Hewitt v. Beattie , 106 Conn. 602 ( 1927 )

Certain of the defendants claim that the so-called ante-mortem claims, presented to the executor and still remaining unpaid, are now barred by lapse of time. They were duly presented within the time limited by the Court of Probate, have never been disallowed, and are apparently just claims. As we held in Robbins v. Coffing, 52 Conn. 118, in such a situation there is no applicable statute of limitation and it is not for this court to establish one. At the same time, it was early recognized in our decisions that the existence of a claim upon an estate cannot be permitted to take on the guise of a perpetual lien upon the land of the deceased, and that gross neglect or unreasonable delay should be held to be a waiver or extinguishment of it.Griswold v. Bigelow, 6 Conn. 258, 265; Wooster v.Hunts Lyman Iron Co., 38 Conn. 256, 259; Hewitt v.Sanborn, 103 Conn. 352, 372, 130 A. 472; Ricard v.Williams, 20 U.S. (7 Wheat.) 59, 115. As pointed out in Wooster v. Hunts Lyman Iron Co., supra, the statute limiting the time within which administration may be taken out, General Statutes, § 4978, has no application to proceedings to subject the land of the estate to the payment of a claim where administration has been duly granted; the discretionary right given to the Court of Probate by the statute, General Statutes, § 4979, to proceed with the settlement of an estate after ten years, was not intended to subvert the policy of the law established by the cases cited; nor is this policy wholly served and obviated by the statute, General Statutes, § 5017, which provides that no Court of Probate shall, except within ten years after the death of the deceased, order the sale of real estate of a deceased person, which has been, in good faith and for value, sold or mortgaged by the heirs or devisees. Had the ante-mortem creditors, whose claims are now unpaid, sought with reasonable diligence to enforce their rights, the situation of the estate strongly indicates that they would have been paid from funds forming a part of it without the need of recourse to the land specifically devised to Isabel Sanborn. These creditors are not in a position now to subject that land to their claims. The devise and bequest to the trustees was residuary and not specific; Weed v. Hoge, 85 Conn. 490,494, 83 A. 636; 4 Schouler on Wills (6th Ed.) § 3056; and the property included in it was the primary fund for the payment of these claims. General Statutes, § 4944. Whatever would be the situation were these creditors seeking, in an independent proceeding, to charge their claims upon this property, the "public mischiefs" and danger of harm which Judge Story, inRicard v. Williams, supra, suggests as the probable result if creditors are given a perpetual lien upon the property of an estate, is not present in a situation like this, where the assets have been or will be reduced to money in the hands of the administrator for the general purposes of administration. As against the lands specifically devised to Isabel Sanborn, the ante-mortem creditors may not now assert any claims; but as against other assets in the hands of the plaintiff, those claims may be asserted in their proper order.

The most important question presented concerns the right of those to whom the executors incurred obligations in carrying on the business, to charge the assets of the estate in the hands of the plaintiff with payment of them. The finding of the court is precise, that the quarry business was carried on by the testator's sons as executors, and that they never qualified or acted as trustees. It also appears that the estate has never been fully settled or the duties devolving upon the executors fully performed. It is not possible, then, to regard them as acting as trustees in carrying on the business. State ex rel. Htfd.-Conn.Tr. Co. v. United States Fid. Gua. Co., 105 Conn. 230,235, 135 A. 44. It is true that ordinarily an executor has no right to carry on the business of a testator; Hallock v. Smith, 50 Conn. 127; Wheeler'sAppeal, 70 Conn. 511, 515, 40 A. 452; Mathews v. Sheehan, 76 Conn. 654, 660, 57 A. 694; although by statute the Court of Probate may authorize him to do so, as far as is expedient prudently to wind up the business of the testator. General Statutes, § 5033. However, a testator may direct that an executor continue his business, so far at least as is necessary to preserve the assets of the estate and to carry out his proper purposes. Pitkin v. Pitkin, 7 Conn. 307; 2 Woerner on American Law of Administration (3d Ed.) p. 1049; 24 Corpus Juris, 59. If we turn to the will, we find that the testator intended to have the quarry business continued as long as any one of his sons survived. He set apart for the carrying on of that business all his property, real and personal, except some small bequests and the land specifically devised to his daughter. He left personal property to the value of $64,397.61, with some choses in action not appraised, but upon which the executors realized $15,482.27. Claims were duly presented to the executors aggregating $35,036.86. Obviously these bare facts are sufficient to indicate that the settlement of the estate would necessarily consume some time. Until that estate was settled, the property to be devoted to the trust could not be transferred into it. Ryder v. Lyon, 85 Conn. 245, 253,82 A. 573; Goodsell v. McElroy Brothers Co., 86 Conn. 402,407, 85 A. 509. To preserve the value of the quarry business, it would have to be carried on in the interval. This, the testator must have foreseen, and power in the executors to carry it on is necessarily implied from the provisions of the will and the situation of the estate.

