Opinion
No. 21548.
June 4, 1951.
APPEAL FROM THE RANDOLPH COUNTY CIRCUIT COURT, RANDOLPH COUNTY, LAWRENCE HOLMAN, J.
Don C. Carter, Sturgeon, for appellants.
William M. Stringer, Moberly, for respondents.
This is a suit in equity. Plaintiffs recovered judgment against the defendant, Maggie Cross, individually and as executrix, of the estate of her deceased husband, Sam Cross, for $2686.30, from which judgment she has appealed individually and as executrix.
The purpose of the action is to recover a certain trust fund. We copy that part of the petition which states plaintiffs' theory of recovery:
"That Sam Cross was paid $2,422.37 1/2 out of the estate of his brother, W. C. Cross, deceased, which amount he had the right to use during his natural life, subject to the rights of the survivors and the right of succession in his brothers and sisters. That the said Maggie Cross well and truly knew that her husband had received the money under the terms of the will of the said W. C. Cross, and knew that at the death of the said Sam Cross, the money would go to the plaintiff, Marvin Cross, for his life.
"But the said Sam Cross and the defendant, Maggie Cross, did take the said $2,422.37 1/2, so received, and wrongfully comingled same with their joint property and thereafter wrongfully invested the said $2,422.37 1/2 with other property of the said Sam Cross and defendant, Maggie Cross, owned jointly, and that they did wrongfully destroy the identify of the said $2,422.37 1/2 by wrongfully co-mingling it with their other property, and that it is impossible at this time for plaintiff to trace the said $2,422.37 1/2 into any particular property of the said Sam Cross and the defendant, Maggie Cross. That all of the property of the said Sam Cross, at his death was in the joint names of the said Sam Cross and defendant, Maggie Cross, his wife, as tenants by the entirety.
"That upon the death of the said Sam Cross, the defendant, Maggie Cross, took all of the estate of the said Sam Cross, deceased, and the estate of the said Maggie Cross was actually increased by the said $2,422.37 1/2, and that the said Maggie Cross is trustee of the said $2,422.37 1/2, and that the said Maggie Cross is indebted to the plaintiff, Marvin Cross, in the sum of $2,422.37 1/2, with interest since the 13th day of November, 1947."
Defendant, Maggie Cross, individually and as executrix, answered with a general denial; all other defendants defaulted.
The material part of the judgment is:
"* * * that George Samuel Cross (hereinafter called Sam Cross) died testate on the 13th day of November, 1947, without living children, leaving his widow, the defendant, Maggie Cross, his sole survivor, and who was legally appointed executrix of the estate of the said Sam Cross, * * *. The said executrix did not file an inventory in the estate of the said Sam Cross, and all property owned by the said Sam Cross at his death was in the joint names of Sam Cross and Maggie Cross, his wife. At the death of the said Sam Cross, he and the defendant, Maggie Cross, as husband and wife, held personal property and real estate in their joint names approximating the value of $9,375.00. * *
"3. In 1926, the said Sam Cross received $2,422.38 from the estate of W. C. Cross under the 4th paragraph of his will, * * *.
"4. The Court finds the said $2,422.38 was a trust fund and that the said Sam Cross was trustee thereof with the unrestricted right to use the same for his own use until his death; and at his death the plaintiff, Marvin Cross is entitled to the use of the said $2,422.38 until his death * * *. The said Sam Cross, when he received the said $2,422.38, did use it and in his use thereof commingled it with the property owned by himself and the defendant Maggie Cross, his wife, and the said money lost its identity in the estate of the said Sam and Maggie Cross, and therefore swelled their estate to the amount of said trust fund. There is no evidence of any payment of the said fund or any other fact showing the discharge of the said Sam Cross from the obligations of the said trust, and at the death of the said Sam Cross the estate of himself and the defendant, Maggie Cross was solvent and of the value of $9,375; and the Court further finds that the said $2,422.38 is still in the assets of the joint estate of the said Sam and defendant Maggie Cross. The Court further finds that at the death of the said Sam Cross all the personal property and the real estate described above passed into the name of the defendant, Maggie Cross, as the widow of the said Sam Cross, together with the said $2,422.38 trust fund; that the said Maggie Cross knew that the said Sam Cross had received the said fund from the estate of the said W. C. Cross in trust as provided in the will of the said W. C. Cross and recognized it as an obligation which she should pay and the Court finds that the defendant, Maggie Cross, is indebted to the said Marvin Cross, trustee of the said fund and entitled to the custody and use thereof until his death. * * *
"5. Wherefore it is the order, judgment and decree of this Court * * * that the defendant, Maggie Cross, shall pay to the said Marvin Cross the sum of $2,422.38 with interest in the sum of $264.00 from November 13, 1947, to the 8th day of June, 1950, and six per cent interest on said total sum from the said June 8, 1950; and judgment is hereby rendered for plaintiff, Marvin Cross, against defendant, Maggie Cross, personally, and the estate of Sam Cross, deceased, for the said sum of $2686.38, to bear interest as provided by law and since said judgment is for trust funds said Maggie Cross cannot claim any homestead or other exemptions in the event of a levy upon her property or estate to collect this judgment; * * *."
