Court Opinion

ID: 9834550
Source: CourtListenerOpinion
Date Created: 2023-09-01 23:59:21.521418+00
Date Added: 2024-06-11T07:44:22.181285
License: Public Domain

Opinion on Rehearing*
After the decision in this case was announced and the mandate had gone down, but before the enrollment of the final decree, the defendant brought a petition under G. L. 1567 for a rehearing in this court. In due course the prayer of this petition was granted, and by stipulation of counsel, rehearing was had at the last November Term at Rutland. Realizing the importance of the questions presented, we have carefully re-examined and deliberately reconsidered the whole case. The only questions deemed worthy of further discussion are covered by what follows.
It is urged with much confidence that our holding as to the admissibility of the evidence relating to the purchase of the White River Junction property is contrary to the law of the subject. The argument is that this defendant would be liable only in case it participated in a misappropriation and that misappropriation resulted in a loss to the estate; that this transaction taken as a whole (as the rejected evidence would have tended to show) did not amount to a misappropriation, and did not result in such loss, because the property at White River Junction was bought for and belonged to the estate, and was worth the amount paid for it; and that the misappropriation and loss did not come until some eighteen months later when Enright sold the property and converted the avails.
This argument wholly overlooks the basis of our decision on this question: Enright had been ordered by decree of the probate court to pay over the residue of Mr. Story’s estate, which included the very deposits here in question, to the executor of Mrs. Story’s estate. His only authority over this residue was to comply with this order. Any other use of the property by him as executor of Mr. Story’s estate was unlawful. He had no right to buy real estate for that estate, and the White River Junction *143property never became and never was the property of Mr. Story’s estate. It could not become such until the deal had been ratified in some lawful way and the estate given and accepted the benefit of it.
Moreover, the decree aside, Enright was without authority to make this purchase for the estate. An executor is a representative of limited authority. Speaking broadly, his duties are to collect the assets of the estate, pay its debts, and distribute the residue to those entitled. Rich v. Sowles, 64 Vt. 408, 23 Atl. 723, 15 L. R. A. 850. His powers are only those dele-’ gated to him by the will and the statute; and he has no implied powers except such as are necessarily incidental to those so conferred. In re Munger, 168 Iowa 372, 150 N. W. 447, Ann. Cas. 1917B, 213. Beyond this, his contracts, though made in the name and for the benefit of the estate, bind him alone. If he attempts to -pledge the credit of the estate in such a contract his right to discharge the obligation out of estate funds depends upon its being so beneficial to the estate as to receive the sanction of the probate court. Lovell v. Field, 5 Vt. 218; Reynolds-McGinness Co. v. Green, 78 Vt. 28, 61 Atl. 556; Rich v. Sowles, supra. He cannot borrow money and pledge the credit of the estate for its repayment. If money so borrowed actually goes to .the benefit of the estate, the probate court may authorize its repayment. Merchants National Bank v. Weeks, 53 Vt. 115, 38 A. R. 661. An administrator cannot, nor can an executor without authority given by the will, purchase real estate. Lamotte v. Steidinger, 266 Ill. 600, 107 N. E. 850; Wilson v. Mason, 158 Ill. 304, 42 N. E. 134, 49 A. S. R. 162; Abell v. Howe, 43 Vt. 408. There was no lawful way in which this property could be substituted for money in the bank without the consent of those entitled to the money.
The defendant insists, as it did before, that Mrs. Story’s administrator had no right of action against the defendant, and therefore the plaintiff has none. The unsoundness of the argument lies in its false assumption. Mrs. Story’s administrator did have a right of action against the defendant. She was the residuary legatee under her husband’s will. Her rights passed to her administrator. A former representative of the testator joined with the defendant in a misappropriation of the funds of the trust to its loss. In these circumstances, her ad*144ministrator could have proceeded in equity against this mala fide holder of her legacy to compel restitution of the sum of which the trust had thus been despoiled. Veile v. Blodgett, 49 Vt. 270; note to McBride v. Vance, 112 A. S. R. 732. Though her title to the residue was during administration, prospective and contingent, it was an equitable interest all the time, Moore v. Brandenburgh, 248 Ill. 232, 93 N. E. 733, 140 A. S. R. 206, and if invaded by the misconduct of the executor equity will lend its aid to protect her interests. Rowell v. Rowell, 122 Wis. 1, 99 N. W. 473.
In discussing this subject, Mr. Justice Dodge, in the case cited, says, “* * * The equitable beneficial interest in all property of a solvent estate is in the legal distributees during the whole period of administration. If that interest is invaded, they must have the right, that a court’s aid be invoked. Primarily and ordinarily that right is sufficiently protected by the power and duty of the administrator to bring suit to protect or reclaim any property of the estate. When, however, he allies himself with the wrongdoer, and serves as an obstacle to, instead of a protector of, the rights of his cestuis que trustent, courts of equity have no hesitation in recognizing the equitable interests of the latter as sufficient to give them standing as plaintiffs in a suit to accomplish that which the administrator ought with diligence and good faith to pursue, but will not.”
