Swanberg v. National Surety Co.

• Decision Date: 07 January 1930
• Docket Number: 6519.
• Citation: 283 P. 761,86 Mont. 340
• Parties: SWANBERG v. NATIONAL SURETY CO. et al.
• Court: Montana Supreme Court

283 P. 761

86 Mont. 340

SWANBERG v. NATIONAL SURETY CO. et al.

No. 6519.

Supreme Court of Montana

January 7, 1930

Appeal from District Court, Cascade County; H. H. Ewing, Judge.

Action by A. V. Swanberg, as administrator of the estate of Maude Hedrick, deceased, against the National Surety Company and another.Judgment for plaintiff, and defendant named appeals.Affirmed.

Stewart & Brown, of Helena, for appellant.

H Norskog, of Great Falls, for respondent.

MATTHEWS J.

This is an appeal by the National Surety Company from a judgment in favor of the plaintiff, A. V. Swanberg, as administrator of the estate of Maude Hedrick, deceased, for the full amount of the general bond of a former administrator of the same estate, with interest and costs, entered upon a finding that the original administrator had converted and lost to the estate the real and personal property entrusted to his care.

The record is wholly documentary; it consists of the files in the estate matter and judgment rolls in certain pertinent actions.From this record the following facts appear:

On November 8, 1916, Maude Hedrick and Henry C. Hedrick, her husband, mortgaged the Maude Hedrick ranch to the Wells-Dickey Company, to secure the payment of a note for $2,300 payable December 1, 1921.Maude Hedrick died intestate January 13, 1919, leaving an estate consisting of the mortgaged ranch, with live stock and farm machinery thereon and leaving surviving her, in addition to her husband, two minor children, the issue of a former marriage and one the issue of her marriage to Hedrick.

Henry C. Hedrick was appointed administrator of his wife's estate and, on qualifying, furnished a bond in the penal sum of $4,000 on which the National Surety Company was surety.The property was duly inventoried and the real estate was appraised at $12,468.30 and the personal property at $1,760.Thereafter the administrator petitioned for an order of sale of both the personal and real property, showing to the court that the debts of the estate and cost of administration including "mortgage on real estate $2,300," exceeded $4,000, while the personal property in his hands then had a value of but $815.On this showing the order was made May 13, 1920, and therein the administrator was required to file an additional bond of $15,000 before making sale.According to the testimony of an attorney then acting for the estate, nothing was done under the order of sale, as the administrator was unable to secure the additional bond.However, it appears that some time prior to May 7, 1921, the administrator changed attorneys, and, on the date last mentioned, he entered into a contract for the sale of the real and personal property of the estate to Joseph and Anna McClintock for the agreed price of $14,020, the consideration to be evidenced by a mortgage for $8,000 on the ranch, a mortgage for $4,000 on city property owned by the McClintocks, and the balance "to be paid" by assignment of a lease on the Belmont Hotel, in Great Falls, and transfer of title to the furnishings and fixtures of the hotel, subject to a chattel mortgage for $3,000; it being agreed that, as the existing mortgage on the ranch had not matured, the amount due thereon should be deducted from the $8,000 mortgage note to be given, in the event the administrator did not satisfy that mortgage when the amount became due.

This agreement provided that "possession" of the ranch, with the personal property thereon, should be delivered to the contractees as soon as they delivered possession of the hotel, but it was understood and agreed that an order of court confirming the sale, when made, would be necessary in order to pass title to the ranch.On May 10, 1921, the administrator wrote the McClintocks, on stationery of his then attorney, authorizing them to take possession of the ranch and advising them that "as soon as possible I will arrange to obtain orders of court permitting sale to you and confirming said sale in accordance with said contract."

No order of sale was thereafter obtained and, while the McClintocks evidently took and remained in possession of the ranch property and Hedrick of the hotel, it does not appear that the mortgages mentioned in the contract were ever executed.

On October 13, 1923, an assignee of the Wells-Dickey Company instituted foreclosure proceedings on the Maude Hedrick ranch and therein secured judgment against Hedrick, individually and as administrator of his wife's estate, for $4,212.25 and decree of foreclosure under which the property was sold to the plaintiff.No redemption being had, sheriff's deed followed.The McClintock chattel mortgage on the hotel fixtures was also foreclosed and title passed to the purchaser at foreclosure sale.

