Powell v. Hurt

31 Mo. App. 632, 1888 Mo. App. LEXIS 218

• Court: Missouri Court of Appeals
• Decided: July 2, 1888
• Status: Published

Opinions

Ellison, J.

The defendants are the executors of the will of Henry A. Powell. The plaintiffs are a majority of his heirs. The executors on final settlement before the probate court asked credit for a note of one thousand dollars, given by C. IT. Benedict, J. B. Malone, and R. A. Malone, on the ground that it could not be collected. The probate court allowed the' credit and plaintiffs appealed to the circuit court where the credit was disallowed, and the executors appealed to this court.

The facts of the case are, that deceased died in September, 1880, leaving as a part of his property, the note in question. This note is dated March 12, 1880, due one year after date, with ten per cent, interest. The executors qualified September 24, 1880. Among other provisions of the will was the following: “4. I direct my executors to collect all my notes and accounts due me as soon as the same can be done, and also convert all other personal property to cash within the first year of the administration, or as soon thereafter as may be.” i

It appears that the makers of this note were the proprietors of a wholesale grocery-house in Kansas City, and that Benedict and R. A. Malone attended to the affairs of that establishment in said city ; that J. B. Malone was president and manager of the Macon Savings Bank, in Macon City, where he resided. In the month of February, 1882, both the house in Kansas City and the bank in Macon City made an assignment and became notoriously insolvent. . But, up to the time of the assignment, J. B. Malone was universally considered as abundantly solvent. His financial standing and ability was above reproach, and his commercial credit beyond all question. The wholesale House in Kansas City was run on His commercial standing. The bank was considered safe, and yet he was considered even safer than the bank. The evidence, however, shows that, in point of fact, he was insolvent at the time of the testator’s death, and op up to the assignment. That is to say, his debts largely exceeded his assets. About four months after the note was due, one of the executors presented it to J. B. Malone, who requested him to wait awhile; the executor, thinking he could get the money as well one time as another, waited, and never demanded the payment of the same, or took any steps for its collection, until after the assignment.

The question presented under these facts is, are the defendants entitled to a credit for this note on the ground that it was impossible to collect it by the exercise of due diligence ? Rev. Stat., sec. 240. It is perhaps well in this case to consider the duty of an executor when acting in relation to matters about which he has been specifically directed by the testator, as well as when acting without such direction. In my opinion, it is the duty of the executor, without being directed by will, to diligently and speedily collect in the debts due the estate, especially such as are out on personal security only. The duty of an executor is to pay the debts of the deceased and distribute the residue to the heirs or legatees. To do this, he must collect in the debts due the estate. It is. therefore, said that the collection of debts due the estate, “is the primary essential of prudent administration.” SChouler Exr’s & Admr’s, secs. 269, 308, 309. “ Personal securities change from day to day; and as the death of the testator puts an end to his discretion in regard to them, unless he has exercised it in his will, the executor or trustee will become personally liable, if he does not get in the money within a reasonable time.” Perry on Trusts, sec. 440, The same principle is announced in Clough v. Bond, 3 M. & Cr. 496; Styles v. Gay, 1 Mac. & G. 422; Bullock v. Wheatley, 1 Collyer’s Ch. 130; Tebbs v. Carpenter, 1 Madd. 298; Powell v. Evans, 5 Vesey, 843; Paddon v. Richardson, 7 DeG., M. & G. 582; Shultz v. Pulver, 3 Paige Ch.; affirmed in 11 Wendell, 361; Oglebay v. Howard, 43 Ala. 144; Johnson's Estate, 9 Watts & Serg. 107. An executor, unless charged in the will, is not like a guardian, and his trust is not for the investment like that of a guardian, but he should collect in the debts. “TIis duty, therefore, is unlike that of a guardian. The latter 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.” Charlton's appeal, 34 Pa. St. 473.

The foregoing authorities are only a few among many others, in both England and the United States, which hold that debts without something more than personal security must be diligently collected as soon as may be; and this without reference to a direction in the will. But when there is direction in the will as to what shall be done with the testator’s effects, all question or debate is closed. The will of the testator is law for the executor. It is a fundamental principle that a trustee accepting the trust, must comply with its provisions. “When the will contains express directions what the executors are to do, an executor, who proves the will, must do all which he is directed to do as executor, and he cannot say, that though an executor he is not clothed with any of these trusts.” Williams Ex’rs, bottom page 1796; Schouler Ex’rs & Admr’s, sec. 382.

In Weigland’s appeal, 28 Pa. St. 471, the court said : * ' We regret the loss that falls upon the surviving executor, as we are satisfied that there was no intentional neglect of duty upon his part. There is but one safe course for executors to pursue, and that is to implicitly follow the directions contai ned in the will under which they are appointed.” In Mucklow v. Fuller, Jacob’s Ch. 198, John Mucklow was indebted to the testatrix in the sum of five thousand dollars, and in her will she £ £ directed her executors and trustees to get in and place the said five thousand dollars on government stock or security at interest in their joint names within three years next after her decease.” It was not so collected. The Lord Chancellor said : £ £ The will contains express, directions what the executor is to do, and if he makes himself an executor, he mus t do all which he is directed to do as executor.”

