Court Opinion

ID: 6738443
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:20:17.026191+00
Date Added: 2024-06-11T16:01:52.992445
License: Public Domain

Christianson, J.
(dissenting). I am unable to agree with the conclusions reached by my associates on many of the questions presented on this appeal, and will endeavor to discuss briefly the propositions on which I differ.
I desire to say at the outset that I fully concur in the sentiments expressed in the opinion prepared by Mr. Justice Grace, with respect to the obligations of an administrator or executor. I fully agree that every safeguard should be thrown around the administration of estates, and that an administrator or executor should not be permitted in any manner to enrich himself at the expense of the estate. And it is with this principle in mind that I have considered and arrived at my conclusions in this case.
This litigation arose in the county court. Macfadden was appointed administrator of the Jenkins estate in September, 1908, and continued to act as administrator until in October, 1910. At that time Macfadden tendered his resignation as administrator and filed his final account. A supplementary account was filed in July, 1914. Exceptions were filed *467to the accounts and a full bearing bad before tbe county court, witb the result that tbe county court in January, 1915, made an order settling the account. An appeal was taken from tbe order, and on a bearing in the district court many of tbe findings made by tbe county judge were overturned. Tbe principal questions presented on this appeal are whether tbe county judge or tbe district judge was correct in their respective conclusions upon the facts and tbe law. The county court of Cass county has increased jurisdiction, and tbe presiding judge is a man of ripe experience. He has been an incumbent of bis office for a long term of years, and was probably as well qualified to pass on the credibility of tbe witnesses and tbe other questions arising in consideration of tbe account as was tbe district judge. Not only did tbe county judge have tbe same opportunity to observe witnesses and parties, but be was familiar witb tbe various details of the administration of tbe estate. Consequently I don’t believe that in this case tbe findings of tbe trial court insofar as they overturn those of tbe county court are entitled to any particular weight.
Tbe evidence shows that at tbe time Jenkins died be was in dire financial straits. Tbe land business conducted by him in Fargo bad for some months prior thereto concededly been a losing venture, and tbe books show a considerable loss. Tbe only property left by Jenkins, aside from certain life insurance policies, consisted of equities in lands. The lands were all covered by one or more mortgages. At tbe time of bis death and for sometime prior thereto, Jenkins bad in bis employ as bookkeeper and assistant manager one Simonitsch. It was suggested that tbe land business started by Jenkins might be carried on witb some profit, and that a corporation might be formed to carry on land business, and also that this corporation could aid tbe administrators in handling tbe equities in tbe lands to good advantage. Tbe eoiporation was organized in September, 1908, and commenced business in October, 1908. Tbe three incorporators were Macfadden, Simonitsch, and Mrs. Jenkins. Macfadden was cashier of one of tbe principal banks of Fargo. Simonitscb bad bad considerable experience in tbe land business and was particularly familiar witb tbe affairs of Jenkins. No money was paid in by any of tbe incorporators, but they made an entry upon tbe books of tbe corporation listing as an asset “good will” in tbe sum of $4,500, and issued stock in tbe amount of $1,500 to each of the three incorporators. *468The trial court held that the administrator in this manner permitted the good will of Jenkins’s land business to be converted, and that the entry on the corporate books of $4,500, for “good will” was an admission that the business had this value. There was no other evidence whatever tending to show the particular value of the business except such entry.
If any evidentiary value is to be attached to the entry in the books, this, when taken in connection with the amount of stock actually issued to each of the three incorporators, could not be deemed to establish any valuation upon Jenkins’s business, in excess of the amount of the stock actually issued to Mrs. Jenkins. As already stated J enkins’s land business had been, for some months prior to his death, operated at a considerable loss. Manifestly the business was of such a character that it could not very well be continued by the administrator. The good will contributed by Macfadden and Simonitsch was probably as great as any contributed by the Jenkins’s estate. In fact Simonitsch was probably its chief asset, if he had stepped out there was little or nothing left.
