Fidelity & Deposit Co. of Maryland v. Phillips

• Court: Pennsylvania Supreme Court
• Writing for the Court: MR. JUSTICE ELKIN:
• Citation: Fidelity & Deposit Co. of Maryland v. Phillips, 84 A. 432, 235 Pa. 469 (Pa. 1912)
• Decision Date: 18 March 1912
• Docket Number: 203
• Parties: Fidelity and Deposit Co. of Maryland v. Phillips, Appellant

84 A. 432

235 Pa. 469

Fidelity and Deposit Co. of Maryland v. Phillips, Appellant

No. 203

Supreme Court of Pennsylvania

March 18, 1912

Argued February 8, 1912

Appeal No. 203, Jan. T., 1911, by defendant from decree of C.P Chester Co., No. 512, in equity, in case of Fidelity &amp Deposit Company of Maryland v. Lewis Phillips and Sarah C Massey and Joseph W. Hawley, Executors of Isaac Massey, deceased. Affirmed.

Bill in equity for contribution.

HEMPHILL, P.J., found the facts to be as follows:

This is a bill to compel pro rata contribution by the defendants, who, the plaintiff alleges, were co-sureties with it for a defaulting trustee and whose default has been paid in full by it alone, under the following facts and circumstances.

On August 12, 1889, John A. Rupert was appointed by the orphans' court of this county, trustee of Helen H. Holmes, in place of Samuel Dutton, deceased, who had been the sole surviving trustee of the said Helen H. Holmes under the will of her father, Daniel B. Hinman, deceased; and received from the legal representatives of the said Dutton the trust fund of $12,017.12, first having given bond for the faithful performance of his duties, as trustee in the sum of $24,100 with Isaac Massey and Lewis Phillips as sureties, which bond was joint and not several and was approved by said court. The investments received by Mr. Rupert bore the rate of interest then current here, and for that reason were unsatisfactory to the cestuis que trustent, Mrs. Holmes and her daughter, Juliet C. Johnson (to whom the principal passed upon the death of her mother), who were desirous for an increase of income. Soon after Mr. Rupert's appointment, he was visited by Mr. Holmes, the husband and father of the cestuis que trustent, with the view of having him invest the trust funds in securities bearing a higher rate of interest.

In company with Dr. Isaac Massey, who was a son-in-law of the late Daniel B. Hinman, and brother-in-law of Mr. Holmes, both having married daughters of said Hinman, Mr. Rupert took Mr. Holmes to the office of his counsel, Mr. Hause, where the propriety and desirability of the change was discussed.

Mr. Hause said he would not advise his client to make such investments, unless authorized by the cestuis que trustent so to do, in writing and agreeing to relieve him and his sureties from all losses by reason of such change, save only "for losses happening by gross negligence on the part of said trustee." Such an agreement was subsequently prepared by Mr. Hause and executed by the cestuis que trustent, in the latter part of September, 1889, and returned to Mr. Rupert, who thereupon changed the investments to those bearing a higher rate of interest, mainly Kansas mortgages.

At this meeting Mr. Holmes expressed himself as anxious to have the funds invested in a Massachusetts corporation, called the Weimer Company or the Weimer Investment Company, in which he was interested. But Dr. Massey thought such an investment unwise and suggested that the funds could be invested in western securities, that in his judgment were entirely safe.

Dr. Massey and Mr. Rupert were intimate friends; he was instrumental in securing him as trustee; made investments, in western securities for himself and for his father through him; visited his office "frequently two or three times a week;" knew of the agreement and so upon its receipt from the cestuis que trustent Mr. Rupert called upon him at his home and told him he "could not consent to invest the fund in the Weimer Investment Company bonds," and why -- and that he "proposed to invest moneys in Kansas mortgages, negotiated by the Kansas Investment Company, under the management then of C. N. Beale, of Topeka, Kansas." To this the Dr. neither dissented or approved -- he made no comment at all.

On May 24, 1899, Mr. Rupert filed his first account, which not being excepted to was duly confirmed.

Dr. Isaac Massey died January 31, 1899, and in the latter part of that year Mr. Rupert was requested by counsel to give an additional bond or security, which he complied with by filing on January 29, 1900, a bond of the plaintiff company in the sum of $15,000.

On November 6, 1903, a second account was filed by the trustee, to which exceptions were filed resulting in a surcharge and a finding, that there was due from the trustee to the cestuis que trustent the sum of $12,017.12. Mr. Rupert having become insolvent, the orphans' court on February 26, 1906, upon petition, dismissed him and appointed Benjamin W. Haines trustees in his place.

The new trustee then brought suit upon the bond of the plaintiff company, which resulted on February 17, 1908, in a verdict for the plaintiff for $14,279.89, upon which judgment was duly entered and upon appeal was affirmed by the Supreme Court. (See Com. v. Fidelity & Deposit Co., 224 Pa. 95.)

On April 12, 1909, the defendant company (the plaintiff here) paid the judgment with interest and costs, amounting in all to $15,325.00 and on May 13, 1909, filed this bill for contribution.

