January 20, 1933.
Before RAMAGE, J., Chester, January, 1929. Reversed and remanded.
Suit by James H. Glenn, as administrator of the estate of J.L. Worthy, deceased, and as guardian of B. Hood Worthy and others, against Mary Elizabeth Worthy, a minor, for whom A.L. Gaston was appointed guardian ad litem, and against Nancy Sarah Jane Worthy, Virginia Florence Worthy, David Lee Worthy, Joe Lawrence Worthy, Jr., and B. Hood Worthy, minors, for whom R.L. Douglas was appointed guardian ad litem, and others. From the decree defendants named, except the first-named defendant, appeal.
The Circuit Judge's decree dated July 11, 1931, was as follows:
This suit was commenced by the plaintiff, James H. Glenn, as administrator of the estate of J.L. Worthy, and as guardian for his children, for the purpose of making a full and final accounting as administrator and as guardian, and for the purpose of obtaining his discharge as administrator and as guardian. All of the parties in interest are properly before the Court. Only four of the children at this time are still minors. The suit was commenced on January 2, 1929. As disclosed by the two reports of the referee, eight references have been held during the years 1929 and 1930.
His Honor, Judge J.K. Henry, on February 16, 1929, appointed Honorable J.M. Wise of the Chester Bar as special referee herein. The referee filed his report on January 15, 1930. To this report certain of the defendants filed exceptions. His Honor, Judge T.S. Sease, heard the exceptions on February 4, 1930, and on February 13, 1930, filed an order referring the case back to the special referee for the further slating of the accounts. After two additional references, the special referee filed a supplemental report on November 8, 1930. To this report, both the plaintiff and R.L. Douglas, as attorney for certain defendants, filed exceptions. These exceptions were heard by the agreement in Columbia on Thursday, June 4, 1931. The attorney for certain of the minor defendants argued both his exceptions to the original report of the referee which had not been passed upon by Judge Sease, as well as his exceptions to the supplemental report. The above is an outline of the proceedings herein pertinent to this decree.
The substantial question before the Court at this time is the statement of the administration account and the guardian account, and of the amount due the plaintiff, James H. Glenn, by reason of certain personal advancements made by him to the estate. Can the guardian funds loaned by the guardian to the estate be determined as a proper debt of the estate? If so, can the amounts thus due the wards be offset against the amounts due by the estate to the administrator personally on account of his cash advancements to the estate? If so, what is the proper remedy, and how may the administrator be discharged and the present bond of the administrator and the guardian declared satisfied?
The referee has filed two very comprehensive reports which manifest careful study, not only of the accounts, but also of the legal rights of the parties involved in this case. I confirm his findings of fact, and the statement of facts in this decree will be very largely a repetition of his findings. I also agree with his legal conclusions, and the only thing additional I may state will be supplementary and for the purpose of directing the manner of carrying out the relief prayed for in the complaint.
In this connection, I have considered all the exceptions before the Court, which include exceptions to the first report of the referee and to the supplemental report of the referee. These exceptions were fully argued, and I have carefully considered the record submitted to me, and my conclusions have been reached after a thorough review of the record and full consideration of the rights of the parties herein.
It appears that J.L. Worthy, of Chester County, died on June 30, 1920, seized and possessed of the lands described in the complaint. That he left seven children surviving him; his son, L. Hope Worthy, by first wife, and six younger children by his second wife. At the instance of a brother of the deceased, James H. Glenn, attorney of the Chester Bar, qualified on July 21, 1920, as administrator of his estate. He also qualified on July 13, 1920, as guardian of L. Hope Worthy, and at the same time qualified as guardian of the six younger children, giving bonds as required by law. L. Hope Worthy became of age in 1923, and the guardian settled in full with him and was discharged as such. Mr. Worthy died a widower; both wives having predeceased him.
J.L. Worthy had life insurance in the sum of $7,000.00. $1,000.00 was payable to each of the seven children. This was collected by the guardian and deposited to the guardian account in the Commercial Bank, Chester, S.C.
At the time of Mr. Worthy's death, he was operating a ten-horse farm and a small country store. He died on June 30, 1920, right in the midst of the crop season for that year, and just at the peak of the high prices of the so-called 1920 boom. Immediately after his death, prices commenced to decline, and, within the twelve-month period following, prices reached bottom. Legal claims in excess of $7,000.00 were filed with the administrator against the estate. Mr. Worthy in his lifetime had made large advancements to the tenants on the farm, based on the high prices of 1920, so that his tenants were heavily indebted to him at the time of his death. Mr. Worthy's property consisted, for the most part, of lands described in the complaint, growing crops, farm implements, some cattle, and accounts due on the growing crops by the farm tenants. The administrator continued, of necessity, to operate the farm for 1920. He likewise operated parts of the farm during 1921 and 1922 under the order of the Probate Court in an effort to not only keep the lands worked, but primarily to collect the debts due the estate by the tenants, which appeared to him at that time to be the best thing to do. He employed T.J. Worthy, brother of the deceased, who represented himself to be a good farmer, to operate the farm. However, T.J. Worthy did not prove a successful supervisor and was required to leave the farm in 1922.
The administrator in due course sold to the best advantage, personal property of the estate. But the sales were held under adverse circumstances, due to the depreciation of all values following the financial depression of 1920. Very little was realized from these sales. A review of the testimony and of the records show that James H. Glenn, as administrator, did what he thought best at the time for a proper handling of the affairs of the estate. In order to secure necessary cash money to pay the living expenses of the children and to carry on the necessary farm operations and to pay the debts of the estate, it became necessary to borrow money from himself as guardian of the children. Later, he had to make personal advancements to the estate in order that the estate might have the cash money needed for the aforesaid purposes. It appears that during the year 1923 he completed the payment of the debts of the estate in full, with one exception. This last item was in litigation and amounted to $121.00, and was paid on December 25, 1925.
As to the insurance money received by him as guardian, the greater part of this was first loaned as an investment to outside parties. As these loans were collected, part of the funds were used for the living expenses of the wards, and part loaned to the estate. On May 20, 1922, the Probate Court, upon petition of the administrator, directed the guardian to lend the estate $3,000.00 for the purpose of paying the debts of the estate. The same order authorized the guardian to use the corpus of the wards' estate in providing food, clothes, and education for the minors. The order directed that the guardian lend the administrator "such guardian funds as are necessary," amounting to about $3,000.00. This loan was made; the transaction being evidenced by checks of the guardian to the administrator.
In this connection, the records show that James H. Glenn ran two accounts in the Commercial Bank; one as administrator, and one as guardian. That all transactions between the two were evidenced by checks, and that also book entries were made of the same. It further appears that all funds received for either account were promptly deposited to the proper account in the bank, and that all expenditures were made by checks upon one of the two funds. It does appear that a substantial part of what is properly the wards' living expense was paid by the administrator's checks. It would have simplified the account, and probably the issues before the Court, had all such expenses been paid by guardian checks and none by administrator checks. But it seems that when the items became due, the guardian, in an effort to pay them promptly, paid the same from whatever fund had sufficient balance in the bank: whether guardian or administrator.
As to the advancements made by the administrator personally to the estate, these were all by regular bank channels, being deposited to the estate's account and the repayment being made by check upon the estate account.
It seems that the administrator had other lands in charge beside these estate lands, and that his time was fully occupied, and according to his statement, and by reason of the time required to look after a number of tracts of land after the deflation of 1920, he did not file the annual return. He did file a return as administrator at the end of the first year. He has filed only one return as guardian of the six children, this being filed at the time of the commencement of this suit, and the second return as administrator filed at the same time this suit was commenced. When the two returns were filed in December, 1928, there were cross-references from one account to the other, though separate returns were filed. The Probate Judge stated he could not fully understand the return. Thereupon the plaintiff brought this action as administrator and guardian for the purpose of being allowed to make a final accounting in this Court, and to obtain discharge as administrator and guardian.
At the first reference, it appears that the accounts of the several wards were not separately stated. The administrator stated his willingness to separate the accounts, and did so in what became termed the green book, which shows all the expenditures made by him as administrator and guardian, for what accounts made, and for the accounts of each separate ward. It appears that the referee between the first and second reference checked the bank statement and the bank checks with the account as restated by the administrator and guardian in this green book, and that the bank statements, the returns and amounts appearing in the green book, all agreed.
