Barth v. Fidelity & Columbia Trust Co.

• Decision Date: 30 April 1920
• Citation: 188 Ky. 788
• Court: Kentucky Court of Appeals
• Parties: Barth, et al. v. Fidelity & Columbia Trust Company.

Page 788

188 Ky. 788

Barth, et al. v. Fidelity & Columbia Trust Company.

Court of Appeals of Kentucky.

Decided April 30, 1920.

Appeal from Jefferson Circuit Court (Common Pleas Branch, First Division).

DAVID R. CASTLEMAN, CHARLES W. MILNER and DAVIS W. EDWARDS for appellants.

WM. FURLONG and A. P. HUMPHREY for appellee, Fidelity & Columbia Trust Company.

THOMAS A. BARKER and HELM BRUCE for appellee, John M. Settle.

MARSHALL & NETTLEROTH for appellee, Charles H. Bohmer.

THOMAS A. BARKER for appellee, Ohio River Sand Company.

OPINION OF THE COURT BY JUDGE CLARKE — Affirming in part and reversing in part.

By his will, which was duly probated, Paul C. Barth, who died August 21, 1907, devised all of his estate except a few minor bequests in equal shares to his three infant sons, Frank L., Paul C. and Albert T. Barth, to be held in trust however until the youngest child became twenty-two years of age.

The appellee, Fidelity & Columbia Trust Company, was named as executor of the will and trustee for his infant children and qualified both as executor and trustee on August 26, 1907, and the following day John M Settle, D. F. Murphy and Thoms D. Craig were appointed appraisers of the estate. Craig, although he qualified, did not act, and Settle and Murphy on the 10th day of September appraised the real estate at $73,000.00 and the personal property at about $55,000.00 exclusive of fifteen shares of the capital stock of the Ohio River Sand Company, which they reported but did not appraise, stating in the appraisement that its value was unknown.

On September 17, 1907, less than a month after Barth's death, the executor sold the fifteen shares of Ohio River Sand Company stock, the par value of which was $1,500.00 for $27,500.00 to its co-appellees, John M. Settle and Charles H. Bohmer.

In this action, originally filed by the executor for a settlement of its accounts, the three sons of the testator, one of whom was still a minor when their cross-pleading was filed, seek a cancellation of the sale of this stock to Settle and Bohmer and an accounting by them of all profits realized since the acquisition of the stock, and failing in that, to secure damages of over a hundred dollars against the fiduciary.

From the judgment of the chancellor denying them relief against either Settle and Bohmer or the fiduciary they have prosecuted this appeal.

The cancellation of the sale to Settle and Bohmer is sought upon three grounds; first, that the fiduciary did not have the authority to sell; second, that John M. Settle, being an appraiser, could not buy; and, third, that the sale as to both Settle and Bohmer was fraudulent.

1. The will did not authorize the executor to sell personal property, and by section 4707 of the Kentucky Statutes an executor is forbidden to sell dividend paying stock, such as this was, except upon certain prescribed conditions. This section is as follows:

"All persons or corporations holding stocks, bonds or other securities, in a fiduciary capacity for loan or investment, shall have power to sell and transfer the same whenever in the judgment of such fiduciary such sale will benefit the trust estate, and reinvest the proceeds as in section 4706 of this chapter authorized; but no administrator or executor shall sell any dividend paying stocks, bonds or other security which the decedent owned at his death, until so ordered by a court of general equity jurisdiction in the county where letters of administration were granted or the will recorded; and the court, or in vacation, the judge thereof, may, upon the ex parte petition of said fiduciary, make said order whenever it is necessary to raise funds to pay the debts of the decedent, or when said court or judge may, in his discretion, deem necessary for the protection of the estate or the interest of the beneficiary. A purchaser in good faith for value from such fiduciary shall not be bound to look to the application of the proceeds of sale, nor shall a corporation in which stock held by a fiduciary is sold, as herein authorized, be liable for transferring such stock on its books upon the order of such fiduciary."

Before making the sale to Settle and Bohmer the appellee trust company filed in the Jefferson circuit court the following ex parte petition.

