Berk's Estate, In re

• Citation: 196 Cal.App.2d 278,16 Cal.Rptr. 492
• Parties: In the Matter of the ESTATE of Samuel BERK, Deceased. Herbert L. FREED, Petitioner and Appellant, v. David J. BERKOWITZ, Respondent. Div. 25178.
• Decision Date: 13 October 1961
• Court: California Court of Appeals Court of Appeals

Page 492

16 Cal.Rptr. 492

196 Cal.App.2d 278

In the Matter of the ESTATE of Samuel BERK, Deceased.

Herbert L. FREED, Petitioner and Appellant, v. David J. BERKOWITZ, Respondent.

Div. 25178.

District Court of Appeal, Second District, Division 3, California.

Oct. 13, 1961.

Edward B. Freed, Inglewood, for appellant.

Voorhees, Stewart & Voorhees, and Malcolm E. Stewart, Los Angeles, for respondent.

VALLEE, Justice.

Appeal by the administrator from parts of an order denominated 'Order Settling and Approving Alleged First and Final Account as an account current Without Right of Set-Off Against Heir * * * and for Preliminary Distribution.' The appeal is also from the findings made in support of the order. An appeal does not lie from the findings and that appeal will be dismissed. The cause is here on an agreed statement of facts.

The question is: May the amount of an indebtedness owing to a decedent be retained by his personal representative from a distributive share of his estate inherited by a descendant of the debtor?

Samuel Berk (formerly known as Sholom or Samuel Berkowitz) died intestate on January 7, 1958, a resident of the county of Los Angeles. He left surviving as his heirs at law: Clara Solomon, a sister; Ray Freed, daughter of Rose Goldberg, a predeceased sister; and David J. Berkowitz, son of Daniel S. Berkowitz, a predeceased brother.

On October 11, 1954 the deceased loaned $5,200 to his brother, Daniel. Daniel executed his promissory note for that amount to the deceased, payable one day after date with 6 per cent interest. Daniel, a resident of Pennsylvania, died there in November 1954 without having paid any part of the note. His estate was administered in Pennsylvania. About December 1954 the deceased presented a claim to the administrator of Daniel's estate. The claim was approved. Daniel's estate was insolvent. However, Samuel received $295 in December 1955 as payment on the note. No further sum was paid. Daniel left no assets in California. His estate was closed before Samel's death.

The administrator of decedent's estate inventoried the note as an asset and it was appraised at $4,905. In his first and final account he averred that since David takes by way of representation, the estate has a right of setoff against the amount distributable to David in the amount of the note together with accumulated interest. He prayed: 'That the Court make a decree for the distribution of this estate to the persons entitled thereto, and in the following proportions: a. Ray G. Freed One-third thereof b. Clara Solomon One-third thereof c. David J. Berkowitz One-third thereof. * * * [T]hat the distribution to David J. Berkowitz be so made as to consist of the canceled note receivable of D. Berkowitz in the sum of $4,905.00 plus accumulated interest from the date of said note, October 11, 1954, to the date of distribution herein, at the rate of 6% per annum,' with deduction of amounts assigned. David had not endorsed, guaranteed, or in any way acknowledged the note as his obligation.

The court decreed the administrator of Samuel's estate does not have the right to and shall not off-set any part of the principal or interest claimed due on Daniel's note against the distributive share of David, and distributed the available cash one-third to Clara Solomon, one-third to Ray Freed, and one-third to David and his assignees. The administrator of Samuel's estate appeals.

Appellant's point is that if Daniel had survived Samuel, his debt to Samuel would have been deducted from the share of the estate he would have received as an heir; that David takes by right of representation, i. e., represents his father, Daniel; therefore David takes the same share of the estate Daniel would have taken, i. e., one-third, less Daniel's debt to Samuel.

'Right of retainer' is the right of an executor or administrator to retain the amount of a debt owing the deceased by a legated or heir from his legacy or distributive share and apply it to the indebtedness. Bainbridge v. Bainbridge, 230 Wis. 610, 284 N.W. 536, 540. The right is sometimes referred to as the right of setoff.

It is the general rule that the amount of an indebtedness of an heir or distributee to the estate may be deducted from his share. 26A C.J.S. Descent and Distribution § 71, p. 686. Despite some uncertainty in the decisions, California appears to apply the doctrine of the right of retainer in the ordinary case of debts of money owed where there existed a relation of creditor and debtor between the deceased and the distributee. Estate of Thomas, 140 Cal. 397, 398, 73 P. 1059; Estate of Gamble, 166 Cal. 253, 256-257, 135 P. 970; 21 Cal.Jur.2d 223, § 828; 4 Witkin, Summary of Calif.Law 3281, § 293.

