218 N.W. 537 | Iowa | 1928
The contention of the defendants, in substance, is that the 1. EXECUTORS order of the probate court authorizing the AND administratrix to continue the business of the ADMINIS- deceased is void; that plaintiff depositors' TRATORS: claims were never filed, and particularly not management filed within six months, and therefore of estate: plaintiffs are not entitled to the status of continuing claimants, — at least, to that of claimants of business: the third class, or as having priority over order: defendants. validity.
James B. Harsh in his lifetime owned and operated a private bank, under the name of "The Land Credit Bank." It was a bank of deposit. A part of his business was the loaning of money on mortgage security. He sold and guaranteed the mortgages. He died intestate, June 19, 1923. His daughter, Grace S. Harsh, was appointed administratrix. The first publication of notice to creditors was July 9, 1923. On that date, on the application of the administratrix, an order was made directing her to continue the business of the bank "in accordance with the terms, conditions, and previous management of said business, and that she be authorized and empowered to carry out the contracts and obligations of said estate as fully and completely as the decedent could do, if living." The business was continued accordingly. Deposits were paid, new deposits received, loans made and guaranteed, expenses and some debts paid. Without pausing to reconcile the figures, it is sufficiently accurate to say that the deposits at the time of death of decedent amounted to $69,834.54. Deposits were made between the time of decedent's death and the closing of the business, December 16, 1924, to the amount of $208,845.63. The withdrawals during that time amounted to $234,816.67. The deposits December 16, 1924, when the bank closed, amounted to $32,345.04. The cash and amounts in depositary banks at date of death were $37,512.93, and at the close of the business, $3,317.87. All of the property of James B. Harsh was carried on the books of the bank, which showed credit to him therefor at the date of his death to be $95,992.86. This seems to have been the equivalent of capital, surplus, and *86
undivided profit account. The depositors did not file claims. Many of the plaintiffs were depositors when intestate died. The business was apparently conducted, accounts kept, and books balanced in the same manner as that of banking businesses generally. Defendants reside in the state of Maine, and are creditors because of the guaranty by the Land Credit Bank of real estate mortgages sold by it to them. They did not file claims within the year allowed therefor, but for equitable reasons, were permitted to file after the expiration of the year, pursuant to the judgment of this court pronounced in Nichols v. Harsh,
1. Is the order directing the administratrix to continue the business void? Unlike many states, we have a statute which reads as follows:
"The court, in its discretion, may authorize an executor or administrator to continue the prosecution of any business in which the deceased was engaged at the time of his death, in order to wind up his affairs with greater advantage, but such authority shall not exempt him from returning a full inventory and appraisement, and making reports, as in other cases." Section 11956, Code of 1924 (Code of 1897, Section 3337).
Defendants do not claim that the statute is void, but that the order under it is void, as made without notice to creditors, and as in excess of the power given by the statute, in that the statute empowers the court to authorize the administrator to continue the prosecution of the business "in order to wind up his affairs with greater advantage," while the order is not so limited, and was not so executed.
The statute does not require notice, and such requirement would manifestly frustrate its purpose. The closing of an active business, especially a banking business, is usually not only destructive of its value as a going concern, but depreciative of the property or stock in use and the capital invested in it, and, if the estate is not financially strong, may be a calamity to those interested in the estate, and to the public. Authority to continue the business, if to be given and to be of value, must be exercised without delay. The creditors may not be then known, and they may be widely scattered. To give notice to them would be, in many cases, impracticable, and in some impossible. Defendants *87 had no property interest in the assets of the bank. They are non-lien creditors. Probate proceedings as to them were quasi inrem, not in personam.
"It is elementary that probate proceeding by which jurisdiction of a probate court is asserted over the estate of a decedent for the purpose of administering the same is in the nature of a proceeding in rem, and is therefore one as to which all the world is charged with notice." Goodrich v. Ferris,
See, also, Johnson v. Barker,
Administration of estates of deceased persons is undertaken by the state through its courts, and pursuant to its statutes. The administrator is the officer of the law and of the court, and conducts the administration pursuant to the provisions of the statutes, under the court's authority and supervision. In reEstate of Meinert,
It may be that, because of subsequent developments, particularly the existence of the defendants' claims, of which neither the court nor the administrator was informed at the time, and which seem to have been the cause of closing the bank, it would have been better to have closed at the time of intestate's death, than on December 16, 1924; but the court can exercise its discretion only on facts as they appear at the time it is required to act.
The order is not void.
2. Defendants contend that plaintiffs have no standing to maintain their suit, because they have filed no 2. EXECUTORS claims, and are, therefore, not claimants, under AND Section 11970, ADMINIS- Code of 1924. This and accompanying sections TRATORS: provide for the establishment and allowance of depositors: demands against the estate by adversary non- proceedings, and provide the method of procedure necessity therefor. Section 11969 authorizes the payment to file of expenses of administration, of last sickness claims. and funeral, and the allowance to widow and minor children. Section 11970 provides:
"Other demands against the estate shall be payable in the following order: * * *."
Section 11959 permits approval by the administrator, and allowance thereon by the clerk, without notice. The filing of his claim by a creditor, or the allowance thereof by the court, is not made a condition precedent to the authority of the administrator to approve and pay it. The administrator may voluntarily pay valid claims against the estate, though they are not filed, and having paid them, is entitled to credit therefor.In re Estate of Pennock,
On July 9, 1924, at the expiration of the year for filing claims, the administratrix made application for an order approving and allowing claims. Among them were four notes, ranging from $550 to $5,000, and in general terms were "Deposits in Land Credit Bank $39,834.54," and accrued interest $247.98. The court, on the same date, found that these claims were just, and allowed them. This was an approval of the deposits standing on the books of the bank at the date of intestate's death as valid claims, and of the payment of so much thereof as had been paid. Depositors, new and old, had acted on the faith of the order of July 9, 1923. The administration of that order by the administratrix was, by the order of July 9, 1924, confirmed. Depositors continued to act on the faith of both orders.
