Opinion
13935
November 2, 1934.
Before DENNIS, J., Florence, March, 1933. Affirmed.
Suit for an accounting by the Carolina Life Insurance Company and others against Helen T. Arrowsmith, individually and as administratrix of the estate of Philip H. Arrowsmith, deceased. From an unsatisfactory decree, defendant appeals.
The decree of Judge E.C. Dennis directed to be reported is as follows:
This matter comes before me upon the report of the testimony and exhibits, by R.W. Sharkey, Esquire, special referee, to whom this cause was referred for that purpose. By consent of the attorneys for the parties to this action, his Honor, S.W.G. Shipp, disqualified himself to hear this matter on the merits, because of his close friendship to the deceased and the defendant herein.
This suit is for an account of the acts and doings of Helen T. Arrowsmith, as administratrix of the estate of Philip H. Arrowsmith, deceased. The purpose of the suit is to have an accounting, and to adjust all claims among the creditors of the estate. It is admitted and the testimony undisputably shows that the estate is totally insolvent and this important fact must be taken into consideration. The hearing before the special referee was by agreement of counsel confined strictly to the ascertainment of the amount for which the administratrix should account and a consideration of the propriety of the disbursements claimed by her as having been properly made and authorized.
The bank account of the administratrix which was offered in evidence without objection shows that she received from insurance upon the life of Mr. Arrowsmith, payable to the estate, the sum of $25,533.89, and that from some other source the sum of $26.22 was collected, showing an aggregate of $25,560.11 as the cash received by the administratrix. The bank account further shows that Mrs. Arrowsmith was credited with $150.00 earned interest on October 1, 1931, and $148.25 earned interest on January 1, 1932, on her savings account in the First National Bank in Florence. All of these items aggregate $25,858.36, which the records conclusively show and the administratrix admits she received.
The disbursements which have actually been made as reflected by the bank account, checks introduced in evidence and the testimony will be considered.
A consideration of these items will have to be prefaced by a statement as to the respective jurisdiction of the Probate Court and of the Court of Common Pleas, it being contended in the answer that the Probate Court has exclusive jurisdiction of this matter, and that certain papers in the probate roll purporting to be orders authorizing certain payments by the administratrix have the force and effect of binding adjudication. A demurrer was interposed to the complaint upon the ground that the Probate Court had exclusive jurisdiction of this matter and the same was overruled. There has been no appeal from this order and it is, therefore, the law of the case, but the authorities are so clear to the effect that the Court of Common Pleas has concurrent jurisdiction of such matters as to require the citation of no authority to support this holding. An examination of the probate roll discloses that the creditors of this estate were not made parties to any proceedings incident to an order signed by the Judge of Probate authorizing or directing the payment of any claim. All of such proceedings were ex parte, in which the creditors were given no opportunity to be heard and are therefore not bound thereby. If the administratrix intended or desired to pay any of these claims, it was her duty to have had the creditors properly brought before the Court so that their rights might be protected. In addition to this, the payments in question were made within the year during which claims could be filed and it could not be ascertained what claims against the estate would have to be considered. The record discloses that a large number of the claimants against this estate are contending for a preference and it still remains to be seen whether or not there will be sufficient funds to pay even the preferred claims.
