Opinion
No. 31489.
January 14, 1935.
1. EXECUTORS AND ADMINISTRATORS.
Executor or administrator ordinarily has authority to sell certain property only to pay debts or for purpose of distribution.
2. EXECUTORS AND ADMINISTRATORS.
Party dealing with executrix concerning matter in fiduciary capacity was bound to take notice of extent of her authority.
3. EXECUTORS AND ADMINISTRATORS.
That executrix having deposit in building and loan association subject to check attended meeting at which liquidation of association was discussed, and that some proxy represented her, did not estop executrix from denying that she was stockholder of association.
4. EXECUTORS AND ADMINISTRATORS.
Where executrix deposited proceeds of sale of stock in building and loan association subject to check and association, knowing that executrix acted in fiduciary capacity, changed deposit into stock purchase without her knowledge, duty of showing that will authorized executrix to purchase stock was on association contending that executrix was a stockholder.
5. EXECUTORS AND ADMINISTRATORS.
Where court ordered executrix to sell stock in building and loan association to pay debts of estate, executrix had no authority to use proceeds of sale exceeding amount necessary to pay debts to purchase other stock in association.
APPEAL from the Chancery Court of Forrest County.
Travis Travis, of Hattiesburg, for appellant.
The general rule of law is that the death of a stockholder in a building and loan association terminates his membership and makes it the duty of the association to pay to the legal representative of the deceased the withdrawal value of the stock.
Membership, with all its incidents, is cancelled by the death of the member, and his heirs or personal representatives do not ipso facto become members, although some statutes grant them the option of becoming members in their own right.
9 C.J., sec. 25, page 933, Building Loan Associations; Shahan v. Shahan, 86 A.S.R. 68.
In the case at bar, no by-law or statute fixes the status of a deceased member, so that this general rule applies with full force. The appellant, as has been seen, is proceeding in the capacity of executrix and had and has no power to subscribe for stock, or to waive any legal right of the estate or to take any action, except through the court's consent.
There is nothing in the record to indicate that appellant did any of the things necessary to make her a stockholder.
In the sale of property at an administrator's sale, the doctrine of caveat emptor is applied with great strictness.
Joslin v. Caughlin Brown, 26 Miss. 142; Hutchins et al. v. Brooks, 31 Miss. 432; Cogan v. Frisby, 36 Miss. 178; Alexander v. Herring, 55 So. 360; Luckett v. Brickell, 115 Miss. 457.
As a matter of law the sale and delivery of the stock in question to appellee operated as a legal and valid withdrawal of the same with the effect that appellant became a creditor of appellee in the amount of the value of the stock as then agreed on by the parties, two thousand one hundred dollars.
Section 3985, Code of 1930, provides that any certificate of stock issued by a building and loan association shall "carry with it the right of a stockholder to withdraw his unpledged stock at any time under due notice, as provided by the by-laws" of the association.
Wise Bros. v. Building Loan Association, 105 Miss. 78.
The trial court erred in overruling appellant's motion for a final decree in her favor.
Griffith's Equity, sec. 674, note 7; Tarver v. Lindsey, 137 So. 93, pars. 6-7, at page 96; Crichton v. Halliburton Moore, 122 So. 200, at pages 204-5.
F.M. Morris, of Hattiesburg, for appellee.
The acts of Mrs. Donald in this case, in her presence and participation in a stockholders' meeting and particularly her voting for a resolution reducing the value of the stock from one hundred per cent to forty per cent clearly estops her from asserting a claim as a creditor.
The second position which we maintain must support the decree of the lower court is that the building and loan association was insolvent at the time of the death of Mrs. Orr, and continued so until the appellant bound herself with other stockholders to accept a reduction of sixty per cent of the original value of said stock.
It may be admitted as true that the appellant did not know at the time of her dealings with M.M. Simmons, secretary, in October, 1929, that the association was insolvent, but this fact has no bearing upon the right of the executor as a stockholder in 1929 of twenty-one full shares of stock to withdraw the same in cash. In a note of 49 L.R.A. (N.S.) 1143, the cases are carefully annotated, supporting this rule in the United States as distinguished from the rule in England, as shown in the earlier note 35 L.R.A. 298, the English courts are inclined to permit withdrawals according to the terms of the by-laws if the notice were given without knowledge of insolvency and matured before the order to liquidate was made, but the courts in the United States regard knowledge, or lack of knowledge, of insolvency as wholly immaterial. Here, it is the existence of insolvency, not knowledge thereof, that terminates the right to withdraw.