The only assignment of error preserved is that, "The court erred in rendering a personal judgment against the defendant (appellant), Maggie Cross, for the amount of the trust funds, * * *, since there was absolutely no evidence that the estate by the entirety was swelled or increased by such trust funds."
We understand that Maggie concedes that the court could, and did, properly render judgment against the estate of Sam Cross, so that issue is not directly involved on this appeal. The basis of her assignment of error is that there is no evidence that the trust fund was ever commingled with the property belonging to Sam and his wife, and certainly no evidence that the trust fund swelled the estate by the entirety. She states her contention thus: "There is no presumption of law in the case at bar, that the trust funds went into and swelled the estate by the entirety, as held by the chancellor in this case. It is purely a matter of proof, and the burden would be upon the plaintiff to show that such trust funds actually went into the estate by the entirety." This is an erroneous conception of the law.
In Orr v. St. Louis Union Trust Co., 291 Mo. 383, at page 404, 236 S.W. 642, 649, the court considered that question and said:
"Respondent Trust Company contends that, except for the indefinite showing that part of Mrs. Ghio's money went into the Taylor avenue property, the record fails to follow any of her funds, and that it is not shown that such funds swelled the assets that passed into its hands as trustee, and that therefore no trust can now be established as against such estate, and that plaintiff is not entitled to an accounting. It would indeed be strange doctrine that a trustee can accept money or other property in trust, and, by commingling such property with his own in hopeless confusion, defeat the very object and purpose of the trust. Such a rule would violate one of the cardinal principles of the law, that no man may take advantage of his own wrong. Mrs. Ghio's money went into testator's hands. There is no evidence of its repayment or any accounting in relation to it. Her funds are not shown to have been lost by bad investments or in any manner for which her trustee may be regarded as discharged. In the absence of some showing, the presumption will be indulged that those funds retained their trust character in testator's hands and remained in his hands until his death, and that his trustee received his estate swelled by the amount of such trust funds. The Trust Company, as testator's trustee, is therefore chargeable with accountability for such trust fund and the earnings therefrom, to be satisfied out of the estate in its hands.
"An attempt has been made to show that a portion of Mrs. Ghio's trust funds went into certain investments. If the evidence clearly shows that a definite amount went into any particular property, such as the Taylor avenue property, an equitable lien against such property may properly be decreed; but we are persuaded that, as to such part of her trust funds as were mingled with testator's general property, and cannot now be traced, his entire estate is liable in the hands of his trustee, and such estate should be subjected to a full accounting for the same." (Italics ours.)
This general principle has been cited and approved many times by the courts of this state. See Lolordo v. Lacy, 337 Mo. 1097, 88 S.W.2d 353; Horigan Realty Co. v. First National Bank, 221 Mo.App. 329, 273 S.W. 772; In re Estate of Main, 236 Mo.App. 88, 152 S.W.2d 696; Nelson v. Estate of McClean, 236 Mo.App. 718, 161 S.W.2d 676; Newco Land Co. v. Martin, 358 Mo. 99, 213 S.W.2d 504; State ex rel. Gentry v. Page Bank, 322 Mo. 29, 14 S.W.2d 597; State ex rel. Talbott v. Shain, 334 Mo. 617, 66 S.W.2d 826.
