Court Opinion

ID: 8807123
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:51:12.455114+00
Date Added: 2024-06-11T17:04:08.556327
License: Public Domain

Me. Justice Beown delivered the opinion of the court. The questions involved in this appeal seem to he: First. Were Peabody, Houghteling & Company and their successors in the beneficial ownership of the rights, title and interests which passed under the trust deed of Louis C. Wachsmuth to Francis B. Peabody, dated February 25, 1901, conveying lots 22 and 23 in block 2 in the Circuit Court partition, subrogated to the rights before held by the beneficial owners of the interest in said property which passed by the trust deed from Henry F. Wachsmuth to Edgar M. Snow, dated April 15, 1896? If they were, the petition, of course, could not be sustained against their rights, as it is conceded that an encumbrance or lien placed on property by the decedent would take precedence of any right of the petitioners. So far, at least, as this property was concerned, the. petition would have been in that case properly dismissed. Second. If this theory of subrogation is not correct, did, nevertheless, the foreclosure proceedings begun in the Superior Court by the Penn Mutual Life Insurance Company on January 31, 1903, on said lots, and carried to a decree of the said court June 22,1903, and a sale and master’s certificate and deed thereafter, cut off and foreclose any right that may have theretofore existed in said petitioning executors to sell, or in the creditors of Henry F. Wachsmuth to cause to be sold, the said property to pay Henry F. Waschmuth’s debts ? The ground of this claim on the part of appellees is that the executors made defendants in said foreclosure suit (under the allegation that they “had or claimed to have some interest in said premises as purchasers, mortgagees, judgment creditors or otherwise, which interest, if any, had accrued subsequent to the lien of the complainants and was subsequent and inferior thereto”), represented those rights of creditors which had to be worked out through their intervening action, and that as snch representatives and in every other capacity, they were "bound by the decree which, taking the bill as confessed by them, found all its material allegations true, and that the Penn Mutual Life Insurance Company had a first and prior lien on said premises; and among other things, adjudged and decreed that if the said premises should not be legally redeemed after the ordered sale, “the defendants in the cause and all persons claiming under them, or either of them, should be forever barred and foreclosed of and from all equity of redemption and claim of, in, and to said premises”. If this claim of the appellees is correct, it is also an end of this proceeding so far as they and the property in the Circuit Court partition is concerned. A third question raised by the pleadings is whether the petitioners have been guilty of laches, forfeiting the right which they claim in their petition.. The fourth question is: Assuming that the petitioners still have, as to all the real estate left by Henry F. Wachsmuth, the right, in a proper case and under a proper showing, to sell to pay the debts of the deceased, is this a proper case and has a proper showing been made? No question is made as to the procedure proper, but it is claimed by appellees that no showing has been made that there is any deficiency of personal property in the estate of Henry F. Wachsmuth to pay said indebtedness, and that any apparent showing to that effect by the alleged just and true account of the personal property and debts of said deceased filed in the Probate Court is due to the failure of the said executors to show therein certain credit assets of the estate. . The assets thus wanting are said to be a certain debt due from themselves to said estate, which, added to the other assets, would increase their aggregate above the amount of the estate’s indebtedness. This debt was of $10,000 and accrued interest, and was for money advanced by the deceased, Henry F. Wachsmuth, to Ms sons (the executors and petitioners) in March, 1899. The appellees claim that this sum should be held cash assets in the hands of the exécutors, thereby increasing the amount of assets shown by the “just and true account” from $5,595.08 to $15,595.08, and as much more as the interest amounts to. As the claims allowed oMy amount to $12,850.33, with this increase in the personal assets, the deficiency for which real estate could be sold, would disappear. Therefore these two subsidiary questions arise under this fourth primary one: A. Was the debt of $10,000 and over, from the executors to the estate, in existence at the time of the petition to sell? B. If it were, was it properly to be held cash assets in the hands of the executors? The answer to this last query depends on two questions—one of law and one of fact. The question of law is: Was the debt properly to be so held, even if the executors were personally insolvent at or after the time of their appointment and qualification? If the answer to this question of law is in the negative, this question of fact must be answered: Were the executors solvent at or after said time? The Probate Court in its conclusions made the whole matter turn on the answer to this last subdivision of the inquiry. It held that the appellees, the Penn Mutual Life Insurance Company and Baum-garden, were not subrogated to the rights of the holders of the Snow trust deed. It also held that the foreclosure proceeding and decree in favor of the Insurance Company and the sale and deed thereunder did not cut off or foreclose any right which