Hood v. . Hayward , 124 N.Y. 1 ( 1891 )

The decision of the main appeal involves two questions: Whether the instrument executed and delivered by the plaintiff and the legatees, under the will of Andrew Hood, to Moffat, one of the sureties upon the bond given by the executor, discharged the liability of the defendant Hayward, the other surety upon said bond, and whether this action upon said bond against the defendant Frederick Hood as principal and the defendant Hayward, as surety can be maintained before the issuance and return of an unsatisfied execution against the property of said Frederick Hood, the executor.

These propositions are familiar law and scarcely need the citation of authorities to support them, viz., that the release of the liability of one or more joint or joint and several obligors, or one or more joint tort feasors, discharges the liability of the other; that the rule is the same in law and equity.

But these rules require for their full operation that the instrument should be a technical release without any valid limitation or restriction. The contention in this case is as to the character of these instruments. Whether they constitute a technical and absolute release, or whether they constitute a release with a valid limitation, or, as more practically stated, whether they release the liability of the surety Moffat and reserve the liability of the surety Hayward upon the bond, or whether they discharged the liability of both Moffat and Hayward upon the bond.

A reference to the instruments under consideration shows that the plaintiff, as executrix and individually, together with all the devisees and legatees under the will of Andrew Hood, deceased, in consideration of $7,000, to them paid by said Moffat, released and discharged him, his heirs, executors, administrators and assigns from all causes of action, etc., and especially by reason of the said Moffat having executed with one John Hayward and Frederick Hood a joint and several bond to the People of the State of New York in the sum of $20,000, executed by said Hood as principal, and by the said Moffat and Hayward as sureties. The said instrument further provides that this release is intended to discharge said Moffat from all liability by reason of said bond in every respect, "but shall not be construed as affecting any claim or demand which the parties of the first part, or any of them, have or may have against the said Frederick Hood as executor, or against the said John N. Hayward as surety on said bond or otherwise."

The same parties, in addition to signing the instrument, the substance of which is above stated, also executed and delivered to said Moffat another instrument which provided "that it was intended thereby to release and discharge the said Moffat, his heirs, executors and administrators from all liability whatever of any kind and nature arising or growing out of any and all acts or omissions, neglect or defalcation of the said Frederick Hood, whether done or committed as executor, trustee, or in any other capacity, under said last will and testament of Andrew Hood, deceased, or otherwise, but that said release should not be construed as in any way affecting any claim or demand which they (the parties of the first part thereto), or any of them, had or might have against the said Frederick Hood as such executor or otherwise, or against the said John Hayward as surety on said bond or otherwise."

"Now it is hereby declared that the intention of said parties is to release the said David Moffat from any and all claims which they, or any of them, have or might have against him, his heirs, executors or administrators under or by virtue of said bond, to the extent of one-half of the penalty thereof, and it is expressly understood and agreed that the said release is intended to operate as a satisfaction and discharge of one-half of the obligation arising from or under said bond, so that the said Moffat shall be released from all claim or demand for contribution on the part of his co-surety, the said John N. Hayward, and that this instrument shall be taken and deemed a part of said release and incorporated therein."

"It is also understood and agreed that nothing therein contained shall in any manner affect or impair any claim, right or demand which the parties thereto, or any of them, their, or any of their, heirs, executors or administrators have or may hereafter have against the said Frederick Hood or as against John N. Hayward as to the remaining half of the amount of said bond."

The evidence in the case shows, beyond question and without substantial contradiction, that these two instruments were delivered to Moffat at the same time and upon the occasion of the payment and receipt of the consideration specified in them.

The trial court has found as a conclusion of fact "that David Moffat, mentioned in said bond, has been released from any liability on said bond to the extent of one-half the penalty thereof, to wit, the sum of ten thousand dollars, saving and reserving however, and excepting all cause or causes of action against the defendants in this action and any and all liability thereunder." And, as conclusion of law, that the plaintiff, as executrix, is entitled to judgment against the defendant Hood, the executor, and the defendant Hayward, one of the sureties, for the sum of $10,000 (that sum being one-half of the penalty of the bond) with interest.

The defendant Hayward contends that he was released from all liability upon the bond by the release of the liability of Moffat.

