Carroll v. Bowling

The question presented on this appeal is whether executors, who, in distributing an estate, wrongly turned a fund over to a life tenant without investing it so as to protect the remaindermen, and who, consequently, are required to make good to the remaindermen a loss sustained during the life tenancy, may now, after the death of the life tenant, demand reimbursement from other property owned by her absolutely, and about to be distributed, to, or to vest in, her legatees and devisees, including the remaindermen of the first fund. The question comes up on pleadings only, being raised by demurrer to a cross-bill by the executors.

Charles Boothe and Julia Ann Boothe, his wife, colored, of Charles County, each executed wills leaving property to the other for life, with remainders to children of each. Children of the wife by a former marriage were, under her will, to share as remaindermen in her real estate. Charles Boothe died first, on March 18th, 1919, and the appellees Harry R. Bowling and John F. Mudd qualified as executors of his will. The personal estate, which, after payment of all debts and expenses of administration, amounted to $7,824.25, was turned over by the executors to the widow, Julia Ann Boothe, in United States government bonds registered in her name, cash deposited in a savings bank in her name, and other cash and personal chattels delivered over to her. Upon the death of Julia Ann Boothe, in 1924, an inventory filed by Harry R. Bowling, as her executor, of personal assets held by her, including those received from her husband's estate, showed a total valued estate of only $3,562.22, together with certain securities returned without valuation. The loss appears to have resulted from the investment by the life tenant in these securities. Thereupon Annie Boothe Carroll and Joseph Bernard Boothe, remaindermen under the will of the deceased husband, Charles Boothe, filed a bill in the Circuit Court for Charles County, in equity, praying that the loss of assets thus shown be accounted for and made good by the executors, and a demurrer by the executors to this bill was overruled. In addition to the facts set out above, it was averred in the bill that Charles Boothe and Julia Ann Boothe were illiterate colored people, who acted upon the advice of Harry R. Bowling, who was a real estate agent and farmer, and of John F. Mudd, a lawyer, and that the latter, as executors, not only turned over the whole estate of the husband to the widow without safe-guarding the interests of the remaindermen, but, although they had knowledge of the unfortunate investments at the time they were made, Harry R. Bowling having assisted the widow to withdraw money from the savings account to purchase the stock from his son, they made no effort to avert the loss.

The demurrer to this original bill having been overruled, the respondents answered, denying that they were accountable for the amount lost, and averring that they had turned the assets over to the widow in good faith, in an honest performance of their duty, as they understood it from their construction of the will, and their personal knowledge of the intent of the husband when he executed it. And Harry R. Bowling denied that he ever assisted Julia Ann Boothe to withdraw any portion of the savings account to buy the stock, and averred that, except for the first sale by his son of $2,000 of stock, he had no knowledge of any sale until after it had been made.

The answer was followed by the filing of the cross-bill of Bowling and Mudd against the remaindermen. To this a demurrer was filed, and was overruled; and it is from the overruling of this demurrer that the appeal is taken. The cross-bill avers that Julia Ann Boothe, at the time of her death, owned separately and absolutely personal assets appraised at $894.15, and about to be distributed to the defendants, children of Charles and Julia Ann, and a farm which will pass under the devise of their mother to Julia Ann's children by both husbands. And it prays that if any liability should be found to rest upon the complainants for loss of assets of the estate of Charles Boothe while in the hands of the life tenant, Julia Ann, and they should be required to make good the loss, then they should be reimbursed from the separate assets of Julia Ann, devised and bequeathed by her to the defendants, and so be required to pay, on the whole, only so much as the net proceeds of all the personal and real estate of Julia Ann might fall short of making good the loss of assets received from her husband.

