Appeal of Matthews

• Decision Date: 15 April 1904
• Citation: 57 A. 694,76 Conn. 654
• Court: Connecticut Supreme Court
• Parties: Appeal of MATTHEWS.

57 A. 694

76 Conn. 654

Appeal of MATTHEWS.

Supreme Court of Errors of Connecticut.

April 15, 1904.

Appeal from Superior Court, Hartford County.

Proceedings for the settlement of the accounts of the administrators of Julius Converse, deceased. Prom a judgment of the superior court rendered on the committee's report on appeal from an order of the court of probate, Eugenia C. Matthews appeals. Reversed.

See 45 Atl. 170.

Julius Converse died intestate June 7, 1892, leaving a widow, Mira L. Converse, and four children, namely, Eugenia C. Matthews, Lillia A. Lee, J. Carl Converse, and Louis S. Converse. Alvarado Howard and J. M. Sheetian were appointed and qualified as administrators of the estate of the deceased, and one year from June 16, 1892, was fixed for the settlement of the estate. This case, in another aspect of it, was before this court in Matthew's Appeal, 72 Conn. 555, 45 Atl. 170. After the decision of this court in that case, the superior court proceeded to settle the final account of the administrators of said estate, and as one step in that business it appointed a committee to hear the evidence and report the facts to the court. To the report made by that committee Mrs. Matthews filed a remonstrance, the substance of which is stated in the opinion. To the separate grounds at the remonstrance the administrators demurred on divers grounds. The court sustained the demurrer to the remonstrance, and subsequently overruled the remonstrance, accepted the report, and rendered judgment in accordance with the facts therein found.

Edward D. Robbins, for appellant. Charles E. Perkins, for appellees.

TORRANCE, C. J. (after stating the facts). When Mr. Converse died he was indebted to certain stockbrokers in the sum of a little over $286,000 "on margin account," secured by stock and bonds purchased for him by such brokers, and carried by them for him "upon the usual terms on which speculative accounts are carried" by brokers. The appellant claims that the administrators, instead of settling these speculative accounts within a reasonable time, carried some of them along for an unreasonable time, and for the purpose of speculative gains, and thereby caused loss to her as one of the heirs of the estate, and that they are accountable to her therefor. The committee has found that the course pursued by the administrators with respect to these accounts was one "which ordinary business men would have taken under similar circumstances," and that in pursuing it they acted in good faith, and with due care and prudence. Upon this finding the court held that the administrators were not accountable to the appellant for any losses that may have resulted to her from what they did with these speculative accounts, and the main question in the case is whether the court erred in so holding.

