United States Rubber Co. v. Peterman

119 Ill. App. 610, 1905 Ill. App. LEXIS 159

Opinion

Mr. Presiding Justice Ball

delivered the opinion of the court.

The executors are not, by the will of E. B. Preston, empowered to carry on the business of the testator. Thereby they are directed “to take charge immediately upon my decease and have entire control of all my estate above named and manage and conduct the same to the best advantage.” This provision imposed no other duty upon the executors, as “trustees for that purpose” than properly to care for the assets of the estate coming into their hands as executors. The appeal to the Circuit Court brought up each and all of the items for which the executors claimed credit in their account, so far as the same were disallowed by the Probate Court. That appeal was not of the items separately considered, but was an appeal from, their dis-allowance as a whole, i. e. the sum of $12,077.82.

It is fair to said executors to say that they are not charged with having acted in bad faith in the management of this large and complicated estate. The evidence tends to show that the result of their labors was more advantageous to the creditors than a forced sale would have been. But the question still remains to be determined—did they act within the law?

Upon the hearing before the commissioner the executors admitted that the amount paid for the use of the special Wagner car from Chicago, Illinois, to Hartford, Connecticut, and return, and the sum of $295.53 expended for railway fares for that trip (less $82.50, the admitted cost of the trip for one person) considering the insolvent condition of the estade, were improvidently expended, and they were content to have these two items, $820.75 and $213.03, disallowed. At the time of the funeral of Mr. Preston his estate was considered to be solvent, and these outlays were thought to be justified. Mor did the executors contest the charging back of the item' of $357.82, which twice- appears as a credit in their reports. In view of these admissions and the neglect of the executors to argue these questions, we must hold that their exceptions to these several items was not seriously intended. For these reasons, and because it is just and equitable, we hold that these three items were properly disallowed by the Circuit Court.

It appears that when Mr. Preston died he was owing certain of his employees the sum of $3,616.98, which indebtedness is shown on what is called the back pay roll. Thinking that the estate was solvent, and so representing to the Probate Court, the executors obtained an order authorizing them to pay such employees in full, and then so did. By informing the court under oath that such payment could be made without prejudice to the other general creditors, they made themselves responsible for any damage which should come therefrom to such other general creditors. Beyond question these employees were general creditors of the estate and fall within the seventh class of creditors as classified in chapter 3 of the Revised Statutes, entitled “Administration of Estates.” The insolvency of the estate being admitted, the general creditors having received but 70 per cent of their respective claims as allowed by the Probate Court, it follows that such payment was improvident and unauthorized to the extent of 30 per cent thereof, and that the decree of the Circuit Court disallowing such claim to the amount of $1,085.09 is correct.

At the date of the death of Mr. Preston appellee Peter-man was, and for a long time prior thereto had been, in his employ as a manager of one of the departments of the business at a salary of $300 per month. After his appointment as one of the executors of the estate he continued to work for it, and, without an order of the Probate Court allowing it, he received from the executors the sum of $1,453.83 for such services. The rule is well settled at common law and in courts of equity that an executor is not entitled to any compensation for loss of time or for his personal services in the performance of the duties of his office. The assets of an estate in the hands of the executor are funds held in trust. As to such assets the law will not permit the executor to stand in two inconsistent positions—the one of self-interest, and'the other of official duty. There is no hardship inflicted upon the executor by the enforcement of the rule, that he must work for the estate without other than the statutory compensation, because any executor may elect whether or not he will act. Willard v. Bassett, 27 Ill. 37; Hough v. Harvey, 71 Ill. 72; Cook v. Gilmore, 133 Ill. 139; Gray v. Robertson, 171 Ill. 251; Hannah v. People, 198 Ill. 88. It follows that the compensation provided for executors by the statute concerning the administration of estates is the only compensation the executor can lawfully claim or be allowed; and therefore that part of the decree which charges back this item of $1,153.83 to the executors is correct.

The executors advanced to Ellen M. Preston the sum of $1,382.90 without any authority of law. This act is indefensible. The learned chancellor is right in charging this sum back to the executors.

The sum of $98.50 made up of four payments wrongfully made by the executors to parties who were not creditors of the estate “for influence,” comes within the same rule. It was proper to order the executors to charge themselves with this amount.