Furthermore, as has been stated, the estate had received, since decedent's death, $208,845.63, the most of which presumably was received after the order of July 9, 1923. The estate had the benefit of the money so deposited, and was under liability *91
to repay it. Deery v. Hamilton,
Whether or not the creditors of a business conducted after decedent's death must share pro rata with creditors of decedent at the time of his death, has been variously decided, depending on the law of the particular state and on the facts of the particular case. 24 Corpus Juris 429. We have no occasion to decide the question. The reasoning in some of the cases is quite suggestive. The only case we have discovered depending on statute similar to ours is Stoughton Wagon Co. v. Dreyfus Co. (Tex. Civ. App.), 181 S.W. 703, in which it was held that the cost of replenishing the stock of merchandise used in the business of decedent continued after his death, pursuant to statutory authority, should have priority, as expenses incurred in the management of the estate during administration. In Miller'sExecutors v. Miller's Heirs,
"Any crop commenced by a decedent may be completed and gathered by the executor or administrator, and, the expenses *92 of the plantation being deducted therefrom, is assets in his hands * * *"
This statute was held to invest the administrator with discretion; but it was held, under the particular circumstances, to have been his duty to complete the cultivation and to gather the crop, and that expenses incurred by the administrator therein were paramount to the claims of creditors.
It may be suggested that intestate's liability to defendants is on his contracts incurred in the banking business, and that the money which they paid to him for the mortgages purchased by them went into the business, as did that of the depositors; that, inasmuch as the bank is a private bank, and depositors therein, as such, are not entitled to a preference, defendants likewise are within the terms of the order of July 9, 1923. In the first place, there is no evidence before us as to the nature or details of defendants' claims, except that they are based on decedent's guaranty of mortgages sold by him to them. When the sales were made (except that they were in decedent's lifetime), how the business was transacted, does not appear. But defendants ignored the order of July 9, 1923, claimed no benefit under it, sought and secured allowance of their claims, under the statute, after the expiration of the year. They not only apparently established their status as fourth-class claimants, but, in their answer here, expressly admit that their claims are claims of the fourth class. Defendants are claiming priority, or at least equality, not by building themselves up, but by attempting to tear the plaintiffs down. Their claims as admitted fourth-class claims cannot be advanced to third-class claims. Kells v. Lewis,
Defendants' claims appear to consist of guaranties of something like 113 promissory notes, amounting at face to about $150,000. They were secured by mortgages negotiated by the Land Credit Bank; but the value of the security does not appear, nor have the defendants made any offer to account for or to return to the estate such security, though it may be that the estate would be entitled to subrogation, if it were able to pay the claims. None of these claims was filed before September 24, 1924. The greater number were filed from December 11, 1924, to December 29, 1924. Some were filed later. The business of the bank was *93
continued until December 16, 1924. The cause of the closing then seems to have been the filing of defendants' claims. The report of July 9, 1924, inferentially was filed on the assumption that the year for filing claims had expired, and that the personal property (appraised at $89,514.02) was sufficient to pay debts and expenses. The administratrix testifies that, though she knew of the guaranties, yet, at the time she filed application for order to continue business, she did not know of any claims' ever having been made upon them; that she did not anticipate that there would be any actual liability on them, and believed there would not be a cent's loss to anybody. Defendants' claims were allowed on the assumption that the estate was solvent. Nichols v.Harsh,
"The relief granted in cases of this kind is made by statute to depend upon `peculiar circumstances,' entitling the party to equitable relief. No element of estoppel is involved herein; the rights of no other parties have intervened because of any act on the part of appellant; the estate is unsettled, and open for proper distribution among the legitimate creditors; there is no contention that appellant's claim is not valid; and the estate appears to be solvent. * * * Every case must, of necessity, under this statute, be governed by the `peculiar circumstances' pertaining to it."
There was a stipulation in the district court that the decree in the Nichols case should be entered in all, and that the final judgment of this court in case of appeal should be the final judgment in each of the claims. It is these claims that make the estate insolvent. In Kells v. Lewis,
"The advancement of a claim from the fourth to the third class raises a question between creditors as to priority, where an estate is insolvent; and, in our opinion, the statute absolutely prohibits any such demand by a fourth-class creditor. A large number of cases have been determined by this court, specifying what equitable circumstances may entitle a creditor to relief, but the question has usually been between the claimant and the estate or administrator, without involving the rights of third-class creditors; and it has always been held that the fact that the *94 estate is solvent is a material consideration in favor of allowing the claim as one of the fourth class."
It is not the policy of the law to render solvent estates insolvent by the allowance of claims filed after the expiration of the year. As has been said, the depositors, before defendants' claims were filed, had the right, under the order of July 9, 1923, to have their deposits paid. It was the duty of the administratrix to pay them. Nothing more could be accomplished by going through the empty formality of filing claims. The present proceeding was transferred to equity. Defendants do not argue their exception to the transfer. The case is before us in equity. If it were in probate, its determination should be governed by equitable considerations. Mock v. Chalstrom,
We are of the opinion, under the facts of this case, that the statute of non-claim is not available to defendants in bar to depositors' claim to priority, and that, in equity, the case is with the depositors. — Affirmed.
STEVENS, C.J., and De GRAFF, ALBERT, and WAGNER, JJ., concur. *95