The evidence shows that the Ellsworth-Jenkins Corporation became an actual going concern. It extended its operations and achieved a degree of success greatly in excess of the business formerly carried on by Jenkins. The business manager and directing spirit in the corporation was Simonitsch. Macfadden had little or no hand in its actual management or control. While the corporation aided in making rentals and otherwise looking after some of the lands belonging to the estate, only a very small, in fact an insignificant, portion of its business had anything to do with the affairs of J enlcins.
In my opinion the evidence clearly shows that the corporation was formed for a lawful purpose; that there was no intent on the part of Macfadden to utilize the corporation as a sham through which transactions with the estate might be carried on for his benefit; that the various transactions had by the corporation were for its own benefit, and not for the benefit of Macfadden, except as he might benefit the same as any other stockholder therein. The purchase by the corporation of the interest of Ellsworth in the partnership property was one which was directly in the line of business in which the corporation was engaged. Manifestly Macfadden could not, if he had desired to do so, have purchased Ellsworth’s interest in the partnership property with the funds of the estate. The deal was one which the corporation itself might prop*469erly malee and one which Macfadden as one of the stockholders conld not possibly have prevented it from making. There is no contention on the part of anyone that the estate has in any manner suffered any detriment or injury because the Ellsworth-Jenkins Company purchased such interest. On the contrary it is quite clear to me that the sale resulted in considerable benefit to the estate. The Ellsworth-Jenkins Company succeeded in making sales of, and realizing moneys from, various equities of no particular value. By all such sales the estate was directly benefited. In what manner could the estate possibly be injured by the fact that this corporation acquired Ellsworth’s interest ? Ellsworth, the former owner, was an old man living in Iowa, and he apparently took little or no interest in a disposition of the property belonging to the partnership. The corporation instituted an active campaign to dispose of those equities, and converted paper equities into real money. The estate received an actual benefit therefrom.
While it is true that the supposed interest of the estate in these lands was sold to the corporation, it is also true that the corporation treated the sale by the administrator to it as a mere nominal transfer. Macfadden testified that the sale was made to the corporation, in order to have the title vested in the corporation, so that the equities could be conveniently handled and conveyed when a purchaser was found. The sales to the corporation were treated as nominal, and the administrator has accounted for the full share to which the estate would have been entitled if Ellsworth had made the sales as surviving partner.
.The subsequent trouble between Macfadden and Mrs. Jenkins, and the cancelation of her stock in the Ellsworth-Jenkins Company, has no particular bearing upon the liability of Macfadden as administrator or the amount due on his final account, but it probably furnishes a reason for the bitterness manifested toward Macfadden in this matter.
It is interesting to note that the district court not only allowed Macfadden his fees as administrator, but further found as a fact that "Mr. Macfadden throughout his administration handled the business thereof with care, shill, and good business judgment, with a view to the best interest of the estate as he understood it to be, except as to the cancelation of Mrs. Jenkins’s stock in the corporation, the conversion of the partnership property through the corporation, and the appropriation by himself and the corporation of the business of the deceased, Jen*470kins. Other errors found in his accounts and rectified by this court were due to mistakes of law as to his rights, duties, and obligations, or inadvertent errors.”
In my opinion the decision in this case results in a grave injustice to Maefadden.
Per Curiam.
After the filing of the decision of this court in the above-entitled action and within proper time, each party applied for a rehearing. A rehearing will not be necessary in order to finally dispose of this case. The opinion handed down, however, we believe should be modified in one important particular. The lower court, in % 21 of its findings and decree, in effect, held that it was bound by the decree of the county court of Cass county as to all sales of real property made by Macfadden as administrator, and for this reason could not, in this proceeding, consider any question as to the validity of these sales or inadequacy in the sale price. This court, in its former opinion, understood and believed that such findings referred to all the real property which belonged to Jenkins individually as well as the partnership real property. In this we were mistaken, and it is clear that such finding referred only to the real property belonging to Jenkins individually, and did not refer to the property of the partnership.