The following items under the statute unquestionably are proper payments and entitled to priority and are admitted by the plaintiff in this action to be proper:
Probate Court costs .................................. $200.00 R.L. Mason, D.C., services to deceased immediately prior to death .................................... 14.00 Roper Hospital, hospitalization of Mr. Arrowsmith 5.50 Aiken Long, Inc., premiums administratrix bond 111.00 Mrs. Melvin Lucas, testimony in the case of Mollie Wolfe v. Helen T. Arrowsmith, Admx., et al. 18.90 L.A. Thayer, transporting deceased to hospital ....... 25.00 The administratrix has paid Preston B. Thames, Esquire, attorney, the sum of $2,000.00 for services rendered the estate, and, in addition, claims that Miss Alice Slade should be allowed $500.00 for her clerical services. I have carefully considered the record and have decided to allow the administratrix credit in her account for this payment of $2,000.00, but approval thereof is in lieu of the claim of Miss Alice Slade for clerical services and should embrace several items which I have disallowed, namely, certain office expenses and salary of Miss G.M. Johnson for which there is no warrant in law. Plaintiffs' attorneys contend that this payment of $2,000.00 should be all inclusive of the clerical assistance, office salary of Miss G.M. Johnson, and, in addition, commissions to the administratrix. It is true that all of the work in connection with this estate has been handled by the attorney, nevertheless, I have decided to allow her credit in this account for the usual commissions allowed by law. A discussion of the services performed by Mr. Thames would be unnecessary as the record is very clear along that line. The approval of this payment is made on the theory that same shall be in full and complete satisfaction of all services rendered by Mr. Thames in connection with this estate not only to the date the same was made, but down to and including this account, as the estate will not from this point on require the services of an attorney.The administratrix has paid the claim of Miss G.M. Johnson in the sum of $1,259.17. The facts in regard to this claim are that Miss Johnson, Mr. Arrowsmith's stenographer, loaned him two Liberty bonds in the denominations of $500.00 each, and that at the time, he delivered to her a letter acknowledging the receipt of the Liberty bonds, which he put up at the bank for a loan he was making for $1,000.00, and stating to her if anything happened that she would be paid by Mrs. Arrowsmith out of the proceeds of his insurance to his estate or to her. The bank sold the bonds to retire Mr. Arrowsmith's note and Miss Johnson claimed a preference and was paid $1,259.17, representing the value of the bonds and accrued interest thereon. I have concluded that this letter did not constitute an equitable assignment of or create a lien upon the insurance funds in the hands of the administratrix and therefore is not entitled to such preference as warranted payment thereof by the administratrix and the same must be disallowed, without prejudice, of course, to the later determination of the status of this claim in regard to the position which it will occupy in the payment of claims, namely, its priority, if any, with respect to other claims. Carwile, Receiver, v. Metropolitan Life Ins. Co., 136 S.C. 179, 134 S.E., 285, and authorities therein cited sustain the position that this claim is not an equitable assignment of the insurance funds in the hands of the administratrix.
The administratrix has paid items totaling $124.88, which is shown upon statements exhibited in the evidence to be miscellaneous light, gas, water, and telephone bills for Mr. Arrowsmith's house and office together with $12.00 paid to the janitress at the office during the two months in which his office remained open. With the exception of the $12.00 to the janitress, not an item thereof is a preferred charge under the statute and there is no theory upon which they can be allowed as proper disbursements. The $12.00 payment to the janitress will be covered by what is said in the following paragraph.
The administratrix has paid to Miss G.M. Johnson $350.00 as two months' salary commencing June 1, 1931, at the rate of $175.00 per month as Mr. Arrowsmith's stenographer. The apparent theory upon which this payment was made was that the estate would receive some benefit from conducting Mr. Arrowsmith's law office for two additional months. In addition to this payment, there are other items of expense which have either been paid or there are claims outstanding for same, which were incurred in continuing Mr. Arrowsmith's office open for two additional months. The testimony shows not a cent realized from the continuance of the office. Be this as it may, there is no authority in this State for an administratrix to carry on the business previously conducted by the deceased.
The proper principle of accounting would be for the plaintiff to show that the estate had derived benefit from the advances and to show the extent of the benefit. Further, this should be clearly shown or the administrator would not be entitled to the allowance. Glenn v. Worthy, 169 S.C. 263, 168 S.E., 705, 716; McKee v. Mobley, 3 S.C. 242.
Under these principles there is no authority for this disbursement, therefore, the same is disallowed. All claims against this estate for expenses or obligations incurred in continuing the business of Mr. Arrowsmith shall be disallowed.
The administratrix paid Jones Auto Paint Shop $25.00 and J.R. Schipman $10.00 which represented the cost of towing the wrecked automobile of Mr. Arrowsmith, already mortgaged for more than its value, to Florence and for its custody at St. Stephens. There is no warrant for such disbursements as priorities and they must be disallowed, without prejudice, however, to the latter determination of the status of these claims in regard to the position which they occupy in the payment of claims.
The administratrix has paid the Mount Hope Cemetery Association the sum of $300.00 for a full size lot in the Mount Hope Cemetery purchased in the name of Mrs. Arrowsmith and $1,030.00 to Oulla's, Inc., for funeral expenses. In addition, the administratrix claims the right to pay Florence Memorial Company the sum of $1,050.00 for a monument erected on the cemetery lot. I have considered these three items together for the reason that they, taken together, depict the amount of funeral and burial expenses for which the administratrix is claiming allowance. The law of this State is well settled and is generally to the effect that a reasonable allowance will be made for funeral expenses, and that even an insolvent estate may be charged with a decent burial of the deceased. This is an insolvent estate and the allowance of approximately one-ninth of the total amount available for administrative purposes and payment of all claims would be unreasonable. I feel that if Mr. Arrowsmith were able to express his wishes in the matter, that he would undoubtedly not want his estate, being insolvent as it is, to bear this very large expense, especially since his family was so well provided for. I have concluded to allow the administratrix for all funeral and burial expenses the sum of $650.00 which shall, of course, include the three items above referred to, and, in addition, to allow as part of the funeral expenses the payment to the Western Union Telegraph Company of $12.19 for telegrams sent to Mr. Arrowsmith's friends and relatives at the time of his death.
