Forrester v. State ex rel. Kernan

Action on trustee's bond — Principal and surety — Hearsay and irrelevant Evidence — Presumption on appeals — Estoppel— Guardian and Ward. An action was brought in March, 18M, by the State, for the use of K., on a trustee’s bond to recover the balance of a sum of money arising from a trustee’s sale made by F., and audited to K. then a minor. The sureties filed several pleas, on demurrer to one of which, it was Held : 1st. That K. was under no legal obligation to inform the sureties that F. had become embarrassed, or that he had invested K’s money, or that K. had declined to accept such investment. 2nd. That it was the duty of the sureties to make inquiries, and to see that their principal discharged the obligation resting upon him, whether he was then solvent or insolvent. Evidence was offered by the defendants in said action, consisting of declarations of S., not a party to the suit, without any evidence having been previously introduced, and without any offer to follow it up with evidence to show that he was K’s attorney, or agent, or in any manner authorized by him to make such statements or declarations. Held : That the statements thus sought to be introduced, consisted of hearsay simply, and were properly excluded from the jury. Where the record fails to show that evidence was admitted subject to exception, and it does not appear that the Court below passed upon a motion made to exclude the same, and there is no exception in the record with respect to the matter, it must be presumed by this Court that the evidence was admitted without objection. Case of evidence excluded as having no relevancy to the issue before the jury. Held further in the above action: 1st. That when the auditor’s account was ratified, F. as trustee became liable to pay on notice thereof and demand, and K. entitled to receive the sum of money audited to the latter. 2nd. That until the money due E. was either paid to him, or invested according to his directions, F’s sureties remained liable to E. on the bond. F. and his wife made a deed to E. of certain property on Hoffman street, which was absolute on its face. The deed was executed and recorded without E. having been consulted with respect to it, and without any knowledge on his part of its having been done until some time afterwards, and after F. was shown to have been in very embarrassed circumstances. That property was subsequently sold under a mortgage, and E. applied by petition to the Court having the distribution of the proceeds of sale, to have the balance of the purchase money after the payment of the mortgage debts, applied to the payment of his debt, which was accordingly done. His petition did not state whether he had accepted the deed in satisfaction of Ms debt or as collateral security for its payment. Held : 1st. That E. was not estopped from denying in the present action, that he accepted the deed of the property in satisfaction of his debt, or showing that he accepted it only as security for his payment. 2nd. That the use that E. made of the deed upon his petition to have the surplus of the property thereby conveyed, applied to the payment of his claim against the trustee, was perfectly consistent with the fact that he had accepted it as collateral security for its payment; and such acceptance in no manner affected or altered the liability of the sureties on the bond. Held further: 1st. That the guardian of E. during his minority had no right, without authority from the Orphans’ Court for that purpose, to invest her ward’s money, and certainly none to confer such right upon the trustee. 2nd. That even if the trustee had received such authority from E. himself after he was of full age, neither the trustee nor his sureties would be released from their liability on the bond, unless the authority to invest had been executed in good faith for the benefit of E.

Appeal from the Superior Court of Baltimore City. The case is sufficiently stated in the opinion of the Court. The jury rendered a verdict for the .plaintiff, and judgment was entered accordingly. The defendant appealed. The hondsmen at least-, are not liable in this action. Because the guardian of Kernan, while he was a minor, and himself, after he became of age, authorized and permitted Forrester to invest the money due Kernan. When the auditor’s account was ratified, the money became due and payable by Forrester, trustee, to the guardian of Kernan. Up to that time she had no authority or control over the funds, Forrester had no authority under the audit but to pay the money. When she directed him to invest the money, she asserted her control over it, and by that act the fund was passed from Forrester, trustee, to Forrester, attorney, just as effectually as if the money had passed and re-passed between him and . the guardian. The dealings between the guardian, and Kernan himself, and the trustee, were adverse to the interests of the sureties. When Kernan became of age, in June, 1871, Forrester had been authorized for nearly two years by the guardian to invest the money, and Kernan then also authorizes him to invest, which authority extends apparently for two or three years. Whatever dealings with the principal which might by possibility vary the sureties’ liabilities discharges them. Mayhew vs. Boyd, 5 Md., 110. And the sureties are discharged even though they are benefited by such dealings. Obendorff, Trustee vs. Union Bank of Baltimore, 31 Md., 130-131; see also, Hayes vs. Babbitt, 34 Md., 516 ; O’Hara vs. Shepherd, 3 Md: Chan., 312 ; Burnet vs. Courts, 5 H. & J., 78 ; Nesbit vs. Smith, 2 Brown’s Chan., mar. 583 ; 1 Story’s Eq. Juris., sec. 325 ; McCullough vs. Franklin Coal Co., 21 Md., 256. On January 11th, 1873, a deed from Forrester and wife to Kernan of property on Garden street was recorded in. the clerk’s office of the Superior Court of Baltimore City. The deed is absolute on its face and contains a covenant of special warranty. The property at the time was subject to two mortgages, one of which was on it when Forrester purchased the property, and the other was put on it by Forrester and wife. These mortgages