The executors credit themselves with $9,839.17 of uncollected open accounts arising out of sales of the merchandise of the estate by them upon credit without security, and without being authorized so to do by the Probate Court. By section 91 of the Administration Act it is provided that the executor “when it is necessary” may sell the personal property of the estate at public auction. “The sale may be upon a credit of not less than six nor more than twelve months’ time, by taking note with good security of the purchasers at such sale. * * * Provided that any part or all of such personal property may, when so directed by the court, be sold at private sale.” In Curry v. People, 51 Ill. 263, 265, this statute was considered. The action was debt upon the administrator’s bond by a creditor who alleged a devastavit by the administrator in this, that he sold the property upon credit and took an insufficient security, whereby the purchase price became uncollectable. The court say: “That the administrator failed to discharge his duty in requiring sufficient security, and thereby became liable to the heirs and creditors.” This section again came before the Supreme Court in Bowen v. Shay, 105 Ill. 132. There the administrator obtained an order from the Probate Court authorizing him to sell the personal property at private sale," but that order contained no provision regulating the terms of sale. He sold part of the goods upon credit, taking unsecured notes for the price. By reason of the insolvency of some of the purchasers a part of the accounts became worthless. The court held that the statute requires-the administrators to take security for property sold on credit, whether the sale be public or private, and if the purchase price be lost because security was not taken, the loss must fall upon the administrator and not upon the estate, and that the statute gives no power to the Probate Court to provide, in an order granting leave to sell personal property at private sale, that such sale be made without security. The rule thus established, that an executor cannot sell upon credit the goods which come into; his hands to be administered, without requirng security for the price, is also a rule at common law, sustained by the overwhelming weight of authority in England and in this country. See King v. King, 3 John Ch. 552; Foster v. Thomas, 21 Conn. 285; Vreeland v. Vreeland, 16 N. J. Eq. 512; Swoyers Appeal, 5 Barr, 377. In this state of the law we are not'called upon to decide whether said section 91 is mandatory or permissive, since in either ease the result in this suit is the same. Of the said sum of $9,839.47, the sum of $5,055.15 stands without special excuse. Under the authorities cited the decree of the Circuit Court charging the executors with this item of $5,055.15 is correct. The remainder of said $9,839.47, namely, the sum of $4,784.32, represents an uncollected open account due from Porter & Gilmore for goods sold them by the executors during the administration of the ¡estate. It seems that in the lifetime of Mr. Preston he and that firm had a contract relating to the sale of bicycles in certain territory, including the city of Hew York and "its vicinity, in which a credit of sixty days was given to Porter & Gilmore if they desired it. There is no competent evidence of this contract in the record. But if there were, it was personal in its character, and the executors were not bound to continue its performance. Section 127 of the Administration Apt provides: “All contracts made .by the decedent may be performed by the executor or administrator, when so ordered by the County Court.” If the executors, without obtaining such an order, undertook .to carry out that contract, they must bear the losses, if any were sustained. Smith v. Wilmington C. M. & M. Co., 83 Ill. 498.

At the date of the death of Mr. Preston, Porter & Gilmore were indebted to him in the sum of about $4,800. The executors continued to sell to that" firm on credit without taking any security for payment until the account amounted to about the sum of $5,000. During the months of May and June, 1895, Porter & Gilmore paid the executors about $5,000. The cashier and bookkeeper of the .executors credited these payments to the account which .accrued prior to the death of Mr. Preston. When the aggregate report of the executors was presented, this -$4,784.32 was treated by them as a new open account. It is true that when money is paid upon account and there are two items to either of which it might apply, the payor must direct its application. In case he fail so to do the payee may credit it to either account. If no designation •be made by the debtor or by the creditor, the law declares that it shall be applied upon the older account. There is no evidence that Porter & Gilmore indicated as to which of these accounts the money sent by them should be ap- - plied; while it does appear that the cashier and bookkeeper of the executors, without objection being made by them, applied the payments to the old account, and that the executors treated their sales to Porter & Gilmore as a new and uncollected account. Having thus elected, it is now too late for the executors to urge that these moneys should not be treated as payments upon "the old account. It ■ follows that the decree of the Circuit Court that the executors should not be charged in their accounts with said sum of $4,784.32 is erroneous, and must be and is reversed, with ■directions to charge the executors with said sum.

It appears from the evidence that from October 13, 1897, to July 31, 1899, the executors in their conduct of'the' estate paid a clerk ten dollars per week and hired a room in the Women’s Temple at a rental of $35 per month. In October, 1897, there remained about $37,000 of open accounts, and about $2,500 of machinery and merchandise. The clerk looked after these assets, kept the books, attended to correspondence, made and checked out the third dividend and talked with those persons who came to inquire about the estate. It is true that during this period only a very small amount of the open accounts was collected, but we are not prepared to say that the circumstances did not justify the executors in the employment of such clerk; and therefore we affirm the decree of the court which credits the executors with the sum of $930 for such clerk hire.

