Opinion
15481
December 22, 1942.
Before WM. H. GRIMBALL, J., Charleston County, July, 1942. Affirmed.
Action by the Charleston Library Society and the Trustees of the Endowment Fund of the Charleston Library Society against the Citizens Southern National Bank of South Carolina and the South Carolina National Bank of Charleston, as administrators d. b. n. c. t. a., and as trustees under the last will and testament of Mary Jane Ross, deceased, the Medical Society of South Carolina and the Presbyterian Hospital in Philadelphia, for construction of the will and enforcement of the trust. From a judgment adverse to their respective interests, the Medical Society of South Carolina and the Presbyterian Hospital in Philadelphia appeal.
That part of the circuit decree of Judge Wm. H. Grimball that was adopted as the opinion of the Court and ordered to be reported, follows:
What appears to be the only issue under the pleadings remaining undecided in the case, is whether defendants have established their defense of laches as set forth in Paragraph 14 of their answer. Defendants based their argument on two grounds:
(1) That the delay for over 18 years which elapsed since the probate of the will of itself constituted laches.
(2) That plaintiffs had imputed knowledge through their officers of the pendency of the museum suit.
As evidence of the injury or detriment to the hospitals which they claim to have resulted by reason of the alleged unreasonable delay, defendants rely on the expenditure made by them in the museum suit amounting to $1,360.00.
Questions were raised by plaintiffs that there can be no issue of laches as relied upon by defendants in this case and that defendants are barred by their own actions from charging laches to the plaintiffs. The plaintiffs' contentions on these points are:
First: That the hospitals are not and have not been in the possession of any of the properties involved, all of which are still in the hands of the administrators and trustees under the will and are in the course of administration pending litigation to determine conflicting rights.
Second: Laches cannot be relied on as a defense by one in pari delicto.
It appears to me that there is merit in both positions. The defendant hospitals are not and have not been in possession of any of the properties involved. The properties have been and now are in the hands of the administrators and trustees under the will of Miss Ross. There has never been any settlement of the estate as to these properties. They are still in course of administration pending litigation to determine conflicting rights therein. The library plaintiffs at the times in question had a right to assume, as long as the trust was in course of administration or litigation, that the trustees would follow the law and the terms of the will. They were under no duty to keep watch over the trustees. Only after a settlement or some act of repudiation or abandonment by the trustees of the museum trust, would the library be under a duty to assert its right. Nothing of that nature occurred until the Supreme Court, on April 29th, 1941, terminated the museum trust and the museum was closed. On May 22, 1941, the present suit was commenced. Until the determination of the preceding trust estate there was no duty on the library plaintiffs to act.
"The doctrine of laches applies to the enforcement of an express trust when, and only when, there has been an open and unequivocal breach or repudiation of the trust, assertion of an adverse right, title or interest, or other act of hostility to the trust, by the trustee, which has been so brought home to the actual or constructive knowledge of the cestui que trust as to require him to assert his rights promptly, and, with such knowledge he has inexcusably and unreasonably delayed asserting his rights to the injury or prejudice of Defendant, or, under the circumstances, the lapse of time has been such as to give rise to a presumption of discharge or extinguishment of the trust, or such as to obscure the acts of the parties or the nature and character of the trust, as where there have been deaths of witnesses or loss of papers. * * * Moreover, as the doctrine of laches ordinarily can be invoked only by one in possession against one out of possession, it cannot be interposed as a defense by one whose claim to the property has not been united with the possession; nor can the defense of laches be interposed against one who during the period of delay was under no duty or obligation to act. Subject to the foregoing rules, the applicability of the doctrine of laches to a suit for the enforcement of an express trust depends on the circumstances of each particular case." 65 C.J., Section 955, pp. 1024-1026.
"There has been unusual delay in the assertion of the rights of the plaintiffs. If there had been the slightest effort by the defendant to establish any settlement between Allen Saxton and Wylie Miller, by which settlement all claims by Wylie Miller upon Allen Saxton for his interest in the lands had been settled, a difficulty would have been presented and the staleness might have been relied upon, but such is not true in the case before us. We therefore overrule this exception." Miller v. Saxton, 75 S.C. 237, at page 247, 55 S.E., 310, at page 314. See, also, Lyerly v. Yeadon, 199 S.C. 363, at 382, 19 S.E.2d 648.
"The statute of limitations does not begin to run against the right of an interested party to maintain an action for the construction of a will until distribution of the property disposed of thereby is actually made and mere delay in bringing such action will not bar complainant's right to maintain it on the ground of laches where the property disposed of by the will remains undistributed." 69 C.J. 881, Section 2014 (Wills.)
"If a beneficiary begins his action within a reasonable time after his rights accrue he is not guilty of laches because a long time has elapsed since the death of the testator." Ibid, p. 1293, Section 2702.