Previous to the enactment of the statute, now appearing as § 5771 of the General Statutes, the right of recovery of one to whom an executor or administrator had incurred an obligation in the performance of his duties was against the executor or administrator personally, and the only way in which the estate could be charged with such an obligation was through its allowance to the executor or administrator in his account of the sums paid by him. Taylor v. Mygatt, 26 Conn. 184,190; Burke v. Terry, 28 Conn. 414; Chambers v.Robbins, 28 Conn. 544, 550. Such obligations as were properly incurred by an executor or administrator would be allowed in that account as a matter of course. On the other hand, obligations incurred by reason of positive misconduct or violation of duty on his part would not be allowed to him; although, if he acted reasonably and in good faith, the mere fact that, as later appeared, he had misjudged the situation or incurred expenses unnecessarily, would not prevent their allowance to him. Robbins v. Wolcott, 27 Conn. 234,238. On obligations incurred under such circumstances that they might not be allowed to him out of the estate, he might be held personally liable. Hallock v.Smith, 50 Conn. 127, 128; Burke v. Terry, supra. Moreover, it followed from these principles that obligations incurred by an executor were not chargeable against an administrator, c. t. a., d. b. n., who succeeded him. Alsop v. Mather, 8 Conn. 584, 587.

Under the statute, General Statutes, § 5771, one to whom an executor or administrator has incurred an obligation growing out of money paid or services rendered to the estate, may bring an action against him or his successor in office in his representative capacity, and "if such claim shall be found to be a just one, and one which ought to be equitably paid out of such estate, the statute authorizes a judgment to be satisfied out of the assets of the estate; but it provides that if there be not sufficient estate to satisfy the claim, the claimant may pursue his legal remedy against the executor or administrator individually, for any balance due him, or may elect to hold him liable upon his personal responsibility. This statute does not change the nature of the obligation incurred by an executor or administrator in the performance of his duties; it merely affords the creditor a remedy by which, without injustice to the estate, the obligation owed to him may be discharged immediately from the fund which in any event would ultimately bear the burden, and permits an action to be brought to recover upon it against a successor to the executor or administrator who incurred it. Brown v. Eggleston, 53 Conn. 110, 119, 2 A. 321. While in terms it provides merely that the claimant may bring an action to establish his right, an executor or administrator, or an administrator d. b. n., may pay the claim without action, and, if the Court of Probate is satisfied that it would have been recoverable in an action under the statute, it may allow the sum so paid in the administration account.

It follows that, as regards the obligations incurred by the executors in this case, in carrying on the business, they are proper charges against the estate in the hands of the plaintiff only if they "ought to be equitably paid out of the estate"; that is to say, if they are such that, had the executors paid them, and sought to have them allowed in their administration account, the court should find, first, that they fell within the words of the statute, "growing out of moneys paid or services rendered for the estate"; second, that they are justly due; and, finally, that they were so incurred that they ought to be equitably paid out of the assets of the estate, holding in view the principles we have discussed. As we pointed out in Hewitt v. Sanborn,103 Conn. 352, 375, 130 A. 472, — an action brought by the present plaintiff and involving the administration of this estate, — it is hard to understand, upon the bare facts before us, why the executors delayed so long in settling this estate. Yet, in considering whether the claims of those to whom they became obligated ought equitably to be paid from the estate, it is to be borne in mind that, had the executors transferred the estate to themselves as trustees, in all probability they would have conducted it in the same way they have as executors; and that their conduct in carrying on the business as executors had received some sanction in the approval by the Court of Probate of the accounts they filed. While those who dealt with them might properly be holden to inquire as to their authority to carry on the business, yet, in view of all the circumstances, it would be hardly reasonable to determine the rights of creditors upon the basis of a duty resting upon the executors more speedily to settle the estate and transfer the property into the trust; whether the executors had violated their duty in this respect would depend upon many and varied circumstances necessarily within their peculiar knowledge. See 1 Mechem on Agency (2d Ed.) §§ 759, 760.

