Merritt's Estate, In re

• Decision Date: 12 June 1950
• Citation: 98 Cal.App.2d 70,219 P.2d 40
• Court: California Court of Appeals Court of Appeals
• Parties: In re MERRITT'S ESTATE. PACIFIC STATES CORPORATION v. MERRITT. Civ. 14369.

Page 40

219 P.2d 40

98 Cal.App.2d 70

In re MERRITT'S ESTATE PACIFIC STATES CORPORATION v. MERRITT.

Civ. 14369.

District Court of Appeal, First District, Division 1, California.

June 12, 1950.

Derthick & Cusack, Los Angeles, attorneys for appellant.

Young, Hudson & Rabinowitz, San Francisco, attorneys for respondent.

PETERS, Presiding Justice.

This is an appeal by the Pacific States Corporation, principal creditor of the Estate of H. C. Merritt, Jr., from the decree settling the final account of the executrix, and from that portion of the decree awarding compensation to the executrix and her attorney for extraordinary services.

The estate is insolvent. On distribution it developed that the approved claims of the general creditors against the estate totaled $1,070,044.79. The sole remaining asset of the estate, after paying all preferred creditors and the expenses of administration, was $14,253.20. After a contested hearing, the probate judge found that this sum was too small to compensate the executrix and her attorney for their extraordinary services to the estate, but held that since that sum was the only money available it should be divided equally between the executrix and her attorney, awarding each $7,126.60. The sole point raised by appellant is that to award all of the assets of the insolvent estate to the executrix and her attorney, for extraordinary services, was, under the circumstances, so unreasonable as to constitute an abuse of discretion as a matter of law.

The facts are as follows: Helen Merritt is the surviving wife of H. C. Merritt, Jr. The Pacific States Corporation, the appellant, is largely owned by H. C. Merritt, Sr. Helen was appointed executrix of her husband's estate on August 21, 1945, and served continuously until finally discharged in April of 1949, a period of three years and eight months. Francis W. Murphy, all during the administration of the estate, was the attorney for the executrix. The affairs of the estate were in a badly muddled condition, and the estate was clearly insolvent. After the preferred creditors were paid, there were unpaid and approved general creditors' claims totaling $1,070,044.79, of which amount $1,002,784.36 represents the unpaid claims of appellant. At the time of hearing the final account the sole asset of the estate was $14,253.20 in cash. During the administration of the estate, the executrix, as widow, was allowed a family allowance, receiving a total of $25,500. The statutory compensation allowed her amounted to $2,253.51. Her attorney received an equal sum.

The hearing on the final account was heard on the entire records of the estate and on the final account and report of the executrix. The final account is 50 pages in length, and the report is 64 pages long. The nature of the various services rendered are there set forth in detail. It is unnecessary to do any more than briefly summarize these services.

During the course of administration three separate sales of real property were made, in which notices of sale were prepared and published, returns of sale made, and confirmations, after notices and hearings, sought and secured from the probate court. Four pieces of automotive equipment were separately sold in which notices of sale were given, bids called for, returns of sale made, and, after notices and hearings, confirmations sought and secured. In similar fashion some personal property located in Madera County, and some other personal property coming into the estate by virtue of a claim against one Felix Smith, was sold. One hundred shares of stock of the Cuban Atlantic Sugar Company were sold, after filing a petition and receiving authority of the court to sell. Some livestock totaling 1451 head were sold in 35 different sales, and there were 33 separate sales of other personal property connected with the ranch. The estate realized $76,000 from these sales, which was $20,000 more than the appraised values of the properties.

The report also sets forth that the executrix and her attorney had more than 500 conferences in regard to settling the estate, and that the number of hours spent were beyond calculation. The executrix spent 63 days in trips away from her home in administering the estate.

In addition to the services to which reference has already been made, the executrix and her attorney were involved in considerable litigation on behalf of the estate. Appellant attacks the wisdom of this litigation and contends that the results secured were negligible. For purposes of clarity these various actions will be separately numbered.

Action number 1 was by appellant corporation against respondent as executrix, and was filed in San Francisco. This action grew out of the fact that when Merritt, Jr., died, various head of livestock were pastured on lands of appellant, who had a claim for $14,263.87 against the estate for feed, pasturage, and care of these animals. The executrix was in doubt whether she or the estate had title to this livestock and many months were required to investigate the facts and to determine ownership. During this period of discussion many of the animals were sold, with the consent of appellant, and the moneys received placed in a separate account, which appellant finally attached. The complaint was in two counts, one based on the agister's lien with interest, totaling $15,137.57, and in the other appellant claimed title to all of the livestock on the theory that they had been purchased with appellant's funds. The executrix finally determined that the livestock had been the property of her husband, that she had no personal claim thereto, and that appellant's claim for feed, etc., was meritorious. She finally petitioned the court for permission to compromise this claim, and did compromise it for $12,637.57, which sum was paid to appellant. The appellant argues that this litigation was really to determine whether the respondent individually owned the cattle, and that any services rendered by or to her in this proceeding were for her benefit in her individual capacity. While respondent settled the claim for about $2,500 less than was owed, and thus saved the estate that amount, this was done, according to appellant, by respondent breaking her word to appellant to pay the full amount of the claim. Of course, the compromise did successfully dispose of the claim that appellant owned the cattle.

Action number 2 was also by appellant against respondent, as executrix, and was also filed in San Francisco. This was an action in six counts. Count one was based on promissory notes executed by the deceased in the sum of $1,008,208.02, plus interest for several years. The other five counts were for various sums totaling about $600,000, it being claimed that in five separate transactions the deceased had misappropriated these sums belonging to appellant. Respondent petitioned for approval to compromise this $1,650,000 action for $1,012,784.36. The compromise was allowed and appellant secured a money judgment in that amount. By this compromise, all claims against decedent based on his alleged fraud and deceit were deleted, and the total claim of appellant compromised for over $600,000 less than was claimed by appellant. Appellant has recovered $10,000 in partial satisfaction of this judgment. Appellant contends that, had the claim on the promissory notes been properly investigated prior to its disallowance, it would have been allowed in full. Even as to the claim based on the notes, however, it was compromised for over $50,000 less than claimed. As to the claims based on fraud totaling over $600,000, and not allowed in the compromise, appellant claims that it would never have made these claims had the note claim been allowed. This is all conjecture and surmise. It was for the trial court to determine whether these and the other services were of value to the estate.

Action number 3 was brought by the executrix in San Francisco against appellant to recover from it the value of decedent's services under a contract by which decedent was entitled to receive a percentage of the net profits Pacific States Corporation made on certain farm lands owned by Pacific States. The complaint asked for an accounting and for the agreed compensation. Appellant denied the alleged indebtedness and pleaded the judgment in action numbered 2 as an offset. Because of the death of decedent, proof was difficult to secure, and the action was finally compromised, with the approval of the court by allowing the executrix a $10,000 credit on the judgment in action number 2. Appellant surmises, but offers no proof, that this claim could and should have been settled without litigation.

Action number 4 was filed in San Francisco against the executrix. It appears that decedent had opened an account with the bank under the account name of 'Ranch Managers,' and had deposited therein checks payable to Pacific States Corporation in the total amount of $228,435.52. Decedent thereupon withdrew this money. Pacific States Corporation claimed decedent had no authority to withdraw the money, and filed suit against the bank to recover the total sum. The bank thereupon filed a contingent claim in the estate to protect itself in the event Pacific States Corporation recovered against the bank. The...