There is no doubt that if the language of the instruments had simply acknowledged satisfaction of all claims arising upon the bond and released and discharged the same, the effect would have been to discharge both Moffat and the defendant Hayward from any further liability upon the bond. But the language of the instrument acknowledges the payment of the sum of $7,000, being less than one-half of the penalty of the bond, from Moffat, and purports to discharge Moffat only, and expressly declares such to be its sole object and purpose, and that it shall not be construed as in any way affecting any claim or demand which the releasors have against Hood, as executor, or the defendant Hayward, as surety upon said bond; and in order to make this purpose more manifest and its effect more certain, they executed on a later day and delivered with the instrument just referred to another instrument of an equal degree of dignity and solemnity declaring that it was their intention that said instrument should "operate as a satisfaction and discharge of one-half of the obligation from or under said bond, so that said Moffat shall be released from all claim or demands for contribution on the part of his co-surety, the said John N. Hayward," and "that nothing therein contained should in any manner affect or impair any claim, demand or right which they have or may have against said Frederick Hood, or as against John N. Hayward as to the remaining half of the amount of said bond."

It will be observed that the terms of the instrument do not express that the claim or liability under the bond has been satisfied, which is the essential point in an accord and satisfaction. The terms of the discharge by the instrument expressly limit the operation of the discharge to Moffat and reserve the liability of Hayward. I do not perceive any reason in the relations of the parties to this bond, as between themselves or as to the releasors to prevent the court from giving the precise effect to the instrument intended by the parties to it. Each of the sureties was liable to the releasors for the full amount of the penalty and whatever part of the penal sum either should be compelled to pay, he could compel his co-surety to contribute one-half. Aside from interest neither surety could compel the other to contribute more than one-half of the penalty of the bond, viz.: $10,000, whatever the loss of the estate may have amounted to.

In this case it amounted to much more than the amount of the penalty, so that the releasors could have demanded each surety to pay $10,000. That is the sum which defendant Hayward was liable to pay under the bond, to the releasors, and that is all he is now compelled by the judgment to pay them. What harm or prejudice has or would have been done Hayward in this case, if the releasors had forgiven the liability of Moffat outright or had received $10,000 of Moffat's money and subsequently given it back to him? I can perceive none. Certainly, Hayward could not have sued and recovered of Moffat any part of such gift. The contractual relation between co-sureties is that each shall pay one-half of the amount of the liability assumed. There is no other contractual relation between them; certainly none that entitles one surety to share in the voluntary benefits or presents that the obligee may make the other surety. The question in this case is whether the release to Moffat discharged Hayward. What (if any) rights and remedies Hayward may have against Moffat in any contingency that may arise, need not here be considered.

But without further discussing the reasonableness of the respondent's contention, we think there is an unbroken line of decisions supporting the judgment in this case, to the effect that the defendant Hayward was not discharged by virtue of the instrument which discharged Moffat from liability, upon the bond in suit.

It is not worth while to refer to but few of the numerous cases which maintain this view. (Benedict v. Rea, 35 Hun, 34;Irvine v. Millbank, 56 N.Y. 635; Morgan v. Smith, 70 id. 537; Bronson v. Fitzhugh, 1 Hill, 185; Kirby v. Taylor, 6 Johns. Ch. 246; Matthews v. Chicopee Mfg. Co., 3 Rob. 711;Ellis v. Esson, 50 Wis. 138; 36 Am. Rep. 830; Price v.Barker, 4 Ellis Black, 760; Thompson v. Lack, 3 Com. Bench R. 540.)

The great number of decisions and the discussion in the opinions of the courts upon this branch of the law has arisen, as it seems to me, not from any doubt or diversity of opinion in relation to the effect of an instrument under seal clearly expressing a discharge of one joint obligor in consideration of a sum less than the entire obligation or liability and a reservation of the remainder of the liability against the other obligor, but from a construction of the nature and effect of the various agreements and transactions between one or more joint obligors with the obligee, whether the agreement or transaction shall be held as a full satisfaction of the obligation as to all the obligors or a satisfaction in part and a release of less than all the obligors, or a covenant not to sue one or more of the obligors or whether the instrument affords a presumption of a full satisfaction and discharge of the obligation or whether sufficient in force and dignity to discharge the original obligation. The acts of the legislature from time to time, and as expressed in section 1942, Code of Civil Procedure, are in line with the decisions as respects joint debtors, and under it the presumption is that only the compromising creditor is discharged.