In Booth v. Booth, 1 Beav. 125, the Master of the Polls said : ££ This is a very unfortunate case. It is to be lamented that Batekin, by inadvertence and over good-nature, should have placed himself in such a situation of responsibility as he has done. Here is a will the terms of which are perfectly distinct; on the twenty-sixth of October, 1830, the two executors proved the will; they took on themselves the trust and the duty of performing it. Prom that moment it was their duty to do all that was necessary for the conversion of the estate into money, and to see the dividends duly applied.” In Prior v. Talbott, 10 Cush., it was said of the executor that it was “his duty to administer.the estate according to the will, and such is the condition of his bond.” These authorities are by no means all that may be found. Prom my examination of the subject I feel safe in saying that all, both text-books and reports, bear the imprint of the rule that an executor must strictly obey the direction of the testator.

I am not unmindful of the rule of law established in this state and elsewhere, that executors and administrators are only responsible for want of due care and skill and that the measure of care and skill required of them is that which prudent men exercise in the direction and management of their own affairs. Merritt v. Merritt, 62 Mo. 157. But this rule, of course, only applies to matters left to the discretion of the executor. In order for such rule to have any application, the testator must have left room for the exercise of the executor’s prudence and skill. If the testator has asserted his own discretion and will, the executor must obey it, otherwise the executor would be administering his own will, instead of the testator’s.

Suppose a testator should direct that upon his death one thousand dollars should be paid to his nephew and two thousand dollars to his niece, and yet it could be shown that prudence would suggest that the larger sum should have been given to the nephew and the lesser to the niece, would that excuse him for such application of the money % Suppose the testator should direct the executor to 1 oan certain of his moneys on real estate security or to invest in government bonds, will he be excused for loss consequent on loaning to individuals without security, although they appeared to be on solid financial basis and prudent businessmen were making loans to them ? These questions answer themselves, and they serve as an apt illustration that the rule of prudence and skill only applies where there is room for prudence and skill under the will.

If the executors had demanded the note and been refused, and if in the bona-fide exercise of their judgment they had concluded the note could not be collected, and such conclusion was such as a prudent man would have arrived at in managing his own affairs, then, even though it turned out they were mistaken, they would not be liable. If the testator had directed that the executors collect all his questionable debts but not his good ones, in such event, under the evidence in this case, the executors would not have been responsible for not collecting this note, as they would have been justified in considering it good. I believe it to be beyond question, that the executors should have collected the note in dispute if it could have been done by diligent effort.

But it is said, notwithstanding the evidence shows the makers of the note were considered by everybody to be solvent, yet in point of fact they were really insolvent. Insolvency is a very broad and general term as it relates to the different conditions of debtor and creditor. One’sliabilities may be greater than his assets, in which case, he would be said to be insolvent, though he may have been in that condition for years, and yet paying all claims demanded of him. So a man may be said to be insolvent when he has nothing above exemptions which is subject to execution, and yet there are persons without number, in such condition, who are free from debt, who promptly meet every obligation and whose credit and standing is untarnished. There is, perhaps, no businessman but that in a moment can call to mind men who havé no property above the exemptions, yet whose note for any reasonable sum is worth dollar for dollar. But according to the argument here, an executor would be excused from even demanding a debt from such person, notwithstanding the demand would have been complied with.

Therefore, before entering upon this question it may be well to look at the provision of the statute in this respect. It is provided (sec. 240) that an executor shall receive credit for all debts charged in the inventory where “the debtor was insolvent, or that, from any other cause, it was impossible for the executor or administrator to have collected such claim by the exercise of due diligence.” There is no possible doubt but that the statute uses the word “insolvent,” as meaning impossibility to collect. The insolvency must be such as that it is impossible to collect. The reading-shows such to be the case. It says the executor shall have credit if “ the debtor was insolvent, or that from any other cause it was impossible” to have collected the claim by due diligence. The insolvency must be such as to make it impossible.

Such is the view of the Supreme Court of this state. In Williams v. Petticrew, 62 Mo. 470, Hough, J., says: “The question, therefore, is one of fact, as to whether it was impossible for the administrator by the exercise of due diligence to have collected these notes at any time after he entered upon the administration.” Again in same case he says : “But as the burden of proof was on the administrator to establish his right to credit for this note, he should have at least made.it appear, that even by the exercise of a proper degree of diligence it would have been impossible to collect it.” The same rule is also announced by the approval of an instruction in Julian v. Abbott, 73 Mo. 580, 582. What possible excuse to a trustee can insolvency be, if he can nevertheless collect the debt by demanding it % Is it possible that an executor may know that he can get money from the debtor on demand, and yet, because of the fact that he could not force it out of him by suit, he need not make the demand % Legal proceedings are a resort when other means will not avail. Insolvency must be the cause of not collecting. But aside from the' statute, why should insolvency excuse a. demand in this case ? Even though the executors had known the true condition of the payors of the note, yet they were in high credit and standing, and how could the executors know but that they would not, by some means, pay the claim on demand. Insolvency of the debtor does not excuse demand in other cases. It is no excuse for want of demand of a promissory note in order to hold the endorser. 2 Daniels Neg. Inst., sec. 1171; Parsons N. & B. 446. All the books say that the holder of the note cannot know by what means he may be paid if he will make demand. A man may borrow the money, his friends may pay it, he may have made special provision for the specific debt, or it might otherwise be paid. Fugitt v. Nixon, 44 Mo. 295.

