State Ex Rel. v. Doud

^* Headnote 1. Descent and Distribution, 18 C.J., Section 133; 2. Conversion, 13 C.J., Section 55; 3. Executors and Administrators, 24 C.J., Section 2562; 4. Executors and Administrators, 24 C.J., Section 1733; 5. Descent and Distribution, 18 C.J., Section 179; Executors and Administrators, 24 C.J., Section 1385; 6. Executors and Administrators, 24 C.J., Section 2539 (1926 Anno); 7. Executors and Administrators, 24 C.J., Section 2533; 8. Executors and Administrators, 24 C.J., Section 2539. This action is upon the bond of the administrator de bonis noncum testamento annexo of the estate of Sarah Ann Lockett, deceased. M.F. Doud is the administrator and the Fidelity Deposit Company of Maryland is surety on the bond. The bond is in statutory form and is in the penal sum of three thousand dollars. Sarah Ann Lockett died testate in the city of St. Louis March 6, 1914, seized and possessed of an undivided one-half part of certain real estate situate in said city. This she bequeathed to her four children, Joseph H. Lockett, John A. Lockett, Grace H. Lockett, and Julia Ann Lockett, in equal shares. On September 14, 1915, the probate court of the city of St. Louis ordered the administrator to sell this real estate for the payment of the debts of the deceased. On February 21, 1916, Julia Ann Lockett borrowed $550 from Margaret Enyart, and executed her note therefor, and to secure this note executed a deed of trust upon her undivided one-eighth part of said real estate. At the time the money was borrowed the administrator was informed of the fact and of the execution of the deed of trust to secure the loan. The deed of trust was recorded in the office of the Recorder of Deeds of the city of St. Louis on the day it was executed. Afterwards, the administrator, in compliance with the order of the probate court, sold the real estate for the payment of debts and received therefor $16,000. This sale was reported to the probate court on April 1, 1916. The sale was thereupon approved by the court and deed was made accordingly to the purchaser. Out of the proceeds of the sale the administrator paid the debts of the estate, and after payment of such debts there remained in his hands a surplus of the proceeds of the sale to the amount of $9,569.26. Afterwards, the note secured by the deed of trust having matured, it was presented, together with the deed of trust, to the administrator, and payment thereof requested, on behalf of Mrs. Enyart. At the same time there was presented to him an order signed by Miss Lockett directing him to pay the note and charge the amount so paid against her share of the funds in his hands. There was also endorsed on the back of the note at the time it was presented to the administrator an order signed by Miss Lockett, directing him to pay the note, with interest, out of her share of the funds, and stating that the note marked paid by him should operate as a receipt for the amount so paid. Miss Lockett was also present at the time the note was presented to the administrator and requested him to pay the same out of her share of the funds. The administrator declined to pay the note. Afterwards, pursuant to an order of distribution made by the probate court on September 26, 1918, the administrator paid to Miss Lockett her entire one-fourth share of such surplus. On July 3, 1916, the administrator filed in the probate court his final settlement of the estate. Exceptions were filed to this settlement and it was continued. The administrator was appointed on January 22, 1915, and gave bond in the sum of five hundred dollars with the American Surety Company as security. On July 11, 1921, pursuant to an order of the probate court requiring the administrator to give an additional bond, the bond sued on was given. In April, 1922, Mrs. Enyart again exhibited to the administrator her note and mortgage and demanded of him the payment thereof. Payment was refused, and thereupon this suit was brought.

The cause was tried before the court without a jury. The court gave judgment in favor of the plaintiff and against both defendants for $3000, the penal sum of the bond, to be satisfied upon the payment of $890.60, with interest. The defendants bring the cause here by writ of error.

Defendants insist that under the law no lien attached to the surplus funds arising from the sale of the real estate for the payment of debts, in favor of Mrs. Enyart by virtue of the deed of trust given by Miss Lockett upon her undivided share of the real estate, that Mrs. Enyart had no right, title, or interest in or to said funds, that the administrator was under no obligation or duty to pay the note secured by the deed of trust, out of said funds, that the failure of the administrator to pay the note did not amount to a breach of his bond, and that, therefore, the judgment of the court below should be reversed.

