Defendant and another, executors, seeking in good faith to
follow a testamentary direction to invest a sum in "interest
bearing securities," on certain trusts, caused to be transferred to
themselves as trustees certain National Bank shares belonging to
the estate. Thereafter, their final account as executors,
explaining this transaction and reporting the estate wholly
distributed except for these shares, was approved by the proper
court of Wisconsin. The bank afterwards becoming insolvent, suit
was brought by the receiver to recover the amount of an assessment
levied upon the shares by the Comptroller of the Currency, the bill
seeking to hold the defendant, (who had received a larger amount as
legatee) under a Wisconsin law making distributees liable for debts
of estates in certain cases.
Held
(1) That whether or not the shares were "interest bearing
securities," the transfer was not void.
(2) Title being in the trustees, the estate was not liable for
the assessment, and consequently defendant could not be held as a
distributee under the Wisconsin statute.
At common law, executors have implied authority to pass title to
personal assets of the estate -- a rule which has not been modified
in Wisconsin.
Page 242 U. S. 308
Section 2091, Wisconsin Statutes, 1913, providing that
conveyances made by trustee in contravention of express trusts
shall be absolutely void, does not apply to personal property.
219 F. 663 affirmed.
The case is stated in the opinion.
MR. JUSTICE CLARKE delivered the opinion of the Court.
In 1904, Laura A. Cobb died testate at Mineral Point, Wisconsin,
and by her will directed her executors to invest the sum of $2,000
of her estate in "interest-bearing securities," to pay the income
thereof to Catherine Monohan during her life, and on her death to
distribute the trust fund to certain persons designated in the
will. The defendant, John P. Cobb, and one Calvert Spensley, were
appointed executors of Mrs. Cobb's will, and so administered her
estate that in July, 1908, they filed their final account as
executors, reciting that the estate was wholly distributed, with
the exception of twenty shares of the capital stock of the First
National Bank of Mineral Point, which the account stated the
executors had caused to be transferred to themselves and registered
in their names as trustees for Catherine Monohan.
The bank became insolvent, and the Comptroller of the Currency,
on the third day of November, 1909, made an assessment of $100 upon
each share of the capital stock of the bank for the payment of
creditors.
The defendant was a son of the deceased, and, as legatee and
distributee, received a sum of money greater than the amount of the
assessment on the twenty bank shares.
The foregoing facts are all derived from the bill filed in
Page 242 U. S. 309
this case, to which the defendant demurred. The district court
sustained the demurrer and entered an order dismissing the bill.
The circuit court of appeals affirmed this decree, and the case is
here upon appeal.
The theory upon which this suit was commenced is that the
transfer of the twenty shares of bank stock by Cobb and Spensley,
as executors, to themselves, as trustees for Catherine Monohan, is
void; that the stock is as if it had never been transferred at all,
and is therefore an undistributed asset of the estate of Mrs. Cobb,
and that the defendant, having received as legatee and distributee
much more than the amount of the assessment, is liable under the
Wisconsin statute to the receiver for the assessment, a debt of the
estate, all the other assets having been distributed before the
failure of the bank.
Obviously the question as to the liability of the defendant
turns upon whether the transfer of the stock to Cobb and Spensley,
as trustees for Catherine Monohan, is void or voidable, for if it
is voidable only, this suit was improvidently commenced. At common
law, and no Wisconsin statute is cited to modify the rule, an
executor has full power, without any special provision of the will
that he is administering or order of court, to sell or dispose of
the personal assets of the estate, and thereby to pass good title
to them.
Munteith v. Rahn, 14 Wis. 210;
Ex Parte
Gay, 5 Mass. 419;
Leitch v. Wells, 48 N.Y. 585. Perry
on Trusts, §§ 225, 809. A sale by an executor, even to himself, is
not void, but only voidable at the option of interested persons.
Grim's Appeal, 105 Pa. 375;
Tate v. Dalton, 41
N.C. 562. And if, after such purchase from himself, an executor
sells to another, the purchaser from him acquires a good title.
Cannon v. Jenkins, 16 N.C. 426.
No suggestion is made that the transfer of the stock by the
executors to themselves as trustees was not made in good faith, and
it was obviously made under the conviction
Page 242 U. S. 310
that it was, if not "an interest-bearing security," at least the
equivalent of such a security. Very certainly this was the basis
for the approval of the transaction by the appropriate Wisconsin
court more than a year before the bank failed, and, for anything
that appears in the record, prior to the time when the bank became
insolvent.
The claim that the lower court failed to give proper effect to §
2091 of the Wisconsin statute cannot be allowed. The part of this
section which is claimed to be applicable reads:
"When a trust shall be expressed in the instrument creating the
estate, every sale, conveyance or other act of the trustee in
contravention of the trust shall be absolutely void."
This section is found in a chapter devoted to "Uses and Trusts,"
of the title, "Real Property and the Nature and Quality of Estates
Therein," and the claim is made that its drastic provision should
be extended to trusts in personal property. No Wisconsin court has
so applied it, but, on the contrary, the supreme court of the
state, in
Lamberton v. Pereles, 87 Wis. 449, refused to
make other sections of this same chapter respecting real estate
applicable to personal property, saying: "In this state, we have no
statute making the statute of uses and trusts, or any part of it,
applicable to personal property." It is significant also that, in
the statute dealing with "Trust Investments," no such provision is
found. Wis.Stat. Supp. § 2100b.
It results that, since the executors had lawful authority to
dispose of the bank shares, assets as they were of the estate, so
long as the transfer is permitted to stand unassailed directly the
title to them is in the defendant and Spensley, as trustees for
Catherine Monohan, and that the estate of Mrs. Cobb is not liable
to the receiver for the assessment claimed. If the estate is not
liable, the
Page 242 U. S. 311
defendant, as legatee and distributee, is not liable, and the
claim in suit, obviously without natural equity, is therefore
without technical merit, and the decree of the circuit court of
appeals must be affirmed.