In Tincher v. Arnold, 7 Cir., 1906, 147 F., 665, 7 L.R.A. (N.S.), 471, 8 Ann. Cas., 917, the head note reads: "Mere delay will not debar an heir from maintaining a suit to determine the validity of a legacy where such legacy has remained in the hands of trustees in accordance with the terms of the will."
The Court said: "She further submits that no injury has resulted to any of the parties claiming the trust fund by reason of her omission to commence suit earlier, and that the ultimate rights of the parties to the trust fund remain substantially unchanged. Upon the argument the court disposed of the question of laches through the following expression by Judge Baker, in which we all concurred: The legacy is either void or valid. This is to be determined by the will. If valid, the delay is of no consequence; if void, the laches of appellant could not make it valid. In no event could it become the individual property of the trustees." Tincher v. Arnold, 7 Cir., 147 F., 665, 669, 7 L.R.A. (N.S.), 471, 8 Ann. Cas., 917.
Now taking up plaintiffs' second contention that the defendant hospitals are not in a position to charge laches because they are in pari delicto, we find that from the time the will was probated in 1922 to the year 1934, neither plaintiffs nor defendants did anything. Can either charge the other with delay for that period? Clearly not. There was no more duty to know and to act upon the one side than upon the other. Both are held to the same degree of diligence and in a Court of Equity neither party can charge as laches against the other a failure to know and act according to information which was as much within his range of observation as in that of the other party.
"Where both parties were equally at fault, neither can assert laches against the other; and where each of the parties seeks affirmative relief against the other in reference to the same transaction, neither may assert that the other was guilty of laches." 30 C.J.S., Equity, § 114. Also National City Bank v. International Trading Company, 1932, 167 Wn., 311, 9 P.2d 81.
In 1934 the hospitals instituted the museum suit but omitted to make either of the library plaintiffs a party thereto. It is scarcely equitable to permit them to visit the consequences of that omission upon the plaintiffs. To do so would allow the defendant hospitals to charge laches to plaintiffs in not discovering and intervening in a suit to which they, with better knowledge of the will and the facts, had neglected to make them parties. There could be no equity in charging plaintiffs with a greater knowledge of the indirect implications of the museum suit than the defendant hospitals who brought that suit and failed to make the library plaintiffs parties to it and did not even give them any notice thereof. I do not find a single circumstance of neglect or delay that defendant hospitals seek to attribute to the library plaintiffs, which does not apply at least as much to themselves.
In my opinion under the facts of this case the defendants have no standing in equity to charge laches against the plaintiffs in the particulars stated. Both of these grounds of the plaintiffs appear to the Court to be well taken and are sustained.
Counsel for defendant hospitals have, however, argued with great force and earnestness that, under the evidence, the affirmative defense of laches has been made out, I shall, therefore, not rest my decision solely upon what has been said as to the defendants not being in the equitable position to set up this defense but will also consider the question as made by the testimony and evidence.
Upon defendants' first point that a delay of 18 years of itself constituted laches, the latest decision of the Supreme Court which has been called to the Court's attention in which the principles governing laches have been set forth is Lyerly v. Yeadon, March 28, 1942, 199 S.C. 363, 377-382, 19 S.E.2d 648, 654. In that case the Supreme Court reviewed its earlier decisions and, in a case where two parties delayed action against their guardian for 12 and 17 years after they respectively became of age, held that mere lapse of time, standing alone and without reference to all the circumstances of the case, does not constitute laches. The Court said:
"While the period of time which elapsed before this action was instituted is an element to be considered in determining the question of laches, it is not a controlling element, and must be considered along with all the other circumstances. No definite period has ever been fixed by this Court in applying the rule of laches as a defense in equity. Necessarily such period will vary according to the circumstances in each particular case. In the case of Babb v. Sullivan, 43 S.C. 436, 21 S.E. 277, 279, the Court said: 'It is confessedly impossible to adopt a general rule, and fix a definite length of delay which shall justify a court of equity in refusing relief on the ground of laches. Each case must be governed by its own facts, and courts of equity must be trusted to exercise a salutary discretion.'
"We find the following statement on this question in the case of Thomas v. MacNeill, 138 S.C. 86, 135 S.E. 643, 645: `While lapse of time is an important element, the better view — though there are cases apparently holding the contrary — is that mere delay in enforcing a demand, in the absence of a bar by statutory limitation or of other circumstances tending to render the demand inequitable, will not bar relief. A long lapse of time, however, especially when taken with other circumstances, may create a presumption that a valid right never existed; or that if it existed it has been satisfied, or lost by abandonment, waiver, acquiescence, or equitable estoppel.'"
