Sherman v. El Paso Nat. Bank, 3456.

• Decision Date: 17 December 1936
• Docket Number: No. 3456.,3456.
• Citation: 100 S.W.2d 402
• Parties: SHERMAN v. EL PASO NAT. BANK et al.
• Court: Texas Court of Appeals

100 S.W.2d 402

SHERMAN v.EL PASO NAT. BANK et al.

No. 3456.

Court of Civil Appeals of Texas. El Paso.

December 17, 1936.

Rehearing Denied January 7, 1937.

Appeal from District Court, El Paso County; P. R. Price, Judge.

Suit by the El Paso National Bank against Charles E. Leavell, administrator de bonis non of the estate of John Mulligan, Sr., deceased, and others.On the death of Charles E. Leavell, Ray E. Sherman succeeded as administrator.From the judgment, the administrator appeals, and the plaintiff presents cross-assignments of error.

Affirmed.

Gowan Jones, of El Paso, for appellant.

Jones, Hardie, Grambling & Howell, of El Paso, for appellees.

This is a suit by the El Paso National Bank, filed February 21, 1935, against Charles E. Leavell, administrator, de bonis non, of the estate of John Mulligan, Sr., deceased, Norma Mulligan, the surviving wife of the deceased, and the surviving children and heirs at law of the deceased, John Mulligan, Jr., Edward, Samuel, and Dorothy Mulligan, and others not necessary to mention.

On trial without a jury, the court, on February 26, 1936, rendered judgment in favor of the bank, decreeing the bank had a valid fourth-class claim against the said estate and administrator in the sum of $50,854.68, with interest at the rate of 6 per cent. per annum from February 1, 1936, and ordering the same be allowed and approved as a fourth-class claim to be paid in due course of administration after the claim of the Maricopa Fuel & Feed Company had been paid in full; denying a recovery by plaintiff against Norma Mulligan and John Mulligan, Jr., personally, upon the notes hereinafter described and decreeing the plaintiff have no foreclosure of lien against any of the defendants.The lien referred to is a deed of trust upon certain real estate in the city of El Paso known as the Mulligan warehouse property.

It was further ordered that plaintiff's suit against the Mulligans and Gowan Jones for adjudication of title to said warehouse property, and for removal of cloud on the title thereto, be dismissed without prejudice.

Other features of the judgment are unimportant in this appeal and need not be stated.

From this judgment the administrator alone appealed.Leavell later died and was succeeded as administrator by Ray E. Sherman.

The material facts out of which this litigation arose are as follows:

John Mulligan, Sr., died intestate, April 24, 1930.On July 8, 1930, John Mulligan, Jr., his son, and Norma Mulligan, his surviving wife, were appointed administrators of his estate.In 1934 Norma and John Mulligan resigned; their resignations were accepted and Leavell appointed.The appraised value of the estate amounted to about $205,000.The debts of the estate amounted to about $60,000.Of this latter amount $22,700 was represented by two past-due notes of the deceased in favor of the El Paso National Bank; $3,436 by notes in favor of First National Bank of El Paso, maturing in about 30 days, and $25,000 by notes in favor of the First Mortgage Company of El Paso, Tex., maturing December 9, 1930.The Mortgage Company was threatening to declare its notes due on account of default in payment of interest, but was willing to extend the notes upon the payment of $10,000 on the principal.The administrators and heirs of the deceased requested the plaintiff to lend the estate funds with which to pay most of the past-due obligations of the estate for the purpose of preventing the accrual of attorney's fees on the notes.The administrators accordingly borrowed $45,000 from the bank upon notes signed by the administrators and secured by deed of trust on the Mulligan warehouse property.The loan was negotiated at the request and with the approval of all of the heirs.To evidence the loan, the administrators in their representative capacity executed notes in the principal sum of $45,000.The deed of trust was executed by the administrators in their representative capacities.The surviving wife and all of the children in their personal capacities also joined in the execution of the deed of trust.The notes and deed of trust are dated August 4, 1930.Prior to borrowing the money and the execution of the notes and deed of trust, the administrators filed their petition in the probate court seeking authority so to do.The first application set forth the necessity for raising $40,000 by loan in order to prevent acceleration of maturity of notes owing by the estate and the accrual of attorney's fees; that it was impossible to sell any of the property in time to pay the notes before attorney's fees accrued, also that penalties would accrue on taxes assessed against the properties of the estate.

