Blake v. Chambers , 4 Neb. 90 ( 1875 )

Lake, Ch. J.

The defendant, by demurring to the petition, admits that all the material averments therein contained are true. Do the facts thus admitted entitle the plaintiff to the relief which he seeks?

As to the jurisdiction of the district court, over the subject matter of the action there is no doubt. That court is one of general jurisdiction, and its powers are ample, in all cases of fraud by executors or others holding a fiduciary relation, to compel the proper application of trust funds committed to their care.

The defendant, by his demurrer, admits that the real estate mentioned in the petition was purchased by him while occupying the responsible and confidential office of executor, and that it was paid for entirely, out of the personal assets of the estate of his testator, and the title which he still holds taken in his own individual name. This, certainly, was a most glaring fraud on his part, and one of which a creditor of the deceased, whose claim remained unsatisfied, and which ought to have been paid out of such assets, has the right to complain. Michoud, v. Girad, 4 How., 554.

Our statute provides, and in this case it was evidently intended by the testator, that his personal property should be first applied in payment of his debts, and other lawful claims against his estate, before resorting to his real property for that purpose.

In equity, the assets which thus pass into the hands of an executor are treated as a trust fund, and held by him for the benefit of all persons interested therein, according to their relative priorities, privileges and equities. 1 Story's Equity Jurisprudence, Sec. 579. And whenever it is made to appear, that there has beeua misapplication of any portion of such trust fund, and it can be clearly traced into the hands of any person affected with notice of such misapplication, the trust will he held at once to attach in favor of the person who has been wronged. Id., Sec. 581.

In this case we experience no difficulty in tracing the assets, nor in regard to the notice of their misapplication, for the executor admits that he paid for this land wholly out of the estate of his testator, and that he is the holder of the legal title, thereby fraudulently acquired.

I am of the opiuion, therefore, that the plaintiff has an equitable lien upon this land for the payment of the money due to him from said estate.

As to the statute of limitations, on which some reliance seems to have been placed, it is well settled in courts of equity, in' cases like the one under consideration, that the statute will not commence to run until the discovery of the fraud. And in this state such is the statutory rule. General Statutes, 525, Sec. 12. In this case it is expressly alleged that this fraudulent misapplication of the assets of the estate was not discovered until after the first day of January, 1871, so that, in any event, the statute did not begin to run until after that time, which was but a few days prior to commencing the action.

The judgment must be reversed, and the case remanded to the district court, to be proceeded with in accordance with the views herein expressed.

Eeversed and remanded.

Mr. Justice Maxwell concurred.