Thomas v. Provident Life & Trust Co.

• Decision Date: 22 May 1905
• Docket Number: 1,094.
• Parties: THOMAS v. PROVIDENT LIFE & TRUST CO. et al. WICKHAM v. SAME.
• Court: U.S. Court of Appeals — Ninth Circuit

138 F. 348

THOMAS v. PROVIDENT LIFE & TRUST CO. et al.

WICKHAM v. SAME.

No. 1,094.

United States Court of Appeals, Ninth Circuit.

May 22, 1905

Charles S. Fogg and Frederick S. Fogg, for appellant Thomas.

Louis D. Campbell and Theodore D. Powell, for appellant Lucy L Wickham.

John C Stallcup and John A. Parker, for appellee Provident Life &amp Trust Co.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

GILBERT Circuit Judge.

As the facts of this case are fully stated in the dissenting opinion of Judge ROSS, they need not here be detailed.

The mortgages made to the Provident Life & Trust Company are in effect the mortgages of the executors. The trial court reached the conclusion that the executors and trustees under the will of Gen. Sprague had the power to mortgage the real property of the estate. While it is true that the very decided weight of authority sustains the proposition that a naked power given to executors to sell does not include the power to mortgage, there is authority for holding that where the purpose of the testator can better be answered by mortgaging than by selling, and such a course is not violative of that intention or of the terms of the will, the power to sell may include the power to mortgage. Mills v. Banks, 3 P.W. 1; Ball v. Harris, 4 M.& Cr. 264; Loebenthal v. Raleigh, 36 N.J.Eq. 169; Starr v. Moulton, 97 Ill. 525. The will gave the executors full power to manage the estate and sell it, either at public or private sale, on terms which accorded with their best judgment and discretion, without the supervision or control of any court, and without requiring the purchaser to see to the proper application of the proceeds. It contained the following general provision: 'In all other respects I will and direct my executors and trustees to settle my estate in such manner as to them shall seem best. ' The evidence indicates that a sale of the property immediately succeeding the death of the testator would have resulted in its sacrifice. But even if the mortgages were not authorized by the terms of the will, the estate, having received the benefit of the money, ought, in equity, to repay it, with interest. Said the Supreme Court of Iowa in such a case: 'The estate has received the benefit of the money which was advanced by the defendant. It ought, in good conscience, to repay it, with legal interest. ' Deery v. Hamilton, 41 Iowa, 16.

The trust company undoubtedly loaned its money in good faith. It could have had no object or purpose in doing otherwise. The borrowed money was used by the executors in discharging legal incumbrances on the estate, and in paying the debts of the estate. Afterwards, in consideration of their obligation to repay the money so advanced, the executors executed a quitclaim deed to the trust company. Who of the parties to this record was in a position to attack that conveyance? It is unnecessary to say that the executors themselves were in so such position. Nor was Mrs. Cox. She was no creditor of the estate. At the time of the execution of the quitclaim deed it is true that she had a judgment lien against any real property standing in the name of Otis or Charles Sprague. But she had no lien on their interest in the estate. There was no fraud, therefore, in their act of transferring the real estate to the trust company in discharge of the debt owing to it. No property of Charles or Otis Sprague was thereby covered up. No resulting trust was created for their benefit. The bill of Mrs. Cox is purely a creditors' bill, seeking to discover property wherewith to satisfy her judgment. On what theory can she demand that the conveyance to the trust company be set aside? The trust company got no more than the satisfaction of its claim. That is made apparent by the failure of the executors to redeem. Their failure resulted from their inability to find during the period of three years a purchaser to take the property at a price in advance of that at which it was taken over by the trust company. But if the property had been of much greater value than the debt then owing the trust company, that fact would furnish Mrs. Cox no ground to impeach the conveyance. She had no remedy against an improvident sale by the executors. The will left them free to sell according to their judgement. The most that she could say would be that they mismanaged the estate, and thereby failed to realize any benefit from the will, either for themselves or for their individual creditors. She could only attack the conveyance on the ground of actual fraud participated in by the trust company, and the evidence shows no such fraud. In permitting her assignee to redeem the property from that conveyance, the trial court went as far in her relief as the principles of equity permitted it to go.

