September 10, 1957 —
October 8, 1957.
APPEAL from an order of the county court of Jefferson county: L. L. DARLING, Judge. Affirmed.
For the appellant there was a brief by Dakin Dierker of Watertown, and oral argument by Roland F. Dierker.
For the respondent there was a brief by Schultz Slechta of Jefferson, and oral argument by J. M. Slechta.
There was also a brief and oral argument by Richard C. Thauer of Watertown, guardian ad litem.
Proceeding instituted by petition and order to show cause by Joseph E. Schultz, executor of the estate of Merle Seefeldt, deceased, to have a certain policy of life insurance issued upon the life of Walter A. Kuerschner adjudged to be an asset of the estate and that a release of assignment of such policy executed by the petitioner be declared null and void.
For many years prior to the death of Merle Seefeldt on February 7, 1955, Kuerschner and Seefeldt had been partners engaged in the garage business in the city of Watertown under the firm name of "Dodge Street Garage." There were no written articles of partnership. In 1936, there was issued upon the life of each partner a policy of life insurance in the sum of $5,000. Kuerschner then assigned in writing the policy on his life to Seefeldt, and Seefeldt made a like written assignment of the policy on his life to Kuerschner. The purpose of procuring such life insurance and so assigning the policies was in order to enable the survivor, after the death of the first partner to die, to purchase the decedent's interest in the partnership. However, no "buy and sell" agreement was ever entered into.
The two policies were kept in the partnership safe with other partnership papers and records. The premiums on the policies were originally paid out of partnership funds and charged to business expense. The Wisconsin department of taxation objected to this procedure and thereafter such premium payments were charged to the individual drawing accounts of the two partners. There was a difference in amount of the premiums on the two policies, and such difference was adjusted between the partners.
When Seefeldt died, Kuerschner collected the $5,000 of proceeds on the policy covering Seefeldt's life by reason of being the assignee of such policy. Kuerschner did not deposit such proceeds in the partnership bank account, but treated the same as his personal funds.
Kuerschner negotiated with the executor for purchase of Seefeldt's half interest in the partnership. One Gamroth, a certified public accountant, who had been appointed an appraiser of the estate, prepared balance sheets of the assets and liabilities of the partnership. Such balance sheets did not include the policy on the life of Kuerschner as an asset. Gamroth also prepared an appraisal report based on such balance sheets in which he appraised Seefeldt's half interest in the partnership at $41,296.88. That figure was agreed upon between Kuerschner and the executor as the purchase price to be paid by the former for such partnership interest. The sale was consummated on May 16, 1955. The bill of sale executed and delivered by the executor to Kuerschner described the property transferred thereby to be "all the interest of Merle Seefeldt, deceased partner in the Dodge Street Garage, in said partnership, the Dodge Street Garage, Watertown, Wisconsin."
Kuerschner contacted one Blaesius, the local agent for the life insurance company, for the purpose of having the $5,000 policy on Kuerschner's life transferred into his own name. On July 18, 1955, either Kuerschner or Blaesius came to the executor's office and requested the executor to sign a release of the assignment of the policy to Kuerschner, which release reassigned the policy back to Kuerschner. Such instrument recited that the consideration for which the policy had originally been assigned to Seefeldt had been satisfied. The executor complied with such request and executed such release and reassignment before a notary public, and Blaesius forwarded the same to the insurance company. The insurance company then informed Blaesius that it required a certified copy of the letters testamentary in the Seefeldt estate. Blaesius requested the executor to supply such certified copy of letters. It was at this point that the executor made his first investigation to determine who owned the policy.
As a result of such investigation the executor concluded that the policy was an asset of the Seefeldt estate and that Kuerschner had no legitimate claim to it. The executor then wrote to the insurance company and repudiated the release and reassignment which he had executed on May 16, 1955, but did not institute the instant court proceedings until June 25, 1956.
Trial was had before the court upon the petition of the executor pursuant to which the order to show cause had been issued and served upon Kuerschner. The trial court in a memorandum opinion determined:
(1) That the policy in question was not a partnership asset covered by the bill of sale executed by the executor to Kuerschner, but was an asset of the Seefeldt estate.
(2) That the release of assignment was given without sufficient consideration to make it binding upon the estate or the executor.
(3) That "the executor's recovery from and actions following his inattention [in executing the release of assignment] was sufficiently prompt to prevent detriment to the assignee [Kuerschner]." Pursuant to such findings of fact made in the memorandum opinion, an order was entered under date of January 28, 1957, adjudging the policy to be an asset of the estate and that the release of assignment executed by the executor was null and void and of no effect. From such order Kuerschner has appealed to this court.
The following issues are raised by the appellant on this appeal:
(1) Was the policy upon the life of the surviving partner a partnership asset and therefore covered by the executor's bill of sale to Kuerschner?
(2) If not a partnership asset, may the executor rescind the release of assignment and the reassignment of the policy to Kuerschner thus taking advantage of his own unilateral mistake?
