33 F. Supp. 3 | W.D.S.C. | 1940
Plaintiffs bring this action for an accounting and seek judgment against W. C. Beacham individually and as administrator of the Estate of W. G. Ross, deceased, and his surety for loss caused by his failure to make undistributed annual balances productive, the payment of excessive bond premiums, and for refund of commissions unlawfully received by him in the management of the estate. The defendants deny the allegations of negligence and improper management and plead a judgment in the case of W. C. Beacham, as Administrator, etc., et al., v. W. Rushton Ross, as Executor, etc., et al., 187 S.C 398, 197 S.E. 369, as a bar to the claim of the plaintiffs for interest on undistributed annual balances, which the administrator failed to make productive.
Where diversity of citizenship exists and the requisite amount is in controversy, the Supreme Court has sustained the right of Federal Courts of Chancery to exercise original jurisdiction in favor of creditors, legatees and heirs to establish their claims and have a proper execution of the trust as to them. The only qualification in the application of this principle is that the courts of the United States in the exercise of their jurisdiction over the parties cannot seize or control property while in the custody of a court of the state. This exception does not apply in the instant case. Diversity of citizenship and jurisdictional amount are present in this case, and this court has jurisdiction of the controversy. Sutton v. English, 246 U.S. 199, 38 S.Ct. 254, 62 L.Ed. 664; Waterman v. Canal-Louisiana Bank & Trust Co., 215 U.S. 33, 30 S.Ct. 10, 54 L.Ed. 80; Borer v. Chapman, 119 U.S. 587, 7 S.Ct. 342, 30 L.Ed. 532; Dixon, as Receiver, etc., v. Cleveland, as Executrix, etc., D.C.S.C., 31 F.Supp. 1010.
There is not much dispute about the facts. W. G. Ross died intestate on August 20, 1926 The defendant Beacham qualified as administrator of the estate on October 6, 1926. His bond was fixed at $25,000 with the defendant American Surety Company of New York as surety. On October 12, 1931, by order of the court, the bond was reduced to $12,000. In the statement of receipts and disbursements introduced in evidence it appears that the administrator after making some disbursements to the heirs at law of the deceased during the year 1927, had remaining' cash on hand December 31, 1927, $7,933.21. During the years 1928, 1929, 1930, 1932,
The Supreme Court of South Carolina has announced several general principles upon the main question involved in this controversy: The object of administration is the distribution of the decédent’s estate among those entitled to it according to law. Koon v. Munro, 11 S.C. 139. An administrator shall use such diligence in the preservation and improvement of the trust fund as a prudent man would do in relation to his own affairs. The corollaries to this proposition are: First, that he shall not make profit out of his trust; and second, that he shall be charged with no loss except for neglect of duty. All rules on the accountability of trustees must be made in subordination to these principles. Tucker v. Richards, 58 S.C. 22, 36 S.E. 3; Dixon v. Hunter’s Distributees, 3 Hill, S.C., 204; Nicholson v. Whitlock, 57 S.C. 36, 35 S.E. 412; Parks v. McDaniel, 75 S.C. 7, 54 S.E. 801, 117 Am.St.Rep. 878;
The administrator has neglected his duty in paying to himself unearned-commissions, which he has had the use of, and the profits from, since January, 1928, and March, 1930; in failing to make proper annual accountings; in refusing to distribute the large annual balances not held to meet obligations of the estate; in not heeding the requests and demands of the heirs for distribution of funds on hand and a settlement of the estate; in allowing the bank of which he was president, a director and a stockholder, to have the use of and the profit from these annual balances for many years without payment of interest for the use thereof; in making no attempt for many years to invest or deposit the annual balances in the savings account of the bank or otherwise; and in keeping in force a surety bond much larger than was necessary had the estate been administered according to law. The record does not disclose any legal excuse for his failure to distribute the funds to the heirs. It, on the other hand, shows a lack of observance of legal requirements and proper business methods in the handling of the estate. He would not heed the demands of the heirs to distribute and settle and he would not invest the funds. He did not use due diligence. He did not exercise ordinary prudence, and he has not shown any facts or circumstances warranting a departure from the general rule. There does not appear any circumstances which required the administrator to keep money in his hands. There were no debts, no demands which put the estate in hazard. Tested by the decided principles of law in this State,
