Elting v. First National Bank of Biggsville

50 N.E. 1095, 173 Ill. 368

• Court: Illinois Supreme Court
• Decided: June 18, 1898
• Status: Published

Opinion

Mr. Justice Magruder

delivered the opinion of the court:

First—It is claimed by the plaintiffs in error, that the court below had no jurisdiction to entertain the present bill. The objection to the jurisdiction rests upon the alleged ground, that the bill in this case, and the facts as shown, do not present a case for the interposition of a court of chancery. As the object of the bill is to compel an accounting from the executrix of an estate in regard to her conduct in the administration of the estate, it is said that the county court was the proper tribunal to grant the relief here asked. It is true, that the county court, .in the exercise of its probate jurisdiction, may grant equitable relief in many cases affecting the administration of estates, and may adjudicate most of the questions arising in the course of such administration. But it was long ago held in this State, that courts of equity have a paramount jurisdiction in cases of administration and settlement of estates. Courts of chancery may, in the exercise of their general jurisdiction, take upon themselves the administration of estates, and thus, in the case of a particular estate, supersede the jurisdiction of the probate court. Where they do this, they will take the whole administration into their hands. (Grattan v. Grattan, 18 Ill. 167; Townsend v. Radcliffe, 44 id. 446). The strict rule, thus laid down in the earlier cases, has been somewhat modified. The doctrine, as thus modified, is, that a court of equity will not exercise this jurisdiction and take upon itself the administration of an estate, except in extraordinary cases; but, where a claimant has exhibited his claim and had it allowed in the county court, then, if any special reasons that may be deemed sufficient, can be assigned, why the county court cannot afford the requisite relief, equity will assist such claimant. (Freeland v. Dazey, 25 Ill. 294; Harris v. Douglas, 64 id. 466; Winslow v. Leland, 128 id. 304). The facts shown by the record in this-case, furnish sufficient reasons why the powers of the county court are inadequate to grant all the relief sought, and justify the interposition of a court of equity.

The plaintiff in error, Blandina M. Elting, was really a resident of the State of New York. She came to Illinois upon the death of her brother, and was appointed his executrix by the county court of Henderson county. But in a few months thereafter she returned to the State of New York where she continued to reside. It is in evidence, that assets of the estate were forwarded to her or her relatives in the State of New York. The removal of an executor from the State of his appointment, leav ing his cestui que trust and the trust estate behind him, will justify the interference of a court of equity by the appointment of a receiver on the application of the cestui que trust. His removal places him beyond the jurisdiction of the court and beyond the reach of its process, and amounts to an abandonment of his trust'. (High on Receivers, secs. 712, 715, 724). It is true that, under the statute of this State, an executor, who removes beyond the limits of the State, can be required by the county court, upon proper notice being given to him, to make a settlement of his accounts, and, in case of his neglect or refusal to do so, may be removed from his office by said court. (Rev. Stat. chap. 3, sec. 31). In this case the plaintiff in error, Blandina M. Elting, may have been removed by the county court on account of her removal from the State of Illinois, but, inasmuch as she was beyond the reach of the process of the county court, the payment of money in her hands, belonging to the estate, could not be enforced by attachment for contempt. The ambunt of personal property belonging to the estate was something over §10,000.00, but the bond given by the executrix was only §2000.00, although the statute requires that such bond should be in double the value of the personal estate. When the decree was entered by the county court for the sale of the real estate by the executrix to pay debts, said executrix gave no further and additional bond as required by section 7 of the Administration act. After the sale was made, the executrix did not make report thereof to the next term of the court thereafter, as required by section 109 of the Administration act, but the report was made and confirmed before the next term of the court. The sale was made without givingthe full notice required by said section 109.