The court refused to receive any testimony relative to the value of the real property and lands belonging to Jenkins personally of which sales were had through the probate court, and in this regard the court proceeded properly. The lower court, however, did receive testimony as to the value of the partnership lands, and after hearing such testimony the court placed valuations upon the equities in such land, which values are set forth in the court’s findings, with reference to tho value of the partnership lands. We do not feel disposed to disturb the value of the equities of the partnership land as ascertained by the lower court, and hold that the values of tho partnership land and property as found by the trial court are sustained by the testimony, and that the appellant is entitled to no reduction because of any increase in value of the partnership property fixed by the trial court over and above the sale price of such lands as evidenced by the. records of the county court of Cass county, this upon the theory that the purchase of the partnership property by Maefadden through the medium of the corporation, *471in tlie manner fully set out in the original opinion, amounted to conversion of such property, by reason of which the respondent would be entitled to recover the actual cash value of all the partnership property so purchased, both real and personal.
The former and original opinion is modified to the extent that the values of the equities of the partnership property as fixed by the trial court shall be taken to be the actual cash value of the equities and such partnership property. The appellant, in his brief and additional brief filed in response to the court’s request, claimed that, from the $26,-217.65 which the trial court found to be the amount owing by Macfadden, there should be deducted $6,064.46, being all partnership items prior to 1909, and also the good will item of $6,457.50, and in addition to that, to deduct the partnership property items of $775.31 and the Emerson farm item $926.25, and $359.61 for alleged excess of interest.
We believe we analyzed most of such matters quite fully in the main opinion, and do not think it necessary to again analyze such matters to any great length. Nothing more need be said with reference to the good will item for $6,457.50. That item has been discussed at great length in the main opinion, and the proper conclusion arrived at with reference to the same.
The appellant claimed that $6,064.46 should be deducted for partnership items prior to 1909. We analyzed this proposition quite fully in the main opinion, and concluded that a deduction of said amount for partnership items prior to 1909 should not be allowed. In other words, we, in effect, held that the trial court had made findings as to these partnership items, and we sustain such findings. We may analyze the item composing the $6,064.46 made up from the partnership items prior to 1909, with the view of making it clear that such items were properly charged against Maefadden. The items which made up said sum were:
Balance of insurance money and interest ............................ $2,191.90
One half of Knuth contract and interest.............................. 1,066.75
One half of Haworth mortgage and interest........................... 776.63
Daily crop and interest .........................................• 111.90
Buettell farm ...................................................... 85.50
Mallory farm ..................................................... 8.55
The thirteen items from October 3, 1908, to November 14, aggregating ... 1,82'3.33
*472The insurance policy to. the partnership' was $10,000. The insurance company held a note for $1,500. This was deducted. There was also paid out of the said insurance $513.11 to the Fargo National Bank, which took up a note for $500, and interest. Out of said insurance was also paid a note of $5,000 to J. H. Ellsworth, and also interest on said note to the amount of $1,480. The balance left after these deductions was an asset of the partnership, and it was proper for the trial court, as it did, to require Macfadden to account for it, and that item, with interest thereon amounted to $2,190.90, which the court charged against the account of Macfadden, which was proper. The trial court also found that the $1,090 that was received on the Haworth mortgage was a partnership asset, and that only $545 had been accounted for. This $545, and interest thereon, was charged to Macfadden’s account. The trial court also found that $1,500 had been paid over by J. H. Carleton, January 3, 1909, in part payment of J. H. Ellsworth’s interest in the Knuth contract, and that said $1,500 was a partnership asset and only $750 had been accounted for. The trial court therefore charged Macfadden’s account $750, with interest thereon from January 3, 1909. The trial court charged $111.90 on account Dailey farm for part of the crop and interest on the value of such share of crop and $60, with interest from January 1, 1909, for hay from the Buettell farm, and $8.55 for hay from the Mallory farm. These, together with the $1,823.33, the other thirteen items, as we understand the matter, are objected to for the reason that such items were received by the partnership prior to the time the corporation bought out Ellsworth. We think that such objection is not well founded, and that the trial court was right in charging such items to Macfadden. Macfadden qualified and became administrator of Jenkins’s estate on or about the 5th day of September, 1908. He then became the administrator of the entire estate of Jenkins. Jenkins’s estate did not consist alone of his own individual property, but also included his interest in all the partnership affairs and property. It was the duty of Macfadden to look after and preserve faithfully and as a trust the entire interest of the estate. If, while acting as such administrator, he was instrumental in forming a corporation of which he became the president, which bought up the interest of Ellsworth in the partnership, any profits arising from such purchase by Macfadden, either to him or to the corporation of which *473he was the president such profits accrued not to such corporation or to Macfadden personally, but accrued to the benefit of the Jenkins’s estate, as we have most fully shown in the main opinion; and it was perfectly proper then to require Macfadden to account for all the property which came into his hands from the time he became administrator of Jenkins’s estate. This accounting is brought, not only to compel Macfadden to account for the partnership property, but for all property which came into his hands, either partnerships or that which belonged to the individual estate of Jenkins, and the interest which Jenkins had in the partnership property was an asset of his estate.
