Opinion
January 28, 1935.
February 6, 1935.
Executors and administrators — Proof by executor of asset of estate — Approval by coexecutors — Good faith.
1. Where the will does not explicitly authorize the executor to purchase from the estate, a purchase by the executor at his own sale of personal property belonging to his decedent's estate is voidable at the instance of the beneficiaries under the will of the decedent, even though such purchase is made by the executor in good faith and with the knowledge and approval of his coexecutors. [464]
2. In this case, the executor was held liable for the sum which represented the difference between what he received for shares of stock belonging to the estate, which he had sold to himself with the alleged approval of his coexecutors, and the amount for which he had accounted. [459-64]
Argued January 28, 1935.
Before FRAZER, C. J., SIMPSON, KEPHART, SCHAFFER, MAXEY, DREW and LINN, JJ.
Appeal, No. 3, Jan. T., 1935, by defendant, from judgment of C. P. Berks Co., Jan. T., 1932, No. 36, in case of Elizabeth H. Pomeroy et al. v. Robert Grey Bushong, one of the executors of the last will and testament of George S. Pomeroy, deceased. Judgment affirmed.
Issue on precept to common pleas. Before SCHAEFFER, P. J.
Verdict for plaintiffs against defendant. Motion for new trial.
The facts are stated in the opinion of the lower court as follows:
Elizabeth H. Pomeroy and Ellen C. Potts, daughters of George S. Pomeroy, deceased, on February 6, 1931, filed their petition in the orphans' court praying for a rehearing in the account of George S. Pomeroy, Jr., Lillie C. Pomeroy and Robert Grey Bushong, executors of the last will and testament of George S. Pomeroy, deceased.
In the hearing before the orphans' court it developed that one of the matters in question was whether or not Robert Grey Bushong, one of the executors, was indebted to the estate by reason of the delivery to him of certain certificates of stock during the lifetime of the decedent. Accordingly, the orphans' court issued its precept to this court to determine the following question of fact:
"Is the defendant indebted to the estate of George S. Pomeroy in the sum of $15,040.76, or any other amount by reason of the delivery to him of the 4,000 shares of Golden Rod Mining Smelting Co., 2d preferred stock, and 162 shares of the Standard Oil of California common stock, in the lifetime of George S. Pomeroy, deceased?"
In furtherance of the command of this precept, the plaintiffs filed their statement of claim to which the defendant filed an affidavit of defense. The matter proceeded to trial and, after all the testimony had been received, the court framed the questions for submission to the jury, which were as follows:
"1. Was there a contract of sale of the 4,000 Golden Rod 2d preferred shares and of the 162 shares of Standard Oil of California by Lillie C. Pomeroy and George S. Pomeroy, Jr., two of the executors of George S. Pomeroy, deceased, to Robert G. Bushong, the defendant?
"2. If so, were the prices of $3.75 per share for the Golden Rod and of $54 per share for the Standard Oil stock fair and reasonable?
"3. If the contract was not made or if the said prices were not fair and reasonable, what amount does the defendant owe to the estate of George S. Pomeroy, deceased, after giving defendant credit for the $3,748 charged against him in the inventory and $20,000 expended in paying Tribune bills?"
The jury answered to the first question "No"; the second was not answered by the jury; and to the third question the answer was $13,100.93. A verdict was accordingly entered in favor of plaintiffs for $13,100.93.
Mr. George S. Pomeroy had been the president of Pomeroy's Inc., and acquired control of a newspaper, known as the Reading Tribune. The newspaper was a losing venture. Mr. Pomeroy paid large sums of money to discharge debts of the paper and it became expedient for the Pomeroys to sever their connections with the paper. It was accordingly agreed that both Mr. George S. Pomeroy, Sr., and Mr. George S. Pomeroy, Jr., should withdraw from the Tribune and that Mr. Bushong, who was Mr. Pomeroy's attorney, should run that paper. There were some accounts of the Tribune presently payable and Mr. Pomeroy found himself with insufficient cash to pay them. With purpose of furnishing Mr. Bushong with means to pay those debts, Mr. Pomeroy caused the certificates of stock in question endorsed by himself in blank to be delivered to Mr. Bushong. The receipt dated September 12, 1925, which Mr. Bushong gave for the certificates was as follows:
"Received of George S. Pomeroy, Sr. — 4000 Shares Golden Rod Mining Smelting Corporation Second Preferred.
"162 Shares Standard Oil Company of California to be hypothecated by me to secure a loan of not more than Twenty Thousand Dollars ($20,000.00), or to be sold by me, the proceeds either of the loan or of the sale, up to Twenty Thousand Dollars ($20,000.00) to be used by me, in my discretion, in connection with the Reading Tribune, Inc.
Robert Grey Bushong."
The day following the delivery of the stock to Mr. Bushong, Mr. Pomeroy died. His last will and testament named George S. Pomeroy, Jr., Lillie C. Pomeroy and Robert Grey Bushong as executors. They duly qualified and proceeded to the settlement of the estate.