Mrs. Donald, the appellant, was executrix of the estate of Mrs. Lillian S. Orr, and, as such, in the year 1929, filed a petition in the chancery court of Forrest county for the sale of twenty-one shares of stock in the Hattiesburg Building Loan Association for the purpose of paying debts due by the estate. The chancery court passed an order directing said stock to be sold, and Mrs. Donald went to the Building Loan Association, the stock being fully matured and having an apparent face value, and sold it to said association, but left the money with the association, and drew checks against it which were honored by the association, until the amount was reduced to five hundred seventy-four dollars and seventy cents. Mrs. Donald testified that, when she went to the association and sold the twenty-one shares of stock to it, she asked the then secretary about placing the money in one of the Hattiesburg banks, and that he asked her to let the money remain in the association, and said that they would honor her checks. The amount realized from the sale of the stock, two thousand one hundred dollars, was placed upon the installment stock books of the association without the knowledge of Mrs. Donald, according to her evidence, which is undisputed. It was placed upon the installment stock books by the secretary of the Building Loan Association, and after paying the debts due by the estate, she asked for a statement of her account, and the amount of the purchase price and the amount of the checks drawn against it were noted in a little passbook which does not appear to have been signed by Mrs. Donald, and which she says was made up after her demand for a statement. After this statement was made up and the book given to her, there was an audit made of the association by the state auditing Department which showed that the association was in a bad financial condition; a considerable portion of its assets having been embezzled by its former secretary. Thereupon, the Building Loan Association was placed in receivership by the state auditing department, and its affairs were administered by said receiver.
Afterwards, the Building Loan Association called a meeting of its various stockholders and discussed plans of liquidation, and it was agreed that the stock would be reduced to an amount that would make it solvent, which was accordingly done, the receivership was lifted, and the affairs of the Building Loan Association were turned over to its stockholders and directors.
Mrs. Donald filed this suit to be declared a creditor of the association and not a stockholder, and to have the money, the balance of five hundred seventy-four dollars and seventy cents, adjudged to her.
It appeared in the evidence for the Building Loan Association that Mrs. Donald attended the stockholders' meeting and was present when the plan of liquidation was agreed upon. Mrs. Donald's version was that while she was present, she had no stock and so stated to the persons in charge, and they asked what interest she had, and she stated that she had five hundred seventy-four dollars and seventy cents. The secretary who was in charge at the time the sale for two thousand one hundred dollars was made was not introduced as a witness.
The court below refused to grant the prayer of the petition, but held that Mrs. Donald was a stockholder, from which judgment this appeal is prosecuted.
It clearly appears that the court below had, by its order, directed the sale to be made for the purpose of paying the debts due by the estate, and that the Building Loan Association took the stock and paid therefor its face value, with the exception of five hundred seventy-four dollars and seventy cents. They knew that Mrs. Donald was an executrix and that the court had directed the stock to be sold for the purpose of paying debts. There was no authority shown for Mrs. Donald to buy other stock, or to make any other debts than those authorized by the decree of the court.
Ordinarily, in the administration of estates, the executor or administrator only has authority to sell certain property to pay debts, or to make certain sales for the purpose of distribution. Under section 1682, Code 1930, the court may authorize the continuance of business for a period not to exceed twelve months, but there is no showing that there was any effort made or authority granted to the executrix to continue business with the Building Loan Association, even if permissible under this section, which it is not.
The Building Loan Association knew that Mrs. Donald was dealing with a matter in a fiduciary capacity, and was bound to take notice as to the extent of her authority. There is no authority shown in the record to do so.
It is argued by the appellee that Mrs. Donald is estopped to contend that she was not a stockholder by the fact that she attended the meeting when the liquidation was discussed, and some proxy represented her.
We do not think this position is tenable. See Magee v. Gregg, 11 Smedes M. 70; Glenn v. Thistle, 23 Miss. 42, and Franks v. Wanzer, 25 Miss. 121.
It is also argued that inasmuch as Mrs. Donald was executrix, there was a will, and that she may have been authorized by the will to make investments in the Building Loan Association, and that she should have shown there was no such authority, and not having done so, that we should presume that the court below had knowledge of such power under the will. We think if there was any provision in the will that it was upon the defendant to show such authority, it having knowledge of the fiduciary capacity of Mrs. Donald. Canal-Commercial Trust Savings Bank v. Brewer, 143 Miss. 146, 108 So. 424, 47 A.L.R. 45. But we do not see how this contention can arise when the record does show that the court ordered the stock to be sold for the purpose of paying debts, and the sale must have been made in pursuance of the decree.
We think the court below was in error, and the judgment will be reversed and judgment rendered here for the appellant for the sum of five hundred seventy-four dollars and seventy cents with six per cent interest from the filing of the petition in this case.
Reversed, and judgment here for the appellant.