Neff's Appeal , 1868 Pa. LEXIS 67 ( 1868 )

The opinion of the court was delivered, by

Sharswood, J.

Charles Bird died in 1849. Among his assets were two notes both dated April 2d 1849, drawn by Edwin M. Sellers in his favor, one at six and the other at eight months, each for $3000 with interest from date. These notes were given by Sellers for money advanced by Bird on his marriage with the daughter of the latter. Sellers was, at the time of Bird’s death, in business and continued until April 1853, when he became insolvent. He afterwards secured a clerkship which did not yield him enough to support his family. The firm in which he was so employed gave him an interest as partner in the house on January 1st 1864. His death occurred a few months after, and his family received from the firm some seven or eight thousand dollars.

Mr. Neff, the executor of Charles Bird, was paid the interest by Sellers on these notes up to the time of his failure. He also collected from him several considerable sums on account of the principal. In 1851, under the advice of his counsel, he induced Sellers to effect an insurance on his life for the sum of $5000, which he kept alive, and which was paid to Bird’s estate at his death. Mr. Neff, himself, died in 1863, before this event. His executors having filed his account as executor, it was referred to an auditor, before whom it was claimed that Mr. Neff should be surcharged with the whole amount of the notes and interest. After two references the auditor reported on the testimony before him that Mr. Neff ought not to be so charged. Upon exceptions to the report, the court below were of a different opinion and decreed accordingly. This is an appeal from that decree.

We think the evidence before the auditor fully justified him in the conclusion at which he arrived. The executor found these notes among the assets. The testator! hafl'. 'reposed so much confidence in Mr. Sellers as to loan him this money. His .circumstances appear to have 'been very much the same at the time of the loan and up to the period of his failure. He was in business, but not very successful. A suit, judgment and execution would have broken up his business without producing any fruits. His house had been furnished by Bird, and the furniture belonged to his wife. Her income from her share of her father’s estate was used by him in his business. The different firms of which he was a member during the period from the time of his father'-in-law’s death up to his failure were all heavily in debt, and a levy and sale of his interest, subject to the payment of partnership debts, would have availed nothing. The interest he obtained in 1864, in the business which produced something for his family after his death, was only after inquiries instituted to ascertain whether there were judgments against him. The ground upon which it is now sought to make Mr. Neff’s estate liable is that he did not sue and obtain judgment on these notes before the failure of Sellers in 1853. It is conceded that after his notorious insolvency at that time it was no longer incumbent on the executor to take such a step.

The general rule upon the subject of the liability of trustees has been long and well settled. In 1682 Lord Keeper North, afterwards Lord Guilford, expressed it in this language: “Very supine negligence might indeed in some cases charge a trustee with more than he had received, but then the proof must be very strong:” Palmer v. Jones, 1 Vern. 144. “If there was no mala fides,” says Lord Iiardwicke, “nothing wilful in the conduct of the trustee, the court will always favor him:” Knight v. The Earl of Plymouth, 3 Atk. 480, Dickens 120. “You cannot affect the trustees,” said Lord Thurlow, “with more than they actually received, without wilful default:” Pybus v. Smith, 1 Ves. Jr. 193. And so are all the subsequent cases, Rowth v. Howell, 3 Ves. 565; Osgood v. Franklin, 2 Johns. Ch. Rep. 1; Thompson v. Brown, 4 Id. 619; Pym v. Downing, 11 S. & R. 66; Johnson’s Appeal, 12 Id. 317; Konigmacher’s Appeal, 1 Penna. R. 215; Stem’s Appeal, 5 Whart. 472. All that a court of equity requires from trustees is common skill, common prudence and common caution. Executors, administrators or guardians are not liable beyond what they actually receive, unless in case of gross negligence; for when they act as others do with their own goods and with good faith and are not guilty of gross negligence, they are not liable: Calhoun’s Estate, 6 Watts 185; Crist v. Brindle, 2 Rawle 122; Eyster’s Appeal, 4 Harris 376. Especially where, a trustee acts under professional advice he will be protected: Vez v. Emery, 5 Ves, 144; Calhoun’s Estate, 6 Watts 189.- In the application of the rule to particular cases much must be left to the discretion of the courts: Keller’appeal, 3 Barr 288. In Long’s Estate, 6 Watts 46, the admiulB^u did not bring suit till some years after the dectth Vf-the intestate, and in the mean time he had secured a clamamf his own against the debtor. The court were of opinion J&Pwith proper diligence the debt could have been collected, and held him accountable. In Johnston’s Estate, 9 W. & S. 107, the note had been taken by the administrator on a sale of the goods of the intestate. At its maturity the maker and his surety were both able to pay, but the administrator made no demand'and took no steps to collect it for more than six months. In Bickley’s Appeal, 3 Barr 427, though the note was a part of the assets, yet nothing was done for four years after its maturity, when the maker became insolvent. The distinction between an executor or administrator and a guardian, as recognised in Charlton’s Appeal, 10 Casey 474, is undoubtedly a sound one. A. guardian is not bound to sue at once, but may leave a debt where he finds it, unless there is reason to apprehend danger; but an executor or administrator is under obligation to diligence in preparing for distribution. He cannot be justified in putting forth no efforts to collect a debt due the estate which he represents for a period of three, four or five years. But the court add in that case: “We do not desire to be understood as holding that an administrator is bound to sue immediately a debt due his intestate or encounter the hazard of personal liability for it; such is not the rule, but he is responsible for the want of ordinary diligence. When he has suffered years to pass by without an effort to collect such a debt or offering any excuse for his failure to proceed, when an auditor on his account has convicted him of gross negligence, we will not reverse the decree of the Orphans’ Court confirming the report of the auditor.”

We cannot expect to find cases in the books precisely similar to the one under examination. But Keller’s Appeal, 8 Barr 288, is in most particulars like this. The circumstances in the present case are much stronger than in that. It ivas an administrator who was sought to be charged, not a guardian. There, as here, the note was held by the decedent, and the court rely on the circumstance that the administrator only continued a confidence already reposed in the obligor by the decedent. There, as here, payments Avere made on account, but suit was not brought till the maker had failed, more than eighteen months after the death of the intestate. We have in this case the additional circumstances that the executor acted throughout under the advice of able and distinguished counsel, and, by a wise expedient, secured a very large proportion of the debt. By the account in our paper-book, dated July 26th 1865, it appears that Sellers’ whole liability up to that date Avould have been $10,525.99. Mr. Neff, the executor, by his prudent foresight, secured of that amount $8593.94, leaving a balance of only $1935.05, with which it is now asked that he shall be personally charged. Had- he at once sued, obtained judgment, issued execution and sold out the debtor, the probability is that the whole debt would have been lost. To hold him responsible would indeed illustrate the remark of Lord IlardAYicke, that it is the harshest demand that can be made in equity to compel trustees to make up a deficiency not owing to their wilful default: Jackson v. Jackson, 1 Atk. 513; Johnson’s Appeal, 12 S. & R. 317. Had Mr. Neff been alive to receive the insurance-money and to settle this account, he should have been discharged with a just encomium on his wise foresight and successful fidelity, instead of being condemned as guilty of supine negligence or wilful default.

We are of opinion that the court below ought to have dismissed the exceptions and confirmed the second report of the auditor, and made their decree in conformity thereto.

The decree of the Orphans’ Court is reversed, and the record ordered to be remitted to that court with directions to dismiss the exceptions and confirm the report of the auditor and decree distribution in conformity thereto.