Opinion
12932.
OCTOBER 11, 1939.
Equitable petition. Before Judge McLaughlin. Taylor superior court. April 5, 1939.
Dan S. Beeland and Homer Beeland, for plaintiff.
C. C. Stone, G. C. Robinson, and C. B. Marshall, for defendants.
1. Title to property devised by will, and to be divided among a group of persons upon the happening of a particular event, vests in the executors of the will pending its sale, for the purpose of paying debts of the testator, or for the purpose of distribution, in the absence of assent by the executors to the legacy. An executor may withhold from a legatee whatever portion of his distributive share may be necessary to pay an indebtedness due by the legatee to the estate, so as to equalize distribution among legatees. Such right of retainer may be asserted as against the transferee or assignee of a legatee. So also the lien of a judgment against a legatee does not attach to property passing under a will as above stated, either in the hands of the executor or of purchasers under him at a valid sale.
2. In an equitable action to subject the legacies of certain persons under a will to the payment of claims against such legatees, where it appears that the executors have sold the property passing by such legacies, for the purpose of making distribution among the legatees, and have retained the portions of certain legatees to satisfy their indebtedness to the estate, there is nothing upon which a trust or other equitable claim in favor of the plaintiff may operate, and a judgment denying the relief sought is appropriate. In such a case a showing of fraudulent purposes on the part of the legatees in connection with the sale of such property will not aid the plaintiff, in the absence of a further showing that they hold some interest in the property which might be otherwise subject to seizure.
3. The facts in the present case show that the plaintiff, who by transfer and assignment had succeeded to the interests of certain legatees, took such interest subject to the prior right of the executors to retain such legacies as against indebtedness due to the estate by the named legatees; and for this reason the alleged fraud in the sale of the property passing under the will does not, in respect to such property, alter the rights of the parties.
No. 12932. OCTOBER 11, 1939.
On April 5, 1937, T. Whatley filed a petition in Taylor superior court, alleging in substance that on March 1, 1922, W. M. Musselwhite died testate, seized and possessed of both real and personal property, and by his will disposed of the property by providing that it should be "kept together, operated and handled" just as the testator had done during his life, and until his youngest child reached the age of majority. The will also provided: "Item 4th: It is my will and desire, and I so desire, that when my youngest child living at the time of my death becomes twenty-one years old, that all my property, both real and personal, and wherever situated, be equally divided among my children, in kind or by sale either public or private, as may seem to the best interest of my said children by my executors, hereinafter named, and the money derived from the sale of said property to be equally divided among my children, should the same be sold, instead of being divided in kind. The children to participate in the division of said property as follows: J. W. Musselwhite, Ed Musselwhite, Mrs. John D. Goodman, Frank Musselwhite, Ruth Musselwhite, James A. Musselwhite, Mattie Musselwhite, Brown Musselwhite, Clara Musselwhite, Judson Musselwhite and Jessie Musselwhite." The will was probated in April, 1922, but pending the administration of the estate the executors resigned, and thereupon administrators de bonis non cum testamento annexo were duly appointed. They qualified and since their appointment have acted as such. The youngest child arrived at her majority at some time before February, 1933. Thereafter the court of ordinary of Taylor County, according to allegations in the petition, passed a valid and proper order authorizing the sale of the real estate. It was sold under said order to nine legatees, defendants in error, for $10,600, and a deed to them was executed by the administrators, and this deed was by "some agreement" placed in escrow with and delivered to R. A. Hinton, for him to hold until all debts including delinquent taxes were paid, and until "full settlement of all the heirs should be effected." The escrow agreement by its terms specified: "that the other devisees should not receive any part of said property or of the proceeds thereof." Hinton, the escrow agent, delivered the deed to the nine legatees on March 25, 1936. Four of the legatees, who were not parties to the purchase and are not parties before this court, were, as set out in the petition, indebted in varying amounts to the plaintiff as transferee on several notes and on one judgment. These notes and this judgment were secured by bills of sale, assignments, and security deeds executed by these four legatees, conveying to the plaintiff's predecessor in title their interests in the estate. All of said obligations, except one, were originally made to the First National Bank of Reynolds, Georgia. All of the conveyances, bills of sale, and assignments made to secure said obligations were recorded immediately after their execution, and by proper authority were duly transferred to the plaintiff by J. B. Downs, receiver of said First National Bank.
