Case ID: wis_147/html/0060-01.html
Source: Caselaw Access Project
Author: {"author": "WiNslow, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Estate of McClear: McClear, Appellant, vs. Root, Administrator, Respondent.
    
      September 15
    
    October 3, 1911.
    
    
      Trusts and trustees: Bale by trustee to himself: Remedies of cestui que trust: Accounting for profits: Laches: Harmless error.
    
    1. A sale of trust property by tbe trustee of an express trust to bimself is voidable at tbe election of tbe cestui que trust; and neither good faith nor tbe payment of ample consideration will support tbe sale in sucb a case where tbe trustee acts both for bimself and for bis cestui que trust.
    
    2. Tbe cestui que trust in such case may elect to disaffirm tbe sale and recover tbe property sold, or be may affirm tbe sale, bold tbe trustee to bis purchase, and require him to account for bis profits made in tbe transaction.
    3. Where by see. 3918, Stats. (1898), a cestui que trust in sucb a case is barred from recovering tbe land sold (more than five years having elapsed since tbe sale thereof), be may still elect to affirm tbe sale and require tbe trustee to account for profits.
    
      4. As between the trustee of an express trust and his cestui que trust the right to such an accounting will not he barred by laches of the latter unless there has been an unequivocal denial or repudiation of the trust by the trustee which was known or ought to have been known to him. -
    5. The cestui que trust is entitled to an accounting only for profits actually made by the trustee, and where no profits were actually made a judgment denying the right to an accounting, though legally erroneous, will not be reversed.
    Appeal from a judgment of the circuit court for Green county: Geoege Geimm, Circuit Judge.
    
      Affirmed.
    
    This is a contest over the settlement of the final account of an administrator with the will annexed. The evidence is not preserved by bill of exceptions, and the material facts as found by the circuit court are substantially as follows: Thomas McOlear died March 1,1890, testate, leaving a widow and several children, the appellant in this proceeding being the residuary legatee. His estate consisted of ninety acres of farm laud in Green county and a small amount of personal property. James Root was appointed administrator with the will annexed April 17, 1900, and duly qualified. In January, 1891, fifty acres of the farm, including the homestead, was set off to the widow as her dower, and she occupied the same until her death in 1907. In February, 1891, license was granted to the administrator to sell the remaining forty acres of the farm to pay debts and expenses of administration, and said forty acres were appraised at $600. No bidders appeared at the sale, and Mr. Root reported that fact to the county judge and stated that he would take the land himself if -one Richards would advance him the money. The judge told him he could not buy it himself, but that he could convey the land to Richards and Richards could then convey it to him. This transaction was carried out as suggested, and the administrator reported to the court that he had sold the land at private sale to Mr. Richards for $600. On March 19, 1891, the county court confirmed the sale, and the administrator used nearly all of tbe $600 in paying debts,, and filed an account March 8, 1892, purporting to be a complete account of bis administration, and showing a balance of $29.88 in his hands. The county judge found the account correct and allowed $5 for the fees of a guardian ad litem, and $10 for copies of papers, leaving a final balance in the hands of the administrator of $14.88. No notice of the hearing of this account was given, and no formal order made allowing it or discharging the administrator. The appellant, BobeH ■J. McQlear, became of age in 1892, and resided with his. mother on her dower lands adjoining and has lived there ever since. The administrator in making this sale to himself acted in entire good faith and paid' full value for the land. He went into possession immediately on confirmation of the sale and greatly improved the same by draining, fencing, ditching, removing brush, and otherwise improving the same, thereby putting it in condition for farming, and thus added $700 to the value thereof by his improvements during the ten years he occupied it. In 1901 he sold the land for $1,600. The appellant knew that Boot was in possession, claiming to be the owner, knew of the improvements, knew of the sale in 1901, and at no time made any objection or-claimed any rights in the land or its proceeds. There is no finding that the appellant had any knowledge of the arrangement by which the respondent became in fact the purchaser at his own sale, nor is there any finding that he knew anything-about the filing or approval of the account in 1892. The rental value of the forty acres, for the ten years during which Boot held it is $450. In December, 1908, Boot made application to the county court for license to sell the homestead forty to pay legacies alleged to be unpaid, and notice of the hearing of the petition was given. In March, 1909, on application of the appellant, the county court ordered the administrator to make and file his final account; and the administrator filed a request that the account filed in March, 1892,, be adopted and considered bis final account. Thereupon the appellant filed objection to certain items and claimed that the administrator should be charged with the rents and profits of the forty acres during his possession, as well as with $1,000 of the proceeds of the sale thereof.
    The circuit court found that the order confirming the sale made March 19, 1891, was final and conclusive, and not subject to attack; and that the appellant was estopped by his laches from attacking the sale, as well as from requiring the administrator to account for any profits made by him. Judgment in accordance with these findings was entered, and the residuary legatee appeals.
    Eor the appellant there were briefs by Clancey & Loverud, and oral argument by E. K. Loverud.
    
