Opinion
No. 21872.
October 5, 1953.
APPEAL FROM THE CIRCUIT COURT, CALLAWAY COUNTY, W. M. DINWIDDIE, J.
Alexander Robertson, L. A. Robertson, St. Louis, W. C. Maughs, Fulton, for appellant.
Baker Baker, J. R. Baker, Fulton, Green, Hennings, Henry Evans, John R. Green, II, St. Louis, for respondent.
Respondent, a bank in Fulton, Missouri, was executor and trustee under the will of Prentiss S. Tate, deceased. The estate consisted of personal property in excess of $90,000. Appellant, sister-in-law of deceased and a substantial beneficiary under the will, filed exceptions to the final settlement in the estate. Her Exception No. 2, sole issue in this appeal, is a challenge to the right of the respondent to a credit claimed by it, representing a loss of $7,228.95 in the disposition of a real estate mortgage note, one of the assets of the estate. After disposing of various motions in the proceedings, the Probate Court of Callaway County sustained in part the appellant's motion to surcharge the executor and ordered the respondent to pay $1,125 to the trustee under the will. Both appellant and respondent appealed from that order to the Circuit Court of Callaway County, which appeals were Consolidated and tried to the court without a jury. Upon a trial of the issues the Circuit Court dismissed appellant's appeal, approved respondent's final settlement as filed in the Probate Court, and ordered the judgment certified to that court. Appellant, the exceptor, has now appealed to this court.
Prentiss S. Tate died in November, 1949. While his will is not shown in the transcript supplied us, it appears as admitted in the briefs that Julia N. Tate of St. Louis, sister-in-law of the deceased, and her children, and deceased's sister Julia J. Tate were substantial beneficiaries under its terms. Robert P. Tate, the foster son of the deceased, and his children were likewise substantial beneficiaries. For convenience and clarity we shall generally refer to the appellant Mrs. Julia N. Tate as the "exceptor" and the respondent bank as the "executor".
Prior to his death the deceased had sold for $15,000 some land and cabins located in Morgan Country upon the Lake of the Ozarks, which property was known as the Point Breeze Resort. He received from the purchasers E. Jones McNamee and Margarite McNamee, his wife, as part of the purchase price, their note for $12,000, payable in installments, secured by a deed of trust on the real estate referred to and certain property located thereon. According to the provisions of both the note and deed of trust, the mortgaged property was the sole security for the indebtedness, and imposed no personal liability on the signers. By the time of the death of the deceased the principal of the note had only been reduced to $11,500, and interest had accrued in the amount of $1,228.95. The inventory filed by the executor charged the executor with the said note and interest in the total amount of $12,728.95.
On September 20, 1950, the executor applied to the Probate Court for an order to foreclose the McNamee deed of trust. The application set forth that the note was in default; that there was no personal liability therefor on the part of the makers of the note and mortgage; that the latter had stated their inability to make further payments and upon demand had declined to do so; that the property had no modern conveniences, and had been allowed to deteriorate greatly; that the full amount of the note had been declared due. It was further stated that it would be to the best interest of the estate that the property be sold under the deed of trust. The application requested the appointment of appraisers to value the property and for an order to foreclose.
The Probate Court on the same day appointed three appraisers and ordered the foreclosure within the limits of the appraisal. On September 29, 1950, the appraisers filed their report, placing the value of the mortgaged premises at $7,000. Meanwhile the executor had sent the exceptor a copy of its semiannual report, which did not disclose any proceedings for foreclosure. On November 27, 1950, the exceptor wrote to the executor and inquired what could be done about the McNamee note and whether a quitclaim deed to the estate could be obtained, or a sale of the security be arranged without loss to the heirs and the money be invested. The executor later paid the fees of the appraisers and the unpaid taxes on the McNamee property. On January 15, 1951, the assistant cashier wrote the exceptor generally about the estate and, in reference to the McNamee note, told her that efforts were then being made to settle it; that McNamee had left the property; that he could not be held personally liable on the note; that appraisers had been appointed to value the McNamee property and that their appraisal was much less than the amount unpaid on the note; that the Probate Judge was trying to get bids, which he would no doubt submit to the heirs; that the judge thought it best to settle or sell the note rather than to spend more money on the security.