The evidence shows gross mismanagement of the estate by the executrix, both in regard to the personal property and in regard to the sale of realty. When she removed from the State, she appointed her brother, Philip B. Elting, who was insolvent, to manage the estate in her behalf, and left him to deal with it as he saw fit. She and he used the property of the estate for their own benefit, rather than for the benefit of the estate. In her reports to the county court the executrix failed to charge herself with all the personal property received by her, and her reports were in other respects incorrect. She did not account therein for interest on notes collected, and did not account for some of the notes inventoried. Soon after her appointment she executed a mortgage' upon 400 acres of land, belonging to the estate, to the sureties on her bond as executrix, to secure them as such sureties, but without any other consideration, thus seeking to place a charge upon the land, which operated to her benefit only, ahead of the charge to which the land was subject under the law for the payment of the debts of the testator. But, while not deciding that the matters and circumstances heretofore detailed would alone constitute a sufficient reason for invoking the interposition of a court of equity, we are yet of the opinion, that these and other evidences of neglect and mismanagement in the administration of the estate, when taken in connection with the more serious facts hereinafter stated, did furnish sufficient reason for filing the bill in the present case.

The strongest ground for the jurisdiction of equity in this case arises out of the breach of trust, of which the executrix was guilty, in the sale of the real estate belonging to the estate. On April 15, 1887, nearly two years after her appointment as executrix, she sold at a sale, made by her as executrix under a decree of the county court, 500 acres of land belonging to the estate, in tracts, varying all the way from 20. acres to 160 acres. These tracts of land, making 500 acres in all, were bid in by, and struck off to, her brother and agent, Philip B. Biting. The testimony shows that Philip B. Biting paid nothing for the purchase of this property at the time of the sale, and that whatever he may have paid subsequently, or settled for subsequently, was either taken from the funds of the estate, or raised by mortgages which he executed upon the property of the estate. After these tracts of land were thus struck off to Philip B. Biting, and on January 4, 1888, he deeded the same to his sister, the plaintiff in error, Blandina M. Biting, executrix of the estate. So far as the evidence shows, there was no consideration for these transfers from Philip B. Biting to his sister, the executrix. Thereafter, at various times between January 4, 1888, and the latter part of 1892, Blandina sold and conveyed all, or nearly all, of the land deeded to her by her brother, Philip, to outside parties for large sums of money. Under this state of facts, no other conclusion can be arrived at, than that the executrix sold this property to herself, making her brother and agent the medium through which she secured the title.

It is well settled in this State, that an administrator or executor cannot purchase at his own sale. The purchase of real estate belonging to the deceased by an administrator or executor at his own sale, through the intervention of a third party, is fraudulent per se. A bill in equity will lie to set aside a sale of land made by an administrator or executor, where the latter has made the purchase for himself. (Miles v. Wheeler, 43 Ill. 123; Kruse v. Steffens, 47 id. 113; McCreedy v. Mier, 64 id. 495; Whitlock v. McClusky, 91 id. 582; Lagger v. Mutual Union Loan Ass. 146 id. 283).

It is said, however, by the plaintiffs in error, that, in all cases decided by this court, where a bill has been filed to set aside a sale by an administrator or executor to himself, such bill has been filed by the heirs only of the deceased, and not by the creditors. The present bill is filed by creditors, whose claims against the estate of the deceased Cornelius D. Elting had been allowed by the county court of Henderson county. It is true, that, in most of the cases'referred to, this court has sustained the rig'ht of the heir to file such a bill. But we are of the opinion that in a case, where the circumstances are such as appear in this record, creditors, who have reduced their claims to judgment, can file a bill of this character.

