Court Opinion

ID: 7362614
Source: CourtListenerOpinion
Date Created: 2022-07-27 23:48:31.478907+00
Date Added: 2024-06-11T16:20:40.850991
License: Public Domain

ANDERSON, J.
“While the power of an executor or administrator, over the dioses in action in his hands for administration, is of necessity large ,and may be dealt with generally as if he was the owner of them, he is without authority to apply them in payment of his individual debts. Whoever accept them as security for or in payment of such debts has full notice of the abuse his fiduciary power and duty, and must be made answerable for them.”—Shelton v. Carpenter, 60 Ala. 211; Swoope v. Trotter, 4 Port. 27; Chandler v. Chandler, 87 Ala. 300, 6 South. 153. In the cases of Shaw v. Spencer, 100 Mass. 382, 97 Am. Dec. 107, 1 Am. Rep. 115, and Smith v. Ayer, 101 U. S. 320, 25 L. Ed. 955, the pledgee of choses in action by the administrator or trus*199tee was held not to be a bona, fide purchaser, because pledged to secure an antecedent individual debt of the trustee. But the authorities do not prevent the pledging of choses in action to secure the debts of or borrow money for the estate, and there is a. broad distinction between pledging notes of the estate to secure an antecedent debt of the trustee and pledging them as security for a present or subsequent consideration. In the latter case the pledgee is not required to follow the money lent and see that it is applied to the benefit of the estate.
In the case of Gottberg v. United States National Bank (N. Y.) 13 N. Y. Supp. 841, a case quite similar to the one at bar, the court said: “The present case is analogous to McLeod v. Drummond, 14 Ves. 352, 17 Ves. 152, which was caiefully analyzed by Chancellor Kent in Field v. Schieffelin. There was, in McLeod v. Drummond, a pledge by the executor of the testator’s bond upon advances of money. The bill, as here, was by a coexecutor, and it was dismissed by the Master of the Bolls, and the decree was affirmed on appeal to the Lord Chancellor. The Master of the Bolls said he had found no case, where the money had been advanced at the time to the full value of the assets, that it was ever-called hac-k. Lord Eldon, on the appeal, declared that, on a sale by the executor for money advanced at the time, the vendor'could never be affected by proving the executor’s intention at tire time to misapply the money. The third person, if there was no more in the transtion, would be justified in assuming that the sale was for those purposes for which the law gives the executor the power of sale. The conclusion, in substance, was that, to charge the purchaser, he must have had direct evidence that the advance was not for a purpose connected with the administration of the as,sets, but for a different purpose, and that the executor was going to misapply the fund. Both upon principle and authority, then, the plaintiff in the present case must fail. We will assume that the bank was bound to notice the manner in which the bonds were registered. What then? It simply advanced money to one of the executors upon the collateral security of the testator’s bonds, registered in the name of the two executors. There was absolutely noth*200ing more than this in the transaction. It is true that in form the advance was to John J. Louth personally; that is, he did not add the descriptive Avord ‘executor’ to his signature to the stock note, nor did the hank add snch word to- the name of Louth as the payee of its check, nor did Louth inform the bank that he desired the loan for the.purpose of the estate. Rnt all this Avas implied upon the face of the txansaction, and the hank is certainly not chargeable because its president supposed that he aaus dealing Avith Louth personally. Avlien, if he had noticed the manner in Avhich the bonds Avere registered, Avhat transpired need not have been changed even in matter of detail; for the debt contracted by Louth as executor Avas in laAV personal, and it Avouid have been just as much personal, Avhether he added to his signature to- the stock note his executorial description or not. The form of the transaction, therefore, AA'as unobjectionable. It appropriately effected a loan to the estate, and, so far as it spoke at all, it spoke of a loan to the executor for the purposes of the estate. It did not of itself effect a misappropriation of the funds of the estate, and it certainly gave no hint to the bank of an intended misappropriation.”
In the case at bar the bill aAmrs that the notes of the estate Avere transferred by W. S. I-IoAvell to secure a debt contracted by him a íCav days previous, and, if the complainants were trying to subject the proceeds of the notes to the payment of this debt, they Avouid doubtless not be bona fide purchasers, and their claim could not prevail; hut the bill avers that this debt Avas settled, .and the executor, W. S. HoAvell, authorized them to hold the notes to secure another debt for money presently and subsequently advanced, being the one for which they claim the proceeds of the notes. It is true the note given the complainants Avas not executed by W. S. Howell in his executorial capacity; but that of itself was not sufficient to inform the complainants that the money was not obtained by him as executor and for the benefit of the estate. We know of no laAV that prevents an executor from negotiating for or procuring money for the benefit of the estate beyond the border of the state in Avhich his letters were granted.
*201The chancellor erred in dismissing the bill or petition for want of equity, and the decree of the chancery court is reversed, and the cause is remanded.
Reversed and remanded.
Dowdell, Simpson, and McClellan, JJ., concur.