are not recited in the deed. Kernan claims that he knew nothing of the deed until some time after it had been recorded, and that when brought to his notice he accepted it only as collateral security. Forrester claims that the deed was given in absolute payment. The property covered by this deed was sold under the first mortgage by a decree of the Circuit Court of Baltimore City, passed in the case of Brown, et al. vs. Craig, et al. Kernan filed a petition .in this cause claiming to be the owner and purchaser of the property, and asking that the balance of the proceeds be paid to him, as such owner and purchaser, which was done. Now we hold that if Kernan accepted this deed after it was made and put upon the record, without any previous arrangement or understanding between him and Forrester as to the character of the conveyance, the terms of the deed must be explained by the deed itself, and this is more especially true, when to permit its character to be changed by parol testimony, innocent parties must suffer. Because a man cannot receive a benefit under a deed and then claim that the deed is different from what its face discloses. Lanahan vs. Latrobe, 7 Md., 268. The instrument must explain itself except as to the amount of consideration. Cole vs. Albers, et al., 1 Gill, 412; Baxter and Wife vs. Sewell, 3 Md., 334; Hutchins, et al. vs. Dixon, 11 Md., 29. The deed having been accepted, then if any loss was sustained by Kernan he had his action on the covenant of special warranty. When a deed is taken with special warranty, the only action, is then on this covenant. Though Forrester may have said the property was free from incumbrance, still if sued on the warranty, he might have a good defence. Timms and Wife vs. Shannon, 19 Md., 316 ; Middlekauf vs. Barrick, 4 Gill, 290. Kernan having by his petition claimed to he the owner and purchaser of the property, he is estopped from claiming that he accepted it as collateral security. All of the testimony offered hy him, therefore, for the purpose of proving that it was accepted as collateral security, should have been excluded and the motion of defendants (incorrectly incorporated in his ninth prayer,) should have been granted. It makes no difference that this petition was ■ signed only hy the attorneys for Kernan ; he is hound hy the acts of his attorneys. Henck vs. Todhunter, 7 H. & J., 275 ; Bethel Church vs. Carmack, 2 Md. Chan., 143. Kernan was under no obligation to inform Forrester’s sureties, Airey and Scarborough, that Forrester became embarrassed, in the fall of 1872, and assumed to invest his, Kernan’s money, in Forrester’s own property, on his, Forrester’s, own terms, and that Kernan had declined to accept said investment. The debt had been due since September, 1869, Forrester had been already in default for three years. His sureties had, for that length of time, been under the obligation to make him perform his duty, or themselves to make good his default. The averments of the appellants’ seventh plea would therefore, even if they had been true, have constituted no defence, and tlie Court rightfully sustained the demurrer thereto. What Forrester is alleged, to have told his sureties, for the purpose of allaying their apprehensions, in the absence of Kernan, was not admissible against Kernan. There was no proof, nor the offer of any, except Forrester’s statement, that Shipley ever was ■ Kernan’s attorney. Shipley himself testified that he never was. There was no testimony to the contrary. But even if the proposed testimony of Scarborough and Airey had been accompanied with an offer thereafter to prove that Shipley was, at the time referred to, the attorney, of Kernan, it would still have been proper to exclude evidence of what he had said or done until proof .that he was such attorney had been first given. Marshall vs. Haney, 4 Md., 498 ; Atwell vs. Miller, 11 Md., 348; Rosenstock vs. Tormey, 32 Md., 182. Even if he had been the attorney of Kernan, and there had been legal proof of that fact, his declarations, under the circumstances assumed, not in the discharge of his duty, would not have been admissible against Kernan. The accounts between Mrs. Willoughby, individually, and other persons, were properly excluded. The guardian of Kernan could not herself, without the authority of the Orphans’ Court, have invested his money, otherwise than at her own risk. She had no power to authorize Forrester to make any investment of it. Even if she had given him express authority to invest it, that would have been no defence as against Kernan. Still less would the fact that she had allowed him to retain it for investment, or, that she had directed him to keep it in some safe place until he should come of age, be any defence to a suit for not paying it after the ward had attained his majority. The acceptance by Kernan of the deed from Forrester and wife to him did not exonerate the appellants from their liabilities for the balance of the money due to Kernan, although such balance may have been the consideration for said deed. Such balance was the consideration for said deed, whether said deed was taken as payment of it, or as collateral security therefor. Taking it as collateral security, unaccompanied by any agreement for an extension of time, or by any other agreement whatever, except the implied one to give credit for what might be realized from the property, could not possibly have prejudiced the sureties, nor can it avail as a defence. Brengle vs. Bushey, 40 Md., 141-7. The actual agreement under which it was accepted could have been proven, even as between the parties to it. Baugher vs. Merryman, 32 Md., 186, 191; Russell vs. Southard, 12 Howard, 139, 147. The rules which exclude parol testimony to contradict or explain written instruments is only applicable as between the parties to such instruments. Scarborough and Airy could have given parol testimony to explain or even contradict a deed to which Forrester and Kernan only were parties. Such testimony being admissible in their favor, is equally so as against them. Barreda vs. Silsbee, 21 Howard, 169; Planters’ Ins. Co. vs. Deford, 38 Md., 396-7.