No doubt because of the failure of the parties to offer evidence before him, the committee's report does not state the facts which would be necessary in order to determine whether most of the claims of those to whom the executors incurred obligations should be paid from the assets of the estate in the hands of the plaintiff. All that we can say is that, upon the facts before us, there does not appear such misconduct or gross negligence on the part of the executors in continuing the business as would prevent such payment. This is true as regards the claim of one of the executors, Peter Beattie, for services rendered as an employee in the conduct of the business, if otherwise they are proper charges against the assets in the hands of the plaintiff. In this connection, we also advise that, while the statute uses the words "moneys paid or services rendered for the estate," it was obviously meant to be inclusive of such charges as are ordinarily incurred by executors and administrators in the administration of the estate, and includes materials furnished. It would not, however, include claims by an executor or administrator for services rendered in his official capacity, or growing out of moneys advanced by him or personal obligations assumed by or cast upon him in the course of the administration of the estate; these, if allowable at all, would have to be allowed to him in his administration account and would not be, under the statute, proper charges against the assets in the hands of his successor in office.

As to a few claims more facts are given, but we are asked no specific questions as to them and, with one exception, they probably are covered by the preceding general discussion. The exception is a claim made on behalf of the estate of one Noble, for a balance due on account of money which, the report states, was loaned to the estate, and for which a note was given. The Noble estate claims that the money so loaned was used for the purposes of the Beattie estate, primarily in connection with a certain so-called Astoria transaction, and was necessary to make available to the estate an asset inventoried as a part of it. The general rule is that an executor or administrator has no power to bind the assets in his possession by borrowing money upon their credit. 24 Corpus Juris, 71. But if reasonable conduct in the administration of the estate requires that he should advance money in the course of his administration to discharge obligations against it, the amount of the money so advanced may properly be allowed to him in his administration account. Stateex rel. Htfd.-Conn. Tr. Co. v. United States Fid. Gua. Co., 105 Conn. 230, 239, 135 A. 44; Guthrie v.Wheeler, 51 Conn. 207, 214. While those from whom the executors borrowed money may not properly come directly upon the assets of the estate, except under the provisions of the statute we have discussed, yet if the money was properly used by the executors in the performance of their duties, they would be entitled to be credited with the amount spent in their administration account. Merchants National Bank v. Weeks, 53 Vt. 115;Allen and Hill, Exrs., v. Shanks, 90 Tenn. 359,388-390, 16 S.W. 715; Morehead Banking Co. v. Morehead,116 N.C. 410, 413, 21 S.E. 190; 3 Schouler on Wills (6th Ed.) § 2457. If the claim of the Noble estate comes within the purview of that statute, it may by virtue thereof be paid by the plaintiff.

The obligations incurred by the executors in carrying on the business being primarily and essentially debts owed by them individually, they might set up to defeat their personal liability the same statutes of limitation as would apply in the case of similar debts owed by any individual, or might waive the bar of those statutes. Though they might have barred them by pleading the statutes, nevertheless, if they did pay them, and they were just claims, and the allowance of the sums so paid to the executors would cause no other prejudice to the estate than the mere use of its assets for that purpose, such payments might be allowed to them in their administration accounts. The statute, § 5771, provides for the satisfaction from assets of the estate of claims which ought equitably to be paid from them. In determining whether the obligations incurred by the executors should now be paid from the assets of the estate, the mere fact that the period of the applicable statute of limitation had run would not be conclusive, but the matter should be determined upon equitable principles. The condition of the estate and the uncertainties which confronted those to whom the executors had incurred obligations both as to their rights and the proper methods to enforce them, are sufficient to prevent the adoption, even by analogy, of the periods fixed by the statutes as barring their claims. These claims are subject, as regards delay in taking steps to enforce them, only to the defense of laches, of which prejudice is the essence.State ex rel. McClure v. Northrop, 93 Conn. 558, 565,106 A. 504.