The suit was against the administrators and all of the legatees, except Ed Musselwhite, who had settled his interest in the estate. It was alleged: "The purpose and effect of said agreement between the said administrators and the said nine of said legatees who were purchasers of the property when sold, and the administrators' deed made in pursuance thereof, was a fraud upon plaintiff and his predecessor in title, and to prevent collection of the debts justly due from the other four legatees, all of whom were at the time of said agreement and now are wholly insolvent, and the said administrators' deed having been made to the purchasers at said sale under the above-stated agreement as to the administrators and the four legatees set out as being indebted to plaintiff; said sale being under a valid order of the court of ordinary providing for said sale. The assets of the insolvent debtors thereby passed into the hands of the said grantees under the said administrators' deed; therefore the said grantees should be deemed and treated as trustees for the respective shares of the said debtor legatees excluded from said deed, and thereupon plaintiff's liens upon the said shares should be set up and established, and the respective interest of said debtors in said lands represented by said shares should be decreed to have been sold to the said nine legatees as trustees for the said debtors as to their respective shares and interest; and that the said land purchased by the said nine legatees should still be subject to plaintiff's respective claims against said four eliminated debtors, and the lien of plaintiff should also apply as to any other funds in the hands of said administrators. Plaintiff is entitled to assert against the said administrators and against said nine purchasers his demands as a prior lien against each of the respective shares of said four debtors that were eliminated by said agreement and deed made by the administrators in pursuance of said sale to the said nine legatees as purchasers as to the property purchased as aforesaid, and to any funds that may remain in the hands of said administrators." The prayers of the petition, omitting formal parts, were: "(a) That he as plaintiff have judgment on each of said claims against each of said four eliminated debtors, setting up the amount due thereon. (b) That plaintiff's demands against the said J. W. Musselwhite, Frank Musselwhite, Clara Musselwhite, and J. A. Musselwhite be set up and established as prior liens as to their full shares as legatees under the will of their father, the said W. M. Musselwhite. (c) That plaintiff have such other and further relief in the premises as the court shall deem meet and proper." To the petition the administrators demurred generally, and the nine legatees demurred generally and specially.
An amendment of the petition was sworn to on December 15, 1937, but the record is silent as to the date when the amendment was presented or filed. It was allowed subject to demurrer, by order not dated. This amendment alleged, that at the time of the agreement between the administrators and the nine legatees, these legatees and the administrators had knowledge of the execution of the conveyances upon which this suit is predicated; that the administrators agreed that the nine legatees were to buy in said property and to pay for it with their distributive shares of the estate; that immediately after Hinton delivered this deed to the nine legatees they went into possession of said real estate; that "at the time of said sale plaintiff's predecessors owned and held the notes and the liens set forth in original petition; Clara Musselwhite, Frank Musselwhite, and J. A. Musselwhite executed their deeds to secure said indebtedness, thereby conveying all of their distributive share to the First National Bank, Reynolds, Ga., which fact was known to the said administrators and to the said nine legatees purchasing said property at the time the agreement was made as to how the purchase should be made. "Plaintiff contends that the acts in connection with said agreement, the agreement itself, and the deed made in pursuance thereof and the taking of possession of the property described in said deed was a fraud, and the property purchased at said sale under the above-stated facts was impressed with an implied trust for the benefit of all of the legatees or their assignees to all of said estate." Further it was alleged that "the property purchased by said nine legatees was by implication the purchase of all of the legatees or assignees of said estate," and that "the acts alleged therein constitute the acts of fraud;" that since the petition was filed the administrators have paid to said nine legatees of said estate $4428.21; that the plaintiff is entitled to such proportionate part of that sum "as may be determined from the accounting herein sought;" that the same "should be apportioned in accordance with the liens and claims held by plaintiff against the four legatees of said estate as his plaintiff's interest appears;" and that "the effect of the purchase of said sale of the real estate, under the alleged facts, circumstances, and conditions as above set forth, was in a legal sense a transfer from the said administrators to the said nine legatees of the trust of the administrators, and left the obligation upon the said nine legatees to administer that part of the estate in accordance with the terms of the will." The prayers of the amendment were, for an accounting between him, the administrators, and the nine legatees; and for judgment against the administrators in "such amount as may be determined by said accounting to be due plaintiff upon its claims set out in his petition."