Quoting from Mr. Justice Fishburne speaking for the Court in Fallaw v. Oswald, 194 S.C. 387, 9 S.E.2d 793, 976: "`The question as to whether the complainant's suit is to be deemed barred by reason of laches is not to be determined by reference to any particular period as compared to the time during which she delayed assertion of her claim. The determination of the question as to laches vel non proceeds in the light of the circumstances of each case. Lapse of time is only one, and not ordinarily the controlling or most important one, of the elements to be considered in applying the rule of laches as a defense in equity.'"
Quoting from Edwards v. Johnson, 90 S.C. 90, 72 S.E., 638, 644, the Court said:
"`In order to constitute laches, there must be shown, not merely neglect for a time to enforce a legal or equitable right, where such neglect is for a period short of that which is a bar under the statute of limitations, but it must further be made to appear that such delay was accompanied either by a failure to perform some legal duty, whereby prejudice has resulted to the person pleading such neglect, or that such delay was accompanied by some act on the part of the person so negligent, which operated to mislead the person pleading such neglect, to his prejudice to such an extent that it would be unjust and inequitable thereafter to permit such negligent party to enforce such right.'
"The foregoing excerpt from the case of Edwards v. Johnson, was quoted with approval in the recent case of Whitlock v. Croswell, 190 S.C. 314, 2 S.E.2d 838."
The Court further quoted from Fallaw v. Oswald, supra: "One of the constituents of laches is injury or prejudice to third persons in the event relief is granted to the complainant," and held that the claims were not barred by laches. Pages 380, 381 of 199 S.C. page 656 of 19 S.E.2d. That although a period of twelve years elapsed between the time one minor became of age and the commencement of the action and a lapse of seventeen years in the case of the other minor, "it is fair to assume from all the circumstances that each was unfamiliar with his rights or interest.
`This delay has not prejudiced appellants. The amount received by the guardian is not disputed, nor the fact that he has never undertaken to render any accounting to the Probate Court. * * *" Page 381 of 199 S.C. page 656 of 19 S.E.2d.
"In concluding our discussion of the question of laches, we wish to point out that the guardian has never undertaken to make a final and complete settlement with Kirtain Lyerly. While he contends that there was paid to Kirtain his full share of the proceeds of the insurance and personal property, he admits that he has never made any settlement as to the real estate. Therefore, we are not confronted with a case where the guardian has done an act purporting to be a final execution of his trust and which had the effect of the guardian disclaiming any further fiduciary relationship. For this reason, the principles laid down in Owens v. Watts, 24 S.C. 76, and similar cases are not applicable to the claim of Kirtain Lyerly." Page 382 of 199 S.C. page 656 of 19 S.E.2d.
In Whitlock v. Creswell, 190 S.C. 3314, 327, 328, 2 S.E.2d 838, 844:
"The doctrine of laches is applied to prevent the commission of a wrong and is a weapon of defense. In Edwards v. Johnson, 90 S.C. 90, 103, 72 S.E. 638, 644, the Court says, `In order to constitute laches, there must be shown, not merely neglect for a time to enforce a legal or equitable right, where such neglect is for a period short of that which is a bar under the statute of limitations, but it must further be made to appear that such delay was accompanied either by a failure to perform some legal duty, whereby prejudice has resulted to the person pleading such neglect, or that such delay was accompanied by some act on the part of the person so negligent, which operated to mislead the person pleading such neglect, to his prejudice to such an extent that it would be unjust and inequitable thereafter to permit such negligent party to enforce such right.' * * *
"The neglect for a time to enforce a legal or equitable right is not sufficient alone to make out the defense, and at most, that is all Creswell could be guilty of, and this to some extent may be explained by the fact that not until he survived the death of his father would the mortgage be of any value. Certainly there is no testimony that by the lapse of time any prejudice has resulted to the plaintiff, or that such delay was accompanied by any act which operated to mislead the plaintiff.
"There is no ratification, such as the payment of interest on the notes secured by the mortgage, but the entire matter appears to have been dormant from the date the papers were executed to the date foreclosure proceedings were instituted. Time from the beginning of the transaction in this matter has been dealt with gently. Practically fifteen years elapsed from the commission of the alleged crime until the arrest by plaintiff of Creswell.
"Almost immediately upon the maturity of the mortgage plaintiff instituted foreclosure proceedings, about the same time the defendant's interest in the property ripened into a title. To have instituted an action sooner to set the mortgage aside might have been asking the Court to do a worthless deed, for defendant's interest might never have ripened into a title."
In Bell v. Mackey, 191 S.C. 105, at pages 124, 125, 3 S.E.2d 816, at page 825: "Delay is not the sole factor that constitutes laches. * * * Laches connotes not only under lapse of time, but also negligence, and opportunity to have acted sooner; and all three factors must be satisfactorily shown before the bar in equity is complete. Other factors of lesser importance sometimes demand consideration, such as the nature of the property involved, or the subject-matter of the suit, or the like. As a definition of `laches,' however, it is sufficiently correct to say that it is the neglecting or the omitting to do what in law should have been done, and this for an unreasonable and unexplained length of time, and in circumstances which afforded opportunity for diligence."
