Frank v. Wareheim

⁶⁴ Offutt, J., filed a dissenting opinion as follows, in which Bond, C. J., and Shehan, J., concurred: I am unable to agree with so much of the court’s opinion as allows to the executor commissions on the gross amount of debts due by the legatees to the testator. The executor collected no part thereof, but merely made a charge. He, could recover not the full amount of the debt, but only the amount thereof less the legacy. His commissions should have been on the net amount distributable to the legatees, and not on the face value of uncollectible promissory notes.

I concur in the other views stated in the opinion. Parke, J., delivered the opinion of the Court. The record on this appeal is meagre. The questions arise on the administration of the estate of the testatrix, Amelia Snyder, by her executor, Carroll G. Wareheim.

The will is not set forth, but sufficient facts are given to show that, after a conversion of all her real and per ⁴⁸ sonal property, the net proceeds were given in equal shares to her five nieces and nephews, Edwin Frank, Lydia Heindel, Amelia A. Bailey, Cora Heindel, and John Frank. After stating a first account, and making no distribution but retaining the residue in his hands for a further accounting, the executor completed his conversions and collections, and then stated his second and final account, in which he distributed the residue of the estate among the five legatees, who were entitled to equal shares. Cora Heindel, one of the legatees, filed a claim against the estate of the testatrix for personal services rendered her in the sum of $3150. The Orphans’ Court duly approved and passed the account by its ex parte order.

Although the executor believed the estate was justly indebted to the claimant, he considered the amount of the account was excessive. Accordingly, he gave the claimant a written notice that the payment of this claim would be refused. After nine months from the time of the giving of the notice had passed and the claimant had not brought suit to recover her claim, the executor reported to the Orphans’ Court that the claimant had agreed to accept the sum of $1000 in full settlement of her claim. The executor represented to the court that this was a fair and reasonable adjustment of the claim; and that he had no knowledge of any other unpaid debt of the estate.

He further stated that he had ample funds in hand to pay this amount, and prayed the court to pass an order to authorize him to compromise the claim by the payment of the agreed amount. The court authorized and directed the settlement to be so made by the executor, and the money was paid. Edwin Frank and Lydia Heindel, two of the five equal residuary legatees, later moved that the ex parte order of the Orphans’ Court which sanctioned and directed this agreement be set aside and annulled on the ground that the claim was barred by the failure of the claimant to bring an action on the claim within the period of nine months from the time of the written notice of its rejection. ⁴⁹ Before any action was had on this motion, the executor stated his second and final account in the Orphans’ Court, and claimed an allowance for the $1000 paid to Cora Heindel in accordance with the authority givén. In this administration account the executor brought in as part of the assets of the estate eleven notes which were severally given by the five residuary legatees to the testatrix; and one which the testatrix had paid as surety for the legatee Cora Heindel, and a certain Emanuel Heindel.

The principal and interest of these twelve notes, which aggregated $8463.78, was first charged as part of the assets. After the deduction of the costs and expenses, commissions, and collateral inheritance tax, the residue was divided equally, and the respective notes of the several legatees credited as part of the whole share received. The two exceptants, Edwin Frank and Lydia Heindel, also objected to the inclusion in the account of the notes, and of the interest due thereon, as part of the estate, and to the allowance of commissions on these charges for the benefit of the executor. The grounds of the objections were that the executor had not collected or been paid anything, and, therefore, could neither charge as corpus any part of these uncollected and stale notes, and retain their respective amounts from the several shares of the distributees; and, further, that commissions could not be allowed on the basis of the inclusion in the estate of the principal and interest of the notes.