On March 15, 1938, the judge overruled the demurrers, except that in his order he held that a copy of the contract between the administrators and the nine legatees referred to above should be set out. This order did not mention any amendments.
On March 22, 1938, a third amendment was offered, with an attached copy of the contract, and since that contract is the one attacked by the plaintiff, as follows:
"Whereas, on this the 7th day of March, 1933, H. K. Sealy and F. A. Ricks, as administrators de bonis non of the estate of W. M. Musselwhite, deceased, after proper orders of the court of ordinary of said county, and after proper advertisement as provided by law, did expose for sale all of the real estate belonging to said estate, at which sale nine of the heirs at law of said estate, to wit, Brown Musselwhite, Judson Musselwhite, Willie Musselwhite, Mattie Musselwhite, Jessie Musselwhite, Mrs. Nellie Musselwhite Goodman, Mrs. Marilu Musselwhite Joiner, Mrs. Ruth Musselwhite Skinner, and Mrs. Kate Musselwhite, were the successful bidders at said sale, and said lands were knocked off to said nine heirs at and for the sum of $10,600; and whereas it appears from an examination of the records of advancements made to the other heirs of said estate that they have already received the full amount of their distributive shares in said estate and that the nine heirs hereinabove mentioned are the only heirs to share in said estate; and whereas said purchasers wish to apply their distributive shares in said estate to the payment of the purchase-price of their said bid, and not to pay same into the administrators in cash in compliance with their said bid; and it appearing that there are no debts of said estate, except for delinquent taxes due by said estate, which still remain in as a lien on the lands sold: Now therefore, the premises considered, it is agreed between the administrators above mentioned and C. B. Marshall as attorney at law representing all the heirs of said estate, those mentioned above as well as four others who have no distributive share in said estate, with the purpose and intent of protecting the rights of all parties concerned, and to fully protect the said administrators in their said actions relative to said sale, that a deed in escrow will be executed and delivered to R. A. Hinton, conveying the lands so sold as aforesaid to the purchasers at said sale, to be held by him to be delivered to the purchasers as soon as all liabilities of said estate, including the delinquent taxes mentioned above, have been fully paid and discharged, and a full settlement of the interests of all the heirs in and estate can be legally effected,
"F. A. Ricks and H. K. Sealy, Admrs. Estate of W. M. Musselwhite.
"C. B. Marshall, Atty. for the heirs of the said W. M. Musselwhite."
The plaintiff sought to "adopt" only the first, second, and last paragraphs of this contract. This amendment was allowed subject to demurrer.
Another amendment was presented on March 22, 1938, whereby it was sought to make the surety for the administrators a party defendant to the cause. On April 3, two additional amendments were presented. The first of these alleged that by virtue of the sale to them, and by virtue of the delivery of the deed to them by the escrow agent, the nine legatees took charge of all the real estate and had had the use and occupancy of same and had collected the mesne profits for six years, and therefore the plaintiff was entitled to recover four thirteenths of this rental value, in certain definite amounts. He claimed that he was entitled to four thirteenths of the sum previously referred to as having been paid to the nine heirs. He prayed that he "have judgment against the respective named debtors for the amount set forth in the above and foregoing petition, in order to determine the amount due petitioner by each of the said four heirs; and that same be set up as a lien on the respective interests of said four heirs. That plaintiff have judgment [against] the said nine heirs referred to in said petition, for the respective amount as set forth in the above and foregoing amendment." This amendment was allowed subject to demurrer. The second amendment struck the names of the administrators and the surety on their bonds as parties defendant, and recited that they had made a settlement with the plaintiff for all claims against them. On April 5, 1939, the nine defendant legatees filed a second demurrer renewing the grounds general and special of the original demurrer, in addition to others presented. The court passed the following order:
"On the call of the above-stated case from the trial calendar, at this the April term, 1939, of Taylor superior court, plaintiff tendered three amendments to the petition, which were allowed subject to demurrer; whereupon counsel for the nine defendants [named] renewed their general and special demurrers previously filed to the petition as amended, and also filed additional general and special demurrers to the petition as now amended; and it appearing from one of the amendments that the plaintiff, since the filing of this suit, has settled with the administrators, Ricks and Sealy, named as parties defendant in the original petition, and has released said administrators from all claims against them, and by said amendment struck their names as parties defendant; and it further appearing from the petition as amended that all the general as well as special demurrers are meritorious and well founded: It is considered, ordered, and adjudged, that all of the general as well as the special demurrers be and the same are hereby sustained, and the names of the above-named nine defendants who filed these demurrers are hereby stricken as parties defendant." Error is assigned on this ruling; and complaint is made that the grounds of the first demurrer could not be inquired into, because no exception was taken to the original order overruling it.
