Aetna Cas. & Sur. Co. v. Hill

• Decision Date: 11 June 1971
• Citation: 270 N.E.2d 385,359 Mass. 628
• Parties: The AETNA CASUALTY AND SURETY COMPANY v. Charles M. HILL et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 385

270 N.E.2d 385

359 Mass. 628

The AETNA CASUALTY AND SURETY COMPANY v. Charles M. HILL et al.

Supreme Judicial Court of Massachusetts, Worcester.

Argued May 7, 1971.

Decided June 11, 1971.

Morton C. Jaquith, Worcester, for plaintiff.

Phillips S. Davis, Worcester, for Worcester County National Bank, executor and trustee.

Before TAURO, C.J., and CUTTER, REARDON, QUIRICO and BRAUCHER, JJ.

CUTTER, Justice.

The plaintiff (Aetna) brought this bill in equity in the Superior Court on February 28, 1966, against (1) Charles M. Hill (Charles), (2) Worcester County National Bank (the bank), which has qualified as executor of the will of David J. Hill (the testator) and is also the trustee of an insurance trust (the 1964 insurance trust) set up by the testator on November 20, 1964, as amended that day; and (3) various other persons. ¹ The bill (as three times amended) seeks (a) to establish Aetna's claim against the testator's estate; (b) to restrain further transfer of assets allegedly transferred to certain defendants, in fraud of creditors of the testator and of Charles: (c) to reach such assets in which the testator's estate is alleged to have a recoverable interest (because of fraudulent transfer, preference, trust, or otherwise); and (d) to require the bank, as executor and as trustee, to account for certain assets.

The following facts appear from the confirmed report of a master to whom the suit was referred, and from a stipulation between Aetna and the bank, in both capacities. The stipulation incorporated the master's report by reference.

Hill Construction Company (the company) was a firm of which Charles and the testator had been partners prior to the testator's death. Aetna had executed, as surety, a bond covering construction work done (apparently through the company) by Charles and the testator. They each agreed to indemnify Aetna against loss as surety. The two Hills defaulted on their work contracts. As a consequence, Aetna became liable for, and made payments of, $16,126.05 (which, with interest of $1,935.12, and $7,450 of legal expense, gave Aetna a total claim of $25,511.17 against both Charles and the testator).

The testator died on January 7, 1965. His will was allowed on March 9, 1965, and the bank qualified as executor by filing a bond. On December 21, 1965, the executor filed with the Probate Court a representation or 'petition of probable insolvency' indicating debts and expenses of $37,110.43 and personal estate of $775. Within the six months allowed for filing claims, two claims were filed, including that of Aetna for $16,126. ² 'No adjudication of insolvency has been made' and there has been 'no decree for distribution of assets.' The bank, as executor, on September 19, 1966, filed a first and final account showing receipts (Sch. A) and disbursements (Sch. B) each of $2,857.66. This account has not been allowed.

On the testator's death, the bank, which held certain insurance policies on his life as collateral and as trustee, paid to itself, apparently as trustee under the 1964 insurance trust, a net balance of $65,577.03 of insurance proceeds, after various deductions. The testator had assigned certain policies to the bank as trustee. Some policies, taken out by the testator, had been assigned to his wife Dorothy M. Hill, who thereafter made the bank (as trustee under the 1964 insurance trust) beneficiary of the policies.

The 1964 insurance trust (art. Second) required the bank, as trustee, to collect at the testator's death certain insurance policies on the testator's life which were payable to the trust. The bank (see art. Third of the trust) was to hold the policies, their proceeds, and other trust property during the testator's life to pay income and principal to him at his request or in the bank's discretion. By art. Third, par. 2 (inserted by the amendment of November 20, 1964), the bank was '(u)pon the death of the Grantor (the testator) to pay from * * * income * * * or from principal or both, the source * * * to be solely in the Trustee's discretion, to the executor * * * of the Grantor's estate such sums as may be necessary for debts, funeral expenses, administration costs, and any * * * death tax of any nature which may be imposed by reason of the Grantor's death' (emphasis supplied). Paragraph 3 of art. Third, and succeeding paragraphs, made the trust's net income payable to the grantor's wife after his death, and (after the death of both the grantor and his wife) made provision for their children and issue. ³

