Appeal of Stewart, and McClay

| Pa. | Jun 4, 1885

First assignment. — There is no doubt that an executor who retains the goods of his testator is liable for their value, and it was quite open to the exceptants in this case to give evidence of the actual value of the store goods kept by the accountant and have him charged therewith. But that course was not adopted. In the regular inventory of the estate, sworn to and signed by the appraisers, and filed in October, 1874, shortly after the testator's death, the store goods were appraised at $1,800. This is prima facie evidence of their value, and is the sum charged in the account. Another paper was given in evidence, which was filed October 17th, 1883. It is not sworn to and not signed, but appears to be a schedule or list of the personal assets of the testator in detail, with valuations marked opposite each item. No verbal explanatory evidence was given showing what these valuations represented. An individuated and itemized list of store goods appears in this paper not footed up, but the figures of which, being added together, amount to $2,839.60. It is very certain that this sum does not represent the value at which the store goods were appraised, because, by the sworn and signed inventory, they were appraised at $1,800. If this was too low an appraisement, it was entirely competent to prove it; but that not having been done, there is no basis upon which we can find that the Auditor and court below were in error in finding the sum of $1,800 to be the proper value of these goods.

The Auditor finds as a fact the store was an old one, kept for many years by the testator, in which were many goods which had gone out of date and had greatly depreciated in value, and this appears to be a sufficient reason for holding that $1,800 was an adequate valuation, even if the ordinary retail prices had been as the figures in the specific inventory indicated. The first assignment is not sustained.

Second assignment. — The accountant charged himself, on the 17th of November, 1877, with the sum of $7,885, being the valuation of 95 shares of Juniata Valley Bank stock at $83 per share. The facts were that the testator held 178 shares of this stock at the time of his death, which were appraised at $17,880, being the par value of the stock.

The institution in which these shares were held was not a corporation but a partnership. The articles of partnership contained a provision authorizing a majority of the stockholders, upon the death of any member, to purchase the stock or interest of the deceased member at a valuation to be fixed in the manner pointed out in the articles. This valuation was made and the price fixed at $83 per share. The bank purchased 83 shares at that price, and the accountant charged himself with that value for those shares. This left 95 shares still in the hands of the accountant, and these the cashier urged him to take at the same valuation. He finally consented to do so, and had them transferred to himself at the price of $83 per share. The Auditor finds that this was the full value of the stock at that time, and there is no doubt that the transaction was made in perfect good faith by the accountant without a suspicion of its illegality. He probably failed to take the advice of counsel on the subject, and that was his misfortune. The rule of liability in such cases does not depend in the slightest degree upon the good or bad faith of the trustee. The transaction is voidable at the instance of thecestui que trust, on the ground that it is prohibited by public policy. A trustee cannot thus deal with the trust estate. It would be a waste of time to recur to the authorities. There is no more familiar doctrine in the law than this. The Auditor thought that Lewis v. Ewing, 6 Harr., 313, was not applicable, because that case related to a transfer of stocks, and this was a partnership interest, which the surviving partners had a contract right to buy. This would have been very well, and would have controlled the question, if the remaining partners had exercised their right of purchase, and taken all of the stock. But they took a part only, and the rest of the shares remained with the accountant. They were not his and could not become his by being transferred to his name. They belonged to the estate the same after as before the transfer. The exceptants ask to have the accountant charged with the full appraised value of the shares instead of the price at which he took them. They have a right to make this demand, and their exceptions and assignment of error on this subject are sustained. The accountant must be surcharged, but we have some difficulty in determining in what way and with what amounts, owing to the language of the exceptions taken before the Auditor, and of the assignment of error. There were two exceptions before the Auditor. One was the 3d specific exception, in the following words: "III. He should be charged with the full value of Juniata Valley Bank stock as it was appraised." The other was the 8th specific exception, as follows: "VIII. He should be charged with the appraised and full value of the Juniata Valley Bank stock." As we understand these exceptions, they contain no demand to charge the accountant with any other than the full appraised value of the stock, which was $100 per share, and of course it would follow that the demand would relate back to the time of the appropriation of the stock by the accountant, to wit, Nov. 17th, 1877, and he should be charged with interest on the amount from that time. Neither of these exceptions asked that he should be charged with dividends after the stock was taken, nor does the second assignment of error. The exceptions and the assignment treat the stock as having been appropriated by the accountant, and ask to charge him with its value. Of course, this regards the accountant as owner and simply demands payment of the proper price. If the exceptants claimed the stock as still belonging to the estate, they should have asked to charge the accountant with all dividends received, and should have required him either to divide the shares among the legatees or sell them at public sale. Failing to do either of these things, they could have petitioned the court for an order to compel him to sell the shares, or could have asked the Auditor, by a proper exception, to surcharge him with the value of the stock as it was at the time of the audit or at some other fixed time. But they did neither of these things. The second exception in the Orphans' Court to the report of the Auditor does claim that the "Auditor erred in overruling the third exception and in not charging the accountant with the full and actual and present value of 95 shares of Juniata Valley Bank stock and the dividends thereon, and in overruling the eight exception so far as it relates to Juniata Valley Bank stock, which exceptions are as follows: "III. He should be charged with the full value of Juniata Valley Bank stock as it was appraised." "VIII. He should be charged with the appraised and full value of the Juniata Valley Bank stock."

