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Lucas Circuit Court.
6. Rights of Cestui que Trust Considered Primarily.
An executor, or administrator under the circumstances stated, holds the property and asserts the rights in autre aroit and courts should consider primarily the rights of the cestui que trust, though the rule might be otherwise if the executor or administrator were endeavoring to recover back in his own personal right.
7 EXECUTOR PROPER PARTY TO BRING ACTION TO RECOVER BACK.
An executor in his official capacity is the proper party to bring an action for the recovery of certain funds belonging to his estate in the hands of a third person.
8. CLAIM Barred in SIX YEARS-ACTION ACCRUES.
A claim based upon the payment of money by mistake, or the wrongful appropriation and withholding of the money of another, is barred in six years after the cause of action accrued, and in the absence of concealed fraud the claim would accrue so that the money would of right be demandable immediately upon its being wrongfully obtained and withheld.
9. STATUTE of LIMITATIONS RUNS AGAINST CONSTRUCTIVE TRUSTS.
Constructive trusts are subject to the statute of limitations and do not come within the excepted class of Sec. 4974, Rev. Stat., exempting "continuing and subsisting trusts" from the operation of the chapter relating to time of commencing actions.
10. STATUTE RUNS AGAINST LEGatees in OHIO.
In Ohio, if the cestui que trust has knowledge of the transaction, and was under no disability, and his right to demand and have the funds has accrued, the statute will run against his claim. Legacies in the hands of executors, who have no duty with respect thereto except to pay the same, are not of the nature of continuing and subsisting trusts, and the statute runs in favor of the executor and against the legatee from the time the legacy becomes due and payable.
11. RULE THAT CESTUI Que Trust and TRUSTEE BOTH BOUND-INAPPLICABLE. The rule that where the trustee is bound by the statute of limitations, the cestui que trust is also bound, is not applicable in cases where, if there were no trustee intervening, the statute would not operate against the cestur que trust, as, for instance, where the cestui que trust is a minor, or otherwise disabled from suing on his own account, or where the claim is not due so as to give him a right of action on his own account, or where the right of the cestui que trust is that of remainderman, and the life estate has not ended.
12. AGREEMENT POSTPONING TIME WHEN ACTION ACCRUES.
Where the devisees and legatees under a will, devising a life estate to the husband of testatrix, with remainder in her sous after payment of certain legacies, mutually agree that the legatees shall not be paid until after the death of the father, and in accordance therewith the receipt and enjoyment of the legacies are postponed until the father's death, such postponement of the time of payment has the effect, as to all parties concerned, of postponing the beginning of the running of time under the statute of limitations until the father's death, and it is not material whether or not the agreement was based on a correct construction of the will. Therefore an action to recover money unlawfully withheld from the estate for the payment of such legacies by a party to the agreement in question cannot be defeated by a plea in bar of the statute if brought within six years of the death of the father.
13. SAME-RIGHTS KEPT ALIVE AND FOLLOWING TRUST FUND.
The right arising out of the implied promise of defendant to contribute to the payment of legacies is not barred because no action ripened thereon until after the death of his father. Therefore, if this promise is enforced by the executor on behalf of the legatees, all their rights in equity follow the trust fund and are kept alive, as concomitant or incidents of the transaction and promise.
HEARD ON ERROR.
A. W. Eckert and C. W. Everett, for plaintiff in error, cited:
Ward v. Ward.
Courts of equity do not impute laches as a rule: circumstances gov
Bank v. McIntyre, 40 O. S., 528; Treasurer v. Martin, 50 O. S., 197; [33 N. E. Rep., 1112]; Angell and Ames on Lim., Sec. 262-3, and notes; High on Inj., Sec. 87; 2 Pomeroy, Eq., Sec. 802, et seq.; 2 Beach on T., Sec. 671, et seq.; 2 Story's Eq., Sec. 1521; 13 Enc. Law, 674, sub. 2, note 5; 19 Fed. Rep., 609; 13 Enc. Law, p. 719n.; Clark v. Potter, 32 O. S., 49; Berry v. Love, 107 [11., 612, 618, 619; Sugg v. Thresher, 30 Miss., 135, 142, 143, 144; Turner Mfg. Co. v. Stamping Co., 113 U. S., 319, 321 [4 S. Ct. Rep., 401]; Gunton v. Carroll, 101 U. S., 426, 428, 429; Dickerman v. Burgess, 20 Ill., 266, 276, 277, 278; Glenn's Admr. v. Bebbs, 17 Ind., 260, 281, 282; Johnson v. Trask, 22 N. E. Rep., 377 [116 N. Y., 136]; Stokes v. Turnpike Co., 6 Humph. (Tenn.), 241; Lyon v. Lyon, 8 Ind. (N. C.); Bollingre v. Choteau, 20 Mo., 89; Ayletts, Exr. v. King, 11 Leigh. (Va.); Obert v. Obert, 12 N. Y., Eq., 423; Morse v. Ryall, 12 Enc. Law, 540-1-4; Nudd v. Powers, 136 Mass., 273; Daggers v. Van Dyck, 37 N. J. Eq., 130; Platt v. Platt, 58 N. Y., 646; Wissler v. Craig, 80 U. S., 22; Cramer v. McSwords, 24 W. Va., 594, 601; Stahl v. Van Vleck, 53 O. S., 136, 150 [41 N. E. Rep., 35].
