Smith v. Combs

• Decision Date: 30 April 1892
• Citation: 24 A. 9,49 N.J.E. 420
• Parties: SMITh v. COMBS et al.
• Court: New Jersey Court of Chancery

24 A. 9

49 N.J.E. 420

SMITh

v. COMBS et al.

Court of Chancery of New Jersey.

April 30, 1892.

(Syllabus by the Court.)

Suit by Thomas Smith, administrator, against William S. Combs and others.

S. C. Cowart, for complainant. A. C. Hartshorn, for administrators of Joseph Combs, deceased. F. P. McDermott, for Samuel Combs.

BIRD, V. C. John Reid died in 1861, leaving a last will and testament, in and by which he disposed of his estate, among other things giving to Aaron Combs, a nephew, $1,250, and to Samuel Combs, brother of said Aaron, $1,250, the interest thereof to be paid to him during his natural life, and upon his death the principal to his issue, if he should leave any, but, if not, to his said brother Aaron. He appointed three persons his executors. Two of them died. At this time Joseph Combs was left in possession of the estate. He died in 1876, not yet having administered the entire estate. He had paid the interest due upon the legacy of Samuel Combs every year, and taken receipts therefor. He had paid numerous other legacies provided for in the will, and had taken receipts for the same. He had not paid the legacy given to the said Aaron Combs. I think this is perfectly clear, whatever may be regarded as the proper application of the statute of limitations, or the practice in this court with respect to the rule by way of analogy. As intimated, I think it cannot be doubted but that, at the time of his death, Joseph Combs had in his possession several thousand dollars of the estate of John Reid, deceased. William S. Combs, his administrator, and Lydia M. Combs, his administratrix, obtained the ordinary rule to bar creditors, and in due time had it made absolute. From time to time they made distribution of the assets of his estate among his creditors. In the year 1884 they made application to the orphans' court for the sale of lands for the payment of his debts. The lands were sold. In the next year they took such steps as to have the court declare the estate of Joseph Combs insolvent. In 1889 they filed their final account in the orphans' court. The creditors of the said Joseph Combs were not then all paid. This account showed a balance in their hands at that time of $4,927.70. John Allen filed exceptions to their account. He was a creditor. The complainants took an assignment of his claim, and withdrew the exceptions, so that there is no longer any controversy as to the amount in the hands of the administrators of Joseph Combs, deceased. Sarah G. Parker died March 6, 1884. Thomas Smith and James S. Parker were made administrators of her estate. They claim that they, as such administrators, are entitled to the whole of the amount now in the hands of the administrators of Joseph Combs, deceased. The said Sarah G. Parker was made residuary legatee under the will of the said John Reid, and her administrators claim that all of the said moneys must be considered residue, or at least so much of them as will be required to satisfy the principal and interest of the legacies given to the said Aaron Combs and the said Samuel Combs. On the other hand, the administrator of Joseph Combs insists that the said moneys do not belong to the estate of John Reid, but to the estate of Joseph Combs, and that his creditors are entitled to the whole fund.

Three questions are presented: First, have these funds been identified as trust funds? second, have they, or any part of them, become residue? and, third, who are entitled to them ?

My judgment is that they are trust funds. It is undisputed that Joseph Combs, after he became executor of John Reid, deceased, received large sums of moneys belonging to the estate of his testator.

About that time, and very soon after he received large portions of these moneys, he purchased bank stock, which he held at the time of his death. There can be no reasonable doubt whatever but that this stock was purchased with this trust money. It is in vain that I have searched for any application of a like amount of moneys in discharge of any of the provisions made by the will of John Reid, deceased. He had not the means of his own with which to buy this stock. No one, considering the nature of his private business, and the amount of his real and personal property, as developed in the schedule to the application by his administrators for an order directing them to sell lands, can come to any other conclusion than that his resources were so limited and so much demanded by his own business as to compel the conviction that he did not use his own money to purchase the stock referred to. Therefore, when it is considered that he had these trust moneys, and that there is no evidence that he made any other application of them, and that numerous vouchers are produced showing the proper application of other trust moneys according to the will of John Reid, the mind may safely be at rest on this point.

However, it is nevertheless urged that there are no ear-marks by which the moneys which came to the hands of Joseph Combs, deceased, can be traced and distinguished from any other moneys, and that consequently it is impossible to say the balance now in the hands of his administrators is trust money. If this be the criterion, then it is only necessary for any person acting in a fiduciary capacity to convert all the estate which he has in charge into money, and mingle it with his own, and become insolvent, in order to deprive his cestuis que trustent of their rightful claims, and give his creditors an equal benefit with the cestuis que trustent. I think, in case it can be shown that a trustee has converted portions of his trust estate into money, or has used trust funds for the purpose of purchasing personal property and taking the title thereto in his own name, and again converting that into money, or where it has been converted into money by his administrator, and there is no uncertainty in either event as to the amount, whatever funds or estate may be left in his hands or in the hands of his administrators should be regarded as representing the trust until it is fully satisfied, and this even against creditors, unless it be made manifest that injustice will be done them. Lewin, in his work on Trusts and Trustees, (volume 2, p. 894,) says: "It may be said that the trust money has, like water, run into the general mass, and become amalgamated and therefore the cestui que trust has no lien. But clearly this cannot be maintained, for suppose a trustee, partly with his own money and partly out of the trust fund, to have purchased an estate. It cannot be predicated of any particular part of the estate that it was purchased with the cestui que trust's money, and yet the cestui que trust has a lien upon the whole of the amount that was misemployed. And it follows, in the other case, that, though the identical pieces of coin cannot be ascertained, yet, as there is so much belonging to the trust in the general heap, the cestui que trust is entitled to take so much out. "The same author again says that trust funds will be followed through all the ramifications of the trade or business, or, if deposited in bank with private funds, will be separated from the latter, and given to the beneficiary. Id.; 2 Perry, Trusts, § 1076; National Bank v. Insurance Co., 104 D. S. 54; Bank v. Pollock, 4 Edw. Ch. 215; Third Nat. Bank of St. Paul v. Stillwater Gas Co., (Minn.) 30 N. W. Rep. 440; Wilkins v. Stevens, 1 Younge & C. Ch. 431; Pennell v. Deffell, 4 De Gex, M. & G.372.

On this head one suggestion more deserves attention. It is claimed that there is nothing to show that these trust moneys are invested in real estate which was sold by the administrators, the proceeds of which constituted the funds, or a portion of the funds, at least, now in the hands of the administrator of Joseph Combs for distribution. This ought not to prevail, for the administrators of Joseph Combs since his death, like himself in his lifetime, encouraged the legatees in the belief that he was possessed of the money due to them under the will of the testator. He and they not only paid to Samuel Combs the interest due to him under the will until they made application to the orphans' court, in 1884, for the sale of lands to pay debts, but in the application which they then made for that purpose, as administrators, they distinctly set forth the claim of the said legatees under said will as two of the...