Thereupon, the referee, in the interest of accuracy and of satisfaction to all parties concerned, employed Mr. James McLarnon, public accountant, to check both accounts, and to restate the entire account. The accountant did so under the direction of the referee. The administrator had run an account as administrator and a separate one as guardian. The accountant, however, charged James H. Glenn with both funds, and stated the two accounts as against him, which was a different method of bookkeeping from that employed by James H. Glenn. In this first statement of the account, the accountant eliminated all checks between the administrator and guardian, and also allowed full commissions for the entire time. Mr. R.L. Douglas, attorney for majority of the minors, excepted to this, and it was on this ground that Judge Sease sent the case back to the referee with instructions that the accountant restate the account, showing all checks between the guardian and administrator both ways. In the meantime, the opinion in case of Andrews v. United States Fidelity Guaranty Company was filed, 154 S.C. 456, 151 S.E., 745, and, in view of the rule stated there, the referee instructed the accountant to eliminate all commissions except those accruing during the first year of the administration and guardianship. Subsequent to Judge Sease's order, two references were held at which very little additional testimony was had. Thereafter the accountant restated the account, and the referee filed a supplemental report. Before stating the balances now due on the several accounts, and before stating the relief to which the parties hereto are entitled, I desire to incorporate in this decree what the referee has said as to the records of the administrator and as to the efforts put forth by the administrator in behalf of the estate and of the wards. It appears that the administrator and guardian has safely preserved all bank accounts, checks, all claims filed against the estate duly probated, with the exception of the Hornaday claim of about $42.00, which was lost after the suit was started; that he has checks for all expenditures, and has supporting vouchers for all store accounts or similar transactions. It also appears from the referee's report and from a review of the entire record herein that all guardianship funds were invested by loans to the estate or by loans to the Cedar Rock Church, or to F.B. Culp.
It also appears by the return that the estate would often owe the guardian account, that the guardian would owe the estate, and again that the estate was indebted to James H. Glenn personally or as attorney. The referee mentioned this in view of the fact that, in restating the account, the accountant used a different method from that used by the administrator. As a matter of fact, James H. Glenn was never indebted to the estate or to his wards. The contrary might be inferred from the accounting system of Mr. McLarnon, which is different from the one used by the administrator.
It is true that in some instances, check of the administrator or guardian to the creditor is not supported by separate voucher, but in each instance check was made payable to the creditor and indorsed by the creditor, and the referee held that this was sufficient proof of the debt and of the payment thereof. Formerly, many accounts against the estate were paid by cash. Then receipted bills were necessary, but now most of the accounts and obligations are paid by checks, and the referee properly held in this case that the checks in evidence were proper vouchers for the debts paid by the several checks.
The referee has very properly incorporated into his report that the administrator has saved the children substantial sums of money in their living expenses. Florence lived in his mother's home several years. Sadie lived in the home of his mother-in-law, Mrs. Allison, at York, for about two years. Elizabeth Worthy has lived in the home of the administrator all the time, except for about two years. No board was charged in any of these three instances, and practically all clothes and education furnished free of cost. David Lee was furnished a home in the Thornwell Orphanage at Clinton about four years without expense to the estate, and is now living with relatives, without expense to the estate. J.L. Worthy, Jr., has been at Thornwell Orphanage since July 1, 1926, without expense to the estate. Florence Worthy has been at the Church Home Orphanage at York four years or more, without expense to the estate. At the time of the filing of the return in December, 1928, the administrator had saved the estate approximately $2,800.00 in this way. Three of the children are still so located, and there has been an annual saving of at least $500.00 since; so that at least $4,300.00 has been saved the estate by the administrator arranging homes for the wards without expense. It is further true that Sadie Worthy for the past two years has been working, receiving her own wages and making her own living without expense to the estate. David Lee has been living with relatives, without expense to the estate.COMMISSIONS
In view of the fact that the administrator has saved the estate over $4,300.00 as just outlined, it may seem an undue hardship to deprive him of any of his legal commissions, yet, under the strict law, I will have to affirm the referee's findings in this regard and allow him commissions only for the first year. However, I am going to affirm the account as stated by the referee and allow him the right to offset the account as reported by the referee. Ordinarily the commissions due would be approximately $1,150.00. The actual commissions allowed are $468.58.
It would be well to state at this point that it was the best judgment of the administrator that he retain the farm, not only because of its value, but also as a home for the children, should necessity require. In fact, relatives of the children lived on the plantation through 1926, and from the time of the death of Mr. Worthy until June 26, 1926, one or more of the children have lived upon the farm and in the former dwelling of J.L. Worthy; so that the farm was maintained for the purpose of a family home up through 1926, and in connection with the farm it appears from the evidence and the report of the referee, and I confirm the findings, that the administrator ceased to operate the plantation and farm in December, 1922. That in January, 1923, he rented the farm for standing rent to such tenants as he could obtain without making advancements to the tenants. He succeeded well in 1923, obtaining $1,100.00 as rent. This was partly due to the high price of cotton in 1923. It was of course necessary to maintain the real estate in condition to be rented to tenants as well as to maintain the family home as a fit place for one or more of the children to live. The big barn burned on the place about one month before Mr. Worthy died. The main dwelling had to be recovered one year, and other repairs had to be made to the buildings in order to keep what tenants were on the place.
As appears from the second report of James McLarnon, expert accountant, which is a complete restatement of all accounts involved in the administration and guardianship, the Worthy estate owes the wards $3,942.06. On the advances made by James H. Glenn personally to the estate, there is due by the estate to James H. Glenn, personally, $1,229.82. This I hold to be a debt against the estate. Hood Worthy not only required all his guardian funds for his maintenance and support, but he overdrew these funds by expenditures made by the administrator in the sum of $330.26, and made for his necessary support and maintenance. This I hold to be a personal obligation of Hood Worthy to James H. Glenn, but not a debt of the estate to James H. Glenn, so the credit due James H. Glenn is thereby by reduced from $1,229.82 to $899.56. The total indebtedness of the estate is $4,841.62, and each child's part of this total indebtedness is $691.66. This amount of $691.66 is a charge against the one-seventh interest of each child in the estate lands. Offsetting this is the credit balance of each ward or child as appears in the McLarnon report, and which is hereafter set forth in detail. The credit of each child is the balance remaining for each child from the $1,000.00 insurance money received by the child from his father.
I hold that James H. Glenn is entitled to the right to offset the amount due him as guardian to each child against the amount of each child's part of the estate indebtedness as above set forth. That is the one-seventh part of each child's interest in the estate lands is subject to a charge of $691.66. Offsetting this is the balance due by the guardian to each ward. This offset either raised or reduced the net amount of the estate debt to be charged against each child or ward according to the expenditures made by the administrator guardian in behalf of each child.
The following is a statement of this offset as to each ward:ELIZABETH WORTHY
It appears from the McLarnon report, which is made as of date September 1, 1930, that there is due Elizabeth Worthy by her guardian, James H. Glenn, $858.71. From this amount must be deducted her one-seventh of the indebtedness of the estate, $691.66, and which still leaves a balance in her guardian funds of $167.05, so that upon a sale of the real estate or upon a final division of the land, after the payment of all costs and expenses as hereinafter mentioned, Elizabeth Worthy, now of age, is entitled to receive $167.05, and, in addition, her one-seventh part of the real estate.SADIE WORTHY
It appears from the McLarnon report that there is due Sadie Worthy by her guardian as of September 1, 1931, $245.72. Her one-seventh part of the amount owing by the estate of James H. Glenn individually and as guardian is $691.66, so that her one-seventh interest in the estate lands is chargeable with this balance of $445.94. Upon sale of the real estate or upon final division thereof, this amount of $445.94 must be first deducted, together with one-seventh part of all costs and expenses as hereinafter mentioned, before Sadie Worthy can receive any part of the real estate.FLORENCE WORTHY
It appears from the McLarnon report that there is due Florence Worthy on her guardian account, $719.05. Offsetting this is her one-seventh part of the indebtedness of the estate amounting to $691.66, leaving a balance due this ward of $27.39. Her one-seventh interest in the real estate is also chargeable with one-seventh of the costs and expenses hereinafter mentioned before she is entitled to receive her one-seventh part of the real estate.JOE LAWRENCE WORTHY, JR.
It likewise appears from the McLarnon report that there is due J.L. Worthy, Jr., of his guardian fund, a balance of $490.39. His one-seventh interest of the estate debt is likewise $691.66, so that his interest in the estate lands is chargeable with $201.27, together with one-seventh of the Court costs, expenses, and taxes, as hereinafter mentioned. This amount must be paid in before this ward is entitled to receive any part of the proceeds of the sale of the real estate.DAVID LEE WORTHY
It appears from the McLarnon report that there is due this ward, David Lee Worthy, a balance of $538.53 of his guardian funds. His one-seventh part of the estate debt is $691.66, in addition to his one-seventh part of the Court costs and taxes and expenses, as hereinafter mentioned, so that his one-seventh interest in the real estate is chargeable with the sum of $153.13, and that amount must be paid in before he receives his one-seventh part of the real estate.HOPE WORTHY
It appears that in 1923 James H. Glenn, as guardian, made full and final settlement with Hope Worthy, and is due his discharge as guardian. However, Hope Worthy was indebted to the estate by reason of advancements made for his support and maintenance and for farming operations of 1921. He paid into the estate $502.75 in 1923; the last payment being July 5th. This was $110.68 in excess of the amount due by him for previous advances made in his behalf. The net sum was immediately used by the administrator for proper estate expenses or payment of its debts. If it were a practical question, I would be inclined to disallow the interest charged by the accountant on this amount, which is $190.10 as of September 1, 1930. But since Hope Worthy mortgaged his interest and later conveyed it to James H. Glenn, trustee, for the purpose of equalizing his liability for Hope Worthy's part of the estate debt, this difference of $80.00 is not a practical question. I therefore hold that his one-seventh interest is chargeable with the sum of $501.56, and which by agreement is second in priority to the lien of the Snell mortgage.