The administratrix has paid the sum of $395.53 on the judgment of the Atlantic Life Insurance Company v. J.W. Hicks Company, a corporation: C.W. Muldrow and P.H. Arrowsmith. The judgment is a primary obligation of J.W. Hicks Company and it seems that C.W. Muldrow and P.H. Arrowsmith were indorsers on the obligation on which judgment was taken. The record in regard to this matter in the Probate Court discloses that as between Mr. Muldrow and Mr. Arrowsmith the latter was liable for the judgment. Under the statute relating to the order of payment of claims, the judgment was entitled to be paid after the expenses of administration, funeral and last sickness and debts due to the public. Mr. Arrowsmith at the time of his death was in the possession of a valuable law library and considerable office furniture appraised at considerably more and actually worth much more than the amount of this judgment. The record shows this property to be owned by J.W. Hicks Company, but the same is now and has been since Mr. Arrowsmith's death in the possession of the administratrix and her attorney. The record further discloses that Mr. Arrowsmith owned practically all, if not all, of the stock of the J.W. Hicks Company, but that the same was and is pledged to a third party. The administratrix could and should have exhausted by execution under the judgment, or otherwise, this property in her possession as more than a year has elapsed since this payment was made. Although this payment might have been proper, the administratrix's neglect in failing to protect the estate out of the property in her hands would make her liable for an equal amount, and, therefore, I have concluded to disallow the same.
The testimony shows that at the time Mr. Arrowsmith died he owned a house and lot on West Cheves Street on which there were two mortgages, one to the State Planters Bank and Trust Company on which there was due approximately $4,300.00; and a second mortgage to Mrs. Cora Nofal on which there was due approximately $6,700.00, making a total mortgage indebtedness of about $11,000.00. The testimony shows that the property was not worth more than the first mortgage indebtedness. Mrs. Arrowsmith, nevertheless, paid out of the estate funds $497.50 on this mortgage and claims, as an additional credit, $2,500.00 which she paid out of her own funds. The statute provides that mortgages, to the extent only of the mortgaged property, constituted a preferred claim against an estate. It is, therefore, readily apparent that all amounts paid as above set forth, cannot be allowed as proper disbursements against the estate, nor is the administratrix entitled to allowance for the additional $2,500.00 claimed.
The administratrix has paid Aiken Long, Inc., the sum of $192.16 and the further sum of $190.05. The $190.05 payment represents insurance premiums from June 1, 1931, on the dwelling house; furniture and fixtures in the office of Mr. Arrowsmith, which were not owned by him but by the J.W. Hicks Company; household furniture, which was owned by Mrs. Arrowsmith; and the Studebaker automobile, which was owned by Mrs. Arrowsmith. It is clear that this payment was without warrant of law and not even a bona fide claim against the estate. The $192.16 payment was for insurance premiums owed by the deceased to Aiken Long, Inc., maturing before his death. This account was purely and simply an open account and entitled to no preference in the assets of this estate, and, therefore, the administratrix should not be allowed credit therefor in this accounting. The disallowance of the $192.16 payment, however, is made without prejudice to the later determination of the status of this claim in regard to the position which it will occupy in the payment of claims.
The administratrix has paid an item of $53.75 to The R.L. Bryan Company. The testimony shows that this item was paid in connection with litigation in which Mr. Arrowsmith appeared as counsel for the plaintiff against the Atlantic Coast Line Railroad Company, and had a contingent fee therein. A verdict had been obtained in the State Court for a considerable sum of money, and it was on appeal to the Supreme Court of the United States by the railroad company. The administratrix agreed with counsel associated in the case with Mr. Arrowsmith to pay one-half of the cost of the printing, and this item of $53.75 paid to The R.L. Bryan Company represents that cost. I have concluded to allow the administratrix credit for this payment. The Supreme Court of the United States reversed the decision of the State Courts and nothing was recovered by the administratrix. In this connection it might be well to mention the fact that the administratrix employed counsel to argue the appeal in the United States Supreme Court and made some sort of agreement with respects to his fee. The allowance of this payment for printing cost is not to be taken as an approval of any arrangement which the administratrix might have had with the attorney who argued the case in the United States Supreme Court. That matter is not now before me for determination and in allowing this payment, I might state that, in my opinion, the administratrix was justified in agreeing to pay one-half of the printing cost on appeal, but I will go no further than that.