In Lazenby v. Mackey, 196 S.C. 507, 513, 14 S.E.2d 12, 15, the Court held there was no laches, saying:
"The nature of these defenses and the elements necessary to constitute same are fully covered in the opinion of the Court in the case of Bell v. Mackey, supra, so that it is unnecessary to discuss same in this report other than to state in order for the defendants to avail themselves of these defenses they must show: first, a delay of an unreasonable length of time by the plaintiff in instituting the action; second, that such delay is unexplained, and negligence in failing to do what in law should have been done. Applying the foregoing principles to the present case, I am of the opinion that this case should not be barred by laches, staleness of demand or equitable estoppel. * * *
"The action of Bell v. Mackey above referred to was brought for the purpose of adjudicating this claim and that said action resulted in an opinion of the Supreme Court which was not handed down until July 12, 1939, which was only seventeen (17) days prior to the institution of this action. I find therefore, that the delay in instituting this action is fully explained, even if without such explanation it were deemed to be unreasonably delayed."
In Jackson v. Johnson, 186 S.C. 155, at page 159, 195 S.E., 239, at page 241, the Court said it was "well settled that mere lapse of time does not amount to laches, but that in each case the surrounding facts and circumstances, and especially opportunity on the part of the person against whom laches is claimed, and knowledge and capacity to appreciate the opportunity and the necessity for taking action must be considered."
It appears from these and other authorities that not every delay is ipso facto laches, but all circumstances surrounding the case must be taken into consideration. The delay must be under circumstances which require diligence or afforded notice or reasonable opportunity for knowledge or indicated the necessity for action. The circumstances, in order to impose a present duty for action, should be sufficient reasonably to suggest to a person that his rights were involved and that someone else was dealing with the subject-matter in a manner inconsistent with the recognition of these rights and in reliance upon such person's inaction. The delay must be prolonged for a length of time under circumstances affording opportunity to act to one under a duty to act. To constitute laches, the failure to perceive and grasp the opportunity must have been under circumstances amounting to neglect. The opportunity for action must have been available by the exercise of due diligence. The existence of such an opportunity not discoverable by ordinary diligence imposes no duty upon a person to discover it at his peril. Further the delay or inaction to constitute laches must result in injustice if the bar of laches were not applied, so that it would be inequitable and shocking to the conscience of the Chancellor to allow the rights to be asserted thereafter. Lastly, it must be the cause of some injury or detriment to the person claiming laches.
Guided by these principles, we examine the facts of the case before us.
From the time of the probate of the will in 1922, to the commencement of the museum suit in 1934, neither the hospitals nor the library had taken any action. During that period there was no evidence of any knowledge on the part of either of them. I do not think that any cause of action or duty to act on the part of either party commenced from the time the will was probated in 1922. The codicil of 1921 disposed of the properties to trustees for a museum upon certain trusts which, as far as the provisions themselves disclose on their face, appeared to be valid. Under the terms of the codicil the library trust could take effect only if and after the museum trust had failed and been declared invalid. As long as that trust continued, neither the hospitals (except for possible surplus income) nor the library could have any interest in the property except subject to the outstanding trust estate for the museum and contingent upon the termination of the same. From such an event only could time commence to run.
The only other circumstances relied upon by defendants to establish notice or knowledge on the part of the plaintiffs of what their rights were and that such rights were threatened, are such circumstances as were disclosed in the record in the museum cause, mainly the testimony as to deficiency in museum quality. Because the facts were presumably known to the counsel in that case, who happened to be also trustees or a trustee and vice-president of the plaintiff library, it is argued that the library, is to be charged with laches. Those circumstances, however, were not such as could reasonably be calculated to suggest to the plaintiffs, had they known of them, that their rights were involved or at issue in that suit. Nothing in the suit was even remotely coupled up in any respect with the library until that case was on appeal and Exception XIX attempted to raise the point for the first time. Plaintiffs had not been made parties to that suit nor were they mentioned therein. There was no more duty upon them to discover the fact that from a true construction of the will and codicils, they might have an interest, than it was upon the present defendants, who as plaintiffs brought that suit, to discover that fact and to make them parties to the suit. At most both parties were in pari delicto — a point already discussed.
A knowledge that the nature or quality of the museum articles was questioned, even had they known it, would still have availed nothing, unless the plaintiffs had also known not only the precise terms of the will and codicils, in the light of a correct legal knowledge of the doctrine of dependent relative revocation, but also had coupled that knowledge in their minds with a knowledge of the nature or quality of the art collection, in the light of a further legal knowledge of the rule against perpetuities as applicable thereto. That would indeed be an extraordinary degree of diligence for a Court of Equity to require. If such a rule were applied in this case it would fix the hospital defendants, who brought that suit, with knowledge that the rights of the library plaintiffs were involved and that they should have made the library plaintiffs parties to that suit.
