At his death Mr. Bourne left valuable real estate. His executors were authorized in their discretion either for purposes of division among his heirs or otherwise to partition it at a valuation which they shall determine to be just and which valuation is to be binding on all concerned, or to sell it. The proceeds would then be divided among such heirs.
If they sold the property, either to one of the heirs *Page 351 or to a stranger, dealing with the purchaser, as Judge McLAUGHLIN points out, at arms' length, their duty to the estate required them to effect a sale on terms as advantageous as possible. They were under no obligation to point out to the intending purchaser that they believed his offer was excessive. Their knowledge of the true value of the property was immaterial. If, however, they partitioned the real estate among the heirs they should do it on what they honestly believed to be a just basis, especially in a case where one of the executors was also an heir who would profit personally by not so doing. If knowing property to be in fact worth but $50,000 they set it off to an heir at a valuation of $389,000, they failed in their plain duty. This would be so although they made no false representations as to value; even though the heir in ignorance of the fact accepted the partition or even requested that it be made. In such a transaction she might insist on the utmost good faith, on the disclosure of any facts known to them but not known to her.
If, therefore, the transaction by which Miss Bourne and Mrs. Strassburger acquired title to Dark Island was a sale, the conclusion reached by the surrogate was correct. If in truth, however, it was a partition and distribution of the estate under the form of a sale, as the amount they were charged for the property was grossly excessive and was at the time known to be so by the executors, he was in error.
The Appellate Division has found "that such sale to said Marjorie Bourne and May Bourne Strassburger was intended and was made as a partial distribution of the decedent's estate, pursuant to paragraph 8 of his will, and was unjust and unfair." It seems to me that the only question in the case is whether there is any evidence that either directly justifies this finding or fairly permits an inference that it is correct.
I think the record contains such evidence. At Mr. Bourne's death on March 9, 1919, all his real estate *Page 352 vested in his heirs, subject to the power in the executors to sell or to partition it among them. Three days later these heirs requested the executors to maintain certain of these properties, including Dark Island, for a limited period, charging the expense to the residuary estate. Evidently they wished time to advise as to their ultimate disposition. Miss Marjorie Bourne had an especial affection for Dark Island, and wished to retain it in the family. Originally there was some talk of preserving it as a family club. This project failed, but on April 11, Miss Bourne, in a talk with the executor, Arthur, was told that an offer of $500,000 had been made for the property by one Peacock. She told him of her desires as to retaining the island in the family and said that she would not see it go to Peacock as her father had not liked him. She wanted to keep it herself. Her sister would help her to "buy" it. She asked Arthur to do nothing about it until the family meeting.
On May 19th there was a formal meeting of the heirs, the executors and two or three friends. There was a general discussion as to the real estate and other matters connected with the estate. Clearly the executors intended to carry out the powers conferred upon them not arbitrarily but only after consultation with those interested.
At this meeting the executors fixed the value of the various parcels of real estate left by Mr. Bourne at their so-called "book value," representing the expenditures made by Mr. Bourne on each. As to the other properties this seems to have been fair. Not as to Dark Island. The expenditures made thereon had been extravagant. The "book value" was some $379,000. Its market value at the time was between $40,000 and $50,000. They then discussed the various parcels. On three pieces three of the children were living and they wished to "purchase" the properties on which they lived. The word "sell" was used. All agreed to this proposition and later three papers were signed by the heirs, consenting that the *Page 353 executors sell each parcel to its occupant at its book value on the following terms: "$100 down on the signing of a written contract and the balance of the consideration by charging the same to the distributive share of the said ____ of the estate of the said Frederick J. Bourne." The first of these consents was indorsed "Glen Cove property to George G. Bourne." The second contained a similar indorsement to Arthur K. Bourne. Then came up the question of Dark Island. Arthur asked if any of the family wanted the island or if they were interested in buying it. He knew that several of the heirs were not and if no one there wished to "buy" it, he would have to sell it to an outsider for the best price he could obtain. Mrs. Strassburger and Miss Bourne were to have the refusal of the property at the price at which the executors received an acceptable offer. Arthur preferred that a member of the family should own Dark Island rather than an outsider.
Official minutes of this meeting were kept and they help to explain the meaning of these transactions. The executors were to attempt to sell Dark Island, giving the children named the first privilege to buy. It was agreed "that the executors might convey the property at Glen Cove * * * to George G. Bourne at a price equal to the cost of the property to the testator." So the Ludlow place to Alfred upon condition that in certain contingencies he should offer it to his brothers and sisters "at a price not to exceed the price at which he received the same." So, also, another parcel to Arthur. The prices so fixed were $40,000, $125,000 and $5,500 respectively. Certain property was not to be sold but conveyed to the seven heirs to be used by them in forming a membership corporation. The legatees are to indicate by the next conference whether any of them desire any of the club memberships left by Mr. Bourne. If not the executors will try to sell the same. So *Page 354 whether they wish to take any automobiles at their appraised value or any motor boats. Mrs. Hard, an heir, also wishes to have conveyed to her certain real estate.
