State ex rel. Gable v. Coale

Miller, J., delivered the opinion of the Court. In this case suit was brought upon the bond of Isaac Coale, Jr., as one of the executors of John Gable whose will was admitted to prohate in February, 1856. By this will the testator devised all the residue of his estate, real and personal, after payment of debts and funeral expenses, to his wife, Louisa M. Gable, George Neilson and Isaac Coale, Jr., and the survivor of them, in trust for the purposes therein stated, and appointed the same parties his executors. All the executors qualified as such, and gave separate bonds.

Coale, who had married one of the daughters of the testator, appears to have taken upon himself the principal mangementof the estate, and died in December, 1873. Neilson died in October, 1876, and Mrs. Gable is still living. The bond sued on was executed on the 6th of March, 1856, and the suit was instituted on the 6th of November, 1877, more than twenty-one years after the date of the bond. The equitable plaintiff's are parties who were appointed trustees under the will in place of Mrs. Gable, the surviving trustee, who asked to be relieved from discharging the duties of the trust.

The order appointing them, passed two days prior to this suit by the Circuit Court of Baltimore City, upon application ³⁷³ therefor, authorized them to bring suit upon the bond of Coale, in order to recover from the sureties therein a large amount of money alleged to be due by him as executor. The sureties pleaded limitations, and also relied upon the defence that the assets of the estate received and collected by Coale as executor, had, long prior to his death been transferred by operation of law, to himself and his co-trustees under the will. The case was submitted to the Court without the intervention of a jury upon an agreed statement of facts, and upon the evidence which appears in the record. The effect of the Court’s rulings upon the several prayers offered on both sides, was to overrule the defence of limitations, and to sustain that of transfer by operation of law.

The judgment was consequently in favor of the defendants, and the plaintiffs have appealed. The only question, therefore, for review is whether the rulings of the Court in favor of the defendants were correct. The first inquiry looking to a solution of this question is, what were the duties of the executors under the will, and how long did their functions as such continue? This depends upon the construction of the will itself.

The testator first makes an absolute devise to these parties, and the survivors or survivor of them, of all the rest and residue of his estate, real, personal and mixed, after payment of debts and funeral expenses in trust to allow his wife to take and receive out of the rents, income and profits of the same, the sum of $2400 annually during her life, or as long 'as she continues unmarried, and after her death he divides his estate into three parts, and devises each of these parts to Neilson, one of the same parties, in trust for his two daughters and his son, with contingent limitations over, and then appoints the same parties his executors, with power to sell or dispose of any portion of his real or personal estate, and to convey the same at their discretion for the purpose of carrying out his will. ³⁷⁴ Now intermediate the devise in trust in favor of his wife, and that in favor of his children after her death, is this clause: “And whereas a considerable portion of my personal estate consists of the capital invested by me in the commercial house of McDowell & Gable, in the City of Baltimore, I do hereby order and direct that the business of the said house shall he continued after my decease, for the benefit of my estate, upon such terms and for such periods as may be agreed upon between my executors and the surviving partner, and that my executors shall regularly receive and take out of the profits of said house, the share thereof to which my estate will be entitled, and after paying to my wife the aforesaid provision for her support, that they shall safely invest the excess of said profits for the benefit of my estate, and whenever the said business shall be closed and my capital therein withdrawn, I do order and direct that as fast as the said capital shall be received by my executors, they shall invest the same in good and safe securities that it may yield the means of paying the said annuity, and increasing my estate for final distribution.” It seems very manifest that the intent which pervades this entire clause and controls its construction is, that the business of the firm should be carried on after the testator's death, by an arrangement between his executors and the surviving partner. The language used and the provisions made are all plainly referable to this continuation of the firm business. The profits to be made and the capital when withdrawn, upon the closing of the business so to be conducted, as well as the duty of conducting and managing the business itself, are confided to the care of the executors. The duty of carrying out an arrangement by which his commercial business was to be continued as it had been conducted by the testator himself, is one that pertains more appropriately to the office of executors than to that of trustees, and the whole clause is founded upon that idea.