In substance the report shows the following facts bearing upon this question: At the time of his death Mr. Converse had speculative accounts with the following stockbrokers, namely, Howard, Lapsley & Co., Clark. Dodge & Co., Cordley & Co., and Samuel W. Boocock. For brevity these accounts will be called the "Howard account," the "Clark account," the "Cordley account," and the "Boocock account," respectively. The understanding between Mr. Converse and these brokers was the usual one in such cases—that the securities carried by them should at all times have a value exceeding the balance due upon his account by a margin of at least 10 per cent. of the par value of such securities; and that, if Mr. Converse did not furnish such margin when required to do so, the brokers had the right to sell such securities upon the stock exchange, so far as might be necessary for the broker's protection. On July 1, 1892, there was due from the estate upon these four accounts the following sums (omitting the cents), namely, on the Howard account, $44,610; on the Clark account, $148,324; on the Cordley account, $75,895; and on the Boocock account, $15,275. In the inventory the administrators entered the net value of the securities held by the brokers for this indebtedness as "cash with bankers and brokers, $45,000," that amount being their estimate of what might be realized from a sale of these securities above the indebtedness due on the several accounts. The administrators permitted all of the securities to remain in the hands of the brokers, but made no arrangements with them as to the terms on which the accounts should be carried for the estate other than the arrangement which Mr. Converse had with them as hereinbefore stated, with the exception of an arrangement made with Cordley & Co. in July, 1893, as hereinafter stated. No advances were made to any of the brokers by the administrators to restore reduced margins, although in a few instances they were called upon to do so. If the margins were impaired by reason of the reduction in the market value of the collateral, they were restored to the amount required for the proper security of the account, either by a sale of the stocks, or by a transfer by the administrators of stocks from the other brokers whose accounts showed a margin above what was required; the broker receiving the stock holding it as additional security for the money advanced. The interest on the balances due to the several brokers was adjusted in the accounts, and no money was ever advanced to the brokers by the administrators on account of this item, nor for any other purpose. The administrators bought no new stocks, and their transactions related wholly to the stocks belonging to the estate of Mr. Converse in the hands of said brokers at the time of his death. The Boocock account was closed out in August, 1892, by a sale of the securities held by him, leaving a balance due the estate of $6,620.52, which was paid to the administrators, and duly credited in their account. By February, 1893, the Cordley account had been reduced by sales or transfers of the securities to $20,002.50; and on the 20th of that month, by order of the administrators, Howard, Lapsley & Co. paid that indebtedness, and took by transfer the securities then remaining in the hands of Cordley & Co., thus closing the Cordley account. In July, 1893, by sales of securities from time to time, the Clark account had been reduced to $34,000.22 secured by certain stocks; and on July 5, 1893, by order of the administrators, these stocks were transferred to Cordley & Co., who then assumed the indebtedness to Clark, Dodge & Co., whose account was thus closed. On July 27, 1893, the Howard account had been reduced to $25,594.61, secured by stocks; and on that day, by direction of the administrators, Cordley & Co. paid that balance to Howard, Lapsley & Co., and took a transfer of the securities held by the latter, and this closed the Howard account. On August 1, 1893, under this new account with Cordley & Co., the balance due to them from the estate was $10,070.43, secured by certain stocks in their hands. Subsequently, by sales of these securities made in November, 1895, and in May, 1896, the indebtedness to this firm was reduced to $2,610.38. To secure this balance there was left the following stock; 500 shares of Buffalo, Rochester & Pittsburgh Railroad (common), and 150 shares of Buffalo, Rochester & Pittsburgh Railroad (preferred). No further sales of the stock were made, and on June 24, 1897, F. R. Cordley & Co. became insolvent, and their estate is being wound up under the insolvent laws of Massachusetts. It is not probable that anything will ever be paid on this account. Cordley & Co., in order to secure their own private debts, either sold or pledged the stock in their hands belonging to the estate—being the 500 shares of Buffalo, Rochester & Pittsburgh common stock, and 150 shares of the preferred stock of the same company—and at the time of the failure they held none of these shares. The new account was opened with Cordley & Co. with the agreement that the interest charge on balances should be at the rate of 6 per cent., and that it should not be considered or treated as a speculative account. Subsequently the accounts were rendered to the administrators, in the form usually adopted in speculative accounts, but the administrators were not called upon for any money to increase or restore the margins. In June, 1893, there was a financial panic, and the stock market became unsettled and irregular, and there was little opportunity of disposing of the stocks at fair prices. Some time afterwards Messrs. Clark, Dodge & Co. and Howard, Lapsley & Co. each demanded 12 per cent. Interest on the balance due to them from the estate for carrying the stocks then in their hands. The administrators refused to comply with this demand, and made an agreement with Cordley & Co. to open a new account with them on August 1, 1893; the rate of interest on balances to be 6 per cent. Under this agreement the stocks in the hands of the two firms were transferred to Oordley & Co., as hereinbefore stated. Between July 1, 1892, and February 1, 1893, "many attempts were made by the administrators and the heirs to divide the property and settle the estate by some agreement which should cover all of the property, including the broker's accounts." "No agreement was reached at this time, and, with the approval of the widow and all of the heirs, except Mrs. Matthews, who did not participate in these attempts at settlement, the brokers' accounts were permitted to remain as they were, in the expectation that such an agreement would be accomplished. It did not appear that Mrs. Matthews either approved or disapproved of this agreement."

It is further found, in substance, that between...