In October, 1930, the one-seventh part of the estate lands were set off to Hope Worthy, subject to the Snell mortgage. This consisted of tract No. 1, containing 114 acres, and by previous decree of this Court of date October 14, 1930, this tract was sold and proceeds of sale applied to the payment of the Snell mortgage as directed in the decree of sale. By this writ of partition and this decree of sale, and by Mrs. Snell becoming purchaser of the 114 acres at this sale, I do not see any practical good in allowing Mrs. Snell a judgment for any amount against James H. Glenn, trustee, as grantee of L. Hope Worthy, nor is she entitled to judgment for any amount against L. Hope Worthy, since she did not serve a copy of her answer upon him. I therefore cannot sustain the position of the exception of Mrs. Snell asking for this deficiency judgment. The estate will not realize anything from the sale of Hope Worthy's interest, but since each ward's part is chargeable with one-seventh of the debt separately, and is not chargeable with this deficiency arising from the sale of Hope's interest, no hardship is worked upon the other wards. I am not allowing either guardian or creditor, James H. Glenn, individually, a general judgment against the estate, but I am holding that each one-seventh interest is subject to one-seventh of the estate's debts. This interest of each child in the guardian fund and in the assets of the estate is one-seventh. The obligation of each child is to pay one-seventh of the debt left by J.L. Worthy or incurred in their maintenance and support. Since the interest in the assets and the interest in the liabilities are the same, it is equitable and lawful that these accounts be offset.HOOD WORTHY
It appears from the McLarnon report that Hood Worthy has consumed all his guardian estate, and, in addition, has been advanced, by the administrator of his father's estate, the sum of $330.26. In view of the offset allowed on the other accounts, I hold that James H. Glenn must look to Hood Worthy personally for this overdraft of $330.26, and not to the estate generally, so that the one-seventh interest of B. Hood Worthy is chargeable first with $691.66, his one-seventh of the estate debts, and next with $330.26 due by him to James H. Glenn.
It appears from the record that Hood Worthy mortgaged his one-seventh interest in the estate lands to S.C. Carter for $200.00, which mortgage has been foreclosed. It also appears that in October, 1930, by writ in partition. One-seventh of the estate lands was set off to Hood Worthy, being tract No. 2, and containing 71.5 acres and that by decree of sale dated October 14, 1930, duly consented to, this tract of land was sold in November, 1930, and bought by James H. Glenn. Since he is the beneficiary of the liens established against this tract, in the sum of $691.66 and $330.26, he has the right to waive the priority of these liens in favor of the mortgagee, S.C. Carter. By purchasing this tract, and after payment of Mr. Carter's mortgage, he has the opportunity to realize part or all of the amounts due him and the estate by the defendant, H. Hood Worthy.ACCOUNTS OF SEVERAL WARDS MUST BE EQUALIZED BEFORE FINAL DIVISION
It is apparent that some of the amounts due each ward and the net amount charged as a lien against each child's interest in the land is a different amount. That when any final settlement is had by sale of the premises, or otherwise, proper equality must be observed between the several children. Some of the children have required greater expenditures in their support than others. Those children who have been economical, or who have benefited most by having taken advantage of the homes tendered them, must receive the benefit of this financial advantage, and receive first the benefit of any sums derived from the sale of the premises or otherwise before final distribution of the funds be had.
In affirming these offsets, I have followed the recommendations of the referee stated by him in this language:
"I have held that J.H. Glenn is entitled to the right to offset against the amount as shown to be due each child by the amount that each child is due him as their part of the indebtedness. I have arrived at this conclusion by reason of the fact that J.H. Glenn took this estate when prices of land and every other commodity was at its height in the year 1920 and before he had possession of the estate a year prices had fallen to the lowest they have been in the past ten years. He attempted to operate the farm for the benefit of the estate, which was a direct benefit if any had been derived to the children. If he had ceased to operate the farm and had immediately sold the land, it would have been what would have appeared at that time a great sacrifice. It is true prices never recovered from the low prices of 1921 but J.H. Glenn acted on his best judgment in operating the farm and hoping as every one else did, that the financial depression would soon pass and that he would be able to operate the farm at a profit to the benefit of the estate and the children, and any profit would go to them and not to him personally. He was operating for their best interests and not for his personal gain, and he should not be required to bear the loss under such circumstances.
"It also appears that J.H. Glenn as administrator, on authority of the Probate Court under order of May 20, 1922, which is in evidence in this case, borrowed from himself as guardian $3,000.00 for the purpose of paying the indebtedness of the estate. This is certainly the authority of the Court for making loans from the guardianship to the estate and justifies the offset that I have above made. This amount from the date of that order to the first of September 1930, the date of the McLarnon report, together with the interest at 7 per cent, would amount to about $4,700.00, which is nearly the total amount of the indebtedness of the estate
"It also appears that the interest of each child in the guardianship money was equal and the interest of each child in the assets of the estate was equal. I can see no reason why J.H. Glenn should be required to pay each minor the amount as shown by the McLarnon report to be due by him to them and to bear the loss of the indebtedness of the estate, or to be thrown on the land to protect himself. I think there is no doubt but that he has a right to reimburse himself out of the land for the indebtedness of the estate and if he has such right there is no doubt but that he has a right to make the offset and I think it would be nothing but equitable for him to be allowed such a right. I don't think that counsel for the minors would deny him the right to reimburse himself out of the land for the contention as I understand it of counsel for the minors is that he should be required to pay out of the money shown by the report to be due by each minor and to reimburse himself out of the land.
"This matter has been before me for some eighteen months and I have given the matter much thought and have heard much testimony about the transactions of the estate and if J.H. Glenn is not allowed the offset as hereinabove stated I think he will suffer an injustice. It is true that J.H. Glenn did not make annual returns, as required by law to do, but aside from that he has done no legal or moral wrong in connection with this whole matter, either as guardian or as administrator and his failure to make annual returns is not the proximate, or even the remote cause of the indebtedness on the estate or any loss to it. This is another reason why the offset should be allowed.
"J.H. Glenn also saved the children substantial sums by way of support. Through him, one of them was kept in the home of his mother for some time, and one of them kept in the home of his mother-in-law for some time with but very little cost, and he made arrangements for others kept in orphanage free of cost. Elizabeth Worthy was kept in his own home practically as a member of his family except for some small sum which was paid for some of her clothes. This accounts in some way for the fact that the McLarnon report shows that he is due Elizabeth as guardian more money than he is due any other one of the children.
"In my original report I had this to say regarding checks as vouchers. `It is true that there is not for each item a verified receipt or bill which was paid but there is a check made payable to the creditor and endorsed by the creditor and this I hold as sufficient proof of payment. Many years ago when many, if not most of the transactions of an estate were made by payment of cash, then strict accounting would require a receipted bill as evidence of payment, but now since most of the payment of bills of an estate are made by checks, a check made by the guardian or administrator to the creditor and endorsed by that creditor should be sufficient evidence of the payment of that debt, and that is why I instructed Mr. McLarnon to allow credit for all bills paid to creditors by check when that check bore endorsement of the creditor.' I here wish to repeat that proposition of law and it is especially true where the guardian or administrator testified, as did J.H. Glenn, in this case, that certain checks on which there was no endorsement was used to pay certain bills referred to in his testimony."
In this connection, I wish to call attention to the comments of the administrator and guardian attached to his returns, setting forth in summary form the sources of income, the classification of expenditures, each child's separate living cost, and other information showing the interest of the administrator in the estate and in the welfare of the children.
I now desire to set forth the manner in which this estate should be concluded, and the guardian and administrator discharged and bonds satisfied.
It is ordered that the administrator and guardian forthwith file returns as of July 13, 1931; that these returns not only be submitted to the Probate Court, but to the referee as well; that a statement of the accounts together with receipts and disbursements for each ward be made as of July 13, 1931; that the wards' accounts be credited with the interest at 7 per cent. per annum, as previously credited by the accountant. And that likewise, the estate's overdraft due James H. Glenn be charged with interest at the same rate, which has been the accountant's method in the statement of these accounts; that the administrator report all unpaid taxes and any other proper items necessary to be reported as a part of his final return. It is further ordered that the bill of the accountant and stenographer's bill be taxed as part of the cost in this case, together with other proper Court costs. It is further ordered that the fee of $250.00 to J.M. Wise, special referee herein, be taxed as part of the cost in the case.