Probate Code, section 225, reads:

'If the decedent leaves neither issue nor spouse, the estate goes to his parents in equal shares, or if either is dead to the survivor, or if both are dead in equal shares to his brothers and sisters and to the descendants of deceased brothers and sisters by right of representation.'

Section 250 reads:

'Inheritance or succession 'by right of representation' takes place when the descendants of a deceased person take the same share or right in the estate of another that such deceased person would have taken as an heir if living * * *.'

Taking by right of representation, as used in Probate Code, sections 225 and 250, means taking per stirpes. Maud v. Catherwood, 67 Cal.App.2d 636, 644, 155 P.2d 111; Wood v. First Nat. Bank, 71 Cal.App.2d 544, 549, 162 P.2d 859; 26 A C.J.S. Descent and Distribution § 23, p. 564. Taking per stirpes denotes that the descendants of a deceased person together take the share which the deceased person would have taken. Among themselves, they take per capita. 3 Page on Wills, Lifetime ed., 267, § 1070. 'The law divides the property into as many equal shares as there are children and as there are deceased children with surviving descendants. Each child takes per capita, as it is said, one share. The descendants of each deceased child take per stirpes or by representation, as it is said, and diving among them one share.' 16 Am.Jur. 806, § 38; 26A C.J.S. Descent and Distribution § 23, p. 566; Estate of Jepson, 174 Cal. 684, 687, 164 P. 1. Estate of Healy, 176 Cal. 244; 246, 168 P. 124, 125, defines 'by right of representation' as that which 'occurs when the descendants of a deceased heir take together the same share of the estate of another person that their parents would have taken if living. Civ.Code, § 1403.' Civil Code, section 1403, was the basis of Probate Code, section 250.

Referring to former Civil Code, section 1386, which contained the rules of succession (now Probate Code, sections 220-229, 231), the court in Dickey v. Walrond, 200 Cal. 335, 253 P. 706, said the statute designated not only the takers of the decedent's property but the proportions they take. When there is only one descendant of the deceased person he takes the entire share the deceased person would have taken. The 'share' mentioned in the statute refers to the quantum of the estate the descendants of a deceased person take.

Our statute casts the inheritance directly on the heir. The heir's title to inherited property vests automatically on the intestate's death. Prob.Code, § 300. 'The estate vests in the heir eo instanti upon the death of the ancestor; and no act of his is required to perfect title. The estate is cast on the heir by operation of law without regard to his wishes of election. No assent or acceptance is necessary. He cannot, by any act, cause the estate to remain in the ancestor, for the latter is incapable of holding it after his death.' Estate of Mayer, 107 Cal.App.2d 799, 810, 238 P.2d 597, 605. A person taking per stirpes takes directly from the intestate and not from or through his parent who predeceased the intestate and had no title to transmit on his death. 26A C.J.S. Descent and Distribution § 23, p. 565.

The question whether the indebtedness owing to the deceased by a predeceased immediate ancestor may be deducted in determining the amount which the distributee is entitled to take in the remote ancestor's estate seems to be one of first impression in this state. The cases in other jurisdictions which have passed on the question are in conflict, the weight of authority being that such deduction cannot be made. 1 A.L.R. 991, 1037. The author of an annotation in American Law Reports says:

'These divers views are the result of the difference in opinion as to whether statutes providing for succession in the case of the death of an immediate ancestor cast the inheritance directly upon the heir, or whether the heir, taking in the place of his ancestor, inherits simply as his representative, and therefore takes only what such ancestor would have taken had he survived the decedent. It may be pointed out that it is not conclusive of this question that the statute may provide that, in the distribution of the intestate's estate, the heir shall take by representation, since such expression may be taken merely to denote the fractional part to be taken, and not the ultimate share.'

1 A.L.R. 1037; 30 A.L.R. 781; 75 A.L.R. 888; 110 A.L.R. 1389; 164 A.L.R. 747.

The reasoning of the cases holding that the indebtedness to the deceased by a predeceased immediate ancestor may not be deducted in determining the amount which the distributee is entitled to take in the deceased's estate is that since the immediate ancestor died first, he never had any interest in the estate of the deceased; if it were held to the contrary it would logically follow that his share in the estate would be subject to the debts due from his immediate ancestor to the latter's general creditors; the distributive share of the distributee is in no way affected by the debt; and the statutes of succession define the quantum of the estate the distributee will take from the deceased.

Johnson v. Huntely, 39 Wash.2d 499, 236 P.2d 776, is on all fours...