Skeer's Estate

84 A. 787, 236 Pa. 404, 1912 Pa. LEXIS 765

• Court: Supreme Court of Pennsylvania
• Decided: May 13, 1912
• Docket: Appeal, No. 89
• Status: Published

Opinion

Opinion by

Me. Justice Pottee,

This proceeding was the adjudication of the fourth and final account of Ellen B. Skeer, administratrix of the estate of Charles O. Skeer, deceased. Exceptions to the account were filed by the collateral heirs of the decedent, in which they alleged that the administratrix was guilty of gross negligence in failing to collect a large amount of money due to the estate from those who were charged with the settlement of the affairs of the firm of Linderman & Skeer.

The court below appointed an auditor to consider the exceptions and to report a schedule of distribution. The only exceptions which are here brought in question are those relating to the interest of the decedent in the firm of Linderman & Skeer. This interest as shown by a trial balance taken shortly after the death of decedent, was valued at $161,876.34, but in the inventory and appraisement filed in the register’s office, it was appraised at $57,211.96. The auditor, however, refused to surcharge the accountant with any part of this sum, and dismissed the exceptions relating to the failure of the administratrix to realize upon this asset. The court below overruled tbe exceptions to tbe auditor’s report, and confirmed it absolutely. The exceptants have appealed, and contend that tbe evidence showed that tbe accountant was guilty of gross negligence in failing to collect tbe amount due to tbe estate from tbe firm of Linderman & Skeer, and that sbe is liable for tbe amount collected and embezzled by ber agent and attorney in fact, Garret B. Linderman.

Prom tbe facts found by the auditor it appears that Charles O. Skeer, who resided in Mauch Chunk, died March 13, 1898, intestate, leaving a widow and collateral heirs. Letters of administration were granted to tbe widow, who filed an inventory and appraisement showing personal property of tbe appraised value of $850,477.53, tbe interest of decedent in tbe firm of Linderman & Skeer being appraised at $57,211.96. Tbe firm was originally composed of Dr. G. B. Linderman, of South Bethlehem, Pa., and Charles O. Sheer, tbe interest of tbe latter in tbe partnership being nine-twenty-eighths. Tbe firm was originally engaged in tbe operation of certain leased coal mines, but prior to Sheer’s death it bad ceased to operate mines or to engage in active business. At tbe time of Sheer’s death, tbe winding up of tbe firm’s business was in tbe bands of Robert P. Linderman, a son and one of tbe executors of Dr. G. B. Linderman. Mrs. Skeer, as executrix of ber bus-band, gave a power of attorney to R. P. Linderman, authorizing him to act for ber in tbe settlement of tbe business. Up to July 1902, Mrs. Skeer received tbe sum of $31,000 on account of tbe interest of Sheer’s estate in the firm. Sbe received nothing more during tbe lifetime of R. P. Linderman, who died in 1903. On December 8, 1903, Mrs. Skeer, as administratrix, gave to Garret B. Linderman, another son of Dr. Linderman, and a brother of R. P. Linderman, a power of attorney to represent ber in tbe settlement of tbe firm’s business. It seems that this was done without tbe knowledge or consent of any of tbe collateral heirs of C. O. Skeer, nor does it appear that any of them were informed of the existence of the power of attorney. On October 8, 1906, she received from Garret B. Linderman $10,000, making an aggregate of $141,000 paid her on account of the interest of her husband’s estate in the firm. On May 16, 1903, the book value of that interest was stated as $130,876.34.

Garret B. Linderman continued in charge of the settlement of the firm business, with Mrs. Skeer’s consent, until January 1908, when he was adjudicated a bankrupt, and it then transpired that he had collected and appropriated to his own use moneys of the firm, of which the share of the Skeer estate was $126,734.43. Deducting the sum of $7,500 paid by a surety company, the loss of the estate by reason of Linderman’s defalcation was $119,234.43. No action of any kind was ever brought by Mrs. Skeer to compel a settlement of the Linderman & Skeer partnership business, or to secure an accounting from either R. P. Linderman or Garret B. Linderman. The record shows that after the death of C. O. Skeer, the estate of Mr. Linderman collected from the firm of Linderman & Skeer, a total sum of $239,000, of which $157,000 was paid during the years 1906 and 1907. During the same period Mrs. Skeer, as stated above, received only $41,000, whereas her proportionate share would have been some $90,000.