1. The question, as shown by the foregoing statement, is whether or not the general demurrers should have been sustained. It is to be remembered that no exception was taken by the defendants to the order of the court overruling the general grounds of the first demurrer. So we must first determine the controversy as to whether the court had the right to pass upon these grounds after the subsequent filing of the several amendments. "An amendment to a petition, or plea, or answer, which materially changes the cause of action or defense, opens the petition, plea, or answer, as amended, to demurrer or plea. The opposite party shall be allowed a reasonable time for answering such amendment." Code, § 81-1312. Under this section the trial court could have considered all the amendments, because they were all presented after the first demurrer was filed, and were all allowed subject to demurrer. In the order complained of the court said: "On the call of the above-stated case . . at this the April term, 1939, of Taylor superior court, plaintiff tendered three amendments . . which were allowed subject to demurrer." That order did not designate specifically those amendments. The last two of the amendments, one of which struck the names of the administrators and their bondsman as parties defendant, were presented on April 3, 1939, according to the court's order allowing them. These are the two which are dated. It is to be remembered that the other amendment in this record, which appears to have been sworn to on December 15, 1937, bears no date of presentation or of allowance. Counsel for the defendants state in their brief that this amendment was presented on April 5, 1939, and was one of the three which the court passed on. The plaintiffs have not refuted this statement. Irrespective, however, of this contention, and since the record does not disclose the date on which that particular amendment was presented or allowed, and since the judge passed upon three amendments, and not two, at the time he sustained the demurrers, we must conclude that he had under consideration the amendment which appears to have been sworn to on December 5, 1937. As before stated, the court could have considered all of the amendments in determining whether or not there was such material change in the plaintiff's cause of action as to open the petition to demurrer; but in passing on that question, we shall consider only the amendments which were presented on April 3, 1939, and that amendment which was sworn to as of December 15, 1937.
The petition alleged: "The said grantees [defendants] should be deemed and treated as trustees for the respective shares of said debtor legatees excluded from said deed, and thereupon plaintiff's lien upon the said shares should be set up and established on the respective interests of said debtor in said lands," etc. One of the prayers of the petition was as follows: "That plaintiff's demands against the said J. W. Musselwhite, Frank Musselwhite, Clara Musselwhite, and J. A. Musselwhite be set and established as prior liens as to their full shares as legatees under the will of their father, the said W. M. Musselwhite." So that all the relief sought was judgment against the debtor legatees, and that the plaintiff be decreed to have a lien, presumably upon the land. No other relief of any nature was prayed for in the original petition against the defendants in error, and no accounting was prayed.
The amendment sworn to on December 15, 1937, which we have concluded the court passed on in the order sustaining the general demurrers, set out that the purchase of the real estate was by implication the purchase of all the legatees, including the assignees of said estate. The petition likewise alleged that all of said legatees should share in a sum of money which was paid to the nine legatees, defendants in error. In other words, the petition alleged that these four debtor legatees should be considered as purchasers, and should be considered as being entitled to share in this sum of money. By that amendment the plaintiff prayed for "judgment against said administrators for such amount." There was no prayer for judgment against the defendants in error. We think that this constituted a material change in the pleadings. The next amendment was one of those presented on April 3, 1939, claiming four thirteenths of the rental value of the land conveyed by the administrators, as to the defendants, for a period of six years; also for four thirteenths of the distribution in money made to the nine legatees; and for the first time the plaintiff prayed for judgment against defendants. This constituted a material change in the pleadings. In view of the character of relief prayed for, it also was a substantial change in the state of the pleadings when the plaintiff presented another amendment by striking the administrators and their bondsman, by setting out that these parties, against whom he had prayed substantial relief, had pendente lite settled their liability on plaintiff's cause of action. We conclude that the effect of these several changes in the pleadings was such as to permit the court, as was done, to consider and pass upon the demurrers which were sustained. See Kelly v. Strouse, 116 Ga. 872 ( 43 S.E. 280).