In so far as the law of Missouri is concerned, it is unnecessary for the claimant to trace the trust funds into any particular property owned by the trustee. That old doctrine has long since been abandoned in most of the states of this country. The leading case on the subject in the United States is National Bank v. Insurance Company, 104 U.S. 54, 26 L.Ed. 693, decided by the Supreme Court of the United States in 1881. In that case an agent of an insurance company commingled premiums which he had collected for the company with his own money in a general deposit in a bank. It was held that the company was entitled to be repaid out of the fund although the agent was indebted to the bank and the bank claimed a lien upon the deposit. The bank was not in the position of a bona fide purchaser since it had notice of the source of the funds deposited. The court said that although its money could not be identified, yet the insurance company was entitled to a charge upon the deposit to the extent that its money was traceable into the deposit; it was immaterial whether the wrongdoer was a trustee or other fiduciary. For an interesting discussion of the history and development of the modern doctrine, see Scott on Trusts, Vol. 3, Sec. 515, p. 2461. In discussing this question, the author says (2463): "The fact that money has no earmark is a good reason why the claimant cannot insist that any particular part of the mingled fund is his; but it is no reason why he should be denied an interest in the fund, no reason why he should be relegated to a mere personal claim against the wrongdoer. The wrongdoer owes a duty to the claimant to restore him the money wrongfully taken from him. It is the wrongdoer's own fault that he cannot identify his own contribution. Therefore, to make reparation he should use, and a court of equity will compel him to use, so far as necessary, the fund which is made up in part of the money of the claimant. In other words, the claimant has an equitable lien or charge on the whole fund. The creditors of the wrongdoer cannot object to this. Since they are not purchasers for value, they stand no better than their debtor. The claimant's lien is therefore available against the general creditors of the wrongdoer." (Italics ours.)
In Sec. 516, p. 2464, the same author announces a corollary to that general rule as follows: "Where money of the claimant is mingled with money of the wrongdoer and the mingled fund is used in acquiring other property, the claimant is entitled to follow his money into the property thus acquired. There is no doubt that he is entitled at least to an equitable lien upon the property. Since he was entitled to a lien upon the mingled fund, he is entitled to a lien upon the product of that fund." (Italics ours.)
The evidence amply supports the following findings: That (a) Sam received the trust fund; (b) that Maggie knew he received the fund and that it was a trust fund; (c) that the trust fund was not repaid or otherwise disposed of in a manner for which Sam may be regarded as discharged, and that Maggie knew that fact; (d) that when Sam died all the property which he owned was in his and his wife's name as an estate by the entirety, and that Maggie knew that fact; (e) that all such property was acquired after Sam received the trust fund, and Maggie knew that fact; (f) that upon Sam's death there was no property of any kind inventoried or accounted for in his individual estate, and Maggie admitted there was none; (g) that Sam had supplied all the funds to purchase the property held in entirety. There is no claim made that Maggie ever had any property other than that which she received from her husband, or that she invested any of her funds in the property held by entirety. From these facts the presumption is inescapable that the trust money became and was a part of the purchase price of the property owned by entirety.
It is true that Maggie introduced some evidence to the effect that Sam had received funds from the estate of another brother and from the sale of some real estate which he owned prior to the time he received the trust fund. She argues that it is just as reasonable to infer, and that we should infer, that he purchased the property held by the entirety with such funds, and not with the trust funds. However, this question is disposed of by the Supreme Court in Lolordo v. Lacy, supra, wherein the court said, 88 S.W.2d at page 358: "* * * it is a well-established rule that when a trustee has received and commingled trust funds with his own funds, it is presumed, in the absence of a contrary showing, that the trust funds are still there, and it will be considered that what was paid out of the commingled funds for other than trust purposes was paid out of the trustee's personal funds and not out of the trust money, and that all the rest remains as trust funds."
We think the evidence and the presumptions indulged by the law clearly support the conclusion that the trust fund was invested in, and became a part of, the property owned by the entirety.
The question which gives us concern is whether a judgment can be entered against Maggie Cross individually for the amount of the trust fund under the facts in this case. There is no evidence that she ever received or possessed or had any control over the trust fund. The evidence does support the conclusion that she knew her husband had received the fund; knew that it was a trust fund; and knew that he had not accounted for it. But such evidence falls far short of proving that she had received the fund and had commingled it with her property or with property belonging to her and Sam. In other words, she had not become such a trustee or wrongdoer as would justify the court in entering judgment against her individually.
However, that does not mean that the claimants are not entitled to an equitable lien against the property which Maggie and her husband owned by the entirety. Since we hold that the trust fund was used as a part of the purchase price of the property held by the entirety, and the evidence is sufficient to support the conclusion that Maggie knew or was charged with the knowledge that the trust fund had become a part of such property, it must be held that she took it, as survivor, impressed with a lien to the extent of the trust fund. This finding is supported by evidence, in addition to that mentioned, supra, to the effect that after Sam's death Maggie admitted they had received the trust fund; that it had been helpful to them, and that she intended to repay it when she ascertained to whom it should be paid.