before existed in the executors to sell under their petition. It further held, as we understand the record and the admission of counsel, that the executors were guilty of no laches which so cut off, waived, or foreclosed their right. It held, moreover, that the proper procedure had been followed if the proper showing had been made and that if the executors were solvent their debt to the estate should be considered as such assets of said estate in their hands, but that if they had been insolvent at, and for all the time after, their appointment and qualification, the debt due from them should not, as a matter of law, be accounted cash assets in their hands. To this point, therefore, the Probate Court followed the petitioners and the creditors in their claim of a right in this proceeding to sell the land held by Baum-garden. But it held on the evidence before it, as a matter of fact, that the executors were solvent at and after the time of their appointment and qualification, and that no deficiency existed. The necessary consequence of this holding was the dismissal of the petition, and this order was entered. Thus, as stated, the Probate Court’s decision was based on its answer to this last question of fact before set forth. The cross-errors assigned, however, make it necessary for us to review as well the decisions of the lower court on the preceding questions of law, as on this final one of fact. The court is undivided in the opinion that on each of the questions of law, the conclusion of the Probate Court was the correct one. Its reasons will be briefly set forth. The first of these questions is whether the Penn Mutual Life Insurance Company and Baumgarden, through their holding' of the Peabody encumbrance, are subrogated to the rights of the holder of the Snow trust deed. As is pointed out by appellants, there was certainly no agreement to that effect when the “Peabody” loan and trust deed were made. The Peabody loan was made as the cross-petition of Baumgarden alleges, to secure money to discharge the Snow eneunibrance and, as the evidence of Mr. Houghteling shows, on the representation that there were no claims against the estate. If, therefore, the holder of the Peabody trust deed is entitled to be subrogated to the rights of the Snow trust deed, it must be by operation of law and merely because the money which Peabody, Houghteling & Co. advanced actually went to pay the Snow encumbrance. But this in itself does not, according to any authorities of which we are aware, create the right of subrogation. Thus Beach on Modern Equity Jurisprudence, sec. ■ 801, says: “But one who is only a volunteer cannot invoke the aid of subrogation, for such a person can establish no equity. He must have paid on request or as surety, or under some compulsion, made necessary by the adequate protection of his own right. * * * The loaning of money to discharge a lien does not subrogate the lender to the rights of the lien holder”. The American & English Encyclopedia of Law, Yol. 24, p. 281, says: “One who advances money to pay the debt of another, in the absence' of agreement express or implied for subrogation, will not be entitled to succeed to the rights and remedies of the creditor so paid, unless there is some obligation, interest or right, legal or equitable, on the part of such person in respect of the matter concerning which the advance is made, as otherwise he is a stranger, a volunteer, an intermeddler, to whom the equitable right of subrogation is never accorded”. Both of these text-bqok propositions are quoted as correctly stating the law by the Supreme Court of Illinois in Bouton v. Cameron, 205 Ill. 50. To the same effect are Fuller v. Davis’ Sons, 184 Ill. 505; Hough v. Aetna Life Ins. Co., 57 Ill. 318; Small v. Stagg, 95 Ill. 39; Pearce v. Bryant Coal Co., 121 Ill. 597; and White v. Cannon, 125 Ill. 416. The second question relates to the effect of the foreclosure proceedings in the Superior Court in case No. 227982, Penn Mutual Life Insurance Company et al. v. Louis C. Wachsmuth et al., on the right of the executors of Henry F. Wachsmuth to sell the real estate therein involved for the benefit of the creditors of the estate. This was the question raised by the plea of the Penn Mutual Life Insurance Co. to the petition, which plea was overruled by the Probate Court. Because of the fact that the executors of the deceased, Henry F. Wachsmuth, were made parties to this proceeding to foreclose a trust-deed mortgage given by a devisee under the will of which they were executors, and were by the general language of the decree foreclosed from all claim of, in, and to said premises, on which the complainants were said to have a first lien, it is claimed by the plea of the Insurance Co. and by the cross-petition of Baumgarden, and is claimed in this appeal, that the executors lost by the principle of res adjudicata any right they might, before said decree, have had to sustain their petition. The reasoning of the judge of the Probate Court in disposing of the plea seems to us, however, entirely satisfactory. In the first place, to be res adjudicata, a controversy must be one which could in the prior proceeding have been litigated; and it is difficult to understand how the executors of a will could litigate the priority of right between themselves, claiming under and representing the testator, and the assignees of a devisee from that testator. The priority is self-evident and axiomatic in such a case, not a matter for litigation. But if it were, then the litigation of the priority involved here would necessarily draw with it into the cause, the entire administration of the estate. This, the