It is well settled law that when a person dies the owner of real estate, the title to such real estate passes to and vests in the heir or devisee eo instante, subject to the right of the administrator or executor to sell the same for the payment of the debts of the decedent. If the real estate is sold by order of the probate court for the payment of the debts of the decedent, any surplus of the proceeds of the sale remaining after payment of the debts goes to the heir or devisee, and if the heir or devisee has conveyed the real estate the surplus belongs to her grantee. In other words, when real estate is converted into money for the payment of the debts of the decedent, the surplus of the proceeds of the sale remaining after payment of the debts retains the character of real estate for the purpose of succession or distribution, and goes to the person in whom the title to the real estate was vested when it was converted. In this case Miss Lockett by her deed of trust conveyed to the trustee therein named her undivided share of the real estate devised to her. The conveyance was made in trust to secure the payment of her note. When the land was sold for the payment of debts, her share of the surplus arising from the sale not needed for payment of the debts, in equity belonged to the beneficiary in the deed of trust to the amount of the note secured thereby. The administrator received this surplus in his capacity as administrator and held it in trust for those to whom it belonged. The share of Miss Lockett to the amount of the note secured by the deed of trust, he held in trust for the beneficiary in the deed of trust. It was his plain duty to pay over to her out of this surplus the amount necessary to discharge the note. His failure to do so was a breach of his trust, for which he and the surety on his bond are liable. [Grant v. Hathaway, 215 Mo. 141, l.c. 147,114 S.W. 609; Jewell v. Knettle, 39 Mo. App. 262, l.c. 264; 2 Woerner's American Law of Administration (2 Ed.), p. 1344; In re Motier's Est., 7 Mo. App. 514, l.c. 517; Sears v. Burnham, 17 N.Y. 445; Fiscus v. Moore, 7 L.R.A. 235, l.c. 238; Dix v. Morris,66 Mo. 514; Hill v. Chouteau, 1 Mo. 731; Wenzel v. O'Neal (Mo.),222 S.W. 392, l.c. 395; Reid v. Mullins, 43 Mo. 306; State v. Dickson, 213 Mo. 66, l.c. 90, 111 S.W. 817; Hopkins v. Thompson,73 Mo. App. 401; 24 C.J. 706; Strawbridge v. Clark, 52 Mo. 21; Helweg v. Heitcamp, 20 Mo. 569; Foster v. Potter, 37 Mo. 525, l.c. 534; Traders' Bank v. Dennis' Est. (Mo.App.),221 S.W. 796.]

It is urged in argument that since the deed of trust in question was not given until after the order of sale was made by the probate court, the deed of trust therefore conveyed no title. We cannot agree to this view. The order of sale did not divest the devisee of her title. This was not effectuated until the sale was made and approved and the deed executed and delivered.

Defendants further insist that the order of distribution made by the probate court is a final judgment and that the administrator was required to pay the money in accordance with the order unless the funds were arrested or reached under some process of law before he had paid the funds to the devisee under the order. This view is untenable. The probate court was without jurisdiction to determine the right or title to the funds as between the devisee and the beneficiary in the deed of trust. The order of distribution does not conclude the beneficiary, and it affords the administrator no protection for the wrongful disbursement of the funds belonging to the beneficiary and for his wrongful failure to pay over the same to her. No legal or equitable proceeding was required on the part of the beneficiary to establish her right or title to the funds. Her right to the funds was created and existed by virtue of her deed of trust. The administrator had notice of her claim, both actual and constructive. Not only was the deed of trust of record, but, while the funds derived from the sale under the deed of trust were yet in the administrator's hands, the deed of trust and note secured thereby were exhibited to him, together with two orders signed by the devisee directing him to pay the note out of the funds in his hands. In addition to this, the devisee personally requested such payment to be made. We do not see how the administrator could have been prejudiced or jeopardized by making such payment under these circumstances. But if a court order or judgment was necessary for his proper protection in disbursing the funds, he should have resorted to a court of competent jurisdiction for an adjudication of the rights of the parties. This he did not do; but he elected to pay the money pursuant to an order of a court having no jurisdiction to adjudicate the rights of the parties. He cannot justly complain that this order affords him no protection. [State ex rel. Jones v. Jones,131 Mo. 194, l.c. 207, 33 S.W. 23; State ex rel. Jones v. Jones,53 Mo. App. 207, l.c. 217; In re Winnegar's Est., 118 Mo. App. 445,94 S.W. 833; McClure v. Baker (Mo.App.), 216 S.W. 1018, l.c. 1019; Johnson v. Jones, 47 Mo. App. 237; Cauley v. Truitt,63 Mo. App. 356.]