It is our conclusion that a judgment should be entered against the estate of Sam Cross, and that such judgment should be declared a special lien on the property owned by Sam and Maggie as an estate by the entirety; that if any of said property has been sold or disposed of by Maggie since Sam's death, the lien should attach to the money or property received from such sale or disposal; that so much of said property as is necessary to satisfy said judgment be ordered sold, but that there should be no judgment against Maggie Cross individually.
It follows that the judgment should be reversed and the cause remanded with directions to the trial court to enter a judgment in conformity herewith.
BROADDUS, P. J., concurs.
DEW, J., concurs in separate opinion.
I concur in the result of the majority opinion, but wish to emphasize what I consider the distinctive feature of the case which authorizes the rulings made. Since the opinion appears to deal with an aspect of the estate by the entirety seldom found in the digested cases and which characterizes this case as an exception to the general operation of that form of ownership in Missouri, I desire to add my conception of the theory and the law which, it seems to me, fortifies and explains our final conclusion.
We must bear in mind that all of the general principles of an estate by the entirety have long since been firmly settled in Missouri. As recently as the case of Robinson v. Pattee, 359 Mo. 584, 587, 222 S.W.2d 786, 787, the court reiterated the rule that: "It is true, as defendants-appellants urge, neither the husband nor the wife can convey any real property or affect any interest of the other in the property held by them by the entirety without the assent of the other, and, absent such assent, the whole must remain to the survivor. Samuel v. Frederick, Mo. Sup., 262 S.W. 713; Stifel's Union Brewing Co. v. Saxy, 273 Mo. 159, 201 S.W. 67, L.R.A. 1918C, 1009". In A. J. Meyer Co. v. Schulte, Mo.App., 189 S.W.2d 183, 189, the court said: "It is established law that neither husband nor wife acting alone has power to subject to a lien property held as an estate by the entirety". For the most recent review of the law of this state as to the immunity of property in an estate by the entirety to the debts and liabilities of a deceased spouse, see United States v. Hutcherson, 188 F.2d 326, wherein the United States Court of Appeals for the Eighth Circuit denied a lien of the Federal Government as against property held by a surviving wife under a deed to her and her husband in the estate by the entirety for unpaid federal income taxes owed by the husband.
Defendant Maggie Cross relies upon a succession of conveyances and transactions evidencing an estate by the entirety, which she claims was converted and reconverted until resulting ultimately in the property now claimed by her as the surviving tenant by the entirety. It is clear from the evidence that she knew that her husband, 21 years prior to the trial, received the trust fund of $2422; that she knew that it had been of some assistance to herself and husband; that it had not been repaid by him during his lifetime, nor by his estate. She also knew that she had paid no part of the purchase price of any of their joint property, and that she had no property or means of her own individually. It also appears, however, that her husband had received some funds from the sale of a farm which he owned before their marriage and which was sold after their marriage, and had received some inheritance from other sources, which private funds she claims were used in the acquisition of their joint property. It also appears that she never had possession of the trust fund, nor any control of it, nor did she know what disposition had been made of it by her husband.
Although Maggie Cross did not participate in any of the transactions of her husband that resulted in the acquisition of their joint properties, her present claim under and reliance upon the successive deeds and other conveyances to herself and husband as tenants by the entirety give rise to the assumption that the property so received by her and her husband as tenants by the entirety was so conveyed to her at the direction of her husband, with full authority from her to so receive the property in her behalf and for her benefit. In other words, she cannot rely upon the succession of deeds to property in the estate by the entirety, and at the same time question the authority or assent for such deeds and conveyances.
The significance of such assumption is that it compels an inquiry into the circumstances of the acquisition of the property in the estate by the entirety, rather than the mere effect of Sam Cross's separate liability on any property already vested in the estate by the entirety. According to the evidence, long before any property had been received by Sam Cross in the estate by the entirety, he had possession of the trust funds in question for use during his lifetime, and it was his continuing duty to preserve the same or its proceeds intact to be accounted for to his successor trustee, at least upon his death. Since he died without any individual assets and without having so accounted for the trust funds, but having acquired, since receiving the trust money, property taken by him in the estate by the entirety, the law will reach back and inquire into the acquisition of property taken by him in that form of ownership. The presumption, therefore, of his use of the trust funds as a consideration for the purchase of property taken in the estate by the entirety applies to the acquisition and very inception of such title which, as to both tenants by the entirety, continued charged with the lien so created and to such properties into which the same were converted.