Wherever a party, purporting to act in his fiduciary character, deals with himself in his private and personal character, without the knowledge of his beneficiary, as when a trustee or agent to sell sells the property to himself, the transaction will be set aside at the suit of the beneficiary. The reason of the rule grows out of the fiduciary relation which exists between the parties. (2 Pomeroy’s Eq. Jur. sec. 958). The statute authorizes an administrator or executor to sell the real estate in case of the deficiency of personal assets, in order to raise money to pay the debts of the deceased. Necessarily the administrator or executor in such case has a double duty to perform. He owes a duty to the heirs to sell the land fairly and for as much as possible, in order that the surplus out of the proceeds of sale, after paying the debts, shall be as large as possible, inasmuch as such surplus goes to the heirs. But the administrator also-owes a duty to the creditors to make a fair sale, in order that such sale, if possible, may realize enough to pay the debts due such creditors. If, by reason of fraud 'or collusion or other improper conduct, he sells the property to himself, or otherwise so conducts the sale that the creditors fail to realize sufficient to pay their claims, he is guilty of a violation of his trust, as well against the creditors, as against the heirs. In such case the creditors are beneficiaries in the trust. Accordingly, we find that the doctrine, which forbids a trustee to take advantage of his fiduciary relation to work a wrong to his beneficiary, applies to executors and administrators, as well as to other trustees. “The equitable doctrine applies with strictness to executors and administrators, who, in common with all trustees, are prohibited from purchasing the property of the estate, when sold in the course of administration, and from making any personal profits by their dealings with it.” (2 Pomeroy’s Eq. Jur. sec. 953). Here, the real estate, so far as the proceeds of its sale were to be applied to the payment of these creditors, was to that extent subject to a charge in their behalf and, in a certain sense, may be regarded as their property. Whenever a fiduciary person wrongfully converts the trust funds by taking the title to himself, equity impresses a constructive trust upon the property, whose title he thus holds. Wherever property, subject to such a trust, is wrongfully sold and transferred to a bond fide purchaser, so that it is freed from the trust, the trust immediately attaches to the price or proceeds in the hands of the vendor. This is true, whether such price is in the form of unpaid purchase money, or a different kind of property has been taken in exchange. Whenever a trustee in such case makes a profit to himself out of the trust fund, a constructive trust is impressed upon such profit in favor of the original beneficiary. (2 Pomeroy’s Eq. Jur. secs. 1051, 1052). In the case at bar, when the executrix conveyed the property to Philip at the public sale, he held the title in trust for the creditors. After he conveyed the property to his sister, the executrix, she held the title subject to the same trust. When she sold the property to other parties, the notes and mortgages taken for the purchase money thereof, or other proceeds of the sale thereof in her hands, remained impressed with the same trust in favor of the creditors. It is manifest, that the county court did not have power effectually and efficiently to enforce the trust here described against the executrix and her grantees. Equity was, therefore, justified in assuming jurisdiction, in order to enforce the trust in behalf of the creditors. In this particular case, the executrix was sole devisee under the will, and all the property of the deceased belonged to her, subject to the payment of the debts. Her conduct in colluding with her brother in the manner, shown by the record, amounted to an appropriation of the property to herself in such a way, as to get rid of the charge of the debts upon it, without making it realize the full amount which it should have realized for the benefit of the creditors. (McCreedy v. Mier, supra; Cohen v. Menard, 136 Ill. 130).

Counsel for plaintiffs in error single out particular transactions and sales, and point out specific objections to the findings of the decree of the court below in relation to the same. So many different pieces of property were sold, and so many different re-sales were made by the executrix after she became possessed of the titles through deeds from her brother, that it would be impossible for us to notice all of them. It would swell this opinion to too great a length. It is sufficient to say that, in our opinion, the testimony justifies the finding of the court below in reference to these transactions. For instance, the executrix sold about 300 acres of land to Mary S. Caldwell. Upon this purchase Mrs. Caldwell still owes $2000.00. The decree properly holds that these $2000.00, when collected, should go to the estate of the deceased testator. The evidence of the indebtedness of Mrs. Caldwell to the amount of $2000.00 is held by a nephew of the executrix living in New York. But the testimony shows that he was not an innocent holder thereof, and that it should be treated as though the title to it was in the executrix herself. So also $5800.00 of purchase money remains due from Emma Biggs. The decree below properly held that this money also belongs to the estate of the deceased, although the evidence of the indebtedness is held by a nephew of the executrix in the State of New York. The evidence shows, that the holder of it had notice of the facts herein stated, and was not an innocent purchaser. Again, the deceased was in partnership with a man named Douglas in the elevator and grain business. Philip B. Elting sold the interest of the deceased in this partnership to a man named Tate, and took in payment therefor 80 acres of land in Fulton county. Said 80 acres of land were conveyed to the executrix, who sold and conveyed the same on March 30, 1889, to one William Rector. Clearly this land and the proceeds of its sale belong to the estate of the deceased. The title to it was held by the executrix in trust for the estate, and she must account to the estate for the proceeds of its sale. So with other transactions, which need not be here mentioned. The general doctrine as to the existence of the trust, and as to the liability of the executrix and her agent to account for the property appropriated by them, and for the proceeds of the sales made by them of such property, applies to all the transactions complained of.