How much more does the legatee deserve the assistance of the court when, as here, his money has been appropriated after his title to it has been made complete by the decree of the probate court.
To this right the plaintiff was subrogated by his payment of the judgment. He then stepped into the shoes of Mrs. Story’s administrator, became possessed of all remedies that the latter had, Hodgson v. Shaw, 3 Myl. & C. 190; 25 R. C. L. 1377, and could enforce every right that the latter could, so far as necessary to secure reimbursement, including the right to follow the trust property into the hands of a purchaser with notice, and to proceed against a third person participating in a breach of the trust by his principal. 6 Pom. Eq. § 924; Rice v. Rice, 108 Ill. 199; American Bonding Co. v. National Mechanics’ Bank, 97 Md. 598, 55 Atl. 395, 99 A. S. R. 466, and note; Browne v. Fidelity & Deposit Co., 98 Tex. 55, 80 S. W. 593; Blake v. *145Traders’ Nat. Bank, 145 Mass. 13, 12 N. E. 414; Farmers’, etc., Bank v. Fidelity & Deposit Co., 108 Ky. 384, 56 S. W. 671; note to Western Surety Co. v. Waller (S. D.), 24 A. L. R. 1523.
Nor is it made to appear that the plaintiff’s claim is barred by lapse of time. It is urged that Mrs. Story’s administrator knew all about the misappropriation when and before he brought his action against the plaintiff on April 8, 1910; and that inasmuch as it was Mrs. Story’s right that the plaintiff seeks subrogation to, the administrator’s knowledge was his knowledge; that the plaintiff takes the right subject to such defenses as existed against Mrs. Story’s estate, that the statute began to run from the time when her administrator ascertained the facts, and therefore the right in suit has outlawed.
That Mrs. Story’s administrator knew, when he brought his action on the bond, that Enright was in default, is true of course. But it does not of necessity follow that he knew of this particular misappropriation or that the defendant took assets of the estate in circumstances making it liable for their recovery. When these facts came to light is not shown by the findings, and we cannot assume that it was prior to June, 1911, the time when the plaintiff learned of them.
Our former opinion on this subject went only so far as necessary to meet the defendant’s argument. It accepted the defendant’s assumption that the statute of limitations applied and that the six-year rule governed, though the plaintiff’s brief asserted that the statute had no application. Upon further consideration we are convinced that the plaintiff was right in his contention. An administrator or executor is a technical trustee. Stickney v. Parmenter, 74 Vt. 58, 52 Atl. 73; Pond v. Pond’s Estate, 79 Vt. 352, 65 Atl. 97, 8 L. R. A. (N. S.) 212. It is well established that, as between a trustee and ceslui que irust, the statute of limitations does not apply to bar a trust claim, so long as the trust continues. Evarts v. Nason’s Estate, 11 Vt. 122; Kimball v. Ives, 17 Vt. 430; Drake v. Wild, 65 Vt. 611, 27 Atl. 427; Bigelow v. Catlin, 50 Vt. 408. Enright’s relation to the funds of the estate did not change when he settled his account; as long as he held the funds, he held as a trustee. In re Hodges’ Estate, 63 Vt. 661, 22 Atl. 725; 2 Wood, Lim. § 205; Thompson v. McGaw, 2 Watts (Pa.) 161. And until he repudiated the trust and knowledge thereof was brought home to the cestui que *146trust, the statute of limitations would not begin to run. Davis v. Eastman, 68 Vt. 225, 35 Atl. 73. Had Enright lived, he could not have invoked the statute to protect himself from a suit by Mrs. Story’s administrator. Nor can the defendant, who received the funds mala fide, and thereby became a trustee ex maleficio, set up the statute as a bar to the right of a cestui or one who has become subrogated thereto. 2 Perry, §§ 828, 832, 859; Ernest v. Croysdill, 2 DeG. F. & J. 198; Ducketl v. National Mechanics’ Bank, 86 Md. 400, 38 Atl. 983, 63 A. S. R. 513; Blake v. Traders’ Nat. Bank, 145 Mass. 13, 12 N. E. 414.
The defense of laches may be interposed in such eases, but no question of that kind is before us.
The defendant now insists that the findings do not show that the plaintiff has exhausted his remedies against En-right’s estate, and that until he has done this, he cannot recover from the defendant. In the original brief this point was discussed under the caption “Demurrer.” So we then understood that a question of pleading, only, was raised, and we so treated it in our opinion. Assuming that the defendant is entitled on rehearing to raise the question now presented, it is unavailing. In the opinion we gave the general rule governing a surety’s obligation in this respect, but there is another and a better reason why this defendant cannot require the plaintiff to proceed first against Enright’s estate; Enright and the defendant were joint tort-feasors. They joined in an embezzlement of trust funds. All persons so offending are equally culpable, and there is no primary and secondary liability between the participants, for all are equally amenable. Duckett v. National Mechanics’ Bank, supra; American Bonding Co. v. National Mechanics’ Bank, supra. In these circumstances, the defendant has no equities that the plaintiff was bound to respect.
In this connection it may be worth while to call attention to just how the findings stand on this subject. There is no express finding that any attempt was made to secure restitution from the Enright estate. But the chancellor refers to the transcript and exhibits and makes them a part of the findings. It may be that this was intended as a finding that Mrs. Story’s administrator presented a claim against Enright’s estate which was allowed at $6,944.31, on which he received dividends amounting to $3,387.34, all as shown by plaintiff’s Exhibit No. 27. If *147so intended, the reference to the exhibit did not amount to a finding.

The result is that the defendant takes nothing by the rehearing, and the cause is remanded ivith full costs.

Opinion on rehearing filed May 8, 1924.