Wachsmuth v. Penn Mutual Life Insurance

241 Ill. 409 | Ill. | 1909

Mr. Justice Vickers

delivered the opinion of the court:

This is an appeal from the judgment of the Appellate Court for the First District affirming a decree of the probate court of Cook county which dismissed the petition of Frederick H. Wachsmuth and Louis C. Wachsmuth, executors of the last will and testament of Henry F. Wachsmuth, deceased, for leave to sell lands to pay debts. The executors have prosecuted a further appeal to this court.

Henry F. Wachsmuth died November 2, 1900, leaving a last will, by which he devised to each of his sons a piece of real estate in Chicago, and to both of them, share and share alike, a third piece of Chicago city property. His sons, who are his executors and appellants in this case, were his sole devisees. It does not appear that Henry F. Wachsmuth owned any other real estate than the three pieces above referred to. He left personal property to the amount of $5595.08. The debts probated against his estate amounted to $12,850.33, thus showing a deficiency of personal assets of $7254.25. The petition to sell the real estate was based on a just and true account filed December 12, 1905, which showed the deficiency of personal assets as above stated. All of the real estate of which the testator died seized was encumbered by trust deeds or mortgages placed thereon by the testator. The liabilities of the estate under these encumbrances was $35,500. One piece of property was sold under foreclosure and failed to bring the full amount of the encumbrance against it. The parcel of real estate known as the Forty-seventh street property, which was devised to Louis C. Wachsmuth, was mortgaged for $11,000. This indebtedness was paid with part of the proceeds of a $15,000 trust deed placed on the property by Louis C. Wachsmuth after his father’s death. This trust deed was executed to Francis B. Peabody, and finally, by assignment, became the property of the Penn Mutual Life Insurance Company, and was by that company foreclosed and the property sold for the amount of the debt and costs, and no redemption having been made, a deed was issued by the master in chancery to the Penn Mutual Life Insurance Company on October 26, 1904, and afterwards the insurance company conveyed the said property and the title thereto is now in Bernard Baumgarden. The encumbrance upon the other piece of property, which is known in the record as the Rhodes avenue property, was $10,000, and this piece was devised to Frederick H. Wachsmuth by the will.

The ground upon which the probate court dismissed appellants’ petition was, that it did not appear that there was any deficiency of personal assets to pay the debts of the estate. This holding is based upon the admitted facts that the executors were at the time of their appointment indebted to their father’s estate, on account of money loaned to them by their father in his lifetime, in the sum of $10,-000, and that the property devised to appellants under the will was at a fair market value worth $70,000, or $34,500 more than the aggregate amount of encumbrances thereon.

The evidence shows that the appellants had property in their own right at the time they were appointed executors, valued at $5000, and that their personal liabilities were $27,-000. Deducting the individual liabilities of the executors from the value of the equities devised to them, it appears that the executors were solvent and able to pay the $10,000 indebtedness which they owed to their father’s estate. Under these facts the probate court held that the debt due from appellants to the estate must be regarded as cash assets in the hands of the executors available for the payment of claims against the estate, and that so regarding this amount, and adding it to the $5595.08 of other personal assets belonging to the estate, the deficiency of personal assets disappears, hence there was no authority, under the law, for resorting to a sale of real estate to pay debts. The Appellate Court took the same view of this question that the probate court did and affirmed its decree.

The appellees have assigned cross-errors on the record which call in question the rulings of the court on other questions which were decided in favor of appéllees, but in the view which we have of the question already stated it will not be necessary for us to either state the facts out of which they arose or decide the questions raised by the cross-errors assigned. The ultimate question to be determined is, should the $10,000 debt due the estate' from the executors be regarded as so much personal assets, which by operation of law is converted into cash in the hands of the executors ? If this question is answered in the affirmative, it follows, as a necessary sequence, that there was no deficiency in the personal property and that the decree dismissing the petition is correct.

