45 A.2d 868 | Pa. | 1946
Lead Opinion
Mr. Justice PATTERSON and Mr. Justice JONES filed a dissenting opinion.
Argued March 28, 1946. The question is whether the Act of May 24, 1945, P. L. 944, is constitutional. Its provisions are: AN ACT providing that when the contract of a fiduciary is made by him, or approved by court, inadequacy of price or an offer to deal on other terms shall not relieve the fiduciary of his obligation or constitute ground for any court to set aside the contract or to refuse to enforce it.
"The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:
"Section 1. When a fiduciary shall hereafter make a contract not requiring approval of court, or when the court shall hereafter approve a contract of a fiduciary requiring approval of court, neither inadequacy of consideration, nor the receipt of an offer to deal on other terms shall, except as otherwise agreed by the parties, relieve the fiduciary of the obligation to perform his contract, or shall constitute ground for any court to set aside the contract, or to refuse to enforce it by specific performance or otherwise: Provided, That this act shall not affect or change the inherent right of a court to set aside a contract for fraud, accident or mistake.
"Section 2. Nothing in this act shall affect the liability of a fiduciary for surcharge on the ground of negligence or bad faith in making a contract.
"Section 3. This act shall become effective immediately on final enactment." *49
It is a general act to be applied by all courts having jurisdiction over fiduciaries. In the Statutory Construction Act of May 28, 1937, P. L. 1019, fiduciary is defined in section 101 (42) as follows: "(42) 'Fiduciary,' an executor, administrator, guardian, committee, receiver, trustee, assignee for the benefit of creditors, and any other person, association, partnership, or corporation, acting in any similar capacity." It came up for construction in the Orphans' Court of Allegheny County and the court held the act unconstitutional. The proceeding was an ancillary executor's petition for an order authorizing private sale of his decedent's real estate for the payment of debts pursuant to section 16 of the Fiduciaries' Act of June 7, 1917, P. L. 447, 20 PS 321. The petition averred that Harry G. Austin "has made a bid of $25,000 cash for the . . . property, and . . . signed . . . Articles . . . for the purchase of same, and that the said price offered is better than can be obtained at public sale." The court fixed a day for hearing and notice was given that the petition would be heard on the day fixed "when higher offers will be considered and exceptions or objections to the proposed sale will be heard."
The Fiduciaries Act, section 16 (m), (3), 20 PS 572, provides: "On the day fixed by such order and notice for authorizing or directing such private sale, any creditor of such decedent, or party interested as heir, devisee, or intending purchaser, or any legatee whose legacy is by the express terms of the will or by law charged on such real estate, may appear and object to such private sale on account of the insufficiency of the price, and, if such objection be sustained, may offer to give or pay a substantial increase for such property; and the court, at its discretion, may thereupon authorize or direct such sale, or refuse to authorize or direct the same, and accept any substantially increased offer, and may authorize the sale of such property to such new bidder upon compliance with the conditions of sale and giving such security as shall be directed by the court; or, such creditor, party *50 interested, or legatee may appear, as aforesaid, and object to such sale on any legal or equitable grounds: . . ."
Section 6 of Rule 13 of the court below provides: "On the return day of private sale of real estate, any person desiring to make a bid higher than that appearing in the petition shall state in open court the total amount he will bid; if the increase is material, the court may open the sale to competitive sealed bidding. After all parties interested have been given an opportunity to present sealed bids the court will order the property sold to the highest bidder; or, if the parties desire, the court may refer the matter to the clerk and fix a time and place during the same day when the clerk will offer the property at auction and make immediate return thereof to the court, whereupon the purchaser shall forthwith deposit cash or its equivalent with the fiduciary in a sum not less than ten per cent. of the amount of his bid."
What happened at the hearing is thus stated in the opinion filed by the court below: "Due notice was given of the proposed sale to be made on the 26th day of September, 1945 and, after competitive bidding, the court ordered a private sale to E. J. Carroll and C. A. Waite for $27,850.00, secured by a certified check, whereupon the ancillary executor was directed to make a deed for the property described in the petition. After the sale was ordered and before delivery of the deed to Carroll and Waite a petition was presented on October 10, 1945 by Harry G. Austin, the first bidder, praying for the revocation of the order of September 26, 1945 and, after notice to Carroll and Waite, upon deposit of a cashier's check by Austin, the previous order of sale was revoked and a new order of sale was made to Austin [for $30,000.00] on the 10th day of October, 1945." Messrs. Carroll and Waite excepted to this action and contended that the order of the court was in conflict with the Act of 1945. After hearing on the exceptions, the court dismissed them and held the Act unconstitutional on the ground that it limited or restricted supervisory power *51 that had been exercised by the orphans' court prior to the effective date of the present Constitution, and that such legislation was prohibited by Article V, section 22, of the Constitution. This appeal was then taken.