These questions were all considered together in connection with the approval of the second and final account as stated and presented by the executor. After testimony before the Orphans’ Court and a hearing, the court declined to annul its authorization and approval of the settlement of the claim of Cora Heindel for services to the decedent; and approved the account with reference to the disputed notes and to the basis for the computation of the commissions to the executor. 1. The exceptants rely upon the terms of section 110 of article 93 of the Code of Public General Laws in support of their position that the executor cannot be ⁵⁰ allowed the $1000 paid to Cora Heindel in settlement of her claim against the estate. The section cited provides that if a claim shall be asserted against or exhibited to the executor or administrator in any form, whether sworn to or passed by the orphans’ court, and he shall refuse payment thereof in writing, such claim shall be forever barred unless the creditor shall bring suit upon the same within nine months after such rejection.

This language of the statute has been held to be a statutory bar, and not a statute of limitations, which may be waived. Bogart v. Willis, 158 Md. 393, 406 , 148 A. 585 ; Baker v. Cooper, 166 Md. 1, 15, 16 , 170 A. 556 ; Davis v. Winter, 172 Md. 341 , 191 A. 902 . The use of the term “waived” is not intended to express the meaning that the executor or administrator may not later bind the estate to a payment of the claim either in whole or in part. In the appeal of Bogart v. Willis, supra, an illustration is afforded of the accuracy of this statement.

In that opinion the decision points out that the statute is not the usual statute of limitations whose operation as a bar to the remedy may be variously obviated or abandoned, but a statutory bar which prevents the collection of the claim, unless the creditor shall bring suit on the claim within nine months of its rejection. 158 Md. at page 406 , 148 A. 585 . In that case a notice of rejection had been given which the court accepted, for the purposes of the decision, as a full compliance with the requirements of the statute. The creditor did not bring an action on the claim within the statutory period of nine months, but the court held the bar of the statute did not apply because, after the notice of rejection, the executors admitted to the creditor the obligation of the estate to pay the claim. While this admission was subsequent to the rejection of the claim, but before the expiration of the full period of nine months, action was not brought on the claim until after the expiration of the period of nine months.

Thus the letter of the law was fulfilled to make the bar of the statute effective. The court held, however, that the subsequent admis ⁵¹ sion by the executor of the creditor’s claim had the effect of rescinding the notice given. The words of the court are: “Any other construction would permit a defendant to play fast and loose, and claim the benefits of the statute while at the same time leading the plaintiff to believe that he proposed to pay the claim.” 158 Md. at pages 406, 407, 148 A. at page 590 . Thus the court held and established the construction that the meaning of the language of the statute is not to preclude the operation of other principles of law.

In Bogart v. Willis, supra, the fundamental basis of the ruling is the undertaking by the ex-executors to pay to the extent of the assets available for the purpose a debt of the testator to the creditors. The contract was implied from the acts of the executors under the facts and circumstances, and the consideration for the promise of the executors was the claim of the creditor and the obligation of the executors to use the assets in their hands for the benefit of the creditor. So, in the record now before the court, an analogous case exists. No action was brought within the prescribed nine months, but the testimony tends to support the finding that, notwithstanding the notice, the creditor and the executor continued negotiations until an agreement was reached.

The performance of the services and the liability of the testator’s estate to pay were not the subjects of dispute, the only question was the worth of these services. The creditor and the executor could not agree on this single issue until the creditor agreed to lessen her claim from §3150 to §1000, and the executor promised to pay her that amount. The material difference between the two records is that in the case of Bogart v. Willis, supra, the promise to pay was implied while here it is express. In both instances, the personal representative was acting within the compass of his duty and power.

The statute expressly declares that an executor or administrator is not bound in duty to avail himself of the statute of limitations to bar what he believes is a just claim. The problem is left to his honesty and discretion. ⁵² Article 93, section 100 (vol. 3, p. 1220), sections 109, 110. On the other hand, he may reject and at law dispute the claim, if he should have reason to believe that the decedent never owed the debt, or had discharged it in whole or in part or had a claim in bar. Article 93, sections 101, 111.

The assets of the estate must, however, be dedicated to the discharge of all just debts which are actionably known to the personal representative. If the assets be insufficient to pay all the creditors, a proportionable distribution is made among them. Article 93, sections 103, 105, 124, and sections 121 (Acts of 1823, ch. 131, sec. 2), 110 (Acts of 1920, ch. 674). Should the personal representative believe it to be his duty to reject or dispute a claim, he may retain in his hands sufficient assets to meet the contingency of an establishment of the demand.