There is no evidence that the defendant, Lewis Phillips, who has died since the filing of this bill, ever saw or knew of the existence of the agreement of September, 1889.

The court decreed: "That Sarah C. Massey and Joseph W. Hawley, executors of Isaac Massey, deceased, contribute, reimburse and pay over unto the plaintiff, Fidelity and Deposit Company of Maryland, 24100-39100 of $14,279.89, being the sum of $8,801.67, with interest thereon to be computed from February 18, 1908, amounting (on December 14, 1910, the date of the decree) to the sum of $10,291.56, and that they pay the costs of this proceeding."

Error assigned was the decree of the court.

Decree affirmed.

S. D. Ramsey and E. H. Hall, for appellants. -- The appellants were discharged by the agreement between the cestuis que trustent and the trustee: Bensinger v. Wren, 100 Pa. 500; Nesbit v. Turner, 155 Pa. 429; Bauschard v. Fidelity & Casualty Co., 21 Pa.Super. 370; North American Land Co.'s Estate, 60 Pa. 247; Hibbs v. Rue, 4 Pa. 348; Brez v. Warner, 9 W.N.C. 45; Shackamaxon Bank v. Yard, 150 Pa. 351; Rutter v. Hall, 31 Ill., App. 647.

The surety is a favorite in law and all intentments must be resolved in his favor: Young v. American Bonding Co., 228 Pa. 373; North American Land Co.'s Estate, 60 Pa. 247; Bensinger v. Wren, 100 Pa. 500.

In an action for contribution between sureties, any defense can be made that would have availed against the creditor: Baily's Estate, 156 Pa. 634; Lowndes v. Pinckney, 1 Richardson Eq. (S.C.) 155.

If there are several sureties liable for the same debt, and the creditor releases one of them from liability and does not thereby materially alter the contract, he releases the remaining surety to the extent that such released surety would otherwise have been liable to contribute to his co-surety: Mortland v. Himes, 8 Pa. 265; Schock v. Miller, 10 Pa. 401; Klingensmith v. Klingensmith, 31 Pa. 460.

Wm. A. Glasgow, Jr., with him John H. Hall and Cornwell & Cornwell, for appellee. -- The consenting surety, Dr. Isaac Massey, was not discharged from liability, per se, by the fact that his co-surety, Mr. Lewis Phillips, was discharged: Swanzey v. Parker, 50 Pa. 441; Schock v. Miller, 10 Pa. 401; Cox v. Detwiler, 1 W.N.C. 94; Holt v. Bodey, 18 Pa. 207; Talmage v. Burlingame, 9 Pa. 21; Weist v. Jacoby, 62 Pa. 110.

The right of contribution exists between the two bonds filed in the Orphans' Court: Com. v. Cox, 36 Pa. 442; Com. v. Fidelity & Dep. Co., 224 Pa. 95; Com. v. Transue, 2 North. County 313; Com. v. Risdom, 8 Phila. 23; Newcomer's App., 43 Pa. 43; Com. v. Rogers, 53 Pa. 470; White v. Com., 39 Pa. 167; Bownman v. Kistler, 33 Pa. 106; Busch's Est., 12 Phila. 53.

The loss resulting from the surcharge against the trustee, John A. Rupert, should be apportioned between the two bonds filed by him according to the amounts of the respective penalties named in such bonds: Deering v. Winchelsea, 2 Bos. & Pul. 270; Craythorne v. Swinburne, 14 Ves. Jr. 160; Loring v. Bacon, 57 Mass. 465; Bell v. Jasper, 37 N.C. 597; Jones v. Hays, 38 N.C. 502; Jones v. Blanton, 41 N.C. 115; Moore v. Boudinot, 64 N.C. 190; Moore v. Hanscom, 103 S.W. Repr. (Tex.) 665.

The full share of the surcharge apportionable to the first bond filed by Dr. Massey and Mr. Phillips, should be borne by the surety remaining liable on said bond: Wolf v. Fink, 1 Pa. 435; Burson v. Kincaid, 3 P. & W. 57; Boughton v. Bank of Orleans, 2 Barb. Ch. (N.Y.) 458.

Before FELL. C.J., MESTREZAT, POTTER, ELKIN and MOSCHZISKER, JJ.

OPINION

MR. JUSTICE ELKIN:

In Com. v. Fidelity & Deposit Co., 224 Pa. 95, the judgment entered by the court below against the bonding company appellant there and appellee here, was affirmed. The result of that judgment was to charge the bonding company with the entire default of the trustee, amounting at that time to $14,279.89. The appellee bonding company then brought this suit for contribution against the sureties on a former bond given by the same trustee to insure the faithful discharge of his duties and to secure a proper accounting of the trust funds. Unless the sureties on the former bond were discharged their liability to answer for the default of the trustee to those interested in the trust estate still continues, and it follows as a legal consequence, if there was a separate bond taken as an additional security, and the surety on the additional bond, paid the loss resulting from the default, the surety thus required to make good the default, may proceed against the sureties not discharged for contribution. The fact that there are two or more bonds instead of one, but all conditioned to be answerable for one general purpose, does not affect the primary liability of the...