Of the correctness of the decision of the court below in respect to the office and effect of the instrument given to Moffat by the obligees or beneficiaries of the bond I think there can be no doubt.

The next question to be considered relates to the remedy by which the plaintiff seeks to maintain her right against Hayward. The general rule is that a party must resort to a remedy prevailing at the time the action is commenced to enforce his right. The defendant contends that it was necessary before bringing this action to recover against the surety upon an executor's bond, that the proper surrogate should have made a decree against the executor, and that an execution should have been issued to collect the sum specified in the decree, and that the execution should have been returned unsatisfied in whole or in part.

It is found by the trial court that no such execution had been issued or returned. It will also be borne in mind that the proper surrogate had made a decree or order directing the executor Hood to pay the plaintiff the sum of $29,100, on account of a loss through mismanagement and revoking his appointment as executor and later made an order granting leave to sue the bond.

"In all the cases of actions on bonds of executors and administrators, a compliance with the statutory formalities has been regarded as essential to the maintenance of an action against the sureties." (Hood v. Hood, 85 N.Y. 561-574.) All the statutory prerequisites for the commencement of actions upon the bonds of executors and administrators were abolished by chapter 245 of the Laws of 1880, and the provisions contained in the Code of Civil Procedure were adopted in their stead. The orders or decrees of the surrogate revoking the letters testamentary to Frederick Hood, and directing the payment of the sum of $29,100, the loss by his misconduct to the estate of the testator to the plaintiff, and granting leave to her to bring an action upon the bond were made subsequent to the change of the laws relating to the bringing of actions upon such bonds. The laws applicable to that subject are to be found in sections 2607, 2608 and 2609 of Code of Civil Procedure. Section 2607 provides "Where an execution issued upon a surrogate's decree, against the property of an executor, administrator, testamentary trustee or guardian has been returned wholly unsatisfied, an action to recover the sum remaining uncollected may be maintained upon his official bond by and in the name of the person in whose favor the decree was made. If the principal debtor is a resident of the state the execution must have been issued to the county where he resides."

This section manifestly embraces all cases where an order or decree is made by the surrogate for the payment of money by the executor or administrator as formerly existed under the provisions of the Revised Statutes and chapter 460 of the Laws of 1873, and perhaps other statutes upon that subject.

The proceeding under this section is based upon a judgment or decree against the executor or administrator for the payment of money and the issuing of an execution for its enforcement and the failure of its accomplishment before an action can be brought upon the bond of his sureties. Under that provision it is not now requisite that an order be made by the surrogate granting leave to prosecute the bond or assigning the bond for that purpose.

It is sought to obviate this objection and to maintain the action upon section 2608, which provides that "where letters have been revoked by a decree of the Surrogate's Court, the successor of the executor, administrator or guardian, whose letters are so revoked, may maintain an action upon his predecessor's official bond, in which he may recover any money, or the full value of any other property, received by the principal in the bond, and not duly administered by him; and to the full extent of any injury sustained by the estate of the decedent, or of the infant, as the case may be, by any act or omission of the principal. The money recovered in such an action is regarded as part of the estate in the hands of the plaintiff, and must be distributed or otherwise disposed of accordingly; except that a recovery for an act or omission, respecting a right of action, or other property appropriated by law for the benefit of the husband, wife, family or next of kin of a decedent, or disposed of by a will for the benefit of any person, is for the benefit of the person or persons so entitled thereto."

But it seems to me that cannot be done with a proper regard of the plain language of the provision and scheme contained in sections 2607, 2608 and 2609.

As before stated, section 2607 does and is intended to embraceall cases where there is a decree against the executor for the payment of money. The money is to be collected by the ordinary process of execution, if practicable, before resort can be had to the bond of the sureties. In this case, the basis of the action is the decree which plaintiff (after revocation of the letters to her co-executor, Frederick Hood) had been granted, and such decree was the only evidence of the loss which the estate had sustained, and was the measure of such loss. Section 2608 has application only to a different class of cases, to cases where the letters have been revoked by the surrogate, as to all executors or administrators, and where a successor has been appointed, and section 2609 to a case where the letters have been altogether revoked and no successor has been appointed. The language used and the scheme of those sections forbid such a construction of them.

