Wilmerding v. Russ

33 Conn. 67

• Court: Supreme Court of Connecticut
• Decided: September 15, 1865
• Status: Published

Opinion

Hinman, C. J.

The bill seeks to make the executrix of the last will and testament of Charles J. Russ, deceased, accountable for fifty-three shares of the capital stock of the Hartford Fire Insurance Company, together with the dividends which have accrued thereon since 1842, under the following circumstances. The said Charles J. Russ in May, 1842, was appointed administrator with the will annexed, on the estate of Cornelia Russ, who died in April, 1842, leaving a will, the residuary clause of which was as follows :—

“ The rest and residue of my estate, real and personal, I direct should be held by trustees, hereinafter named, in trust as follows, to wit: — the same should be divided into seven parts, and held for the benefit of the children of my deceased sister and brother, to be divided and held for and delivered to them as follows : — each of the daughters to have two-sevenths parts, and the son of my sister, Mrs. Burrows, to have one-seventh part; the interest or income of the part belonging to each shall accumulate and be added to the principal, and not paid over to the children respectively until they shall respectively attain the age of twenty-one, when each one so attaining said age shall respectively receive on his or her part both principal and inter ' est. In case of the death of either of said children before attaining said age, then his or her said portion shall go to and be held for said survivor or survivors in like proportions, subject to the restrictions and limitations hereinbefore expressed. I appoint Rev. George Burgess and Henry Barnard, 2d, Esq., to be trustees of this will, and in case of the refusal, resignation or death of either of them, I direct the judge of probate of the district of Hartford to fill the vacancy, and in every case my trustees shall give bonds, satisfactory to said judge, for a faithful execution of said trust.”

The petitioners are surviving legatees, and became of age as follows: Harriet, July 15, 1857 ; John Russ Burrows, September 13, 1859; Johanna Russ, March 9, 1860.

The testatrix at her decease owned fifty-three shares of the capital stock of said insurance company, which were inventoried at five dollars per share. In the settlement of her estate it became necessary to dispose of some of its assets, and the administrator made an arrangement with Isaac W. Stuart to transfer these shares to him, which was done on the 22d of December, 1842, about six weeks after the arrangement was made. On the 20th of December, 1842, Mr. Russ settled his administration account with the court of probate, and in this account he charged himself with these fifty-three shares of stock as sold at the inventory price, which is found by the committee to have been at that time their fair market value. The account was approved by the court of probate, and the rest and residue of the estate, as found by the court, was delivered over to the trustees, and their receipt taken for the same, on the said 20th of December, 1842. The stock continued to stand in the name of Stuart on the books of the company until December, 1856, when it was transferred to Mr. Russ. And it is found by the committee that Stuart held the stock, not for his own use, but for the use and benefit of Mr. Russ, and that Stuart had no substantial interest in it: but the committee say that they do not find any fraudulent or collusive combination between Stuart and Russ, nor any concerted concealment of their acts, except what is inferable from the facts specially found. The stock has now become very valuable and has yielded large dividends, which, with a transfer of the stock, were demanded of the executrix by the petitioners before this suit was brought. Mr. Russ as administrator, on the 30th of November, 1842, received and gave his receipt for a dividend of three dollars per share on the stock, which he did not credit to the estate in his administration account.

On these facts there can be no doubt that the sale of the stock to Stuart was in trust for Mr. Russ ; and as Russ could not legally be the purchaser of property which' he owned as administrator, and which he himself sold, the sale was contrary to the policy of the law, and was a void sale, however fair and honest in fact it might have been, and would unquestionably have been set aside as constructively fraudulent, had an application been properly made to the court in due season for that purpose. The counsel for the respondents claim that the petitioners had adequate remedy at law, by appeal from the decree of probate settling the administration account, and for this reason they have no remedy in chancery. That they had this remedy before the statute of limitations in respect to appeals from probate had run, is probably true. And indeed this would seem to be an ample and an appropriate remedy, but in cases of this description courts of equity have in many cases claimed and exercised jurisdiction, and we are not disposed in this case to examine the question whether under our statute restricting the jurisdiction of courts of equity to matters in which adequate relief can not be had in the ordinary courts of law, this bill ought to be dismissed on this ground, since we are of opinion on another ground that the petitioners are not now entitled to the relief they ask for.

The case, we think, may safely be put upon the general statute of limitations, irrespective of the statute prescribing the time within which appeals from probate must be taken. The petitioners claim that an administrator is a trustee, and that, in chancery, statutes of limitation do not run in favor of trustees; and it is unquestionably true that while the trust is an open, continuing or acknowledged trust, statutes of limitation have no application. Before the settlement of his administration account, and while he is acting as administrator, he is a continuing trustee, the trust is executory, and statutes of limitation have no application to him, because in general in no fair sense is there a cause of action against him until he is called on to account, and until a cause of action accrues the statute does not commence running. But when he makes a final settlement of his administration account with the court of probate, then a cause of action does arise if there is any just ground of complaint against his account. He then openly attempts to discharge himself of his character of trustee, lays down the trust, and repudiates the idea of being any longer administrator in respect to the estate administered upon. If the statute does not then begin to run it never does or can, and there is no limit to the liability of executors and administrators. Whatever cause of action these parties ever had, they had in 1842. This suit was commenced more than nineteen years after the close of the administration account and the approval of it by the court and the final disposition of the residuary estate according to the terms of the will. By this lapse of time all legal remedies are barred, and equitable remedies also, unless the case can be brought within some of the exceptions to the statute. The petitioners say the fact that they weré minors brings them within an exception to the statute. But the residuary estate is by the will vested in trustees, who were under no legal disability, and this is a sufficient answer to this claim. Wych v. East India Company, 3 P. Wms., 309.

