Court Opinion

ID: 3841296
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:10:35.244018+00
Date Added: 2024-06-11T07:40:35.475957
License: Public Domain

ON THE MERITS
Department 1.
This is an appeal from a decree of the circuit court of Baker county, which in substance sustained the objections of the respondents, residuary legatees, to the final report of the appellants, who were the executors *Page 8 
of the estate of Miles Lee. The latter died testate May 29, 1925, possessed of an estate which was appraised of the value of $143,441.62, and against which claims to the extent of $80,795.96 were filed. The deceased and his brother, David Lee, who subsequently became one of the two executors, were partners doing business under the firm name of Lee Brothers; the partnership was principally engaged in the business of purchasing, selling and raising sheep. In pursuing these activities it preferred to speculate upon the market, and would often contract for the future acceptance of lambs, in the anticipation of a rise in the market price before the delivery. At the time of his death, the deceased was individually the owner of a quantity of sheep, which, according to the estate's inventory, consisted of 1,308 ewes and 1,125 lambs, and which were appraised at $14,387.50. The partnership of Lee Brothers was the owner of several contracts requiring the future delivery of 15,100 head of lambs upon which it had paid $13,700. These contracts stipulated that the vendors would commence making deliveries in the early part of July and complete them in September. At the time of his death Miles Lee was indebted upon several promissory notes in an aggregate sum which approached $50,000 and his bank account was depleted. He was possessed, however, of some valuable real property which was unencumbered. Interest upon the aforementioned notes and the care of the sheep constituted continuing expenses; in addition instalments of the purchase price of the lambs were payable when the vendors would begin their delivery in July.
When the will was admitted to probate, June 12, 1925, David Lee and one W.G. Ayre, now deceased, were appointed executors of the estate. No special *Page 9 
administrator for the partnership property was requested or appointed. June 30th the appraisers met and fixed their valuations; July 3d the inventory and appraisement were filed. July 20th the executors obtained from the county court an order authorizing the estate to borrow $25,000 so as to enable it to handle the sheep, take care of the lamb contracts, and meet its obligation upon some wool contracts. This money, however, was never borrowed.
June 23d, which was seven days before the appraisers met, the executors sold all of the sheep owned by the estate under a written contract which named Chris Lee as vendee; the contract required the purchaser to take delivery and pay the full price within 10 days time. It acknowledged receipt of $3,000 upon the purchase price. Chris Lee is the son of David Lee; he and his father are partners actively engaged in the same business as Lee Brothers. Their firm name is Lee  Son. When Chris Lee drew his check for the initial payment of $3,000, his bank account credited him with $99.97; so as to make provision for the honoring of his check he borrowed $3,000 from his bank June 24th upon a note endorsed by David Lee, and deposited it to his credit. November 17, 1925, this note was paid by Lee  Son. When the second payment of $2,000 was made upon the purchase price of these sheep, Chris Lee's bank account was overdrawn to the extent of $1,437.92; but before the $2,000 check was presented Lee  Son deposited to his credit two items of $1,500 and $2,000. When the third and final payment of $8,274.51 was made, Chris Lee's bank balance was $46.11; however, on the same day that he drew his check for the final payment, Lee  Son deposited to his credit $8,274.51. Chris Lee never executed any notes to Lee  Son covering these items and paid it *Page 10 
no interest. Shortly after the sale of the sheep by the executors, Chris Lee resold them at a substantial profit. The objectors contend that David Lee acquired an interest in these sheep through the aforementioned sale by the executors, and that the final account should credit the estate with his profit.
An order authorizing the sale of personal property was not obtained until July 3d. It recites the need of the estate for money, and the burdensome expense of the keep of the sheep. It, however, made no mention of their actual sale, and in fact, refers to them as still owned and maintained by the estate. July 3d, when this order was signed, Chris Lee handed to the executors the check for $8,274.51. Upon that same day he, the executors and David Lee individually executed a second contract; the subject-matter of it was the contracts for the future delivery of lambs. While the sheep, previously mentioned, were owned by the deceased individually, these lamb contracts were the property of Lee Brothers. This contract recited that all of these contracts were transferred to Chris Lee and required that he should pay for them the amounts advanced by Lee Brothers. Lee  Son at once took possession of these lamb purchase contracts, and as the lambs were delivered resold them at a substantial profit to themselves. The objectors insist that this profit should be accounted for in the final report.