The burden of proof of notice or knowledge under the affirmative defense of laches pleaded in defendants' answer under the rule prevailing in this State rests upon defendants. Bank of Charleston v. Dowling, 52 S.C. 345, 29 S.E., 788.
The defendants, although they undertook that burden of proof in answer and evidence have not sustained it, in that no evidence of knowledge on the part of plaintiffs has been shown. As to whether the circumstance, that two officers of the plaintiff library happened to represent other and different clients as counsel in the trial of the museum case, affords a basis for imputed knowledge to the library plaintiffs, will be discussed presently.
I think it clear from an examination of the complaint in the museum case that in 1934, when the suit was commenced the hospitals were not aware of the latent question involved in the fact that the museum trust might be subject to attack on the ground of lack of museum quality, a question of fact as to subject-matter not discoverable from the terms of the codicil itself. No references to such facts are made in the complaint and had the hospitals at that time been aware of the nonartistic quality of the museum collection, it is reasonable to suppose that they would have set it up as a specific ground in their complaint. If no such knowledge was had by the hospitals such knowledge certainly could not be imputed to the library society.
In all of its specific allegations the complaint in that suit was based on insufficiency of income to open and operate the museum — a ground which failed of proof in the trial.
Not until December, 1935, over a year after the commencement of the suit, did the hospitals for the first time introduce evidence on the point that the art collection was not of museum quality. Even at that time they had not discovered the other latent question between them and the library, as to which of them would be entitled if the museum trust were terminated, for if they had discovered it they would have made the library a party to the suit.
At that time the library had not discovered either of those questions, unless notice be imputed through counsel in the museum case, which the authorities hereinafter cited show cannot be done.
Therefore as far as appears in the case, plaintiffs never learned of either of those questions until after the decision by the Supreme Court on April 29, 1941, in the museum case. Until that time no laches could start against the library plaintiffs, as they had no earlier notice of the termination of the museum trust or of any grounds for its termination, or of the existence of any question between them and the hospitals.
The defendants did not attempt to show or impute any knowledge to the library plaintiffs at any time earlier than during the trial of the museum case. The only period during which they have attempted to show delay with imputed knowledge was for some time after the commencement of the museum case to the time of the termination of the same. It cannot be said that any inaction of the library caused the hospitals either to commence or to continue the museum case.
We now consider the argument that plaintiffs are to be charged with laches because of knowledge imputed to them through their officers, who were counsel for other interest in the museum case. Of course there can be no impropriety in the officers of the library society being the counsel in this case. The defendants, in order to show a basis for laches in some knowledge or duty on the part of the plaintiffs to act or to commence suit sooner than they did, relied, for the connecting link to impute knowledge to the plaintiffs, upon the fact that a trustee and a vice-president of the plaintiffs were counsel for other parties in the museum case. The position they take is that it appears from the evidence that Mr. F.H. Horlbeck was one of the trustees of the plaintiff, Charleston Library Society, from 1922 to the present time and that Mr. N.B. Barnwell was one of the trustees from 1925 to 1930 and vice-president of said Charleston Library Society from 1930 to the present time. They argue that because of the fact that Mr. Horlbeck was attorney of record for the trustees of the Ross Memorial in the museum cause and Mr. Barnwell was attorney of record for Carolina Art Association in its application to intervene in the museum cause, the library society and the trustees of the endowment fund had imputed knowledge of the pendency of the suit to set aside the museum bequest through knowledge of its officers. This, they urged, placed upon the library plaintiffs a duty to assert their rights before the determination of that cause, in default of which they are barred by laches. They further argue that, with this knowledge imputed to them, the plaintiffs sat by and allowed the defendants to carry on the museum case at defendants' cost and expense without asserting their rights and waited until that case was brought through defendants' efforts to a successful conclusion before the plaintiffs brought forward their claim. The knowledge of such counsel for the museum and the art gallery respectively in the museum case was the only basis upon which defendants relied for charging the plaintiffs, the Charleston Library Society and the trustees of the endowment fund, with notice of their rights in order to give rise to a duty to assert them with due diligence.
The defendants, however, cannot support their claim of laches from such imputed or constructive knowledge to the library plaintiffs, when it is shown that the only officers or trustees of the plaintiffs, whose knowledge is sought to be so imputed, were counsel representing other and different clients and acquired their knowledge in the trial of a suit in which they were actually representing as attorneys such other parties. It would have been unethical and grossly improper for counsel engaged in the trial or defense of a case to have imparted to third persons information as to the cause entrusted to them which might be calculated to lead such third persons to step in and claim such property for themselves and so add another difficulty to the cause or persons they were representing before the Court. Such is not the duty of counsel employed to represent his client with single purpose and undeviating loyalty to the interests of his client alone. There was not only no duty upon such counsel to disclose to the library, even if they were aware of it, the fact that the library might have an adverse interest to the interests they were representing, but it was their duty not to disclose it before the termination of the museum cause.