Again, it is claimed that Mr. Russ by the purchase of the stock through the agency of Stuart became a trustee for the petitioners, and" that this is a continuing and still subsisting trust, and therefore not within the statute. But by the whole current of modern authorities implied trusts are within the statute, and the statute begins to run from the time the wrong was committed by which the party becomes chargeable as trustee by implication. This subject has been fully examined in Kane v. Bloodgood, 7 Johns. Ch., 90, and by Judge Story in Robinson v. Hook, 4 Mason, 152, and a reference to these cases is sufficient.

But a more difficult question arises upon the report of the committee, on the further claim of the petitioners, that an actual, as distinguished from a constructive or legal fraud, was committed upon them by Mr. Russ ; and that this fraud was concealed from them until after the statute of limitations had attached to the claim; and that, in a court of equity, the statute of limitations ought not to be allowed to protect a fraud of this sort. And the case of Phalen v. Clark, 19 Conn., 421, is relied upon in support of this claim. We have no disposition to dispute this doctrine as established by the authority of that case, although the principle ought not, we think, to be extended. Where fraud is concealed for the purpose of taking advantage of the statute of limitations there is a strong natural justice in punishing it, however remote, especially when no laches are imputable to its victims. Still, we must recollect the danger of mistake in the examination of stale demands, and the great difficulty there is in getting at the whole truth in respect to ancient transactions; the danger and difficulty in which are greatly increased in cases like tliis, where both the actors in the subject of investigation are dead. It can hardly be otherwise than that many of the items of evidence which may happen to be preserved, and which appear after so long a time in an unfavorable light, would be subjects of satisfactory explanation if the parties to the transactions were alive to explain them. It is true that considerations of this sort would be entirely out of place here, if the committee had seen fit to find that there was in this case the fraud and the concealment which would bring the case within the principle established by Phalen v. Clark. But we think they have not done this. They have found certain facts. They have negatived all combination to defraud, and all combined concealment, and then left it for us to infer from the facts they have found whether there was actual fraud in the case or not. It is the case, therefore, where we are called upon to draw inferences which the committee were not willing to draw. And in such a case we must most obviously act upon the same principles that it would have been the duty of the committee to act upon, or we must omit to draw any inferences whatever.

The committee, we have remarked, do not find actual fraud. If it existed the court must infer it from the facts reported by the committee. Now the interposition of Stuart as a sham purchaser is relied upon by the petitioners as an important item of evidence to show the fraud. Undoubtedly it is evidence favorable to the petitioners on the point, but we think it is not of that conclusive nature that requires us to find the fraud upon it alone, or in connection with any other facts in the case. As administrator Mr. Russ could not transfer the stock directly to himself. The transfer to a friend, therefore, was natural as well as necessary, if the administrator intended to become the purchaser. Such purchases, though forbidden by the policy of the law, are, we believe, often made by executors and administrators from honest motives and to save the property from ruinous sacrifice, and are not, we think, necessarily, as matter of law, fraudulent in fact. If the sale had been at any thing less than its actual value at the time, it would have been much stronger evidence of fraud. But when the administrator could have procured the same or a larger quantity of this stock in the market at the same price at which he accounted to the estate for this, he obviously had no motive to commit a fraud, and in the absence of any motive the inference is nearly as strong that he did it for the benefit of the estate as that it was done for his own benefit.

The transaction was not at once openly recognized as a sale to the administrator, but the stock remained in the name of •Stuart until 1856. This undoubtedly is a suspicious circumstance. Still it may have arisen from the confidence which the parties reposed in each other, and from the mere neglect and inattention consequent upon the small value which the stock had at that time; and there may have been objects to be accomplished entirely unconnected with the matter in dispute. In the absence of all proof, and after the death of the parties has rendered any explanation impossible, we do not feel justified in saying that the failure,to re-transfer was intended to conceal the facts from the notice of the petitioners or their trustees ; especially after the express statement of the committee that they do not find any fraudulent or collusive combination between Stuart and Euss, or any concerted concealment of their acts, except what is inferable from the facts themselves, and that the administrator charged himself with the fair market value of the stock, and that the sale of assets to the amount of the value of this stock was necessary to pay debts and charges against the estate, and the sale of the stock in furtherance of that object. As the committee, with all the facts before them, and of course a much better opportunity to come to a correct result upon the subject than it is possible for us to have, have not seen fit to find actual fraud, we do not feel justified in .coming to a result to which they could not arrive! A court of equity would undoubtedly declare the sale to be one which was invalid, as against the policy of the law and constructively fraudulent, but in cases of constructive fraud the statute of limitation applies. The decisions to this effect are conclusive. Bickford v. Wade, 19 Ves., 88; Murray v. Coster, 20 Johns., 576 ; Robinson v. Hook, 4 Mason, 151.

It is not, moreover, unworthy of notice on the question of fraudulent concealment, that the sale, to Stuart at its fair value was known to the trustees, and they made no objection to it whatever; and to allow them or the petitioners, after this lapse of time, to set the sale aside as fraudulent, is to allow them, at any subsequent time however remote, to take advantage of any fluctuation by which its value was increased, while they in any event obtain its full value at the time, -in the settlement of the administration account.

In respect to the dividend on this stock which Mr. Russ received, November 80th, 1842, it was received after the arrangement for the transfer of the stock was made, but before its final transfer on the books of the company. It was. openly receipted for on the books of the insurance company a few days before the settlement of the administration account. The claim in regard to it stands substantially on the same footing with the claim for the stock itself and the subsequent dividends. We think the petitioners’ remedy is,barred by the lapse of time, and so we advise the superior court. The opinion here expressed renders it unnecessary to consider the question of evidence whichihe respondents raised.

In this opinion the other judges concurred, except Dutton, J., who dissented.