In re Estate of Sullivan, Civil 3864

• Decision Date: 11 April 1938
• Docket Number: Civil 3864
• Parties: In the Matter of the Estate of J. W. SULLIVAN, Also Known as JERRY W. SULLIVAN, Deceased. EDWIN L. CARTY, Appellant, v. HOMER R. WOOD and ED WESTON, Executors of the Last Will and Testament of J. W. SULLIVAN, Also Known as JERRY W. SULLIVAN, Deceased, Appellees
• Court: Arizona Supreme Court

78 P.2d 132

51 Ariz. 483

In the Matter of the Estate of J. W. SULLIVAN, Also Known as JERRY W. SULLIVAN, Deceased. EDWIN L. CARTY, Appellant, v. HOMER R. WOOD and ED WESTON, Executors of the Last Will and Testament of J. W. SULLIVAN, Also Known as JERRY W. SULLIVAN, Deceased, Appellees

Civil No. 3864

Supreme Court of Arizona

April 11, 1938

APPEAL from an order of the Superior Court of the County of Yavapai. Henry C. Kelly, Judge. Order reversed and cause remanded with instructions.

Messrs Gust, Rosenfeld, Divelbess, Robinette & Collidge and Messrs Moeur & Moeur, for Appellant.

Messrs Baker & Whitney and Mr. Lawrence L. Howe, for Appellees.

OPINION

LOCKWOOD, J.

This is an appeal from an order of the superior court of Yavapai county, dismissing the petition of Edwin L. Carty, hereinafter called petitioner, which asked that the powers of Homer R. Wood and Ed Weston, as executors of the last will and testament of J. W. Sullivan, hereinafter called deceased, be suspended, and that the letters testamentary heretofore issued to said executors be revoked. The proceeding was obviously based on the provisions of sections 3956, 3957, Revised Code 1928, which read as follows:

"§ 3956. Ground for investigation; suspension. Whenever the court has reason to believe, from its own knowledge or from credible information, that an executor or administrator has wasted, embezzled or mismanaged, or is about to waste or embezzle the property of the estate committed to his charge, or has committed or is about to commit a fraud upon the estate, or is incompetent to act, or has permanently removed from the state, or has wrongfully neglected the estate, or has long neglected to act as such executor or administrator it shall suspend the powers of such executor or administrator, until the matter is investigated."

"§ 3957. Notice, hearing and revocation. When such suspension is made, notice thereof shall be given to the executor or administrator, and he shall be cited to appear and show cause why his letters should not be revoked; if he cannot be found notice may be given by publication as the court may direct. If he fail to appear in obedience to the citation, or if appearing, the court finds that there exists cause for his removal, his letters shall be revoked, and letters of administration granted, as the case may require. At the hearing any person interested in the estate may appear and file his allegations that the executor or administrator should be removed, which the executor or administrator may answer. The issues raised shall be heard and determined by the court."

In order that the principles involved in the appeal can be better understood, it is necessary to make a brief statement of the facts leading up to the petition. J. W. Sullivan died on or about October 24, 1929, leaving a last will and testament which was duly admitted to probate in the superior court of Yavapai county. Homer R. Wood, Ed Weston, and James A. Cashion were duly appointed executors of said last will and qualified as such. Cashion died some time after his qualification, but before the bringing of this proceeding. Shortly after the appointment and qualification of the executors, the estate was appraised and the total value of the property, which was located in the states of California and Arizona, was fixed at $434,143.93. Various creditors' claims were filed, allowed, and approved against the estate, amounting to $384,357.78. Among these was the claim of the Security First National Bank of Los Angeles, which was for a contingent indebtedness alleged to have arisen out of the fact that deceased, during his lifetime, had guaranteed the payment of certain bonds issued by the Reed-Cashion Land & Cattle Company, a corporation, in the sum of $525,000, of which sum some $385,000 of the principal was still outstanding at the time of the death of Sullivan. This claim was eventually assigned to Edwin L. Carty, petitioner herein, and it is as the owner of such claim that he justifies the filing of his petition for suspension and removal of the executors. Within the year allowed for such proceeding, Daniel J. Sullivan, a brother of deceased, contested the will. The executors undertook the defense of the contest and incurred a good deal of expense and attorneys' fees therein. A question arose as to their right to conduct this defense and to pay attorneys' fees therefor, and we upheld their right in the recent case of In re Sullivan's Estate, Carty v. Wood, ante, p. 55, 74 P.2d 346.