Prior to this correspondence, and on October 6, 1950, Robert P. Tate, foster son of the deceased and whose legacy was about one-fourth of the estate under the will, had called on the exceptor and her family in St. Louis. He expressed dissatisfaction about the administration of the estate and said he was going to Fulton to find out about the conditions and would advise her. He did not report to her. However, shortly after the death of the deceased, the exceptor's son Waddy Tate, had gone with his mother to Fulton and while there accompanied his cousin Robert Tate to the resort property to see it and to do some hunting and fishing. Returning to Fulton, Waddy and Robert went to the executor bank and discussed the McNamee matter with its assistant cashier. Robert Tate stated there that Miss Julia J. Tate, sister of the deceased, had expressed approval of a sale of the mortgaged property for a minimum of $10,000, and Waddy Tate stated that he felt an effort should be made to get a better price, but they should take $10,000 if "we had to take it". The assistant cashier replied: "We can try", but expressed the opinion that — "We will be lucky if we can get $10,000, perhaps". At that time all the heirs and legatees were harmonious and gave the executor the impression that Waddy Tate and Robert P. Tate were "Working together".
On January 19, 1951, following its letter of January 15, above mentioned, advising the exceptor that a settlement of the note was being considered, the executor wrote her that the resort was badly run down; that appraisers had valued it at $7,000, but that it was the opinion of the appraisers that $2,500 or $3,000 would have to be spent on the property to put it in saleable condition; that the Probate Judge thought the offer a good one and should be accepted, rather than to spend more money on the place. The exceptor was asked to advise the executor if the proposed deal would be satisfactory to her. She promptly replied on January 23, 1951, that the bid was "surprisingly low"; that the executor had agreed that it should be sold at a minimum of $10,000; that efforts should have been made earlier to get bids when the property was occupied; that there could not have been a $1,750 deterioration since the court's appraisal of $7,000; that she personally preferred to sell rather than to improve the property, but it should be advertised and more time taken to get higher bids. On February 14, 1951, Robert Tate again visited the exceptor's family and gave her the first information she had received that he was the highest bidder for the McNamee property and that it had been deeded to him for $5,500.
It Appears that the order to foreclose had never been performed. Instead, on February 14, 1951, the executor filed a petition in the Probate Court for an order to compromise the McNamee note and deed of trust. The petitioner again set out the deteriorated condition of the security and the limited liability on the note and mortgage, and alleged that the makers had offered to deed the property to save the expense of foreclosure, and that Robert P. Tate, a legatee under the will of Prentiss S. Tate, had offered $5,500 for the property, the next highest bid being $5,250. An order was prayed to settle the note for $5,500. On the same day the court granted the order as for the best interest of the estate and authorized a settlement of the note and deed of trust for $5,500.
On February 10, 1951, four days before the order to compromise was made, the executor received from McNamee and his wife a deed to the mortgaged property, with the name of the grantee left blank. After the above order of compromise was made "Robert P. Tate and Irene Tate, husband and wife" were inserted as grantees. According to the evidence on the part of the executor this delay in insertion of the name or names of the grantee or grantees was solely for the purpose of ascertaining how Robert P. Tate desired the property to be conveyed. Thereafter the executor charged Robert P. Tate with $5,500 against his portion of the final distribution, representing the proceeds of the compromise of the McNamee note and deed of trust, which presumably were delivered to him.