In 1924 Hedrick rendered his first account in the estate matter, in which he showed receipts in 1919 from sale of cattle amounting to $1,042.72 and from sale of cream $452.50, and disbursements amounting to $1,409.14, leaving a balance cash on hand of $86.08.Therein no mention is made of his transactions with the McClintocks in 1921, nor is there any explanation of the absence of receipts from estate property after 1919.The account was approved and settled.

In June, 1926, Earl McLeish, one of the heirs, then 22 years of age, petitioned for an order requiring the administrator to account, and, in response to a citation issued, Hedrick filed a purported final account and petition for distribution, in which he sets out the balance of cash on hand as shown in his first account, and then recites "following personal property sold as per contract hereto annexed,"(the McClintock contract), being horses valued at $715 and farm machinery valued at $100.He then described the real estate, followed by the statement that it was mortgaged for $2,300, due December 1, 1921, which mortgage was foreclosed in 1924; reference being made to the judgment roll in that proceeding.The report then recites that the administrator "received as a consideration for said sale of the above described personal and real property, the furniture, fittings and equipment of the Hotel Belmont * * * upon which there was a mortgage of $3,000; that said mortgagee subsequently foreclosed the mortgage * * * and said Hedrick saved nothing as a result of said sale."He reported certain debts outstanding, principally for attorney's fees, and no property in his hands.

McLeish filed objections to this report, and a hearing was had, which resulted in the court's finding that Hedrick had "converted and lost" to the estate both the real estate and personal property, the former being of a value of $12,486.30 and the latter of a value of $815, but that the administrator was entitled to credit for $500 attorney's fees, $2.50 filing fees, and the principal sum of the mortgage note for $2,300.The report was rejected, and the court declared that there was a balance due from Hedrick to the estate of $10,536.26.Thereafter, on petition of McLeish, Hedrick was removed and this plaintiff appointed as administrator of the estate.

This action was then brought to recover the amount found due the estate, from Hedrick and the surety on his general administrator's bond; it resulted in judgment against the surety company for the full amount of its obligation, $4,000, with interest in the sum of $628.44, and the costs of suit.

The defendantNational Surety Company, through counsel, having nothing to do with the probate proceeding, has appealed from the judgment, asserting that it is willing to submit to judgment for the value of the personal property, less the deductions allowed by the court on the hearing on the administrator's report, which would be but $367.96, but contending that it is in no wise liable for the loss of title to real estate, and therefore the judgment for the full amount of the penalty in the bond, with interest, is erroneous.The position taken is based upon the assertion that the record in the probate proceeding, on which the order surcharging the administrator was made, shows that the property was not lost, converted, or wasted by reason of his dealing with the McClintocks, but was, in fact, wiped out by the foreclosure proceedings instituted by the mortgagee.Counsel for the surety company contend that the sole question presented is: "Can the qualifying bond of an administrator be held for the value of real property which was sold under foreclosure proceedings?"

Counsel for plaintiff challenges this statement, contending that the property was lost, converted, and wasted prior to the commencement of that action, and asserting that two questions are presented: (1) As to whether or not the bond is liable for the loss of the real estate in the manner stated and for the proceeds "received by the administrator for the embezzlement," and (2)"is the judgment, or order in the probate proceedings, finding the amount due the estate from the administrator, conclusive upon the surety company?"

1.We will first dispose of the question as to the effect of the order surcharging the administrator's account.

A careful consideration of the authorities discloses that except for the decisions in certain of the Southern States holding that a surety is not in privity with his principal on such a bond (Lucas v. Guy, 2 Bailey [S. C.] 403;Bryant v. Owen,1 Ga. 355;Lipscomb v. Postell,38 Miss. 476, 77 Am. Dec. 651), and the few cases holding that such a judgment or order is but prima facie evidence against the surety, doubtless based upon particular statutes(Means v. Hicks,65 Ala. 241;Gillespie v. Riggs, 253 F. 943, 165 C. C. A. 385, Id.[D. C.]248 F. 843), it is universally held that administration bonds form an exception to the general rule that sureties are not concluded by judgment against their...