It is argued that because at the time of the execution of the bond the records of the probate court showed that the devisee had received her entire distributive share under an order of the probate court and that the order so far as the surety knew or could know was a valid and binding judgment, the surety had a right to rely upon the records in executing the bond, and that therefore there is no liability on the part of the surety. We are unable to perceive how this state of the records could affect the liability of the surety. The deed of trust was of record in the office of the Recorder of Deeds. The records of the probate court showed that the funds in question were derived from the sale of the real estate conveyed by this deed of trust. The surety must be held to have known that the probate court was without jurisdiction to determine the rights of the parties to these funds. Moreover, the surety's liability is determined by its contract and not by its knowledge or lack of knowledge of the condition of the estate at the time of the execution of the bond.

Defendants further argue that there is no liability on the bond in suit for the reason that the money to which Mrs. Enyart was entitled was paid to the devisee before the bond was executed. The universally accepted rule is that, where an administrator or executor is required to give a new or additional bond, the new bond relates back and the sureties thereon become liable for any breaches of the trust occurring prior to its execution. If there is any case holding the contrary, it has not been brought to our attention. [Scofield v. Churchill, 72 N.Y. 565, l.c. 568; Dugger v. Wright, 51 Ark. 232, l.c. 234, 11 S.W. 213; Elizalde v. Murphy, 163 Cal. 681; Pinkstaff v. People, 59 Ill. 148, l.c. 150; Bankers Surety Co. v. Wyman, 141 Iowa 574; Brown v. State,23 Kan. 235, l.c. 243; Commonwealth v. Gould, 118 Mass. 300; Morris v. Morris, 9 Heiskell 814, l.c. 822; Bobo v. Vaiden, 20 S.C. 271; Pickens v. Miller, 83 N.C. 543, l.c. 547; Corrigan v. Foster,51 Ohio St. 225; State v. Fields, 53 Mo. 474; State v. Berning,74 Mo. 87, l.c. 98; Wolff v. Schaeffer 74 Mo. 154, l.c. 158; State v. Paul's Exec., 21 Mo. 51.]

The rule thus announced by the authorities with such great unanimity accords with the true meaning and intent of our statute on the subject. The grounds for requiring an administrator to give a new bond under our statute are that the surety on the original bond has or is likely to become insolvent, or has died, or has removed from the State, or that the principal in such bond has or is likely to become insolvent, or is wasting the estate, or that the penalty of the bond is insufficient, or that the bond has not been taken according to law. [Secs. 26 and 27, R.S. 1919.] The statute further provides that when a new or additional bond is ordered to be given and the administrator shall not give such additional bond within five days, his letters shall be revoked. Manifestly the statute contemplates that if the administrator is to be left in charge of the estate after his original bond has been adjudged insufficient for any or all of the causes mentioned in the statute, his additional bond shall operate to secure any prior breach or devastavit as well as such as may subsequently occur. If it were otherwise, all proceedings to recover for any antecedent breach or devastavit might be postponed until the conclusion of the administration and the final accounting of the administrator, so that the assets which had been wasted, misappropriated, or wrongfully disbursed, or damages therefor, might never be recovered; whereas, if the administrator were removed his successor could take immediate steps to recover the assets and prevent any further loss or risk, and if the security or principal was not then in fact insolvent, but was only likely to become insolvent, the successor could take immediate steps to recover from the solvent parties, before they became insolvent, for the loss occasioned by the breach ordevastavit. [Scofield v. Churchill, supra.]

Nor do we think the statute contemplates that, where a defaulting administrator has given a succession of bonds, the distributees of the estate shall be put to the task of ascertaining which of the several bonds operates to secure each separate breach or devastavit, before they could safely institute proceedings upon any of such bonds to recover for the losses suffered. It is not the intention of the statute that the rights of distributees should rest upon such precarious grounds. The courts ought and do exhibit a jealous solicitude for the preservation of the estates of deceased persons to the end that such estates may go unimpaired to the rightful distributees. The statute will not be so construed as to make it easy to defeat this end.

It is clear that it is the intention of the statute that an additional bond, given pursuant to an order of court, should operate as security for any breach or devastavit occurring prior to the execution of the bond as well as such as may occur after its execution. And this is in harmony with the condition of the bond as prescribed by the statute, to-wit, "that the administrator of the estate shall faithfully administer said estate, account for, pay and deliver all money and property of said estate, and perform all other things touching said administration required by law, or the order or decree of any court having jurisdiction." [Sec. 18, R.S. 1919.] It will be observed, too, that the condition of a new or additional bond as required by the statute is not in any respect different from the condition prescribed for the original bond. [Sec. 28, R.S. 1919.]

The Commissioner recommends that the judgment of the circuit court be affirmed.