Opinion
No. 32485.
January 4, 1937.
1. EXECUTORS AND ADMINISTRATORS.
Contribution by administratrix of estate owning plantations in the Delta for advertisement in newspaper, setting forth that the Delta was a suitable territory to be electrified by the Tennessee Valley Association, held chargeable to administratrix, since possible benefit to plantations of estate was too remote.
2. EXECUTORS AND ADMINISTRATORS.
Rebates on regular price for ginning cotton produced on plantation of decedent's estate, made to father of administratrix to whom administratrix had transferred her stock in ginning company under arrangement to credit rebates on price of stock, as stockholder in ginning company, held chargeable to administratrix.
3. EXECUTORS AND ADMINISTRATORS. Trusts.
Administrators, trustees, and others of a fiduciary relation cannot use trust estate so as to derive personal profits therefrom, and whatever profit is made thereby must go to estate which they manage or control.
APPEAL from the chancery court of Washington county. HON. J.L. WILLIAMS, Chancellor.
Cooper Thomas, of Indianola, for appellant.
Was the expenditure of fifty dollars in an effort to secure T.V.A. power the act of a prudent business man in the management of his own business and thus a proper charge against the estate? We frankly admit that, viewed in the light we now have, the expenditure in question was not a fruitful expenditure of the funds of the estate. It did not achieve its purpose, but the good motive of Catherine Alexander in making the expenditure is, and has been, unquestioned. It was not for her personal benefit. She was striving to secure an economical benefit for the estate. We believe it is elemental that any ordinary administrator, in the handling of an estate, is only chargeable with that degree of prudence in the management of the estate that an ordinarily prudent man exercises in the management of his own business.
O'Brian Bros. v. Wilson, 33 So. 946.
It was with that principle in mind that we brought Mr. Ed Holmes before the court to show by him that this expenditure by this trustee was in conformity with what other careful, prudent, successful farmers and planters were doing on the same subject. It is true that the court refused to accept this testimony, but we think that the lower court was in error in not considering such evidence.
Is the trustee liable for the nine hundred dollars of money borrowed by J.L. Alexander and repaid on January 8, 1935, by dividends on stock in the gin? The trustee, by this court decree, is held liable to account for funds she never collected, which never came into her hands and which were never collected by any one during her term of office. Certainly no dividends were payable until after the end of the season or after the end of the calendar year or the fiscal year. No one could have collected them before that time.
If the cotton of the tenants had been brought to Indianola or any other gin, the tenants would have received the same price for their seed and would have been charged the same ginning charges. If there had been a rebate the tenants would have been entitled to it and not the estate. Opposing counsel cannot, with logic, argue that even if the cotton had gone to a "rebate" gin, that the estate would have been entitled to the rebate.
An effort was made to show that the stock itself came from a revenue of the estate, but that effort also failed for the stock itself was purchased not with any assets of the estate and no assets of the estate went for its payment. Not one dime was the estate deprived of in this transaction.
Alexander v. Hancock, 164 So. 772.
While it is true that on objections to a final account, it is the duty of the representative to show its correctness, still when she has so done as she did in this record and then the objector alleges that certain sums were not collected by her which she ought to have collected, then, when the representative gives her testimony, the burden rests on the objector to show the liability for such funds not collected which ought to have been collected. To show such liability, the objector has the burden of showing that the sum in question was due and payable during the term of office of the trustee and there was a dereliction of duty on the part of the trustee. It is further necessary for the objector to show that the trustee knew of the fund in question. None of these the objector showed in this record.
Grey, Admr. v. Harris, 43 Miss. 421. B.B. Allen and Moody Johnson, all of Indianola, for appellee.
Appellant paid out fifty dollars to the Huntsville, Alabama, newspaper for advertising in which appellant was advertising the plantation as probably the largest plantation in the Delta. This money was paid out without authority of the court or without any previous authorization by the court, but solely by the appellant at her own risk. This was purely an advertising scheme by a shrewd tongued advertising agent and he seems to have roped in quite a number of farmers and planters in the Delta and as the records show the enterprise was a failure, it is inescapable that this was a fake scheme whereby a good many people were victims. And the fact that others fell victims to the racket of this advertiser is no justification for appellant using trust funds which she was under obligation to account to others for. And when she so used the funds she and the sureties on her bond became liable therefor.
Counsel argues throughout his brief that the money collected in this case was not collected during the year 1934, which is covered by the account in question, but in this he is mistaken because both his clients, Mr. Alexander and his daughter, tell the court differently. Counsel contends that no rebate was paid and argues very strenuously to that effect but the proof shows that rebate was paid to the holders of the stock on the basis of the number of bales of cotton ginned at this particular gin through the influence of the holders of the stock and was given a reward or compensation for the bringing of business to the gin. The appellant was being paid a handsome salary to act as administratrix and trustee. She was paying to her father, J.L. Alexander, a handsome salary to manage the plantation. This was a full time job and required of him and his daughter that they use all of their effects on behalf of the plantation and that they refrain from profiting by their position other than the salary that is paid them. This stock was purchased with funds that they were in duty bound to have turned over to the estate.
Fidelity is always required of executors and administrators in the performance of their duties and the utmost good faith is required of them in all their transactions in regard to the estate.
11 R.C.L., sec. 141, page 134, and sec. 188, pages 174 and 175.
It is the law of this state that an administratrix and person acting in the capacity that the appellant was acting in must exercise due diligence and be guilty of no bad faith to the estate and must not profit personally from his connection with the estate.
