Virgin, J.
The main question is, whether the bank obtained a valid title to the shares of stock pledged to it by the executor as collateral security for the payment of his note.
The interest which an executor, as such, has in the personal estate of his testator is not the absolute title of an owner, else it might be levied on for his personal debts; but he holds '/in auter [450]*450droit — as the minister and dispenser of the goods of the dead. Wentw. Off. Ex. (14th ed.) 196; Pinchon’s Case, 9 Coke, 86, 5; Dalton v. Dalton, 51 Maine, 171; Weeks v. Gibbs, 9 Mass. 76; Hutchins v. State Bank, 12 Met. 423. As soon as he is clothed with a commission from the probate court, the executor is vested with the title to all the personal effects which the testator possessed at the instant of his decease; but the title is fiduciary and not beneficial, (Peterson v. Chemical Bank, 32 N. Y. 21,) and his office is not that of an agent, but of a trustee. Dalton v. Dalton, supra; Sumner v. Williams, 8 Mass. 198; Shirley v. Healds, 34 N. H. 407.
As a necessary incident to the execution of the will and the administration of the estate, the power to dispose of the personal estate is given to the executor. And no general proposition of law is better established than that an executor has an absolute control over all the personal effects of his testator. Peterson v. Chemical Bank, supra; 1 Williams Exr’s, (6th Am. ed.) 709 ; 2 Williams Exr’s, 998 ; 1 Perry Trusts, § 225, and cases in notes. And this rule prevails where no statute intervenes. E. S., c. 64, § 49.
While it is the duty of an executor to use reasonable diligence in, converting assets into money for the general purposes of the will, the law permits him to exercise a sound discretion as to the time, within a limited period, when he will sell. And high authority has declared that circumstances may exist in which it is certainly not wrong in him, although it may not be a positive duty, to make advances for the benefit of the estate and reimburse himself therefrom. Munroe v. Holmes, 13 Allen, 110. If he may advance his own money for the general purposes of the will, and may sell the personal effects for the like object, it is difficult to see why, in the absence of any prohibitory provision in the will, he may not mortgage or pledge the assets for the same purpose, and the great weight of authority so holds. 2 Williams Exr’s, 1001, and cases cited. McLeod v. Drummond, 17 Ves. 154; Andrew v. Wrigley, 4 Br. Ch. Cas. 125. In Darle Vane v. Bigden, (L. E.) 5 Ch.. App. Cas. 663, Lord Hatherly said: "Lord Thurlow expressed his opinion clearly to be that the [451]*451executor is at liberty either to sell or pledge the assets of the-testator. Scott v. Tyler, 2 Dick. 712, 725. In fact he has-complete and absolute control over the property, and it is for the safety of manhood that it should be so; and nothing which lie-does can be disputed, except on the ground of fraud or collusion.', between him and the creditor.” And Sir W. M. James, in the-same case, said : "It seems to be settled on principle, as well as by authority, that an executor has full right to mortgage as well as sell; and it would be inconvenient and very disastrous if the-executor were obliged immediately to convert into money by sale-every part of the assets. It is a very common practice for am executor to obtain an advance from a banker for the immediate-wants of the estate by depositing securities. It would be a strange thing if that could not be done.” See also, 3 Redf. Wills,, c. 8, § 32, pi. 4 et seq.
In considering the question whether an executor had followed a specific power in a will, Ch. BuchNer made the general remark : "It is certain that an executor, as such, has no power to pledge the estate of his testator for a loan of money.” Ford v. Russell, 1 Freem. (Miss.) Eq. 42. If the learned chancellor, meant that an executor has no authority to pledge the assets of' his testator for a contemporaneous advance of money for the use¡ of the estate- — -for a purpose connected with the administration of the assets, he is not sustained by the groat current of modern authority. 1 Perry Trusts, 270, and cases there cited, and cases-supra.
