Shupe v. Jenks

Doerfler, J. Plaintiffs’ counsel in their complaint specifically charge a failure on the part of the defendant Jenks, as administrator, to make and file an inventory and to cause an appraisal to be made of the assets; also a failure to offer for sale and dispose of the fifteen shares of stock in the Loyal State Bank; and alleges that as a result of such failure the conditions of the administrator’s bond were breached and that the heirs of the deceased suffered a loss of $1,875. Plaintiffs also in their complaint allege a number of other breaches of the official bond, such as the failure to take the proper legal steps necessary to wind up the estate; failure to pay the claims of creditors; failure to make and file an account, etc. An administrator is a trustee, and as such holds the legal [338] title to the personal property. In the performance of his duties, if he exercises ordinary care and acts in good faith, the administrator, like a trustee, will be protected by the court. The appraisal of the assets scheduled in the inventory is designed to fix a standard for the guidance of the administrator in the sale of the personal property, and while acting in good faith the property may be sold by him at public or private sale at a price equal to or in excess of the appraised value, and the legality of his acts cannot be questioned unless they are tainted with fraud. If no offer for personal property at the appraised valuation or in excess thereof can be secured, the administrator may apply to the court for authority to sell for less than the appraised value, and such order of the court will fully protect him in such sale, unless he has been guilty of an act which in its effect amounts to a fraud upon the court. Sec. 312.18, Stats. See, also, Williams v. Ely, 13 Wis. 1; Munteith v. Rahn, 14 Wis. 210; Gary, Probate Law (3ded.), §333. Furthermore, an administrator in the sale of personal property is not required to warrant or guarantee the title, the soundness of the article or articles, or their value. The doctrine of caveat emptor strictly applies. 11 Ruling Case Law, title Executors and Administrators, p. 388, sec. 467. A probate court in the exercise of its jurisdiction is vested by law with the powers of a court of equity to the extent that the exercise of such powers may be necessary for the protection of the parties over whom it has jurisdiction. As in the case of an ordinary trustee, the administrator, entertaining doubts as to the advisability or legality of a sale of the personal assets of the deceased, is authorized to apply to the-court for directions or instructions with respect to the course or policy to be pursued by him in the performance of his official duties. Therefore, in the instant case, had the administrator entertained an honest conviction that the bank stock in question was of no value and that a sale thereof would constitute a fraud, he could have applied to the court [339] to exercise its equitable jurisdiction in the premises, and if under all the facts and circumstances the court would have agreed with him, he could have been relieved of responsibility by the order of the court. The evidence, however, discloses an utter lack of a recognition or appreciation of his rights or obligations. Up to the time when it became necessary to reorganize the bank (at'which time a period of two years and six months had elapsed after the appointment of the administrator), no effort was made by him to dispose of this bank stock. He did not even make out an inventory or procure an appraisal. He ignored the repeated urgent requests of the heirs to sell this stock and to apply the proceeds to the liquidation of the debts of the deceased. It is difficult to perceive how an administrator could have been more negligent in the administration of the estate of a deceased person. There is an abundance of credible evidence in this case that if the administrator as an official of the court had exercised but a fair percentage of the diligence which he exercised when he disposed of the stock of others, a substantial amount might have been realized on this stock; and all of this could have been accomplished without warranting or guaranteeing either the title or the value of the same. In the fall of 1921, which was'three years after the ending of the World War, property values receded to substantially pre-war values. There was evidently a large shrinkage in the value of securities held by the bank. These securities, however, were retained by the bank, but unquestionably could not be disposed of at a price equal to their appraised valuation at the time they were taken by the bank as collateral. They became frozen assets, and for this reason, principally, when the bank was reorganized it was considered insolvent. In other words, it was deemed insolvent principally on account of the frozen assets, as appears from the testimony., An asset may be deemed a frozen asset at one time, and shortly thereafter may become readily marketable [340] at a fair price. In fact, a bank unable to meet its current obligations when they fall due, on account of its holding frozen assets, is deemed insolvent, but such a condition may oftentimes be overcome by a change in the economic situation ; but a bank unable to meet its current obligations when they fall due, due to impairment of its capital by a substantial depletion of its assets, can rarely be rehabilitated unless an amount of necessary new capital is added to the assets of the bank’. It was the hope and view of the stockholders, the officers, and the directors of this bank for a period of three years that the bank might be rehabilitated; and this hope and view were also shared by the banking commissioner of the state, otherwise drastic steps would have been taken for the protection of the interests of the public. In the ordinary course of events, an estate like the instant one could have been liquidated and settled before the expiration of one year. This is contemplated by the express wording of the statutes, and a personal representative is negligent in the performance of his duties if he either violates them or fails to apply to the court, upon sufficient grounds, for an extension of the time. For the violation of the duties of the defendant administrator and for his neglect as heretofore indicated, he and his sureties are responsible on the bond to the extent of the damage suffered by those interested in the estate. In view, therefore,- of all of the evidence in the case, including the testimony of one Richardson, the bank cashier, who testified that the bank was insolvent since the year 1919, mainly on account of the frozen assets possessed ,by it, the extent of the loss or damage constitutes a question for a jury to decide, and the court therefore committed error in directing a verdict for the defendants. At the opening of the trial defendants’ counsel moved to amend the complaint, by increasing the damages sought to be recovered from $1,875 to $5,000, the amount of the [341] penalty of the bond. Plaintiffs also claim that the failure to sell the bank stock resulted in damage because interest had to be paid upon claims filed. Whether the bank stock had a value, and, if so, the amount of its value, were questions for the jury, and the loss which would result by the payment of interest depends largely upon the value fixed by the jury upon the stock. It would also appear that the application to amend the complaint should have been granted. Sec. 313.13 of the Statutes provides that, within sixty days after the expiration of the time limited for creditors to present their claims, every executor or administrator shall render an account of his administration to the county court, and the court shall thereupon direct him to proceed forthwith with the payment of the debts and final settlement of the estate, excepting under certain conditions enumerated in the statute, pursuant to which the court may grant an extension of time; and the provisions of this statute must be taken into consideration by the jury in fixing the loss, if any, on account of the payment of interest. By the Court. — The judgment of the lower court is reversed, and the cause is remanded for a new trial and for further proceedings in accordance with this opinion.