Reiley v. Healey

• Decision Date: 09 October 1936
• Citation: 122 Conn. 64,187 A. 661
• Court: Connecticut Supreme Court
• Parties: REILEY et al. v. HEALEY.

187 A. 661

122 Conn. 64

REILEY et al. v. HEALEY.

Supreme Court of Errors of Connecticut.

October 9, 1936

Appeal from Superior Court, New Haven County; Patrick B O'Sullivan, Judge.

Proceeding by Bessie A. Reiley, administratrix of the estate of Edward B. Reiley, and another against Patrick Healey, administrator de bonis non of the estate of Edward B. Reiley, wherein an appeal was taken to the superior court from a decree of the probate court disallowing the final account of the named plaintiff, which was tried to the court, the court adjudging as an interlocutory judgment that the named plaintiff file an amended account. From a judgment allowing the amended account, all parties appeal.

Error and a new trial ordered.

John H. Cassiey, of Waterbury, for appellant American Surety Co. of New York.

Clayton L. Klein and John F. McLinden, both of Waterbury, for appellant Bessie A. Reiley.

Nathaniel R. Bronson, of Waterbury, for the appellant Patrick Healey.

Argued before MALTBIE, C.J., and HINMAN, BANKS, AVERY, and BROWN, JJ.

MALTBIE, Chief Justice.

The questions presented by the appeals in this case arise out of the proceedings for the settlement of the estate of Edward B. Reiley, who died intestate August 6, 1929, leaving his wife and a minor son. On August 16, 1929, his wife was appointed administratrix of his estate, qualified by furnishing a bond, upon which an attorney in Waterbury became surety, and proceeded with the settlement of the estate. On December 18, 1930, the attorney was relieved as surety and a new bond given wherein the American Surety Company became surety" . The Waterbury Trust Company filed a claim against the estate which was disallowed; the company instituted an action to recover the claim and on June 18, 1932, recovered judgment for $22,672.50. Meanwhile it had made application to the court of probate to remove the administratrix or require her to furnish an additional bond, and on April 3, 1933, the court of probate ordered an additional bond to be filed. The administratrix failed to do this, and on July 29, 1933, she was removed as administratrix, and Patrick Healey was appointed and qualified as administrator d. b. n. On June 30, 1934, the administratrix filed a final account and at a hearing held on August 8, 1934, the Court of Probate disallowed it. An appeal was taken from that decree by the administratrix and by the American Surety Company to_the superior court. There the surety company filed what purported to be an account of the administratrix and prayed the superior court, sitting as a probate court, to allow it and render judgment accordingly. Subsequent proceedings in that court were based upon this account. Judgment was entered confirming the action of the court of probate in disallowing the account filed with it, and stating a final account of the administratrix which was adjudged to be correct. From that judgment the administratrix, the surety company, and the administrator d. b. n. have appealed, the first two from a disallowance of certain credits claimed by the administratrix, and the last from the allowance of certain credits to her.

All the items in dispute except two grow out of transactions of the administratrix with the Citizens-Manufacturers National Bank. At his death the decedent was indebted to it to the amount of $49,165 and it held collateral to secure that debt of an " appraised value," which we take to mean, as appraised in the inventory of the estate, of $69,559.50. Just before his death he had ordered, through it, 198 shares of stock of the Sterling Securities Company, worth at his death $4,752; on October 8, 1929, the administratrix turned this stock over to the bank; and it sold it for $5,733.60 and applied this sum to reduce the debt. Then came the stock market crash and the value of the collateral held by the bank fell rapidly. In the beginning of 1930 it made frequent calls upon the administratrix for more collateral, threatening that unless it was furnished or the debt reduced it would sell the securities in its hands and apply the proceeds to the debt. The administratrix called at the bank several times, urging it not to sell them, but did not furnish any additional collateral. On April 11, 1930, the bank sold certain shares of the stock it held and reduced the debt by the amount realized. Thereafter at various times before October 1, 1930, the administratrix turned over to the bank shares of stock belonging to the estate, as additional collateral. The bank continued to make further demands upon her, with the result that on December 19, 1930, she assigned to it five savings bank accounts which were a part of the estate, amounting in all to $12,813.10. As the administratrix, in response to its continued demands, neither furnished further collateral nor made any payments on the debt, the bank at several times on or before August 1, 1931, withdrew the amounts in the accounts except one in the Merchants Trust Company and applied the money upon the indebtedness.