Is the judgment in the case of Beacham, as Executor, et al., v. Ross, 187 S.C. 398, 197 S.E. 369, a bar to the claitm of plaintiff for interest on the annual balances? The essential elements of res adjudicataare: (1) Identity of parties; (2) identity of subject matter; and (3) an adjudication in the former suit of the precise question sought to be raised in the second, and that the matter in dispute must have been necessarily involved and adjudicated in the former proceeding. Johnson-Crews Co. v. Folk, 118 S.C. 470, 111 S.E. 15. The parties are not identical and the judgment in the case relied upon grew out of the management of the estate of Mary Ross Chipley, deceased, by Beacham as executor. The instant case concerns the handling of the estate of W. G. Ross, deceased, by Beacham as administrator. While Mrs. Chipley and Mr. Ross were brother and sister, their estates are entirely separate and distinct. Under no circumstances could matters pertaining to the Ross estate have been included in, and adjudicated in, the suit in the Chipley estate. A judgment is not conclusive on any point or question which from the nature of the case, the form of action, or the character of the pleadings could not have been adjudicated in the suit in which it was rendered. Furthermore, as pointed out in the case relied upon by defendants, the allowance or dis-allowance of interest on annual balances not made productive, must be decided on the facts and circumstances of each particular case. The facts and circumstances of the case under consideration differ in two important particulars from case relied upon as a bar to the claim here. In that case the Supreme Court said [187 S.C. 398, 197 S.E. 373], “It is conceded that the disbursements by him .to the beneficiaries were made with reasonable promptness”, in -the instant case it is not conceded that the disbursements were made by him to the beneficiaries with reasonable promptness; from the statement in evidence it appears they were not. In that case, while there was some request for distribution, there were not insistent and continuing demands made by the heirs for settlement and distribution, as was made by the heirs in the case under consideration.
Section 9012, South Carolina Code, 1932, requires administrators to render annually to the Judge of Probate, from whom they obtained letters of administration, a just and true account, upon oath, of the receipts and disbursements of the estate. It provides that if an administrator “should neglect to render such annual account, he. shall not be entitled to any commissions for his trouble in the management of said estate; and shall moreover be liable to be sued for damages by any person or persons interested in such estate.”
It is admitted, and the record shows, the defendant administrator, in the more than thirteen years he has been handling this estate, has rendered but one accounting to the Judge of Probate. This was filed in October, 1937. Where returns are filed during certain years and omitted during other years, the commissions are allowed only for the years in which returns are filed. In re Norris’ Estate, 153 S.C. 203, 150 S.E. 693. However, this will not prevent the defendant Beacham from receiving and retaining his commissions allowed by law upon the payment to the parties entitled thereto of any balance in his hands. Epperson v. Jackson, 83 S.C. 157, 65 S.E. 217. The administrator in this case is, therefore, entitled to commissions only on receipts and disbursements for the administrative year ending October 6, 1937, and on the final return hereafter to be ordered by this Court.
The statement of receipts and disbursements in evidence shows the administrator paid to himself, as commissions, on January 9, 1928, $1,000, and on March 6, 1930, $300. These commissions under the South Carolina law were not earned, and must be refunded to the estate by the administrator, with interest at the rate of six per cent, per. annum from the 30th day of May, 1938, the date upon which he was informed that the commissions had not been legally earned.
An administrator, in his accounting, will not be allowed credit for unnecessary bond premiums paid, but since the administrator in this case will be required to pay interest on the annual balances retained in his hands, he should not also 'be required to pay loss on excessive bond premiums caused by his refusal to distribute; he should not be charged with loss except in the amount of the difference
Let counsel submit an order in accordance with this opinion.