Smith's Estate, In re

• Decision Date: 29 July 1955
• Docket Number: 9491,Nos. 9490,s. 9490
• Citation: 71 N.W.2d 577,76 S.D. 11
• Parties: ESTATE of Homer W. SMITH, Deceased. Tom COSTELLO, Appellant, v. Robert C. SMITH and Marguerite C. Smith, Respondents.
• Court: South Dakota Supreme Court

Page 577

71 N.W.2d 577

76 S.D. 11

ESTATE of Homer W. SMITH, Deceased.

Tom COSTELLO, Appellant, v. Robert C. SMITH and Marguerite C. Smith, Respondents.

Nos. 9490, 9491.

Supreme Court of South Dakota.

July 29, 1955.

Stordahl, May & Boe, R. G. May, Sioux Falls, for plaintiff and appellant.

Chester H. Smith, Tucson, Ariz., Louis H. Smith, Woods, Fuller, Shultz & Smith, and H. L. Fuller, Sioux Falls, for defendants and respondents.

BAKEWELL, Circuit Judge.

Appellant, a claimed creditor of Homer W. Smith, deceased, appeals from orders of the Circuit Court of Moody County dismissing his appeals to that court from orders of the county court, vacating Letters of Special Administration of said estate and denying his Petition for Letters of Administration with the Will Annexed therein.

Homer W. Smith died testate on March 29, 1952. By the terms of his will, his wife Marguerite was the sole beneficiary. A son, Robert C. Smith, was appointed Administrator with the Will Annexed and Letters of Administration were issued to him on April 28, 1952. Without estimation of its value, the Petition for Letters of Administration refers to 400 acres of land in Moody County, 80 acres of land in Rock County, Minnesota, and 160 acres in Lyman County, South Dakota, as being property of the estate. The Inventory and Appraisement filed on June 2, 1952 makes no mention of the Lyman County land or the Minnesota land, but appraises the 400-acre Moody County farm at $40,000 less a mortgage of $13,500 and taxes in the amount of $500. Other property listed and appraised brought the grand total of the estate to $54,419.39 less indebtedness.

An Inheritance Tax Report and Inventory filed on September 11, 1952 assigned to the Rock County, Minnesota land the value of $8,000, but failed to list any Lyman County land, and reported the 400-acre farm as being of no value because subject to a mortgage in the approximate amount of $13,000 and government liens and past due taxes of about $550. The report stated that 'the mortgage has been foreclosed since administration'. This appears to be a fact as a foreclosure of the mortgage had culminated in a sheriff's sale of the farm to the Travelers Insurance Company, the mortgagee, five days previously upon its bid of $12,994.86. On October 15, 1952, Louis H. Smith, attorney for the estate, purchased the Sheriff's Certificate of Sale from the insurance company for $13,618.67 and filed for record his assignment thereof. It seems proper here to note that on the death of Homer W. Smith the mortgage was not in default, but was permitted to become in default during probate notwithstanding the reported income from the mortgaged property in 1952 amounted to $3,751.10.

A Final Report and Account with Petition for Distribution was filed in the county court on December 24, 1952, and on that date Order and Notice of Hearing on the Account, Report and Petition was issued out of the county court fixing January 5th as the time for hearing thereof. This report shows a balance of $1,747.30 in the hands of the administrator. The petition represents that certain hospital, nursing, doctor and funeral bills totaling $1,271.30 are preferred claims and are unpaid and that at the time of the closing of the estate there will be $900 due for family allowance. The Report and Petition further alleges:

'* * * so that the balance above set out, as your petitioner believes, should be used in payment of the preferred claims and family allowance together with the costs and expenses of administration. That there have been common claims filed with your petitioner, but for which there is no money to pay the same.'

and further recites:

'That as appears from the Inventory on file herein, there was real estate belonging to said estate located in Moody County, South Dakota, which was subject to mortgage, which mortgage has been foreclosed, so that said property is no longer an asset of said estate, which real estate, in the opinion of your petitioner, could not be sold for more than the amount of the secured indebtedness against the same, and that there is no other property owned by said deceased to be disposed of or distributed herein. That as appears from the Inventory herein there was other personal property, all of which has been sold and such sale approved by Order of this Court, and the proceeds thereof paid to the holders of mortgages against the same or set aside to the widow under order entered herein exempting said property.'

