Hill v. Wiley

• Decision Date: 25 September 1936
• Citation: 3 N.E.2d 1015,295 Mass. 396
• Parties: HILL et al. v. WILEY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

295 Mass. 396

3 N.E.2d 1015

HILL et al. v. WILEY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

September 25, 1936

Suit in equity by Donald M. Hill and others as trustees against Henry C. Wiley, and the American Surety Company. From a decree overruling a demurrer to plaintiff's petition, the American Surety Company appeals, and from a final decree plaintiffs and the American Surety Company appeal.

Decree affirmed.

Appeal from Probate Court, Suffolk County Dolan, Judge.

E. A Neiley, D. M. Hill, D. M. Hill, Jr., and S. H. Babcock, all of Boston, for petitioners.

H LeB. Sampson, E. A. Howe, and A. J. Rockwell, all of Boston, for respondents American Surety Co.

DONAHUE, Justice.

The respondent Wiley had been one of the trustees under the will of William H. Hill. He had also been a trustee under the will of Daniel Chamberlin. As trustee under the Chamberlin will Wiley gave a probate bond in the penal sum of $50,000 on which the respondent American Surety Company on New York was surety. The petitioners are the present trustees under the will of William H. Hill.

The petition which was brought in the probate court alleged among other things that the respondent Wiley, having earlier misappropriated funds of the Chamberlin trust, then misappropriated securities of the Hill trust, placed them or their proceeds in the Chamberlin trust and delivered the same in distribution of that trust to the beneficiaries thereunder; that a decree has been entered in the probate court on a final account filed by the trustees of the Hill estate charging Wiley with defalcations in an amount stated; that a decree has been entered in the probate court on the final account of Wiley as trustee under the Chamberlin trust charging him with the additional sum of $6,092.50 on account of an excessive credit in that amount, taken by Wiley in the account filed, in stating the value of certain bonds delivered to the beneficiaries in distribution; that the decree allowed the account as thus modified and further provided that the beneficiaries having accepted and received from the respondent surety company the sum of $3,500 in full accord and satisfaction of all their rights against the surety in respect to the delivery to them of said bonds, the beneficiaries now have no right to receive from said surety company anything on account of said bonds. The petition further alleged that Wiley, by reason of his misappropriation of funds of the Chamberlin trust, became indebted to the beneficiaries thereunder, and that since he used securities of the Hill trust to make good his defalcations from the Chamberlin trust the petitioners as trustees of the Hill trust should in equity be subrogated to the rights of the beneficiaries of the Chamberlin trust against the respondent Wiley and against the respondent surety company. The petition contained prayers that the petitioners be subrogated to the rights of the Chamberlin beneficiaries against the respondent surety company under its bond; that the surety company be ordered to pay to the petitioners the amount of its obligation under the bond which was discharged by misappropriation of the funds of the Hill trust and that the surety company be ordered to pay to the petitioners under the terms of the bond $50,000 the principal sum thereof; and for such further order as the court deemed proper.

The petition was taken as confessed against the respondent Wiley. A demurrer of the respondent surety company, on the ground that the allegations in the petition were insufficient to enable the petitioners to maintain the petition, was overruled. The probate judge who heard the petition on the merits filed a report of facts and entered a final decree which ordered the respondent Wiley and the respondent surety company jointly and severally to pay to the petitioners the sum of $41,849.42 without costs. The respondent surety company has appealed from the decree overruling the demurrer and from the final decree. The petitioners also have appealed from the final decree but solely on the ground that the decree did not allow interest from April 6, 1933, the date of filing of the petition. All the evidence has been reported.

The findings of the trial judge with respect to the defalcations of Wiley are here briefly summarized. Prior to April 29, 1929, the term of the Chamberlin trust had ended and distribution of the principal of the fund was in order. The Hill trust was on that date still in the course of administration. Prior to April 29, 1929, Wiley had embezzled assets of the Chamberlin trust to an amount in excess of $90,000. On that day Wiley distributed to the beneficiaries of the Chamberlin trust negotiable bonds of the market value of $67,397.50. These bonds were the property of the Hill trust which Wiley misappropriated to make good in part his prior defalcations from the Chamberlin trust. At various times between August 26, 1929, and February 6, 1930, Wiley also misappropriated other negotiable bonds belonging to the Hill trust, sold them for $13,592, and applied their proceeds to restoring in part his previous defalcations from the Chamberlin trust.‘ Thus assets of the Hill Trust of the total market value of $80,989.50 were stolen by Wiley from the Hill trust and applied by him to make up in part his previous embezzlements from the Chamberlin Trust.’