Although the general proposition mentioned is so well established, nevertheless like most others, it is not without an-exception. For while it is of the greatest importance that the-disposal of a testator’s effects should be made reasonably safe to-the purchaser, still it is the bounden duty of the executor to> faithfully appropriate the assets to the due execution of the will; and a misapplication thereof is a breach of duty for which he is-liable. And all the authorities concur in • holding that if the purchaser, mortgagee or pledgee know or have notice, that the-transfer to him is made for the purpose of misapplying the assets, his title cannot be upheld, and he thereby becomes involved and [452]*452is made liable to all persons beneficially interested in the will, •except the executor. 2 Williams Exr’s, 1002, and cases in note , (x). 1 Perry Trusts, 270, and cases in note 1; 1 Story Eq. § § 400, 402 and cases; McLeod v. Drummond, 17 Ves. 153, where the- cases are critically reviewed by Lord-ELDEN. Collinson v. Lister, 7 De G. M. and G. 633. Gerger v. Jones, 16 How. 30, 37, 38; Hutchins v. State Bank, supra.
It also now seems to be well settled in equity at least, that an • executor, can make- no valid sale or pledge of his testator’s effects for the payment or security of his own private debt (2 Sugd. Vend. 372, and cases, in note o) ; 1 Perry Trusts, 270, and cases in note 3 ; 2 Williams Exr’s, 1004, and cases in note d; on the ground res ipsa loquitur, giving the purchaser, mort-_gagee or pledgee such notice of the-misapplication as necessarily ' to involve him in the breach of duty.
Chancellor Kent concludes a critical examination of the cases ■which had then been decided as follows : "I have thus looked • pretty fully into, the decisions of a; purchaser from an executor (of the testator’s assets and' they all agree in this: -that the •purchaser is safe, if he is no party to any fraud in the > executor and ■ has-, no- knowledge or proof that the executor ‘intended to misapply the proceeds, or was in fact by. the very transaction, applying them to the- extinguishment -of his own '¡private debt. The- great difficulty has been, to determine how ifar the purchaser dealt-at his peril, when he knew from the very fface of the proceeding that the executor was applying the assets 'to'his own private purposes, as the payment of his own debt. ‘The later and better-doctrine is, that in such a case, he does ¡ buy at his peril; but that if he has no such proof or knowledge, ¡he is not-bound-to inquire into the state of the-trust, because he ’ has ..no -means to support the inquiry and he -may - safely repose on -.the general presumption that the executor is in the due execution <of his trust.” Field v. Schieffelin, 7 Johns. Ch. 150, 160.
• So Ch. J. Taney said : "An executor may sell or raise money -on the property of the deceased, in the regular execution of his ■duty ;• and the party dealing with him is not bound to inquire into Ms -object,, nor liable, for- -his misapplication of - the money. [453]*453. .
Free access — add to your briefcase to read the full text and ask questions with AI
Virgin, J.
The main question is, whether the bank obtained a valid title to the shares of stock pledged to it by the executor as collateral security for the payment of his note.
The interest which an executor, as such, has in the personal estate of his testator is not the absolute title of an owner, else it might be levied on for his personal debts; but he holds '/in auter [450]*450droit — as the minister and dispenser of the goods of the dead. Wentw. Off. Ex. (14th ed.) 196; Pinchon’s Case, 9 Coke, 86, 5; Dalton v. Dalton, 51 Maine, 171; Weeks v. Gibbs, 9 Mass. 76; Hutchins v. State Bank, 12 Met. 423. As soon as he is clothed with a commission from the probate court, the executor is vested with the title to all the personal effects which the testator possessed at the instant of his decease; but the title is fiduciary and not beneficial, (Peterson v. Chemical Bank, 32 N. Y. 21,) and his office is not that of an agent, but of a trustee. Dalton v. Dalton, supra; Sumner v. Williams, 8 Mass. 198; Shirley v. Healds, 34 N. H. 407.