The sum and substance of the demand, then, is that the executors, if required to pay the legacy again now, out of their own money, to make good to the remaindermen a loss sustained while the funds were in the hands of the life tenant, shall have the assets of the life tenant first applied, on the ground that she was the one primarily responsible to the remaindermen for the loss. There is a question whether, on the allegations made, the executors here were not themselves primarily responsible, as for a waste of their own, whatever may have been the responsibility of the life tenant. It is urged that payment of the fund without restriction into the hands of one incapable of handling it, was such negligence, or an act attended with such danger, as should be held to render the executors primarily responsible for waste. But we think that situation is not established by the pleadings. While the allegations of the original bill refer to the ignorance and dependence of Julia Ann Boothe, and negligence in making payment to her, this is not admitted or proved. The answer and cross-bill show that Julia Ann had the estate of her first husband left in her hands, without restriction. And on the demurrer to the cross-bill, which we are now considering, we are not permitted to take it as established that there was negligence constituting waste in the mere placing of her second husband's assets in her hands. It is urged again, that the executors themselves are to be regarded as guilty of actual waste, and are primarily responsible, because of their failure to avert the loss when the life tenant made the investments, There is nothing in the cross-bill itself concerning any connection of the executors with the investments, and on the original bill and answer it appears only that one executor failed to interfere to prevent one large investment, although he knew of it before it was made. But the facts thus admitted would not, in our opinion, be sufficient to make even that one executor a participant in the waste which now appears to have occurred at that time, and so primarily responsible for it. It is not admitted that he took any active part in having the investments made; he appears as having been passive merely, acting upon the erroneous assumption that the life tenant was free to handle the assets as she pleased, the assumption on which they were turned over to her unrestricted control in the first place. On the allegations in the pleadings, this wrongful distribution in the first place appears to have been the devastavit for which alone the executors would be responsible, and the responsibility would we think be secondary only.

In Hanson v. Worthington, 12 Md. 418, a bill was filed by remaindermen under a will against a surviving executor and against residuary legatees, to compel payment of a legagy which, by mistake, had been ignored in the distribution, so that the amount was wrongly distributed to the residuary legatees, and the executor in his answer demanded that, if the distribution made should be found so erroneous, and he should be held liable to pay the amount of the legacy to the remaindermen, then the residuary legatees, who received the money with which it should have been paid, and who were co-defendants, should be compelled by decree to refund and pay it to him, or, directly, to the complainants. And it was decreed that this should be done. The Court remarked that the executor was liable for the amount primarily, and the residuary legatees who had received the money were liable ultimately, and that as the latter were alive and in court, subject to decree, the court should do simple justice by this equitable adjustment in the decree of the claims of all parties. While the Court described the liabilities as primary and ultimate in that case, it is evident that the distinction drawn was the same as that generally drawn between secondary and primary liabilities, and that the executor's liability was held to be that generally described as secondary. And there was in that case, therefore, an adjustment between primary and secondary liabilities, with the primary or ultimate liability first applied to the payment of the common creditor. And, again, in Prince deBearn v. Winans, 111 Md. 434, because of a mistake in construing a power of appointment in a will by the law of the domicil of the testator rather than by the law of the domicil of the donee of the power, the complainant, who should have received in distribution the whole of a trust fund, received only one-third, the remaining two-thirds having been distributed to his children; and on a bill brought by him against the trustees and the children, it was decreed that the distribution should be corrected by payment from the children who were co-defendants. And see Zollickofer v. Seth, 44 Md. 359, 373, 374. And these decisions seem to us, and they did to the trial court, to dispose of the main contentions of the appellants on the demurrer here, notwithstanding some differences in the facts which have been pointed out by counsel.

In the first place, the recipients of the wrongful payments in the cases just cited were, as the court remarked, living and in court, subject to decree, while here the life tenant is dead and the cross-bill attempts to resort to assets received by the defendants from her; and such a resort to the property of a decedent is subject to restrictions. With respect to the real estate, the claimant can proceed only under the provisions of the Code, art. 16, sec. 233, to have real estate applied to the payment of the debts of the decedent, and it is argued that there would be no such debt of the deceased here to the plaintiffs in the cross-bill, as, under the statute, is essential to this proceeding. But in an adjustment between primary and secondary liabilities, in payment of a debt, the adjustment which is sought by this cross-bill, the secondary obligor stands substituted to the rights of the creditor against the primary or ultimate obligor. Sheldon on Subrogation, sec, 1; 6 Pomeroy, Equity Jurisprudence, sec. 921; State v.Graham, 115 Md. 520, 523. And we think the liability of the life tenant to make good the loss to the remaindermen, which would rest upon her from the moment the loss occurred, would be a debt within the meaning of the statute, and for the payment of which the real estate of the decedent might be resorted to. Dickersonv. Baltimore, 48 Md. 583, 589; McLaughlin v. Long, 5 H. J. 113. The circumstance that, in this case, the real estate is devised to remaindermen who themselves constitute the creditors, cannot, in our opinion, affect the operation of the principle of substitution and the right of the party secondarily liable, to have the adjustment of liabilities in accordance with it. The liability of the decedent and her assets is none the less alive for this purpose.