August 1, 1930, the probate court entered an order authorizing and directing the administrators to borrow $40,000 as requested in the petition, to be secured by deed of trust on the warehouse property and authorizing the execution of the notes and deed of trust lien.

On August 4, 1930, the administrators filed a petition in the probate court for authority to increase the loan and lien to $45,000, setting forth the necessity for such increase.On the same date the probate court entered an order granting such petition and directing and authorizing the administrators to make said loan and execute notes for said $45,000, secured by lien on the real estate above mentioned.Said notes and lien were excuted by the administrators dated August 4, 1930, as heretofore stated.

On August 6, 1930, the proceeds of the loan were deposited to the credit of the administrators in the El Paso National Bank.At the same time a check was drawn by the administrators in favor of said bank for $22,789.66, to pay the claim of the bank on the two notes of John Mulligan heretofore mentioned, the principal and the interest of which amounted to $20,424.40, and the balance represented by money advanced by the bank to pay funeral expenses and other debts of the estate.A claim for this sum of $22,789.66 had been duly presented to the administrators and allowed by them on August 6, 1930, and approved by the probate courtSeptember 30, 1930, as a fourth-class claim.

On August 7, 1930, a check for $32.50 payable to the Abstract Company for bringing down abstract on Mulligan property was paid.

On August 8, 1930, the following checks were paid out of said account: $100 for bank's attorneys in connection with loan; $1,340 commission to bank for making loan; $42.90 to a building and loan company to cover payment on loan covering property belonging to the estate; $160 for premiums on administrators' bond; $10,120.88 on notes held by First Mortgage Company; $2768 on notes held by First National Bank.

On August 9, 1930, there was a withdrawal of $250 to cover the attorney's fee of Tom Lea for representing the estate.

The claim of the First Mortgage Company of El Paso, Tex., for the above $10,120.88 was allowed by the administrators August 7, 1930, and approved by the courtSeptember 30, 1930.

The claim of the First National Bank of El Paso, Tex., for the above $2,768 is shown as allowed by administrators August 7, 1930, and approved by the courtSeptember 30, 1930.

All of the deposits in, and withdrawals from, the above bank account were listed in the final account of Norma Mulligan, and approved by the probate court.

The annual report of John Mulligan, Jr., and the order accepting his resignation and stating his account are to the same effect.

In these reports, the proceeds of the notes aggregating $45,000 in principal amount were treated as funds of the estate, to be accounted for by the administrators, and the notes and deed of trust were treated and recognized as valid obligations of the estate.In these orders of the probate court, the same position was taken and confirmed.

The administrators paid the semiannual interest on the $45,000 up to August 5, 1931.The administrators defaulted in the payment of the state and county taxes for 1931, and they were paid by the bank on February 5, 1932, by cashier's check in the amount of $1,239.The administrators defaulted in the payment of the city taxes for 1931, and they were paid by the bank on May 20, 1932, by cashier's check in the amount of $2,556.08.They defaulted on county and state taxes for 1932, which were paid by the bank January 30, 1933, in the amount of $1,064.They defaulted on city taxes for 1932, which were paid by the bank February 28, 1933, in the amount of $2,243.93.They defaulted on county and state 1933 taxes, which were paid by the bank January 30, 1934, in the amount of $1,239.The deed of trust provides that if default should be made in the payment of taxes, the holder of the notes should have the right to pay the taxes and be reimbursed by the signers of the deed of trust, and that if default should be made in paying the principal or interest on the notes, any holder of any of the notes should have the right to collect and receive the rents from the Mulligan warehouse property, covered by the deed of trust lien.

Because of defaults in the payment of interest and taxes the El Paso National Bank, with the consent of the administrators, began the collection of the rents on the warehouse property on August 25, 1932.

The probate court had theretofore joined with the administrators in allowing and approving a claim by the bank on the first four $1,000 notes, interest, and attorney's fees, and for $1,239 paid by the bank as taxes on the Mulligan warehouse property.Said claim was approved and allowed as a secured claim on May 5, 1932.

Upon application of the bank, the probate court, on November 28, 1933, entered an order authorizing the bank to take possession of the Mulligan warehouse property, attend to the renting of it, and apply the proceeds to the payment of taxes, insurance, necessary repairs and then to apply any balance on the claim of the bank which had theretofore been allowed, and to apply any balance on the other notes of the series aggregating...