A successor is one who follows another into a position, and not one who went into the position with and survives such other in the position after it has been vacated by such other. Other sections of the Code are only consistent with this construction of sections 2608 and 2609. Section 2605 provides, "* * * the successor may complete the execution of the trust committed to his predecessor." "The Surrogate's Court has the same jurisdiction upon the petition of the successor, or of aremaining executor * * * to compel the person whose letters have been revoked to account * * *" as was done in this case.

It is provided by section 2692: "Where one of two or more executors or administrators dies, or becomes a lunatic, or is convicted of an infamous offense, or becomes otherwise incapable of discharging the trust reposed in him; or where letters are revoked with respect to one of them, a successor to the person whose letters are revoked shall not be appointed, except where such an appointment is necessary in order to comply with the express terms of a will, but the others may proceed and complete the administration of the estate, pursuant to the letters, and may continue any action or special proceeding brought by or against all."

And by section 2693 it is provided that: "When all the executors or all the administrators, to whom letters have been issued, die or become incapable, as prescribed in section two thousand six hundred and ninety-two, or the letters are revoked as to all of them, the surrogate must grant letters of administration to one or more persons as their successors in like manner as if the former letters had not been issued; and the proceedings to procure the grant of such letters are the same, and the same security shall be required as in case of intestacy, except that the surrogate may, in his discretion, in case where the estate has been partially administered upon by the former representative or representatives, fix as the penalty of the bond to be given by such successor or successors, a sum not less than twice the value of the assets of the estate remaining unadministered."

Besides the tenor and design of section 2608 prescribe what is to be done by the successor. A surviving executor is already charged with those duties, and there is no occasion to re-charge him. Section 2609 is intended for a case where the letters have been revoked and no successor has been appointed. In the latter case any person aggrieved may obtain from the surrogate leave to prosecute the bond given by the executor whose letters have been revoked, and the duties cast upon such person are conferred in the same language as the duties cast upon the successor under section 2608. And it may be remarked, in considering section 2609, that it alone presents a case where the surrogate has any occasion to grant leave to sue the executor's bond under existing laws.

I am reluctantly constrained to the conclusion that the omission to issue execution upon the decree against the executor is fatal to the maintenance of this action against the defendent Hayward, surety upon the bond in suit, for I have an impression that the issuing of an execution against the executor Hood, a non-resident of this state, would have proven a fruitless ceremony.

If the conclusion in relation to the objection that an execution should have been issued and have been returned unsatisfied in order to maintain this action, is correct, the appeal must result in a new trial, and there is not any necessity or perhaps occasion to discuss the question of the amount of interest involved in the cross-appeal. But as I have discussed the question of the effect of the release of Moffat, notwithstanding my conclusion that a new trial is necessary, it may not be amiss to indicate, but without deciding it, the impression of the court upon the subject of the extent of the interest recoverable upon the bond of the surety in suit.

As it appears from the case that the letters of the executor Frederick Hood were revoked December 27, 1883, and the court below has allowed interest upon $10,000, one half of the penalty of the bond and the limit of Hayward's liability, I am of the opinion that the allowance of interest from that date was erroneous. The decree revoking the letters did not necessarily or judicially determine the amount or extent of the loss to the estate arising from the misconduct of the executor whose letters were revoked.

A revocation of letters may be granted for various grounds of misconduct of the executor, and among those grounds are investments made by him in securities not authorized by law or in violation of the decree or order of the surrogate, and regardless of the sum so misinvested. (Code of Civil Procedure, § 2865.)

It appeared, incidentally, from the order of revocation that the executor has misinvested at least the sum of $29,100 of the sum of $53,710.69 which he was directed to invest by the decree of the surrogate dated January 6, 1869. Upon an accounting by the executor subsequent to the decree revoking his letters, upon the petition of the plaintiff as executrix praying for an accounting for the moneys received by him on the 31st day of July, 1883, "whereby, among other things, he disallowed the said investment of twenty-nine thousand one hundred dollars, and ordered and directed that such sum together with the further sum of $2,675, amounting in all to the sum of thirty-one thousand seven hundred and seventy-five dollars, be paid by said Hood to the plaintiff."

This is the period at which the amount of the loss to the estate by the misconduct of the executor and the liability of the defendant, as his surety, was adjudicated, and the executor was on that day directed by the order of the surrogate to pay the amount to the plaintiff.

The executor upon demand of payment of that sum failed to pay it or any part of it. It seems to me very plain upon principle that the interest should begin to run from the date of the last-named decree.