It is not difficult to find precedents for the immunity of property held by a surviving spouse under a deed to husband and wife in the estate by the entirety from the debt, liability or lien created by the other, since deceased. Neither is it difficult to find precedents where the surviving wife did not actively participate in the creation of the lien asserted. However, there is a dearth of precedents wherein, after the death of one spouse, the property of the surviving tenant by the entirety is impressed with a lien created by the deceased spouse before the acquisition of such property. This issue was before the Supreme Court of Tennessee as a matter of first impression in that state, in Moore v. Cary, 138 Tenn. 332, 197 S.W. 1093, L.R.A. 1918D, 963. There a vendor's equity was sought to be enforced against a certain property held by a widow under a deed to her and her deceased husband by the entirety. The court said, 138 Tenn. 332, 197 S.W. at page 1095, L.R.A. 1918D, at page 966, "In the case before us it does not appear that the wife actually participated in making the contract of purchase, and it does appear that the husband made the cash payment and executed his own notes for the deferred payments. It is a necessary conclusion, however, since the wife is relying upon the deed for her title, that she accepted this deed as one for her benefit. By this acceptance she became a party to the purchase, was thus a purchaser of the land equally with her husband, and thus recognized that in making the contract he acted for both. So, the wife falling distinctly within the definition of one who has bought land, the purchase money for which has not been paid, cannot resist the enforcement of the vendor's equity against the land".
The same court in Martin Bank v. Woods, 24 Tenn.App. 241, 142 S.W.2d 750, was dealing with a situation where the husband bought property from a woman and agreed to pay as a part of the consideration, the seller's note to a third person. The husband took deed to the property in the estate by the entirety. Instead of paying off and satisfying the note of the seller, he acquired the note and hypothecated it in his bank in another transaction. The note having been defaulted, and the husband of the defendant having died, plaintiff sought a vendor's lien against the property then held and claimed by the widow under the deed conveying the title in the estate by the entirety. It was urged that on account of the nature of the estate there could be no lien on the property in question of which she claimed to be the sole owner as surviving wife, growing out of her husband's violation of the purchase contract. On page 754 of 142 S.W.2d the court said: "Although she may not have participated in the transaction whereby the conveyance of the thirty-eight acre tract was made, the appellee, Mrs. Woods, as the surviving tenant by the entirety, stands upon no higher ground than her deceased husband stood insofar as the asserted right to the lien on the tract so conveyed is concerned. In other words, if the right to the lien existed on the land as against the husband during his lifetime it likewise exists against her as the surviving tenant by the entirety; for in taking the title in their joint names and in agreeing upon the consideration, he is to be treated as having acted on her behalf as well as on his own. In short she is regarded as having been a party to the consideration (citing Moore case, supra)."
It was said in 41 C.J.S., Husband and Wife, § 34, p. 476: "So where, although the wife did not participate in the making of a contract for the purchase of land, the deed is executed to the husband and wife as tenants by entirety, and the husband dies, the vendor may enforce his equitable lien for the unpaid purchase money as against her." (Citing the Tennessee cases above quoted.)
It is true that in the Tennessee cases the property against which the liens were sought to be charged was identified. It is true that in the present case there was no direct proof that any of the trust funds went into the identical property now held by Maggie Cross received by her under deed to herself and husband in the estate by the entirety. However, in the case at bar it must be assumed, under the Stifel's Union Brewing Company case, supra, that when Sam Cross first took any property in the estate by the entirety, after having received the trust funds in question, he possessed the means to purchase such property, and that such means consisted, not of his private funds, but of the trust funds held by him, and that when the same were converted into other forms of joint property, the trust character followed such investments of whatever nature and in whatever names taken. Under the evidence further identification of the property is not required. The title, though now vested solely in Maggie Cross, his surviving tenant by the entirety, is charged in her hands with the lien arising from the presumed acquisition of it by the wrongful use of trust funds.
In view of the expressions of the appellate courts of this state defining the rights of tenants by the entirety, heretofore cited, and the possible conflict therewith with what we have said herein, and in view of the public importance of a determination of the right of a surviving spouse in property in the estate by the entirety under similar circumstances, I hereby request that this cause be transferred to the Supreme Court of Missouri.