It is further ordered that the plaintiff's attorneys be allowed a fee of $500.00 for their services rendered to the administrator in this case; $250.00 to be paid to Col. A.L. Gaston, of the firm of Gaston, Hamilton Gaston, and a like sum to McDonald, Macaulay McDonald, in full of services rendered by the old firm of Glenn Macaulay, and by the present firm of McDonald, Macaulay McDonald. A review of the record herein, of the length of the account, of the issues, and of the work done by the attorneys, indicate that the fee allowed the plaintiff's attorneys in this case is reasonable and proper.
I think it entirely proper, and so order that all costs be taxed against the estate generally. That is one-seventh of the cost to each child, and entered as a judgment against the one-seventh interest in the real estate. A review of the testimony shows that the administrator and guardian has kept a full record. That checks are produced for all expenditures. All estate claims have been presented by itemized accounts. That payment of the bills incurred by the administrator and guardian were supported by checks in every instance, but by receipted bills in most instances and in all instances when called for. These records were all available before the reference commenced. It further appears that when required at the first reference, the administrator and guardian promptly separated each ward's account in the green book. In fact this had been previously done, for on sheets attached to the final return are statements of the amounts expended for each ward, separately. It further appears that the plaintiff consumed very little of the time involved in the reference, while by far most of the time consumed was by the attorney for the various minors. Under these circumstances, I order that the Court costs be charged against the estate as a whole.
It is further ordered that upon this final accounting, to be had as of July 13, 1931, the judgments be entered of record against each ward for the net amount due by each ward for his or her one-seventh part of the estate's debts including taxes, Court costs, and other items herein mentioned, subject to the offset due by reason of any balance due such ward for the guardian fund. It appears that by reason of the writ of partition and the return thereon had in October, 1930, the estate lands have been subdivided, and that the two tracts aggregate 409.27 acres, having been set off to Mary Elizabeth Worthy, Nancy Sarah Jane Worthy, Virginia Florence Worthy, David Lee Worthy, and Joe Lawrence Worthy, Jr., as their part of the estate lands as tenants in common, so that each of these five children has, as his one-seventh interest in the estate lands, a one-fifth interest in tract No. 3, containing 409.27 acres as aforesaid.
Upon filing of the return as of July 13, 1931, and upon approval of same by the referee herein, it is further ordered that James H. Glenn be discharged as administrator of the estate of J.L. Worthy, and that the bond be satisfied.
Ordered further, that the return of James H. Glenn, as guardian of the six Worthy children, be approved, and that he be discharged as guardian of B. Hood Worthy, Mary Elizabeth Worthy, Nancy Sarah Jane Worthy, Virginia Florence Worthy, David Lee Worthy, and Joe Lawrence Worthy. Since both Hood Worthy and Mary Elizabeth Worthy are now of age, it will not be necessary for any new guardian to be appointed. However, the four remaining children are still minors, and the Probate Court is at liberty to appoint as their guardian any proper person who may petition the Court to be appointed as their guardian, subject to the usual requirements of a guardian.
It is further ordered that any party to this action may, upon proper notice to the attorneys of record herein, apply for an order of sale of the premises belonging to the four minor children, at such time that the parties so applying can show to the Court that a sale of the premises is to the best interest of all parties concerned, and will work no hardship or injustice to any of the parties interested herein, whether as owners of the premises or as judgment creditor against the said premises. Likewise, when such showing can be made, any party may apply for an order directing or confirming a private sale of the premises, if a satisfactory price be offered for the estate's assets for a private sale. In this connection, attention is called to the return of the commissioners, made in October, 1930, showing their appraisal of the value of the estate lands.
In coming to the conclusion the Court has reached, in holding that the advances made by James H. Glenn to the estate are valid debts, and in further holding that it is proper to allow an offset of the balance due the wards on their guardian account against the debt still due by the estate, whether to the guardian fund or James H. Glenn personally, I have considered the following authorities:
In the first place, this is a suit in equity, and the powers of the Court of equity are broad. I am sure that the Court has done substantial justice to all parties to this action, and will not here restate my previous findings and those of the referee in this regard, which have been fully stated heretofore. The general principle is fully stated in 24 Corpus Juris, page 441: "Although the duty of a personal representative to serve the best interest of the estate does not impose upon him any obligation to advance money or use his own funds for that purpose, it authorizes him to do so, and if in good faith and for the benefit of the estate, he advances his own funds to pay debts or discharge contracts which are just charges, against the estate, he is entitled to reimbursement."
The same principle is set forth in 11 Ruling Case Law, page 343; also page 126; also paragraph 122, page 119. The same principle is stated in 18 Cyc., page 570. In the citation in Corpus Juris and Cyc. just mentioned, we find, in the footnote, reference to Brooks v. Brooks, 12 S.C. page 422, at page 461. Also Watts v. Watts, 2 McCord, Eq., page 77. In Brooks v. Brooks, the executrix had borrowed money to pay for certain slaves for an estate in which she held personally a life estate. As to the debt, the Court held: "It is not disputed that the debt was a legal demand against the estate of W. Brooks and was paid by Mrs. Brooks out of her individual estate; she is accordingly entitled to credit therefor."
Watts v. Watts is very full upon this point, declaring that "where a trustee has in good faith made advances out of his own funds for the benefit of the trust estate, he is entitled to be refunded out of that estate." A careful reading of Watts v. Watts justifies the holding of the Court in the present case. For this reason I do not deem it necessary to quote at length from Watts v. Watts.
As to the cases cited by the attorney for certain minors, Smith v. Moore, 109 S.C. in the last sentence on page 200, 95 S.E., pages 351, 353, the learned Justice, Honorable George W. Gage, says: "But facts make the law of a case, and the facts here differ from those of the cases cited." In Smith v. Moore, there had been unquestioned mingling of the funds. Separate bank accounts had not been kept. The two estates were mixed together. In the Worthy case separate accounts were always kept, and separate accountings had. From the evidence, I conclude that at any time a statement could be made up showing just how the guardian account stood and how the administrator account stood, and in no sense was there any confusion or commingling of the funds as in Smith v. Moore. The loan of the guardian funds to the administrator was in the nature of an investment, and in effect secured as a first claim against the home plantation belonging to the wards, whose interest in the assets of the estate and its liabilities were in the same proportion.
Since the guardian funds were loaned to the estate to preserve the estate assets and to preserve the plantation as a family home for the children, for which purpose it was needed until 1926; and since I have ordered a decree that a lien be declared upon the interest of each minor in the estate lands to the extent of the minor's guardian fund, subject to the offset of such minor's one-seventh part of the indebtedness of the estate, there is no longer any need of continuing the administration or guardianship. It is therefore finally ordered, adjudged, and decreed that James H. Glenn be discharged as administrator of J.L. Worthy, and the bond ordered satisfied and canceled, and the surety discharged.
It is likewise ordered, adjudged, and decreed that James H. Glenn be held to have fully accounted as guardian herein; that he be discharged as guardian of the six Worthy children as prayed for in the complaint, with leave for any proper person interested to apply for new letters of a guardianship over those children who are still minors, to receive any subsequent funds that may belong to such minors, either from rent and profit of the real estate, or from sale of their interest therein.
Mr. R.L. Douglas, for appellants, cites: As to guardian and ward: 109 S.C. 196. Construction of statute: 161 S.C. 479. Trustee may loan funds to private persons provided he takes security: 1 S.C. 209; 1 S.C. 279; 2 McC., 77; 98 S.C. 420.
Messrs. Gaston, Hamilton Gaston and McDonald, Macaulay McDonald, for respondent, cite: Where administrator compelled to pay debts with own funds he may be reimbursed from the real estate: 24 C.J., 441; 17 N.C. 262; 18 Cyc., 570; 12 S.C. 422; 2 McC. Eq., 77; 12 R.C.L., 221; 82 S.C. 109; 63 S.E., 128; 156 S.C. 346; 153 S.C. 349; 162 S.C. 133; 160 S.E., 200. Finding of referee confirmed by Circuit Court will ordinarily not be disturbed: 150 S.C. 244; 147 S.E., 874; 161 S.E., 767; 144 S.C. 70; 142 S.E., 36; 128 S.C. 31; 121 S.E., 674.
January 20, 1933. The opinion of the Court was delivered by
On June 30, 1920, J.L. Worthy died intestate, leaving as his only heirs at law seven minor children. Hope Worthy, eighteen years of age, was the eldest, and was the only child of the first marriage. The other six, children of a second marriage, ranged in years from two to thirteen. On July 13, 1920, James H. Glenn, the respondent herein, a practicing attorney of the Chester Bar, was appointed by the Probate Judge as guardian of Hope Worthy, and his bond was fixed at $2,000.00. On the same day he was appointed guardian of the other six children; bond being fixed at $12,000.00. On July 21, 1920, he was appointed administrator of the estate of J.L. Worthy, and his bond was fixed at $30,000.00. On December 20, 1923, James H. Glenn made his final return as guardian of Hope Worthy, and received his discharge. No interest of Hope Worthy is herein involved.