Trusts-Abuse of-Party can acquire no rights by: Sec. 4974, Rev. Stat.; Ib., 1080 (Limitations); 1 Beach on Trusts, Sec. 230; Newton v. Taylor, 32 O. S., 399, 407, 408, 413, 415; Hubbard v. Burritt, 41 Wis., 365; Barrett v. Bamber, 81 Pa. St., 247; Newton v. Porter, 69 N. Y., 133, 138, 140; Burks v. Burks, 7 Barb., 353; Taylor v. Mosely, 37 Miss., 544, Swinburne v. Swinburne, 29 N. Y., 569; Oliver v. Pratt, 44 U. S. (3 How.), 333, 400; McLeod v. Bank, 42 Miss., 99; Jones v. Haddock, 41 Ala., 262; Iver v. Williams, 38 Miss., 546; Smith v. Walter, 49 Mo., 250; Denn v. McKnight, 6 Holst., 385; Wigg v. Wigg, 1 Ark., 382; Wright v. Doan, 22 Pick., 55; Ryan v. Doyle, 31 Iowa, 53; Sec. 4974, Rev. Stat.; Paschall v. Hinderer, 28 O. S., 568, 569; Douglass v. Corey, 46 O. S., 349 [21 N. E. Rep., 440; 15 Am. St. Rep., 604]; Webster v. Bible Society, 50 O. S., 1 [33 N. E. Rep., 297]; Laver v. Fillder, 9 Jur. N. S., 190; 2 Story's Eq., N. S., 190; 2 Pomeroy Eq. Jur., Sec. 838, et seq.
Mistake of law-Equity will correct: 15 Enc. Law, 642n.; Harrell v. De Normandie, 26 Tex., 120; Fariknicht v. Myer, 8 N. Y., L. J., 167; Champion v. Layton, 6 Paige (N. Y.), 189; Mead v. Johnston. 3 Conn., 592; Lowndes v. Chisholm, 2 McCordch (S. C.), 16 Am. Dec., 667; Lawrence v. Beaubren, 2 Baily (S. C.), 23 Am. Dec., 155; Hopkins v. Mazyuk, 1 Hill (S. C.), Eq., 242, 250; Fitzgerald v. Peck, 4 Little (Ky.), 127; Cassell v. Thomas, 3 Leigh. (Va.), 113; Bowlin v. Pollock, 7 Mon. (Ky.), 26, 33; Dunn v. Clark, Cooke (Tenn.), 373, 374; Green v. Railway Co., 12 N. J. Eq., 165; Willin v. Willin, 16 Ves., 72; Stopylton v. Scott, 13 Ves., 424; Bryan v. Masterman, 4 J. J. Marsh, 225; 15 Enc. Law, 642, par. 2; State v. Paup, 13 Ark., 129 [56 Am. Dec., 303]; Koonegay v. Everett, 99 N. C., 30 [5 S. E. Rep., 418]; Gurn v. Railway Co., 12 N. Y. Eq., 165; Champlin v. Leyton, 1 Edw. (N. Y.), Ch., 467; Griffith v. Sebastian, 49 Ark., 24 [3 S. W. Rep., 886]; 15 Enc. Law, 643, n. 2; Larkins v. Biddle, 21 Ala., 252; Copton v. Martin, 11 Ala., 137; Stine v. Hall, 17 Ala., 557; Wyche v. Grant, 16 Ga., 49; Burson v. Markoe, 37 Minn., 30; Green v. Railway Co., 12 N. Y. Eq., 165; McMillan v. Railway Co., 29 N. J., 610; Wintemuite v. Snyder, 3 N. J. Eq., 489. 500; Kennard v. George, 44 N. H., 440; Huyler v. Atwood, 11 C. E. Green (N. J.), 504; Sisson v. Donnelly, 36 N. J. L., 432;
Lucas Circuit Court.