Second—The decree of the court below also sets aside a judgment, rendered by the county court against the estate of the deceased in favor of Philip B. Elting, as executor of his mother Anna M. Elting, and requires the said Philip, as the agent of the executrix, to account for the amount made by him by the sale of property purchased by him for the redemption thereof through proceedings under said judgment. The statement preceding this opinion sets forth the facts in relation to the claim upon.which said judgment was based. Philip, by collusion with his sister, he being in Illinois and she being in New York, procured himself to be appointed executor of the estate of his deceased mother by a surrogate court in the State of New York. After his appointment as such executor, he cited his sister, executrix of the estate of Cornelius D. Elting, deceased, to appear before said surrogate and make an accounting. His sister in New York appeared before the surrogate^ and entered her appearance, and permitted judgment to be entered against her, as executrix of the estate of Cornelius, in favor of Philip, as executor of his mother’s estate, for §6174.21. This judgment was obtained by collusion between Philip and his sister, and could not have been obtained without such collusion. Blandina had not been appointed executrix in the State of New York, and was only executrix of the estate of Cornelius by virtue of her appointment^ as such in Illinois. The surrogate court of New York had no power to render a judgment against an executrix appointed in Illinois. Such is the doctrine of this court. In Judy v. Kelley, 11 Ill. 211, a judgment was rendered by a court in Ohio against an administrator, appointed in Illinois, and suit was brought on such judgment in this State; it appeared, that no administration had been taken out in Ohio, and that the administrator sued held office only by virtue of the Illinois appointment; the question in that case was, whether a judgment, recovered in another State against an administrator appointed in this State, can be here enforced against the estate; it was held that, in his official capacity, an administrator cannot be sued out of the country from which he derives his authority, and that the State of Ohio could not rightfully extend her jurisdiction over the Illinois administrator, and that judgment rendered under such circumstances was a nullity in this State. Under subsequent decisions of this court, even if the plaintiff in error, Blandina M. Biting, had taken out administration in the State of New York, or been appointed executrix there of the estate of Cornelius, a judgment rendered in favor of Philip against her, as such administratrix or executrix there appointed, would have been improperly allowed against the estate of Cornelius in this State. If allowed in this State under such circumstances, it would have been founded solely on a judgment rendered in New York against an executrix in that State, to be paid there in due course of administration. “A judgment against an administrator in one State is no evidence of indebtedness against another administrator of the same decedent in another State, for the purpose of affecting assets received by the latter under his administration.” (Rosenthal v. Renick, 44 Ill. 202). If such a judgment rendered against the executrix in New York should be allowed here, the judgment of allowance would at best be only prima facie evidence of indebtedness as against the heirs. (McGarvey v. Darnall, 134 Ill. 367; Rosenthal v. Renick, supra). Here, however, the judgment rendered in New York against the exeputrix of the estate of Cornelius, who was appointed such executrix in Illinois, and not in New York, when allowed by the county court of.Henderson county, was not even prima facie evidence of indebtedness, because the surrogate court of New York had no power to render such 'a judgment. The proof shows, that no other evidence was introduced before the county court to establish the claim of §6174.21, except the transcript of the record. of the judgment in New York. The county court, therefore, had no power to allow the claim in favor of Philip, as executor of his mother, against the estate of the deceased Cornelius. (Hedenberg v. Hedenberg, 46 Conn. 30).