In March, 1951, exceptor and her son Waddy Tate visited the lake property. It consisted of eight or nine acres of wooded land on the Lake of the Ozarks about five miles above Bagnall Dam. On it were built nine cabins, one of stone structure, a dock and some septic tanks. With the property and included in the deed of trust were furnishings for the cabins, wells, some boats, swings and roadways. One cabin was modern with septic tank and essential kitchen facilities. The other cabins were locked and exceptor could view the interior only through the windows. They took 12 pictures while there and offered them in evidence at the trial. According to their testimony the improvements were in good state of repair and the furnishings in good condition so far as they could be seen.
There was conflicting evidence as to the value of the mortgaged property. It was shown that about 10 weeks after receiving a deed to the McNamee property Robert P. Tate sold it to Theodore P. McNulty and wife for $6,000, subject to one-half the commission. A few months thereafter McNulty advertised it once and sold it to William Hoffman for $10,000, reserving one acre and one of the cabins. As a witness for the exceptor one A. G. Elam, experienced in buying and selling resort property on the Lake of the Ozarks, testified that the property was reasonably worth $11,300. McNulty, a witness for the exceptor, admitted that he first offered Robert Tate $5,000 for the property. He said that the plumbing in one building was frozen and broken and that the resort was not occupied at the time. He said he put on a new roof on the cabin he retained, and that the cabins needed painting and did not look as well preserved as they appeared in the pictures offered in evidence. He stated that he was satisfied to pay $6,000 for the property. Walter Deem, a witness for the executor, owner of property nearby, valued the McNamee property at $5,000. Elmer Meyer, a real estate operator, and who was one of the appraisers appointed by the Probate Court to appraise the property after the order to foreclose, and who joined in the appraisal of $7,000, testified for the executor and said the market value was $5,500 from the investment point of view. He was later engaged by Robert Tate to sell the property, advertised it twice and finally negotiated the sale to McNulty. J. A. Garrett, another witness for executor, a former bank official, and one of the court's appraisers in this case, described the rundown condition of the resort and fixed the value in the present condition at $6,000. W. C. Whitlow, the remaining member of the court's appraisers, described the condition of the property as much in need of repair. Steve Ruffel, witness in the executor's behalf, said he looked at the property, found the dock in bad condition, the boats gone, the septic tanks were emitting foul odors, the toilets were outside the cabins, and that the place was generally neglected and run down. He offered the executor $3,500 for the property, figuring it would take $4,000 to put it in shape.
The bank vice president testified that he had advised against a conveyance of the McNamee property direct to the estate on account of possible liens that might have attached to the title. The assistant cashier testified that he obtained the deed from McNamee for Robert Tate a few days prior to the date of the compromise order, as a convenience to McNamee, who could not be present on the date set. The executor then held the deed for Robert Tate and for no other person, waiting for instructions as to whose name or names should be inserted as grantee or grantees. He said he never advertised the property or visited it, nor did anyone else from the bank do so, nor authorized anyone to inspect it, but depended upon information received from various sources and upon the court's appraisal and the judge's instructions.
On February 20, 1951, the executor filed its final report. Among other things, it reported that Mrs. Julia N. Tate was entitled under the will to a balance of cash of $844.39, she having already been paid $1,000 on account; that certain corporate shares were due Mrs. Robert P. Tate as trustee for her two children ($1,330); that Robert P. Tate was entitled to $12,626.62 in cash, after charging him with the $5,500 paid for the McNamee note; that the invested estate then consisted of stocks and bonds of inventoried value of $53,911, of which Robert P. Tate was entitled to one-fourth and the remaining three-fourths were due to the trustee for Julia N. Tate and Julia J. Tate; that the executor declined to serve as such trustee and a new trustee would be required. Among the credits shown and claimed was $7,228.95, asserted as a loss on the McNamee note between the $5,500 for which it was compromised and the inventory value of $12,728.95.