McKay v. Simpson, 6 Ired. (N. C.), 452; Sted well v. Anderson, 21 Conn., 139; Petisch v. Hambach, 48 Wis., 443; German Am. Ins. Co. v. Davis, 131 Mass., 316; O'Donnell v. Harmon, 3 Doty, 424; Spinks v. Pittman, 51 Miss., 511; Evants v. Strode, 11 Ohio, 480; [38 Am. Dec., 744] Clayton v. Freet, 11 O. S., 440 [38 Am. Dec., 744]; Clayton v. Bussey, 30 Ga., 946 [76 Am. Dec., 680]; Underwood v. Brockman, 4 Dana (Ky.), 309 [29 Am. Dec., 407]; Freeknicht v. Meyer, 8 N. Y., 167; Clifton v. Cockburn, 21 Cent. L. J., 4; 3 M. & K., 76; State v. Fogers, 5 De. G. & M., 76; Rogers v. Ingham, 3 Ch. Div., 351; Stedwell v. Anderson, 21 Conn., 439; Farrell v. Fitch, 5 Whart. (Pa.), 325; Jenkins v. Green, 24 Kan., 493; 23 Am. Law J., 146.
Recovery back: 15 Enc. Law, 679, n. 1; Davis v. Krum, 12 Mo. App.. 279; Grimes v. Blake, 16 Ind., 160; Goodspeed v. Fuller, 46 Me., 141 [710 Am. Dec., 572]; Glenn v. Shannon, 12 S. Car., 570; Newell v. Smith, 53 Conn., 72 [3 Atl., 674]; Wolf v. Beard, 123 Ill., 585 [5 N. E. Rep., 161]; Wolf v. Beard, 71 Iowa, 389 [32 N. W. Rep., 389]; Wheaton v. Olds, 20 Wend., 174; Van Santen v. Standard Oil Co., 17 Hun, 140; Lane v. Boone Co., 62 Mich., 63 [28 N. W. Rep., 786]; Buffalo v. O'Malley, 61 Wis., 255 [50 Am. Rep., 137]; Billingsten v. Ware, 32 Ala., 415; Gimbel v. Baldridge. 2 Swan (Tenn.), 295; Mauzy v. Hardy, 13 N. W. Rep., 12 [13 Neb., 36]; Rogers v. Weaver, 5 Ohio, 536.
Ray & Cordell, for defendant in error.
The court below sustained a general demurrer to the third amended petition, and the plaintiff not desiring to amend, judgment was entered dismissing the petition, and to this plaintiff prosecutes error here. The petition is somewhat lengthy, but the parts we deem material can be epitomized.
Plaintiff avers that his mother, Mary Ward, died testate in 1879, seized of a certain farm of one hundred acres in this county, and certain live stock, growing crops and other property thereon. Also $1,300, deposited in a bank, to which was added shortly after her death $1,080, being the proceeds of said crops growing on the farm at the time of her death.
That by her last will she devised the farm and all property thereon to her husband, John Ward, for his lifetime, with remainder in fee to the plaintiff and his brother George, the defendant. That by her will she authorized the consumption by her husband of so much of said property as might be needful for his comfort and support, provided for the payment to other children named in the petition of bequests of money, and nominated plaintiff as executor of her will.
Plaintiff avers that because of a course of dealing on the part of his mother, his brother George and himself, extending over a series of years prior to her death, whereby he and George farmed the place and were allowed as their compensation to share all the proceeds after all expenses, including the support of the family, had been paid, he and George, in good faith, believed that this money in bank belonged to them, and that the farm and other property was to be theirs on the death of their father, subject to the burden and charge of the bequests which they believed they were bound to pay, contributing thereto equally.
Ward v. Ward.
That plaintiff and defendant therefore divided what remained of said money after the payment of certain charges and expenses, and on said division George received $1,500, most of which he invested in certain lands, described in the petition, still owned by him.
It is also averred that it was the understanding of John and George and all the legatees and heirs, that nothing was to be paid on said legacies until after the death of the father, and that all relied and acted upon this understanding. The father occupied the farm and consumed a large part of the personal estate up to the time of his death, which occurred in June, 1897. Plaintiff did not pay and was not called upon to pay anything to any heir or legatee during his father's lifetime, and neither plaintiff nor defendant supposed that the money before mentioned belonged to the estate and must be accounted for by John, as executor, until after the death of the father, when, for the first time, on the application of the heirs and legatees, plaintiff, as executor, was required by the courts of this county to file an inventory of the property which came into his hands as executor, and to include said money therein. He avers that to discharge said legacies will require about $4,800, and that the whole burden and loss will fall upon him unless the defendant shall restore the share of said money which he received as aforesaid; but that George refuses to pay anything; and he prays for such judgments, decrees and orders in the premises as may afford him the relief to which he may be entitled, and specifically that the lands bought with said trust funds may be subjected to sale for the satisfaction of this demand.
