Davis v. Hutchinson

• Decision Date: 24 October 1927
• Docket Number: No. 5160.,5160.
• Citation: 22 F.2d 380
• Parties: DAVIS et al. v. HUTCHINSON et al.
• Court: U.S. Court of Appeals — Ninth Circuit

22 F.2d 380 (1927)

DAVIS et al. v. HUTCHINSON et al.

No. 5160.

Circuit Court of Appeals, Ninth Circuit.

October 24, 1927.

Morton Stevens, of Fairbanks, Alaska, and Bronson, Jones & Bronson, of Seattle, Wash., for appellants.

John A. Clark, of Fairbanks, Alaska, and Lyons & Orton, of Seattle, Wash., for appellees.

Before HUNT, RUDKIN, and DIETRICH, Circuit Judges.

DIETRICH, Circuit Judge.

This is an appeal from a judgment on the pleadings, denying plaintiff's prayer for an accounting and the recovery from defendants of certain funds alleged to have been wrongfully and fraudulently received by them from the partnership estate of W. W. Pendergraft and John Aldridge. In brief, the facts pleaded and necessarily assumed to be admitted are as follows:

For some years prior to October 24, 1924, on which date Aldridge died, Pendergraft and Aldridge were partners engaged in the mercantile business at Fairbanks, Alaska. Exclusive of the $5,500 item, more particularly to be explained, the firm owed the aggregate amount of $17,000, and was insolvent at the time of Aldridge's death. Pendergraft continued in possession for the purpose of winding up the business, and on November 13, 1920, for himself and his surviving partner, he executed to defendant Hutchinson, as trustee, a real and chattel mortgage covering the partnership property, to secure the payment to the trustee for the benefit of his codefendants the sum of $5,500, thus admitting that there were due the beneficiaries severally debts from the partnership aggregating that amount; but such debts "had no existence in law and were not collectible against said partnership estate," and the mortgage "was wrongful, illegal, unauthorized, fraudulent in law as well as in fact," and covered a "pretended debt."

On February 1, 1921, Pendergraft was appointed and qualified as administrator of the partnership estate, but, instead of winding it up, he continued to run the business, and without leave of court used the assets on hand when his partner died for that purpose. He died on December 12, 1921, leaving a will in which he nominated as his executor one Brown, who, on December 17, 1921, was appointed and qualified as such executor. Brown thereupon took possession of both the individual and the partnership estate. On May 14, 1925, he was removed as executor, and two days later appellant was appointed as his successor, and by the court was authorized to bring this suit. In the meantime Pendergraft or Brown, or both of them, had used $4,000 or more of the partnership assets in paying the "pretended mortgage debt."

Apparently the specific property covered by the mortgage has been exhausted, and, all of the defendants having by default or otherwise disclaimed any present interest in the mortgage, the court decreed its cancellation, but, as already stated, denied plaintiff the right to recover the moneys paid under its terms to the trustee, and to the beneficiaries, all of whom are made defendants.

The ground upon which the court denied relief is that, even though defendant may have wrongfully received the moneys, plaintiff as administrator de bonis non is without the right or capacity to recover. Such, admittedly, was the rule under the common law. United States v. Walker, 109 U. S. 258, 3 S. Ct. 277, 27 L. Ed. 927; Beall v. New Mexico, 16 Wall. 535, 21 L. Ed. 292; Wilson v. Arrick, 112 U. S. 83, 5 S. Ct. 75, 28 L. Ed. 617; Potts v. Smith, 3 Rawle (Pa.) 361, 24 Am. Dec. 359. The reasons underlying the rule grew out of a conception of the relation of an administrator to an estate, measurably out of accord with the prevalent modern notion that he has no beneficial interest, but holds all of the property in a fiduciary capacity. In Woerner's American Law of Administration (3d Ed.) vol. 2, § 352, pp. 1170, 1171, the learned author says:

"The historical justification of this rule, however valid in England, does not exist in America, except as an element of the common law; hence many of the states have discarded the rule itself, in some instances by judicial authority, but most generally by statutory enactments. Administration is, in the states not adhering to the artificial common-law rule, understood to consist in the legal proceedings necessary to satisfy the claims of creditors, next of kin, legatees, or whatever other parties may have any claim to the property of a deceased person; until all such claims are satisfied — whether of creditors or heirs, the widow or minor children of the deceased — administration is not completed. * * * Two principles follow from this view, which are inconsistent with the common-law rule under discussion: First, that the conversion of property from the form in which the decedent left it into some other form — e. g., changing it into money by a sale, etc. — does not exhaust the authority of the executor or administrator over it in its changed form, but it still remains to be administered; and, next, that upon the death, removal, or resignation of the executor or administrator, before the administration has been fully completed, all the authority vested in him must pass to an administrator de bonis non, so that the purpose of law demanding administration may be accomplished."

Under the Code of Alaska we are of the opinion the common-law rule does not prevail in that territory. The provisions touching the administration of estates (Act Cong. June 6, 1900, 31 Stat. 321, 452, et seq.) are substantially the same as the laws of Oregon (Act Oct. 11, 1862, Lord's Oregon Code, tit. 16, c. 2). The pertinent provisions may be found in Compiled Laws of Alaska, §§ 1619, 1620, 1622, 1624, corresponding respectively to sections 1098, 1099, 1101, and 1103 of Hill's Oregon Code. After adverting to the common-law rule in question, Mr. Justice Bean, speaking for the Supreme Court of Oregon, in Gatch v. Simpson, 40 Or. 90, 66 P. 688, said:

"But, as Mr. Woerner points out, the historical justification of this rule, however valid in England, does not exist in this country, and therefore many of the states have discarded the rule itself, either by judicial authority or by statutory enactments. And this is true in this state. The statute provides that, whenever all the executors or administrators die, resign, or are removed, administration of the estate remaining unadministered shall be granted to those next entitled, if they be competent and qualified, and that the new administrator `is entitled to the exclusive administration of the estate, and for that purpose may maintain any necessary and proper action, suit, or proceeding on account thereof, against the executor or administrator...