The Supreme Court has clearly held that notice to an attorney, received while acting in and about his client's business, is not notice to a third party or corporation of which such attorney happens also to be an officer or director. Akers v. Rowan, 33 S.C. 451, 471-473, 12 S.E., 165, 10 L.R.A., 705; Steinmeyer v. Steinmeyer, 55 S.C. 9, 29, 33 S.E., 15; Wardlaw v. Oil Mill, 74 S.C. 368, 373, 374, 54 S.E., 658, 114 Am. St. Rep., 1004.
In Akers v. Rowan, 33 S.C. 451, 471-473, 12 S.E., 165, 10 L.R.A., 705, Judge McIver first adverted to the holding of the Circuit Judge as follows: "(1) The fact that Col. Sloan, being the solicitor of the bank and one of its directors, and knowing that a number of suits had been brought against Robbins, his knowledge must be imputed to the bank." Page 471 of 33 S.C. page 172 of 12 S.E.
"As to the first of these points, it seems to me that the circuit judge overlooked the qualifications to the admitted general rule that notice to the agent is notice to the principal. Sloan, though he was at the time the solicitor of the bank and one of its directors, did not acquire knowledge of the fact that suits were commenced against Robbins while acting in either of those capacities. On the contrary he acquired it as the attorney of Robbins and therefore so far from being under any obligation to communicate such knowledge to the bank it would have been a violation of the professional confidence reposed in him by Robbins for him to have done so. The manifest purpose of Robbins was 'to stave off' action by his creditors, and to conceal, as far as practicable, the fact that he was being sued; and hence it would have been a clear breach of confidence on Sloan's part to have communicated to the bank knowledge that he had acquired as the attorney of Robbins, and it cannot, for a moment, be assumed that he had done so. * * *
"These authorities show, beyond all dispute, that the conceded general rule that notice to the agent is notice to the principal is subject to qualification, and that, though an attorney or director of a corporation may be its agent, yet knowledge which such an officer has acquired while acting for himself, or for a third person, and not for the corporation, cannot be imputed to his principal; and more especially is this so where such knowledge cannot be communicated to the principal without a breach of confidence on the part of the agent. I think it is clear, therefore, that any knowledge which Sloan acquired when acting as attorney for Robbins cannot be imputed to the bank."
In Wardlaw v. Oil Mill, 74 S.C. 368, 373, 54 S.E., 658, 660, 114 Am. St. Rep., 1004, the Master and Circuit Judge held that actual notice of a mortgage must be imputed to the bank from the fact that S.H. McGhee, the president of the bank, was also attorney of the Troy Oil Mill and Dr. Neel, the president of the oil mill company, was a director and member of the loan committee of the bank. The Court in an opinion by Mr. Justice Woods, held:
"In general, notice to an attorney is notice to his client, but obviously notice is not imputed to an attorney in all his personal, professional, and official connections from the fact that one of his clients has notice. The bank could not be charged with notice through McGhee, its president, of a mortgage of another corporation of which McGhee was the attorney, when McGhee himself had no notice of such mortgage. Neel, the president of the oil mill company, when procuring a loan for it from the bank, was not acting as a director of the bank, or a member of its loan committee, but on the contrary his relation and interests were those of a borrower from the bank, and there is no presumption that he informed the bank of the mortgage. The rule imputing to the principal the agent's knowledge, it is said in Knobelock v. [Germania Sav.] Bank, 50 S.C. [259], 290, 27 S.E., 962, is placed by majority of courts, including our own, 'on the ground that it is the duty of the agent to communicate to his principal all knowledge which he possesses material to the principal's business, and the presumption that he has done that duty. Under the operation of this reason, what are sometimes called exceptions or qualifications to the rule have grown up. For example, an agent is not presumed to have communicated to his principal professional confidences received in representing a third person ( Akers v. Rowan, 33 S.C. 473, 12 S.E. 165 [10 L.R.A. 705]), or knowledge acquired while acting for himself or for a third person and not for the principal (same authority), or where the knowledge is such that, according to human nature and experience, the agent is certain to conceal, or where the agent is acting in adversary relation to the principal, or meditates a fraud against his principal or some third person in his own interest which would be defeated by disclosure.' The knowledge of Neel as president of the oil mill company is not, therefore, to be imputed to the bank, though he was one of its directors and a member of its loan committee."