In support of the demurrer various objections to the petition are urged, but the only one that we deem worthy of much consideration is that based upon the contention that the claim is barred by the statute of limitations. We understand that the judgment of the court of common pleas was based upon this.
That the receiving and withholding of this money by George gave rise to a constructive trust in favor of the heirs and legatees, and that all property into which the funds can be traced is held by one not an innocent purchase for value subject to the same trust, we think is true beyond doubt.
The authorities in support of this are numerous, clear and harmonious. We content ourselves with brief quotations from Pomeroy Eq. Jur. :
"Section 1047. By a well settled doctrine of equity a constructive trust arises whenever one party has obtained that which does not equitably belong to him, and which he cannot in good conscience retain from another who is beneficially entitled to it; as for instance, where money has been paid by accident, mistake of fact, or has been acquired through a breach of trust, or violation of fiduciary duty and the like.
"Section 1048. Whenever property, real or personal, which is already impressed with or subject to a trust of any kind express or by operation of law, is conveyed or transformed by a trustee not in the course of executing and carrying into effect the terms of an express trust or devolves from a trustee, to a third person who is a mere volunteer, or to a purchaser with actual or constructive notice of the trust, then the rule is universal that such heir, devisee, successor or other voluntary transferee or such purchaser with notice, acquired and hold the property subject to the same trust which before existed, and becomes himself a trustee for the original beneficiary."
Lucas Circuit Court.
"It is not necessary that such transferee or purchaser be guilty of positive fraud or should actually intend a violation of a trust obligation; it is sufficient that he acquires property upon which a trust is imposed and that he is not a bona fide purchaser without notice.
"This universal rule forms the protection and safeguard of the right of the beneficiaries in all kinds of trusts. It enables them to follow trust property lands, chattels, funds, or securities, and even money, as long as it can be identified in the hands of all subsequent holders, who are not in the position of bona fide purchasers without notice. It furnishes all those constructively equitable remedies which are so much more effective in securing the beneficiary's rights, than the mere pecuniary recoveries at law."
This money was a trust fund in the hands of the plaintiff as executor, and defendant, having knowledge of its origin, and receiving it under the circumstances related, was not in the position of an innocent purchaser for value; so that at any time within six years from the date of its receipt, he might have been required to return it to its proper custodian for the estate, unless some special grounds of defense existed cutting off the right of the true owner or custodian.
It is urged that this special ground did exist, and is disclosed in the petition where it is alleged therein that the money was divided and appropriated in consequence of a mistake on the part of both John and George, as to its ownership; that this amounted to a mistake of law, and that money thus obtained under a mistake of law cannot be recovered back, and in support of this contention we are cited to Phillips, Exr., McConica, Guardian, 59 Ohio St., 1 [51 N. E. Rep., 445; 69 A. S. Rep., 753]. The rule that money paid under mistake of law cannot be recovered back often operates harshly and inequitably, and is regarded with so much disfavor by the courts that it will not be extended beyond the limit heretofore defined for the scope of its operation. The tendency of the courts is to treat mistakes as to legal rights as mistakes of fact, or mistakes of mixed fact and law, wherever it is possible to do so without disturbing well-settled precedents.
The case cited was an action at law, where the court seems to have felt obliged to apply the strict rule of law. This is a suit in equity wherein it is sought to correct the mistake of the parties. There a claim against an estate for a distributive share seems to have been asserted and recognized. Here no claim was asserted against the estate or against John Ward as executor. It does not appear that either party recognized John's action as taken in his capacity as executor or trustee ; but they went about the division and distribution of these funds as individuals under a mistaken view that it was their money, just as they might have each taken a horse belonging to the estate under the supposition that they owned them, without at any moment being consciously in the attitude of adverse claimants. We do not think that under such circumstances the rule of "mistake of law" is to be so applied by a court of equity as to prevent the doing of justice between the parties to the transaction, and especially not so as to prevent the recovery of the property by or on behalf of the real owners thereof who were not parties to the transaction. John Ward did not pretend to act as executor, and therefore as representative of the heirs and legatees in the premises, and George did not understand that he was dealing with John in such capacity, according to the averments of the petition, fairly construed.