For the benefit of his six minor children, the intestate carried six policies of insurance in the sum of $1,000.00 each. By August 10, 1920, all six of these policies had been collected, and the guardian had on hand the proceeds of same amounting to $6,000.00. Some of this money was loaned on real estate mortgages, but it appearing that all of those loans were collected in full with interest, no further mention need be made of them.
No returns were filed by the respondent herein as guardian until the early part of 1929, and the return then filed was as of December 28, 1928, although he had been handling the guardianship funds since July, 1920.
On June 23, 1921, the respondent filed his first annual return as administrator which showed that there had come into his hands as such administrator during the first year the sum of $5,223.28; the report of the auditor, made later, shows this amount as $5,238.14. No further returns were filed until the early part of the year 1929, when returns were filed as both administrator and guardian. The return made as of December 28, 1928, was refused by the Probate Judge, for the reason that both accounts "were all mixed up" and he could not understand the nature of the return. On January 2, 1929, a suit was brought in the Court of Common Pleas for Chester County by the administrator guardian setting forth various facts and praying judgment:
(a) That he be allowed to account for his actions and doings as administrator guardian.
(b) That he be directed how much further to proceed as both administrator and guardian.
(c) That the Court authorize partition of the one-seventh interests of Hope Worthy and Hood Worthy.
(d) That certain of the property be sold in aid of assets.
(e) That the amount due by the administrator to the guardian be reconciled and payment directed, and that any other debts be declared liens upon the land.
This complaint, which was signed by Glenn Macaulay, as attorneys for the plaintiff, brought in all parties in interest. A.L. Gaston, Esq., was appointed guardian ad litem for the minor defendant Mary Elizabeth Worthy, and R.L. Douglas, Esq., was appointed guardian ad litem for the other minor defendants. Formal answers were filed by the guardians ad litem alleging the minority of the defendants and submitting the rights of the minor defendants to the Court for protection.
During the year 1929, six references were held by John M. Wise, Esq., who had been appointed special referee by order of Honorable J.K. Henry, Circuit Judge. The special referee filed his report after securing the services of an expert accountant to assist him in making up a statement of the accounts. An appeal was taken from this report by both parties, and, it appearing that the accountant had omitted from his statement various items between James H. Glenn, individually, and James H. Glenn, as administrator and guardian, involving about $10,000.00, Judge Sease refused to pass upon any of the questions presented by the appeal and remanded the case for a more complete report by the special referee. Two more references were held, and a new statement prepared by the accountant. The first report of the special referee was filed in November, 1930, and from it the present appellants appealed. This appeal was heard by Judge Ramage, and his decree was filed in July, 1931. The case now comes to this Court on appeal from the decree of Judge Ramage.
From the various references, the report of the special referee, and the decree of Judge Ramage, we have gathered additional facts pertinent to this case; a brief narrative of them being necessary to a more complete understanding.
When J.L. Worthy died in June, 1920, he was the owner of a large tract of land of nearly 600 acres in Chester County, farming implements, machinery, stock, and cattle, and also was the owner of a small country store. His crop was already planted and "lay by" time was near at hand when he was stricken with typhoid fever and died. He had made contracts with various tenants, had borrowed money from a bank in Chester, and had assumed other obligations which rendered it necessary for the administrator to continue the farming operations for the remainder of the year 1920. Smith v. Smith, 105 S.C. 393, 89 S.E., 1032, to be referred to hereafter.
The administrator applied to the Probate Judge for permission to operate the farm for the year 1921, and from the operation made a small profit. He likewise secured an order from the Probate Judge to operate the farm for the year 1922, and again made a small profit. After that, and probably up to the present, the farm was rented.
The administrator also applied to the Probate Judge for an order permitting him, as administrator, to borrow from himself, as guardian, certain of the guardianship funds to be used in the payment of debts due by the estate, and also certain debts or advances made by himself. This was allowed, and $3,000.00 were so taken over from the guardianship estate by the administrator. The administrator also advanced his own funds in the farming expenses, taxes, insurance, etc., and claims that he is entitled to a refund of same.
The figures as taken from the statement of the auditor, reported by the special referee and confirmed by the Circuit Judge, are:Amount due the wards by the Worthy estate .......... $3,942.06 Amount due James H. Glenn by the Worthy estate 899.56 _________ Total debt of the estate ........................ $4,841.62 Each child's part of the debt is one-seventh each, $696.66, and this is made a charge of one-seventh each on the land of the estate. However, each child is held to be allowed a credit of such portion of the $1,000.00 insurance as has not been expended upon maintenance and support; the amount being different in the case of each child. By the decree, each child is likewise charged with a one-seventh amount of all costs and expenses of this suit. Just what will be the total amount of costs has not yet been determined, but the following items are listed as a part of the Court costs: J.M. Wise, special referee ......................... $ 250.00 A.L. Gaston, attorney for administrator ............ 250.00 McDonald, Macaulay McDonald, attorneys for administrator ................................... 250.00 Stenographer ....................................... 88.00 James McLarnon, accountant ......................... 250.00 --------- Total ........................................... $1,088.00 Having determined this indebtedness, the Circuit Judge, confirming the report of the special referee, held that the children are liable to the administrator for this amount, and that the administrator could offset his losses of administration with the money yet in his hands as guardian, to wit, about $1,890.00. The decree also provided that the administrator should have judgment against the minors for the established debt, and also all costs and expenses.
The appeal from this decree sets out six principal issues to be determined, and while we may not follow the exact order adopted by the appellants, we will endeavor to dispose of all grounds of appeal.
The grounds of appeal may be briefly stated as follows:
(1) Can the administrator reimburse himself for losses sustained by operating the farm?
(2) Can the guardian be relieved of liability to his wards for the expenditure of $3,000.00 of their money upon an order signed by the Probate Judge, to use said money for the payment of debts of the estate?
(3) This is practically the same as No. 1.
(4) Can the administrator have judgment against the heirs and a lien on their real estate for losses incurred in operating the farm without authority?
(5) Practically the same as No. 4.
(6) Relative to charging costs and expenses and attorney's fees to the appellants without any hearing being afforded their attorney upon this question.
The intestate, who was engaged in both farming and mercantile operations at the time of his death in the middle of the year, left many contracts to be completed, and it was unquestionably the duty of the administrator to take charge of the business for the remainder of the year. In the case of Smith v. Smith, above mentioned, the Court holds at pages 398 and 399 of 105 S.C. 89 S.E., 1032, 1034, as follows: "The evidence shows when Smith died that there were a large number of outstanding contracts made by him to furnish supply for the farmers that year. Under these circumstances some one had to act and take charge of his farming interest and carry on the crop and carry out his outstanding contracts for the year, and it was within the province and jurisdiction of the Probate Court to make the order it did, and neither the heirs or creditors were necessary parties to this proceeding. It was necessary, under the circumstances of the case, for the representative and administratrix of the deceased to continue the business for that year for the purpose of carrying out the existing contracts and winding up the same and collecting the money due, or to become due, in the fall of that year, and to manage the farming operations of the deceased for that year, and for this purpose to employ such aid as was necessary in the way of clerks, bookkeepers, and overseers to carry on the mercantile and farm operation, paying them reasonable compensation for their services and hire. His Honor was in error in holding that the order of the Probate Court was void, and that the administratrix should be charged any loss incurred by the estate by reason of operating the business under the terms of said order, which he found to be $2,877.13. It was necessary for the business to be carried on, and it does not appear that the administratrix did anything that she was not empowered to do under the order of the Probate Court, and that Court had jurisdiction and authority to grant the order made; and these exceptions are sustained."
It is not claimed, however, that any losses occurred by reason of this operation of this business for the remainder of the year.
At the close of the year 1920, the administrator filed his petition with the Probate Judge praying that permission be given him to operate the farm for the year 1921. Likewise a similar petition was filed to operate the farm for the year 1922. Both petitions were granted by appropriate orders. It will be borne in mind that these petitions were not filed by James H. Glenn as guardian, but as administrator. At the end of the first year the administrator made a return which showed receipts and disbursements of $6,623.28; $1,400.00 of this being borrowed money. The total indebtedness of the estate was about $7,200.00, all of which was paid by the administrator before the end of the year 1923; a considerable portion of the money used to pay the debts was borrowed from the guardianship fund.
Three distinct personalties on the part of the respondent must be considered in this case. He was administrator of the estate; he was guardian of the children; he was a creditor of the estate, having advanced certain of his personal funds.