As a necessary incident to the execution of the will and the administration of the estate, the power to dispose of the personal estate is given to the executor. And no general proposition of law is better established than that an executor has an absolute control over all the personal effects of his testator. Peterson v. Chemical Bank, supra; 1 Williams Exr’s, (6th Am. ed.) 709 ; 2 Williams Exr’s, 998 ; 1 Perry Trusts, § 225, and cases in notes. And this rule prevails where no statute intervenes. E. S., c. 64, § 49.
While it is the duty of an executor to use reasonable diligence in, converting assets into money for the general purposes of the will, the law permits him to exercise a sound discretion as to the time, within a limited period, when he will sell. And high authority has declared that circumstances may exist in which it is certainly not wrong in him, although it may not be a positive duty, to make advances for the benefit of the estate and reimburse himself therefrom. Munroe v. Holmes, 13 Allen, 110. If he may advance his own money for the general purposes of the will, and may sell the personal effects for the like object, it is difficult to see why, in the absence of any prohibitory provision in the will, he may not mortgage or pledge the assets for the same purpose, and the great weight of authority so holds. 2 Williams Exr’s, 1001, and cases cited. McLeod v. Drummond, 17 Ves. 154; Andrew v. Wrigley, 4 Br. Ch. Cas. 125. In Darle Vane v. Bigden, (L. E.) 5 Ch.. App. Cas. 663, Lord Hatherly said: "Lord Thurlow expressed his opinion clearly to be that the [451]*451executor is at liberty either to sell or pledge the assets of the-testator. Scott v. Tyler, 2 Dick. 712, 725. In fact he has-complete and absolute control over the property, and it is for the safety of manhood that it should be so; and nothing which lie-does can be disputed, except on the ground of fraud or collusion.', between him and the creditor.” And Sir W. M. James, in the-same case, said : "It seems to be settled on principle, as well as by authority, that an executor has full right to mortgage as well as sell; and it would be inconvenient and very disastrous if the-executor were obliged immediately to convert into money by sale-every part of the assets. It is a very common practice for am executor to obtain an advance from a banker for the immediate-wants of the estate by depositing securities. It would be a strange thing if that could not be done.” See also, 3 Redf. Wills,, c. 8, § 32, pi. 4 et seq.
In considering the question whether an executor had followed a specific power in a will, Ch. BuchNer made the general remark : "It is certain that an executor, as such, has no power to pledge the estate of his testator for a loan of money.” Ford v. Russell, 1 Freem. (Miss.) Eq. 42. If the learned chancellor, meant that an executor has no authority to pledge the assets of' his testator for a contemporaneous advance of money for the use¡ of the estate- — -for a purpose connected with the administration of the assets, he is not sustained by the groat current of modern authority. 1 Perry Trusts, 270, and cases there cited, and cases-supra.
Although the general proposition mentioned is so well established, nevertheless like most others, it is not without an-exception. For while it is of the greatest importance that the-disposal of a testator’s effects should be made reasonably safe to-the purchaser, still it is the bounden duty of the executor to> faithfully appropriate the assets to the due execution of the will; and a misapplication thereof is a breach of duty for which he is-liable. And all the authorities concur in • holding that if the purchaser, mortgagee or pledgee know or have notice, that the-transfer to him is made for the purpose of misapplying the assets, his title cannot be upheld, and he thereby becomes involved and [452]*452is made liable to all persons beneficially interested in the will, •except the executor. 2 Williams Exr’s, 1002, and cases in note , (x). 1 Perry Trusts, 270, and cases in note 1; 1 Story Eq. § § 400, 402 and cases; McLeod v. Drummond, 17 Ves. 153, where the- cases are critically reviewed by Lord-ELDEN. Collinson v. Lister, 7 De G. M. and G. 633. Gerger v. Jones, 16 How. 30, 37, 38; Hutchins v. State Bank, supra.
It also now seems to be well settled in equity at least, that an • executor, can make- no valid sale or pledge of his testator’s effects for the payment or security of his own private debt (2 Sugd. Vend. 372, and cases, in note o) ; 1 Perry Trusts, 270, and cases in note 3 ; 2 Williams Exr’s, 1004, and cases in note d; on the ground res ipsa loquitur, giving the purchaser, mort-_gagee or pledgee such notice of the-misapplication as necessarily ' to involve him in the breach of duty.