The county court confirmed the final report and awarded the executors $2,738.88 for their services; it allowed the attorney a fee of $1,000. The objectors appealed to the circuit court. The latter tribunal found that the purchases of the sheep and of the lamb contracts was vitiated by fraud, actual as well as constructive. It held that in these transactions David Lee acquired an interest and received profits. It decreed *Page 11 
that he should account for these profits and that in the meantime he should be denied a discharge. It remanded to the county court the matter of determining the fees. From this decree of the circuit court the executors have appealed to this court.
The record contains 429 pages of testimony and numerous exhibits. This mass of evidence has received careful consideration by this court, but we find no occasion for setting forth an extended review of all of it. The able judge of the circuit court who tried this case in that court, announced his conclusions in a very carefully prepared opinion which analyzes with painstaking detail this mass of evidence and clearly points out the manner in which he arrived at his conclusion that David Lee, one of the two executors, acquired an interest in that portion of the estate's property, which consisted of a half interest in the lamb contracts and full ownership of the sheep; this property was purchased in the name of Chris Lee, the son and business partner of David Lee. After a careful study of the record we find that the circuit court's extended analysis of the record satisfactorily expresses our views also, and since the issue as to whether David Lee acquired an interest in the sheep is one of fact only, the analysis by the circuit court of the evidence bearing upon this issue will suffice as an expression of our findings also. Our conclusion is that while the purchase was made in the name of Chris Lee, the real purchaser was the partnership composed of David Lee and Chris Lee, and that as a result of this transaction the former acquired a half interest in these sheep.
The issue as to whether David Lee was interested in the sale of the estate's half interest in the lamb contracts was one of law as well as of fact, and, therefore, requires an expression of our views. The *Page 12 
appellants contend that the estate's transaction in regard to these contracts merely substituted Chris Lee as owner of its previous half interest, and that since David Lee, as a partner in the firm of Lee Brothers, already owned a half interest in these contracts, the transaction nowhere trespassed upon the inhibitions of § 1276, Or. L., which provides: "All purchases of the property of the estate by an executor or administrator, however made, whether directly or indirectly, are prohibited, and if made are void." It is clear that after this transaction Lee 
Son became the owner of these contracts, and that David Lee received his one-half of the profits derived from the sale of the lambs. It will be observed from the statement of facts, which precedes this decision, that the instrument which transferred these contracts named Chris Lee vendee, and that it purported to assign not only the estate's one-half interest in them, but also David Lee's. It is worthy of mention that the various documents, filed from time to time in the probate record of the estate, avoided mention of the fact that David Lee was interested in these lambs until the final chapters were being written. When the appointment of the executors was made, no administrator for the partnership property was mentioned; but the executors evidently felt that their authority extended over it, for the inventory and the appraisement make an effort at including it, and the semiannual reports refer to it. Under the laws of this state when David Lee, the surviving partner, failed to apply for the administration of the partnership property it passed into the custody and under the control of the general executors: § 1167, Or. L. One who administers upon the property of a partnership is
"* * * denominated an administrator of the partnership, and his powers and duties extend to the *Page 13 
settlement of the partnership business generally, and the payment or transfer of the interest of the deceased in the partnership property remaining after the payment or satisfaction of the debts and liabilities of the partnership, to the executor or general administrator within six months from the date of his appointment, or such further time, if necessary, as the court or judge may allow. In the exercise of his powers and the performance of his duties, the administrator of the partnership is subject to the same limitation and liabilities, and control and jurisdiction of the court as a general administrator. § 1168, Or. L."
See Burnside v. Savier, 6 Or. 154, and Gregory v. Keenan, (D.C.) 256 Fed. 949. In the latter case the federal district court for this district held:
"Under the statute, the powers and duties of the administrator of the partnership estate extended to its settlement generally. § 1168, Lord's Oregon Laws. The petition for sale shows that the partnership estate was the owner of this land; and, it being the owner, the land was subject to sale for payment of the partnership debts. There exists no good reason why the administrator of such estate may not sell the real property of the estate for the payment of the debts, although the real property stood in the name of the individual members of the partnership. It was the property of the partnership estate, nevertheless."
