs. Moreland, and an inmate of the family.

To establish the fraud the plaintiffs introduced the appraisement, and a report made by the administrators to the probate court, showing the liabilities of the estate to amount to $14,504, which also valued the assets, principally slaves, at $9,110, which report constituted the foundation of the application to sell the property, and was made under oath. Several witnesses were also examined to show the manner in which the sale was conducted, together with the conduct of the administrators in regard to certain debts due from the estate.

The existence of fraud must generally be gathered from cir-cumstanlial proof, as it is usually perpetrated in such a manner as to exclude the possibility of establishing it by positive proof. The circumstances in this case are such as lead irresistibly to the conclusion that the administrators were acting in bad faith to the creditors, by having the property sold under its value, with a view to their own benefit, or for the benefit of a confidential friend. It is the paramount duty of an administrator to protect the interests of'creditors by using every effort to make the property under his charge sell for the best price. Creditors have the first claims upon it, and the law and his oath of office, both require that he should administer in good faith. He cannot purchase at his own sale, either directly or indirectly ; nor can he sell under a secret trust, or private understanding that he is to have an interest in the property,, or to derive a benefit from the sale. He cannot use or dispose of the trust property for his own benefit, or for the benefit of his private friends. It is devoted by law to particular purposes, and it is a breach of trust in the administrator to permit counteracting interests to divert it from its legitimate destination, or to diminish its value. Planters Bank v. Neely, 7 How. 80; Michoud v. Girord, 4 How. S. C. R. 503.

In the first place by this controversy the administrators are insisting that the report of sale shall be approved and confirmed, when it is obvious that the property did not bring more than a third of its value, as established by the appraisement, by their own report under oath, and by the testimony of witnesses, when too the purchaser is a sister of one, a sister-in-law of the other, and a member of the family. A strict regard for the rights of creditors should induce a desire on the part of the administrator to have a sale of property at prices so greatly under its value, set aside. But an opposite desire seems to prevail with these administrators, and, under the circumstances, this alone is calculated to create doubts whether they did not permit their private interests to have an undue weight in making the sale.

But the testimony of the witnesses is still more conclusive on this subject. Henry O’Kelly attended the sale as the agent of his brother, who was a creditor, with instructions to make the property bring its value, or to secure the debt’ of O’Kelly. He arrived about half an hour before the sale, which commenced about five minutes after, twelve o’clock, when but three persons besides the witness were present. The witness bid $1000 for the first lot of negroes put up, consisting of five in number; Mary Seybourne bid one dollar more and was declared the purchaser. The bid made by O’Kelly seemed to create great surprise amongst the persons present, and before another lot was offered the witness received a proposition through John T. Moore that his brother’s debt should be settled, to which he acceded, and which was accordingly done during the day, to the full amount, by the joint note of Mary Seybourne and J. T. Moore. He did not know that Mary Seybourne knew this proposition had been made. The rest of the negroes were then put up in lots, and sold at prices greatly below their value, the auctioneer dwelling but a short time on the bids, as but few persons were present, though sufficiently long to have enabled the persons present to bid.

James T. Marye went, to the sale in company with O’Kelly, and went for the purpose of purchasing negroes. He asked More-land if the family wished to buy the property, and was answered that Mary Seybourne expected to purchase it; the witness then said he would not bid, and accordingly did not, nor did any other person except O’Kelly and Mary Seybourne. The witness stated to the persons present at the sale that there were several gentlemen coming out from Port Gibson to bid for the property, and would be there very soon. Moreland asked if it was twelve o’clock, and on being informed that it was, directed the auctioneer to proceed, which he did, and sold the negroes before the bidders arrived, which they did at about half past twelve o’clock. Mary Seybourne was crying during the sale, and appeared much affected when O’Kelly bid. She purchased all the property'-, which did not bring more than one-third of its value.

It seems also that A. W. Putnam had a claim against the estate of Willis for a sum of money on which a suit was pending. He had also brought an action of ejectment against Moreland and wife for a tract of land, which had been sold to Putnam’s testator, for which the money claimed had been paid, but the title had been acquired from another source, as it was not in Willis when he sold. As a creditor he had filed exceptions to the confirmation of the report, in order that the property might be resold for its value. But shortly before the exceptions were to be tried, he compromised the\vhole matter with Moreland, and received the joint note of Mary Seybonrne and John T. Moore for the amount of money which had been 'paid on the purchase of the land, and thereupon withdrew his exceptions to the report.

The testimony of J. B. Thrasher, is still more conclusive, in showing the motives and plan of Moreland. As counsel, he prepared the report of insolvency, and gave general instructions as to the mode of conducting the sale. He afterwards learned that Moreland expected him to buy the property, and hold it until he (Moreland) could pay for it, and for his benefit. On an interview with Moreland, Mr. Thrasher undeceived him, by informing him that he would not buy the property. He at the same time told Moreland that the negroes would have to sell for their full value,' as several persons in town, who had money, wished to buy such property, and would attend the sale. To this, Moreland replied that he did not think any one would bid for the negroes against the children, or against him; that he wished and expected to buy them very low. The witness knew some of the negroes, and would have purchased one of them, (Tom,) at six hundred dollars, but, in consequence of Moreland’s declarations, did not attend the sale. Mrs. More-land had met him the day before in the street, and expressed great surprise and regret that he should appear against them, as she did not wish the sale set aside.

This testimony shows, beyond a reasonable doubt, that the administrators were not acting in good faith towards creditors, and that they had concocted a plan by which the property should be sold for a trifle, and bought in for their benefit. The facts will justify no other conclusion. When O’Kelly manifested a determination to bid, he was soo.n given to understand that his debt would be settled, which was done to the full amount, although the estate, at a fair valuation, was not able to pay more than two-thirds of the amount. Can it be believed that the administrators were ignorant of this arrangement1? Why did the administrator press the sale, by directing the auctioneer to proceed, when he had been informed that other bidders were coming, and would soon be there 1 A due regard for the interests of creditors should have induced him to delay until they arrived. His duty demanded delay, but his interest required expedition, and prevailed. Why was Putnam’s claim compromised, and his objections to the sale consequently withdrawn? The compromise was made with Moreland, but he' did not give his note; Mary Seybourne and John T. Moore gave theirs, as they had done to O’Kelly. Bu t Moreland had furnished the key which unlocks this mystery, by his declaration to Thrasher. He did not think any one would bid against the children, or against him, and he expected to purchase the property very low. Mary Seybourne, however, who was one of his family, was substituted in his place, as the purchaser. He told, in advance, that she intended to buy it. This declaration was made to a witness, who had gone there for the purpose of bidding, but who said he would not bid if the family wished, to buy the property. Instead of inviting bidders, he kept them away from the sale, and so managed as to keep those persons from bidding who had attended for that purpose. Sales so made are fraudulent, in fact and in law, and it is the duty, as it is the province, of the probate court to set them aside, and order the property to be resold.

But it has been insisted that the judgment must be affirmed, because the sale could not be set aside, in the probate court, without making the purchaser a party, which she was not, as no notice was given her of the proceedings in that court. If for this reason no judgment could have been given against her, it is certainly not a good reason why judgment should have been given in her favor, when the facts did not entitle her to judgment. If notice was necessary, the court should have suspended the proceedings until it could have been given. On the authority of the Planters Bank v. Neely, 7 Howard, 80, the judgment must be reversed, and the sale set aside.