Gray v. Armistead, 41 N.C. 74, 6 Ired. Eq. 74 (1849)

June 1849 · Supreme Court of North Carolina

41 N.C. 74, 6 Ired. Eq. 74

WILLIAM GRAY & AL. vs. THOMAS T. ARMISTEAD & AL.

Aii administrator has a right to sell notes oí hand, as well as chattels, belonging to his intestate's estate, and the sale is no breach of duty; and the purchaser, even at a discount, shall not be held liable to creditors or others, unless he Is privy to a misapplication of the price, as where he receives it in payment of a debt due to him by the administrator individually, or has otherwise actual notice that the administrator intends to commit a fraud.

The cases of Tyrrell v. Morris, 1 Dev. & Bat. Eq. 560, Exum v. Bowden, 4 Ired. Eq. 281, Fox v. Alexander, 1 Ired. Eq. 340, Powell v. Jones, 1 Ired. Eq. 337 and Bunting v. Ricks, 2 Dev. & Bat. Eq. 130, cited and approved.

Cause transmitted from the Court of Equity of Martin County, at the Spring Term 1849.

William Corprew died in 1841. Wilson Corprew, one of the defendants, in October of that year was appointed his administrator and the plaintiffs were his sureties. In November, the administrator sold the effects of the intestate, and, among other things, sold a negro boy to one Chesson and took his note with two sureties for the price, $730, payable to the said Wilson as administrator of William Corprew, six months after date, 1st November 1841. On the 23rd of February 1842, the said Wilson sold the note to the defendant Armistead at a discount of 25 per cent, or to the defendant Latham, and he sold the note to the defendant Armistead at a discount of 25 per cent., in the presence of the said Wilson.

The said Wilson was at that time very much embarrassed. His property was under execution for a large amount of debt, and was afterwards sold without paying his debts, and he has since been insolvent. The said Wilson wasted the estate of his intestate, and the plaintiffs, as-his sureties, have been compelled to pay the sum of $586, to the creditors of the intestate. The note of Chesson was undoubtedly good at the time it was sold to Armistead, and he has since collected it.

The original bill charges, that the said Wilson sold the note to the defendant Armistead; that he was insolvent at the time, and this fact was known to Armistead; that the note belonged to the estate of the intestate, as was apparent on its face, and this was known to Armistead ; and that Armistead received the note in payment of a'debt due to him by the said Wilson. The prayer is for a decree for an amount sufficient to repay the plaintiffs the amount paid by them, as sureties.

The answer of Armistead denies, that he bought the note from the said Wilson; but admits, that he did purchase it from one Latham at a discount, and avers, that he paid Latham the price in cash. The answer denies, that the said Wilson was insolvent at the time the defendant purchased the note; and avers, that “he then owned a considerable amount of both real and personal property, which was not sold for some time afterwards since which time.it is admitted he has been insolvent.

The plaintiffs then amended their bill by making Latham a defendant, arid charge, that the note was sold to Armistead by the said Wilson, or was sold by the said Wilson to Latham in the presence of Armistead, and immediately sold by Latham to Armistead, and that Armisstead and Latham appropriated the proceeds of the note to themselves, in pursuance of a contrivance and conspiracy, well knowing that the said Wilson was insolvent, and was commiting a breach of his trust, and was making a misapplication of funds, which, they knew, belonged to the intestate.

The answer of Armistead avers, that he bought the note of Latham, and paid him the price in cash ; denies any knowedge of an intention, on the part of the said Wi!« son to misapply the funds of his intestate, and admits the receipt of the amount of the note from Chesson.

The answer of Latham denies, that he bought the note from the said Wilson, or sold it to Armistead , and avers, that the said Wilson told him he was about to sell the note to Armistead, and requested him to go with him to the counting room of Armistead, which he did, and the said Wilson in his presence sold the note to Armistead, and received from him $545 in cash, the nett proceeds, after deducting 25 per cent. He admits, that the said Wilson w'as then much embarrassed, but he was not sold out, until some time afterwards. He denies, that he received from the said Wilson, or any other person, any part of the proceeds of the sale of the note.

