Opinion
(August Term, 1849.)
1. An administrator has a right to sell the notes of his intestate, and the mere fact of selling is no breach of trust.
2. But if a purchaser takes notes from an administrator, belonging to his intestate's estate, in satisfaction of the administrator's individual debt, or otherwise, he has actual notice of a dishonest intention and purpose on the part of the administrator to misapply the funds, the purchaser is liable to the persons entitled in equity to the notes.
THE bill of the complainants sets forth that they are the next of kin of the Jonas Bradshaw, who died intestate in February, 1840; that administration on his estate was afterwards granted to the defendant Fullenwider and to John Bradshaw; that in April, 1840, (244) they made a sale of the estate, and among other things of four negroes, one to Dr. Hunter for $890, one to Thomas Shuford for $890, one to Ephriam Brevard for $600, and one to Franklin Rhinehart for $314; that these respective purchasers gave their notes severally with surety to the said administrators, payable six months after the said first day of April, each for the amount of which he was bound; that the defendant Fullenwider, as administrator, took the said bonds into his possession and shortly afterwards sold them at a discount to the defendant Samuel P. Simpson, for the purpose of paying his individual debts; that the said Samuel well knew and had full notice that the said notes belonged to the estate of the said Jonas Bradshaw, and that the proceeds of the sale were to be applied to the individual use of the said Fullenwider; that soon thereafter the said Samuel transferred the said bonds to the defendant Jacob Ramsour, and that the said Ramsour was fully apprised how and in what manner the said defendant Simpson had traded for the said bonds, and knew well that they belonged to the estate of the said Jones, and, before his purchase from Simpson, knew also that the proceeds of the sale to Simpson went to the individual use of the said Fullenwider. The bill also states that the said Fullenwider is utterly insolvent. The bill further states that the coadministrator, John Bradshaw, who is one of the plaintiffs, never countenanced nor assented to the said transactions, and it prayed that the said bonds should be delivered up to the plaintiffs or that the defendants should pay them the amount thereof and interest. An amended bill further stated that besides these negroes, the estate of the said Jonas, after paying all the debts, was worth a large amount of money, most of which came to the hands of defendant Fullenwider, and had never been accounted (245) for, and some of the distributes had received the full amount of their shares and others had received nothing.
Samuel P. Simpson and Jacob Ramsour in a joint and several answer admit the administration on the estate of Jonas Bradshaw by Fullenwider and John Bradshaw, and that the bonds stated in the bill were taken on the sale of the negroes belonging to the said estate and were made payable to the said administrators; and Samuel P. Simpson for himself says that he purchased the bond of Franklin Rhinehart from the defendant Fullenwider at a discount of 15 per cent or thereabouts and paid for it in cash; as to the other bonds, he hath no knowledge how, when, or where he obtained them from Fullenwider, nor does he recollect that they were received from Fullenwider for a debt to him from Fullenwider individually, nor does he recollect what he paid for them. These defendants both admit that the bonds of Hunter, Brevard, and Shuford were transferred from Simpson to the other defendant, Ramsour, and aver that no discount was taken on this transfer, and that it was for a valuable consideration. They admit that the bonds have been collected. They further say that at the time the said transfers were made they fully believed that Fullenwider had a perfect right to dispose of the said bonds, and that, by receiving them, they incurred no responsibility to the next of kin of the said Jonas Bradshaw. They further allege that Fullenwider has secured, by a deed of trust, the payment of all he may owe to the estate of the said Bradshaw. They deny all fraud, etc., and pray to be dismissed, etc.
Replication was filed to the answers, proofs taken, and the cause, being set for hearing, was transmitted to this Court.
Bynum Avery, and Landers for plaintiffs.
Guion for defendants.
An administrator has the right to sell the notes of his intestate. The purchaser is under no legal obligation to see to the application of the purchase money. But although the exigencies of estates sometimes make it expedient to sell note, it is rarely ever the case, and such dealings are looked upon with suspicion, and when permitted to stand it is not because courts are satisfied that the parties have acted honestly, but because their dishonesty cannot be proven. As an administrator has the right of property, and, of course, the right to sell, the mere fact of selling is no breach of trust, and a purchaser cannot be liable without actual notice that the administrator intended to use the funds for his own purpose. The case of most frequent occurrence is when the purchaser receives the funds in satisfaction of an individual debt of the administrator, so as not merely to have notice, but to be a participator in the guilt. This latter circumstance, however, is not necessary. It is sufficient if the purchaser has actual notice of a dishonest intent and purpose to misapply the funds. Tyrrell v. Morris, 21 N.C. 559; Gray v. Armistead, ante, 74. The defendant Simpson swears that he purchased the note of Rhinehart, and paid for it in cash, deducting 15 per cent. There is no proof that he had actual notice of a particular dishonest intent on the part of the administrator, and, although the fact that an administrator proposes to sell a good sale note at a discount of 15 per cent will most usually put honest dealers upon inquiry, this constructive notice is not sufficient. In this a purchaser from an administrator stands on higher ground than purchaser from a trustee, who has no right to sell, and when the mere fact of selling is a breach of trust. For these reasons the plaintiff cannot have relief as to the amount of the note of Rhinehart. Simpson does not allege that he is a purchaser of the other three notes, but merely makes the general assertion that the is unable to recollect how, when, or (247) where he got them from Fullenwider. As he does not allege himself to be a purchaser, he must be looked upon as a volunteer, holding in trust for the person entitled, and the plaintiffs are entitled to a decree against him for the amount of those three notes and interest, with costs. There is no proof of the allegation that John Bradshaw, one of the plaintiffs, who is a coadministrator with Fullenwider, was privy and consented to the misapplication of the funds, nor is there any suggestion that the sum realized from the deed of trust made by Fullenwider reduced the amount of his defalcation, so that it does not exceed the amount of the notes for which Simpson is liable. If the amount has been reduced below the amount of the notes and interest, Simpson can have the benefit of that fact upon taking the account. But there is proof that some of the distributees have received from John Bradshaw, the coadministrator, a part or the whole of their shares of the estate. This is no ground of defense for Simpson, for the plaintiff John Bradshaw has an equity to be substituted and receive the amounts so paid by him; but it may render it necessary for the plaintiffs to have an account among themselves, so as to ascertain the sums they are respectively entitled to, out of the amount decreed against Simpson. In the meantime the fund must be paid into the master's office, and an execution will issue therefor in the name of John Bradshaw. The defendant Ramsour is not fixed with notice; he swears he purchased the notes from Simpson for a full and fair consideration, after Simpson obtained them from Fullenwider. The bill must be dismissed as to him, with costs. The defendant Fullenwider is admitted to be insolvent. He is primarily liable and either party may hereafter move for a decree against him.
PER CURIAM. Decreed accordingly.
Cited: Wooten v. R. R., 128 N.C. 124.
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