The petition concludes with a prayer for the approval, settlement and allowance of the final account and for the distribution of the cash balance to the preferred creditors named therein and further prays that after such payments and payment of the expenses of administration, any amount remaining be distributed according to the terms of the will. Proof of posting and mailing as required by statute was duly filed, and on February 19, 1953 to which date the hearing had been regularly adjourned, a final decree was made and entered. This decree finds that Notice to Creditors has been given as provided by law and that the time for filing claims has expired; that a true inventory and appraisement of the property of the estate has been filed; that an Inheritance Tax Report and Inventory has been filed and an order entered exempting the estate from payment of any inheritance tax; that certain common claims have been filed but not paid; that preferred claims to the amount of $1,271.30 have been settled for $1,170.30; that there remains in the hands of the administrator a cash balance of $577 which should be paid to the Director of Internal Revenue on the claim of the U. S. Government for social security withholdings and other taxes resulting from the business operations of decedent all of which the court adjudged to have priority over the common claims of creditors; the court further found that administrator's and attorney's fees have been waived and that 'there is therefore no additional amount to be paid to any of the common creditors or with which to make distribution herein, and said estate is in condition to be closed.' The decree then adjudges that the Final Account and Report 'be, and the same hereby is in all things approved, allowed and settled, and said administrator be allowed credit for all items of expense and disbursements as shown by said report and by him so paid out. * * * That the balance of Five Hundred Seventy-seven Dollars ($577.00) be paid to the Director of Internal Revenue on social security and withholding tax claim against said deceased. * * * that * * * the administrator * * * and * * * surety, be released from further liability * * * there being no further funds with which to pay any of the common claims filed herein or to make any distribution herein.'

On the same date, the Administrator with the Will Annexed was discharged. No appeal was taken from this order and decree but more than six months thereafter and on August 24, 1953, the appellant, Tom Costello, claiming to be a creditor, both common and preferred of the Homer W. Smith estate, petitioned the county court for his appointment as a special administrator of such estate and was on that date so appointed. His petition alleged that the estate had a valuable equity of redemption from the foreclosure of the mortgage on the Moody County farm and that the redemption period would expire on September 6, 1953. Immediately following his appointment, appellant as such special administrator, by payment of $2,362.34 to the Sheriff of Moody County procured a Certificate of Extension of the Redemption Period for an additional two years from and after September 6, 1953. On August 31, 1953, appellant filed a petition for Letters of Administration with the Will Annexed which alleged that deceased left an estate in the Counties of Moody, Minnehaha and Lyman, and in Rock County, Minnesota, and which further stated:

'that all property left by said deceased has been probated and disposed of in prior court proceedings, * * * except for 400 acres of farm land in Moody County, South Dakota, the value of which is in excess of $30,000.00 and was reported by a former administrator as being worth $40,000.00'

On September 9, 1953, Marguerite C. Smith, widow and sole legatee and devisee of Homer W. Smith appeared specially in the county court and objected to the appointment of appellant as Special Administrator and moved the court to vacate his appointment as such. Objections were also filed by the said Marguerite C. Smith and by Robert C. Smith, the former Administrator with the Will Annexed, to the issuance of Letters of Administration with the Will Annexed to appellant Costello. On November 14, 1953, the county court vacated and cancelled the Letters of Special Administration theretofore issued to appellant and denied his application for general Letters of Administration with the Will Annexed.

Separate appeals were taken to the circuit court from such orders by appellant Costello and by other creditors. By separate orders, the circuit court affirmed the decision of the county court and dismissed the appeals.

As is disclosed by his Petition for Letters of Administration, appellant predicates his right to letters on the grounds; first, that the 400-acre farm was not administered upon in the original probate; second, that Robert C. Smith, the former administrator, was lacking in integrity and failed to faithfully discharge his duties to the court and to the persons interested in the estate in that he permitted the property to go to foreclosure for an amount less than its value, and failed to redeem same, and in connivance with others mis-managed the affairs of the estate and made it appear to be an insolvent estate when it was in fact solvent, and that he fraudulently closed the estate and falsely reported to the court that there were insufficient assets to pay the creditors.

The petition alleges that letters should again be issued to the end...