Clopton v. Gholson

Chalmers, J.,

delivered the opinion of the court.

In 1865-66, Haughton and McNairy, executors of Thomas Brandon, deceased, delivered for collection to Davis & Haughton (afterwards Davis, Haughton & Gholson), attorneys-at-law, a large mass of claims against various persons, amounting in the aggregate to something more than 135,000. Upon all of them suits were instituted, which, in many instances, resulted in long and complicated litigation, involving injunctions in the chancery and appeals to the Supreme Court. A large majority of the judgments obtained proved worthless, so that, after the appropriation by the attorneys of all the money realized, there still remained due them several thousand dollars for fees. The fees charged were proved to be usual and legitimate, according to the custom and standard at the Aberdeen bar. Both of the executors having resigned and subsequently died, the appellant Clopton was, in 1869, appointed administrator cum testamento annexo. One of the suits only seems to have been revived and prosecuted in his name, all the others having ripened into judgments before his appointment. The claim of the attorneys for their fees remaining unpaid, this bill was filed against the administrator Clopton in his represent *471 ative capacity, to compel payment out of the assets in his hands. Many questions were raised by the pleadings below and by the assignment of errors in this court; but we shall notice only the principal one, which underlies and controls all others. Can an attorney make the estate of a decedent liable for services rendered to the executor or administrator in its management ?

We had occasion, in the recent case of Fearn v. Mayers, ante, 458, to declare that, while trustees have a lien on the trust estate for all costs and expenses legitimately incurred by them in its administration, this privilege does not extend to agents employed by them, but such agents must look alone to the trustee for reimbursement. It follows from this, that while the trustee who has paid or become responsible to parties legitimately employed by him in the business of the estate may retain the assets for his own reimbursement, yet if he does not do so, the parties employed by him are ordinarily powerless to assert any claim against the estate.

A careful re-examination of the subject has strengthened our conviction of the soundness of this decision, both on principle and authority. If the trust estate was liable to be attacked and impleaded by every person who had dealt with the trustee, and forced to litigate with them the nature, value and beneficial character to the estate of the services alleged by them to have been rendered, it would be involved in endless complications, and be perhaps swallowed up or seriously injured by the accumulations of costs. The law, therefore, compels such persons to look to the trustee with whom they dealt, •and against whom alone they have a legal demand. If their claim is recognized or enforced against him, he presents it to the proper tribunal, and with him the beneficiaries of the estate will litigate the question of the propriety of its allowance against themselves. The authorities on this point are almost, if not altogether, uniform and harmonious. Hill on Trustees, 567; 2 Perry on Trusts (2d ed.), § 907; Lewin on Trusts, 454, 455 ; Worrall v. Harford, 8 Ves. Jr. 4 ; Jones v. Dawson, 19 Ala. 672 ; Wade v. Pope, 44 Ala. 690 ; Mulhall v. Williams, 32 Ala. 489 ; Livingston v. Gaussen, 21 La. Ann. 286 ; Kessler v. Hall, 64 N. C. 60 ; Austin v. Munro, 47 N. Y. 360 ; Guerry *472 v. Capers, Bailey Eq. (S. C.) 159; Sims v. Stilwell, 3 How. (Miss.) 176; Woods v. Ridley, 27 Miss. 119 .

It is evident that this principle applies with especial force to contracts entered into by executors and administrators. These functionaries have no authority to contract debts which shall primarily bind the estates committed to them, except in cases specially authorized by statute, and ordinarily such debts are obligatory only as personal obligations. This has been repeatedly held true of fees due attorneys for professional services in the njanagement of estates, as was declared in the leading case of Worrall v. Harford, ubi supra, and in several of the other cases above cited.

