44 F. 224 | U.S. Circuit Court for the Southern District of Iowa | 1890
On the 12th day of June, 1879, Michael Holderbaum, then a resident of Madison county, Iowa, executed a will, the material parts of which are as follows:
“Item 2. I desire that all my just and equitable debts be paid out of the first realized assets of my estate, including expenses of last illness and funeral expenses.
“Item 3. I desire that my executor hereinafter named shall stand in my place and stead, for the purpose of managing and controlling my real and personal property in such a way and manner as to realize the largest and best income therefrom, and in paying off! the indebtedness on said real property.
“Item 4. I desire that my said executor, for the purpose expressed, in item 3, shall have full power and authority to negotiate a loan or loans for the pur*225 pose of meeting said indebtedness on said real estate, and to make and exe-, cute a mortgage or mortgages oil a part of said real estate, and generally to do, and make and execute such paper or papers, as shall or may be for the best interest of said estate, as I might or could do for said purpose, limiting my said executor as to mortgages, so that no new mortgage shall be given on the quarter section known as the ‘home place.’
“Item 4¿. I desire that personal property and proceeds from the real estate be first used to pay off indebtedness, and real estate not to be so used unless my said executor should find that by disposing of a portion of said real estate, not to exceed a half section, (exclusive of the home place,) he could realize enough to pay off all lions on the real estate; then, and in that case, 1 desire my said executor to dispose of so much of said real estate (exclusive of the home place) as shall pay such incumbrance as may remain unpaid instead of procuring new loans, and in this, as in all matters, to do all for the best interests of the said estate.”
“Item 5. I desire that the home place, containing one hundred and sixty acres, together with the buildings, farming utensils, two teams of horses, their harness, reaper and binder, and threshing machine, be and remain in the possession and control of my beloved wife, Kachel Holderbaum, for the use of the family as a home, and for their support; any overplus remaining to be used in the payment of indebtedness.
“Item 6. After the payment of all indebtedness and liens on my real estate, I desire that my said wife, Kachel Holderbaum, have the full one-third of the assets remaining, unless the said sum should be less in amount than the said homestead; then, and in that case, it is my will that she hold the said homestead, and, if her share is given in land, I desire that she have the full one-third thereof in value.
“Item 7. I desire that the remaining two-thirds of my said estate, including personalty and realty, be equally divided between my eight children, namely: Henry D., Michael S., Augustus C., Solomon, Eliza Schlarb, Sophia II., and Lucinda, and the two children of my deceased daughter, Mary Hoehstetler; except that I have advanced Henry D. one thousand dollars, and Michael S. one thousand live hundred dollars, which is to be considered in said division, and except my son Solomon, whom I desire to have and receive five hundred dollars more than his proportionate share of my said estate.
“Item 8. It is my further will that, should any of my children die without issue, the share that would go to them should be equally divided among the brothers and sisters; and, if my said wife should not be living at the time of such division, then I desire that the estato be equally divided among my said children, or their representatives, subject to the matters stated in item 7 as to the advancement and the extra amount to Solomon.
“Item 9. Keposing full confidence in my son Augustus C. Holderbaum, Í desire him to act as my said executor for this, my last will and testament, and that he be duly appointed as such executor without being required to execute any bond as such executor.”
Michael Holderbaum died on the 21st day of June, 1879, being then seised of some 1,120 acres of land in Madison county, on which rested mortgages to the amount of some $15,000 and over. His will was duly admitted to probate in the proper court, and the executor named therein entered upon the discharge of his duties as such executor. On the 28th day of January, 1887, a loan was negotiated with one Wilson Ames, of Chicago, 111., for the sum of $6,000, for which two coupon notes or bonds were given, the principal of which was made payable August 1, 1892, and the payment of principal and interest was secured by the execution
Default in payment of interest having been made, suits of foreclosure were brought by Julia Ames, to whom the notes and mortgages had been assigned by Wilson Ames, the mortgagee. Among others, there were made defendants to the bills for foreclosure W. R. Shriver, administrator of Adam Hochstetler and Josiah Hochstetler, who are creditors of the estate of Michael Holderbaum, and Henry A. and David M. Hochstetler, who are devisees under the will of said Michael Holderbaum. These parties contest the validity of the mortgages sought to be foreclosed, and thus arise the issues presented for determination in these cases.
