Opinion
Argued March 24, 1931
Modified April 14, 1931
Appeal from Circuit Court, Multnomah County, GEORGE TAZWELL, Judge.
Final accounting of Maud May Ellman, executrix of the estate of Charles D. Chandler, deceased, to which M.S. Hammond and others filed objections. From an order disallowing the final account, the executrix appeals.
MODIFIED AND REMANDED.
Dean H. Dickinson, of Portland, for appellant.
Earl C. Bronaugh, of Portland (Bronaugh Bronaugh, of Portland, on the brief), for respondents.
Charles D. Chandler died on the 2d day of November, 1922, at Portland, Oregon, and on the 4th day of November, 1922, the circuit court of the state of Oregon for Multnomah county duly made and entered an order admitting to probate the last will and testament of decedent of which the material parts are as follows:
"3. I hereby bequeath unto Maud May Ventros, of Portland, Oregon, the following described real property, to wit: Lot number two (2) in block number fifteen (15) in Foxchase addition to Portland, Oregon, as platted and recorded, she being my housekeeper and taking care of me.
"4. All the rest, residue and remainder of my property either real, or personal, or both, of which I may die possessed, I hereby bequeath unto my legal heirs at law, in the manner in which the same would descend to them by law.
"5. I hereby appoint Maud May Ventros, as the executrix of my last will and testament, and I desire that she may act without giving bonds. * * *"
By the same order, Maud May Ventros, now Maud May Ellman, the appellant, was duly appointed executrix of the said will and estate of deceased, and thereafter on the 15th day of November, 1922, said executrix filed her inventory and appraisement omitting therefrom a promissory note executed by Robert Schubert in the principal sum of $300. The total appraised value of personal property being $1,340.91, and of real property, $4,300.
On the 7th day of February, 1923, the executrix filed a petition for sale of real property, which petition was verified by the oath of the executrix.
On the 12th day of March, 1923, the circuit court made an order for the sale of that part of the real property of said estate not devised to the executrix. On May 9, 1923, the executrix filed a report of said sale of real property.
On July 13, 1923, an order of confirmation of sale of real property was entered.
On the 18th day of September, 1923, the executrix filed in said estate and court her final account disclosing:
Payment to William G. Martin for publication costs _______________________________________________________ $ 50.00 Payment to William G. Martin, attorney fee ____________________ 250.00 Payment to executrix, as executrix fee ________________________ 232.93 Payment to William G. Martin, account Sunday Welcome Publishing Company, publishing notice ______________________________________________________ 19.41 And also account, Henry Fraser for labor making dies _________________________________________________ 58.00
Said final account also discloses that the real property sold by order of court, as aforesaid, was purchased by one Carl Johnson for $2,000 and that the said $2,000 was embezzled by William G. Martin. Said final account also discloses that deceased was the owner at the time of his death of a promissory note made by one Robert Schubert for the principal sum of $300, dated January 24, 1922, payable one year after date with interest at 7 per cent, secured by a chattel mortgage on a Ford truck, and by a second mortgage on the following described land: N.E. 1/4 of the S.E. 1/4 of section 3, T. 2 S., R. 3 E., W.M., Clackamas county, Oregon.
This statement also appears in said final account:
"Upon advice of said William G. Martin and of Seabury Chandler, brother of deceased and one of the principal heirs, said note was not included in the inventory of the estate. Upon being advised by her present attorney that said note must be collected, executrix attempted to do so but finds that on June 29, 1923, said William G. Martin had collected the same without the knowledge of executrix and has surrendered the note and mortgage to the maker. Said William G. Martin has fraudulently converted the proceeds thereof to his own use."
On October 26, 1928, objections of M.S. Hammond, one of the heirs at law and devisees of said decedent, to the said final account of executrix were filed to said account upon the ground and for the reason that said executrix has not well and truly accounted for the estate of said decedent received by her during the course of the administration of said estate and particularly in the following matters and particulars, to wit:
"(1) That said final account shows that said executrix paid to William G. Martin, as attorney for said estate, a large sum of money, to wit: Two hundred fifty dollars ($250) as attorney's fees whereas the said final account and the records in the files of said estate show that said attorney has misappropriated the funds of said estate and has been false in his duties as attorney and was not entitled to receive any attorney's fee and no order was ever entered allowing a fee to him or authorizing the same to be paid.
"(2) That said final account shows that the executrix, without any order of the court therefor, or any allowance for her commission as executrix, paid to herself a large sum of money, to wit: Two hundred and thirty-two and 93/100 dollars ($232.93) as executrix, whereas the records and files of said estate and said final account show that said executrix has not discharged the duties of her trust according to law and has permitted the substance of said estate to be wasted and dissipated to the loss and damage of this objecting devisee and all other parties interested in said estate.