In this connection, we turn to the question whether there is any method by which the obligations now due from the estate, other than ante-mortem claims, can be ascertained. None is suggested and we know of none. At the same time, the plaintiff ought to be aware of any obligations he has incurred and of any incurred by the executors which have been presented to him. Eight years have now elapsed since the executors ceased to hold office. Any creditor who has not presented his claim to the plaintiff, or shall not do so in the further time that will be necessary to put the estate in condition for final settlement, will be in no position to complain if it be not kept open to satisfy it. Such a delay on his part would preclude, upon the principles we have just stated, the assertion by him of any claim to assets of the estate after it has been regularly settled.

In Hewitt v. Sanborn, 103 Conn. 352, 376,130 A. 472, we held that, upon the facts then before the court, the heirs of Isabel Sanborn did not have title to the lands specifically devised to her by adverse possession, and there is certainly nothing in the facts presented in this report which suggests any different conclusion. We also held in that case, page 369, that those lands could not be held to respond to obligations incurred in the conduct of the quarry business. In the course of the opinion, we indicated that so much of the property as was devised and bequeathed to the sons as trustees would be held to respond to those obligations. Certain of the defendants now point to some of the provisions of the will as indicating an intent on the part of the testator that none of the real estate, or indeed of the property comprising the trust, should be used to discharge obligations incurred in the business. In the will, he gave the trustees power to sell any of his estate except the developed quarry property, which could only be conveyed to the corporation, if one were formed as authorized by him, but in the codicil he limited the trustees' power of disposal so that they might not sell any part of the estate, real or personal, for a period of three years after his death, and he provided that the proceeds of any property sold should be added to the estate as a part of the capital or fund for business transactions. Until a corporation was formed, he authorized the trustees to use all the trust estate to carry on the quarry business; and he expressly forbade the trustees or executors to place any mortgage or other incumbrance upon the real estate devised for the trust. Beyond question the testator did contemplate that the expenses of the business would be paid out of the income from it and that the quarry property and equipment would remain a part of the trust. But he also must have contemplated that obligations would be incurred and debts become owing in the conduct of the business. It may well be that the trustees, or the executors, while carrying on the business would have no power voluntarily to encumber or alien any of the real estate, or any of the personal property not of such a character as naturally would be disposed of in the codicil, but when the testator directed that the business be continued, he necessarily put the property set aside for that purpose to the hazard of loss that might be incurred, and, in the provisions in question, he cannot be taken to have intended that it was not to be subjected to the claims of creditors, if the income from the business proved insufficient to pay them. Whitman's Estate, 195 Pa. 144, 155,45 A. 673. All the property set aside for the trust is subject to sale, under authority from the Court of Probate, if necessary to discharge obligations of the estate.

There are outstanding valid obligations chargeable against the estate, or some part of it, as follows: General administration expenses, incurred by the plaintiff, and by the executors in so far as, under the statute, they are now chargeable against the estate in the hands of the plaintiff; debts owing to creditors incurred by the executors in the conduct of the business, as far as they are now chargeable against the estate; and claims of ante-mortem creditors. The property of the estate, aside from the lands specifically devised to Isabel Sanborn, must be exhausted in the discharge of these obligations before recourse can be had to them. General Statutes, § 4944; Hewitt v. Sanborn,103 Conn. 352, 371, 130 A. 472. If that property does not suffice, then certain questions of priority would present themselves. The general administration expenses would ordinarily have priority over the claims of ante-mortem creditors. The executors received assets greatly in excess of the amount necessary to discharge all claims presented against the estate, and it is obvious that they have kept the estate open and continued the business so many years solely in the interests of devisees and legatees. In such a situation, the claims of ante-mortem creditors have priority over the expenses of conducting the business. Whitman'sEstate, 195 Pa. 144, 148, 45 A. 673. On the other hand, neither the claims of the ante-mortem creditors, nor of those to whom the executors incurred obligations in conducting the business, could in any event be charged against the land specifically devised to Isabel Sanborn, while the general administration expenses might be; so there is presented a situation where there are two funds which may be charged with general administration expenses and one of those only is chargeable with the ante-mortem claims and business debts. By the familiar equitable principle of marshaling, in such a situation the ante-mortem claims and business debts would be given priority as to the latter fund, that is, the property of the estate aside from the land specifically devised; the remainder of that property, if any, would be applied to the general administration expenses and the balance of those expenses would be charged upon the land specifically devised. Weidemann v. SpringfieldBreweries Co., 78 Conn. 660, 665, 63 A. 162. While this is an equitable doctrine, and Courts of Probate have no general equitable powers, its application is so much an incident of the power of that court in the settlement of this estate that the principle may properly be applied. Vail's Appeal, 37 Conn. 185,195; 3 Woerner on American Law of Administration (3d Ed.) § 495.