Appellees contend that when a debtor is appointed administrator of his creditor’s estate the debt is considered paid and the administrator is chargeable with the amount thereof in the settlement of his accounts, regardless of the financial condition of the administrator. This contention is supported to the full extent claimed by appellees by the Supreme Court of Massachusetts in Leland v. Felton, 1 Allen, 531; by the Supreme Court of Ohio in McGaughey v. Jacoby, 54 Ohio St. 487; by the Supreme Court of New Hampshire in Judge of Probate v. Sulloway, 68 N. H. 511, and by the Supreme Court of Alabama in the case of Wright v. Lang, 66 Ala. 389. It will thus be seen that the rule contended for is not without support. The reason upon which these decisions rest is that the administrator cannot sue himself, and that therefore when he is appointed his debt to the estate is by a fiction of law regarded as collected and paid to himself, as administrator. The rule laid down in the foregoing cases, which is known as the Massachusetts rule, has been modified by later cases in other States so as to permit the administrator to show that he was insolvent at the time of his appointment and so remained during the term of his office, and thus relieve himself from the consequences of failing to pay over money which he never, in fact, had and was wholly unable to obtain. The rule in its modified form is applied in the following cases: In re Walker, 125 Cal. 242; Baucus v. Stover, 89 N. Y. 1; Baucus v. Barr, 107 id. 624, affirming 45 Hun, 582; McCarty v. Frazer, 62 Mo. 263; Parker v. Irick, 10 N. J. Eq. 269; Rader v. Yeargin, 85 Tenn. 486; McClamrock v. Gregory 119 Ind 503.

In the case last above cited the Supreme Court of Indiana uses the following language: “One question which seems to have been overlooked on the trial of the cause was the financial condition of Levin T. Miller, the administrator, during the period of his administration. The money collected by him while professing to act as the agent of the administrator in Missouri, and for which he had not accounted when he became administrator, was a claim in favor of his trust, which he should have inventoried and charged himself with, and if by the use of due diligence all or any part of the claim could have been saved to the estate his sureties are therewith chargeable, but if he was hopelessly insolvent they do not become liable therefor, the burden as to the question of insolvency being on the administrator and his sureties.” Further on in the opinion the court says: “The debt of the administrator is to be accounted for as other debts or assets, and he may show his insolvency during the period of administration in discharge of his official liability.”

So far as we are advised this question has never been passed on by this court. It seems to us that the rule laid down in Massachusetts is liable to work a great hardship upon administrators and the sureties upon their bonds. To compel sureties on administrators’ bonds to augment the estate of the deceased by requiring them to pay a debt which an insolvent administrator happens to owe the estate is imposing upon them a burden not contemplated and in many cases a great hardship. Leaving out of view the rights of the sureties, it would seem equally shocking to our sense of justice to proceed against an administrator personally for a failure to pay over money which he, in fact, did not have and which he had no means of procuring. Where, however, the administrator is solvent, no such hardship can be imposed upon either the sureties or the administrator. The rule thus applied will accomplish the desired end in most cases and avoid the harsh consequences that would occasionally result from the application of the unrestricted Massachusetts rule.

Appellants, however, contend that, even under this view of the law, the decree of the county court is erroneous, because it is said that the administrators were not solvent at the time of their appointment and have not been at any time since. This contention presents a question of fact. As already shown, the real estate devised to appellants under the will of their father was worth $34,500 over and above the encumbrances thereon. These valuations are fixed by a stipulation of the parties. After deducting" all of the indebtedness chargeable against this real estate there is an excess sufficient to show that appellants were solvent at the time of their appointment as executors. If they were solvent at that time,—that is, if they had property sufficient to pay all of their personal liabilities, including the $10,000 which they owed their father’s estate,—-they were properly chargeable with their debt to the estate and it should have been regarded as collected. It can make no difference, with the transmutation which the law effects in the legal status of this debt, that afterwards, through some cause, appellants became insolvent and finally unable to account for the debt due the estate. The status of the debt having been fixed by their appointment as executors and their solvency at that time, cannot be changed by subsequent insolvency of the administrators. It was not only the duty of appellants to charge themselves with the $10,000 which they owed the estate and inventory it as cash on hand, but in the eye of the law this was done. The debt was paid to the estate. In this view there was no deficiency of personal assets, and there was no error in dismissing appellants’ petition.

The judgment of the Appellate Court will be affirmed.

Judgment affirmed.

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