"(3) That it appears from the files of said estate that on August 29, 1925, said executrix filed what purported to be a final account of her administration but which was not in truth and in fact a true or a complete accounting of her administration, but it appears therefrom that said executrix collected moneys belonging to said estate in an amount equal to or exceeding all of the disbursements made by said executrix, including claims against the estate and moneys so paid for attorney's fees and executrix's commission so that no reason existed nor any lawful ground whatever for selling any of the real property of the estate, but nevertheless it appears from the records and files of said estate that said executrix did, by false petition, procure an order of sale of the real property of decedent devised to this objecting devisee and other heirs at law of said decedent and did make a sale of said real property without warrant of law and did collect and receive a large sum of money, to wit: Two thousand and 00/100 dollars ($2,000) as the proceeds of sale of the property lawfully belonging to the heirs at law of said Charles D. Chandler, including this objecting devisee, and has failed to account therefor, and has not paid, nor offered to pay, said sum of money to the devisees of said real property so sold.
"(4) But notwithstanding the fact that the said executrix has so failed in the administration of her trust and has so failed to account to the devisees of said residuary estate of said Charles D. Chandler, said executrix, is claiming the right to receive real property of said estate specifically devised to her and is, therefore, endeavoring to wrong and defraud the heirs at law of said decedent and that said executrix is not entitled to have her final account approved nor to receive in her own right any part of the real or personal property of said estate, or any compensation for her services, or any credits for attorney's fees paid by her until she shall make restitution of the losses accruing to said estate from her maladministration thereof, nor until all other devisees under said will shall have received distribution of the shares of said estate to which each of them is lawfully entitled.
"(5) That at the time said executrix made said pretended and unlawful sale of the real property devised to the heirs at law of said decedent, she gave a bond or undertaking in the sum of two thousand and 00/100 dollars ($2,000) with one Marvin A. Walker, as surety, conditioned that said executrix would well and truly conduct said sale and would well and truly account for the proceeds of sale of said real property and no order approving said final account should be entered until said executrix, and her said surety, are required to, and shall make restitution to said estate and the heirs at law of said Charles D. Chandler for said sum of money so received from the sale of said real property and wasted and dissipated by the executrix."
On the 21st day of December, 1928, at the hearing of said final account, the appearance of Messrs. Bronaugh Bronaugh, as attorneys for said M.S. Hammond was entered as attorneys for the other respondents named herein, and objections filed on behalf of said M.S. Hammond were allowed to stand as objections on behalf of such other objectors.
By leave of court at said hearing of said final account, said objectors filed an amendment to the objections therefore filed to the allowance of said final account, in which amendment it is alleged that it appears from the record in this matter that in filing her inventory of said estate said executrix failed to charge herself with a certain note for the sum of $300, executed by Robert Schubert, which note was duly secured by mortgage upon personal and real property executed by said Robert Schubert in favor of said Charles R. Chandler, and which was a good, valid and subsisting obligation and which promissory note was paid in full by the said Robert Schubert to William G. Martin, attorney for said executrix, and that said Martin receipted to the said Schubert for said payment acknowledging the payment thereof to himself as attorney for said executrix.
On December 21, 1928, hearing was had by the court on said final account and objections thereto, and thereafter on the 1st day of August, 1929, the court made and entered an order to the effect that the final account filed by said executrix be disallowed and that said account be surcharged with the following items, to wit: The sum of $250 paid to said attorney; the sum of $2,000 received by the executrix from the sale of real property devised to the objecting legatees, and the further sum of $300 collected upon the note of Robert Schubert, and the further sum of $232.93, paid to herself by said executrix; and to the further fact that said executrix forthwith pay into the registry of the court for the benefit of the legatees named in said order, the above-mentioned items aggregating the sum of $2,782.93, together with interest on said sum of $300 collected on the Schubert note from July 2, 1923, at the rate of 6 per cent per annum and interest upon the sum of $2,000 realized from the sale of real property at the rate of 6 per cent per annum from May 1, 1923; and said order further provided that the payment of said sums of money was thereby made a charge and lien upon the real property devised to said executrix by the will of the decedent.
From this order of August 1, 1929, the executrix appeals.
The executrix contends that her account should not be surcharged with the items embezzled by, or which she paid to, her attorney.
Whether these items may be surcharged on her account depends upon whether the executrix acted in reference thereto within the scope of her powers, with good faith and ordinary prudence, that is, with the same prudence and discretion that a prudent person, under like circumstances, is accustomed to exercise in such person's own affairs: Douglass v. Stephenson, 75 Va. 747.
