Opinion
Hearing Granted by Supreme Court April 18, 1927.
Appeal from Superior Court, Yolo County; Ernest Weyand, Judge.
In the matter of the estate of Abraham E. Clary, deceased. Proceedings by the surviving executor to require the personal representative of Charles M. Clary, deceased executor, to account for the balance due on a promissory note made and executed by Charles M. Clary to Abraham E. Clary. On appeal from an order requiring an accounting. Affirmed. COUNSEL
Griffin, Boone & Boone and Edward T. Taylor, all of Modesto, for appellant.
Grant & Bailey, of Woodland, for respondent.
OPINION
PLUMMER, J.
This matter is before us upon an appeal from an order of the superior court, made and entered in the matter of a proceeding had and taken in said estate, as authorized and provided for in section 1639 of the Code of Civil Procedure, requiring the personal representative of Charles M. Clary, deceased, to account to the estate of Abraham E. Clary, deceased, for the balance due upon a promissory note made and executed by Charles M. Clary to Abraham E. Clary.
It appears from the record that on or about the 1st day of August, 1918, Charles M. Clary made, executed and delivered to Abraham E. Clary his promissory note for the sum of $3,000, due one day after date; thereafter, and while this note was uncollected, the said Abraham E. Clary died testate in the county of Yolo, and Charles M. Clary and E. F. Clary, pursuant to the last will and testament of said Abraham E. Clary, were appointed, and on the 6th day of December, 1920, qualified as the executors of the estate of Abraham E. Clary, deceased; thereafter, and on or about the 4th day of April, 1921, the said Charles M. Clary died intestate in the county of Monterey, state of California. Certain payments were made upon said promissory note by the said Charles M. Clary, and, upon the accounting taken and had in the superior court of Yolo county, the sum of $2,965.91 was found to be the remainder due upon said note, against which sum, the distributive share of $1,257.50 otherwise coming to the estate of Charles M. Clary, deceased, from Abraham E. Clary, deceased, was ordered retained as an offset and payment pro tanto of the moneys due from the estate of Charles M. Clary, deceased, to Abraham E. Clary, deceased.
This matter was before this court upon a previous appeal, wherein it was sought to adjudicate questions relative to the indebtedness of the estate of Charles M. Clary to Abraham E. Clary, upon distribution in the estate of Abraham E. Clary, deceased. Estate of Clary, 71 Cal.App. 22, 234 P. 851. Upon that appeal it was held by this court that the court had no jurisdiction to hear and determine the matter of an accounting on the part of the personal representative of the estate of Charles M. Clary, deceased, for moneys due the estate of Abraham E. Clary, deceased, upon distribution, and thereupon to order a set-off or retainer of the distributive share of the estate of Abraham E. Clary, deceased, which would otherwise be due and payable to the estate of Charles M. Clary, deceased, as payment pro tanto of the indebtedness of Charles M. Clary, deceased, to the estate of Abraham E. Clary, deceased; that section 1639 of the Code of Civil Procedure specified the procedure which must be taken in such cases, and that such procedure is now the exclusive remedy; that such an accounting cannot be had upon distribution, nor can such an accounting be had in a suit in equity. The portion of the decree of the superior court sitting as a court of probate purporting to adjudicate these matters was reversed. As we read the opinion of the Estate of Clary, supra, no other questions were adjudicated and determined upon the former hearing of this cause, and therefore there is no basis for the plea of res adjudicata urged by appellant upon this hearing. It is further specifically pointed out in the opinion to which we have referred that the procedure provided by section 1639 of the Code of Civil Procedure is the one to be followed by the executor of the estate of Abraham E. Clary, deceased, in order to compel the desired accounting. The language of the opinion is, "The proceeding for such accounting must be inaugurated under said section of the Code of Civil Procedure," and then concludes that, as the court did not follow such procedure, the action taken by it was without jurisdiction. The opinion referred to does cite a number of authorities in which it is held that assets cannot be collected upon distribution, but there is nothing in the opinion which prohibits, or in any way tends to prohibit, the superior court of Yolo county, on the going down of the remittitur, from proceeding, if proper pleadings were filed therefor, under section 1639 of the Code of Civil Procedure, to enforce the desired accounting.