Upon the trial Mr. Bushong testified on September 25th he borrowed on an ordinary collateral note $7,000 upon the 162 shares of the Standard Oil Company of California at a bank which held securities, which were his individual property, as collateral for other notes of his own. Similarly on October 26th he borrowed $8,000 by pledging the 4,000 shares of Golden Rod. And on October 30th he borrowed $10,000 more without increasing his collateral. It appears that he applied the sum of $19,946.16 to the payment of indebtedness of the Reading Tribune. Prior to September 25th when he made the first loan, he had the stock transferred into his own name.
Mr. Bushong testified that, after the stock had been delivered to him, and the Tribune creditors were becoming persistent, he discussed with his coexecutors possible methods of raising money upon the stock and after consultation with Mr. Gehret, who had been Mr. Pomeroy's confidential financial secretary, it was agreed by Mrs. Pomeroy and George S. Pomeroy, Jr., with Mr. Bushong that the latter should buy the Golden Rod, which was an unlisted stock, at $3.75 per share and the Standard Oil at $54 per share or for the total sum of $23,748. The excess over $20,000, to wit: $3,748, was inserted in the inventory as an amount due from Mr. Bushong to the estate. The inventory was signed and sworn to by each executor before it was filed. Mr. Bushong testified that the item was explained to his coexecutors in his office.
Mrs. Pomeroy and Mr. George S. Pomeroy, Jr., denied that they agreed that Mr. Bushong should buy the Golden Rod stock at $3.75 and the Standard Oil at $54 per share. The former also denied that Mr. Bushong had explained to her before, or at the time of signing the inventory, the item of $3,748 due from Mr. Bushong. Mr. George S. Pomeroy, Jr., testified that the item in the inventory "Amount due from R. G. Bushong $3,748" was called to his attention by Mr. Bushong at the time he signed the inventory, and that Mr. Bushong said that that item represented the difference between the amount realized on the sale of the stocks and the $20,000 that was to be applied to the Tribune accounts.
From the portions of the pleadings which were admitted in evidence it appeared that Mr. Bushong had sold the Golden Rod stock in July and August, 1926, for the total sum of $23,620 and the Standard Oil stock in September and December, 1926, for a total of $9,604.92, and that he had received the sum of $3,624 in all in dividends upon the shares. The total sum received by Mr. Bushong on account of these stocks accordingly was $36,848.92 as against which sum Mr. Bushong was entitled to a credit for the sum of $3,748 charged against him in the inventory and for the sum of $20,000 that was to be applied to the debts of the Tribune. The plaintiffs, therefore, claimed $13,100.92 for which sum the jury returned a verdict in their favor.
The reasons for a new trial contain no specific assignments of error. Upon the argument the defendant contended that the admission in evidence of certain post cards purporting to come from the Globe Securities Company and containing references to bid and asked prices of the Golden Rod stock, was error. It is true that no one was called to testify to the truth of the facts set forth in the cards. But the cards were not offered or admitted in evidence as proof of the market value of the stock; that was not in issue, for the plaintiffs sought to recover only the difference between the amount Mr. Bushong admitted that he realized upon the sale of the securities and the $23,748, which represented the $20,000 he was authorized to apply to the Tribune and the $3,748 which he accounted for in the inventory. The cards were produced from the files of the defendant and were used in cross-examination of the defendant and in connection with the question of his ability to find a market for the Golden Rod stocks at the time he said he purchased them.
At the conclusion of the testimony the plaintiffs asked for binding instructions in their favor for $13,100.92. After argument, the court reserved this point and submitted to the jury the three specific questions above set forth. The jury answered them in accordance with plaintiff's claim. We have carefully reviewed the entire case in the light of the argument upon the motion for a new trial, and are of the opinion that the case was fairly and correctly tried and submitted to the jury and that the motion for a new trial must be dismissed.
After due consideration we are also of the opinion that plaintiffs were entitled to an affirmance of their point for binding instructions. Under the cases the rule is clear that the purchase by an executor at his own sale of shares of stock belonging to his decedent's estate is voidable at the instance of the beneficiaries under the will of the decedent upon the ground of public policy. The executor's liability to account for assets so handled does not depend in the slightest degree upon his good or bad faith: Stewart's App., 110 Pa. 410. Where, as here, the will does not explicitly authorize the executor to purchase from the estate, he cannot do so at a sale over which he has control, even with the knowledge, approval and agreement of his coexecutors. Such approval or agreement might estop his coexecutors from complaining in their individual right, but it would be no answer to a suit by the cestui que trust, such as we have here. It follows that, under all the facts and testimony before us, the plaintiffs are entitled to a verdict for the sum which represents the difference between what the defendant received for the stocks and the amount for which he had accounted. See Lewis v. Ewing, 18 Pa. 313; Chorpenning's App., 32 Pa. 315; Gilbert's Est., 78 Pa. 266; Grimm's App., 105 Pa. 375; Gilmore v. Gilmore, 279 Pa. 193; Messmore's Est., 290 Pa. 107, 114; Kelley's Est., 297 Pa. 17, 21; Chiswell v. Campbell, 300 Pa. 68.
And now, to wit: October 9, 1933, the rule for a new trial is discharged.
Defendant appealed.
Error assigned, inter alia, was refusal of new trial, quoting record.
E. H. Deysher, for appellant.
Charles W. Matten, with him Ralph B. Evans, for appellees.
The judgment is affirmed on the opinion of President Judge SCHAEFFER.