Of course it was not error for the Auditor to refuse to do that which he was not asked to do. As we understand these exceptions and the assignment of error, they constitute a demand by the exceptants that the accountant shall be charged with the appraised value of the stock at the time it was taken. That value was $100 per share, and the surcharge will therefore be $1,615, being $17 per share on 95 shares, with interest thereon from Nov. 17th, 1877. Where exceptions are taken before an Auditor they should specify definitely what is claimed, not only for the information of the Auditor, but in order that the accountant may know what claims are made against him and what he has to meet. In this case, not even the printed argument asks any surcharge of dividends received nor any charge of the value of the stock other than is stated in the exceptions before the Auditor.

Third and Fourth assignments. — We see no reason for surcharging the accountant with the loss sustained in the sale of the Pennsylvania and Reading Railroad stock. They were securities which the testator had himself purchased and held up to the time of his death. They were both dividend-paying securities and so continued for several years after the testator's death. There was no necessity for selling them either to pay debts or for any other purpose. The accountant simply held them as the testator held them while he lived. When he sold them he sold his own similar securities also for the same prices and for the same reason. He was fearful they would depreciate still further. It was of course utterly impossible for him or any other person to know what the future course of the market would be. If they had gone still lower, he might have been still more censured and incurred the possibility of still greater loss. For aught that we can see he exercised the ordinary judgment of an ordinarily prudent person in making these sales, and in this there is nothing of supine negligence which is required in order to charge a trustee in such cases. In Neff's Appeal, 7 P.F.S., on p. 96, we said: "All that a court of equity requires from trustees is common skill, common prudence and common caution. Executors, administrators or guardians are not liable beyond what they actually receive unless in case of gross negligence, for when they act as others do with their own goods and with good faith, and are not guilty of gross negligence, they are not liable." The foregoing is very familiar doctrine and supported by numerous authorities. Hanbest's Appeal, 11 Nor., 482, was an application of the same doctrine to the case of the continuance of a bank deposit of over $40,000, and its loss by the subsequent failure of the bankers, when it might have been saved by simply transferring it to some solvent bank, but we held that the accountant was not liable for the loss. The third and fourth assignments are not sustained.

Fifth assignment. The executor of the widow disclaims all benefit of this assignment, and the daughter, Mrs. McClay, withdraws her plea of infancy to the written agreement, by which all the legatees agreed that the executor should pay $10,000 to the widow, who in consideration thereof released all claim to her dower and thirds of the estate. None of the other legatees asked to surcharge the accountant with the annuity which was charged upon the land devised to him for the benefit of the widow. The question then stands in this way: The widow and all the legatees and devisees by a contract in writing agreed that the widow should decline to take against the will and release all claims of dower and thirds in and to the real and personal estate of the testator, and, in consideration thereof, the executor should pay to the widow ten thousand dollars, and one sixth part of the residue of the personal estate, and one sixth part of the interest of the proceeds of the sale of the real estate during her life.