During the same term of the Probate Court the exceptor filed her exceptions to the final settlement, among which was No. 2, challenging executor's right to the McNamee credit. She alleged that the executor had failed to comply with the foreclosure order; that the court had never set it aside and was without power to make the later order of compromise, which order was therefore void. The executor filed answer to the exceptions and as to Exception No. 2, restated the condition of the security, the limited liability under the note, the tender of the deed from the mortgagors; that $5,500 was the best bid received and that the compromise was a good one and the most practical way to settle the note.
On May 9, 1951, the Probate Court overruled all of the exceptions except No. 2, which the court sustained and ordered "the real estate in controversy * * * brought back into the estate" to await further orders. The next day the executor filed a motion to modify the above ruling for the reasons that it exceeded the pleadings, attempted to set aside the deed in which the executor was not a party, made with the full knowledge of the court; that such action could only be attempted by a direct proceeding; that the objection should have been made to the order itself; that the compromise was made with the approval and upon the order of the court; that if the court felt that the executor had been negligent in the matter that the only remedy would be to require the executor to pay back the $275 charged as its commission on the compromise. It was further alleged that in the absence of fraud or deceit upon the court, it had no authority to set, aside its order of compromise. The court was asked to modify the judgment, deleting the requirement "to bring the real estate back into the estate", and to make such order as could be carried out by the executor.
In the following term of the Probate Court exceptor moved to strike executor's motion to modify the judgment. It asserted that executor's only remedy was by appeal, that the judgment on the exceptions was final and the time for appeal had elapsed, leaving the court without jurisdiction to hear the motion to modify. At the same time the exceptor filed a motion to surcharge the executor with the $7,228.95, for which, it alleged, it had wrongfully taken credit and that a final settlement so corrected be filed. On July 17, 1951, the Probate Court overruled the exceptor's motion to strike the motion to modify, sustained in the motion to modify, sustained in part and overruled in part exceptor's motion to surcharge, found that the court had no authority to make the order of May 9, 1951, regarding the real estate, and thereupon set the same aside. The remaining exceptions to the final report were then overruled. The court further found that the compromise of the note for $5,500 should never have been made; that the court had not been fully informed as to all the facts; that the executor did not use due diligence in ascertaining the value of the security; that the compromise should have been for $7,000 instead of $5,500; that Robert P. Tate received the benefit of the compromise and since he is entitled to one-fourth of the estate, he should be charged with one-fourth of the $1,500 difference, or $375: that the executor should pay to the trustee of the heirs under the trust clause of the will the sum of $1,125, and when so paid the final settlement should be approved.
Upon the appeal to the Circuit Court and on trial de novo, the Circuit Court found that the executor had acted in good faith in the administration of the estate; that the order of compromise was valid and binding; that the previous order of foreclosure, not having been acted upon, was not final or binding so as to preclude the order of compromise; that the reasonable market value of the real estate securing the note did not exceed $5,500; that the executor should not be surcharged with any amount. The exceptor's appeal was dismissed and the executor's final settlement, as filed, was approved.
The first point here made by the exceptor is that the Circuit Court erred in dismissing her appeal and approving the final settlement because (1) the judgment of the Probate Court of May 9, 1951, sustaining her Exception No. 2, became final from which no appeal was taken; (2) the executor failed to exercise due diligence to secure the best possible settlement of the note; (3) that the amount realized was far less than the amount of the note and its acceptance was not for the best interest of the estate; (4) the executor was required to foreclose under the foreclosure order and the acceptance of the blank deed was, in effect, a compliance with that order, making the land an asset of the estate. The exceptor asserts that it was the duty of the executor to obtain an order to purchase at the foreclosure sale, and that the order to compromise was reviewable under the exceptions to the final settlement.