The administratrix has paid taxes in the name of Mr. Arrowsmith for city, school, county, and State for several years prior to 1932, amounting to $867.34. The taxes due by Mr. Arrowsmith constitute a prior claim against the estate, but an examination of the tax returns introduced in evidence discloses that the only taxes paid, for which he was liable personally, was on the automobile in which he met his death and the house and lot on West Cheves Street. The balance of the property included in the tax returns was made up of household furniture, office equipment, including library, and another automobile, none of which were owned personally by Mr. Arrowsmith. I have concluded to allow the administratrix credit for taxes only to the extent of the amount due on the property owned by Mr. Arrowsmith. A calculation based on these returns will show that she is entitled to credit as a proper disbursement on this account, of only $435.57.
It is not clear whether in the above amount, which Mrs. Arrowsmith has paid for taxes, there is included a payment of $88.32 on account of paving assessments against the dwelling house. It makes no difference because a paving assessment is not a debt due to the public, and therefore, not entitled to the preference accorded taxes.
The administratrix has paid a federal inheritance tax in the sum of $390.91 out of the estate funds. This is an insolvent estate, and, in addition, there is an estate exemption of $100,000.00. The amount of taxes which was paid by the administratrix was computed on the amount of life insurance payable to Mrs. Arrowsmith, the widow of the deceased, and Mrs. Arrowsmith, the mother of the deceased. It is inconceivable to me that this estate should be made to bear the expense of this inheritance or estate tax, since it is computed solely upon the insurance payable to beneficiaries. I have, therefore, concluded to disallow this payment.
The administratrix shall be entitled to subrogation of any valid claim paid by her and herein disallowed because the same was not entitled to priority or because the priority thereof has not been properly established.
The testimony and bank account show that Mrs. Arrowsmith on August 5, 1931, withdrew $5,000.00 of estate funds to make a personal loan to Mr. S. Goodstein, and replaced same on August 31, 1931. This fund earned during the period above 6 per cent. interest, and, therefore, I have concluded the administratrix should be charged in her account with $21.67, being interest on the $5,000.00 at 6 per cent. for twenty-six days. The testimony and bank account show that on October 24, 1931, Mrs. Arrowsmith withdrew from the estate funds $2,500.00 to make an 8 per cent. loan to Chase and William Friar, and the said amount has never been replaced in her account as administratrix. She claims to have replaced this amount in her account as administratrix by paying to State Planters Bank Trust Company, some time after the bank closed, $2,500.00 on the mortgage on the dwelling house. This payment was not a proper disbursement and the withdrawal for her personal benefit has, therefore, never been repaid. I have concluded that Mrs. Arrowsmith be chargeable in her account with interest on the $2,500.00 withdrawn from date thereof which amounts to $367.21.
On or about December 31, 1931, Mrs. Arrowsmith loaned T.R. Barringer $2,200.00 and took a mortgage on certain property in Florence. She drew her check as administratrix on the First National Bank in Florence for $2,200.00 on December 31, 1931, to purchase Richmond Exchange to take up a mortgage with the Atlantic Life Insurance Company on the Barringer property. This check was paid and charged to her account as administratrix. In oral argument before me counsel agreed for Mrs. Arrowsmith to replace in the estate this $2,200.00, and, therefore, consideration of this disbursement is unnecessary. Plaintiffs contend, however, that in addition to the $2,200.00, Mrs. Arrowsmith should be chargeable with interest thereon from December 31, 1931, in the sum of $283.18. I can see no difference in this and the preceding item of interest. The withdrawal from the bank was without authority and in effect amounted to a conversion. I might state here that there is no question in my mind but what the disbursement was made in good faith and with the intention to replace the funds, and had not the First National Bank failed before the Richmond Exchange had cleared, I am satisfied this item would not now be before me. The fact remains, however, that Mrs. Arrowsmith did convert these funds and has had the use thereof since December 31, 1931, and I must conclude therefore that she is chargeable with interest in the amount above set forth.
The record discloses that the administratrix now has on deposit in the First National Bank in Florence, which is closed and in the course of liquidation, a balance of $8,405.28.