Our statutes affecting partnership property after the death of one of the members, therefore, seem to contemplate that the administrator of such property sustains to it a fiduciary relationship which authorizes him under proper circumstances to dispose of it so as to wind up the business. To enable him to accomplish this end there reposes in him temporarily the title to the partnership property. Rowley, Modern Law of Partnership, § 617. Under these circumstances David Lee's interest in the partnership property, when Chris *Page 14 
Lee acquired an interest, was not that of a half owner, but was somewhat similar to that of a residuary legatee; that is, he was entitled to receive one-half of the remainder after the debts had been fully discharged. It follows that the transaction with Chris Lee did not consist of a substitution of him in Miles Lee's stead, but that the real import of this transaction was the purchase by Lee  Son of these lamb contracts from the administrators of the partnership property of Lee Brothers. Thus David Lee, as one of the fiduciaries, was seller, and as a partner in Lee  Son, was also a buyer. No extended analysis of § 1276, Or. L., previously quoted, is necessary to show that this sale can not be upheld as valid. The application by this court of this section of our code to sets of facts somewhat similar in the cases of Wells v. Wood, 125 Or. 38 (263 P. 54); Adams v.Kennard, 122 Or. 84 (253 P. 1048); Gilbert v. Branchflower,114 Or. 508 (231 P. 982); Acton v. Lamberson, 102 Or. 472
(202 P. 421, 732), will readily indicate that the spirit as well as the letter of the statute has been observed. We conclude that both of these transactions were in direct conflict with § 1276, Or. L.
But the appellants argue that the word "void" in the above section of our code should be construed as "voidable," and contending that a county court has no jurisdiction to try an issue of fraud, submit that the objections of the respondents to the final report of the executors must be overruled. We are aware of the fact that purchases made by a fiduciary of the trust estate are frequently held only voidable. This court, however, recently gave effect to the precise language of § 1276, Or. L., and declared such purchases not merely voidable but void: Adamsv. Kennard, supra. We remain satisfied with that conclusion. *Page 15 
But since the property can not be recovered it is proper to treat it as actually transferred, and require the executors to account for any profits gained by them: Adams v. Kennard, supra.
The appellants contend that the mother of the objectors, who was also a beneficiary under the will, was entirely familiar with the administration of the estate; that she approved the purchases by the executor, and that she was the representative of the two objectors. No contention is advanced that the daughters personally approved these purchases by David Lee, nor that they had any knowledge that he had acquired an interest in the estate's property. The contention of the appellants that the mother was the agent of the two daughters presents a question of fact only to which we have given careful consideration. The decision of the circuit court analyzes the evidence upon which the parties rely; in holding the appellant's contention is not supported by the evidence, we adopt the words of the circuit court as our own. The only important question which remains undetermined is what disposition should be made of this proceeding. The circuit court remanded the matter to the county court, with directions to require the executors to file a new final account which should include the profits gained by David Lee from these unlawful transactions. The objectors urge us to make a final disposition of the matter in this court. The appellants call to our attention the decisions In re Plunkett'sEstate, 33 Or. 414 (54 P. 152), and Roach's Estate, 50 Or. 179
(92 P. 118), and contend that those holdings require the appellate court to try the cause de novo and that therefore it is impossible to remand the cause. Upon appeal the appellate court is vested with authority to render such decree or make *Page 16 
such an order as the probate court should have made. 24 C.J., Executors and Administrators, § 2524 and § 2525, p. 1051. Based upon the premises just mentioned we shall endeavor to make a final disposition of the matter in this court so far as that is possible. When the executors presented their final account to the county court, and asked for its approval, that tribunal was authorized to make such corrections in it as would cause it to set forth a true statement of the transactions handled by the executors: Roach's Estate, 50 Or. 179 (92 P. 118); Schouler on Wills, Executors, etc. (6th Ed.), § 3409. The appeal, as we have just stated, confers similar authority upon the appellate court.
We entirely agree with the conclusion of the circuit court withholding approval from the final account submitted, but we believe that the circumstances of this proceeding justify us in indicating the correction that the executors should make in their accounting before it may be approved. As submitted it makes no mention of these purchases by Lee  Son. It should be amended so as to include them, together with the profit derived by David Lee; the amount we shall now undertake to determine.