The first point made is that the mortgages are not so executed as to bind the property of the estate, but must be held to be simply the deeds of Augustus C. Holderbaum as an individual. Under the statutes of Iowa, a deed or mortgage is not an instrument under seal; the use of private seals being abolished. Code Iowa, §§ 49, 2112. .It is well settled that in case of instruments not. under seal courts may road the instrument in the light of the facts attending its execution, in order to ascertain who it was intended should be bound thereby. Whitney v. Wyman, 101 U. S. 392; Hitchcock v. Buchanan, 105 U. S. 416; Post v. Pearson, 108 U. S. 418, 2 Sup. Ct. Rep. 799. The attending circumstances, as well as the form of the mortgages, clearly show that it was the intent of the parties on the one hand to give, and on the other to receive, mortgages executed by Augustus C. Holderbaum in his capacity as executor, and such they must be held to be.
It is next urged that the testator had no legal right to create a trust or confer a power by will to execute mortgages for the payment of debts, and that the several provisions of the will looking to that end are wholly void. The contention is that the statutes of Iowa forbid any testamentary disposition of property prejudicial to the rights of creditors, and an exceedingly ingenious argument is made for the purpose of showing that such a use could be made of the power to mortgage as that thereby certain creditors might be preferred to the injury of others, and that in fact the will creates a discretionary power in trust for the benefit of a certain class of creditors, to-wit, those holding mortgages on the realty. By sections 2322, 2384, 2406, Code Iowa, it is provided that every person of sound mind and full age may dispose by will of all his property, except what is sufficient to pay his debts, or is allowed as a homestead, or other
The facts developed in the evidence submitted in this case show that Michael TIolderbaum, when he executed his will, owned a large amount of farm property, both real and personal. Upon the realty rested mortgages to the amount of $15,000, or over, representing the large bulk of his indebtedness. It is entirely clear that he believed that with proper management the proceeds of the available personal property, with the profits of the farm, would he sufficient, if time was allowed, to pay off the entire; amount of the indebtedness. The general purpose of the will was to provide for the payment of the debts, and, this being accomplished, then to have the property remaining divided between his widow and children. His eldest son was appointed executor, to “stand in my place anu stead, for the purpose of managing and controlling my real and personal property in such a way and manner as to realize the largest and best income therefrom, and in paying off the indebtedness on said real property.” This is not to be construed, as is argued on behalf of defendants, as an attempt to create a trust or power for the payment of the debts secured on the real estate in preference to the unsecured debts, for in the preceding clause of the will it is declared that — -
“ I desire that all my j ust and equitable debts be paid out of the first realized assets of my estate, including expenses of last illness and funeral expenses.”
Instead of being an attempt to dispose of the estate in a manner prejudicial to creditors, the will not only provides for the payment of all
The will in express terms gives “full power and authority to negotiate a loan or loans for the purpose of meeting said indebtedness on said real estate, and to make a mortgage or mortgages on a part of said real estate,” etc. It is argued that this power was exhausted when the first loans and mortgages were executed, thus limiting the power of the executor to one renewal or extension of the debts, secured on the realty. The express intent of the will was to place the executor in the stead of the testator, and to authorize him to carry on the farm until the indebtedness had been fully paid; and, to aid him in so doing, the authority to make a loan or loans and execute mortgages was given him, so that the time of payment of the mortgaged indebtedness could be carried along until the executor had the funds in hand to meet such indebted
“Courts, in carrying out the wishes ot testators, the pole-star in wills, are much inclined, especially in equity, to vest all the power or interest in executors which are necessary to effectuate those wishes, if the language can fairly admit it. * * * They are inclined, also, when considering it a trust, or a power coupled with an interest, to have its duration and quantity commensurate with "the purpose to be accomplished.”