The question of accountant’s liability is to be determined by inferences to be drawn from facts which are not disputed, and by the application to these facts of sound and established principles of law. The rule as to the liability for failure to collect assets of the estate is well settled. In Calhoun’s Estate, 6 Watts 185, 188, Mr. Justice Rogers said: “All that a court of equity requires from trustees is common skill, common prudence and common caution. Executors, administrators or guardians are not liable beyond what they actually receive unless in case of gross negligence; for when they act as others do with their own goods and with good faith, and are not guilty of gross negligence, they are not liable.” The language above quoted was repeated by Mr. Justice. Sharswood in Neff’s App., 57 Pa. 91, 96, and Mr. Justice Green in Webb’s Est., 165 Pa. 330, 336; Bortol’s Est., 182 Pa. 407, 410, and Semple’s Est., 189 Pa. 385, 390. In Webb’s Est., 165 Pa. 330, 336, Calhoun’s Est., (6 Watts 185) is referred to as “the leading case in Pennsylvania on this subject.”

Did the accountant here use common prudence, and exercise common caution, or was she grossly negligent? She took charge of the estate on May 21,1898. At that time, as stated above, the firm of Linderman & Sheer was not actively engaged in business. Its affairs were being closed up by Robert P. Linderman, acting under powers of attorney from the executors of his father, and from C. O. Sheer. After the death of the latter, his administratrix, the present accountant, permitted R. P. Linderman to remain in charge of the settlement of the affairs of the firm. This arrangement continued for some five years, when R. P. Linderman died, prior to December 8,1903, without having made settlement of the business of Linderman & Sheer, and without submitting any account to the administratrix. At that time, December 8, 1903, Mrs. Sheer, as administratrix, gave a power of attorney to Garret B. Linderman, authorizing him as her representative to settle the affairs of the firm. No final settlement of the firm’s business was made, and some four years later, in 1907, it was discovered that Linderman had appropriated to his own use funds of the Sheer estate amounting to $126,734.43. No suit for an accounting was brought by Mrs. Sheer, though more than nine years elapsed between the grant of her letters of administration and the discovery of Garret B. Linderman’s embezzlement. It appears from the testimony that Mrs. Sheer and her attorney frequently discussed the advisability of bringing suit for an accounting, and it was agreed that it ought to be done. But it was not done because of promises of adjustment made by tbe Lindermans, and because of Mrs. Skeer’s personal and social relations with them. After the defalcation of Garret B. Linderman became known, Mrs. Skeer brought no suit against him beyond filing proof of tbe debt with tbe referee in bankruptcy. Mrs. Skeer testified that when sbe gave tbe power of attorney to Garret B. Linderman, sbe did it with hesitation, although tbe executors of tbe Linderman estate requested it, and her own attorney advised it. Sbe said sbe never trusted him, and thought that be was cunning. But in spite of this feeling, sbe did not consider taking a bond from him, as security for tbe faithful discharge of bis duties, because sbe thought it would have been considered an insult to ask it of him. It appeared that among other assets, tbe firm of Linderman & Skeer owned valuable real estate in Hartford, Conn. In 1906, upon tbe petition of Mrs. Skeer, Garret B. Linderman was appointed ancillary administrator of C. O. Skeer at Hartford, and as such sold tbe interest of tbe Skeer estate in tbe real estate there, from which a net balance of $19,524.09 was realized, all of which was embezzled by Linderman. Tbe Surety Company which was upon bis bond as administrator, paid $7,500 as a compromise settlement, and this amount is included in tbe present account. Linderman bad previously sold personal property of tbe firm at Hartford for $50,045.67. As above noted, tbe books of Linderman & Skeer showed that after tbe appointment of tbe appellee as administratrix, there was paid to tbe estate of G. B. Linderman, $239,000, while tbe Skeer estate received only $41,000. This was far below tbe amount to which tbe Skeer estate was entitled. Tbe only excuse given for tbe failure to settle tbe partnership business, during this long period of nine years, was the alleged inability to dispose of tbe Hartford property, and tbe pendency of two law suits. It appears, however, that tbe Hartford property was entirely independent of tbe other business, and no reason was shown why it should have interfered with the settlement of the remainder of the firm’s affairs. One of the law suits in question was settled soon after Mr. Skeer’s death, and the other involved a liability at the most of $25,000.