Upon the going down of the remittitur, after the prior hearing of this cause, the surviving executor of the estate of Abraham E. Clary, deceased, instituted proceedings under and in accordance with the provisions of section 1639 of the Code of Civil Procedure to enforce an accounting by the representative of the estate of Charles M. Clary, deceased, of the amount of property and moneys in his hands belonging to the estate and constituting a part of the estate of Abraham E. Clary, deceased, at the time of the death of said Charles M. Clary, deceased, and upon this accounting an order fixing the indebtedness as we have herein stated, was made in the probate court of Yolo county.
The proceedings had in the first instance, leading to the first appeal and the proceedings had in the appeal now before us, were and are both based upon section 1447 of the Code of Civil Procedure, under the terms of which all moneys due from the executor to a testator at the time the executor qualifies as such become assets of the estate of the testator in the hands of the executor, and hence renders the executor liable for the same as if so much money was in his hands. The note in this case was due at the time of the qualification of Charles M. Clary as executor of the estate of Abraham E. Clary, deceased, but against this note the statute of limitations had not yet run. This period would not have expired until some 18 months after the death of Charles M. Clary, deceased. The exact dates are immaterial. No accounting was ever made or rendered by Charles M. Clary, as executor of the estate of Abraham E. Clary, deceased, of the amount due upon said note or of what the Codes specify shall be considered as so much cash in his hands, nor was any accounting ever made or had thereof by the personal representative of Charles M. Clary, deceased, until the institution of the proceedings herein. The surviving executor of the estate of Abraham E. Clary filed an account of his administration of said estate, called a "final account" and also a report therewith. In the account, termed a "final account," the surviving executor, E. F. Clary, made no mention of the promissory note herein referred to, but did attempt, as we have herein stated, to make collection of the same upon distribution as therein prayed for.
Upon this appeal it is urged that the whole matter presented herein was and is res adjudicata; also that the proceeding is barred by the statute of limitations. A number of cases are cited upholding the finality of a final account, from which no appeal has been prosecuted, or which has been adjudicated upon appeal, in addition to urging that the questions involved herein have once been passed upon by this court, which we have just stated to be without merit. That an account becomes final as to all matters adjudicated, the authorities abundantly establish, but it is also true that it is not final as to nonadjudicated items. The text-writer in 24 C. J. p. 1029, § 2484, thus states the rule:
"A final settlement is conclusive as to all matters, the proper subject of account, included in such a settlement or necessarily involved therein; but it is not conclusive as to matters not included or necessarily involved therein, or as to matters not within the jurisdiction of the court. The settlement is not conclusive as to assets not accounted for in such statement or received thereafter, but as to such assets the personal representative may be required to make a further settlement."
In the Matter of Estate of Ross, 179 Cal. 358, 182 P. 303, the Supreme Court, having before it this same question, there said:
"The settlement of an account is not conclusive, ‘except as to such items as are included in it and actually passed upon by the probate court."’
See, also, Estate of Adams, 131 Cal. 415, 63 P. 838, where the same holding is had.
When Charles M. Clary, on the 6th day of December, qualified as an executor of the last will and testament of Abraham E. Clary, deceased, he became a voluntary trustee of the property and assets of the estate of Abraham E. Clary, deceased, holding the same for the benefit of the devisees and legatees, under the terms of the last will and testament of Abraham E. Clary, deceased. Thus, as pointed out in 16 California Jurisprudence, p. 420 et seq., § § 30 to 37, the rule is that the statute of limitations does not run where the parties occupy a fiduciary relationship toward each other, so long as such relationship is not repudiated. Thus, a guardian may not acquire title by adverse possession against his ward, nor an agent against his principal, nor an executor against the heirs. As to the latter, the rule is stated in this language:
"Pending the administration of an estate, the possession of an administrator is not adverse to that of an heir; he cannot acquire an adverse title by possession for the statutory period."
