In Re Ouzts'estate

139 S.E.2d 465, 245 S.C. 150, 1964 S.C. LEXIS 50

• Court: Supreme Court of South Carolina
• Decided: December 17, 1964
• Docket: 18287
• Status: Published

Opinions

Moss, Justice.

William L. Ouzts, a resident of Spartanburg County, died testate on February 8, 1960, and by the terms of his will he appointed his brother, David T. Ouzts, as executor. This brother qualified as such and continued to serve in such capacity until his death on March 18, 1961. Thereafter, the respondent herein, Wilmot B. Ouzts, was appointed Administrator de bonis non cum testamento annexo of the estate of William L. Ouzts. David T. Ouzts died testate and by the terms of his will he appointed the appellants herein, Tallulah C. Ouzts and Dorothy Ouzts Willliams as executrices of his will. They duly qualified and are now serving as such.

At the time of the death of William L. Ouzts, he owned various stocks held in “margin accounts” by and in the name of (1) Harris, Upham & Company, (2) James Richardson & Sons, (3) Pennington Colket & Company and (4) Carl L'oeb Rhoades & Company, as brokers. These stocks were registered in the names of the aforesaid brokers under an agreement which governed the relationship o,f the parties with reference to the stocks held in these “margin accounts”. Physical possession of these stock certificates were, at all times, retained by the brokers at their respective home offices located without the State of South Carolina. Dividends on the aforesaid stocks were received by the brokers and credited to the account of William L. Ouzts. During the lifetime of William L. Ouzts these stocks, though registered in the name of the aforesaid brokers, were voted by them under the express orders of William L. Ouzts. He instructed the brokers when and what stocks should be sold and they were sold at his direction. Upop the death of the testator, David T. Ouzts furnished to the brokers a certificate of his qualification as executor and all of the aforesaid stocks were sold prior to the death of David T. Ouzts, at his direction, and the proceeds of said sale, after the deduction o,f the indebtedness owed the brokers by William L. Ouzts, were remitted by said brokers to David T. Ouzts, as executor as aforesaid.

All of the said stocks in the “margin accounts” held by the four brokers above named, were duly appraised as a part of the estate of William L. Ouzts, and the value of said stocks was fixed by said appraisers on the basis of the market value as of the date of his death. These values so fixed were the values used by the executor in computing Federal and State Estate taxes. The appraised value of all the stocks in the “margin accounts” held by the four brokers aforesaid, amounted to $1,280,872.33, the total indebtedness against the same aggregating $602,881.12, leaving a net of $677,-991.21, which said sum was remitted and received by David T. Ouzts, as executor as aforesaid.

After the death of David T. Ouzts, a controversy arose between the respondent and the appellants as to what commissions David T. Ouzts was entitled to receive as executor of the estate of his brother, with respect to the securities of the estate which were held by the various stockbrokers in the “margin accounts” and which were disposed of in the manner hereinbefore stated.

The appellants contend that the estate of David T. Ouzts is entitled to commissions on the basis of the market or appraised value of the stocks in the “margin accounts” undiminished by the indebtedness of the testator to, the brokers. The respondent contends that the commissions to which the estate of David T. Ouzts is entitled should be based upon the equitable interest of the testator in the stocks held by the brokers and that such interest was the net amount of $677,-991.21, which said sum was received by David T. Ouzts, as executor as aforesaid.

The respondent filed his Petition in the Probate Court for Spartanburg County, asking for a determination that David T. Ouzts, as executor of the estate of William L. Ouzts, was only entitled to commissions on the balance of the sale of the proceeds of stocks held in the “margin accounts”, after deduction of the indebtedness owed by William L. Ouzts, and not on the market or appraised aggregate value of all the stocks in the “margin accounts”.

The Probate Judge of Spartanburg County, after taking testimony and hearing arguments, found that the appellants, as representatives of the estate of David T. Ouzts, were not entitled to commissions on the gross value of the stock pledged in the “margin accounts” of William L. Ouzts, and commissions should be computed only on the net amount, or balance of the sale proceeds after payment of the -indebtedness owed on the “margin accounts”, received by David T. Ouzts, as executor. The executrices of the estate of David T. Ouzts appealed this holding to the Court of Common Pleas for Spartanburg County. The appeal came on for a hearing before the Honorable Bruce Littlejohn, Resident Judge of the Seventh Circuit, and, on February 21, 1964, he filed an order overruling the exceptions made by the appellants to the order of the Probate Judge and adopted such order as the judgment of the Court of Common Pleas. This appeal followed.