Prior to the effective date of the Act of 1945, the courts had power to set aside a fiduciary's contract and to order resale at a bid substantially higher: Dundas' Appeal,
The question before the court is not whether this statute is a wise exercise of legislative power; that question is exclusively for the legislature and the executive. The courts must give effect to the Act unless it clearly appears that the legislation is prohibited by the Constitution: Sharpless v.Mayor of Philadelphia,
So far as now material, section 22, which was relied on as prohibiting the legislation, provides: "In every county wherein the population shall exceed one hundred and fifty thousand, the General Assembly shall, and in any other county may, establish a separate orphans' court, to consist of one or more judges who shall be learned in the law, which court shall exercise all the jurisdiction and powers now vested in or which may hereafter be conferred upon the orphans' courts, and thereupon the jurisdiction of the judges of the court of common pleas within such county, in orphans' court proceedings, shall cease and determine. . . ." That section authorized the legislature to establish a separate orphans' court and transfer to it the power exercised by common pleas judges in orphans' court proceedings in the counties in which such separate orphans' courts shall be established. No change was made for counties in which the orphans' court proceedings remained in the charge of the common pleas judges. By section 31 of the Schedule, adopted with the Constitution, the people directed that "The General Assembly at its first session, or as soon as may be after the adoption of this Constitution, shall pass such laws as may be necessary to carry the same into full force and effect." Pursuant thereto, the legislature passed the Act approved May 19, 1874, P. L. 206, entitled "An Act Relating to the organization and jurisdiction of orphans' courts and to establish *53
a separate orphans' court in and for counties having more than 150 thousand inhabitants, and to provide for the election of judges thereof." In Reid v. Smoulter,
The basic error in this proceeding is in the construction put upon that section by the learned judge when he said: "By Article V, section 22, no change can be made by law for Orphans' Courts. There the powers 'now vested' can be changed only by Constitutional Amendment." Section 22 will not stand that construction; there are no prohibitive words justifying it: see Sharpless *54 v. Mayor of Philadelphia,
In Com. v. Dabbierio,
Section 6 of Rule 13 of the Rules of the court below, quoted above, supplementing section 16 (m) (3) of the Fiduciaries Act of 1917, 20 PS 572, provided for an auction to be conducted by the judge or the clerk of the court on the return day of the petition. That procedure was *57
followed in this case. The question then is: When did the contract of sale come into existence? "The accepted view of a sale by auction is stated by Williston, Contracts, section 29, Vol. 1, p. 68. 'The auctioneer may more accurately be said to invite offers than himself to be an offeror, and the law has adopted this doctrine. Since the bargain is incomplete until the hammer falls, a bidder may therefore retract his bid until that time. The same point is involved in decisions turning on the right of the auctioneer to withdraw an article offered for sale; and for the same reason, until the hammer falls, the auctioneer may withdraw, unless it has been advertised or announced that the sale shall be without reserve . . .' See Restatement, Contracts, section 27, Vol. 1; Stover v. Rice, 3 Whart. 21; Fisher v. Seltzer,
Another point may be referred to very briefly. The authorities show that it cannot be said that the Act of 1945 is in conflict with section 1 of Article V providing *58
that "The judicial power of this Commonwealth shall be vested in a Supreme Court, in courts of common pleas, in courts of oyer and terminer and general jail delivery, courts of quarter sessions of the peace, orphans' courts, magistrates' courts, and in such other courts as the General Assembly may from time to time establish." In Gottschall v. Campbell,
The decree is reversed; the record is remitted for further proceedings not inconsistent with this opinion; each party to bear his own cost.
Dissenting Opinion
We cannot concur with the majority view that the Act of May 24, 1945, P. L. 944, is a constitutional interference with the jurisdiction and powers of orphans' courts.
