These probate appeals were taken by the executor of the will of John M. Dean from two decrees of the probate court of the city of Cranston. Both decrees were entered in that court on the same day, February 15, 1941. after a single hearing. One disallowed the executor's first and final account; the other was a refusal of the executor's resignation. The appeals were also heard at a single hearing by a justice of the superior court sitting without a jury, who sustained both decrees. The executor, who will be hereinafter referred to as the appellant, duly excepted to those decisions and the cases are here on such exceptions.
John M. Dean died on May 5, 1938 leaving a will in which he named the appellant as his executor. On June 13, 1938 appellant qualified as such executor. At that time it held testator's note in the amount of $20,832.92, dated November 2, 1934, which had been overdue since February 4, 1935. Appellant also held on that date as collateral security for this note 78 shares of the stock of the National Ring Traveler Company and 100 shares of the stock of the Providence Washington Insurance Company.
On the dates hereinafter stated the appellant, in its capacity as executor of the will of John M. Dean, filed the following papers in the probate court: August 4, 1938, inventory of the testator's estate, including the above-named stock; December 20, 1938, its claim against testator's estate for $99,285.61 in which sum was included testator's overdue note of November 2, 1934, which claim was never allowed; April 14, 1939, its first and final account and also its resignation as executor.
On October 7, 1938, without obtaining permission from the probate court, appellant sold the Providence Washington Insurance Company stock for $3194.67, and in like manner on January 4, 1939, the National Ring Traveler Company stock for $12,870. Appellant credited testator's estate with each amount in its first and final account in part payment of testator's overdue note.
It was on this record that the probate court disallowed appellant's *Page 506 first and final account and refused to accept its resignation as executor. In addition to this record the justice of the superior court had before him testimony of appellant's trust officer to the effect that appellant's trust department was separate and distinct from its loan department and, more particularly, that such trust department at no time had possession of testator's note and the collateral security therefor. Each court, nevertheless, reached the same conclusions on the record before it.
The justice of the superior court incorporated his decisions in a rescript in which he also stated the reasons for such decisions. He held that the appellant's interest as pledgee of the collateral security was adverse to its interest and duty as executor and that such conflict of interests impaired its authority to freely sell testator's personal property in its possession under the pledge agreement while acting at the same time as executor. He also held that the appellant could not satisfy in part the claim which it had filed in the probate court before such claim had been allowed by the probate court in accordance with the statute regulating proof of claims against estates of deceased persons. General laws 1938, chapter 578, § 10. He held further that until appellant settled its accounts with the probate court appellant could not resign, by virtue of G.L. 1938, chap. 575, § 12.
Appellant contends that a creditor, holding collateral security under a valid pledge, may exercise all his powers as pledgee, including the power of sale, despite the death of the pledgor and the creditor's subsequent appointment as executor of the pledgor's estate. In support of this general proposition it argues that there is no question that the death of a pledgor does not revoke the power of sale under a pledge of collateral security, or that a creditor in this state is a proper person to administer a decedent's estate. G.L. 1938, chap. 578, §§ 3, 10. Appellees do not controvert either of these contentions.
The controversy arises almost wholly over appellant's main contention, which is substantially that the fiduciary relationship *Page 507 of an executor to the estate of his deceased debtor does not in and of itself absolutely exclude the exercise by the executor, in his own interest, of the power of sale under a valid pledge of collateral security made by the debtor in his lifetime. In other words, appellant claims that under certain circumstances the law has made an exception to the general rule that a fiduciary's duty is superior to his personal interest where a conflict arises between such duty and interest. That exception, appellant claims, arises where it is clear in a given instance that the fiduciary's conduct in protecting his own interest has not resulted in harm to the interest of his beneficiary.
In support of this view appellant cites the case of White v. Kinniburgh, 57 R.I. 117, and numerous cases from other jurisdictions, as well as 2 Scott on Trusts, § 170.9. We need not stop to discuss any of those authorities except the White case. We have read them and though it would appear that on the facts of each case the principle contended for by the appellant here was applied, it does not seem to us that the facts in any of those cases can reasonably be said to be similar to those of the instant case.
White v. Kinniburgh, supra, was not a case where the same person was both executor and pledgee creditor. It involved a trustee and the creators of the trust who were living and beneficiaries thereunder. There were also special circumstances, not present in the case at bar, that persuaded this court to allow such trustee to charge his beneficiaries interest, but only at the legal rate, for the use of money which he had advanced out of his own funds for their benefit and which seemed to have been contemplated by the beneficiaries in their trust deed and relations with the trustee. All of the substantial facts upon which the court relied are carefully set out at some length in the opinion in that case, and we think a comparison with the facts of the instant case will disclose a great lack of similarity.
After carefully considering the fundamental principle which is involved here and the nature and extent of the exception *Page 508 which the courts have made thereto in applying the principle to special situations, we are of the opinion that the appellant does not come within such an exception. On the contrary, its case appears to be clearly ruled by Horton v. Maine, 22 R.I. 126. In that case a guardian sold his ward's stock of goods in the exercise of a power of sale contained in a mortgage made by the ward, before his guardianship, to the guardian. There this court held that the duty of the guardian and the interest of the mortgagee with power to sell were clearly adverse. It was the duty of the guardian, the court said, to see that such power was fairly exercised in the ward's interest and that to permit its exercise by the guardian for his own interest would be liable to result in depriving the ward's estate of the very protection which the guardianship was designed to afford. And the court, at page 127 of the opinion, thus concluded: "Such a liability the law will not tolerate, and therefore it does not permit the same person to occupy two antagonistic relations from which a possible conflict of duty may arise, and will not stop to consider whether or not a sale in such circumstances in a particular instance is fair or otherwise."
That statement appears to fit the instant case. Appellant's duty as executor is plainly adverse to its interest as pledgee. That interest must be subordinated by appellant to its duty as a fiduciary. And that duty must be performed by one acting in the capacity of executor in compliance with the statutes governing the powers and duties of executors. If, as here, those duties necessarily deprive appellant of the right of power of sale which it otherwise had over its testator's property in its possession as a pledge, such deprivation is the result of appellant's free choice.
Appellant was not obliged to accept appointment as executor of the will of its debtor and pledgor. It could have declined such appointment and retained its freedom of action over the pledged property in its possession without recourse to the probate court. It elected not to do so but qualified as executor and duly inventoried the pledged securities of the *Page 509 testator as assets of his estate, which was its duty. However, it seeks to claim now that, as executor, it never had possession of the pledged property but that such property was in the exclusive possession of its loan department which it asserts is separate and distinct from its trust department; and that such latter department alone is charged with performing its executorship duties. A claim of this kind is clearly lacking in merit. Appellant is one artificial person in the eyes of the law, not two; and we must treat it, in the circumstances here, as we would a natural person.
We are accordingly of the opinion that on the record before it, the probate court was justified in disallowing appellant's first and final account and in refusing its resignation as executor; and hence that the justice of the superior court did not err in sustaining the decrees appealed from.
Appellant's exceptions are overruled and each case is remitted to the superior court for further proceedings.