On October 3, 1931, the bank made a strongly-worded written demand upon the administratrix either to furnish more collateral to the amount of $5,000 or reduce the debt, threatening to liquidate the indebtedness by the sale of the collateral unless she did so on or before October 5, 1931. As a result, on October 6, 1931, she paid to the bank, to be applied on the debt. $2,500 of her own funds. This left as the amount of the debt, $22,609.79. Until July 6, 1932, the administratrix continued to pay to the bank interest upon the indebtedness, the payments until and including October 1, 1930, amounting to $3,201.82, and those thereafter made, to $3,232.92. When the administratrix was removed, the bank held as collateral securities of an " appraised value" of $66,145.80, including the stock turned over to it by the administratrix, except the Sterling Securities stock which it had sold, and also the assignment of the savings bank account in the Merchants Trust Company, which amounted to $3,245.23. The Merchants Trust Company went into receivership and after the removal of the administratrix the bank, through Home Loan bonds which it took in lieu of the deposit and sold, realized $2,200, which it applied on the debt. While the proceedings were pending in the superior court, the bank sold several items of the stock held by it, liquidating the debt, and delivered to the administrator d. b. n. the rest of the collateral, which included most or all of the securities furnished it by the administratrix.

The trial court has found that the administratrix acted at all times in good faith, for what she thought were the best interests of the estate; but that she was inexperienced in business, consulted no one who was experienced and made no application to the court of probate for advice or approval of her acts; that she relied solely upon her own judgment and that of a woman who had been stenographer in her husband's office, to whom she left both the bookkeeping and actual management of the estate; that in furnishing the additional collateral to the bank and continuing to pay interest after October 1, 1930, she seriously jeopardized the interests of the general creditors and in fact gave preference to the bank; that after October 1, 1930, a reasonably prudent investor would have requested the bank to sell the collateral it held and apply the proceeds upon the debt; and that the reasonable period for the final liquidation of the estate did not extend beyond a period of fourteen months, although the estate could not be settled within the time because of the pendency of the action brought by the Waterbury Trust Company upon its claim.

While the reasons of appeal raise other questions, the only claimed errors of the trial court as far as concerns the dealings of the administratrix, with the bank which are pressed upon the brief, are in regard to these items: The trial court allowed the administratrix credit for the amount realized by the bank upon the sale of the Sterling Securities Company stock; it did not allow her credit for the savings bank accounts which were assigned to the bank as collateral after October 1, 1930, nor for the payment made from her personal funds after that date; it allowed her credit for the interest payments made to the bank before that date; but it did not allow credit for those thereafter made.

As the trial court pointed out, the administratrix could not finally settle the estate as long as the action by the Waterbury Trust Company upon its claim was pending; but that did not prevent her at an earlier date from taking steps to have liquidated the indebtedness to the Citizens-Manufacturers National Bank or from refusing to deliver to it further collateral or pay interest on the debt, thus leaving the bank to realize upon the securities it held. The administratrix was a fiduciary for creditors as well as heirs of the estate. Hewitt v. Sanborn, 103 Conn. 352, 378, 130 A. 472. In her dealings with the estate she was bound to exercise that care and prudence which an ordinarily prudent person would who was entrusted with the management of like property for another. Beardsley v. Bridgeport Protestant Orphan Asylum, 76 Conn. 560, 564, 57 A. 165; New Haven Trust Co. v. Doherty, 75 Conn. 555, 559, 54 A. 209, 96 Am.St.Rep. 239. The securities held by the bank belonged to the estate, but were subject to the right of the bank to hold and use them to secure payment of the debt. Mathews v Sheehan, 76 Conn. 654, 660, 57 A. 694, 100 Am. St. Rep. 1017. Those securities apparently had at the time the stock of the Sterling Securities Company was delivered to the bank, a value considerably in excess of the amount of the debt. The delivery of the Sterling Securities stock was apparently made in order that the...