The question here is whether David T. Ouzts was entitled to commissions as executoy of the estate of William L. Ouzts on the basis of the market or appraised value of his stock in the “margin accounts” with his brokers, or whether his commissions should be based only on the surplus remaining after the deduction of the indebtedness qf the testator to the brokerage firms, which said surplus only was actually received, handled and distributed by the executor.

The right of an executor or administrator to compensation is controlled by Section 19-534 of the Code, which provides:

“Every executor oy administrator shall for his care, trouble and attendance in the execution of his duties take, receive or retain in his hands a sum not exceeding the sum of two dollars and fifty cents for every hundred dollars appraised value of all personal assets which he shall receive and the sum of two dollars and fifty cents for every hundred dollars appraised value of all personal assets which he shall pay away in credits, debts, legacies or otherwise during the course and continuance of his management or administration and so in proportion for any sum less than one hundred dollars. * * *”

The aforesaid statute fixes the commissions of an executor by a percentage of the sums “which he shall receive” and “which he shall pay away” upon the appraised value of all the personal assets of the estate. The appellants and respondent assert that a proper construction of the aforesaid statute will sustain their respective legal positions.

The appellants call our attention to Section 9017 of the 1942 Code of Laws which provide commissions to an executor only for receiving and paying over moneys and provided no fees as compensation to an executor fo.r receiving and turning over specific property to a legatee. Our Court so construed Section 9017 of the 1942 Code. Turnipseed v. Sirrine, 60 S. C. 272, 38 S. E. 423. However, the General Assembly, by an Act approved March 12, 1943, 43 Stats. 34, amended Section 9017 of the 1942 Code relating to commissions of executors and administrators by providing for the calculation of such commissions upon the “appraised value of all personal assets” of an estate, “which he shall receive” and “which he shall pay away in credits, debts, legacies or otherwise * * The effect of the 1943 amendment was to allow to an executor or an administrator commissions on estate assets received and distributed in kind, in addition to compensation for receiving and paying over moneys; such commissions being determined by a percentage of the appraised value of such personal assets. However, whether the assets of an estate be money, or other personal property, before an executor or an administrator is entitled to commissions, he must actually receive the money or other personal property, and pay away the money or distribute the personal assets in kind.

In the liquidation of stock margin accounts o,f William L. Ouzts, the stocks were actually sold by the brokers and only the surplus remaining after deduction of the indebtedness of Ouzts to the brokerage firms was actually received, handled or distributed by David T. Ouzts, as executor.

In the case of Hitchcock v. Mosher, 106 Mo. 578, 17 S. W. 638, the Supreme Court of Missouri has declared the law in that state to be that the administrator is entitled to commissions only on the assets belonging to his decedent actually received by him virtute officii, and properly paid away by him in the course of his administration. It appears in this case that the deceased had entered into contracts with stockbrokers for the purchase of certain stock, part of which was sold by them and the proceeds credited to his account, leaving an unpaid balance. The stock was never delivered to the deceased or his administrator, but was sold by the brokers under the direction of the latter. Out of the proceeds of the sale a large sum was applied by the brokers on the unpaid balance of the debt of the deceased, and the remainder was accounted for and paid to the administrator, who charged himself with the full amount of the sale price and took credit for the sum appropriated by the brokers, claiming commissions thereon. It was held that the stock never became the property of the estate, that the only assets administered were the contracts, which did not produce the value on which commissions were claimed, but only so much as remained after payment of the balance to the brokers. The administrator was allowed commissions only upon the amount of such remainder. The Court, in this case, said:

“By charging himself with the gross amount of the sales of stock, and taking credit by the amount retained by Mathews & Whitaker (brokers), an appearance is given of having administered upon an estate of a value in excess of the estate actually administered upon, to the extent of that credit, but it is an apparition only. We think the circuit court did right in disallowing commission on a value which never had an existence for the beneficiaries of the estate or at all, save in the account of the administrator, where it appears for an instant on the debit, only to vanish in the same instant on the credit, side of that account. It is an estate too ghostly and impalpable to bear the burden of such commission.”

In re Mercantile Trust Co., 210 N. Y. 83, 103 N. E. 884, where the personal estate consisted principally of a large number of shares of stock which had been purchased by the decedent on a margin, were being carried by a broker, and never had been in the possession of the decedent, the administration was held entitled to commissions only on the number of shares turned over to it after the broker had been paid, and not on the proceeds of the stock applied to the payment of the indebtedness to the broker. The court said:

“Fo.r purposes of general definition, the relationship between customer and broker in relation to stocks which have been purchased, and are being carried by the latter on a margin, has been held to be that of pledgor and pledgee. * * * This relationship, however, has some special and unusual features. Ordinarily, and in the absence of evidence to the contrary, we assume this to be an ordinary case where a broker is carrying stocks on a margin for his customer, these stocks have not been delivered to him by his customer, but have been bought with his own money, and have never been in the possession of the latter. Under certain limitations the broker may hypothecate such stocks, and sell them for the payment of the indebtedness due thereon, and on payment by his customer is not restricted to the delivery of the specific certificates which he purchased on his order, but may deliver others of like kind. Not only has the customer not had possession of or delivered the stocks to the broker, but he cannot secure possession thereof from the broker until he has paid the indebtedness due thereon. Under such principles applicable to this case we think the conclusion that the respondent ever had possession of so, much of the testator’s stocks as were sold by the brokers for the purpose of paying their claim and discharging their lien, or that it ‘received and paid out’ the proceeds thereof, would result in an unwarranted subordination of facts to theory, and would be wholly unjustifiable.”

The North Carolina Supreme Court has decided a question similar to the one presented by this appeal and under a statute of similar import to our Section 19-534. In the case of In re Ledbetter, 235 N. C. 642, 70 S. E. (2d) 667, an administrator applied for an allowance qf commissions on the credits or offsets deducted from the indebtedness of his testate to certain brokers. In disallowing such commissions, the court held:

“The terms ‘receipts’ and ‘expenditures,’ as used in the statute, refer to the actual receipts and the actual expenditures of the personal representative. The administrator in the instant case has no lawful claim to commissions on the credits or offsets deducted by the consent judgment from the indebtedness of his testate to the banks. This is necessarily so for the very simple reason that the deductions were neither actually received nor actually expended by the administrator. Walton v. Avery, 22 N. C. 405; 34 C. J. S., Executors and Administrators, § 865(b).”

In the case of Buerhaus v. De Saussure, 41 S. C. 457, 19 S. E. 926, 20 S. E. 64, the executors sold a lot of land for $16,000.00, the property being at the time encumbered with a mortgage of over $9,000.00. It was agreed that the purchaser would assume and satisfy the mortgage, which she did, and paid the balance of the purchase money amounting to over $6,000.00 to the executors. The executors claimed commissions upon the sales price of $16,000.00. The court held that they were only entitled to commissions on the purchase money in excess of the mortgage debt, saying: “This sum, therefore, was the only amount that passed through the hands of the executors, and upon that sum alo;ne are the executors entitled to commissions.”

In the case of Spartanburg County v. Arthur, 180 S. C. 81, 185 S. E. 486, the receivers of a defunct bank sought commissions upon collections received and handled by secured creditors of the bank. The statute under which they sought commissions established the measure thereof by the “moneys received” and by the “moneys paid out” by such receivers. This Court affirmed the circuit decree which said:

“Can it be said, with any show of reason, that moneys which admittedly were received wholly by a secured creditor and applied by such creditor to its indebtedness have ever been ‘received’ or ‘paid out’ -by the receivers? For the court to hold that the fiduciaries in 'this instance ‘received’ the funds collected by the secured creditors is to disregard the indisputable physical fact, necessarily acknowledged by the receivers themselves, that such fiduciaries had never ‘received’ these collections. With even less color of reason can it be urged that the receivers ever ‘paid out’ such collections. As a matter of fact, these collections were never ‘paid out’ by any one, but were merely credited by the secured creditors upon the debt.”

It was pointed out in construing Section 9017 of the 1932 Code, now Section 19-534 of the 1962 Code, that our Court has steadfastly adhered to an exact definition of the word “received” and has denied unto a fiduciary any commissions upon a fund unless it could fairly be said that such fiduciary had himself actually “received” into his possession funds of the estate. In denying commissions to the receivers, the Court held that they were not entitled to such on collections made by the secured creditors and applied to their claims, especially in view of the construction of the word “received” in statute fixing fees of executors as meaning that money must be actually received and handled. Attention is called to the cases cited in Spartanburg County v. Arthur, 180 S. C. 81, 185 S. E. 486, construing what is no,w Section 19-534 of our Code, and holding that before an executor is entitled to commissions he must actually receive and pay out funds of an estate.

There is no valid basis here upon which to predicate an allowance of commissions to David T. Ouzts because he never actually received and paid out the funds upon which the appellants assert that he was entitled to commissions.

We conclude, as did the Probate Judge and the Circuit Judge, that the estate of David T. Ouzts was only entitled to executor’s commissions on the surplus remaining after the deduction o,f the indebtedness of the testator to the brokerage firms, for said surplus only was actually received, handled and distributed by the executor.

The exceptions of the appellants are overruled and the judgment of the lower Court is affirmed.

Affirmed.

Taylor, C. J., and Lewis, J., concur. Brailsford, J., concurs in result. Bussey, J., dissents.