In connection with the consents that have been referred to, this paper it seems to me indicates that the transactions with the three sons were in no true sense a sale of the several parcels to them, any more than the acceptance by a legatee of a car or a motor boat at its appraised value would be a sale. Within the meaning of the will, which treated all the children equally, it was a partition for purposes of distribution.
After the meeting Miss Bourne became anxious. She knew, or supposed she knew that Peacock had offered $500,000 for Dark Island. She feared a sale outside of the family. She determined to "buy" it and sent word to Arthur that she wanted it. She was advised to "submit a bid" and she did offer $370,000.
The next family conference took place on May 26. At this time all the real estate had been disposed of with the exception of Dark Island and another valuable parcel called Oakdale. It was announced that this bid for Dark Island had been received and Mr. Strassburger stated that it came from his wife and Miss Bourne. Both he and his wife knew of the alleged Peacock offer of $500,000. Neither he nor they could, therefore, have supposed that if this bid was accepted it represented in any true sense a sale by the executors for the best price they could obtain. The matter was discussed. Arthur figured the book value and it came to $389,120.97. Mr. Strassburger then stated that his wife and sister-in-law could not pay "unless it was charged against the residuary portion of the estate, which had been done in the other properties." This was acceptable. The boats were put in at their appraised value and the amount finally fixed at the sum stated. All were in accord as to accepting this price and a paper was signed by the heirs consenting *Page 355 to the "sale" upon the following terms: "$100 down on the signing of a written contract and the balance of the consideration by charging the same in equal half shares to the distributive shares in the estate * * * of the said May Bourne Strassburger and Marjorie Bourne." Not only is this consent identical with the consents to the transfer to the sons but it was signed on the same day. In all cases, too, with regard to the sons as well as to the daughters there was the same use of the words "buy" and "sell." Thereupon the attorney for the executors prepared a contract of sale. Its provisions differed slightly from the consent. The consideration need not be paid in cash but by delivery of receipts as residuary legatees and devisees for the amount required, so executed as to be filed on an accounting.
On June 5 the executors were ready to deliver the deed. They altered, however, the original proposition. As the legatees, they say, are anxious to have an early distribution of the estate they will on June 12th pay to Miss Bourne and Mrs. Strassburger each $175,000 and these two could pay back that amount to apply on their contract. This was done and personal checks for the amount received were given back. The same thing was done with regard to the sons except that in each case $175,000 was divided into two checks, one of which represented the amount they were charged for their real estate, and this last check was returned. The deed was thereafter delivered. This distribution was made to simplify matters and to avoid interest complications — to avoid cross interest charges between the several distributees. The transactions with the sons and with the daughters were of the same kind.
In view of all these facts the Appellate Division might fairly infer that this transaction was no sale to the daughters in any true sense. All Mr. Bourne's estate, real and personal, was to be equally divided between his children. At least two separate parcels of real *Page 356 estate had cost him great sums. Dark Island, might not be physically divided into seven parts. If it went without more to his heirs a sale at auction would be the inevitable result of an action in partition — probably at a great sacrifice. Therefore, his executors were empowered to sell it publicly or privately. So they might sell his personal property. Or they might take his stocks, his bonds, his real estate, for purposes of division among his children, and partition it among them at just valuations fixed by them. They might turn over in specie Dark Island to Albert or Arthur. They might turn over its equivalent to another child in Delaware, Lackawanna and Western stock. In essence this is what they did. They said to George we will not set off the Glen Cove property to you at a valuation of $40,000 and compel you to take it. We will not even permit you to take it at that valuation unless the other heirs consent. But if you and they do consent you may take it at that price as a portion of your distributive share of the estate. The others shall be made good from other assets in our hands. These we will turn over to them in specie or we will sell them and pay them the money. They had the power to do this and I think they did it. The exchange of checks on June 12 did not alter the nature of the transaction. It was done merely for convenience in bookkeeping. The use of the words "buy" and "sell" should not blind us to the reality.
If this was the nature of the transaction with George, it was the same transaction with the two daughters. It was a partial division of the estate. Such a division as the executors were empowered to make. And in making it, as was said at the beginning, I think the executors were bound by a continuing duty to fix a fair valuation, as far as their own judgment permitted, upon the portions allotted to each child. I do not mean that they were guardians for the daughters in any sense. I do not mean that they were bound to refuse to set off to them *Page 357 the island at an exorbitant price if the daughters with all the facts in their minds still desired it. But something similar to a trust relationship existed. If they did know that the price fixed was exorbitant they were bound to reveal that knowledge unless the daughters already possessed it. They did not. Marjorie says she believed a bid for $500,000 had been received.
I think the judgment should be affirmed.
HISCOCK, Ch. J., POUND and LEHMAN, JJ., concur with McLAUGHLIN, J., and CARDOZO, J., concurs in result; ANDREWS, J., reads dissenting opinion, in which CRANE, J., concurs.
Order reversed, etc.