The power of the executor in this case is not lo be limited to a single renewal of the mortgages in existence at the time of the death of the testator, nor to loans made for the purpose of paying off' such original mortgages; but it must he hold that such power extended to such further renewals or loans as were fairly necessary to enable the executor to execute the trust imposed upon him by the terms of the will. It is claimed that the will confers only a naked power upon the executor, and that such power must receive the limited construction that usually obtains in such cases. This is not the true construction of the will. It creates an Interest in the devisees, of whom the executor is one, and in fact in favor of the creditors, and confers the powers granted to the executor, in order that ho might be enabled to protect these interests and discharge the trust imposed upon him for the benefit of the creditors and the devisees. In Taylor v. Benham, supra, it is said by the supreme court, that—
“ Xo doubt exists that a power coupled with an interest may be inferred by obvious implications from the whole will, as the fee not being vested at once elsewhere, and it being necessary to have it in the executors to effect the general design, as well as from the usual course, which is by an express devise to the executors. Xor is it of any consequence how small the interest.may be. It is enough if only to distribute the proceeds as here, or to take the rents or use for the benefit of others.”
There can be no question that the will in this case confers upon the executor a power coupled with an interest, and charges him with the performance of a trust, and that his authority under the will must be construed in that light.
Equally ill founded is the assumption that the title and beneficial interest in the realty passed at once to the devisees upon the death of the testator. The eslate devised was that remaining after the payment of (he debts, and, taking the entire will into consideration, it is clear that the title, as well as the control of the estate, real and personal, passed primarily to the executor. ' It is declared that the executor shall stand in the place and stead of the testator in managing and controlling the real and personal property, with power to execute mortgages, and such other paper or papers as shall he for the best interest of the estate, and with the further power to sell at once a half section of the realty, if by so doing enough could be realized to pay off the incumbrances on the
To effectuate the power to sell the realty, or to mortgage it, the title must be vested in the executor, or otherwise he could not well execute the trusts created by the will. It is true that it might be held that the title passed to the devisees, subject to the right of the executor to sell the same in the execution of the trusts, and such a construction may be giveh to a will, and especially in cases wherein particular realty or the whole is devised to a particular person. In the will now under consideration no such devise is made. Until the debts are all paid, it cannot be known what property will be left for distribution, nor whether it will be in realty or personalty. The will does not devise the realty which the testator might own at the time of his death, subject to the payment of his debts, to certain named devisees, but he directs the executor to pay all debts first, and then ,fco divide what -is left, giving “one-third of the assets remaining” to his widow, and the remaining two-thirds to be equally divided betw'ecn the children. Viewing the will as a -whole, it seems to me to be the true construction thereof to hold that the title to the realty passed to the executor for the purposes of the trusts created by the will, and that, under the terms of the will, he had the power to make loans, and execute mortgages for the security thereof, without applying to the probate court for authority so to do.
It is further contended that the will charges the payment of the debts upon the entire property of the estate, by reason of the direction in the second clause thereof, — “That all my just and equitable debts be paid out of the first realized assets of mjr estate, ” — and that thereby the debts became, equitably, a prior lien upon all the property of the estate, and that'consequently all mortgages given by the executor would be inferior to such lien.
The charge or equity in favor of creditors created by the will is not limited or defined by a single clause of the will. If the creditors claim rights or equities created by the will, they must be willing to take what the will, fairly construed, intended to give them. Leaving out the homestead, the will intends that all the remaining realty, and the profits derived therefrom, should be used for the payment of the debts, so far as might be needed. This purpose is to be gathered, not from a single clause in the will, but from the will as a whole; and the mode in which the estate was to be managed, including the making loans and giving mortgages therefor, is provided for in the will. In order to secure to the creditors the benefit of the profits arising from the.cultivation of the farm, it was necessary that the loans secured hy mortgages thereon should be extended from time to time. The will provided a mode for so doing, and the executor, by securing new loans, was enabled to retain control of the realty, and to use the proceeds thereof in the payment of debts. The primary purpose of the wall was to provide a means
It appears in the evidence that the creditors are proceeding in the state court, and have obtained an order for the sale of all the realty, including that covered by the mortgages to Ames. It would seem that by agreement a sale might be had that would convey a clear title, and thus secure the best possible price for the realty, in which event it ought to realize enough to pay the mortgage lien thereon, and also the amount due the other creditors.
In each case a decree will be entered for complainant, adjudging the amount due on the debt secured by the mortgage, for a foreclosure of the mortgage, and Sale of the premises therein described.