"The petitioner, the Fidelity Trust Company, states that it is a corporation organized under the laws of the state of Kentucky, with power to sue and be sued, contract and be contracted with, and to act as executor and trustee of the estate of deceased persons.

"The petitioner states that on the 21st day of August, 1907, Paul C. Barth departed this life a resident of and domiciled in the city of Louisville, Jefferson county, Kentucky, leaving a last will and testament which was duly admitted to probate by the Jefferson county court. In and by said will this petitioner was appointed the executor and trustee of his said estate and on the 26th day of August, 1907, qualified as executor and trustee by executing bond with surety and taking the oath prescribed by the statute, assumed said trust and is now administering upon the assets of said estate.

"The petitioner states that among other property which came into its hands as such executor and trustee is fifteen shares of capital stock of the Ohio River Sand Company and sixty shares of the capital stock of the Island Land Company. The petitioner states that both of said concerns are commercial corporations subject to the influence of business changes and reverses and it is the opinion and belief of said trustee that, owing to the death of said Paul C. Barth and the loss of his influence in the management of both said companies, that it is advisable and desirable that said stocks be sold and the petitioner requests advice of this court in the matter.

"Wherefore, the petitioner prays that judgment be entered as herein prayed."

The petition was verified by the vice president of appellee. Nothing else appears of record upon that application except the order which was entered by the court upon the same day the petition was filed, which is as follows:

"This petition coming on to be heard and the court being advised, it is considered and adjudged that it is advisable for the petitioner, as executor and trustee, to sell the fifteen shares of the capital stock of the Ohio River Sand Company and the sixty shares of the Island Land Company, belonging to the estate of Paul C. Barth, deceased, and now in possession of the petitioner, and the Fidelity Trust Company, executor and trustee of the estate of Paul C. Barth, deceased, is authorized, directed and empowered to sell and dispose of said stock at the best price obtainable therefor, provided the same is not less than said stock originally cost, said sale or sales to be made at such time and such place and on such terms as may in the judgment of the trustee and executor seem most advantageous and desirable for the estate of said Paul C. Barth."

Immediately thereafter the sale to Settle and Bohmer was consummated at the price of $27,500.00 theretofore agreed upon.

Appellants insist that this section of the statute is mandatory and confers a special power upon a court of general equity jurisdiction to order a sale of this character of decedent's property only when it is necessary to pay debts or to protect the estate or the interest of a beneficiary; that such a necessity is a fact that must be manifested by the record to sustain jurisdiction; that the petition does not aver or the judgment declare any such necessity, and that therefore the court was without jurisdiction of the matter and the order or judgment is absolutely void.

Appellees contend, first, that since under the common law in force in this state the executor already had title and absolute power to sell personal property just as did the decedent, the statute confers no new power but directs only how an existing power shall be exercised, and is therefore merely directory; and, second, that, if mandatory, the judgment, which has never been set aside or modified, was not void, but voidable only at most and cannot be attacked in this a collateral proceeding; that in either event the purchaser, unless guilty of fraud, will be protected.

Conceding the force of appellees' argument that the statute should be construed as directory only, if, as claimed, it does not materially change the character of the title of the personal representative to the personal estate of a decedent, or confer upon him any power he would not otherwise have, and merely directs the manner in which that power can be exercised with respect to one of the numerous classes of personal property, we are nevertheless constrained to hold that the statute is mandatory because of the opinion that appellees' premises are untrue, or at least inaccurate, and that to hold it directory only would defeat the legislative purpose. The statute is mandatory in its terms, a pertinent though not a controlling factor, and was plainly intended to change and limit very materially the personal representative's common law power of sale over this particular class of personal property. Title is but the evidence of power over property. Any change of power necessarily changes the character of title. Formerly, under the common law in force in the state, a personal representative, by the mere fact of his appointment and qualification, was invested with such title to his decedent's personalty as carried with it an absolute, unlimited power to sell. However, by reason of this statute, his appointment and qualification, while still investing him with legal title, confer upon him only a qualified power of sale as to dividend paying stocks, and impose upon him the duty of delivering to the beneficial owner the property in kind, just as it came into his possession, unless empowered under this statute to sell same. Crenshaw v. Ware, 148 Ky. 196. It no longer lies in his discretion to decide whether or not such...