Hood v. Hayward

1 N.Y.S. 566, 55 N.Y. Sup. Ct. 330, 15 N.Y. St. Rep. 846, 48 Hun 330, 1888 N.Y. Misc. LEXIS 1446

Opinion

Pratt, J.

There are cross-appeals in this ease. The action was on a joint and several bond given April 28,1864, by Frederick Hood, deceased, as principal, with David Moffat and defendant John FT. Hayward, as sureties, to the people, etc., in the penalty of $20,000, conditioned that it should be void if Hood should “faithfully execute the trust reposed in him as such executor, and also obey all orders of the surrogate of the county of Westchester touching the administration of the estate committed to him.” The will made Frederick, one of testator’s sons, and Maria, his widow, executors. The letters to Frederick having been revoked December 7,1883, and the surrogate having subsequently made decree against Frederick on his accounting for some $31,795, which he had failed to pay, the widow, as remaining executrix, brought this suit to recover $35,000 against him and defendant, Hayward, “or for so much thereof, up to one-half the penalty of said bond, and interest from January 1,1876, or for such other relief as may be proper. The complaint alleged a decree on an accounting January 6, 1869, whereby it appeared that Frederick was chargeable with $53,710.69, which he was directed to hold and invest pursuant to the powers and directions contained in the will, which was “on bond and mortgage on real estate in this state, ” and that he had failed thu,s to invest the same, and otherwise misapplied the trust fund. The will gave Maria, the widow and remaining executrix, certain rights as a legatee, and she sued on the bond in her own right. Defendant demurred on the ground that she had no legal capacity to sue. The demurrer was sustained, and she was allowed to amend by adding the proper description after her name, “as executrix,” etc., “in her own right, and in behalf of all persons interested in the estate,” etc., in the title, and making corresponding allegations in the body of the documents. It also alleged that David Moffat, the other surety, had been released to the extent of one-half the penalty of the bond, reserving rights against the defendant, Hayward, surety. Frederick, the principal, did not answer.. The answer of Hayward, among other things, alleged that the decree, January 6,1869, was an accounting by both Frederick and Maria, and that the balance was found in their hands,—all parties interested being parties tp that decree; also that a decree was made after the revocation of Frederick’s letters whereby he was directed to pay Maria, as executrix, $31,795, but denied any knowledge of a demand for its payment. He also pleaded that the decree, January 6, 1869, discharged Frederick as executor, and that he thence held the money or property in his hands as trustee only under the will; also that all investments subsequent to the account filed in January, 1869, were made by Frederick solely as such trustee, with plaintiff’s knowledge and consent; also that the decree of July 31, 1885, was made by the surrogate without affording Frederick any opportunity to be heard; that Moffat’s release was without his (Hayward’s) knowledge or consent; also that Moffat had fully satisfied the bond; also that no execution had ever been issued against Frederick; also a misjoinder, in that plaintiff was not jointly interested with anybody in the cause of action; also the pendency of an appeal by Frederick from the last decree on his accounting in the court of appeals; also the pendency of a former suit by Andrew Hood and Henry Hood as plaintiffs against Frederick and the sureties and the present plaintiff as defendants, and that covering the same course of action, and that the present plaintiff instigated that suit; but there was no allegation that she set up her present claim affirmatively in that suit; also the ten-year and six-year limitation under the statute; also, the non-joinder of the other parties interested in the estate; also, as a counter-claim or set-off, that Maria acted with Frederick in the management of the estate, and was liable with him, and that she was insolvent. The issues were tried before Mr. Justice Dyicman at the Westchester special term, October, 1887, without a jury. He found for plaintiff $10,000, with interest at 6 per cent, from December 7, 1883, (amounting to $2,890,) the date of revocation of Frederick's letters; but refused plaintiff’s request to charge interest from any earlier date. Plaintiff excepted to this refusal, and appeals from the part of the judgment which refuses such interest. Defendant, Hayward, appeals from the -entire judgment. It is proposed to consider the material points presented by ■defendant, and we shall thus incidentally consider the plaintiff’s exception •about the interest.