appellees say, the Superior Court has jurisdiction to undertake in the exercise of its chancery powers. This may be conceded, but it is nevertheless true that the Supreme Court has in like circumstances held that if the Superior Court or Circuit Court be a possible forum, it is not so the proper forum for such administration that its determination in a collateral suit will be held to have barred or disposed of the matters pending in the Probate Court which, under this theory of its jurisdiction, might have been, but were not, litigated. We do not see but that the principle stated, if not involved, in Sutton v. Read, 176 Ill. 70, and Crane v. Stafford, 217 Ill. 21, is applicable to the case at bar. But further than this we do not think the form of the findings and orders of the decree in the foreclosure case, properly construed, cut off the rights of the executors. The court found that the Peabody trust deed constituted a first and prior lien on the property involved. So it does, for the contingency that the property might have to be sold under a paramount claim did not constitute a lien in the proper sense of that word. Where that expression has been used by the Supreme Court to describe this contingent right of sale to pay a decedent’s debts, the question whether there was properly a “lien” existing was not involved, and it was apparently used loosely and without precision. The enforcement of future and unassessed taxes might possibly take the land out from under this “first and prior” lien, and yet said taxes would not have been a lien at the time the finding was made. We do not mean to imply that the nature of the right of the executors to sell is identical with that of the contingency of future unpaid assessments, but use the suggestion merely as matter of illustration. The only other provision in the decree which 'could affect this right, is that which says that “the defendants in this cause, and all persons claiming under them or either of them shall be forever barred and foreclosed of and from all equity of redemption and claim of, in and to said premises and every part and parcel thereof which shall have been sold as aforesaid and which shall not have been redeemed according to law”. These italicized words by a forced construetion might be said in terms to exclude the executors’ right (if the executors represented in this litigation the creditors who alone are beneficially interested in that right) to sell to supply a deficiency in the personal assets of the estate; but such is not the natural meaning to be given to the phrase. It is that claim of the defendants “in and to the premises” which is the subject of the sale and of the redemption—in other words, that which was conveyed by the trust deed sought to be foreclosed—from which they are barred and foreclosed. This is the construction which a learned judge in the fourth district evidently placed on this language, holding that in the absence of a more specific allegation than the general one of a claim of interest made in this case, the rights of a prior encumbrancer made defendant was not by them affected when he had made no defense to the bill. Foval v. Benton, 48 Ill. App. 638. This court virtually approved this doctrine in Hibernian Banking Association v. Law, 88 Ill. App. 18. It is the doctrine held in many other jurisdictions, for example, in Vermont—Buzzel v. Still, 63 Vermont, 490; in California —McComb v. Spangler, 71 Cal. 418; in New York— Emigrant Savings Bank v. Goldman, 75 N. Y. 127; and in Wisconsin—Strobe v. Downer, 13 Wis. 11. We are aware that language used by our Supreme Court in such cases as Kehm v. Mott, 187 Ill. 519, and Rohrhof v. Schmidt, 218 Ill. 585, seems inconsistent with this view; but we are forced to agree with the learned judge of the Probate Court that the language in those cases must be considered as obiter dictum save so far as it applies to the precise facts in "those cases. In neither of those named was the thing to be decided what was the effect of the general language of a decree on a point not litigated, but in the first it was whether on a point put in direct issue by the pleadings, and thus actually litigated, the allegations of the bill were sufficiently specific; and in the second, whether certain evidence was sufficient to make a prima facie case to establish the allegations of the bill. To give the language used a wider effect as authority would be to make it contradict in principle the doctrine of Gage v. Perry, 93 Ill. 176. But we may go further still, and state our opinion on a point left undetermined by the court below, which is in itself conclusive against the bar claimed to have been made by the foreclosure decree. It is this—that the action of executors in enforcing a sale of real estate to supply a deficiency in personal assets to pay debts is in the right of the creditors whose debts are to be paid, while in the character of defendants to the foreclosure bill in this case, the executors did not so represent the creditors of the estate as to have required them to present and have litigated the creditors’ claims. We by no means intend to hold that making the personal representatives of a deceased person parties to a foreclosure suit to foreclose an encumbrance existing at the time of the death of the deceased, does not bar the right of all the creditors of the estate.' Undoubtedly it does. But this is a different case, and it seems to us inconsistent with the logic and right reason of the situation, to assume that without an actual day in court, before, it may be, their claims are allowed, creditors who would otherwise have in the probate procedure the