Chancellor Kent concludes a critical examination of the cases ■which had then been decided as follows : "I have thus looked • pretty fully into, the decisions of a; purchaser from an executor (of the testator’s assets and' they all agree in this: -that the •purchaser is safe, if he is no party to any fraud in the > executor and ■ has-, no- knowledge or proof that the executor ‘intended to misapply the proceeds, or was in fact by. the very transaction, applying them to the- extinguishment -of his own '¡private debt. The- great difficulty has been, to determine how ifar the purchaser dealt-at his peril, when he knew from the very fface of the proceeding that the executor was applying the assets 'to'his own private purposes, as the payment of his own debt. ‘The later and better-doctrine is, that in such a case, he does ¡ buy at his peril; but that if he has no such proof or knowledge, ¡he is not-bound-to inquire into the state of the-trust, because he ’ has ..no -means to support the inquiry and he -may - safely repose on -.the general presumption that the executor is in the due execution <of his trust.” Field v. Schieffelin, 7 Johns. Ch. 150, 160.
• So Ch. J. Taney said : "An executor may sell or raise money -on the property of the deceased, in the regular execution of his ■duty ;• and the party dealing with him is not bound to inquire into Ms -object,, nor liable, for- -his misapplication of - the money. [453]*453. . But it is equally clear, that if a party dealing with an executor, has at the time, reasonable ground for bebeying that he intends to misapply the money, or is, in the very transaction, applying it to his own private use, the party so dealing is responsible to the persons injured.” Lowry v. Com. & Farm. Bank, Taney’s C. C. 310, 330.
The law recognizes a distinction between ' an ordinary trustee and an executor. The former has possession for custody and the latter for administration. The latter has a necessary incidental power of disposal which the former does not. And as a consequence when one purchases of the latter stocks or other securities bearing on their face the revelation of a trust, he may do so safely in the absence of notice or knowledge of any intended breach of trust on the part of the executor; but if he purchase like trust property of an ordinary trustee, the law imposes upon him the duty of inquiring into the right of the trustee to change the securities. Duncan v. Jaudon, 15 Wall. 165, 175 ; Shaw v. Spencer, 100 Mass. 388; Pendleton v. Fay, 2 Paige, Ch. 205; Atkinson v. Atkinson, 8 Allen, 15; 1 Perry Trusts, § 225, p. 271.
In the case at bar the certificate of stock was changed by the corporation and issued to Cook, executor, thus revealing to the bank the trust. But this alone would not imperil the bank in the transaction, for the executor had the presumptive right to sell or pledge the stock. But the executor gave to the bank his note for the security of which the pledge was made. The note could not be collected against the estate for it was the personal note of the executor. Davis v. French, 20 Maine, 21. lie could not create a debt in that manner against the estate. And if the money ivas thereby procured for his own private use and the ■ bank knew it at the time, the transfer of the stock would be a devastavit and could not be upheld. If the note had been given to the bank for a private debt due to the bank from the executor, created before or during his executorship, but independent thereof, it would come within the principle of the numerous cases before cited where the transaction itself would speak and conclude the bank. But if given as a voucher for money/ [454]*454obtained for a legitimate purpose connected with a bona fide administration of the will, then though the executor alone was made liable for its payment, the transaction would be legitimate and the estate would have no reason for complaint. The case finds "that the money was loaned in good faith by the bank and upon the statement made by Cook that the same was wanted in the settlement of the estate.” The presumption is that he was acting faithfully. There is no evidence to the contrary and the presumption must stand. The doctrine of this case is recognized in Pettingill v. Pettingill, 60 Maine, 412, 425.
Plaintiff nonsuit.
Appleton,C. J., Walton, Barrows, Libbey and Symonds, JJ., concurred.
Note. —To the same purport see Smith v. Ayer, 101 U. S. 320, decided since the foregoing opinion was announced. Reporter.