In Steinmeyer v. Steinmeyer, 55 S.C. 9, at page 29, 33 S.E., 15, at page 25, the Court said: "It is obvious, therefore, that the only ground upon which it could be claimed that Whitridge had notice is the fact that Mr. Ficken had notice of the condition of affairs, and that his client, Whitridge, must be regarded as having had notice, upon the doctrine that notice to the agent is notice to the principal. But Ficken's knowledge was not acquired while acting as attorney or agent for Whitridge, but was acquired while acting as attorney for other parties, and hence the doctrine does not apply in this case. See Akers v. Rowan, 33 S.C. 451, 12 S.E. 165 [10 L.R.A. 705]; Knobelock v. [Germania Sav.] Bank, 50 S.C. 259, 27 S.E. 962. The exceptions raising the sixth question must therefore be overruled."
Defendants relied upon Citizens' Bank v. Heyward, 135 S.C. 190, 133 S.E., 709, as authority to the contrary but that case is clearly inapplicable. The position of the bank's president, Brown, in that case and his duties were very different from those of attorneys at law who acquired the knowledge sought to be imputed while engaged in the actual representation of clients different from the person to whom the knowledge is sought to be imputed.
The principle of Knobelock v. Germania Sav. Bank, supra, has been approved and applied in a number of cases subsequent to Citizens' Bank v. Heyward, supra, to wit: Ayers v. Ins. Co., 148 S.C. 355, 146 S.E., 147; Peurifoy v. Loyal, 154 S.C. 267, 151 S.E., 579; Little v. Southern Cotton Oil Co. 156 S.C. 480, 153 S.E., 462; Eskew v. Life Ins. Co., 190 S.C. 515, 525-527, 3 S.E.2d 251.
There is no escape from the conclusion that under the foregoing authorities and the facts and circumstances of this case the plaintiffs actually had no notice or knowledge of their rights or of any necessity or occasion of their assertion before the termination of the museum suit, which was but three weeks before the commencement of the present action. Therefore, no such knowledge could be imputed to them because of the bare fact that certain of the trustees of the plaintiffs or either of them happened to be counsel for and were at the time actually representing as attorneys other clients or interests in the museum cause.
The rule established by the cases above cited as applicable to attorneys at law representing other interests, in which case no knowledge is imputed, is further borne out by a long line of cases relating to agents in general, in which a similar exception to the general rule that notice to an agent is notice to the principal, is well recognized. Rapley v. Klugh, 40 S.C. 134, 150, 151, 18 S.E., 680; Knobelock v. Germania Sav. Bank, 50 S.C. 259, 289-292, 27 S.E., 962; Strickland v. Capital City Mills, 74 S.C. 16, 26, 54 S.E., 220, 7 L.R.A. (N.S.), 426, and other cases already cited following Knobelock v. Germania Sav. Bank, supra.
There is therefore no fact proved in the case imparting notice to the library plaintiffs or giving rise to a duty to act before the time of the commencement of the present action, and I must hold that there was on the part of plaintiffs no knowledge or duty to act prior to the commencement of the present action.
I now come to the question as to the expenditure made by the defendants in the museum suit.
There mere fact of the expenditure of $1,360.00 by the hospitals would not justify a Court of Equity taking away from the plaintiffs properties amounting to over $250,000.00 to which the Supreme Court has recently held them to be entitled in preference to the defendant hospitals. Nor could that fact alter the disposition of the property under the will and codicils of Miss Ross as construed by the Supreme Court. There is nothing to show that plaintiffs knew that such expenditures were being made, or that the suit in which it was made was pending or affected them. Nor does it appear that the suit was brought or the expenditure made because of any act, omission or neglect of the plaintiffs. There is nothing to indicate that the hospitals would not have made this expenditure in any event even if the library plaintiffs had known of their rights and the hospitals had been advised of the same.
The whole difficulty arose from the many complications and uncertainties inherent in the case, both factual and legal, which require considerable litigation and Court decisions to resolve.
The hospitals brought the suit and made the expenditure in furthering a venture of their own and for their sole benefit, without making the library interests parties to the suit or giving them any notice or opportunity to join in. It was evidently actuated by a mistaken belief on their part that the library had no interest and that they and not the library plaintiffs would be entitled if the museum trust were terminated. The risk of losing their expectation in the event the Court should hold the property sued for to belong to another is a chance which they, as all other litigants who seek to acquire property by suit must take. The Court cannot save them from the necessary effect of the former decision that the plaintiffs and not they, are entitled to the property, nor in equity treat their loss of their venture as if they had been held by the Supreme Court to be entitled to the properties. The Court in its effort to do equity between both parties cannot give them more than they had before the suit was started and before the expenditure was made. What they had was at all times nothing more nor less than the chance of winning the properties in the event the Supreme Court should hold that the library plaintiffs were not entitled thereto. That chance was all they ever had. The latent question between them and the library at all the times referred to lurked in the will and codicils themselves although only discovered and brought to light very recently.