right and the means to enforce payment in full against the estate, can be cut off from that right by the neglect of an executor to answer or deny the allegations of a bill brought by a stranger, to foreclose a trust deed subsequent in time to the death of the testator. We do not believe that it is the law that they can. We see no ground for an affirmative answer to the third question—-Were the petitioners guilty of laches? The Probate Court therefore properly answered it in the negative. The time for filing claims against the estate, under the law as it then existed, expired on December 12, 1902, and as early as August 28, 1903, one of the creditors (in whose right this proceeding is brought and by whose diligence the question of laches should be tested) began its attempts to secure the enforcement of the remedy involved in this cause; and the Supreme Court has said that a much longer time is allowed to enforce this right. Myer et al. v. McDougal, 47 Ill. 278. As to the first subdivision of the fourth primary question—Was the debt of $10,000 in existence at the time of the petition to sell1?—no contention is now made by the appellants. It is conceded that such debt did exist, although at one stage of the proceedings it was claiméd that it had been extinguished by the deceased in his lifetime. The executors, Frederick H. Wachsmuth and Louis C. Wachsmuth, were the sons of the deceased, Henry F. Wachsmuth. They were on March 15, 1899, in the wholesale clothing business in Chicago, and at that date their father loaned them $10,000. Louis C. Wachsmuth testified in this proceeding that a short time afterward his father said: “I have cancelled this debt”, and, again, “Ton are having trouble and I will help you out. I will give you that”. The Probate Court rightly held that the agreement which this testimony tended to prove would be without consideration and ineffective either as an executory contract or a gift inter vivos, and the appellants make no contention to the contrary in this court. We are thus brought to the question whether the sum of $10,000 and interest should be held cash assets in the hands of the executors. On the propositions of law involved in this question, the parties and the Probate Court are, as we understand it, in substantial accord. At least no strenuous contention is made by either party that the rule which we understand the Probate Court adopted, and which we believe to be the correct one, is not the law of Illinois. It is that executors or administrators are chargeable with a debt due from them to the estate as cash assets in their hands only when they are solvent. Even if they could show that they were insolvent, they were held so chargeable by the common, law and they are so held by what has been denominated the Massachusetts rule. Leland v. Felton, 1 Allen, 531; In re Howell, 66 Neb. 575, reported with annotations also in 61 Lawyers Reports Annotated, p. 313. But because this rule worked injustice and hardship, particularly to the bondsmen of insolvent personal representatives, the courts, as is said in Sanders v. Dodge, 140 Mich. 236, have “modified this rule somewhat”. The opinion in that case quotes from Dame on Probate and Administration with approval the following: “It is a well established rule of law, running back even before the Revolution, that an executor or fl.dTniTiistra.tor is considered as having paid the debt due from him to the estate and as actually having in his possession that much more cash. If the personal representative is insolvent, the courts, in the interests of all concerned, modify this rule somewhat. He still charges himself with the amount of his debt, but it does not make it actually money. The law does not require impossibilities, and there is no more reason why he should be considered as having paid what he was utterly unable to pay than any other creditor. He is held liable to the estate to the extent _ of his ability to pay the same at any time during administration”. This doctrine is approved in In re Walker, 125 Cal. 243; in Lyon v. Osgood, 58 Vermont, 707; in In re Georgi, 47 N. Y. Suppl. 1061; McCarty, Admr., v. Frazer, 62 Mo. 263, and Wilson v. Ruthrauff, 82 Mo. App. 435. The California decision above cited states it on text-book authority to be the law of Indiana, Maine, Wisconsin, New Jersey, New York, Oregon, Pennsylvania, Tennessee and Vermont. We think that it is also the law of Illinois and that the principle is fully recognized in the language of the opinion of the Appellate Court of the fourth district in May v. Leighty, 36 Ill. App. 17, and of the second district in Phillips v. Duckett, 112 Ill. App. 587. With these conclusions reached by the undivided court, there only remains for this court, as there did for the Probate Court under the same conditions, as the ultimate query on which the decision of the case must turn, the question of fact: Were Frederick H. Wachsmuth and Louis F. Wachsmuth insolvent on and after the death of Henry F. Wachsmuth on November 2, 1900, up to the hearing of this cause, and the order appealed from which dismissed the petition on June 22, 1907? Counsel for appellees claim that all the authorities which hold that the insolvency of the executors prevents the indebtedness from being reckoned as cash assets, place upon them the burden of showing their inability to pay; but under the circumstances of this case, it will be, we suppose, conceded that if the insolvency immediately after the death of Henry F. Wachsmuth and at the time of the issuance of the letters testamentary is established, that condition will be presumed to have continued except so far as the evidence in the record