In MacMullan v. Kelly, 19 Cal.App. 700, 127 P. 819, the court, having before it the question of the running of the statute of limitations where one occupied the position of a voluntary trustee, thus announced the rule:
"It is a rule of law in this and other jurisdictions that the statute of limitations does not begin to run in favor of a defendant chargeable as the trustee of an express trust during the life of the trust. In order to set the statute in motion it is necessary that such a trustee, by some act or declaration, positively and unequivocally repudiate the trust, and that notice of such repudiation be brought home to the beneficiary. This rule is so well settled and so generally recognized that no argument is necessary to support its reiteration."
The court then cites a number of cases supporting the rule. The same rule is set forth in the case of Taylor v. Morris, 163 Cal. 718, 127 P. 66. In the case of Elizalde v. Murphy, 163 Cal. 681, 126 P. 978, the court had before it the consideration of a plea of the statute of limitations against requiring the representative of a deceased person to account for funds belonging to the estate, and held as follows:
"The action was simply an action for an accounting-an action to compel the personal representative of a trustee after his death, and the sureties upon his bond as such trustee, to give an account of the property held by the trustee, and of his administration of the trust, to have that account audited and settled by the court, and a balance struck, "citing Osment v. McElrath, 68 Cal. 466, 9 P. 731, 58 Am. Rep. 17. "The duty of the administrator to account is a continuing duty, and does not become barred. Estate of Sanderson, 74 Cal. 199, 15 P. 753; Cook v. Ceas, 147 Cal. 614, 82 P. 370."
It was held in that case that an accounting does not depend upon any questions of fraud or malversation. It was simply a duty of the administrator or executor, while alive, to account for the trust funds in his hands, and, upon his death, the duty of the personal representative so to do.
In behalf of their plea, appellants cite the case of Minifie v. Rowley, 187 Cal. 481, 202 P. 673, and refer to the following language contained in the opinion:
"‘The naming of a person as executor does not thereby discharge him from any just claim which the testator has against him, but the claim must be included in the inventory, and the executor is liable for the same, as for so much money in his hands, when the debt or demand becomes due.’ Code Civ. Proc. § 1447. As a necessary consequence, if defendant Forrest S. Rowley owed the $10,000 here in controversy on June 3, 1915, when he became executor, he became chargeable with that sum as for so much money in his hands and continued liable therefor, irrespective of the running of the period of the statute of limitations against the debt itself, by reason of the change in the character of his obligation due to his intervening fiduciary capacity."
From this it is argued that the statute of limitations has run against the note involved in this action and therefore that an accounting cannot be had. The language quoted, however, holds exactly the contrary. As we read it, it means that, irrespective of the lapse of time which would ordinarily bar an action upon the note, the executor, by reason of his fiduciary capacity, becoming chargeable with the note in his hands as so much money, is in that capacity, precluded from pleading the bar of the statute, and therefore, so long as the trust relation continues, the statute does not run. The duty to account is a continuing one, as stated in Elizalde v. Murphy, and devolved upon Charles M. Clary until the date of his death and immediately devolved upon his personal representative, and, applying the reasoning of the court in the case of Minifie v. Rowley, the fiduciary relationship of the parties stops the running of the statute and precludes reliance upon such plea, irrespective of whether the statute might or might not have been pleaded as against an action on the note itself.
