Barroll v. Forman

Boyd, J., delivered the opinion of the Court. A bill was filed in the Circuit Court for Queen Anne’s ■ county for the sale of the real estate of Joseph O. Rasin, for the purposes of partition and a decree was passed appointing A. Randolph Weedon and Hope H. Barroll, trustees. The record does not show the dates on which some of the papers were filed, but apparently sometime in October, 1891, the trustees filed a report showing they had offered the several properties for sale on September 29th, 189 j , and had sold eight of them for $4,745. The proceedings were converted into a creditor’s bill and the proceeds of sales directed to be paid to creditors, as far as necessary.

A second report was filed, showing that additional sales had been made to the amount of $3,800, which together with the others were duly ratified. On the 31st day of May, 1893, the two trustees filed a statement, showing that they had collected from the purchasers the several amounts therein named, being in the aggregate the sum of $4,370, and asked to have the papers referred to the auditor. In September of that year an audit was filed distributing that sum. After allowing commissions, costs, taxes and $416.73 to Mrs.' Rasin in lieu of dower, the balance was distributed to creditors, and on February 23rd, 1894, the audit was finally ratified. ¹⁹² In May, 1894, Barroll filed a petition setting forth that the whole of the $4,370 had been paid to Weedon, as stated in the previous report, and only $703.65 of it had been received by him (Barroll), which was the amount of a judgment of William Deering & Co., a creditor represented by him, and that, although he had requested Weedon to distribute the money as directed by the audit, he had not done so, and alleged that he was informed that a large sum in addition to the $4,370 had been paid to Weedon by the purchasers, which he had not accounted for.

After some other proceedings, an order was passed requiring Weedon to bring into Court all the moneys received by him from the sales or proper and legal vouchers showing the disbursements thereof, and the bonds, notes and evidences of debt arising from the sales which had not been collected, in answer to which he only returned three notes, amounting to $1,100. Barroll finally asked to have Weedon removed and Weedon filed his resignation, which the Court accepted and ordered him to deliver to Barroll all bonds, notes or evidences of debt held by him, and to pay him all moneys received by him, excepting such as had been properly paid out under the audit. On October 12, 1895, Barroll filed another petition, in which he recited at length the previous transactions and proceedings in the case, alleged that it was impossible to proceed further without having the rights of all parties interested determined, and made the heirs of Mr. Rasin, the purchasers and creditors parties. On March 11, 1896, he amended that petition by adding a prayer to revoke and set aside the order of ratification of the auditor’s account.

Most of the respondents answered the petition. A separate bill in equity was also filed on January 27, 1896, by Barroll, against the heirs and others, in which he asked to have the ratification of the audit set aside on account of the fraud of Weedon. He also proceeded in equity against Pere T. Forman, and The Workingmen’s Permanent Building and Loan Association, to recover the amount of a note which Forman had given to Weedon as part of his purchase money, ¹⁹³ and which the Building Association had discounted, and brought another case against the Centreville National Bank and others, to compel payment of three notes of R. Hopper Smith and Isaac Snitcher, which it was alleged the bank had collected. There are altogether six equity cases connected with these transactions which the solicitors for the respective parties agreed should be heard together, which was done, but a re-argument having been ordered a pro forma decree was agreed to, which was passed, and an appeal was taken by Barroll.

It is doubtful whether so many cases should be thus heard together and disposed of in one opinion — especially when the record is as imperfect as this is, but as the administration of the trust has already been shamefully delayed — owing principally to the evasions and misappropriations of Weedon — we will pass upon such questions as are properly before us. It seems to be conceded that Weedon and his bond furnish no protection to the parties interested, although he collected most of the purchase money that has been paid, and has misappropriated a considerable amount of it. Barroll being financially responsible, the main questions presented by this appeal are how far he is to be held liable for the defaults of his co-trustee, and what relief he has against the several parties sought to be charged by the various proceedings brought before us. His contention is that the purchase money was paid to Weedon without his authority, and that therefore he is not responsible for the misappropriations by him, and that in some instances purchasers so dealt with Weedon and so settled with him, contrary to the terms of the decree, as to enable him to misappropriate the funds without his (Barroll’s) knowledge, and therefore the payment to Weedon did not release them.

Then again it is contended that other parties dealt with the assets of the estate in the hands of Weedon under such circumstances as to be notice to them that they belonged to the trust estate, and are hence responsible. It will be more convenient and perhaps less confusing to discuss the several items in the order they were disposed of by ¹⁹⁴ the pro forma decree, and we will therefore adopt, as far as practicable, that plan, although to some extent what is said of some will apply to others. i. The application of Barroll to have the order ratifying the audit vacated was refused and he was directed to proceed with the execution of it. The audit was filed at Barroll’s instance, after his examination of it, was ratified on the 23rd day of February, 1894, and no formal application to have it rescinded was made until January 27th, 1896.

An order finally ratifying the audit can only be vacated or revised as other decrees can. “ It is conclusive as to the matters in controversy to which it relates and has the effect of a final decree. The account is res adjudicata, all parties are concluded and the litigation is terminated.” Miller’s Equity Procedure, section 552 and cases there cited. There was no such surprise, fraud or mistake as would entitle a party to be relieved from a decree that had been thus passed and enrolled, even if the application had been promptly made. The only surprise or mistake that has been suggested was that the appellant believed the money was in bank.