As administrator he had nothing whatever to do with the real estate after the first of January following the death of J.L. Worthy. As shown above, from the case of Smith v. Smith, he rightfully took charge of the real estate for the remainder of the year 1920, but his farming operations for the years 1921 and 1922 were without warrant of law. The orders of the Probate Judge authorizing him as administrator to continue to operate the farm were not within the power of the Probate Judge to grant, and hence constituted no authority. His rental of the farm lands for the years following 1922 were acts of his own volition, and did not have even the sanction of the Probate Judge. As before stated no returns were being made in all of these years, and hence it is but fair to the administrator to say that it is doubtful if he himself knew accurately the condition of his affairs. When he did make an effort to file a return, as of December, 1928, the two estates were so mixed and confused that the Probate Judge would not accept the return.
In discussing this phase of the case wherein the administrator claims reimbursement for money paid out by him because of estate expenses, we refer to the case of Ex parte Coleman, 98 S.C. 420, 82 S.E., 674, in which the executors claimed commissions on the income from farming operations for the years 1908, 1909 and 1911. The testatrix died in August, 1908, and commissions were allowed for that year, but were denied for the remaining years upon two grounds: First, it was not their duty to continue the farming operations after 1908; and, second, that they had employed agents to attend to that business for them, and had paid the agents from the funds of the estate.
It also appeared in this case that the executors had advanced money of the estate to a negro tenant named E. Littlejohn and had taken his note therefor, which had not been paid. In denying the claim of the executors for credit on this item, the Court summarily disposed of it by saying: "This note was properly charged to them."
In the case of McKee v. Mobley, 3 S.C. 242, the plaintiff, father of the intestate, took possession of a store and stock of goods belonging to the estate of his son, without authority of law, and carried on the business. About a year thereafter he applied for letters of administration. In accounting as administrator, the plaintiff claimed credit for $1,412.00 advanced by him while conducting the business. After holding that the case must be treated as one of advances by the administrator in carrying on the business, the Court then says that the proper principle of accounting would be for the plaintiff to show that the estate had derived benefit from the advances, and to show the extent of the benefit. Further, "this should be clearly shown, or the administrator would not be entitled to the allowance."
If the administrator could not claim a credit for an advance of his own funds unless he could show a benefit to the estate, how can the respondent in the present case claim a credit for funds advanced from a trust estate when it is only a loss? The claim of the administrator to offset his losses as administrator against the guardianship money now in his hands and not expended must therefore be denied.
Relative to the relation of the plaintiff as guardian for the minor children, the situation is somewhat similar. The Probate Judge had no legal right whatever to grant an order for the guardian to lend to the administrator funds of the guardianship estate for the purpose of paying debts of the estate, or for any other purpose. The loan was made by the guardian to the administrator upon the promise of an unsecured note to be given by the administrator, which note, according to the record before us, was never given.
It is impossible to find any authority whatever for this loan. It was made in 1920, at which time the provisions of Section 9050 of the Code of 1932, wherein were set forth the kinds of permitted investments of guardianship funds, were applicable. Certainly no authority for this loan can be found under the provisions of that law.
When the plaintiff herein assumed his duties in the dual capacity of administrator and guardian, he very wisely undertook to administer these estates separately, and to that end deposited his funds in separate accounts in the bank. Later he was advised by the cashier of the bank to place all of his funds in one account. He followed this advice rather than the established law of the State.
The case of Smith v. Moore, 109 S.C. 196, 95 S.E., 351, seems peculiarly applicable. The Court says, quoting from page 201 of 109 S.C. 95 S.E., 351, 353:
"The chief property of the children, independent of their share of the above, consisted in some $5,500.00 derived from insurance of the life of H.E. Mooneyhan, payable directly to them, and some $2,500.00 they got directly from the estate of John Mooneyhan. In order to get hold of this fund of some $8,000.00 Moore became guardian of the children thirty days after he qualified executor, and then collected the fund. He mixed up the two estates without regard to the character of each. Out of the common fund thus in his hands, he paid the debts of H.E. Mooneyhan's estate above described, and he bought for his wards the one-sixth interest of the widow in the estate of H.E. Mooneyhan. And these are chiefly the acts of the guardian which the plaintiff wards have challenged.
"The two trusts were of a different character, and they ought to have been separately executed. It was and is yet the duty of the executor to administer the estate of H.E. Mooneyhan according to the rules of law. That estate has not yet been administered, and the executor has not yet received his discharge therefrom. The executor has never rendered any account to the Probate Court of his doing as executor, save the one account he made as guardian wherein he mixed the two estates.
"The complaint in the instant action is on the three guardianship bonds. There is no dispute about the amount of money Moore received as guardian for his wards, aside from their father's estate: that is to say, he got some $8,000.00 in round figures. That fund was in no wise liable for the debts due by the father's estate, no more than for the debts of a stranger. It was the duty of the guardian to invest that fund, pay the increment on it for the maintenance of the wards, and at their maturity to pay the principal to them. He is yet bound to do that, and his sureties undertook to warrant that he would do that, and they are yet bound to perform that undertaking."
The Circuit Judge recognized the force of this case, but endeavored to avoid its applicability by holding that the facts were entirely different, in that there was a commingling of the funds in the case of Smith v. Moore, whereas there was not in the present case. In this holding we think there was error and in support of this holding we refer to certain extracts from the record. The fact that all the funds were carried in the bank, under one account, under advice of the cashier, has been adverted to previously. In making an examination of the return, the attorney for the appellants considered the matter so badly mixed that he moved the special referee to employ an expert to restate the accounts. Upon objection by the attorney for the respondent, the special referee stated that he would look over the accounts before he decided the motion. After looking over the accounts the expert accountant was engaged, and he had to make two statements of the accounts; the first one not being acceptable to Judge Sease. The Probate Judge testified:
"Q. Was it (the return) separate from administration and guardian accounts? A. No, sir; all mixed up so that I could not tell heads and tails. I never did see anything so mixed up in my life * * * I found the papers all mixed up — the administration and guardianship — and not one of the children's accounts kept separate * * * I couldn't make heads and tails out of them."
Mr. McLarnon, the accountant, testified: "Mr. Glenn had this mixed up in one account. He started out with guardianship account and then transferred guardian account to administration account and then it dealt with it as one account."
So, then, under Smith v. Moore, supra, the guardian and his bondsmen must be held liable for the guardianship funds borrowed by the administrator and used to pay the debts of the estate to the extent of $3,000.00.
We are much impressed with the efforts of the guardian to render every assistance within his power to his wards, and with the reasons given in the decree for the protection of the guardian. We are likewise impressed with the fact that under the law the insurance money could not be given to the minor children in person, but that for their benefit the law gives their funds to a guardian for care and protection. Being deprived of the use of it by operation of law, they are powerless in regard to its management; but they have a right to depend upon the law to safeguard that which the law places out of their control and in the hands of another. The good faith of the guardian can always be relied upon as a defense to any charge of misconduct on his part, but it is not sufficiently all-powerful to always defeat the rights of those who by reason of age or other legal infirmity must look to the law for protection. The following extract from 11 Ruling Case Law, 136, seems to have the support of quite a number of authorities: "An administrator, or an executor, in the absence of authority therefor, is not permitted to use any part of the estate in trade, or manufacturing, or stock speculation, or other business venture, whereby the trust fund is put at hazard; and the doing by him of any of these things has generally been regarded as a breach of trust and a devastavit. It has been recognized from time immemorial as the characteristic duty of an administrator, to settle the estate of his intestate with reference to the situation of the assets at the time of the death of the decedent, and not attempt, by trade or speculation, to adjust the affairs of the estate upon an entirely different basis, which might seriously affect the question of distribution and in some instances render the estate insolvent. If a personal representative does carry on such a trade or business, he becomes answerable to those interested in the estate for all losses sustained, while he will not be allowed to share in the profits — the rule being that the persons beneficially interested in the estate may either hold the representatives liable for the amount so used with interest, or, at their election, take all the profits which the representative has made. The same penalty may be exacted of those who leave estates at the risk of business disaster by continuing without authority to operate business ventures in which the estates are invested when they come into their hands. In calculating interest in such cases the executor or administrator in fault may be charged with compound interest with annual rents, and it seems that he may be held liable for the highest legal rate of interest on the money so converted. In addition to the liability to those interested in the estate, such personal representative may be held personally liable on all contracts made with persons dealing with him in such business. No excuse can be found in the good intentions of the personal representative in venturing the funds of the estate in business in violation of this rule; and it is immaterial as to the apparent advantage which would be derived from such conduct."