The answer of Wilson Corprew admits, that he sold the note to Armistead and received the money from him ; but he does not recollect, whether he sold the note to Armistead himself, far got Latham to act as his agent in making the sale.

It is not necessary to recite the testimony.

Biggs, for (he plaintiffs.

Meath, for the defendants.

Pearson, J.

The answers of Armistead and Latham, as well as that of Corprew, are evasive and unfair, and, taken in connection with the testimony, create a strong suspicion, that the facts are, that, in January 1S42, Corprew, being pressed for money and his property being all under execution, borrowed of Latham 86650, at a premium of ten per cent, to be returned at March Court, when Latham had promised to return it to one Gaither, of whom he had borrowed it to “ accommodate” Corprew: That on the 25th of February, in order to raise the money for Latham, Corprew, in his presence, sold the note in question, appearing on its face to be the property of the intestate, to Armistead, at 25 per cent discount — received the nett proceeds in cash and paid it to Latham, and that. Armistead knew, that the' money was to be so applied, If these facts had been established by the proof, the plaintiffs would be entitled to the decree, prayed for. But the answers deny the material facts, and the proof is not sufficient to weigh them down.

As to Armistead, he bought the note and knew that it was the property of the intestate; but he denies, that any part of the price was applied to the payment of the debt due to him by the administrator. This is true. He denies, also, that he knew of an intention on the part of the administrator to misapply the fund. The proof does not show this to be untrue. He knew the administrator was hard pressed and that all of his propaaj^^p^under execution — in fact, one of the executU^A\®^i|rffif!f^|ror for near $ 1000 ; he knew the note wafe entirely gooS^md, it being unusual for administrators j/pTfJtfytr“^f»J?otep must have suspected from the ram ofoiscTOilí^MEmitted. to, that the object of the admii^stj^jog-^vasjto mike a misapplication of the fund. This\would be ^ffrci^ht to subject a purchaser from a trustee, wI^6S;^gíi»»T!r^TÍJwer to sell, and, it may be, a purchaser from a guardian,-but it is not sufficient to subject a purchaser from an administrator ; for an administrator has a right to sell all of the personal estate, notes as well as chattels, and the purchaser is not bound to see to the application of the money, and cannot be made liable, unless he is fixed with notice, as by sh ewing, that the proceeds are applied to a debt of his own ; which would not only fix him with notice, but make him a participator in the fraud, or by shewing, in some other way, that he had actual notice of the intended misapplication. Putting him on enquiry, or constructive notice, will not do. The exigency of estates sometimes makes a sale of notes necessary. Tyrrel v. Morris, 1 Dev. & Bat. Eq. 560. Scott v. Tyler, 2 Dickens 725, McLeod v. Drummond, 17 Vesey 151, which case is taken not to encourage “concerted” fraud. The powers of executors and administrators must not be “cramped.”

Exum v Bowden, 4 Ire. Eq. 281; Fox v. Alexander, and Powell v. Jones, 1 Ire. Eq. 340 and 337, are cases, in which guardians disposed of the notes of their wards, and the purchasers took the notes in payment of their own debts. Bunting v. Ricks, 2 Dev. & Bat. Eq. 130, was the case of the Clerk of a Court, trading a note deposited in his office, and then, too, the purchaser took it in part payment of his own debt.

When a trustee sells the trust fund, the purchaser must put himself on the footing of having an equal equity with the cestui que trust, and this he cannot do, if he has notice, actual or constructive, of the trust; for, as the trustee has no right to sell, the sale amounts to a breach of duty, in which the purchaser, of necessity, participates, without reference to the application of the fund. Whereas an administrator has a right to sell, and the sale is no breach of dut}q the purchaser is innocent, unless he is privy to a misapplication of the price, and knowingly aids, by his purchase, an intended fraud.

As to Latham, if he received the price from the administrator, he would be liable ; but he denies having re. ceived any part of it, and the proof does not establish the contrary ; for he did not pay back the money to Gaither until near three weeks after the note was sold, and the money cannot be traced during the intermediate time.

Per Curiam.

Bill dismissed, but without costs.