If the business was not to be so continued, there ³⁷⁵ was no reason for the existence of this provision. If the executors were simply to collect the interest of the testator in this firm, as any other asset of his estate or debt due to it, there is no reason why it should not pass to the trustees with, and at the same time the other portions of the estate passed to them, under the devise of all the rest and residue of his property. Now this’ is precisely what the executors did. It is admitted the business was not carried on after the testator’s death by his surviving partner and the executors.

The latter either declined to carry on the business, or the surviving partner refused to enter into any such arrangement with them. The executors therefore proceeded at once to collect and receive from McDowell, their testator’s interest in this firm. The continuation of the business according to the testator’s wish having thus failed, we are clearly of opinion that all the duties imposed upon the executors under this clause of the will, ceased to be obligatory upon them. In other words, the whole clause fell with the failure of the main object it was its purpose to effect.

Such being in our opinion the true construction of this will, the duties which it, as well as the law imposed upon these parties in their two-fold capacity of executors and trustees are too plain to admit of controversy. As executors it was their duty simply to collect the assets, pay the debts, and then transfer the balance to themselves as trustees. In the latter capacity it was their duty to administer the trust according to the provisions of the will, during the life of the widow, and upon her death to transfer the estate to the single trustee for the children. Now what was done?

The debts were few, of small amount, and were promptly paid. Two accounts were then passed in the Orphans’ Court, the first, on the 22nd of April, 1857, showing a balance due the estate of $25,657.34, of which $22,786.49 consisted of cash, and the second, on the 29th of June, 1858, showing a balance of $45,223.44, of ³⁷⁶ which $42,352.29 was cash. These accounts were passed, by the three executors and were sworn to by all of them, but we shall assume as the proof seems to establish, that, the money was collected and received by Coale alone. We shall not stop here to notice the fact that a portion of this money was invested in the purchase, of property, or to follow the evidence that traces out the final disposition of a part of the property so purchased, and the amount ultimately realized from various sources to the estate of the testator.

After the passage of these accounts it is admitted that Coale received the additional sums of $4347.68- and $3862.63, the first, on the 4th of July, 1859, and the second, about the 1st of January, 1860. It thus appears, that a very long period after the debts had been paid and the time allowed by law for the settlement of the estate by the executors, and their receipt of all assets, for which the executor’s bond sued on is sought to be held responsible, had elapsed before this suit was instituted. If, therefore, the doctrine of transfer by operation of law, has any foundation in reason and justice, this is a case which calls, for its -application, and very stringent and satisfactory objections to its operation must be adduced and established. The reasons upon which the doctrine is founded have been so clearly stated by this Court, and the instances of its application have been so numerous, that it is quite unnecessary to refer to other authorities either for its support or its illustration.

In fact, it has for nearly a century been accepted in this State as established and familiar law. The cases have all been cited in argument, and we shall refer to a few of them only. The first is that of State vs. Jordan, 3 H. & McH., 179 , where a testator gave legacies to his grand-children, and made his executors their guardians, and.in a suit by one of these legatees upon the bond of the executors, it was held, that the bond was-not liable, because the legacy by operation of law had ³⁷⁷ passed to the guardians. In this case, which was decided by the General Court, the question arose on the pleadings which are set out in 2 Harr.

Ent., 326 to 329. This was followed by the case of Downes vs. The State, 3 H. & J., 239 , where the same question was decided in the same way by the Court of Appeals. In neither of these cases was any opinion filed, but in Seegar vs. The State, 6 H. & J., 162 , an opinion was delivered and the Court say: “it is an established principle of law, that where the same person who acts as the administrator of a deceased party is appointed guardian to the representatives, that whatever balance is in his hands at the rendition of the final account, (and perhaps, even prior to that time) is in his hands and possession not as administrator to the deceased, but as guardian to the representatives. This transfer is by operation of law.

The administrator having in his hands a balance that ought to be paid over to the guardian, and one person representing both these characters, he cannot pay the money over to himself, nor, if the payment was refused, is there any person who could enforce it. Under these circumstances, the law, by implication, considers it in the hands and possession of the party in that representative character that ought to receive it.” The reason of the rule thus stated, is