Case Name: Lizzie M. F. Spallholz, Appellant, v. Mark L. Sheldon, Individually and as Executor, etc., of James C. Ferguson, Deceased, Respondent
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1913-09-26
Citations: 11 Mills Surr. 453
Docket Number: 
Parties: Lizzie M. F. Spallholz, Appellant, v Mark L. Sheldon, Individually and as Executor, etc., of James C. Ferguson, Deceased, Respondent.
Judges: 
Reporter: Mills' Surrogate's Reports
Volume: 11
Pages: 453–459

Head Matter:
Lizzie M. F. Spallholz, Appellant, v Mark L. Sheldon, Individually and as Executor, etc., of James C. Ferguson, Deceased, Respondent.
(Supreme Court, Third Department,
September 26, 1913.)
Executors and administrators—Suit to recover excessive commissions OF EXECUTOR—LIMITATION OF ACTION FRAUD—“ CONSTRUCTIVE fraud ”—Code of Civil Procedure, section 382, subdivision 5.
Where an executor under a will has been awarded excessive commissions and allowances on each of his annual accountings, and has rendered his final account and been discharged, he is not guilty of “ constructive fraud,” and a suit in equity to recover such excessive allowances, brought after ten years have elapsed, is barred by the Statute of Limitations. '
In order that a person may be adjudged guilty of “ constructive fraud ” there must be some act or omission or breach of duty on his part.
It seems, that the word “ fraud ” as used in subdivision 5 of section 382 of the Code of Civil Procedure means actual and not “ constructive fraud,” and that the Statute of Limitations commences to run against “ constructive' fraud ” as soon as the act or emission constituting it occurs.
Kellogg and Woodward, JJ., dissented, with memorandum.
Appeal by the plaintiff, Lizzie M. F. Spallholz, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Washington on the 18th day of October, 1912, upon the decision of the court after a trial before the court without a jury at the Washington Trial Term.
Visscher, Whalen & Austin [Robert E. Whalen of counsel], for the appellant.
James Gibson, Jr. [William J. Roche of counsel], for the respondent.

Opinion:
Howard, J.
On January 31, 1891, James C. Ferguson died leaving an estate of $23,274.40. He made some other small bequests, but left the bulk of his property to his only child, Lizzie M. Ferguson. He appointed the defendant, Mark L. Sheldon, the executor of his will. Yearly, after assuming his duties, the executor rendered an account to the surrogate. At each of these annual accountings certain erroneous commissions and allowances were made to the executor, the aggregate of which is $1,102.53. When the plaintiff arrived at the age of fourteen years, upon her petition, the defendant rendered his final account, February 24, 1899, and was discharged. In March, 1909, the plaintiff discovered that the defendant had been allowed and had taken and appropriated to his own use .these unlawful commissions and allowances. Thereafter and before the beginning of this action she demanded of the defendant restitution of this money improperly and unlawfully taken out of her estate by the surrogate and awarded to the defendant. The defendant refuses to return it.
Statutes of Limitations run against actions in equity as they do against actions at law. (Gilmore v. Ham, 142 N. Y. 1.) This law is well settled and, therefore, unless there is some way of escape, this action is barred both by the six and the ten years' Statute of Limitations.
If the acts of the defendant in taking these unlawful commissions, costs and allowances do not constitute " constructive fraud " the Statute of Limitations has run against the claim. The plaintiff recognizes this, and, therefore, her first effort is to endeavor to convince the court that the acts complained of do constitute " constructive fraud," and thus come within the provisions of subdivision 5 of section 382 of the Code. All attempts to establish actual or positive fraud have been aban doned. A careful examination of the best definitions of " constructive fraud " does not warrant or permit us to pronounce the acts of the executor in this case " constructive fraud."
" Legal or constructive fraud includes such contracts or acts as, though not originating in any actual evil design or contrivance to perpetrate a fraud, yet by their tendency to deceive or mislead others, or to violate private or public confidence, are prohibited by law. Thus, for instance, contracts against some general public policy or fixed artificial policy of the law; cases arising from some peculiar confidential ór fiduciary relation between the parties, where advantage is taken of that relation by the person in whom the trust or confidence is reposed, or by third persons." (1 Bouvier's Law Dict. [Rawle's Rev.] 843.)
"'Constructive frauds ' are acts, statements, or omissions which operate as virtual frauds on individuals, or which, if generally permitted, would be prejudicial to the public welfare, and yet may have been unconnected with any selfish or evil design." (Anderson Law Dict. 475.)
" Constructive fraud may be described as an act done or omitted, not with an actual design to perpetrate positive fraud or injury upon other persons, but which, nevertheless, amounts to positive fraud, or is construed as a fraud by the court because of its detrimental effect upon public interests and public or private confidence." (Eaton Equity, 287.)
Definitions might be multiplied, but this is not necessary, for the authorities and text books agree substantially upon this misnomer. From these definitions it will be observed that there must be some act or omission on the part of the person accused, or breach of duty as other definitions say, in order that he be guilty of " constructive fraud." In this case the defendant did nothing that he ought not to have done; he omitted nothing that he should have done. There was no "breach of duty," for it was his right, if not his duty, in absence of actual knowledge that the court was wrong, to take what the court gave him; no more and no less. He did exactly this. In fact he obeyed absolutely and innocently the decrees of the court. He supposed he was right; he never entertained a different thought. He took no advantage of his fiduciary relations. His moral delinquency attached years after he was out of office, years after the fiduciary relations ceased. While these relations existed he was unconscious that an unlawful profit was accruing to him. It is clear that no act and no omission of his produced this profit. The blunder of the court, not the act of the executor, produced it; and a blunder of the courts has never been held to make any litigant guilty of fraud. A search through the books will fail to disclose any instance or definition which will permit the facts existing here to be denominated " constructive fraud." Actual fraud was copiously alleged in the complaint, but there was no attempt to prove it, and we must take the record as we find it. The trial justice was right in refusing to find that there was " constructive fraud."
But even if we extend the definition of " constructive fraud " so as to include the situation here, the question then arises does the word " fraud " as used in subdivision 5 of section 382 of the Code include " constructive fraud " or refer only to positive fraud? It is conceded that the alleged cause of action is barred by the Statute of Limitations unless it is preserved by this subdivision. It can only be preserved under this subdivision if the word " fraud " used therein embraces " constructive fraud " as well as actual fraud. So far as there have been any adjudications upon this question the cases all hold that it is actual fraud against which the statute does not run until its discovery; and that the statute commences to run against " constructive fraud " as soon as the act or omission constituting it occurs. Just why the courts have pronounced this doctrine is not very well reasoned out, but that it is well recognized as the law seems to be established by the following cases: Chorrmann v. Bachmann (119 App. Div. 146); Lammer v. Stoddard (103 N. Y. 672); Price v. Mulford (107 id. 303); Finnegan v. McGuffog (139 App. Div. 899; 203 N. Y. 342).
We discover; therefore, first, that equity actions like actions at law are barred by Statutes of Limitations; second, that the defendant herein was not guilty of " constructive fraud; " third, that even if his acts or omissions do amount to constructive fraud, the statute has, nevertheless, run against the cause of action arising out of such acts or omissions—subdivision 5 of section 882 of the Code of Civil Procedure having no application. It follows that the judgment of the trial court must be affirmed. This should be without costs.
All concurred, Lyon, J., concurring in memorandum, except Kellogg, J., dissenting in memorandum, in which Woodward, J., concurred.
Lyon, J.