We cannot regard the conduct of the administratrix in permitting this long delay in the settlement of the interest of the estate in the partnership as being anything else than gross negligence. It was her duty, as was said in Chambersburg Saving Fund Ass’n Appeal, 76 Pa. 203, 228; ...... within a reasonable time to maker proper efforts to convert all the assets and securities into money for distribution.” And if she failed to make such efforts, she “was guilty of gross negligence and became liable for any loss thereby sustained.” In Johnston’s Estate, 9 W. & S. 107, 109, Mr. Justice Rogers said: “It is a case, not of ordinary care, but of gross negligence, for he has failed to show that he made any effort whatever in proper time to recover the money. A mere application for payment, without more, would not have availed him. To entitle him to a crédit, he must, in addition, prove that he took legal steps to recover the sum due, or that, from the notorious insolvency of the debtors, a suit would have been useless. But, so far from this being true, the probability is that if ordinary diligence had been used the money would have been recovered.” This language fits accurately the facts of the present case. The record shows that while Mrs. Skeer and her counsel frequently discussed the bringing of suit, and were convinced of the propriety of so doing, yet for reasons which were largely personal and social, this obviously prudent step to protect the estate was not taken. The delay in the settlement of the partnership affairs was unreasonable, even at the date of R. P. Linderman’s death, as more than five years had then elapsed. The demands of ordinary prudence certainly required sharp insistence upon a settlement at that time. The administratrix, however, apparently made no investigation as to the condition of the firm affairs, but proceeded to give another power of attorney to Garret B. Linderman, whom, at the time, she said she distrusted. Notwithstanding her suspicions, she left the control of the matter in his hands, exercising very little, if any, oversight of his conduct in representing her. Only one instance appears in which she had an examination of the books made, and that was in 1904, when she employed an audit company to investigate the accounts of the firm. Their report shows that a large amount of cash and negotiable securities was then on hand, which should have been promptly distributed. That report also showed that in eight years, salaries amounting to $25,446.70 had been drawn from the firm for services which “were only nominal and could not have required more than two to three days annually.” This report in itself should have been enough to have placed any reasonably competent person on guard. As noted above, a simple inspection of the books of the firm in the year 1906 would have shown that the agent and attorney in fact of the administratrix was paying large sums of money out of the firm to the estate of his father in which he was interested, and at the same time was failing to distribute anything like a proportionate amount to the Skeer estate. This fact would have appeared from such an examination of the books as ordinary prudence would have suggested.

We can see nothing in the evidence to justify the inference which the auditor drew from the facts, that the conduct of the administratrix should be excused. No reasonable explanation of the long delay in compelling a settlement was given. The evidence points unmistakably to negligence in this respect. The delay of five years until the death of R. P. Linderman was not justified. And the conduct of Mrs. Skeer in making no investigation at that time, and in proceeding to give another power of attorney to a brother of R. P. Linderman, and in permitting him to continue for years the same careless and unbusinesslike course of procedure, without requiring any security, and without compelling prompt, or reasonable settlements at his hands, can only be properly characterized as gross negligence upon the part of the administratrix. The record discloses nothing which affords any adequate excuse for a delay of nine years in securing to the estate the amount of its interest in a business which was in course of settlement, and whose assets were admittedly good, and whose conversion called for nothing but the exercise of reasonable business caution and activity. We are convinced that the failure of the administratrix to exercise common skill, common prudence, and ordinary business caution resulted in the loss of the interest of the estate, in the assets of the firm of Linderman & Skeer. To the extent of the value of this interest, which the administratrix failed to collect, and which was lost through the defalcation of her agent and attorney in fact, Garret B. Linderman, the administratrix must be surcharged.

The fourth, fifth, sixth, ninth, twelfth, fourteenth, fifteenth, sixteenth and twenty-second assignments of error are sustained. The decree of the Orphans’ Court is reversed, and the record is remitted for further proceedings in accordance with this opinion.