In re Ver Varen's Estate , 24 N.Y.S. 133 ( 1892 )

Weiant, S.

The estate of the deceased was inventoried at $910.50, and for this sum, less allowances for unavoidable losses, the contestants claim that the administrator should be charged on this accounting. The administrator contends that, in addition to the deductions for such losses, there should be deducted therefrom the value of all chattels and properties included in such inventory which constituted a part of the milk business, and were therein valued at $372, on the ground that the same were his individual property, and not a part of the estate. I think that the claim of the contestants must prevail. The evidence clearly shows these chattels and goods to have been' the property of the intestate. The administrator admits that his father, the intestate, bought the horses, wagons and cans in question and inventoried, and that he paid Mr. Maroney for the milk route $125 or $130. He testifies that he only made one payment on the milk route, and that was $20, to a Mrs. Partridge. He says his father made all the rest, and that most of these notes against the estate were given for borrowed money to buy this milk route or purchase the properties used therewith. He testified that he supposed that the milk route belonged to his father, because he had no papers showing it belonged to him. He inventoried this property as a part of the estate, making the usual affidavit thereto, but designated it as disputed. He paid the claim of Louis Biltz, of $38, against the estate, and this he testifies was a difference on a wagon trade, made before his father’s death, of a running gear of a milk wagon for another, which was the new one sold at the auction. This is one of the articles that he claims to have been his individual property. Further, the administrator in his accounts filed herein on October 26, 1891, charges himself with these articles, and swears to the amount accordingly without reservation or qualification. He some time subsequently, during the hearing, asked that his accounts might be amended, reducing the sum for which he should be charged to the extent of the value of these articles in question. The decision thereof was reserved, and now, in accordance with the facts, must be denied. The expenses of the sale of all this property were charged up by him to the estate, and paid out of the estate moneys. His verified accounts show this. It thus appears that all of this property appertaining to this milk business was acquired by the intestate, and that the administrator really believed and understood that he had not acqxiired any title to the same. Conceding, as he does, that it was all his father’s at one time, to sustain his claim he must have shown the acquisition of the property from his father in some form. This he has not done. All of the property, including the farm, belonged to the father, and it was upon this farm and through this milk business that the father and son, by mutual family relations, without any definite fixing of rights, provided a livelihood and home for themselves. I think that is the only interest this administrator had in this property and business.

The contestants also ask that the administrator should he charged with $150, the sum for which he sold the milk route to Wood; the sum of $50, realized by him over and above the price he paid for a wagon at the auction sale; the sum of $10, that he received over and above the price at which he purchased a horse at the auction sale; and, also, the sum of $17.50, being the difference between the price at which he inventoried and sold the one-half interest of a colt belonging to the estate. The facts, undisputed, are that the administrator did, after the auction sale of the inventoried property, sell the milk route, the right to serve customers, and the cans, to one Wood, for $200; that $50 of this price was retained to stand against tickets that the Ver Valens then had out in the hands of customers, and $25 was the value of the cans. The cans, as I understand, are already charged against the administrator’, and whatever that value is should be deducted from the $150. The wagon in question was purchased hy the administrator at the auction sale for $10, and subsequently sold, in about three or four months, to one Tuttle, for $55 or $60. The horse “Boll” he also purchased, for $165, and sold it within five or six weeks thereafter to George Lyeth for $175. The half interest in the black colt was inventoried at $12.50, and the colt was sold at the auction for $41, bought in hy the administrator, and subsequently sold by him for $60. IJnder the rules of law and equity applicable to' the rights and duties of trustees it seems clear that the administrator must account for these profits arising from the trust estate. Equitable as well as legal rules are applicable. Upson v. Badeau, 3 Bradf. Sur. 13. A trustee cannot make any profit to himself from a secret transaction, initiated while, the relation of trustee and cestui que trust exists. Green v. Green, 2 Redf. Sur. 408; Gardner v. Ogden, 22 N. Y. 327; Mitchell v. Reed, 61 N. Y. 123. The principle of the rule of equity which prohibits purchases by parties placed in a situation of trust or confidence is that no such person can be permitted to purchase an interest in property and hold it for Ms own benefit, where he has a duty to perform in relation to such property which is inconsistent, with the character of purchaser on his own account. Van Epps v. Van Epps, 9 Paige, 237, Hawley v. Cramer, 4 Cow. 717; Willink v. Vanderveer, 1 Barb. 599. This rule is recognized in Harrington v. Bank, 101 N. Y. 259-264, 4 N. E. Rep. 346. It is there stated to be a “well-established doctrine that a trustee cannot purchase or deal in the trust property in his own behalf, or for his own benefit, directly or indirectly. This is a rule of equity, and is not to be impaired or weakened.” In Mitchell v. Reed, supra, Judge Earl, writing the opinion, says, at page 126, speaking of the relations of partners:

“The functions, rights and duties of partners in a great measure comprehend both those of trustees and agents, and the general rules of law applicable to such characters are applicable to them. 27either partner can, in the business and affairs of the firm, clandestinely stipulate for a private advantage to himself. He can neither sell to nor buy from the firm at a concealed profit to himself. Every advantage which he can obtain in the business of the film must inure to the benefit of the firm. These principles are elementary, and are not contested.”

In Estate of Barlow, 15 N. Y. St. Rep. 721, it was held that the sale by the administrator of a deceased partner of his interest in the partnership property to the survivors, and the subsequent purchase by the administrator individually, is an unlawful transaction, whether or not the sale was in good faith. One executor or trustee can make no valid agreement to purchase or take the trust property at a fixed valuation from his co-executor or trustee without being liable for the profits, if any ■are made by the agreement. Case v. Abeel, 1 Paige, 393. An executor who compounds debts or buys in for less than is due ¿cannot take the benefit to himself. Van. Horne v. Fonda, 5 Johns. Ch. 388. Ho profit can be made by executors or administrators by increase of the estate. 3 Rev. St (5th Ed.) p. 179, sec. 63. He must answer for the true value. Zilkin v. Carhart, 3 Bradf. Sur. 376. As to so much of the $150 received by the administrator on the sale of the milk route for the “right to .serve customers,” I may add that it appears he is chargeable for the same as an asset of the estate. It was a sale of the “good will” of the milk business that belonged to the intestate, and for whatever he may realize therefrom he is accountable. In ■re Benedict, 13 Abb. N. C. 67; In re Randell’s Estate (July 27, 1889) (Surr.), 8 N. Y. Supp. 652; Zilkin v. Carhart, supra,; Hitchcock v. Coker, 6 Adol. & E. 438; Howe v. Searing, 19 How. Pr. 14; Gibblett v. Read, 9 Mod. 459. Let a decree be settled and entered accordingly adjusting and settling the accounts.