65 C.J., pages 652 and 653; Worthington v. Eggler, 98 So. 788; Joor v. Williams, 38 Miss. 545.
The stock was transferred to J.L. Alexander, the father of appellant, by appellant, in the spring of 1934, and he collected these dividends in advance on this stock in the summer and fall of 1934, at a time when appellant was acting as administratrix of the J.N. Johnson estate, and he got it during the time covered by the account which we excepted to, and which account is now before this court for approval. It so follows that the argument of counsel to the contrary is without foundation and it is contrary to the record and testimony of his own client. The undisputed proof shows that the Holly Ridge Gin Company advanced to Mr. Alexander, in cash, during the fall of 1934, on his rebate to be later paid, the sum of nine hundred dollars and that he got this money and put it in his pocket.
The vouchers filed by the appellant were not proper legal vouchers, but were in the form of cancelled checks, and therefore the appellees could not know whether the credits were proper credits, and it was necessary for an explanation thereof to be made to the court before he could pass on the legality of the expenditures.
It is doutless true that the cancelled checks in evidence are not what the statute contemplates as a voucher.
Campbell's Estate, 167 P. 905.
So far as disclosed by the record, the appellant should be held to the same degree of strict accountability to which any other administrator is held. Manifestly, the expenditure of fifty dollars, the amount paid to the Huntsville Daily Register for an advertisement, was an unauthorized expenditure, as the court below held, and the administratrix should be charged therewith.
The Holly Ridge Gin Company stock, while issued to Miss Catherine Alexander who was then the administratrix of the estate, was bought with the money of the estate, that is, from dividends and bonuses arising from the cotton of the estate ginned at the Holly Ridge Gin Company; the stock should have been issued to her as administratrix of the estate and not to her individually, as it was not her property and she held the stock only as administratrix of the estate and as the property of the estate, and therefore, any payments arising by virtue of said stock were the property of the estate. The stock was later transferred by her to her father, J.L. Alexander, but thereafter, of course, the same conditions obtained. While the stock was in his name, yet in truth and in fact it was the property of the estate. The advances of nine hundred dollars made to him were made by reason of his purported ownership of the stock and were repaid from dividends and bonuses arising from the ginning of the cotton of the plantation at the gin. Therefore, this amount should be accounted for by the administratrix, and the court correctly held that she should be charged thereof.
Argued orally by Forrest G. Cooper, for appellant, and by B.B. Allen, for appellee.
Nell Johnson Hancock and Josephine Rice, both legatees under the last will and testament of J.N. Johnson, deceased, and Nell Johnson Hancock, as administratrix de bonis non of said estate, filed objections to certain items in the account of Catherine Alexander, administratrix de bonis non of the estate of J.N. Johnson; the court having attempted to remove said Catherine Alexander. The court overruled the objections to her account, with the exception of two items, and held her liable therefor; said items being as follows:
1. Voucher 186, fifty dollars paid to the Huntsville Daily Register for an advertising scheme joined in by several Delta planters to secure T.V.A. service in the Delta.
2. Nine hundred dollars claimed to be due and owing by Catherine Alexander for money received from the Holly Ridge Gin Company as rebate paid to parties ginning cotton there. Under an arrangement, each gin company would give rebates to its patrons.
It appears that the fifty dollars paid to the Huntsville Daily Register was a contribution for running an advertisement therein setting forth that the Delta was a suitable territory to be electrified from the Tennessee Valley Association. No order of the court was obtained to make this advertisement. The theory appears to have been that the Delta would receive cheaper power from the T.V.A. We do not think there was any authority for Catherine Alexander to pay out money for such purpose. So far as we are advised, she had no specific authority to exercise any discretion in this regard by the will of J.N. Johnson. It was too remote in its connection to benefit the Delta plantations, and it does not appear, from the evidence, that it would have tended to reduce the expenses of operating plantations. Further more, it would have required the approval of the chancellor before it could be allowed.
The facts in regard to the nine hundred dollar item are that the Holly Ridge Gin Company was a corporation, and had issued two shares of stock to Catherine Alexander, which she transferred to her father, J.L. Alexander, who was her agent in managing the plantation belonging to the estate of J.N. Johnson. Her father gave a promissory note for these two shares, with the understanding that the note would be credited with rebates, or amounts allowed from the regular charges of the gin company. There seems to have been sharp competition in the Delta among ginners, and various schemes were adopted by the different gins. All of them had a uniform charge, subject to rebates from the maximum price. This plantation of the estate of J.N. Johnson paid the regular price for ginning cotton, but, by arrangement, J.L. Alexander, being a stockholder, received a rebate; the checks for same being payable to him.
We think, on the facts disclosed, neither Catherine Alexander, nor her father, J.L. Alexander, could personally take advantage of this rebate scheme, using the assets of the plantation as a basis and consideration for receiving such rebate.
The principles announced in the case of Meyer v. Meyer, 106 Miss. 638, 64 So. 420, in our opinion, control here. There the administrator deposited funds of the estate in a bank with the agreement that, in consideration for so doing, the bank would lend the administrator money without interest. The court held that he had to account to the estate for the interest saved by this arrangement. See, also, Belt v. Adams, 125 Miss. 387, 87 So. 666, and Walton v. Walton's Estate, 143 Miss. 666, 109 So. 707.
Administrators, trustees, and others of a fiduciary relation, cannot use trust estates so as to derive personal profits therefrom, and whatever profit is made thereby must go to the estate which they manage or control.
We think, therefore, that the decree of the chancellor should be affirmed.
Affirmed.