It is true that, under some circumstances, attorneys or other creditors of the administrator may, under the principles of substitution and subrogation, reach the assets of the estate ; but such relief must be based on the fact that the administrator himself either already has some claim against the estate, or would be entitled to one by a payment of the demand of the creditor, and that the latter is unable to obtain satisfaction from the administrator. If, for instance, the creditor can show that the consideration of his demand inured to the benefit of the estate, and is unpaid; that the administrator is non-resident or insolvent; has never received credit for it in his settlements; and that the estate is indebted to him, —- in such case the creditor may, by a bill in chancery, have himself subrogated to the rights of the administrator against the estate, and to that extent have satisfaction of his demand out of its assets. Nor would it be necessary for him to show that the estate was actually indebted to the insolvent administrator. It would be sufficient if he could show that the estate would have been indebted if the administrator had paid the demand out of his private funds. Inasmuch as in such a case the administrator ought to have paid it, and if he had done so, would have been allowed a credit against the estate, a court of equity will consider that done which should have been done, and will give the creditor a decree against the estate, provided the administrator is not indebted to the estate, or would not thereby become so, and has not already received credit for the claim. Under such circumstances the *473 creditor would obtain payment only for beneficial services rendered to the estate, while it would be in no wise damaged.

The Supreme Court of South Carolina, in Guerry v. Capers, 1 Bailey Eq. 159 , after laying down, in the broadest terms, the doctrine that the creditor must look alone to the administrator with whom he contracted, thus announces the principle above stated: “ Whenever the trustee, if he had paid the debt out of his own funds, would be in advance to the trust estate, and would be entitled to be reimbursed out of it, his creditor may, if the trustee is insolvent, be allowed to take his place, and be paid out of the estate to the same extent. This constitutes, however, the only exception to the general rule which we are prepared to recognize.” This, we think, announces the true rule, except that the court omits the contingency of the estate being already indebted to the trustee, in which event, of course, the equity would be still stronger.

This right of subrogation is not to be confounded with that intimated in Woods v. Ridley, 27 Miss. 119 , and more fully exemplified in Short v. Porter, 44 Miss. 533 , where parties had furnished money to the administrator, which had been applied in exoneration of the debts of the estate. In such cases the equities arise by reason of the application of the money to the discharge of the burdens .resting upon the estate, and are in no manner affected by the solvency or insolvency of the administrator, or by the state of the accounts between himself and the estate. In the class of cases under consideration the creditor has no debt against the estate, nor has he discharged any. He has a personal claim against the administrator, which he will be allowed to assert against the estate under the limitations above indicated, because the estate has received the benefit of the consideration, and has not paid for it; and while it is impossible to collect it from the party primarily liable, its payment out of the assets can inflict no injustice upon the beneficiantes of the estate.

Whether under any circumstances such a proceeding can be instituted against the estate, before the administrator with whom the contract was made has been pursued to insolvency, is a mooted question. It was ruled in the affirmative in Coopwood v. Wallace, 12 Ala. 790 ; but this decision was overruled *474 in Jones v. Dawson, 19 Ala. 672 , Chief Justice Dargan dissenting. The latter decision was undoubtedly correct in the principal question discussed, to wit, the non-liability of the trust estate to the claims of parties dealing with the trustee, in discussing which the court remark, “We say nothing of the right of the party, after he has exhausted his legal remedy against the trustee, to proceed in equity to subject an equitable demand which the trustee may have against the estate.”

Conceding that the party has this right, as we have declared above that he has, we see no reason why he should not be allowed to assert it primarily, without being put to the necessity of a suit at law in the first instance. In such a proceeding he must assume the burden of showing the impossibility of obtaining payment from the administrator, as well, as of establishing all the other facts necessary to maintain the suit. The administrator or his legal representatives should be made ' a defendant, as well as the existing representative of the estate proceeded against.

The bill in this case possesses none of' the features deemed essential to its maintenance, and the demurrer filed to it should have been sustained.

We reverse the final decree, and also the order overruling the demurrer, and remand the cause with instructions that the demurrer be sustained, and that the complainants be allowed a suitable time to file such amended bill as they may be advised ; if the same be not filed within the time granted, that the cause be dismissed without prejudice to any rights the complainants may have to proceed against the defendant personally for any services rendered under any employment by him, express or implied.