That would not entitle him to relief, but the audit laid in Court nearly six months before it was ratified, and he had every opportunity to acquaint himself with the facts. In October, 1892, when Weedon sent him a check for balance on the Deering claim it was drawn on his individual account. It is true that Barroll says he did not notice that fact, but as between him and innocent parties he was compelled to notice such transactions, if he proposed to hold them responsible. Then, ■ too, he knew the exact amounts that were included in the audit, and the purchasers who had made the payments.

The testimony is not as clear as it might have been, but it is sufficient to show that Barroll permitted Weedon to settle with the purchasers for the cash payments aue from sales embraced in the first report. He left Céntreville, where the sales had taken place, before the settlements were made. He said on cross-examination, “ I returned home that evening, it was understood that ¹⁹⁵ Mr. Weedon would arrange the settlements, but only in accordance with the advertised terms of sale.” By the terms of the sale, one-fourth was to be paid in cash and he must certainly have contemplated and understood that at least to that extent the purchasers would settle with Weedon, and as between Barroll and them there could therefore be no question about his being bound by such payments. They were under no obligations to see that the money was deposited to the joint account of the two trustees.

In the $4,370 distributed in the audit were the payments made by three of the purchasers which were ratified by the execution of deeds, $2,000 of those made by Forman which were authorized to the extent of the cash payment due and the Deering claim, and the cash payments of the two Smiths, together with a small amount, which Barroll will get the benefit of against Robert J. Reynolds, and it would be very unjust to hold the purchasers responsible for those amounts. In all probability neither Barroll nor they had, at the time, any cause to suspect Weedon of dishonesty, but inasmuch as Barroll had authorized him to settle in accordance with the terms of sale he was expressly authorized to receive the cash payments. But as we have already intimated, even if that were not so, he subsequently ratified these payments by his conduct ■before and after the audit was stated. That ratification was with full knowledge of the material fact that the money had been paid to Weedon and he cannot be relieved merely because he believed that the fund was in bank to their joint credit or would be forthcoming when needed.

Every principle of justice and equity should estop him from casting the burden of the loss on innocent parties after thus ratifying the acts of his co-trustee — especially when most of the payments had been previously authorized by him. Nor can we agree with the appellant that the order of the Court of August 10th, 1894, which amongst other things provided “ that the papers and proceedings in the case be referred to the auditor to state one or more accounts of all the funds in the case, or such as shall by ¹⁹⁶ said co-trustees be deemed solvent and collectible,” had the effect of rescinding the order ratifying the audit. In the first place the Court at that time had no power to rescind it to the detriment of those interested in it, on the ex parte application of one of the trustees. But at that time Barroll had not even applied to have it rescinded.

The object of that order evidently was to have a statement between Barroll and Weedon and not between them and the distributees. That part of the pro forma decree must be affirmed and the appellant will be required to pay to the persons distributed to in accordance with the audit, unless otherwise herein di-. rected, excepting of course such sums as have been already paid or discharged by the parties. The decree provides that the amount received by Robert J. Reynolds on the Nelson E. Smith note is to be deducted from the distribution to him. He did not appeal and under the evidence is undoubtedly chargeable with that amount, as the note was payable to. the two trustees and Weedon had no power to use it for the payment of his individual debt or to endorse Barroll’s name on it.

Of course Barroll is entitled to the distribution allowed the Deering & Co. claim, and the difference between that distribution and the amount received by him in payment of that judgment can be allowed in the next-audit. 2. The decree further inquires Barroll to bring into Court so much of the purchase money of Forman as was represented by two notes of John B. Brown, payable to the order of Forman, endorsed in blank by him, and turned over by him to Weedon as part payment of his purchase money. One of them was for $1,167.15, payable twenty-four months after September 29, 1891, and the other for $1,230.50, payable thirty-six months after date, being intended to cover the two last deferred payments of his purchase money. The first was discounted by the Workingmen’s Permanent Building and Loan Association, and the second was turned over by Weedon to Robert J. Reynolds in payment of some ¹⁹⁷ individual debt.

By this paragraph it is also decreed “ that the petition and bill in No. 1344 in this Court, so far as the same seeks to charge said association and others therewith, is dismissed with costs.” No. 1344 is a case of Barroll, trustee, against Forman, The Building Association “ et al.” The record does not disclose who the others are, but the brief statement of the case shows that the bill was filed to recover the note negotiated by Weedon with the Building Association, and was purchased by the association before maturity — • October 25, 1892. There is no evidence to show that the Building Association had any knowledge that it belonged to this or any trust estate. It is true that Mr. Brown was president of the association, but he was not present when the note was purchased and was not aware what use Forman was going to make of it or, until long afterwards, what had been done with it. He gave the notes to Forman in settlement of a debt due to him.

To hold a bona fide purchaser of a negotiable note responsible under such circumstances would be an effectual barrier to the safe conduct of ordinary bona fide commercial transactions. So much of the decree as holds the Building Association free from liability must therefore be affirmed. Nor is there anything in the record to show that Reynolds had notice that the Brown note he received belonged to