Mrs. Wickham was in no better position than Mrs. Cox. A specific portion of the real estate was charged with the payment of her legacy, and all the remainder was expressly relieved therefrom. The property charged with the burden of her legacy was sold, and she received the proceeds. The remainder of her legacy was not paid, for the reason that there were not funds wherewith to pay it. The debts of the estate were a first charge on the estate. The whole property went to pay those debts. Of the $55,000 first borrowed from the trust company, on which interest was made payable at 7 per cent., $40,000 was used to pay the principal of the prior mortgage which incumbered the business block, and was drawing interest at 8 per cent. per annum; $15,000 was used to pay the debt due the widow, and on which was a fixed charge of $200 per month until paid. Of the $30,000 subsequently borrowed, the evidence is convincing that all of it was used for the benefit of the estate. Said the trial court, 'Every dollar of it was applied and used for the benefit of the estate. ' It is contended by the appellant that the evidence does not account for more than $13,602.49, and does not positively and satisfactorily account for more than $6,300, of the $30,000 so borrowed. Otis Sprague testified, however, that it was used in paying taxes, insurance, street improvements, and notes of the estate in the bank. 'We left some small amount on hand to dispose of afterwards, but it was all used in the interest of the estate. ' Longstreth testified that it was paid out for taxes, street assessments, and interest on the first mortgage. It was objected that the trust company failed to produce vouchers to show the disbursement of the $30,000 in the manner indicated by this evidence, but it was shown that the vouchers had been lost, and a detailed statement of the account of the disbursements was produced under the oath of one of the executors, and was filed, showing that for taxes, insurance, and interest becoming due and payable in the years 1894, 1895, and 1896, the executors had paid in the aggregate more than $32,000. The dates of these payments, it is true, are not shown, but the fact that the $30,000 was not borrowed until September 9, 1895, does not contradict the testimony that the items so mentioned were paid out of this particular fund. The taxes, for instance, were overdue when paid, and there was evidence that money had been borrowed upon notes of the executors for other items of that account. The trust company had nothing to do with these disbursements, and had not the custody of the vouchers. It bought the property and paid for it. It was not required to see to the application of the purchase money, and it is under no obligation now to pay the balance due on Mrs. Wickham's legacy. If she has a remedy, it is against the executors.

We find no error for which the decree of the Circuit Court should be reversed. It is accordingly affirmed.

ROSS Circuit Judge (dissenting).

I dissent. This suit was commenced in one of the courts of the state of Washington by a judgment creditor of certain of the residuary devisees named in the will of the late Gen. John W. Sprague, and was, on motion of the defendant company, transferred to the United States Circuit Court for the district of Washington, where the bill was amended. The original complainant having died, and having, previous to her death, assigned all of her interest to the appellant Jesse Thomas, the suit was revived in his name. In the Circuit Court a cross-bill was filed, by leave of the court, by the appellant Lucy L. Wickham, and upon issues raised by answers to those pleadings the cause was tried and decided by the court below.

The case shows that Gen. Sprague died in the city of Tacoma, state of Washington, on the 24th of December 1893, leaving what is designated by section 955 of 2 Hill's Ann. St. Codes Wash. a 'nonintervention will'; that section being as follows:

'Sec. 955. In all cases where it is provided in the last will and testament of the deceased that the estate shall be settled in a manner provided in such last will and testament, and that letters testamentary or of administration shall not be required, it shall not be necessary to take out letters testamentary or of administration, except to admit to probate such will in the manner required by existing laws; and after the probate of such will, all such estates may be managed and settled without the intervention of the court, if the said last will and testament so provides: provided, however, in all such cases, if the party named in such will as executor shall decline to execute the trust, or shall die, or be otherwise disabled from any cause from acting as such executor, then letters testamentary or of administration shall issue as in other cases: and provided further, if the party named in the will shall fail to execute the trust faithfully and to take care and promote the interests of all parties taking under the will, then, upon

...