The executor asserts that the order to foreclose was interlocutory in nature and that the Probate Court retained jurisdiction to modify or vacate it before compliance; that it was vacated by the order to compromise the note; that the executor exercised the reasonable diligence of a prudent person in determining the value of the security and that it is the duty of the exceptor to prove that such care was not used; that the real estate was never and asset of the estate; that the order of May 9, 1951, requiring the executor to put the real estate back into the estate was in excess of the pleadings and was further void after the valid order of compromise had been acted upon; that the Probate Court can vacate a void order at any time; that the exceptor is estopped by her conduct from complaining of the sale to a member of the family with whom she was apparently in accord. The executor insists that since there was ample evidence to support the findings and judgment of the Circuit Court in this case tried without a jury, the judgment should not be set aside under Section 510.310(4) RSMo 1949, V.A.M.S., unless clearly erroneous.
Proceedings upon exceptions to a final settlement of an estate in the Probate Court are essentially equitable in nature and should be tried and reviewed as such. In re Estate of Danforth, 66 Mo.App. 586, 589; In re Helm's Estate, Mo.App., 136 S.W.2d 421,426. On appeal to the Circuit Court on such issues its jurisdiction is derivative and equitable as is true in the present appeal to this court. In re Helm's Estate, supra. We find no merit in the executor's point that the exceptor is estopped by her conduct to complain of the compromise on the theory of her acceptance thereof. Her position as to the value of the note and security and the efforts to realize thereon was consistent and well known to the executor to be adverse to the value accepted.
We next consider the binding effect of the foreclosure order with which there was no compliance and from which no appeal was taken. Sales by administrators under order of the Probate Court are judicial sales. They pass no title until approved by the court. Where, in the discretion of the court, the best interest of the estate may be served, the court can, prior to compliance with the order, modify or withdraw it. Rhodes v. Bell, 230 Mo. 138, 159, 130 S.W. 465; Noland v. Barrett, 122 Mo. 181, 189, 26 S.W. 692; Brown v. Marshall, 241 Mo. 707, 748, 145 S.W. 810. In the instant case the Probate Court, after ordering the foreclosure, was apprised of the tender of a deed by the mortgagor and wife, making the expense of foreclosure unnecessary; and the court, before any such sale was had, in effect withdrew its order by making one providing for other disposition of the note and deed of trust. We find no law, statutory or otherwise, that prevents the exercise of such a wise discretion. We conclude, therefore, that the Probate Court was not deprived of its authority to make the order to compromise the note because of the previous order of foreclosure.
But the exceptor claims that the order of foreclosure was, in effect, complied with by the acceptance by the executor of the deed in blank and that the real estate then became an asset of the estate. The evidence was that the proposed sale of the land to Robert P. Tate for $5,500 had been made known to the court before the petition to compromise the note had been filed and the court had expressed its approval. Thereupon the executor sought to obtain the deed in connection with the hearing and order on the petition to compromise, but McNamee would be unable to come to Fulton on the date the motion was to be set and heard. The executor received the deed four days prior to the date set, and left the grantees' name blank until; the order was made and the instructions received from Robert P. Tate as to what names to insert. The names were inserted after the order as instructed by Robert P. Tate, and the deed delivered to him.
The officers of the bank testified that they held the deed merely as agent for Robert P. Tate, and for delivery to him only. The evidence also showed that the executor did not desire to take title to the land by deed from the mortgagor because of possible defects in title. There is no evidence that it was the intention of the grantors to convey to the executor the title to the real estate, nor that the executor intended to receive the same, nor to treat the real; estate as an asset of the estate, nor does the evidence show any proper conveyance to the estate or its executor. The executor merely received and held the deed for Robert P. Tate. We hold there was no compliance with the order of foreclosure nor did the real estate ever become an asset of the estate.
