Mahon v. Harney County Nat. Bank of Burns

• Decision Date: 13 June 1922
• Parties: MAHON v. HARNEY COUNTY NAT. BANK OF BURNS.
• Court: Oregon Supreme Court

206 P. 224

104 Or. 323

MAHON v. HARNEY COUNTY NAT. BANK OF BURNS.

Supreme Court of Oregon

June 13, 1922

In Banc.

Appeal from Circuit Court, Malheur County; Dalton Biggs, Judge.

Action by Ira J. Mahon, as executor, against the Harney County National Bank of Burns, Or. Judgment for defendant, and plaintiff appeals. Reversed.

This is an action at law, prosecuted by the plaintiff as executor of the estate of James F. Mahon, against the Harney County National Bank of Burns, Or. The plaintiff sues to recover $2,127.07 deposited with the defendant bank by him as executor, and the further sum of $1,500 damages.

On June 16, 1917, the Harney County National Bank loaned to Ira Mahon the sum of $2,000. As evidence of such indebtedness, a joint and several promissory note was executed and delivered to the defendant bank by Ira Mahon and his father, James F. Mahon. On December 18, 1917, they executed and delivered to the bank a renewal note, and on February 6, 1918, a second renewal note was made by them to the bank. In May thereafter James F Mahon died, and Ira J. Mahon was appointed executor of his estate.

From the testimony of the cashier of the bank, it appears that on August 10, 1918, the second renewal note was returned to Ira J. Mahon, executor, and was replaced by a note signed by him as executor of the estate. It was also stated by the witness that on November 9, 1918, this note was replaced by a note due three months from date, similarly executed and delivered which is designated in the record as "Plaintiff's Exhibit 3"; that on the 15th day of February, 1919, Ira Mahon individually executed his promissory note for $2,000 which was held as collateral for the note marked "Plaintiff's Exhibit 3"; and that this note was renewed on January 19, 1920, by another note executed by Mahon for the same purpose.

The complaint avers, among other things, that on November 4 1920, the plaintiff, as executor of the estate of James F. Mahon, deceased, deposited in the defendant bank $5,003.92; that of such sum the defendant paid out on plaintiff's orders $2,876.85, leaving a balance of $2,127.07; that on the 4th day of november, 1920, defendant, without plaintiff's knowledge, and without authority from plaintiff so to do, took from the sum so deposited the remaining $2,127.07, and has refused to return such sum to the account of the estate. The answer sets forth:

"That the said executor, plaintiff herein, had been and now is conducting and managing the said estate as a going concern, and for the purpose of so operating, conducting, and managing the said estate the said plaintiff was borrowing said money as said executor, upon the credit of the said estate, and giving and executing promissory notes of said estate in evidence thereof, and as funds were received by him in operating, conducting and managing the said estate the same were applied in payment of the expenses thereof and paying off and taking up the notes heretofore mentioned.

"That the plaintiff, as such executor, made, executed, and delivered to the defendant herein, a number of notes upon the credit of the said estate prior thereto, and on the 4th day of November, 1920, the defendant held and owned one certain promissory note, dated November 9, 1918, which had been executed by the said plaintiff individually and as executor of the said estate of James F. Mahon, deceased, for the sum of $2,000, which said notes as to the principal and interest had not been paid, or any part thereof, and there was then due and owing upon said note as principal and interest, to the defendant on the said 4th day of November, 1920, the sum of $2,127.07, and that the said defendant, on said date, in the general course of business, paid and canceled the said note out of the funds so deposited by the said plaintiff, and on the said 4th day of November, 1920, delivered to the said plaintiff, as executor of the said estate, the said note canceled and paid as hereinbefore stated; and that said note was taken and there charged to the account of the executor of the said estate of the said James F. Mahon, deceased."

The answer further alleges that plaintiff received the canceled note and retained possession thereof without objection until a short time prior to the commencement of this action, and has never offered to return the same. The plaintiff replied by denying "each and every allegation contained in the affirmative answer of the defendant."

Trial by jury was had, and a verdict returned in favor of the defendant. On October 10, 1921, plaintiff moved the court for its order "to set aside the judgment and verdict of the jury rendered on the 8th day of October, 1921, and for its further order entering judgment for the plaintiff in the sum of $2,127.07," with interest, and for costs, upon the grounds:

"(1) That the verdict of the jury is contrary to law.

"(2) That the answer filed in said cause does not state any fact or facts which would constitute a defense to the matters set forth in plaintiff's complaint."