It would be very strange, after such an agreement as this, if the executor who paid the $10,000 to the widow in pursuance of its terms, and on the faith of its provisions, by the express authority of all the parties interested, including this exceptant, Mrs. McClay, should be denied credit for the payment. The money was paid for the common benefit of all, and of course is paid out of the residue of the estate, and simply diminishes the amount of the residue by that sum. As the residue is given to all the children in equal sums, the loss thus sustained, if there is any loss, is common to all. All are disappointed in this respect alike, and it is not necessary to call upon a devisee or legatee, who has advantages by the release of dower and thirds, to make good the loss of some other legatee or devisee, who is injured by the widow's election to take at law operating to diminish, or burden, his legacy or devise. The widow in this case does not take at law. She simply releases all her claims both at law and under the will for a special sum of money payable out of nobody's share, but out of the general residue. The cases of Sandoe's Appeal, 15 P.F.S., 314, and Gallagher's Appeal, 6 Norr., 200, are not analogous. In both of them the widow did elect to take at law, and this claim worked special injury to certain devisees whose devises were thereby burdened and rendered unequal with the others. Equality of distribution required that the benefits intended for the wife should be sequestered to secure compensation to those who were disappointed by her election. But there is nothing of that kind in the present case. It is true that the accountant as a devisee is relieved of paying for a few years an annuity to the widow. But that is no injury to the others and it is simply a relief to him. If the parties had desired that he should pay this annual sum or its equivalent to them, they should have so stipulated in the agreement. There is no provision of that kind in the contract, and the facts are not such as to warrant a court in sequestrating the annuity for the benefit of the other parties. The fifth assignment is not sustained.

Sixth assignment. The accountant's compensation was fixed at $4,000 by the auditor and court below. The debtor side of the account as determined by the final decree of the court below amounts to $127,387.07, and the credit side to $74,821.16.

The estate was a very complicated one, the settlement of it extended through a number of years, and is not yet closed, the account itself is of extraordinary length, containing a vast number of items, very great responsibility was case upon the accountant, and the compensation allowed is but a little over three per cent. We do not think this at all excessive, and the sixth assignment is therefore not sustained.

Seventh assignment. As the accountant is charged with interest on all the moneys received by him, he is undoubtedly entitled to interest on the sums paid, and especially to have credit for sums of interest upon claims of creditors when actually paid. The assignment is not sustained.

Eighth assignment. As the accountant was specifically charged with the item of $1,515.13 for articles of personal property taken by the heirs, he was certainly entitled to have credit for it because of his delivery of the goods to those who received them. We cannot imagine any principle upon which he should pay interest on such an item. It never was money in his hands and of course could not bear interest. It was delivered to the legatees and for that reason, if for no other, no interest should be charged on the value of the goods. It was possible for the legatees to make interest on this sum by selling the goods. But in no conceivable event could the accountant do so, as he had neither the goods nor their value.

Ninth assignment. The compensation of executors and trustees is due at the time the services are performed: Parker's Est., 14 P.F.S., 307; Adams Appeal, 11 Wr., 94; Callaghan v. Hall, 1 N.Y. St. Rep., 241" court="None" date_filed="1886-07-15" href="https://app.midpage.ai/document/smith-v-hartwell-8329549?utm_source=webapp" opinion_id="8329549">1 S. R., 241. In the last of these cases we held that the commissions must be deducted from the balance before interest is computed. In the present case the Auditor stated the account up to January 1st 1876, deducted the commissions then earned from the balance then in hand, and charged interest on the remaining sum to September 1st, 1883. This was in exact accordance with the decision in Callaghan v. Hall, supra. After 1876 the commissions were allowed for each year, and as interest was charged on each item of money received from one month after its receipt, of course the accountant was entitled to credit for interest on the commissions earned during the year. The eighth and ninth assignments are not sustained.

Now, October 15th, 1885, the decree of the court below is affirmed in all respects except as to the Juniata Valley Bank stock, and as to that it is adjudged and decreed that the accountant be surcharged with the sum of $1,615 and interest thereon form November 17th, 1877, and to that extent the decree of the court below is reversed at the cost of the appellee.