The third personality with which we are interested in this appeal is that of James H. Glenn as a creditor. It appears that he has advanced several hundred dollars to himself as administrator. We are not altogether clear as to either the nature or the necessity of these advances, but notice by the report that they were advanced subsequent to 1922, the last year the administrator actually farmed the lands of the estate. The report shows that these advances amounted to $3,564.50, and that the administrator repaid himself $2,006.84, leaving a balance of $1,577.66. We have endeavored to show that the retention of the farm lands by the administrator was without authority, and that it was an unfortunate personal venture. Under the Coleman case, supra, his advances, under these conditions, cannot be charges against the estate. The Circuit Judge was therefore in error in allowing a lien upon the land for these advances.
In justice to the respondent, we consider it only proper to review the case relied upon by him in support of the decree of the Circuit Judge. His quotation from the case of In re Willcox, 162 S.C. 133, 160 S.E., 260, 263, omits the first part of the paragraph, which is as follows: "This Court will, as it should, extend its hand at all times to aid in giving proper protection to a ward whose estate has been wrongfully, recklessly, or negligently dissipated by an unfaithful guardian."
The quotation then continues that a guardian faithful to his trust should not be held too strictly for any technical requirement of the law.
This is the approved doctrine of the Courts, and in the Willcox case, failure of the guardian to comply with the statutory requirement of obtaining the consent and approval of the Probate Court was considered a mere technical violation of the law, and did not subject the guardian to a charge of misconduct in failing to obtain same. In the present case we should not be disposed to hold the guardian responsible for a technical violation of the statutory requirements.
The text in 24 C.J., 441, holding that the personal representative may be reimbursed his personal funds used for paying just debts and contracts of the estate, is not disputed. This authority, as well as the North Carolina case of Sanders v. Sanders, 17 N.C. 262, refers to debts existing when the personal representative took charge of the estate; not to debts created by him.
Brooks v. Brooks, 12 S.C. 422, holds: "It is not disputed that the debt was a legal demand against the estate of W. Brooks, and was paid by Mrs. Brooks out of her individual estate: she is accordingly entitled to credit therefor."
In Watts v. Watts, 2 McCord. Eq., 77, as well as in the Brooks case, the debt which the personal representative paid existed at the date of the death of the testator.
12 R.C.L., 221 is evidently cited in error. However, we find in 11 R.C.L., 221, a paragraph which conforms to the rule stated in the cases first set out above, to the effect that reimbursement by a personal representative is permissible when debts contracted by the deceased were paid by the personal representative out of his own funds.
On the question of the right of the guardian to expend a portion of the corpus of the estate, the respondent cites the case of Anderson v. Silcox, 82 S.C. 109, 63 S.E., 128, 131. In that case an expenditure was upheld in an opinion by Mr. Justice Jones, although Mr. Justice Woods filed a dissenting opinion. This was a case in equity, and the allowance of the expenditure of a part of the corpus seemed to have been influenced largely by the fact that the guardians had been denied the right to charge over $300.00 in premiums on bonds, and over $2,000.00 as commissions. However, we have no desire to question the doctrine announced in that case, and were there nothing else in this case than an expenditure of a part of the corpus for the urgent needs of the wards, the task of deciding it would be free from difficulty. In Pickett v. Geer, 156 S.C. 346, 153 S.E., 349, the trustees sold certain property without Court authority, but as the sale resulted in great benefit to the trust estate, the Court confirmed the sale, holding, as in Anderson v. Silcox, supra, that if application to make the sale had been made, the Court would have granted it.
On the question of the right of offset by reason of loans to the estate, the respondent cites the case of Falconer v. Powe, Bailey, Eq., 156. In this case the administrator had purchased property from the estate for which he had not paid, and had advanced his personal funds for the payment of debts of the intestate and for the support and education of the intestate's children. In his final accounting the Court allowed him to offset or take credit for the personal funds so advanced; a very different situation from the one here presented, of money advanced to the estate in taking charge of the real estate without authority.
The authorities cited by the respondent, to the effect that findings by a referee, concurred in by the Court, will not ordinarily be disturbed, are correct. The exception is that where the preponderance of the evidence is clearly against such finding, or where there is an absence of all evidence, the finding may be reversed. This is a suit in equity, and it lies within the power of this Court to review all of the facts. In fact, in cases of this nature, where the rights of minor children are involved, it is especially the duty of this Court to examine with the utmost care all of the facts in order that a proper decision may be reached.
The only other citation by the respondent is on the subject of the allowance of costs. In Anderson v. Silcox, supra, the Court says: "Being an equity case, this was within the discretion of the Circuit Court, and will not be disturbed."
In that case the referee had taxed the costs equally against both plaintiff and defendant, and the Court was evidently satisfied with the discretion as shown. This Court has never relinquished its power to review discretionary acts of the Circuit Court.
It appears from the testimony in this case that shortly after the death of J.L. Worthy in 1920 there came into the hands of the administrator almost enough money to pay the debts of the estate, which amounted to about $7,200.00. That considerably more money came into the hands of the administrator, and during the year 1923 the last of the debts had been paid. It also appears that $7,000.00 of insurance money has been collected; some of this being loaned out at interest and some loaned to the administrator. Just how much this fund was increased by interest does not clearly appear, but it does appear from the report of the special referee and from the circuit decree what amounts are still due by the guardian to the wards. From this finding there is no appeal, and the amounts are therefore fixed. They are as follows:For Mary Elizabeth Worthy ................ $ 858.71 For Nancy Sarah Jane Worthy .............. 245.72 For Virginia Florence Worthy ............. 719.05 For David Lee Worthy ..................... 538.53 For Joe Lawrence Worthy, Jr. ............. 490.39 For Hood Worthy .......................... 000.00 We have endeavored to show that the administrator has no claim against the estate for either his losses or his advances, and in this connection we may cite two South Carolina cases reported in Ex parte Chappell, 34 S.C. 99, 12 S.E., 934, and Rowell v. Hyatt, 108 S.C. 300, 94 S.E., 113, holding that such debts are personal to the administrator. His farming expenses alone were over $2,600.00 for 1921 and 1922, as admitted by his attorney in his brief. This brief also shows collections of over $13,000.00.
The amount expended by the administrator without authority far exceeds the balance still due the wards and the estate, but the attorney for the appellants in his brief calls attention to the fact that his clients do not claim the full amounts of these advances.
This is a typical case for the Court of equity to exercise its powers in an honest endeavor to arrive at what is just and right between the parties, and our conclusion is as set forth below:
MARY ELIZABETH WORTHY
She did not appeal from the decree, and hence her interest in the suit is fixed by the decree of the Circuit Judge.
NANCY SARAH JANE WORTHY
VIRGINIA FLORENCE WORTHY
JOE LAWRENCE WORTHY, JR.
DAVID LEE WORTHY
HOOD WORTHYThe balance still due her by the guardian is ....... $ 245.72 She is entitled to one-sixth of $3000.00 which was borrowed by the administrator .................. 500.00 --------- Due her by James H. Glenn .......................... $ 745.72 Balance still due her by guardian .................. $ 719.05 She is entitled to one-sixth of $3,000.00 borrowed by administrator ............................... 500.00 --------- Due her by James H. Glenn .......................... $1,219.05 Balance still due him by guardian is ............... $ 490.39 One-sixth of $3,000.00 borrowed by administrator 500.00 --------- Due him by James H. Glenn .......................... $ 990.39 Balance still due him by guardian is ............... $ 538.35 One-sixth of $3,000.00 borrowed by administrator 500.00 --------- Due him by James H. Glenn .......................... $1,038.35 Balance due him by guardian ........................ $ 000.00 He is entitled to one-sixth of $3,000.00 borrowed by administrator ................................ 500.00 Due guardian by Hood Worthy ........................ 330.26 --------- Due Hood Worthy by James H. Glenn ................. $ 169.74
The amounts above stated are hereby declared to be valid claims against the guardian and his bond.
Under the case of Epperson v. Jackson, 83 S.C. 157, 65 S.E., 217, the allowance of interest in equity matters is discretionary with the Court, and in Anderson v. Silcox, supra, the regular method of charging a fiduciary with interest may be changed according to the circumstances of the particular case. In the present case we are content to avail ourselves of this provision of the law, and, in our efforts to arrive at the equities between the parties, to hold that no interest may be charged.
The only remaining question to be considered is that of costs; every item being charged against the appellants. With this portion of the decree we are at considerable variance with the Circuit Judge. It will be remembered that the administrator did not make returns for a number of years, and that when the attempted to do so his return was so badly mixed up that the Probate Judge would not accept it. The administrator then abandoned the Probate Court, which had had jurisdiction of the cause from the beginning, and went into the Court of Common Pleas. His complaint was signed by only Glenn Macaulay, as plaintiff's attorneys. It again appeared that the returns were in such condition that they could not be understood, and the attorney for the appellants asked for an expert accountant. The respondent's counsel objected, and the special referee said he would rule upon the motion after looking over the returns himself. In his report, the special referee says that he employed Mr. James McLarnon, the accountant, "in fairness to all parties." The report further says that the accountant's fee was fixed by him (McLarnon) at $250.00, which was allowed.