The motion was overruled. Judgment was awarded to defendant and against plaintiff. The plaintiff appeals, assigning error of the court in receiving and rejecting certain testimony, by its instructions to the jury, and in refusing to permit plaintiff to amend his complaint.

P. J. Gallagher, of Ontario (W. H. Brooke, of Ontario, on the brief), for appellant.

Wallace McCamant, of Portland (Biggs & Biggs, of Prineville, and McCamant & Thompson, of Portland, on the brief), for respondent.

BROWN, J. (after stating the facts as above).

Under the testimony adduced upon the trial of this cause, Ira Mahon and James F. Mahon, on June 16, 1917, made their joint and several promissory note in the sum of $2,000, to the Harney County National Bank of Burns, defendant herein. During the lifetime of James F. Mahon this note was twice renewed. After the death of James F. Mahon and the appointment of Ira Mahon, his son, as executor, a new note was made in favor of the bank, and signed: "Ira Mahon. Mahon Estate, by Ira Mahon." The record fails to disclose what authority, pretended or otherwise, the executor had to make this note. Eighteen months after the death of James F. Mahon, his executor deposited $5,000 in the Harney County National Bank to the credit of the estate. The bank on its own initiative applied $2,127.07 of this deposit to the payment of the indebtedness due it from the Mahon estate. The effect is to make the bank a preferred creditor. Was the procedure upon the part of the bank lawful? This is the question for determination.

The title of the personal property of the estate of James F. Mahon, deceased testate, vests in Ira Mahon, his personal representative, until the administration is settled. The title of the executor is exclusive. However, he has no beneficial interest in the personal property, but possesses it for the purpose of administration, and after the payment of the debts of the estate he is a mere trustee for those beneficially interested. He likewise is entitled to possession and control of the real property, and is authorized to receive the rents and profits thereof during the administration, or until the same is surrendered to the heirs or devisees by order of the court or judge thereof. Section 1185, Or. L.; State v. O'Day, 41 Or. 495, 69 P. 542; Thorsen v. Hooper, 57 Or. 75, 109 P. 388; Hillman v. Young, 64 Or 73, 127 P. 793, 129 P. 124; Murphy Tillson, 64 Or. 558, 130 P. 637; Hadley v. Hadley, 73 Or. 179, 144 P. 80; 24 C.J. 201.

In Thorsen v. Hooper, supra, this court said:

"The right which the law confers upon an administrator to take and hold the possession of the goods and chattels of a decedent's estate is in the nature of a trust. Schouler's Ex. & Adm'rs, § 242, 11 Cur. Law, 1307; Casto v. Murray, 47 Or. 57 (81 P. 388, 883); In re Roach's Estate, 50 Or. 179 (92 P. 118)."

In Casto v. Murray, supra, 47 Or. 57, 81 P. 883, it was written:

"Upon the death of any person intestate in this state, possessed of tangible goods and effects, such property passes by operation of law to his personal representative, who is entitled to the possession thereof until the administration is completed (B. & C. Comp. § 1147), and from whom only the title thereto can be derived in pursuance of orders made by the county court of the proper county in due course of administration ( Winkle v. Winkle, 8 Or. 193; Weider v. Osborn, 20 Or. 307, 25 P. 715; In re John's Will, 30 Or. 494, 47 P. 351, 50 P. 226, 36 L. R. A. 242: State v. O'Day, 41 Or. 495, 69 P. 542)."

The county court is vested by statute with exclusive jurisdiction over probate matters, and is empowered to direct and control the conduct and settle the accounts of executors, and to direct the payment of debts. Section 936, Or. L.

Section 1238 of our Code provides for giving notice to all persons having claims against the estate. Section 1240 relates to the presentation and verification of claims. Section 1282 provides for the filing of accounts by executors and administrators. This account must show the amount of money received and expended by him, from whom received, and to whom paid, the amount of the claims presented, the names of the claimants, and other matter necessary to show the condition of the affairs of such estate. Section 1284 provides for an order for payment of the expenses, charges, and claims. Chapter 9 of title 16, Or. L., relates to the payment of claims and charges. Section 1295 thereof provides for the order of payment as follows:

"1. Funeral charges;

"2. Taxes of whatever nature due the United States;

"3. Expenses of last sickness;

"4. Taxes of whatever nature due the state, or any county or other public corporation therein "5. Debts preferred by the laws of the United States;

"6. Debts

...