That the error of the executors in distributing to the life tenant without any reservations or safe-guards constituted adevastavit, and resulted indirectly in a loss, is not, we think, a fact which distinguishes this case from Hanson v.Worthington and Prince de Bearn v. Winans, supra, and which should prevent the reimbursement or substitution allowed in those cases. If in Hanson v. Worthington the assets had been wasted by the wrongful recipients, the case would have been the same in that respect as the present case; and the Court there made the adjustment of liabilities without reference to the possibility of waste. Moreover, it has been held that the liability for such adevastavit is contractual merely (Williams, Executors, 11th Ed., p. 1613), so that the executor is not to be regarded as a tort-feasor. But if the liability should be regarded as one in tort, the wrong was not that which immediately caused the loss. The immediate cause was, as has been said, the ill-advised investment, and under the broad principle of substitution or subrogation, the executors would, we think, be entitled in this case to resort for reimbursement to the liability of the person ultimately responsible, notwithstanding their own wrong. Such an adjustment is commonly allowed between tort-feasors who are both liable for an injury, but one of whom is made liable only because of a wrong of the other. Ches. O. Canal Co. v. Allegany Co., 57 Md. 201; B. O.R.R. Co. v. Howard County, 111 Md. 176; Franzell's Exrs. v.Franzell, 153 Ky. 171.

The appellants argue, further, that the executors are seeking no more, after all, than repayment of an amount voluntarily paid by mistake of law, a right to which has been so often denied by this and other courts. Baltimore v. Harvey, 118 Md. 275; Bakerv. Baker, 43 Md. 627; Rogers v. Ingham, 3 Ch. D. 35; Shriverv. Garrison, 30 W. Va. 456; Phillips v. McConica, 59 Ohio St. 1. But this is not a case of such payment by mistake as is commonly held irrevocable under this rule. Julia Ann Boothe was entitled to receive the assets paid over to her, and the executors are not demanding that the payment be revoked and the money repaid to them. Their mistake was in failing to adopt a prescribed method which would have assured the ultimate payment over by her to the remaindermen, and they are demanding that her assets be applied first to make good her loss and failure so to pay the assets over. Even if such a mistake in method could be properly described as one of law, within the meaning of the rule we are discussing, the objection would not, in our opinion, apply to prevent the operation of the principle of substitution or subrogation in the suit brought by the common creditors for a further payment. We do not see that such an objection has anything to do with the adjustment between the two liabilities for the loss. In Hanson v. Worthington, supra, the executors made the mistake of assuming that a refusal of a widow to take a life interest under her husband's will, preferring her thirds, destroyed the whole legacy, the remainder along with the life interest, a pure mistake of law, yet the adjustment of liabilities was allowed.

It is contended that the claim of the executors should be considered barred by laches or limitations. In respect to this, it is argued that the decisions in Hanson v. Worthington, andPrince de Bearn v. Winans, supra, are rested on facts which are not to be found in this case. But if it is true, as we think it is, that the executors who incurred their liability to the remaindermen by their wrongful payment to the life tenant are substituted to the rights of the remaindermen against the assets of the latter as those of the party ultimately liable, then the executors stand on exactly the same footing as the remaindermen in resorting to those assets, and the period of limitations is the same for each. Ohio Life Ins. Co. v. Winn, 4 Md. Ch. 253, 262; American Bonding Co. v. Mechanics Bank, 97 Md. 598, 607. The demand of the executors is, therefore, not open to attack because of laches or limitations.

Decree affirmed, with costs to the appellees.