2. Having held that the amendments opened the petition to demurrer, then the question is, did it, with the amendments, set out a cause of action? In so far as the petition as amended sought to subject or lay claim to the property of the four debtor legatees as their property, it is to be remembered that before its sale the title to said property vested in the executors, after their appointment, and afterward in the administrators d. b. n. c. t. a., it not appearing that there had been any assent on their part to the legacies of these four children of the deceased. "All property, both real and personal, being assets to pay debts, no devise or legacy passes the title until the assent of the executor is given to such devise or legacy." Code, § 113-801. This section applies with equal force to an administrator cum testamento annexo. See Martin v. Walker, 94 Ga. 477 (2) ( 21 S.E. 223). There is no allegation that either the executors before they resigned, or the administrators appointed afterwards, ever assented to the legacies of these four debtor heirs. The situation presented in ruling on pleadings in this case is somewhat different from that confronted by the court in Walker v. Horton, 184 Ga. 429 ( 191 S.E. 462), where an effort was made to subject a legacy to certain claims against the legatee. An issue was made as to whether there had been such assent to the legacy as would permit the passing of title. The question whether or not the executor did assent to the legacy was submitted to a jury; and this court held that the jury was authorized to find, as it did, that such assent had been given; and that the interest of the heir and legatee was subject to a judgment which was rendered against him in favor of the creditor. In that case the will bequeathed certain specific property to the heir, and it appeared that he had entered upon it and taken possession thereof, this being one of the circumstances which was considered sufficient to warrant the jury in finding that the executor had given assent. The effect of that decision was that assent by the executor to the legacy in such a case as the one now before us was necessary, before the interest of the legatee could be in such a proceeding subjected to his individual debts. The statement in the opinion, "Where after an assent to a devise the property is levied on to satisfy a judgment against the devisee, the legal representative can not reclaim the property merely because the devisee is indebted to the estate or there are debts against the estate, pending the settlement of which assent could have been withheld," was predicated on the proposition, that, assent of the executor once being shown, there could not generally be a revocation, even in instances where the legatee was indebted to the estate. Authorities were cited to this effect.
The plaintiff's petition, taken in connection with the contract of sale attached to the amendment of March 22, 1938, shows that these debtor heirs under whom the plaintiff claims to hold were indebted to the extent of, if not more than, their interest or distributive share. It was alleged that the deed conveying the property was delivered to Hinton as escrow agent, to be held by him and delivered to the nine legatees (defendants) when all the debts of the estate had been paid and when full settlement of the interest of all the heirs of said estate had been legally effected. Hinton delivered the deed, and there is no allegation that he did not do his full duty or that he did not effect appropriate settlement in adjusting the interests of all the heirs. The contract to which all of the parties assented recited that "they have already received the full amount of their distributive shares in said estate, and that the nine heirs hereinabove mentioned are the only heirs to share in said estate." The purported facts so stated in the contract appearing in the amendment to the petition were not negatived or challenged anywhere. In Lester v. Toole, 20 Ga. App. 381 ( 93 S.E. 55), it was held that a personal representative of an estate is entitled to retain the share of an heir or legatee in money derived from the sale of realty belonging to decedent's estate, for the purpose of paying a debt which the heir or legatee owes to the estate, as against and in preference to the claim of an assignee or purchaser from the heir. In the discussion in that case it appeared that the precise question there presented was: "Is the assignment of an undivided interest in the realty of an estate by an insolvent debtor heir good against other distributee heirs, the lands having been reduced to money for the payment of the debts . . and for distribution?" It was stated: "It is generally recognized doctrine that the distributive share derived from the personal property of an heir indebted to an estate may be retained, without more, by the administrator in payment of the debt. The same doctrine has also been applied, virtually without exception, as against a debtor legatee. . . Many courts have applied this general doctrine of retainer to the share of a debtor heir derived from the sale of real estate." See also cases cited in that opinion. The further statement was made: "In the case of the personal property the title is cast, by operation of law, upon the administrator. In the case of realty the title is likewise cast, by operation of law, upon the administrator, whenever it becomes necessary for him to sell the realty for the purpose of paying the