It is next urged by the exceptor that the Probate Court's order of May 9, 1951, sustaining her exception to the credit of $7,228.95 claimed by the executor as for loss in the compromise of the McNamee note and deed of trust, was a final judgment not appealed from, and that the court had no authority thereafter to entertain a motion to modify it. It is asserted that the executor's motion to modify that order did not defer its finality beyond the appeal period. The part of the order complained of read: "The Court finds in favor of the claimant and exceptor Julia N. Tate on Item 2 in said exceptions filed in this court, and orders the real estate in controversy in said exceptions brought back into the estate, and further orders that the estate be held open in this court until said matter is disposed of". As we have held, the order to foreclose was, in effect, vacated by the court by the later order to compromise the note, and hence the claim for the loss was not invalid solely because of the previous order of foreclosure. As to the further requirement of the order of May 9, 1951, that the real estate be brought back into the estate, the court had no authority to make such requirement since the real estate had never been a part of the estate, was not subject to the jurisdiction of the court, and could not be acquired upon any such order. Hence the order of May 9, 1951 was void as recognized by the Probate Court in its later order made and hereinbefore described. The Probate Court has authority to vacate or set aside any void order made by it, and do so at the term made or thereafter. In re Waters' Estate, Mo.App., 153 S.W.2d 774, 777; Estate of Main v. Main, 236 Mo.App. 88, 98, 152 S.W.2d 696. Hence, the fact that the order of May 9, 1951 was not appealed from is immaterial since it was void and of no effect. The motion to modify it, setting out its invalidity, was not improper and the court had the authority to enter its order of July 17, 1951, setting aside the order of May 9, 1951, and to make a different judgment on the exception in question.
The remaining point made by the exceptor is that the Circuit Court erred in dismissing her exceptions because the executor failed to exercise due diligence to obtain the best settlement possible. The issue of due diligence was introduced by the executor's pleadings, by the findings of the Probate Court and the Circuit Court and treated on this appeal as an issue herein. The due care and skill required of an administrator in the administration of an estate is the same as that which prudent men use in the management of their own affairs. In re Mill's Estate, 349 Mo. 611, 620, 162 S.W.2d 807. The estate was large and consisted of cash, high class corporate stocks and the McNamee note on which $13,225 was due. Excepting the cash, the note, with interest accrued, was the largest inventoried asset so far as the record here shows. The only security for the note was the deed of trust on the Morgan County real estate which the deceased had a few years previously sold for $15,000. No officer of the executor bank or any person authorized by the bank ever went to the property or saw it. No effort was made to have the property advertised for a purchaser. For information as to its value the executor relied on a few offers, the court's appraisal for foreclosure and upon the judge's efforts to get bidders. The court's appraisers valued it at $7,000. The exceptor was insisting on the valuation of $10,000 or more and that efforts be made to get bids consistent with such valuation. The mortgagors were willing to relinquish the property and made foreclosure unnecessary. An arrangement was made thereupon to have the property sold to one of the legatees for $5,500, to be paid out of his distributive share of the cash. Within a few weeks he resold it for $6,000, less one-half of the commission, and shortly thereafter his purchaser, on one advertisement, sold it for $10,000, retaining one lot and one cabin. The executor's commission on the $5,500, which thus went through the estate, was $275, included in its total commissions of $4,452.67. The executor was credited with a loss of $7,228.95 on the McNamee note. All of this was done with the knowledge of the Probate Court and upon its orders, granted at the instance of and upon the recommendation of the executor. It is difficult to reconcile the executor's administration of the McNamee note with the rule of diligence imposed by the law. The Circuit Court did find that the executor acted in good faith, but that falls short of the degree of diligence required.
However, the Circuit Court further found that the value of the security for the McNamee note did not exceed $5,500. If that be true, the executor realized on the note all it was worth, even though with the minimum effort and concern. There was substantial testimony produced by the executor at the trial that the property was not worth more than $5,500. We are enjoined by Section 510.310 RSMo 1949, V.A.M.S., that in cases tried without a jury "the judgment shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." McCoy v. McCoy, 360 Mo. 199, 227 S.W.2d 698, 703. In view of the conflicting testimony as to the value of the McNamee property at the time of the compromise of the note and deed of trust, we are not in a position under the record before us, to determine the value. nor whether it exceeded the amount for which the note was compromised. On that issue we feel compelled to defer to the findings of the trial judge. Judgment affirmed.
All concur.