Kirsch v. Kahn

• Decision Date: 31 March 1967
• Docket Number: No. 40309,40309
• Citation: 276 Minn. 294,149 N.W.2d 676
• Parties: William E. KIRSCH et al., Appellants, v. M. O. KAHN, Jr., et al., Respondents.
• Court: Minnesota Supreme Court

Page 676

149 N.W.2d 676

276 Minn. 294

William E. KIRSCH et al., Appellants, v. M. O. KAHN, Jr., et al., Respondents.

No. 40309.

Supreme Court of Minnesota.

March 31, 1967.

Syllabus by the Court

1. Where the defense in an action for specific performance is that the title is not marketable and there is no question of fact involved, courts will consider whether the objection creates a grave doubt as to title, and if there are no outstanding rights of third parties to whose claims the purchaser 2. While a representative and a trustee both fall within the broad class of fiduciaries and many of their functions are similar, an executor or administrator is an officer of the court who can act safely only with the court's sanction or approval. A trustee, on the other hand, derives his authority from the settlor and, in the absence of statute or conduct amounting to bad faith or abuse of discretion, he is not normally subject to judicial control.

may be subjected by future litigation and upon which the court is not competent to pass, will construe the law or questioned records and grant or refuse specific performance accordingly as the title is found to be good or bad.

3. In considering the function of the probate court in the administration of an estate and the force of its decree of distribution, it should be observed that the proceeding is one in rem and that the decree of distribution is binding on everyone interested in the estate if the decree covers a subject over which the court has jurisdiction. Under such circumstances the decree is res judicata and, whether right or wrong, the decision is binding unless reversed or modified on appeal or in a direct proceeding.

4. The right to make a will includes the right of the settlor to choose his trustee and, with limited exceptions, to provide for the details of control and management of the trust not inconsistent with statutory or other policy of the law. The terms of a will govern in the absence of conflicting statutory policy.

5. The provisions of Minn.St. 501.33 are permissive and do not give the district court jurisdiction until an application, filed by the trustee or beneficiary of the trust, is considered and granted.

6. The policy of c. 501, which relates to the subject of trusts, does not contemplate that courts will interfere with the rights and powers given to the trustee by the settlor. Once, however, the jurisdiction of the district court is invoked under one of its provisions, the district court shall have jurisdiction thereafter as over a proceeding in rem.

Erickson, Zierke, Kuderer & Utermarck, Fairmont, for appellants.

Seifert, Johnson & Hand, Fairmont, for respondents.

OPINION

MURPHY, Justice.

This is an appeal from orders of the district court denying specific performance of a contract for the purchase of land on the ground that the vendors failed to provide marketable title. The issue is whether the vendors acquired valid title to real estate purchased under a deed from the trustees of a testamentary trust who failed to qualify under provisions of Minn.St. 525.504, which relates to qualification of trustee by a court of competent jurisdiction prior to the discharge of the representative in probate court, and § 501.33, which makes provision for confirmation of appointment of trustee in the district court.

From the record it appears that Marcus E. Teeter, by his last will and testament, left in trust all of his real and personal property including land involved in this litigation. The will was admitted to probate and on September 30, 1957, the final decree of distribution was entered assigning the real estate to the trustees for the purposes set forth in the will. The executors of the estate were the same persons as the trustees. On July 13, 1959, the probate court discharged the trustees as representatives of the estate. The trustees by warranty deeds executed in July and November 1964 conveyed the land to William E. Kirsch, one of the vendors and plaintiffs in this action. In August 1964 Kirsch leased the premises to defendants, M. O. Kahn, Jr., and Reg E Reipke, d.b.a. Reipke Motors, giving them an option to purchase. By letter dated July 30, 1965, defendants gave notice of their intent to exercise the option to purchase. In September 1965 plaintiffs tendered an abstract and warranty deed which defendants then refused to accept on the asserted ground that plaintiffs did not have good title because of the failure of plaintiff William Kirsch's grantors to qualify as trustees pursuant to statute.

It is conceded that the trustees did not qualify prior to their discharge as representatives of the estate, as provided by § 525.504. That statute, so far as applicable here, provides:

'* * * When any bequest or devise to a testamentary trustee amounts to more than $1,000, the representative may not be discharged (by probate court) until a trustee is qualified in a court of competent jurisdiction and until proof of the qualification and a receipt by the trustee are filed, unless the will contains a waiver of qualification * * *.'

It is also conceded that at no time did the trustees or any beneficiary of the trust apply to the district court for confirmation of appointment. Section 501.33 provides:

'Upon petition of any person appointed as trustee of an express trust by any will or other written instrument, or upon petition of any beneficiary of such trust, the district court of the county wherein such trustee resides or has his place of business, shall consider the application to confirm the appointment of the trustee and specify the manner in which he shall qualify. Thereafter such district court shall have jurisdiction of such trust as a proceeding in rem.'

The trial court's finding was essentially to the effect that these statutory provisions are designed for the protection of the beneficiaries of the trust estate and are accordingly mandatory and jurisdictional. Plaintiffs on the other hand contend that, as applied to the facts in this case, the statutory provisions are procedural and not substantive in nature and that the failure of the trustees to qualify amounts at most to a mere irregularity which in no wise effects the title which came to the grantors through a will, the probate of which resulted in a final decree of distribution which was a judgment in rem and removed all contingencies of probate.

The application of the statutes quoted must be viewed in light of the trust instrument from which the trustees derived their interest and powers. The instrument recites:

'They shall hold, manage, control, invest and reinvest my said estate in such manner as they shall deem for the best interest of said estate, and my said Trustees are hereby given and shall have full and ample rights, powers and authority to do any and everything that shall in their judgment be necessary or advisable to conserve, protect, manage, handle and control said estate, including the right to lease, sell, convey, exchange, invest and reinvest and to execute any and all contracts, deeds, leases, releases and any and all other instruments which said Trustees may deem necessary to the execution of the trust, as fully and for all purposes as I might or could do, if living and acting in the premises, and without aid or authority of any Court, and without the necessity of any purchaser or lender seeing to the application of the purchase money, or the money loaned.'

It should be noted that this instrument conveys to the trustees title to the premises in question, with broad powers including the power of sale 'without aid or authority of any Court.' It...