    
      J. D. Dunwiddie, for the respondent.
   WiNslow, C. J.

The administrator was the trustee of an-express trust. Neither under the common law nor under the statute could he make a valid and binding sale of the trust property to himself. In re Taylor Orphan Asylum, 36 Wis. 534; sec. 3914, Stats. (1898). Neither good faith nor the payment of an ample consideration will avail to support the sale in such a case where the trustee acts both for himself and for his cestui que. trust. Shaw v. Crandon State Bank, 145 Wis. 639, 129 N. W. 194. The sale is, however, not absolutely void, but voidable at the election of the cestui que trust. Melms v. Pabst B. Co. 93 Wis. 153, 66 N. W. 518.

These general propositions are not open to serious question. It may be granted at once that the appellant is barred from attacking the sale by the provisions of sec. 3918, Stats. (1898), which prohibit the bringing of any action to recover real estate sold at such a sale unless commenced within five years next after the sale. That fact, however, does not prevent a recovery of any profits which the trustee may have made from his dealing with the trust property. The cestui que trust may elect between two courses: be may disaffirm tbe sale and recover the property sold; or be may affirm tbe sale, bold tbe trustee to bis purchase, and require tbe trustee to account for bis profits made in tbe transaction. In re Taylor Orphan Asylum, supra; 28 Oyc. 1027, subd. b. It is manifest, therefore, that tbe mere fact tbe cestui que trust is barred from bringing an action to set aside tbe sale and recover tbe property is not necessarily decisive of tbe question whether be can require tbe trustee to account for profits made. Sec. 3918 does not pretend to cut off tbe right to such an accounting. There may doubtless be circumstances in special cases which would rightly cut off tbe right to an accounting for profits made by a trustee in bis dealing with tbe trust property, although this court has been very slow to allow any statute of limitations or any bar in analogy thereto to defeat tbe execution of an express trust. There can be no such bar as between tbe trustee of an express trust and bis cestui que trust, unless there has been an unequivocal denial or repudiation of tbe trust. Fawcett v. Fawcett, 85 Wis. 332, 55 N. W. 405; Boyd v. Mut. F. Asso. 116 Wis. 155, 90 N. W. 1086, 94 N. W. 171.

We fail to find facts in tbe present case showing any denial or repudiation of tbe trust brought home to tbe knowledge of the appellant. ' It is not found that be ever knew that tbe sale was in fact made to tbe administrator himself. Tbe sale was reported to the court to have been made to Mr. Richards for $600, and so far as tbe findings show tbe appellant was never informed to the contrary. It is true that tbe administrator took possession and operated tbe farm for ten years to tbe knowledge, of the appellant, but this is entirely consistent with an actual sale in good faith to Richards and a subsequent purchase in good faith by tbe administrator. Moreover, it does not appear that tbe appellant ever bad any knowledge, either actual or constructive, of tbe account which was filed in 1892, or of tbe approval thereof by the county court. We are not required to say what the effect would be upon the appellant’s rights if he were shown to have had full knowledge of the transaction itself and of the account rendered by the administrator and the approval thereof. It is sufficient to say that on the facts found by the court we are unable to find that unequivocal denial or repudiation of the trust by the trustee which was known or ought to have been known to the cestui que trust which must exist to form the foundation of laches which bars his right to insist on an accounting for the profits made by the trustee in his dealing with the trust property. So we conclude that the court was wrong in holding that because the sale could not be attacked no accounting for profits made by the trustee could be had, and equally wrong in holding that the appellant was estopped by laches from insisting on an accounting.

But the cestui que trust is only entitled to an accounting for profits actually made by the trustee. He has elected to ratify the transfer and he has received the full value for the property at the time it was sold. If the trustee made no profits an accounting would be futile. Erom the facts found it seems to us certain that on any permissible method of accounting there were no profits. Under the findings the administrator paid every cent the land was worth at the time it was sold, and the money at once went to the benefit of the estate and relieved it of its debts. No claim could have been made at the time of the sale or at any time prior to the resale that the administrator had actually made any profit. But if it be conceded (which is not decided) that the correct method, would be to state the account with annual rests down to -the present time, it is quite certain that there would be no balance of profits against the administrator.

Having made the purchase in the best of faith and without bad motive of any kind, he would clearly be entitled to credit for his original payment of $600 with legal interest, as well as credit for his improvements to the extent to which they added to the value of the land, which is found to be $100 and credit for taxes paid. The land clearly appears to have been unimproved, if not actually wild and unfit for cultivation,, when purchased. The improvements were doubtless made during the first years of the respondent’s occupation, while the-rents and profits must have been largely earned during the later years. If an account be stated crediting the respondent with his original payment of $600, also with his improvements-(dividing the amount thereof between the first five years), also with a reasonable sum for taxes annually, making annual rests and subtracting the annual rents and profits, allowing interest at the legal rate on each annual balance, it will be found that the aggregate exceeds somewhat the total amount received by the respondent when he sold the land in 1901. On any theory, therefore, the respondent made no profit on the transaction for which in equity he should be required to account.

This being the fact, it would be useless to reverse the judgment merely because it is based on an erroneous legal conclusion.

By the Court. — Judgment affirmed.

BaeNes, J., took no part.