Likewise, the facts in the case of Schaeffer, 53 Cal.App. 493, 200 P. 508, render it readily distinguishable from the case at bar. In the Schaeffer Case the note against which the right of retainer or set-off was claimed was barred by the statute of limitations before the death of the testator, and hence there was neither right nor remedy existing at the time of the appointment of an executor or administrator. Furthermore, in the Schaeffer Case, no relationship of trust or confidence had been created prior or subsequent to the running of the statute. In the case at bar there was a subsisting and enforceable obligation, both at the date of the death of the testator and upon the qualification of Charles M. Clary as an executor, nor does the question of retainer or set-off strictly arise in this case as against the heirs of Charles M. Clary, deceased. Under our procedure and the law of this state, whatever portion of the estate of Abraham E. Clary, deceased, should or may finally reach the possession of the heirs of Charles M. Clary, deceased, does not affect the rule applicable here, as distribution of the estate of Abraham E. Clary, of the portion, if any, distributable to Charles M. Clary, deceased, would not and could not be made to his heirs, but only to his estate, to be taken possession of by his personal representative, administered upon, and then distributed. Under the rule announced in Estate of Pina, 112 Cal. 14, 44 P. 332, followed in Estate of Strong, 119 Cal. 663, 51 P. 1078, and, also, the case of Galvin v. Mutual Savings Bank, 6 Cal.App. 402, 92 P. 322, the heirs of Charles M. Clary, deceased, would take the residue of his estate only after administration had thereon, payment of debts, etc., and the ascertainment of who the heirs of Charles M. Clary are. The right of retainer or set-off is recognized as applicable upon distribution in this state. Estate of Gamble, 166 Cal. 254, 135 P. 970; Estate of Angle, 148 Cal. 102, 82 P. 668. In states where the law and procedure concerning the devolution, administration, and distribution of estates are different from that which prevails in California, and the remote heirs take directly and not from their immediate ancestor, it is held that children stand in the same position as the father when the question of the right of retainer or set-off of a debt due by the father to the estate of the grandfather of the children is involved. Adams v. Yancey, 105 Miss. 233, 62 So. 229, 47 L. R. A. (N. S.) 1026; note to Stenson v. H. S. Halvorson Co., Ann. Cas. 1916D, 1294; Wilson v. Channel, 102 Kan. 793, 175 P. 95, 1 A. L. R. 987, and extended note beginning on page 991. See, also, Woods et al. v. Knotts et al., 196 Iowa, 544, 194 N.W. 953, 30 A. L. R. 768, and annotations thereto beginning on page 775. In many of the cases cited in the annotations to the cases referred to, debts barred at the time of the death of the testator are allowed to be set off. It may be stated that there are some decisions cited in the notes holding that the right of retainer or set-off does not exist as to remote heirs, who succeed directly, and not from the immediate ancestor, but the great weight of authority is to the contrary, and the cases which hold that the right of retainer or set-off cannot be exercised as against remote heirs have no application in this state, for the reasons which we have stated, that they are only entitled to the residue of the estate coming to the immediate ancestor after payment of his debts, as ascertained upon administration of the immediate ancestor’s estate.
Appellants further object that no claim was ever filed by the surviving executor of the estate of Abraham E. Clary, deceased, against the estate of Charles M. Clary, deceased, citing the case of In re Smith, 108 Cal. 115, 40 P. 1037. This case, however, has been overruled and the procedure adopted by the surviving executor which we have been considering, is held to be the proper procedure. In re Philbrook, 47 Cal.App. 683, 191 P. 77; Estate of Randall, 188 Cal. 339, 205 P. 118, hold that the filing of a claim is not prerequisite to instituting proceedings for an accounting under section 1639 of the Code of Civil Procedure.
Under the various provisions of article 2 of chapter 10 of title 11 of the Code of Civil Procedure, it is the duty of an executor and coexecutor to account for all moneys coming into their hands and for all moneys and properties with which they are chargeable, and this duty was incumbent upon Charles M. Clary, deceased, irrespective of a like obligation which rested upon his coexecutor, F. E. Clary.
The proceeding before us is one for an accounting, and is not one involving collection of assets upon distribution, as was the case upon the prior appeal in the Estate of Clary, 71 Cal.App. 22, 234 P. 851, and, as we have said, the cases there relied upon and necessitating a reversal are not applicable here, save and except in so far as they hold that the proceeding now before us is the one that should have been taken in the first instance.
Some minor objections have been urged upon this appeal, but, as they do not affect the substantial rights of the parties, are not set forth in this opinion.
The correctness of the accounting and the indebtedness ascertained by the probate court not being questioned, it follows from what has been said that the order and decree of the trial court should be, and the same are hereby, affirmed.
We concur: FINCH, P. J.; HART, J.