Article 93, section 112, of the Code. In the pending appeal, it appears that, after having thus agreed to pay the creditor the sum of $1000, the executor invoked the power of the Orphans’ Court to authorize and direct any executor or administrator to compromise any claim against the estate of his decedent in such manner as the court may approve; and, thereupon, the Orphans’ Court gave the authority and direction requested. Code, art. 93, sec. 270; Badders v. O’Brien, 114 Md. 451 , 79 A. 917 ; Blum v. Fox, 173 Md. 527, 536-538 , 197 A. 117 ; Williston on Contracts (Rev. Ed.), secs. 160-164.; sec. 693, pp. 2001, 2002; sec. 697. The executor then paid to the creditor the amount agreed.

In this payment, and its approval by the Orphans’ Court as an item for an allowance in the executor’s account, the court discovers no error.

II

The five legatees share the residue of the converted real and personal property in equal portions. It is the clear intention that they should. The second question on the record arises from this and the further fact that, at her death, the testatrix held eleven paper writings against these five legatees, by which they severally agreed, under separate dates, and by distinct transac ⁵³ tions, to pay her specific but unequal amounts of money, with interest at the rate of four per centum yearly. The instruments are not found in the record, but they are called notes, and there is nothing to show that they are specialties.

The number and aggregate amounts of the principal and interest of these notes ($8399.63) which were held by the testatrix at her death against the legatees, show the range of their inequality. Against Amelia A. Bailey she had three notes, whose principal and interest aggregated $1070.06; against Cora Heindel, one note whose principal and interest amounted to $1271.65; against John Frank, one note, principal and interest, $978.20; against Lydia Heindel, four notes, principal and interest, $3641.90; and Edwin Frank, two notes, principal and interest, $1501.97. The dates and maturities of these notes are not set out, nor when any payment was made, but the amounts and the uniform rate of four per cent, interest agreed, indicate interest had been accruing due on the eleven notes for varying periods from ten to eighteen years. The second question, therefore, is: Should the amounts of these notes be brought in and charged respectively against the residuary portions of the five legatees, although every one of the paper writings would be subject to the statute of limitations if an action were brought by the executor.

A sound author writes that “The Statute of Limitations does not operate to the extinguishment of a debt but bars the remedy only, therefore debts may in many States be deducted from or set off to legacies or distributive shares, notwithstanding the efflux of the statutory period of limitation.” The rule is enforced against an assignee. 3 Woerner on Administration, sec. 564, pp. 1927, 1928; Id., sec. 563, p. 1923; sec. 554, n. 7, 1883. The cases cited in support of the text are: Tinkham v. Smith, 56 Vt. 187, 190 ; In re Leitman’s Estate, 149 Mo. 112, 121 , 50 S. W. 307 ; Holden v. Spier, 65 Kan. 412 , 70 P. 348 ; Noble v. Tait, 140 Ala. 469 , 37 So. 278 ; Holmes v. McPheeters, 149 Ind. 587 , 49 N. E. 452 ; Wilson v. Kelly, 16 S. C. 216, 217; Higgins v. Scott, 2 B. & ⁵⁴ A. 413; Jeffs v. Wood, 2 P. Wms. 128; Courtenay v. Williams, 3 Hare 539, 553; Ex parte Wilson, 84 S. C. 444, 66 S. E. 675 . See In re Cordmell’s Estate, 1875, L. R. 20 Eq. 644; Rose v. Gould, 21 L. J., N. S., 360; 18 C. J., sec. 148, pp. 883, 884, sec. 252, p. 932. Garrett v. Pierson, 29 Iowa 304 ; Skipwith’s Succession, 15 La.