This employment, being "in fairness to all parties," should be borne equally by both parties, especially as both parties were responsible for his employment; the respondent by reason of "mixed up" returns, and the appellants because of the request of their attorney. However, a slight correction will be noticed later in regard to the payment of these costs.
The compensation of the stenographer should likewise be borne equally by the parties. It is true that the suit brought by the respondent was the occasion for her employment, but, her services being necessary for both parties, a fair adjustment would be as above stated, subject, however, to the slight correction hereinafter noticed.
The compensation of the referee, by agreement, "shall be fixed in keeping with the usual practice prevailing at the Chester Bar." It was fixed by the Circuit Judge without notice to the attorneys for the appellants. It seems that some effort should have been made to ascertain the "practice prevailing at the Chester Bar." It is our opinion that his compensation should be fixed in the manner agreed upon, not, however, to exceed the sum of $250.00. When so fixed it should be apportioned equally between the parties subject to the correction now to be mentioned.
There were six of the children of J.L. Worthy interested in this suit, five of whom appealed from the decree. Mary Elizabeth Worthy, represented by Mr. A.L. Gaston as her guardian ad litem did not appeal, and is therefore bound by the decree. Shell v. Young, 32 S.C. 472, 11 S.E., 299. The charge of the accountant of $250.00, which we hold should be divided equally, must be paid one-half, or $125.00, by the respondent, and $125.00 by the six children, or $20.83 each. The five who appealed therefore must pay of this $125.00 the sum of $20.83 each ( Ex parte Coleman, 111 S.C. 484, 98 S.E., 538) instead of $25.00 each. The balance must be paid by Mary Elizabeth Worthy, who did not appeal.
In the case of the bill of the stenographer of $88.00, the administrator is due to pay $44.00, and each one of the five appellants is due to pay one-sixth of $44.00, or $7.33. The balance must be paid by Mary Elizabeth Worthy.
The same rule shall apply to the fee of the special referee when the proper amount shall be determined as hereinbefore stated.
In regard to the fees of the two firms of attorneys who represented the administrator, we are again forced to disagree with the Circuit Judge. The rule adopted in the Federal Bankrupt Court, a Court of equity, is that a trustee who is himself a competent attorney, is not permitted to employ an attorney unless the necessity for so doing is clearly shown. This is not mentioned as a rule binding upon this Court, but merely as a salutary rule adopted by another jurisdiction for the better protection of estates.
The administrator, a lawyer of recognized ability and skill, was entirely competent to make his final return and receive his discharge from the Probate Judge. Doubtless, in his years of successful practice, he has prepared dozens of final returns for his clients. His suit was prepared, and after answers were filed he employed the firms of Gaston, Hamilton Gaston and McDonald, Macaulay McDonald, outstanding firms not only in Chester County, but in the entire State. Were these attorneys employed to represent the estate of J.L. Worthy or were they representing the administrator to collect advances made by him personally and to protect him personally in his dual capacity? A careful reading of the transcript fails to reveal a single instance where any of these attorneys spoke or acted for any one connected with the estate except the administrator guardian.
In the case of Sherman v. Angel, Executor, 2 Hill, Eq., 26, the heirs found it necessary to bring suit against the executor for an accounting. The executor claimed a credit of $200.00 paid as an attorney's fee, and in passing upon this, the Court said:
"There is certainly much good feeling in the view which the Chancellor has taken of this case, and if it was a case in which the Court could exercise any discretion, the defendant should have the benefit of it; but the rights of the parties appear to me to depend on a rule of right, over which the Court has no control. The defendant, by neglecting to make regular returns of his administration to the ordinary, and to account with the plaintiffs, has rendered this suit necessary — the plaintiffs had no other means of coming at their rights. The principal litigation in the cause arose out of his claim to be paid for the board and lodging of the plaintiffs, and to be led into a distribution of the estate limited over to the children of his wife's mother, and both these claims were decided against him, and he now asks to be reimbursed money paid to counsel for vindicating these claims — and surely the Court would not be justified in compelling the plaintiffs to pay money which he has voluntarily given to another, to their prejudice rather than their advantage.
"It is said that some litigation grew out of one of the credits claimed by the defendant in the account which was objected to by the plaintiffs, and which was adjudged for the defendant, and this is claimed as a ground on which the defendant ought to be reimbursed his expenses. The bill was for an account from the defendant, and it was not only his duty to render a correct account, but the right of the plaintiffs to contest every item, and insist on its being proved and substantiated according to the forms of law. They have not, therefore, been guilty of any wrong, and ought not to be charged with the errors or misfortunes of the defendant."
Also in the case of Finley v. Hunter, 3 Strob. Eq., 81, the Court says: "There is no difficulty as to the principle upon which counsel fees are to be allowed to an executor or administrator; when an estate requires professional services to prosecute or defend its interest, and where the executor or administrator does not litigate for his own benefit, he will be allowed a counsel fee; so he will be allowed fees paid for general advice as to the most proper and profitable course of administration; but where he fails to do his duty, and is called to account, or litigates questions on which he is individually interested, or where he resists the claims of those interested without some reasonable ground, he is not entitled to charge the estate with costs or counsel fees that he has incurred. — Warden v. Burts, 2 McCord, Eq., 76; Wright v. Wright, 2 McCord, Eq., 186; Sherman v. Angel, 2 Hill, Eq., 26; Wham v. Love, Rice's Eq., 51."
In the case of In re. Coleman, 106 S.C. 534, 91 S.E., 861, 862, the Court says: "When a number of lawyers are employed it is incumbent on the executors to show the necessity for employing such an extraordinary number to be paid a high price by the estate. We cannot see in any view of the case if the executors had employed Shand Shand, Johnstone Cromer, and Beatty why they wanted additional counsel, unless they intended to pay them out of their own pockets and not mulct the estate."
Further in the same case, the Court says: " * * * Are all capable lawyers of mental vigor and legal learning, energetic and of integrity and strength, and any two of them could have handled the estate with consummate ability and skill, and could have done everything * * * for the legal settlement of the same."
This case is cited to show that care must be taken by the administrator in the employment of attorneys, even when the estate is in need of such employment.
It may be contended that the exceptions of the appellants relative to the disposition of costs bring up for consideration only the question of the failure of the Circuit Judge to notify the attorney for the appellants of his intention to fix the costs of this suit. The attorney for the appellants was certainly entitled to receive notice of the fixing of costs, fees, and expenses in that litigation, and he was especially entitled to such notice as guardian ad litem for the minor children. It is reasonable for this Court to assume that, had proper notice been given, the attorney and guardian ad litem would have objected to the allowance of these expenses not only upon the ground that they were excessive and not fixed according to agreement, but also that the attorneys' fees were not legitimate charges against the estate. We have therefore considered the allowance of costs and expenses as though proper notice had been given and proper exceptions taken from the decree of the Circuit Judge.
In the case of Waddell v. Cary, 155 S.C. 152, 152 S.E., 179, the Court refused to permit the attorneys for the appellant to enlarge their exceptions in order to bring before the Court certain points not covered in the transcript, and confined the appellant to the exceptions as originally made. In that case the refusal was based upon the ground that the attorneys for the appellants had full notice and should have availed themselves of their rights to present a full appeal to the Court.
In the present case, however, the attorney for the appellants had no notice whatsoever of the allowance of these costs and expenses, and could not be charged with the failure to present his grounds of objection when he received no notice that the question was to be determined. Even in the Waddell case one member of the Court, by dissenting opinion, held that in a Court of equity a litigant should not be deprived of her rights through the failure of her attorneys to present them.
We therefore conclude that but for the condition of this estate and the accounts of the administrator guardian no other attorneys would have been necessary, and that their services were rendered for the benefit of the administrator guardian personally, rather than for the estate. The Circuit Judge was therefore in error in allowing fees for the attorneys.
The judgment of this Court is that the judgment of the Circuit Court be reversed, and that this cause be, and the same is hereby, remanded to the Court of Common Pleas for Chester County to carry out the directions herein contained.
MR. CHIEF JUSTICE BLEASE and MESSRS. JUSTICES STABLER and BONHAM concur.
MR. JUSTICE CARTER dissents.
After a careful study of the record in this case, I am unable to agree with the conclusion reached in the leading opinion, and therefore most respectfully dissent. While Mr. Glenn did not comply with the requirements of the law in every particular, he has, in my opinion, done all he could to protect the estate and the interests of the children of deceased, in their person and their property. He spent much time in the performance of his duties, as administrator and as guardian, and, in my opinion, based on a careful study of the record of the case, has been absolutely fair and honest in the entire transaction. I agree with the finding of the referee and Circuit Judge, and, for the reasons set forth in the decree of the Circuit Judge, think that this Court should affirm the judgment of the lower Court.