1. The first point made by defendant is that Hayward was discharged by "the release of Moffat. The instruments under which this release was accomplished, were peculiar. An instrument dated September 27,1884, was signed ■by plaintiff as executrix and individually, and apparently by all other parties interested in the estate of deceased, acknowledged severally on or before November 11, 1884, reciting $7,000 paid by Moffat, purports in one part to be •a general release to him, and contains a special reference to the bond in question, and all liability of Moffat thereon, but a later clause reserves all rights •against Frederick and Hayward. It makes no reference to the statute fur the release of one or more joint debtors. Another instrument dated in December, 1884, acknowledged on the 11th of that month by same parties, recites the former release, so called, and declares that it was the intent of the parties to release Moffat only, and to satisfy only one-half of the obligation of the bond, and that it should stand as a part of the first instrument, and says that nothing therein contained shall affect the rights of any of the parties against Frederick or Hayward. Mr. Macklin, one of the attorneys for plaintiff, who •participated in the transaction of the delivery of these instruments, testified that the first one was not delivered until after the second was signed, and that ¡both were delivered together. This was not controverted by any other evidence. The finding is that the release was on the 27 th of September, 1884, ;and it is susceptible of the construction that it was delivered at that time. Perhaps, it is not important, but we note, in passing, that this was nearly itwo months before the last acknowledgment thereon. It may be observed, in the first place, that no element of tort was involved in the liability of Frederick as principal, and Moffat and Hayward as sureties, on this bond. Frederick’s liability, as executor, was for breach of his trust; but that was quite independent of the liability on the bond, which was purely on contract as security for the performance of the trust obligation. Moffat was in no way liable except on the bond, and he was there jointly and severally liable with Frederick and Hayward. It was a general principle of the common law that ;an unqualified release of one of two or more persons who were jointly or jointly •and severally liable for a debt would operate to discharge all of them. Bank v. Ibbotson, 5 Hill, 461, and cases cited. It is said that this rule, in the present case, would have protected Hayward, who was a co-surety with Moffat, and entitled to contribution as among themselves» It is also said that there is no limitation on Moffat’s release and discharge. There is an attempt, in the first instrument, to reserve the liability of Hayward despite the discharge of Moffat; but that does not in any way limit or qualify the discharge of the latter. As to him the discharge is absolute and unqualified. It is said that it is a technical release, as distinguished from a covenant not to sue. It was for less than one-half the liability of both sureties. This puts the defendant’s case, in this respect, at its best. On the other hand, it is pertinent to inquire how this release to Moffat prejudiced Hayward. He was liable jointly and severally with Moffat for the whole of the principal’s obligation as executor within the penalty of the bond. If Hayward had paid the whole of their joint, liability, he could have recovered but one-half from Moffat; and the effect of the release is to hold him only for the sum for which he would have suffered loss in any event; that is to say, for one-half their total liability. The case, therefore, seems to fall within the principle of Benedict v. Rea, 35 Hun, 34. True, that was not the case of a technical release of one surety, but it was. tantamount to that. Benedict, the plaintiff, had recovered a judgment against S. W. Benedict for deficiency on foreclosure. The latter appealed, and Stand-ring and Rea became his sureties in an undertaking on appeal to the general term. The judgment was reduced by $460.15, and affirmed as to the balance. Then plaintiff orally agreed with Standring that the latter should purchase-110 acres of the land at not to exceed $75 per acre, and convey it to plaintiff;, in consideration of which plaintiff agreed that he would not sue Standring on the undertaking. This oral contract was fully performed, so that plaintiff’s oral promise not to sue became valid, notwithstanding a possible defense under the statute of frauds. The plaintiff then sued Rea for one-half the deficiency, and recovered. The court held that, while this oral promise not to sue-was not a! technical release, still, since Standring would have had a perfect right of recovery back against plaintiff if he did sue, the effect on the bargain was to discharge him. Ho question arose relative to the statute about releasing joint debtors. Harrison v. Close, 2 Johns. 448, was a like case in this respect, in which it was held that, under such circumstances, there was no satisfaction of the entire debt: And so here the intent of the parties was that there should not be a satisfaction of the entire obligation on the bond, and that fact plainly appears from the face of the instrument. The intent was to-satisfy but one-half that liability, and to discharge Moffat from his share of the whole, leaving Hayward liable for his half. This seems to be the spirit of the decision in Irvine v. Millbank, 56 N. Y. 635, in which the court, in-speaking of a somewhat analogous discharge, after noting that it was not a. technical release, say: “Hor was it tantamount to a release, which is, in effect, an assumption of payment, as its whole tenor is at enmity with such an admission.” We are therefore brought back to the point that where, as in this case, there is a technical release- of one surety, as distinguished from a. covenant not to sue, is there necessarily a discharge of the entire obligation as to both parties when that was not the intention of the parties? Before expressing our view on this point, we may premise that the simple element of suretyship seems eliminated by Benedict v. Rea; so that we may considerthecase as if Moffat and Hayward were simply principal joint and several debtors. We think that the reasoning of, and cases cited by, the late Justice-Bronson in Bronson v. Fitzhugh, 1 Hill, 185, fully justifies the position that an instrument in the form of a technical release maybe construed to be a covenant not to sue where the court may see that that was the intent of the parties, either on the f ace of the document, or by one of equal dignity. Here that intent is plainly discoverable from the face of the first release, so called; and the uncontradicted proof was that the second document, which is also under seal, was delivered with the first one. They are therefore to be read as evincing a single transaction. Thus construed, these terms, to borrow the expression from Irvine v. Millbank, are “at enmity” with the theory and purpose of an unqualified technical release, and that the instrument must be construed according to the intent of the parties. We are therefore of the opinion that the decision of the learned trial judge was correct in this respect.

2. We have incidentally covered the defendant’s second point, that the acceptance of the sum from Moffat operated as an accord and satisfaction.