debts or making distribution. When the title to the realty is cast upon the administrator, and when he has reduced the realty to cash, no logical reason occurs to us why the same rule as to personalty does not apply. If this conclusion be correct (and we think the rule a just and necessary one, in order to preserve the equality of distribution), the sale or assignment by the debtor heir of his interest in the realty of the estate can not alter the rule. A stranger has not the power to embarrass the administrator in the settlement of an estate, by dealing directly with the heir. Until an estate is finally settled, every third person is bound to know that the sale of the realty may become necessary for the purpose of paying the debts of the decedent or for the purpose of making equal distribution among the heirs. He is therefore bound to know that the land may be sold and may be converted into money, and, when converted into money, that the personal representative has the right to retain so much from any distributive share as may be necessary to extinguish the debt due by such distributee to the estate. We repeat, the money derived from the sale of the realty does not lose the character and quality of realty, so far as the laws of distribution and descent are concerned, but both the realty and the personalty descend to the heirs at law in like proportions, in the case of intestacy. The assignee of an heir does not, as against the administrator, hold title to any interest in the land. The heir has no superior title to the administrator, whenever it becomes necessary for the administrator to sell the lands in the process of administration. What the assignee has is a claim to the interest of his assignor in the assets of the estate, and he takes that interest precisely as his assignor held it." The principle as quoted above from the opinion of the Court of Appeals delivered by Judge George was considered by him not to have been previously determined by the courts of this State, although he pointed out there had been some decisions of our courts bearing somewhat upon the question. In this connection we find, in Reed v. Davis, 95 Ga. 202 ( 22 S.E. 140), a somewhat similar situation where the will directed the sale by the executor, either publicly or privately, of specific realty for conversion into cash for certain purposes, and that upon the children of the testator coming of age or being married, the executor should turn over to them their portions of the estate. Some years later the executor conveyed a portion of the real estate to a daughter of the testator in a settlement with her of her interest in the estate under the will, she and her mother being, at the time, the only surviving devisees and legatees. It was held, in the opinion by Mr. Justice Lumpkin, that under these circumstances "the legal title certainly remained in the executor until he divested himself of it in winding up the affairs of the estate. When he did part with it, he conveyed it to the testator's daughter," and that the widow never had any such interest in the property as could be subjected to the payment of her debts. Lester v. Toole, supra, was followed in Haley v. Partain, 31 Ga. App. 144 ( 120 S.E. 14), where it was said: "The right of an executor to appropriate the distributive share of one of the heirs of an estate to the payment of debts due by the heir to the testator is superior to the lien of a judgment against the heir." See also Stephens v. Stone, 46 Ga. App. 293 ( 167 S.E. 545), and Walker v. Horton, supra, where the Lester case was cited with approval. In Greenwood v. Greenwood, 178 Ga. 605 ( 173 S.E. 858), this court held that a representative of an estate is entitled to retain the share of an heir in payment of his debt to the estate, as against the claim of a judgment creditor of the heir. The principles hereinabove stated, and now approved under the facts in this case, apply to the claim of plaintiff, not only in respect to the land, but also in respect to the sum of money which it was claimed had been paid on distribution to the nine heirs who are defendants. In the foregoing discussion we have not overlooked the general allegations of fraud contained in the petition and amendments; but they must be considered in connection with what we have undertaken to set forth above as the controlling facts, and when so considered they do not overcome this bar to the relief sought by plaintiff.
3. What has been said substantially controls also as to the other grounds upon which the plaintiff rests his claim to relief. It is seen from the foregoing that just as the one fatal bar to the seizure of any property or funds as belonging to the four legatees is founded on the failure to show any interest which they had in the estate belonging the them, so it would likewise follow that no accounting could be had in the absence of a clear showing that there was something due. See Gould v. Barrow, 117 Ga. 458 ( 43 S.E. 702). Upon the same premise it must be said that there could be no trust established for the benefit of the assignee of the four debtor legatees, if, as we have held, the conveyance by the administrator was valid. The foregoing rulings render it unnecessary to determine the effect of an amendment striking the names of the administrators and their bondsman as parties, on account of an alleged settlement with them; or to inquire into the merit of the various special demurrers.
Judgment affirmed. All the Justices concur.