shows that it has been changed. That, at all events, is our view, and it is on the assumption of its correctness that we pass on the question at issue. The Probate Court decided that the evidence did not establish the insolvency of the executors, but, on the contrary, established their solvency at the time of their appointment and qualification, and this court (but not unanimously) has arrived at the same conclusion. The order of the Probate Court will therefore be affirmed. It is not necessary to discuss at any length the reasons for our differing opinions on this question of fact. Succinctly stated, they are as follows: A year or more before the death of Henry F. Wachsmuth, Louis C. and Frederick H. Wachsmuth, afterwards the executors, had become financially embarrassed in the wholesale clothing business, which they were conducting. Their father helped them to a settlement, but when he died they were insolvent. They had only $5,000 of assets and twenty-six or twenty-seven thousand dollars of liabilities. After that they continued in business without making any recoupment of their losses, and by the end of 1902 their business was closed out, and they had no assets, but liabilities of from twenty to twenty-five thousand dollars. Judgments were obtained against them and creditors’ bills filed on the judgments, apparently without result. But Henry F. Wachsmuth devised to Louis C. Wachsmuth the Forty-seventh street property (mentioned in the prefixed statement as piece No. 2), subject to an encumbrance of $11,000 and some accrued interest, and to Frederick H. Wachsmuth the Rhodes avenue property (mentioned in the statement as piece No. 1), subject to an encumbrance of $10,000, and the Groveland avenue property (piece No. 3), subject to a first encumbrance of $4,500 and a second one for $10,000, to both Louis C. and Frederick H. “share and share alike”. He also gave them, as executors, power to sell or to mortgage all said real estate. Reckoning, then, that at the time of the death of their father they were even $22,000 worse off than nothing (including the $10,000 debt to their father in the account), yet if these equities in the three pieces of property mentioned were worth that amount, it is the opinion of the majority of this court that they would then have become solvent under the operation of the devises before their appointment and qualification as executors. The bill of exceptions or certificate of evidence in this case concludes with the following recital: “It is stipulated by all counsel that at the time of the death of Henry F. Wachsmuth, deceased, the fair market value of the Rhodes avenue property was $30,000, subject to an encumbrance of $10,000, and that the value of the Forty-seventh street property was $30,000, subject to an encumbrance of $11,000, and of the Groveland Park property $10,000, subject to encumbrances of $4,500 and $10,000, making a total value in real property of $70,000, subject to mortgages made by Henry F. Wachsmuth, deceased, aggregating $35,500”. It is also the opinion of the majority of the court, which agrees in this with the decision of the Probate Court, that the effect of this stipulation is to show that the equity in .the Bhodes avenue property, which Frederick H. Wachsmuth received, must be considered among his assets at the approximate figure of $20,000, and that the equity in the Forty-seventh street property, which Louis C. Wachsmuth received, must be reckoned among his assets at the approximate figure of $19,000. No account need be taken in this calculation of the Groveland avenue property,- which was encumbered for more than its value, on which encumbrances, however, the devisees were not personally liable. It is plain, of course, that if this $39,000 is properly to be estimated as a valuable and available holding of the two devisees and executors, it overbalanced their indebtedness by $17,000, and left them solvent and chargeable with the indebtedness to the estate as cash assets. This, it was the decision of the Probate Court and is the decision of this court, it did. Therefore the petition to sell real estate was dismissed by thé Probate Court and the order is by this court affirmed. The writer of this opinion, however, does not agree with this conclusion. His criticism of it is based on the same considerations urged against it in the appellants’ brief and argument, and need not be here elaborated. He thinks that under the true meaning of the rule concerning the treatment of a debt from an executor as assets in hand, the debt can only be so considered when the executor could, with the property in his possession or under his control belonging to him, have paid it. The equities in real estate involved here were not an available fund. The results have shown it. That “the fair market value” was a certain amount, does not mean that the property could have been at any time sold for that much, subject to encumbrances due or soon coming due, and to the contingencies involved in winding up the estate of the decedent devisor. Both the Rhodes avenue property and the Forty-seventh street property are now in the hands of other parties through the immediate or mediate effect of the encumbrances which were on them at the time of the testator’s death. The Rhodes avenue property was foreclosed under such an encumbrance, and the Forty-seventh street property on one which was substituted for such an encumbrance, and from the proceeds of which the original encumbrance was paid. But as this is not the view of the majority of the court and on all the other points in the case we are agreed, the judgment of the Probate Court is affirmed. Affirmed.