The necessity of employing agents and attorneys in the collection of assets involves the risk of loss to the estate by their misconduct, negligence or nonfeasance, and, if a loss be sustained from such cause, the executrix or administrator is not liable if he exercises due prudence in the selection of the agent or attorney, and his conduct is not otherwise negligent or improper.
In the case at bar, the executrix when of the age of approximately 13 years was employed in the household of Martin, the attorney in question, at Eugene. When Martin moved to Portland, he and his wife renewed their acquaintanceship with the executrix. After the death of decedent's wife, the executrix became decedent's housekeeper. Later, the executrix introduced Martin to the decedent. Another attorney had been acting for decedent and had possession of decedent's papers. Martin, however, drew the will, and the executrix selected Martin as her attorney instead of the attorney who had theretofore been so employed by decedent.
We cannot reconcile the course taken by the executrix in entirely failing to give any personal attention to that part of the assets of the estate not devised to her, with the claim that she acted with ordinary prudence. A note of $300 known by executrix to be secured by a lien upon an auto truck was not listed in her inventory. The executrix made no investigation herself as to the value of the truck. She claims that she acted upon the advice of one of the objectors, and Martin. We think that an ordinarily prudent person would not have so acted.
The sale of the real property, other than that devised to the executrix, was made upon the petition of the executrix for the purpose of distributing the proceeds of such sale among the devisees. While we are not prepared to hold that the executrix, not being an attorney, should have known that this in itself does not constitute ground for sale of real property by an executrix, nevertheless, we think that in the exercise of ordinary prudence the executrix would have known that a distribution of the proceeds, if any was made, should be made by her. The executrix concerned herself not at all in that respect, but, on the other hand, claims that she relied on the statement of Martin that the court would make such a distribution.
The executrix signed the petition for the sale, made return to the court of the amount for which and to whom the property was sold, and also executed the deed to the property. In the exercise of ordinary prudence, the executrix would have known that the amount received for the property should be paid to her.
We are not unmindful of the authorities cited by the executrix wherein the courts have held an administrator or executor not accountable for the conversion of assets by his attorney. We have carefully read these authorities: In re Webb's Estate, 165 Pa. 330 ( 30 A. 827, 44 Am. St. Rep. 666); In re Sharp's Estate, 61 N.J. Eq. 601 ( 48 A. 327); Calhoun's Estate, 6 Watts (Pa.) 185; Christy v. McBride, 2 Ill. 75 (1 Scam. 75); McRoberts v. Carneal, 44 S.W. 442, modified in 51 S.W. 800; In re Bender's Estate, 278 Pa. 199 ( 122 A. 283).
Without analyzing each case, suffice it to say that in some of them the executor or administrator selected the attorney regularly employed by the decedent, and not one but recently introduced by the executrix to the decedent; and in the others the court found that the executor had acted with ordinary prudence.
The probate court was correct in surcharging the executrix's final account with the items received and not distributed and also with the amount paid Martin. As to the executrix's fee for administering, she is entitled to such fee, and also to an order allowing a reasonable attorney's fee in case she complies with the order of the court upon distribution and final settlement.
These items, namely attorney's and executrix's fees, should have been surcharged without prejudice to an allowance of executrix's and attorney's fees in case the executrix complies with the order of the court and fully administers said estate.
As to the provision of the order fixing a lien upon the portion of real property devised to executrix, we hold that this was beyond the authority of the probate court to decree.
In the case of Stanley v. U.S. Bank, 110 Or. 648, 656 ( 224 P. 835), speaking for this court, the late Mr. Justice McCOURT said:
"While a probate court may take an account and determine the amount of the waste and misappropriation committed by an executor or administrator, it is not authorized to enter an effective decree declaring that such executor has been divested of his title or interest as legatee or devisee to the remaining property of the estate as a consequence of his devastavit especially as against the lien of his judgment creditor. Nor can that result be accomplished by a probate sale of less than all the assets of the estate. A court of equity is the only tribunal having jurisdiction and power to grant the relief mentioned, and when, as in the instant suit, a case is presented calling for such relief, and incidentally involving the construction of a will, the determination of the amount of the devastavit by a probate court is not a prerequisite to the exercise of jurisdiction by a court of equity": Wilkes v. Harper, 1 N.Y. 586 (2 Barb. Ch. 338); Connor v. Akin, 34 Ill. App. 431.
It is ordered that this cause be remanded to the end that in conformity herewith, the probate court may modify its order, and take such further steps as in the premises are meet and proper.
It is further ordered that appellant recover from said estate her costs and disbursements on appeal.
BEAN, C.J., RAND and ROSSMAN, JJ., concur.