After the master's report was confirmed on January 15, 1968, the bank, as executor of the testator's will and as trustee of the 1964 insurance trust, filed a 'motion to dismiss' the present bill on the ground that the Superior Court 'is without jurisdiction of the subject matter of the suit.' This motion, which we treat as essentially a demurrer (see Luscomb v. Bowker, 334 Mass. 468, 472--473, 136 N.E.2d 192), was allowed on October 14, 1969, after the Superior Court judge deciding the motion had found certain stipulated facts (recited above) to be true. A final decree was entered on February 6, 1970, allowing Aetna's claim against Charles Hill in the sum of $25,511.17; dismissing the bill against the bank as executor and as trustee, 'in accord with the (d)ecree of October 14, 1969, allowing the (m)otion to (d)ismiss'; and dismissing the bill as to all other defendants (apparently on the merits as presented by the master's report). Aetna appealed from the interlocutory decree allowing the 'motion to dismiss' and from the final decree.

1. General Laws Laws c. 198, § 31, ⁴ provides (in part), 'Except as provided in * * * (§ 32) no action shall be maintained against an executor * * * after an estate has been represented insolvent, unless for a claim entitled to a preference which would not be affected by the insolvency of the estate or unless the assets prove more than sufficient to pay all the debts allowed * * *' (emphasis supplied).

The bank, as executor and trustee, argues in effect, in reliance on Fourth Natl. Bank v. Kead, 214 Mass. 549, 102 N.E. 69, that § 31 precludes any effort to establish the indebtedness of a decedent's estate which has been represented insolvent except before the Probate Court which has jurisdiction of the estate. Efforts in other courts by a creditor to compel an executor to attempt to reach and apply alleged assets of the estate have been treated (possibly in too broad language in the Mead case, 214 Mass. 549, 551, 102 N.E. 69) as improperly brought because of an interference with the administration of the insolvent estate committed to the Probate Court. See Proper v. Murphy, 317 Mass. 176, 178--179, 57 N.E.2d 569. We think that, under the cases just cited, the only court which initially could establish the extent of Aetna's claim against the insolvent estate is the Probate Court. The cases indicate that enforcement of the estate's claims to assets in the hands of others must be made by the executor itself, or, perhaps by proceedings brought in the executor's name pursuant to appropriate order of the Probate Court. See Putney v. Fletcher, 148 Mass. 247, 248--249, 19 N.E. 370; Flynn v. Flynn, 183 Mass. 365, 366--367, 67 N.E. 314; Dunbar v. Kelly, 189 Mass. 390, 391--393, 75 N.E. 740; Millen v. Kavanaugh, 268 Mass. 73, 75, 167 N.E. 291. ⁵

2. Under the decisions, a creditor of an insolvent estate is not without remedy. If an executor does not perform his duty to protect the estate's creditors by attempting to collect all assets as to 'which there is reasonable ground to believe' a conveyance 'was fraudulent' or as to which there is other reasonable claim on the part of the estate, 'creditors have a right to insist that an * * * (executor) shall try the question; and if he refuses to do so after an offer of proper indemnity, he should be removed and another appointed * * *.' Putney v. Fletcher, 148 Mass. 247, 248, 19 N.E. 370 ('It is among the ordinary duties of an * * * (executor) to collect all the personal property of his' testator). See McCarthy v. Griffin, 299 Mass. 309, 311--312, 12 N.E.2d 836 (insurance policy).

3. The bank as executor, so far as this record shows, has made no effort whatsoever to bring any assets, held by itself as trustee under the 1964 insurance trust, into the insolvent estate to pay Aetna's claim. The record does not reveal whether this is because the bank's duty to attempt reasonably to collect all assets of the testator's estate is in conflict with some feeling of duty to protect the assets of the 1964 insurance trust for the testator's wife and issue. Indeed, instead of attempting diligently to reach and apply to Aetna's claim the 1964 insurance trust assets by a suit like the present one, which we assume that the bank as executor could have maintained in the Superior Court, it has...