The executors advanced to Mrs. Preston $1,382. This was an illegal distribution. Had it not been made it would have been available for distribution among the creditors. The executors will not be heard to say that they did not know that such act was a devastavit. The statute of 1872 provides, as a penalty for such acts, the payment of interest upon sums retained by executors in their possession or control, at the rate of ten per cent per annum at a period of two years and six months from the date of letters testamentary. The accounts filed by the executors show that such letters were issued to them April 27, 1895. Hence the thirty months provided by statute expired October 27, 1897. The decree of the Circuit Court- charging the executors with interest at the rate of ten per cent per annum from the last mentioned date upon said sum is approved.

The sum of $357.82, for which the executors twice took credit, falls in the same category; and the finding of the Circuit Court charging them with interest upon that sum is approved.

The executors improperly paid executor Peterman the sum of $1,453.83 for services rendered the estate. We must hold that they were bound to know that such payment was illegal and unwarranted. It follows that interest upon this sum must be charged to the executors at the rate of ten per cent per annum from October 27, 1897.

As to the remaining items charged back to the executors, we do not find in the evidence that as to any one of them the acts of the executors relating thereto were wilful, nor do we find from the circumstances that as to any of such items the executors must be held to know that such acts were unlawful. From the time of the filing of such aggregate report to the present date the delay in the disposition of the matters here under consideration must .be attributed largely to the crowded condition of the dockets of the courts, and but little of that delay can be justly imputed to the executors.

This statute charging executors with interest at the rate of ten per cent per annum is penal in its character, and before such a penalty is imposed upon them their liability must be clearly established. Gilbert v. Bone, 79 Ill. 343. We do not find a case made against the executors in regard to such remaining items which calls upon a court of equity to thus penalize them. Upon this subject the court has a large discretion, and it will not impose the burden unless the circumstances of the particular case clearly demand such action. The rule is that the executor will not be charged with interest unless he has used the money or unreasonably retained it after he ought to pay it over or ought to have accounted for it to the court. Rowan v. Kirkpatrick, 14 Ill. 10. Any stricter rule would not only be inequitable, but it would deter responsible and competent men from accepting such trusts. We are therefore of the opinion that as except to the sums of $1,382, of $357.82, and of $1,453.83, the executors should not be charged with interest upon any of the sums charged back to them in their accounts.

Ellen M. Preston, one of the executors, claims that under the evidence and the law applicable thereto, she is not jointly liable with the other executors for any part of the sums charged to the executors except the item of funeral expenses, the item of $357.82, and the item of $1,382 paid to her. The evidence upon this question is furnished by .Mrs. Preston. She says: “I am the widow of the deceased, E. B. Preston. My residence is in Colorado Springs, Colorado, where I have resided for the past three years. At the time of my husband’s death I was in Chicago, but knew nothing of his financial condition. I was one of the executors, but the administration of the estate was run by Peterman and Edwards. I was aware that the business was being conducted by the executors, and it was with my consent. I do not remember when I first learned that the estate was insolvent. It was in the year 1895. .1 had not very much to do with the management of the estate. Still, I was satisfied. I think John Peterman ought to have known. I owned some of the buildings in. which the business of tibe estate was being conducted. He rented that one, 411 and 415; that belonged to me. I received rent for the use of the buildings by the executors.” In short she says that she was aware that the business was being conducted by the other two executors, that this was with her consent,_ and that she was satisfied with their management of the estate. Where an executor is cognizant of a breach of trust by his co-executor, and acquiesces in. it, he is responsible with such wrong-doer for any loss which results, therefrom to the estate. 17 Am. & Eng. Ency. (2nd ed.), 620; English v. Newell, 42 N. J. Eq. 81; Fonte v. Horton, 36 Miss. 355; In re assgt. of Richart & Campbell, 58 Ill. App. 94. We are of the opinion that Mrs. Preston is jointly liable with the other executors.

The distribution of the costs herein incurred is a matter within the sound discretion of the Circuit Court. We see no reason why we should disturb the action of that court in that regard.

The decree of the Circuit Court is sustained by the evidence in all particulars except as indicated in the foregoing opinion.

The decree of the Circuit Court will be affirmed, except in so far as it fails and omits to charge against the executors the sum of $4,784.32, and also fails and omits to charge against them interest at the rate of ten per cent per annum upon the sum of $1,453.83 paid to executor Peterman; as to each of said failures or omissions the decree will be and is reversed and remanded, with directions to charge against the executors, John L. Peterman, Alfred R. Edwards and Ellen H. Preston said sum of $4,784.32, and interest as aforesaid upon said sum of $1,453.83.

Affirmed in part and reversed and remanded in part with, directions.