One claim, that of the estate of Edmund Zacher, is for legal services rendered of a nature in part to fall within the class of general administration expenses and in part within the class of business debts, and the report states that it would be possible, but laborious and difficult, to separate the items pertaining to the two classes. Primarily the duty to make such a separation rests upon the claimants in their presentation of the claim to the plaintiff. If they cannot or do not make it, the claim can only equitably be placed in the class rating the lower as regards priorities, that is, among the debts incurred in conducting the business.

The plaintiff cannot recover back any portion of the sums paid by the executors to creditors of the business even though the amount of the estate now in his hands should prove inadequate to pay the existing claims growing out of the business which are properly chargeable against it. The situation so presented would not be at all like that where an executor or administrator has paid to a legatee, or one who has presented a claim against the estate, more than his just share. In such a situation, the legatee or claimant is entitled only to his aliquot part of the assets of the estate. Each person to whom the executors have incurred an obligation is entitled to full payment. If he seeks it, he may receive his pro rata amount of the estate available for such payments; but if this does not pay him in full, he may look for the recovery of the balance to the personal liability of the executors. General Statutes, § 5771. Those who have been paid have received nothing to which they were not fully entitled and no duty to refund rests upon them.

The finding of the court makes it clear that the quarry business could not in any event be carried on now except at a total loss and that there is no prospect of a change in the situation. Upon the settlement of the estate by the plaintiff, if any funds are left in his hands, they cannot be devoted to the trust specified in the will. By the terms of that instrument it is clear that, aside from such a desire as the testator might have had that the business he had founded and successfully developed should be continued, his intention was to benefit those for whom annuities were created and those to whom the principal of the trust was ultimately to be delivered on the death of the last surviving son. That it has become impossible to carry out so much of the testator's desire as has to do with the continuance of his business, is no reason why the intent to provide for annuities and the other payments specified in the will by holding the property of the estate in trust and ultimately to have the principal distributed to those whom he has designated to receive it, should fail of accomplishment. From the facts in the report it does not appear that there are any children of the deceased son, George Beattie, who might claim the sums specified to be paid to them. The proper course to adopt is the appointment of a trustee, to hold and invest the property and to disburse the income in the payment of the annuities provided or, if it is insufficient, so much of them as may be paid from it, pro rata, and to distribute the principal at the death of the last survivor of his sons as provided in the will. Hayden v. Connecticut Hospital for Insane,64 Conn. 320, 324, 30 A. 50; Colonial Trust Co. v. Brown, 105 Conn. 261, 283, 135 A. 555; Newton v. Healy, 100 Conn. 5, 10, 122 A. 654; 2 Perry on Trust (6th Ed.) § 728. It does not appear from the report that the testator's sons named as trustees have ever declined to act as such or become incapacitated; but if that event occurs, the Court of Probate should designate another trustee. General Statutes, § 4897;Babcock v. African Methodist Episcopal Zion Soc.,92 Conn. 466, 475, 103 A. 665; Eliot's Appeal,74 Conn. 586, 598, 51 A. 558.

The questions upon which we are asked to advise are twenty-four in number. Some of these are too general to justify consideration and several of the others put virtually the same question in different forms. So far as they are properly to be considered by us, we quote them in the footnote.^**

We answer these questions as follows: To questions A and B we say: The obligations incurred by the executors in carrying on the quarry business are not