Before and since the Constitution of 1873 testators and settlors have granted powers of sale relying upon the heretofore unchallenged power of our orphans' courts to see to it that a fair price for estate assets is realized in the interest of beneficiaries, a class composed largely of widows, minor children and persons unborn. If the Act of 1945 is a valid exercise of legislative power, as the majority holds, then the orphans' courts have been rendered impotent to protect their wards in such cases. Under the Act, any agreement made by an incompetent or inexperienced fiduciary with power of sale will be enforceable against the estate, despite gross inadequacy of consideration, except in *59
the infrequent case where fraud, accident or mistake can be proved. In the present case, where the fiduciary was not acting under a power, application of the Act results in a loss to the beneficiaries of $2,160 and a corresponding gain to the vendee. Had he been acting under a power, the original agreement fixing the purchase price at $25,000 would have bound the estate irrevocably, and the loss to the beneficiaries would have been increased to $5,000. The court would be equally powerless to interfere, in the supposed case of a fiduciary acting under a power, if the original agreement had called for a purchase price of $1,000, with a resulting loss to the estate of $29,000. This Act goes far beyond the suggestion of the concurring Justices in Kane v. Girard Trust Company,
By Art. V, section 1, of the Constitution, the judicial power of the Commonwealth is vested, inter alia, in orphans' courts, and in such other courts as the General Assembly may from time to time establish. Although the courts thus ordained have been, and in the future likely will be, implemented from time to time by the legislature for the purpose of their appropriate efficient and uniform exercise of the judicial power, such courts are, nonetheless, created by and now exist under the Constitution itself. That is necessarily so or otherwise *60
the legislature could divest the courts of all their powers and thereby in effect abolish our judicial system. But, that, the legislature may not do: Commonwealth v. Green,
Of necessity, the legislature has specified and delineated the powers of the courts, including the orphans' courts, and thus has regulated the practice and procedure therein. But the essentials of the constitutionally reposed jurisdiction are fundamental attributes of the courts and beyond the power of the legislature to abridge so long as these constitutional courts are to continue as such. In short, the legislature may deal with the function and powers of the orphans' courts only to the extent necessary to render them adequate for the exercise of the judicial power committed to them by the Constitution. Compare Penn Anthracite Mining Co. v. AnthraciteMiners of Pennsylvania,
As applied to sales under a testamentary power, the Act of 1945 operates to deprive the orphans' courts of a power exercised by them from early Colonial days, *61
viz., the power to control and supervise executors and other testamentary fiduciaries. See Act of March 27, 1713, Law Book A, Vol. 2, p. 73. The power to control presupposes a power to review and set aside: Dundas's Appeal,
If the Act of 1945 were a constitutionally valid exercise of legislative power, we should still be unable to see how a sale by an orphans' court of a decedent's real estate for the payment of his debts could be thought to come within the purview of the Act. Its concern and scope are the conclusiveness and enforceability of fiduciaries' contracts; and no such contract is here involved. The court flatly rejected the only fiduciary contract ever introduced in this proceeding. Nor does it help any to fictionize by saying that the court's acceptance of a higher bid and its direction to the fiduciary to make a deed for the property to the bidder was tantamount to the court's approval of a new contract by the fiduciary. The sale of a decedent's real estate for the payment of his debts has long lain peculiarly and exclusively within *62
the jurisdiction and power of an orphans' court: See Act of March 10, 1688, Duke of Yorke's Book of Laws, p. 180. Even though an exercise of such jurisdiction be invoked on the basis of an antecedent agreement between a fiduciary and a prospective purchaser, action thereafter taken by the court in pursuance of the agreement is "not a sale on the contract but one under the authority of law": Powers Estate,
The law as above stated appears to have been the rule uniformly followed by the courts of this State at least since the decision in Demmy's Appeal, supra, in 1862; and the rule there enunciated was but an interpretation of the statutory definition of the orphans' court powers in such regard under Sec. 19, cl. IV, of the Act of June 16, 1836, which was carried into the Orphans' Court Act of 1917 as Sec. 9, cl. (f). Consequently, when the Act of 1945 is construed so as to embrace a fiduciary's contract for a private sale of a decedent's real estate for the payment of his debts, yet necessarily subject to due proceedings in an orphans' court, then the Act is additionally unconstitutional in that it works an amendment of extant orphans' court statute law without so fore. casting in its title and without specifying the amendment in its body as required, respectively, by Art. III, sections 3 and 6, of the Constitution.
The Act of 1945 further violates the same constitutional provisions last above cited. The law with respect to the power of the orphans' courts over fiduciaries even to the extent of reviewing, setting aside and, if necessary, ordering a resale "of real estate made under a testamentary power" (Dundas'sAppeal, supra, p. 331) was likewise an interpretation of the statutory definition of *63
the orphans' court powers in such regard as contained in section 19 of the Act of June 16, 1836, which section 9 of the Orphans' Court Act of 1917 carried forward. The statutory provision as interpreted in Dundas's Appeal, supra, became firmly established in our law by later decisions of this Court:Orr's Estate, supra; McCullough's Estate,
The majority opinion holds that the authorities show the Act of 1945 is not in conflict with Article V, section 1, citing four decisions. But not one of these cases involved an Act comparable in terms or effect with the legislation now before us. The basic principle of the decisions referred to is that the Constitution having granted to the legislature, by section 1 of Article V, the power to create from time to time courts other than those enumerated, nothing contained in the subsequent sections of that article is sufficient to deprive the legislature of the power to create courts of a different class or grade, and to transfer to the courts so created some of the jurisdiction of the courts enumerated, or vest in them a limited concurrent jurisdiction: Gerlach v. Moore,
For the reasons stated, we would declare the Act of 1945 unconstitutional and affirm the decree of the court below. *64