The slightest • heed to the desire of the testator would have caused defendants to at least have demanded payment of this note. It is said in Shultz v. Pulver, 11 Wend. 365, that “the general rule is that all debts in the inventory, not designated desperate, shall be accounted assets in the hands of the executor or administrator; and in order to escape such accountability, he must show that they are desperate, or at least must show a demand and refusal.” So in 5 Vesey, 843, the executors were held liable for a failure to make a demand, the court saying it was their duty to do so. In Gaskell v. Harman, 11 Vesey, 498, it is said, as a general rule, executors are under the necessity of getting in their testator’s property, by all possible remedies; if any securities seem proper to be continued, the court alone, it has been said, must judge of that, and give the proper discretions; executors who take upon themselves to exercise the discretion on such points must be responsible for any loss sustained in consequence of their misplaced confidence, however good their intentions may have been. So in Johnson’s Estate, 9 Watts & Serg., the executor failed to demand payment of a note or institute suit thereon for six months after it became due and he was held responsible for its loss, the j)roof showing it was collectible when due. ‘ ‘ A mere application for payment, without more, would not have availed him. To entitle him to credit, he must, in addition, prove that he took legal steps to recover the sum due, or that, from the notorious insolvency of the debtor a suit would have been useless.”

N ow if we have in mind the provision of the will that the debts should be collected as soon as it could be done, it is apparent that due diligence required some effort to be made, by demand or otherwise, after the note became due, to collect; or if no such effort was made to, at least, show that effort would have been fruitless. The case concedes that'there was no effort to collect; nearly the whole of the defendants’ evidence is to show that the reason they did not endeavor to collect was that the payors were so thoroughly solvent and able to pay, they supposed they could get the money at any time and so let it run. It is evident that the executors did not think an effort to collect would have been fruitless, for, as I have just said, they supposed the money could be collected at one time as well as another. The question then resolves itself to this, do the defendants show that it was impossible to collect this note as directed by the will ? They unquestionably do not; on the contrary, they show beyond cavil that it could have been collected on demand.

It is well to keep in mind that the executors were in charge of the estate on March, 1881, when the note fell due; that though living in the same community with J. B. Malone, who was in daily business as a banker, whose credit and standing was unbounded, they never asked him about the note till some four months after it became due and then never demanded payment, but acquiesced in his request to wait; that they did let it run without even so much as mentioning it to him for some eight months afterwards, when' the bank, of which he was president, made an assignment. Thus the loan was allowed to remain, in the face of the will directing its collection, for a year after it became due. The evidence shows beyond all cavil or doubt, that Malone would have paid the note if it had been demanded or insisted upon. That he was a man who paid all claims against him on demand, is shown by the fact that his financial standing and credit was unbounded. The evidence shows that no man ever possessed the confidence of the business community up to the moment of his bankruptcy to a higher degree. He was considered “better than the bank.” His financial standing was the power which run the wholesale establishment in Kansas City with a stock of from sixty thousand to one hundred thousand dollars. Could he have had such standing, and begot such confidence, without being a debt-paying man? The direct testimony of defendants’ own witnesses is that the money would have been paid if payment had been insisted upon. But besides all this, the evidence shows directly that he was a “paying concern.” The evidence discloses as shown by the list that he owed several notes to this estate. The executors testify that they collected one of three thousand dollars during this period. . And as credit is asked for only one as uncollectible, it follows, the others were also collected.

This, then, is the case: The will directs the note to be collected as soon as it can be done; the executors accept the trust; the note is owing by a debt-paying man of the highest standing and credit; it becomes due and is allowed to run without any effort of any sort for a year, when it is lost by the total wreck of the payors.

It should be remarked that the evidence establishing the extraordinary character, and commercial standing of J. B. Malone, and that the note would have been paid if demanded, comes from defendants. They have shown this on the theory that it was not negligence or imprudence in them to let the note run; but in this case it only fixes their liability the more certainly, for it demonstrates that if they had obeyed the will, the estate would have had the money. There is another theory upon which defendants should not be allowed this credit. It is shown by the testimony, expressed in the language of one of their witnesses, that “if payment had at any time been demanded prior to the failure of the bank the money would have been paid.” It is further shown by undisputed testimony that when one of the executors was asking Malone about the note and Malone requested him to wait, “Hurt said it is good and I will risk it.” In that remark, he sounded the keynote to the situation, and in the language of the books, if he concluded to interpose his own discretion for that of the testator, he must accept the consequences, however unexpected they may turn out to be.

I think the judgment ought to be affirmed, and

Hall, J., concurring,

it is so ordered.

Philips, P. J., dissents.