On that day for the first time was the breach of the bond adjudicated and the amount of damages resulting therefrom liquidated. (Mansfield v. N.Y.C. H.R.R.R. Co., 114 N.Y. 331. )

While there was formerly some contrariety of decisions in respect to allowing interest to be added to the penalty of a bond, or more accurately speaking, of allowing the damages to be added to the penalty for withholding it after it was due, I think now it may be regarded as settled law that interest or damages may be added to the penalty from the date at which it is determined there has been a breach of the condition of a bond.

In case the condition of the bond is the payment of money on a day certain, the interest or damages will begin to run from that date, and in case the condition of the bond is that an act shall be performed, the interest or damages will begin to run from the date that it is adjudicated by a competent court that the act has not been performed, and liquidating and fixing the damages caused by such non-performance. The bond in suit belongs to the latter class. It is necessary in this class of bonds that the complaint should allege the act that was not performed, prove the allegation and the damages occasioned thereby. (Beers v.Shannon, 73 N.Y. 292-302.)

The decree was the evidence of all this and the equivalent of a bond conditioned to pay a particular sum of money upon a day certain, and this court has held that an action cannot be maintained against the surety upon an executor's bond until an accounting has been had and a decree rendered. (Hood v. Hood,85 N.Y. 561; Haight v. Brisbin, 100 id. 219.)

When the amount of the liability in money has been fixed by the decree, it becomes a debt and like a bond conditioned to pay a specific sum of money, and the withholding of its payment will create a liability to pay the damages estimated by law to be equal to the legal rate of interest. (Williams v. Willson,1 Vt. 266; Perit v. Wallis, 2 Dall. 252; Carter v. Carter, 4 Day, 30; 2 Am. Dec. 113; Smedes v. Hooghtailing, 3 Caines, 48; 2 Am. Dec. 250; Brainard v. Jones, 18 N Y 35; United States v. Arnold, 1 Gall. 348; Harris v. Clap,1 Mass. 307; 2 Am. Dec. 27; Wyman v. Robinson, 73 Me. 384; 40 Am. Dec. 360), and I think it was upon this theory of the law that section 1915 of the Code of Civil Procedure was adopted upon this subject.

My conclusion is, therefore, that if plaintiff is entitled to recover in this action, she can only recover, besides the one-half of the penalty, damages or interest from the date of the decree, which was July 31, 1885, and this difference may, upon this appeal, be deducted and the judgment corrected if the views in relation to the necessity of issuing execution are not concurred in.

A brief consideration of the defenses of counter-claim and the Statute of Limitations will suffice.

The action is brought by plaintiff, as executrix, a trustee. The alleged counter-claim sets forth no facts except, possibly, the fact that the plaintiff, as such executrix, acted with Hood, executor, in the management of the assets and property of the estate, and the legal conclusion therefrom that she is jointly liable with the executor for loss and waste.

It is not alleged in the counter-claim that the respondent ever had any individual interest in the estate, or if she had, that it continued to exist at the time the loss was made by the investment.

As executrix and trustee for others, she may maintain this action notwithstanding any complicity with the misconduct of the executor, and any cause of action against her individually cannot form a counter-claim against her as the trustee for others. (Wetmore, as Exr., v. Porter, 92 N.Y. 76; Sperb v.McCoun, 110 id. 605; Boyle v. St. John, 28 Hun, 455; Subd. 3, § 502, Code Civ. Pro.)

The reply seems to me wholly inconsequential, and would not constitute a defense or a basis for affirmative relief if it was admitted for want of a demurrer or reply to be true, for the omission to demur or reply will not impart a cause of action or a defense where none was contained in the preceding pleading.

But in this case the trial court refused to find, upon defendant's request, that the plaintiff had any possession of the fund or any knowledge of its investment until after the loss had been incurred, and the evidence in the case was such as to make such refusal necessary.

If the view I have taken above of the time when the cause of action matured and the defendant became liable to pay interest upon one-half of the penalty named in the bond is correct, that disposes of the defense of the Statute of Limitations.

I think the judgment should be reversed and a new trial ordered, with costs to abide the event.

All concur with BRADLEY, J., except POTTER, J., dissenting, and FOLLETT, Ch. J., not voting.

Judgment modified and as modified, affirmed.