The precise amount of the profit gained by Lee  Son from these transactions is not clearly shown by the evidence. Manifestly the data, from which this profit could be determined, was not in the objector's possession, but was under the control of David and Chris Lee. Most of these sheep and lambs were shipped to distant markets — Chicago, Omaha and Denver; this circumstance, together with the fact that only Lee  Son knew to whom and where the shipments had been made, rendered it additionally difficult for the objectors to assemble proof of the amount of the profits. *Page 17 
Adding further to the difficulties is the fact that the executors offered no proof in support of their accounting; upon them rested the burden to sustain its recitals, to show that the assets had been disposed of according to law, and that they had truly accounted for the proceeds: Roach's Estate, supra; Schouler on Wills, Executors, etc. (6th Ed.), § 3408, and 24 C.J., Executors and Administrators, § 2470, p. 1017. David Lee did not testify; Chris Lee was called to the stand by the objectors in an endeavor to account for the property and the profits from the resales, but was a most unsatisfactory witness. Apparently his memory was poor and he, together with the attorney for the estate, insisted that no documentary evidence was available as to the sales of the livestock. It is true that upon request he produced a few canceled checks, but he lessened their probative value by testifying that his firm's volume of business was so large that it was not always possible to determine in what transaction any particular check had its inception. He reiterated many times his insistence that no documentary proof was available in spite of the fact that the proof showed that in the course of transactions of this character, bills of lading, drafts, statements of account, weight tickets, correspondence, etc., were transmitted to Lee  Son. This evidence, if produced, would have shown the weight, price obtained, and other data in regard to the shipments useful in determining profits. Chris Lee testified that all of these papers had evidently been destroyed; he added that Lee 
Son kept no account books of any kind, although their transactions in sheep, lambs and wool were extensive and required the employment of men, land and borrowed capital. At one time during the course of his examination he seemed willing to produce his income tax returns for the year 1925, but *Page 18 
later concluded not to do so. He acquiesced in the statement that the profits gained from the resale of the sheep were $2,500 and about $6,000 from the lamb transactions. He described these as gross profit, but offered no precise method of determining the net amount apart from the suggestion that the interest charges and the cost of the care of the livestock should be deducted from the gross profits. Other evidence from disinterested sources indicates that the gross profits upon the sheep were materially larger. There is other proof available for the purpose of determining the net profits gained from the resale of the lambs. The commission merchants remitted upon the basis of a definite amount per pound. Chris Lee admitted that in some instances the net profit was more than one cent per pound, although he contended that in other instances the profit was less; the total weight of all lambs delivered to Lee  Son under the assigned contracts was approximately one million pounds. After a careful consideration of all of the evidence, we believe a finding is warranted that a net profit of one cent per pound was gained by Lee  Son from the sales of the lambs. Our conclusion is that the firm made a net profit of $10,000 on the lamb sales, and $2,500 in its transaction in the sheep; the final account should credit the estate with a charge against David Lee for one-half of that sum, $6,250. The order to be entered in the county court will withhold approval from the final accounting until it includes the aforementioned items.
There remains for determination only the matter of the fees. While the attorney for the estate rendered faithful services in various matters disposed of by him, their value was lessened, due to his attitude toward the improper purchases made by David *Page 19 
Lee. Without reservation he testified that he did not inform David Lee that his purchases were unlawful; in fact, his testimony warrants the conclusion that he regarded these transactions as proper. It is evident that the attorney could have readily prevented these purchases by the executor, and thereby the delay and expense caused by this proceeding would have been avoided. Possibly the estate's need for money, and his opinion that the executor was paying a fair price, persuaded him that these sales were advantageous to the estate; but those circumstances are insufficient to uphold the executor's purchases from himself. The law is an enforceable code of ethics governing the conduct of men, and § 1276, Or. L., inhibits such purchases even though the executor is able to show that he paid a fair price. The reasons why such purchases can not be upheld, even though the price paid was fair, have been often stated and need not now be retold. Moreover, he had promised to ask for no more remuneration than David Lee would allow, and the two had agreed that $1,000 was sufficient; this amount was set forth in two of the semiannual reports prepared and signed by the attorney, and was allowed in the order of the county court. Under the circumstances this amount, while small, will have to suffice. We are of the opinion that Messrs. Nichols, Hallock  Donald, who have conducted this proceeding in the preservation of the estate should be allowed a fee of $900. It is contended that the executors are entitled to no remuneration due to the purchases by Lee  Son. We are of the opinion, however, that the executors performed valuable services in bringing an estate out of a bad status of financial embarrassment to the place where it is now free from debt and possessed of much valuable property. These unfortunate purchases adversely *Page 20 
affected the value of the executors' services, but were due largely to zeal and ignorance. To the executors we allow a fee of $1,500.
Our conclusions, therefore, are that the county court should not approve the final account presented until it has been amended so as to include a charge of $6,250 against David Lee. The cause will be sent back to the circuit court to be remitted to the county court of Baker county, with directions to enter a decree as hereinbefore indicated. The decree may allow the objectors their costs and disbursements. Modified.
BEAN, McBRIDE and RAND, JJ., concur.