At various times beginning with January 5, 1931, the executors duly filed four annual accounts which were noticed, approved, and settled by orders of the court made after hearings. In 1932 the executors asked that the order theretofore made fixing the inheritance tax be modified, for the reason that the appraisement of the estate was $186,980.33 in excess of its real value, and that the liability of the estate on the contingent claim of petitioner would be in excess of $100,000. This petition was granted, but there was no specific finding as to the true value of the estate. The fifth annual account and report was filed on June 20, 1963, and thereupon, for the first time, there was an objection to the accounts of the executors, and the manner in which they had administered the estate. It was made by petitioner, and shortly thereafter he filed the petition involved in the present proceeding, asking that the powers of the executors be suspended and that their letters testamentary be revoked, and setting forth in detail the matters on which the petition was based. Demurrers were filed both to the entire petition and to the individual items thereof, which were sustained by the court, and thereafter an amended petition was filed. The same demurrers were directed to the amended petition and were again sustained. Petitioner electing to stand upon his amendment, the court entered its order dismissing the petition, whereupon this appeal was taken.

The petition was based upon the general allegation that the executors had been guilty of acts of mismanagement and waste in their handling of the estate, and set up many specific acts which petitioner claimed justified his accusation.

There are twenty-one assignments of error which, in substance, amount to an assertion that the court erred in sustaining the demurrer to each and every separate item set forth in the petition for the removal of the executors, and also that it erred in sustaining a general demurrer to the whole of the petition. We will consider them on the basis of the propositions of law raised by the assignments.

With few exceptions, each and all of the matters on which the claims of waste and mismanagement are based were reported to the probate court in one or more of the first four annual reports, and were by it allowed and approved. It is urged by the executors that such approval by the court was conclusive that the action of the executors was not only legal, but that it negatived any idea that it was waste or mismanagement, and that the order of the court settling the account is, in substance, a judgment to that effect, which cannot be attacked collaterally at all and directly only on the ground of extrinsic fraud, and that until such order approving the account is set aside, the wisdom, good faith, or legality of the act approved therein may not be questioned in any proceeding. Section 4064, Revised Code 1928, reads as follows:

"Settlement conclusive; exception. The settlement of the account and the allowance thereof by the court is conclusive against all persons interested in the estate except persons under any legal disability may move, for cause, to reopen and examine the account, or may proceed by action against the executor or administrator, either individually or upon his bond, at any time before final distribution. In any action brought by any such person, the allowance and settlement of the account is prima facie evidence of its correctness."

The language of the statute is explicit. An order settling an account of an executor or administrator has the same force and effect as a judgment and is subject to attack only in the same manner. Dockery v. Central Arizona L. & P. Co., 45 Ariz. 434, 45 P.2d 656. Petitioner does not question the rule thus stated, but contends that it only applies to the matters necessarily determined by the approval of the account and not to those which might have been determined, since the proceeding in probate was a proceeding in rem, and he calls our attention to the case of Miller v. Kearnes, 45 Ariz. 548, 46 P.2d 638, 640. In that case we said:

"It is the rule that a judgment is res adjudicata not only as to the matters which were litigated, but as to those which might have been litigated therein. 34 C.J. 856 and notes. This, however, only applies when the party against whom the judgment runs was served personally or appeared therein. If he was not, only a judgment in rem would be valid as against him, and that only as to the issues necessarily litigated, and not as to those which might have been litigated had he appeared."

He insisted that the orders determine nothing but the fact that the items claimed as credits to the executors are allowed as such, and that they in no manner decide that the conduct of the executors in the handling of the various items was not waste or mismanagement such as would justify the probate court in removing the executors. We reaffirm the rule of law as stated in Miller v. Kearnes supra, but we think it is not applicable to the present situation. The argument of petitioner at first blush, it is true, is a plausible one, for it might appear it would be inequitable to bar those interested in an estate from showing previous waste and mismanagement solely for the...