(3) Was the executor guilty of laches so as to bar him from obtaining the relief sought in this proceeding?
As to the first issue, the trial court made a definite finding that the policy in question was an asset of the estate not covered by the executor's bill of sale whereby the decedent's interest in the partnership assets was transferred to the surviving partner, Kuerschner. This court must sustain such finding on this appeal unless it is against the great weight and clear preponderance of the testimony. Estate of Hill (1956), 272 Wis. 197, 213, 75 N.W.2d 582.
The appellant's brief concedes it to be a fact that the purpose of Kuerschner and Seefeldt in taking out the two policies of life insurance was so that, upon the death of one of them, the survivor might use the proceeds to purchase the decedent's interest in the partnership. Until one of the partners died, it would be impossible to tell which of the two policies would be the one which would be employed for such purpose. Such objective would be defeated if the policies constituted partnership assets. This is because, if the policies were partnership assets, then upon the death of the first partner to die, the proceeds realized upon the policy covering the decedent's life would be payable into the partnership treasury, and would not be usable by the survivor for the purpose of purchasing the decedent's interest in the partnership.
Furthermore, the act of the survivor, Kuerschner, in treating the proceeds of the policy on Seefeldt's life as belonging to Kuerschner and not the partnership, is an act of practical construction on his part which strongly tends to support the trial court's finding of fact as to the ownership by Seefeldt's estate of the other policy on Kuerschner's life. This is because of the inescapable inference that either both policies constituted partnership assets, or neither did.
It is, therefore, our conclusion that there was ample evidence to support the learned trial court's finding as to the ownership of the policy in question.
It is the position of the appellant Kuerschner that the executor's attempted rescission of the release of assignment dated July 18, 1955, is predicated upon the ground that he executed the same through mistake. The appellant further contends that such remedy is not available when the mistake is unilateral in character because the party guilty of a -unilateral mistake cannot avail himself of such mistake as against the other party. In passing on this phase of the appeal we will assume, without deciding the point, that the mistake was unilateral in nature and not mutual.
This argument advanced by the appellant overlooks the fact that the party seeking rescission in the instant case was acting in a fiduciary capacity when he committed the mistake. As a result of the mistake an asset of the estate was conveyed away by the executor without any consideration whatever. One dealing with a fiduciary, such as an executor, is bound to know that such fiduciary cannot legally transfer title to assets held in a fiduciary capacity without receiving any consideration therefor. 33 C.J.S., Executors and Administrators, p. 1168, sec. 188, states:
"The executor or administrator has no right to give away any assets even though of trifling value, nor will the law give effect to such transfer."
3 Scott, Trusts (2d ed.), p. 2151, sec. 284, states that it became established in English law that if a trustee transfers trust property to one who gives no value therefor, the transferee takes subject to the trust. We deem such principle to be equally applicable to the transferee without value of estate property from an executor or administrator.
"Mere inadequacy of price, however, standing alone, is not sufficient to vacate a sale, unless it be so gross and inordinate as to indicate some mistake or unfairness in the sale, for which the purchaser is responsible, or misconduct or fraud on the part of the trustee making the sale. [Citing authorities.] "
Where, as in the instant case, the transferee paid the executor nothing for the transfer, it clearly indicates a mistake was made. Kuerchner [Kuerschner], as the transferee, cannot escape some responsibility for the mistake because it was either he, or his agent, who requested the executor to execute the release and reassignment of the policy. However, even without any responsibility by the transferee for the mistake, we are satisfied that the fiduciary may repudiate the transfer where no consideration is received for the asset transferred. An executor or administrator acts in a representative capacity, and the legatees or heirs of the estate should not be penalized for the executor's or administrator's mistake in a situation where the party, who deals with such personal representative, is under the duty to know that assets of an estate may not be conveyed away without consideration.
The last issue to be considered is whether the executor is precluded from prevailing in this proceeding because of laches. The appellant bases his contention of laches upon the fact that the executor delayed approximately thirteen months in instituting the within proceeding against Kuerschner after discovery by the executor of his mistake in executing the release and reassignment. In Greenfield v. West Milwaukee (1956), 272 Wis. 215, 232, 75 N.W.2d 424, this court stated :
"The elements of the defense of laches are (1) unreasonable delay, (2) lack of knowledge on the part of the party asserting the defense that the other party would assert the right on which he bases his suit, and (3) prejudice to the party asserting the defense in the event the action is maintained. 19 Am. Jur., Equity, p. 343, sec. 498; 30 C.J.S., Equity, pp. 531, 540, secs. 116, 118."
Whether the executor was guilty of unreasonable delay in instituting the proceeding is debatable. However, the burden is on the appellant to establish that he was prejudiced by such delay. There is a complete want of any evidence of prejudice to the appellant by reason of such delay, and, therefore, one of the essential elements of laches is entirely lacking.
By the Court. — Order affirmed.