The following is a recapitulation of the above and foregoing and shows how the amount which the administratrix is herein held accountable for, is arrived at:
Receipts and amounts for which administratrix held chargeable:
Life insurance ......................... $24,533.89 Life insurance ......................... 1,000.00 Source unknown ......................... 26.22 Interest on bank account, earned ....... 150.00 Interest on bank account, earned ....... 148.25 Interest on Goodstein loan, from August 5th, to August 31st ................. 21.67 Interest on Chase and Bill Friar loan from October 24, 1931 ............... 367.21 Interest on $2,200.00 converted for T. R. Barringer loan, from December 31, 1931 ............................. 283.18 __________ Total ............................ $26,530.42 Less amount now on deposit in First National Bank, closed ............... 8,405.28 _________ Balance chargeable with in cash $18,125.14 Proper disbursements for which administratrix is entitled:To credit:
Probate costs .......................... $ 200.00 E.L. Mason, M.D. ....................... 14.00 Roper Hospital ......................... 5.50 Aiken Long, bond premium ............. 111.00 M.F. Schnibben, rent for June, 1931 50.00 Mrs. Melvin Lucas, Testimony ........... 18.90 Preston B. Thames, Attorney ............ 2,000.00 Allowance for funeral expenses, place of burial, and monument to grave 650.00 Taxes paid ............................. 453.57 Western Union Telegraph Co. ............ 12.19 I.A. Thayer ............................ 25.00 R.L. Bryan Company ..................... 53.75 Commissions (2 1/2% of receipts)........ 639.03 Commissions (2 1/2% of disbursements) .. 89.72 Commissions (10% of earned interest).... 29.83 __________ Total ............................... $ 4,352.49 Amount administratrix held accountable for in cash .......................... $ 13,772.65 Amount held accountable for on deposit in First National Bank, closed ............................... $ 8,405.28 For the foregoing reasons, it is ordered, adjudged, and decreed that the administratrix be, and she hereby is, held chargeable in this estate with the sum of $26,530.42 and allowed as a credit thereon the disbursements hereinabove approved totaling $4,352.49 and held accountable for the balance in the following manner, to wit, in cash the sum of $13,772.65 and for such dividends as shall be paid on the balance of deposit in the First National Bank in Florence, S.C. of $8,405.28. It is further ordered, adjudged, and decreed that this cause be, and the same hereby is, recommitted to R.W. Sharkey, Esquire, as special referee, to call in all persons who have filed claims against this estate, to take and report the testimony offered in support of said claims to determine the respective priorities of said claims, and to make his report thereon with his conclusions of fact and of law, with leave to report on any special matter. It is further ordered, adjudged, and decreed that the said special referee do notify, in writing, the defendant herein and all persons who have filed claims against this estate, thirty days in advance thereof, of the time and place of the reference. Said notice to be given by depositing a copy thereof in the United States post office at Florence, S.C. directed to each of said claimants. It is further ordered, adjudged, and decreed that the attorneys for the plaintiffs in this cause be, and they hereby are, granted leave to file petition with the special referee for the allowance of attorneys' fees out of the fund recovered in this action, which is now for distribution among the creditors of this estate.Mr. Preston B. Thames, for appellant, cites: As to change of beneficiary: 14 R.C.L., 998; 167 S.C. 484; 166 S.E., 621; 14 R.C.L., 100; 27 S.C. 215; 3 S.E., 193. Charge for monument: 103 S.C. 371; 88 S.E., 363; 99 S.C. 128; 82 S.E., 1008. Payment of taxes listed in name of deceased: 95 S.C. 295; 78 S.E., 883; 96 S.C. 471; 81 S.E., 176.
Messrs. Royall Wright, McEachin Townsend, Willcox, Hardee Wallace, Samuel Want and Melvin Hyman, for respondents, cite: Costs of administering estate: 169 S.C. 263; 3 S.C. 342. As to assignment: 136 S.C. 179. Monument included in costs: 99 S.C. 128; 103 S.C. 371.
November 2, 1934. The opinion of the Court was delivered by
A careful study of the record and the decree of Judge Dennis makes it evident that he has given thorough consideration to, and has made a correct disposition of the issues involved in this appeal.
Wherefore, the exceptions thereto are overruled, and the decree is affirmed.
Let it be reported.
MESSRS. JUSTICES STABLER and CARTER and MR. ACTING ASSOCIATE JUSTICE C.T. GRAYDON concur.