Prosser v. Leatherman ex rel. Hutchins , 5 Miss. 237 ( 1839 )

Mr. Chief Justice Sharkey

delivered the opinion of the court.

This action was brought on a promissory note made by the appellant to Ephraim Fleshman, in his life time, on whose estate the said Leatherman is administrator de bonis non. The appellant pleaded that the note came to the hands of Leatherman in his capacity of administrator, and without lawful authority or right he endorsed the note to Hutchins, for whose usé the suit is brought, in a trade for certain negroes, and avers a knowledge on the part of Hutchins of the fact. There was a demurrer to the plea, which was sustained, and this appeal taken.

The question presented by the plea directly involves the power of an administrator to dispose of the assets, and assign the debts due him in his representative capacity, for his own use, with knowledge of the fact on the part of the purchaser. The plea is rather loosely drawn, but I think substantially good, if the subject matter is such as will support it. In regard to transactions of this land, great contrariety of opinion has existed in the courts of England, of very high authority. The most of the cases on this subject are reviewed by Chancellor Kent, in the case of Field v. Schieffelin, 7 Johnson’s Chancery Reports, 150. The rule as held by Lord Hardwick and Lord Mansfield, was, that an executor could dispose of the assets or choses in action of his intestate for a valuable consideration, and that the purchaser would hold, by good title unless there was fraud or collusion between the executor and purchaser, or unless a contrivance appeared between them to make a devastavit. Lord Kenyon condemned the decision in one of the cases, and adopted this rule, “if upon the face of the assignment of property it appeared to have been made in satisfaction of a private debt of the executor, the sale was fraudulent against the persons interested under the will, and equity would relieve. It would be a case of implied fraud.” Lord Thurlow adopted the same rule. He says that in general the purchaser has nothing to do with the application of the money, “but if one concerted with the executor to obtain the effects at a nominal price, or at a fraudulent undervalue, or in extinguishing the private debt of the executor, or in any other manner contrary to the duty of the office of executor, the purchaser or pawnee will be liable.” Sir William Grant and Lord Eldon have held the same doctrine, and Chancellor Kent comes to a similar conclusion. He says “that the purchaser is safe, if he is no party to any fraud in the executor, and has no knowledge or proof that the executor intended to misapply the proceeds, or was in fact by the very transaction applying them to the extinguishing of his own private debt. The great difficulty has been to determine how far the purchaser dealt at his peril, when he knew from the very face of the proceeding that the executor was applying the assets to his own private purposes, as the payment of his debts. The latter and the better doctrine is, that in such case he does buy at his peril.”

All the cases on this subject are fully discussed by Chief Justice Savage, in the case of Colt v. Lasneir, 9 Cowen 320, where he brings the rule as settled in England and New York down to this, “ that any person receiving from an executor the assets of his testator, knowing that this disposition of them is a violation of his duty, is to be adjudged as conniving with the executor; and that such person is responsible for the property thus received, either as a purchaser or a pledgee.”

This rule seems to me to be entirely unobjectionable, either on the score of justice to all parties, or as resulting clearly and necessarily from the prescribed powers and duties of executors and administrators. It is the duty of an executor to collect the debts of the deceased and take care of the assets, and apply them to the proper objects, and the law gives the power to do this, but nothing more. He is to act in the capacity of a trustee for the benefit of those interested in the estate, but it is certainly not the policy or intention of the law that the debts and assets in his hands should be a fund for him to trade oh at pleasure for his own emolument. The creditors have a lien created by law on ail the assets, and one which they have a right to enforce in the due course of administration, and which is incompatible with an indiscriminate sale or transfer of them by the executor for his own private purposes. If there are no creditors, the legatees or distributees have a direct interest in the estate, the law having- directed that it should be distributed. The executor having the rightful possession of the assets, a knowledge on the part of purchaser of the illegal disposition, would of course be necessary.

As a legal proposition it surely cannot be denied that an executor or administrator may assign a note or chose in action, which, he holds in that capacity, but it must be done for a purpose which will meet the sanction of law, and not for his individual benefit.

The principles as above laid down arise from cases decided in equity, and we are to consider whether the debtor may avail himself of them in an action at law. The authorities all agree that an improper transfer with the knowledge of the purchaser, imposes on him a liability in equity in favor of those interested. They evidently proceed on the ground of an express or implied fraud, which may also he enquired into at law, and courts of law will not enforce a right thus acquired. It cannot be proper, therefore, to permit a recovery in this instance, when it would impose an equitable liability on the plaintiff belotv, and thus ehange the nature of the remedy in favor of creditors and- distributees, and thus far sanction a transaction which was illegal.

Although the ple'a does not expressly aver that the trade was made for the sole benefit of Leatherman, yet the transaction is such as to leave no other conclusion. As administrator he could not purchase negroes, and the very transaction shows the illegal application of the note. In principle there can be no difference between the transfer of a note in payment of a pre-existing debt, and a transfer for property for individual benefit. The subject matter of the plea, therefore, formed a good bar in law, and the ■demurrer should have been overruled and judgment of respondeos ouster awarded, which must he the judgment of this court.

{Note. — This cause was decided in 1835.]