In the mind of the Court there still remains the question as to whether the Court may allow reimbursement to the defendant hospitals for this outlay; not because of any laches or fault on the part of the plaintiffs, but in recognition of the fact that the plaintiffs would otherwise derive the benefit of that much of the money expended by the hospitals without cost to them. It seems to me equitable in all the peculiar circumstances of the case that I should as Chancellor exercise the powers vested in me to seek to do equity and order the allowance to the hospitals of this expenditure out of the funds to be received by plaintiffs from the Ross estate. This is solely to make them whole by reimbursing them for the disbursement shown by their evidence to have been actually made. I do not think they would be entitled to anything more. For the reasons stated, however, the hospitals should receive reimbursement of the expenditures of the sum of $1,360.00, with legal interest from the dates disbursed by them.
Messrs. Hagood, Rivers Young, of Charleston, Counsel for Appellants, cite: As to application of the "Doctrine of Dependent Relative Revocation, which is the Doctrine of Presumed Intention": 157 S.C. 407, 154 S.E., 426; (England), L. Rep., Chanc. Div., 1934, p. 384, at pp. 400 and 401; 23 Ga. 332, at p. 337; 30 Miss., 274; Pickering (Mass.), 535, at 545; 33 Harvard L. Review, p. 356; 31 S.C. Eq. (10 Rich. Eq.), 538; 91 S.C. 101, 74 S.E., 135; L. Rep., Chanc. Div., 1928, 24, at p. 29; Ward v. Van Der Loeff, H. of L. (1924), pp. 684 and 685; L. Rep. (1916), 1 Chanc., 552; L. Rep., 6 Eq., 225; 286 N.W., 735; 1 P. Wms., 345; 28 R.C.L., at p. 177; 28 R.C.L., at p. 142; 65 Conn. Rep., 149; 125 Penn., 287, 10 A.S. R., 590; 142 Ga. 855; 83 S.E., 949, Ann. Cas., 1916-C, p. 4; 3 Ves., 37. As to "Laches as a Bar to Recovery": 135 S.C. 190, 133 S.E., 709; 7 Rich. Eq., p. 230; 199 S.C. 363, 19 S.E.2d 648; 1 McC. Eq., 310; 19 A. J., p. 338, Sect. 493; 69 U.S. 87, 17 L.Ed., 936; 196 U.S. 189, 42 L.Ed., 711; 169 U.S. 237, 42 L.Ed., 730; 105 U.S. 193, 37 L.Ed., 1049; 120 U.S. 377, 30 L.Ed., 718, at p. 720; 1 How., 161, 11 L.Ed., p. 86.
Mr. H.L. Erckmann, Messrs. Barnwell Whaley, and Messrs. Mitchell Horlbeck, all of Charleston, Counsel for Respondents, cite: As to Res Judicata, or Law of the Case: 200 S.C. 96, 20 S.E.2d 623, at 625; Id., at 635; Id., at 627; Id., at 632; 65 S.C. 410, 43 S.E., 884; 194 S.C. 221, 9 S.E.2d 433; 2 R.C.L., 223; 164 S.C. 2, 161 S.E., 769, 774; 196 S.C. 51, 12 S.E.2d 545, 550; 78 S.C. 105, 58 S.E., 955; 92 S.C. 354, 75 S.C. 542, 544; 84 S.C. 193, 65 S.E., 1050; 128 S.C. 478, 123 S.E., 100; 93 S.C. 148, 76 S.E., 117 ( 88 S.C. 31, 70 S.E., 403); 13 S.C. 303, 133 S.E., 547 ( 132 S.C. 10, 129 S.E., 84); 17 S.E.2d 230; 171 S.C. 301, 172 S.E., 135; 118 S.C. 81, 109 S.E., 799; 171 S.C. 221, 171 S.E., 42; 111 S.C. 400, 98 S.E., 144. As to `Laches as a Bar to Recovery": 200 S.C. 96, 20 S.E.2d 623. As to "Case of First Impression" in South Carolina: 4 S.C. L. (2 Brev.), 279; 11 S.C.L. (2 Nott McC.), 272; 14 S.C. 458; 200 S.C. 96, 20 S.E.2d 623, 628-639.
December 22, 1942.
The disposition by this Court of a former appeal in this case is reported in 200 S.C. 96, 20 S.E.2d 623. The exceptions in the instant appeal challenge the correctness of that decision and counsel were allowed to argue against it pursuant to proper petition for the right. Upon consideration again of the question involved, the earlier decision mentioned is adhered to and the exceptions thereabout overruled. There is no necessity to again add to or elaborate upon the reasons clearly and ably stated by the trial Judge, whose decision was under review in the former appeal.
Other exceptions now presented relate to the alleged defense of laches, but the question was not urged in oral argument. However, it is so well disposed of in the Circuit Decree that so much of the latter as deals with it will be reported and is adopted as the judgment of this Court.
The exceptions are overruled and the judgment of the Circuit Court is affirmed.
MR. CHIEF JUSTICE BONHAM and MESSRS. ASSOCIATE JUSTICES BAKER, FISHBURNE and STUKES concur.