We think, therefore, that all items referred to which were charged against Macfadden which came into his hands in 1908, and it is not successfully disputed but what all such items did come into his hands, were properly charged to him by the trial court, and we think it is proper to sustain such findings of the trial court. The appellant claims, however, that if he should be charged for such items, there should be deducted certain disbursements a list of which appellant has set forth in his brief, aggregating $11,918.56. An examination of such disbursements discloses that the major portion of them were allowed by the trial court; as, for instance, the $1,500 payable for the Equitable Insurance Company note, $500 and interest to the Fargo National Bank, $6,480 principal and interest of the note to Ellsworth. All of these the appellant has received credit for. The credits for $900 and $800.10 for payments made by J. H. Carleton on the Bowers farm were completely disposed of in the main opinion, so that practically all the disbursements claimed by appellant either have been allowed, and such as were not we believe were properly disallowed. There remain several other items in said list, none of which is very large, and most of which payments are for interest or mortgage on some of the farms which belonged to the partnership and which farms were purchased by the corporation. The court evidently did not allow these interest charges to Macfadden as disbursements.
As near as we are able to determine, we believe the trial court, at the time it fixed its values upon the equity of the partnership property which was converted, did so, taking into consideration that there were certain mortgages and interest owing upon said property, and that the value fixed by the court was the net value of the equity exclusive of any *474interest on mortgages. We think this must be likely the reason why the court disallowed the interest disbursement charges made by the appellant. Any other disbursement charges claimed by the appellant which were disallowed by the trial court, we believe were properly disallowed. The trial court had the respective parties before it and was in a better position than we to pass upon each item of the disbursements. It was also in better position to know with which items to charge the account of Macfadden as administrator. We think the items which the trial court charged against the account of Macfadden as administrator were properly chargeable to such account.
In the main opinion we referred to a $1,600 claim paid out of the insurance money. The amount deducted by the insurance company was $1,500. The main opinion is corrected in this regard, as we should have stated that it was $1,500 deducted by the insurance company instead of $1,600. We also stated in the main opinion the following:
“Later Macfadden received $1,500 worth of stock for his interest in the Solberg farm, the estate receiving $750 credit for the same interest.”
We should have said that Macfadden received $1,500 stock for his interest in the Solberg and Estby farm. However, the result is the same.
It is time that Macfadden and Simonitsch each contributed certain capital to the corporation, but did not contribute such capital at the time of the inception or organization of the corporation, but some time later as is shown by the evidence in the case. The organization of the corporation was completed about October 23, 1908, and about that time or about the 24th of October, 1908, commenced business. Later, commencing possibly with November 1, 1908, various amounts were contributed to the capital of such corporation by Simonitsch and Macfadden, for which they received stock in such corporation, but none of the amounts paid in by either were paid in at the inception of the corporation; that is, at the time the organization of the corporation was completed.
We have gone into the matters connected with this case at great length. The main opinion was exceedingly long and quite exhaustive. We have reviewed at considerable length the matters presented on the petition for rehearing. We are fully satisfied that the findings of the *475trial court should not be disturbed. Especially in cases where a long account is involved should the findings of the trial court receive much credit. Not only has this case received the most careful attention by the trial court, but also by this court. The main opinion shall stand as heretofore rendered except as the same is, in any manner, modified by this per curiam opinion.
The petition for rehearing both of the appellant and respondent is denied.
All concur except Mr. Justice Christianson, who adheres to the views expressed in his dissenting opinion.