Court Opinion

ID: 5278506
Source: CourtListenerOpinion
Date Created: 2022-01-06 21:48:13.590912+00
Date Added: 2024-06-11T08:28:20.933617
License: Public Domain

Hinman, J.
(dissenting in part):
This is an appeal from a decree of the surrogate of Franklin county rendered upon the final judicial settlement of the account of the executor, entered on the 3d day of July, 1924. The executor’s account was thereby judicially settled and allowed as filed. No objection was made to the account except that the Fort Covington Banking Company filed a claim against the estate for $1,691.95 and interest, which was objected to by the widow of the deceased, who" was the sole legatee. The said claim was rejected by the executor. A hearing was had before the surrogate on said claim which was based upon four promissory notes which the executor had signed as executor and had delivered to the claimant. The proof was that all the proceeds of said notes went to the benefit of the estate. The widow was the sole legatee and the proceeds of the notes were either paid to her or for her benefit as advancements with the exception of one note, the proceeds of which were used to pay for a monument for the deceased, which the will directed the executor to provide for. In the account of the executor he was .credited with these payments made for the benefit of the estate from the proceeds of these notes. The claimant bank objected to such credit items in the account to the extent of the amount due to the claimant on the notes in question, claiming the right to be subrogated to the right of the executor to be reimbursed for the moneys so advanced by the bank to and for the benefit of the estate. One of the notes was for $800 upon which there had been paid by check of the executor the sum of $473.05. At the time of the giving of this note, the executor had pledged to the bank, as collateral security for said note, a bond of the government of Newfoundland for $1,000 which belonged to the estate. The surrogate held that the executor had no authority to issue notes for borrowed money and bind the estate and after reviewing all of the proofs concluded as a matter of fact that the acts and the conduct of the bank officers and the executor showed that neither of the parties regarded these notes as obligations of the estate but the personal obligations of the executor. - The surrogate also found that the executor had no authority to pledge as collateral security the Newfoundland bond for $1,000, the property of the estate, and that the banking company, having knowledge that the bond belonged to said estate, had no right to accept or retain the same as collateral to the personal *342note of the executor. The surrogate disallowed the claim of the bank on the four notes and directed that the bond be surrendered by the claimant to the representatives of the estate. In approving the accounts of the executor as filed, the surrogate allowed him as credits the payments made by him for the benefit of the estate from the proceeds of these notes and overruled the objections to the allowance of such credits. Presumably suitable allowance has thus been made to the executor to permit him to meet his personal obligation upon these notes out of funds of the estate reserved in his hands to take the place of advancements made for the benefit of the estate when he used the proceeds of the notes for that purpose. The Fort Covington Banking Company is one of the appellants here, claiming that the bank is entitled to be subrogated to the right of the executor to be reimbursed.
The executor bound himself and not the estate when he signed the notes in question. This rule is well settled even where the executor makes such an executory contract in the interest of the estate and for its benefit. In such a case the notes, though signed by him as executor, are held to be his personal contracts and do not bind the estate, notwithstanding the executor could have paid the same from the assets of the estate and been allowed for the expenditure in the settlement of his accounts. “ The principle is, that an executor may disburse and use the funds of the estate for purposes authorized by law, but may not bind the estate by an executory contract, and thus create a liability not founded upon a contract or obligation of the testator.” (Austin v. Munro, 47 N. Y. 360, 366; Schmittler v. Simon, 101 id. 554.) Upon this principle he could pay the notes, as he did in part, out of the funds of the estate and he could pledge the bond of the estate as collateral security on one of the notes to obtain the loan for an estate purpose. The title of the executor is absolute for the purposes of administration and he may sell, mortgage or pledge the personal property of the estate for the purposes of the estate. The pledgee dealing with him in good faith obtains good title. The general presumption is that the purposes of the estate may require such a use of the property of the estate in the course of a prudent administration. (Smith v. Second National Bank, 169 N. Y. 467; Matter of Heinze, 224 id. 1.) In this case the executor did not misapply the proceeds of the loan. The estate purpose was the advancement to the sole legatee of a portion of her legacy. It is often more advantageous to pledge for a loan rather than sell good securities paying an adequate return. There was nothing in the transaction to impugn the good faith of the claimant in taking the pledge and making the loan. Indeed, it is questionable whether the surrogate had juris*343diction to determine the adverse claims to the right of possession of this pledged bond. (Matter of Heinze, supra.) In view of the principle involved, as shown by the authorities, the claimant may hold the bond in question to secure the loan on the $800 note even though the amounts that are due on all of the notes are a charge against the executor personally and not against the estate. The executor had a right to reject the claim as against the estate and take personal credit for the expenditures made from the proceeds raised upon his personal notes. Having done so, it was proper for the surrogate to disallow the claim against the estate on the notes but the bond should remain with the claimant as collateral security for the payment of the balance due on the $800 note. The executor must produce the bond by the payment of this note or be charged with the bond in his account. The decree should be modified accordingly.
I dissent from the holding that the claimant is entitled to subrogation and vote for modification of the decree in accordance with the above and also as to the reduction of the allowance to the executor for legal services.
Cochrane, P. J., concurs.
Decree is modified by directing that the sum allowed the executor for credits in the amount of $1,691.95 be paid to the Fort Covington Banking Company; and is further modified by reducing the compensation allowed to the executor, as attorney, to the sum of $500, and as so modified decree is affirmed, without costs.