3. The defendant's third contention is that the failure to issue an execution on the judgment in the surrogate’s court is a fatal objection to this action. It does not seem to be necessary to issue an execution on the surrogate’s decree in such a case as this. Section 2607 of the Code relates to accountings and surrogates’ decrees generally. Section 2608 relates especially to such a case as-this, and states the rule which we apply. True, it seems to relate to cases-in which a successor is called upon to act. But no new appointment is necessary in such a case as this, where one competent executor remains. Section 2692. The remaining executor is the successor in such a case, within the meaning of section 2608. We held substantially this rule in Boyle v. St. John, 28 Hun, 454. The Code does not contemplate an execution in such a case.

4. Defendant’s fourth point is-that the surrogate had no power, at the time the bond was executed, to direct the payment of the money to plaintiff, the executor, etc., and asks us to hold that no action will lie on the bond for that reason. This bond was executed April 28, 1864, and was conditioned “for the faithful performance” of Frederick’s duties as an executor, and that he should obey all orders of the surrogate touching the administration. The will was probated April 20, 1864, and the letters were not issued until the 30tli day of April, 1864. This was before the present Code. The statute then authorized the requirement of just such a bond from a non-resident executor (2 Rev. St. 70, § 7) before letters could be issued to him. It was imperative. This bond was given to satisfy that requirement of the statute. It is not necessary to inquire into the power of surrogates, under the old statute, to-make the orders or decrees for the payment of money, etc. The bond was not given with reference to the powers of the surrogate at that time. The principal was to “faithfully execute the trust reposed in himand, if he failed to do that, it matters not when or how the surrogate obtained power to make the decree that the executor was in default, so long as he had the power when he made the decree. That all relates to the remedy, and does not affect the obligation, and the right to enforce it. Ho question is made respecting the general power to adjudge such default under the Code at the time when the decree was made which fixed the amount of Frederick Hood’s default. This decree, in that respect, is of the same force and effect as if made by this court. It shows a default, and fixes the amount payable in consequence thereof.

5. The plaintiff’s participation in the investments which resulted in loss to the estate furnishes no answer to her effort as executrix to recover their moneys from the sureties. This action is really by the estate to get back the money lost by wrongs for which Frederick Hood was liable; and it matters not who participated therein so long as the beneficiaries of plaintiff’s trust did not do so. Perhaps, if she were insolvent, so that defendant would be without other remedy, he might set up her participation to the extent of her individual interest in the fund. But, while there is an allegation, there is no proof, of her insolvency. The estate is here demanding indemnity for Frederick Hood’s misdeeds. They have been adjudged, and that judgment is at least prima facie evidence against the sureties; and that is all that is necessary to sustain the finding of fact in this respect.

6. The extent of the recovery. We may, under this head, deal with the contentions of both appellants. Defendant claims that he was not liable for interest at all. The court charged him one-half the penalty of the bond, ($10,000,) with interest ($2,390) from December 7, 1883, the date when the surrogate found and adjudged that Frederick Hood had misused the trust fund, and revoked his letters. We think this was right. It then became his duty to pay over the sum for which he was liable, irrespective of the time when he misappropriated it, or when the surrogate fixed the amount of it by his final decree on the accounting. The money was then due and payable. Code, § 2603. He was then in default. The liability of his sureties was then greater than the penalty of their bond. Hayward was then bound to pay $10,000 as an ordinary debtor, because Frederick Hood had then failed to pay something over $30,000 which he ought then to have paid to the'plaintiff. The $10,000 was then due from this defendant, and interest began as against him. White v. Miller, 78 N. Y. 393. The cause of action then accrued. Haight v. Brisbin, 100 N. Y. 219, 3 N. E. Rep. 74. It follows from these views that plaintiff’s contention respecting interest must be overruled.

7. It does not seem to be necessary, under section 2608, that leave should be granted to a “successor,” or one standing in place of a successor, as we have intimated, to obtain leave to sue on such a bond. Sections 2606, 2607, and 2608, when read together, show the distinction.

8. We think that the allegations of the answer pleaded as a counter-claim were not such in law. The acts alleged were not between the same parties. Plaintiff’s action, as it comes to us, is in her capacity as executrix. The liability on which this alleged counter-claim is based, was personal or individual; and, although she is a party in her own right, as well as in her representative capacity, the action could not be maintained in the latter. This claim was rather in the nature of a set-off, depending upon the equitable considerations which might have authorized some relief if the plaintiff had proved her insolvency, which she failed to do. The last remark is not intended to decide anything on this point. We simply hold that no counter-claim is shown by this answer which can be taken as true because plaintiff failed to reply.

9. The pending action set up by defendant is not, in our judgment, a bar to this action. The authorities cited by defendant for this position do not seem to us to sustain it.

10. Bor was the action, in our judgment, barred by any provision of the statute limiting the time for commencement of actions. We have already indicated the time when this debt became due and payable.

11. We think that the report of Hood's Case, in 104 N. Y. 103, 10 N. E. Rep. 35, answers the defendant’s point that the money which Frederick was adjudged to pay to plaintiff by the surrogate’s decree was held by the executors as trustees. We look in vain for anything which discharges them as executors, or which shows that they ever opened a new account as trustees, or took over the funds from their hands as executors to them as trustees.

12. We have examined the other points raised by defendant, and failed to find anything in them worthy of special attention. It follows from these views that the judgment should be affirmed, but the order should be without •costs.