Certain attorneys represented Philip as executor of the estate of his deceased mother, and, as his attorneys, filed the claim for §6174.21 in the county court ag'ainst the estate of the deceased Cornelius. These same attorneys also represented the executrix of the estate of Cornelius Elting, deceased. The claim was filed in the county court of Henderson county in January, 1887, long after the day fixed by the executrix for the adjudication of claims, which was July 20, 1885. The claim was allowed on April 6, 1887. No process was issued to bring in the executrix as required by the statute. The attorneys referred to entered the appearance of the executrix. They represented both sides, both Philip, the executor of his mother, and B1 andina, the executrix of her deceased brother, Cornelius. The entry of appearance was a nullity, and did not give the court jurisdiction. (Pennywit v. Foote, 27 Ohio St. 627). The attorneys, while acting for Philip, executor, had no authority to represent the executrix as to that claim. The evidence shows, that the allowance of this claim for $6174.21 was obtained by collusion. It is said, however, that a certain lawyer, other than the attorneys mentioned, was appointed administrator pro tem. to defend against the claim. The reason for the appointment is the alleged ground, that the executrix, Blandina, as devisee under the will of her mother, was interested in the claim. Such interest, however, did not appear upon the face of the record. Section 72 of the Administration act provides that, when an executor or administrator has a demand against his testator or intestate’s estate, he shall file his demand as othet persons, and the court shall appoint some discreet person to appear and defend for the estate, and, upon the hearing, the court or the jury shall allow such demand, or such part thereof as is legally established, or reject the same, as shall appear just. It did not appear here, that the executrix had a demand against the estate. She did not unite with Philip in filing the claim, as a claim owned in part, or in whole, by herself. Therefore, the statute, providing for the appointment of a discreet person to appear, and defend for the estate, did not apply to this case. The filing of the claim of Philip, executor, was not such an entry of appearance by the executrix as it would have been, had she filed the claim in her own name. Hence, it was necessary, either that summons should be issued and served upon her under section 61 of said act, which provides that, when claims are filed after the day of adjustment, summons shall be served on the executor, unless waived, or that her appearance should have been entered by attorneys, or other persons, legally authorized to enter the same.

This judgment was made use of by Philip, after it was allowed by the county court, to redeem 80 acres of land owned by the estate in Warren county from a sale thereof, which had been made under a foreclosure decree. Philip, after so redeeming and obtaining a deed, sold the land to one Foote.

A court of chancery is invested with power to set aside a judgment thus obtained by fraudulent collusion between the parties, and, therefore, there was no error in the decree of the court below, ordering that it be set aside and annulled. In Propst v. Meadows, 13 Ill. 157, it was held, that a court of chancery is competent to grant relief against judgments of the county court obtained by fraud, in cases where the courts at' law cannot do so. In Nelson v. Rockwell, 14 Ill. 375, it was held, that a party may obtain relief in equity on the ground of fraud against a void, as well as a voidable, judgment. In Whitlock v. McClusky, supra, where the holders of forged notes procured the appointment of their attorney as administrator, and by collusion with him, obtained the allowance of the claim, based upon such forged notes, in the county court, and afterwards procured an order for the sale of real estate to pay such claims, it was held, that a court of equity, in view of such fraud and collusion, would prevent the payment of the unpaid purchase money of the land to said claimants, and that the procuring of the letters of administration in pursuance of the plan to obtain the allowance of said claim, was a fraud not only upon the heirs, but also upon the court. In Atlas Nat. Bank v. More, 152 Ill. 528, it was held, that a judgment or decree, procured through fraud of either or both parties for the purpose of defrauding third persons, may be attacked by such third persons collaterally, whenever and wherever it conflicts with their interests. In the latter case we said: “A collusive judgment is open to attack whenever and wherever it may come in conflict with the rights and interests of third persons.” When a judgment has been obtained by fraud, it is a mere nullity, and it may be attacked on account of the fraud in a collateral proceeding, and equity has jurisdiction to cancel and set aside such a judgment. (2 Pomeroy’s Eq. Jur. sec. 919). It may be said, however, that, even if equity did not have jurisdiction to set aside this judgment, yet, as the court had jurisdiction for the purpose of setting aside the sales made by the executrix to herself, and enforcing the trust hereinbefore mentioned against her and her agent, it would also have jurisdiction to set the judgment aside, upon the general ground that, when equity acquires jurisdiction for one purpose, it will retain it for all purposes. (Stickney v. Goudy, 132 Ill. 213).

It is said, however, by counsel for the plaintiffs in error, that, so far as this judgment is concerned, the defendants in error were guilty of laches in not filing their bill sooner than they did. It is alleged in the bill, that the complainants had no knowledge of the proceedings in reference to this claim, until long after it was allowed by the county court, and no opportunity to defend against the claim. If the defendants below had desired to raise the question of laches, they should either have demurred to the bill, or pleaded laches, or set it up in their answer. Here t'hey did not do so, and are therefore estopped from raising thé question now. (Kerfoot v. Billings, 160 Ill. 563).

The judgment of the Appellate Court and the decree of the circuit court are affirmed.

Judgmmt a#rmed