The respondent surety company contends that the evidence did not warrant the findings of the trial judge that prior to the distribution to the beneficiaries of the Chamberlin trust Wiley had embezzled assets of that trust to a substantial amount and made good the embezzlement with securities of the Hill trust. The finding was warranted that Wiley used in making distribution to the Chamberlin beneficiaries negotiable bonds which the trustees of the Hill trust had bought and paid for and held. The books of the Hill trust at the time of the distribution showed those bonds to be the assets of that trust. They were taken from the safe deposit box where its securities were kept, without the consent or the knowledge of the two other trustees and without any consideration being given to the trust. Wiley was later charged on the adjudication of the accounts of the Hill trustees in the probate court with defalcations in an amount of over $150,000 which included the value of the bonds here in question. On all the evidence the judge was warranted in finding that Wiley stole the bonds in question from the Hill trust. The time came in the early months of the year 1929 when Wiley, who since January of that year had been the sole surviving trustee of the Chamberlin trust, must make distribution to the beneficiaries. There was evidence on which it could have been found that the bonds which he had stolen from the Hill trust constituted a substantial part of the assets which he distributed to the Chamberlin beneficiaries. The respondent surety company suggests that there might have been no shortage in the assets of the Chamberlin trust but that securities of that trust might, in some way, at some time, have been properly exchanged for the Hill trust's bonds. It also suggests that if there were such a shortage it might have been caused by acts of the deceased cotrustees of the Chamberlin trust. We find nothing in the record which makes either of these assumptions likely. The question whether, prior to the time of distribution to the Chamberlin beneficiaries in 1929, Wiley had already made substantial thefts from the Chamberlin trust was one of fact. We think the judge was warranted on the evidence in finding that the thief who stole the Hill bonds did so because there was a then existing deficiency in the assets of the Chamberlin trust caused by his embezzlement and the time had arrived when he must account to the beneficiaries of the Chamberlin trust.

It is established law in this commonwealth ‘ that where a trustee of several estates steals money from one, with which to pay the debts of another, the latter, having been unjustly enriched at the expense of the former, may be required in equity to make restitution.’ Bremer v. Williams, 210 Mass. 256, 257, 96 N.E. 687, 688; Newell v. Hadley, 206 Mass. 335, 92 N.E. 507,29 L.R.A.(N.S.) 908; Fitcher v. Griffiths, 216 Mass. 174, 103 N.E. 471; Ricker v. Ricker, 248 Mass. 549, 143 N.E. 539.

Property of the trustees of the Hill estate was stolen by Wiley to satisfy his obligations as trustee to the beneficiaries of the Chamberlin estate. Those beneficiaries were in a position analogous to that of creditors of the Chamberlin estate. The obligations of Wiley to them were fixed by the terms of his bond. The other respondent was surety for his performance of those obligations. The present trustees of the Hill estate here seek to be subrogated to rights which, they contend, the beneficiaries of the Chamberlin trust had against Wiley and the surety on his bond. The petitioners assert and the respondent surety company denies that a liability on the bond arose at the time when Wiley embezzled funds of the Chamberlin estate, and that consequently an obligation of Wiley and his surety to the beneficiaries of the Chamberlin trust existed when the stolen property of the Hill trust was used in making distribution to the Chamberlin beneficiaries.

The second condition of the bond which the respondents gave expressed the most vital obligations of the relationship of Wiley to the beneficiaries of the Chamberlin trust: Fidelity and honesty. It required that he ‘ manage and dispose of all such estate, and faithfully discharge his trust in relation thereto, according to law and to the will of said testator.’ Wiley broke that particular condition of the bond at the moment he embezzled the assets of the Chamberlin trust. McKim v. Glover, 161 Mass. 418,...