Ann. 209 ; In re Timerson, 39 Misc. 675 , 80 N. Y. S. 639; In re Bogart, 28 Hun 466 . See 1 Roper on Legacies, pp. 924-926; Wood on Limitations (4th Ed.), sec. 283. The rule, however, is not held unanimously. In other jurisdictions the opposite rule prevails, that a debt due the estate by a legatee or distributee is unavailable as a set off if it is barred by the statute of limitations.

In re Schaeffer’s Estate, 1921, 53 Cal. App. 493 , 200 P. 508 ; Hesley v. Shaw, 120 Ill. App. 92 ; Holt v. Libby, 80 Me. 329 , 14 A. 201 ; Allen v. Edwards, 136 Mass. 138 ; Lovell v. Nelson, 11 Allen 101 ; Boden v. Mier, 71 Neb. 191 , 98 N. W. 701 ; Harod v. Carder, 2 Ohio Dec. 274, 3 Ohio Cir. Ct. R. 479; Appeal of Milne, 99 Pa. 483 ; Reed v. Marshall, 90 Pa. 345 ; Levering v. Rittenhouse, 4 Whart. 130 ; Richardson v. Keel, 9 Lea (Tenn.) 74. See 16 A. L. R., pp. 341-343; 18 C. J., sec. 148, pp. 883, 884, sec. 252, p. 932; 24 C. J., sec. 1317, pp. 487, 488, n. 34(1) ; 37 C. J., sec. 150, p. 807, n. 82.

In Maryland the general rule is to retain out' of a legacy or distributive share whatever the legatee or distributee owes the estate. Manning v. Thruston, 59 Md. 218, 228-230 ; Gosnell v. Flack, 76 Md. 423, 426 , 25 A. 411 ; Hoffman v. Hoffman, 88 Md. 60 , 40 A. 712 ; Hoffman v. Armstrong, 90 Md. 123 , 44 A. 1012 ; Julliard & Co. v. Orem’s Excrs., 70 Md. 465, 471 , 17 A. 333 ; Hemsley v. Hollingsworth, 119 Md. 431, 447 (even if the debt be discharged in insolvency, Smith v. Donnell, 9 Gill 84 ) ; and see Gosnell v. Flack, 76 Md. 423, 427-429 , 25 A. 411 ; Devries v. Hiss, 72 Md. 560 , 20 A. 131 . And this is true in the event the debt of the legatee or distributee is subject to the defense of limitations, provided the legatee or distributee is an executor or administrator of the decedent’s estate. Long v. Long, 118 ⁵⁵ Md. 198, 201, 202, 84 A. 375 ; Whiting v. Leakin, 66 Md. 255, 266 , 7 A. 688 ; Julliard v. Orem’s Excrs., 70 Md. 465, 471 , 17 A. 333 ; Sloan v. Sloan, 117 Md. 141, 142, 152 , 83 A. 38 ; State, use of Stevenson v. Reigart, 1 Gill 1, 32 ; Brown v. Stewart, 4 Md. Ch. 368 ; Spencer v. Spencer, 4 Md. Ch. 456 ; Harlan v. Hunter, 170 Md. 513, 517 , 185 A. 327 .

See Rose v. Buscher, 80 Md. 225 , 30 A. 637 . There seems no logical reason why the debt should not be retained in all cases, but on this point there is uncertainty. What then is the rule in Maryland, where the legatee or distributee, who is not an executor or administrator, is indebted to the estate on a debt which may be barred by the statute of limitations? In Hemsley v. Hollingsworth, 119 Md. 431, 446, 447 , 87 A. 506 , the bar of the statute of limitations was removed by the new promise made, so the point was not involved and so not decided.

In Watkins v. Harwood, 1830, 2 G. & J. 307 , a phase of the question was involved. The intestate died in 1826. In February, 1809, one of his distributees gave him a mortgage on personal property to secure the payment of a debt to the mortgagee. The debt became due and payable on January 1st, 1810, more than sixteen years before the mortgagee’s death.

It did not appear what had become of the perishable personal property mortgaged. There was no recognition of the debt at any time. No recovery could be had on the covenant in