United States Fidelity & Guaranty Co. v. People

44 Colo. 557

• Court: Supreme Court of Colorado
• Decided: September 15, 1908
• Docket: No. 5298
• Status: Published

Opinion

Mr. Justice Helm

delivered the opinion of the court:

The most important objection urged in this case challenges the jurisdiction of the county court to allow as a claim against the estate, the demand of relator for legal services; such services being rendered to the administrator in due course of administration. The employment, rendition of. the services, and reasonableness of the allowance are not in controversy. The specific contention is that relator’s demand could only be collected through the administrator. That is-to say, that it was a claim against the administrator and not against the estate; and that he should have looked solely to the administrator, leaving that official to seek reimbursement from the estate through subsequent proceedings in court.

■ Were the matter one of first impression in this state and elsewhere; little difficulty would be encountered in. its decision. But there are two lines of authorities and a marked divergence of opinion, respectively upholding and denying the jurisdiction in question. This divergence of opinion is accounted for, in part, by differences in the various statutory enactments on the subject. And by observance of this fact a large part of the seeming conflict -will disappear.

Many decisions limit claims against the estate of a deceased person to debts or .obligations contracted by the deceased himself; or to liabilities resulting from contracts made or obligations incurred by him in his lifetime. As to expenses, arising in connection with the administration and settlement of the estate, these cases hold that they constitute claims against the executor or administrator individually, and not claims against the estate itself; and that such demands or expenses must be paid by the executor or administrator and then reported by him to the probate court; which court may allow the same or such portions thereof, if any, as it shall deem reasonable and proper.

But, in this state, we cannot accept the distinction thus made. Whatever may be the ground given for its adoption elsewhere, no room is left for its recognition here. Our statute, §4780, Mills’ Ann. Stats., puts this matter beyond question. It‘first declares that 4 4 all demands against the estate of any testator or intestate shall be divided” into four classes. Of these four classes, save as to the physician’s hill and expenses in the last illness, only the third and fourth could by any possibility he construed as referring to debts or obligations created by deceased in his lifetime. The first two classes, with the exception noted, apply exclusively to expenses 'accruing subsequently. Mofeover, the second class expressly includes 4 4 all expenses of proving the will and taking ont letters testamentary or of administration and settlement of the estate. ’ ’

Hence, we repeat, whatever the law may he elsewhere, the status of expenses accruing after the death of testator or intestate and in connection with the administration and settlement of the estate, is here, hy law, absolutely fixed; such expenses are undoubtedly covered by the statutory classification of demands ‘ ‘ against the éstate ’ ’; and no ingenuity or skill in argument could demonstrate the contrary.

But if the foregoing conclusion be correct it naturally follows that, unless some other statutory provision forbids, claims or demands arising through ■the administration and settlement of estates may be presented directly to the county court and allowed and ordered paid to the claimant in the ordinary course of administration. That court is by our constitution clothed with “original jurisdiction in all matters of probate, settlement of estates of deceased persons,” etc.; and by statute it is made a court of general jurisdiction and vested with unlimited control over “all questions of law and fact relating to probate matters.” It has plenary power to guard all assets and adjudicate all alleged liabilities during the process of administration. And no doubt can arise as to the scope of its authority in dealing with claims or demands against the estate of deceased persons; whether such claims be contracted by them during life, or arise from materials furnished or services performed in connection with the administration and settlement of the estate, after death.

It is not disputed that the claim of relator in the case at bar was a bona fide obligation incurred by the administrator in connection with the settlement of this estate. And unless, as already observed, some other legislative provision affects the question, we would not feel warranted, even were this a direct attack upon the judgment, which it is not, in holding either that the county court had no jurisdiction to allow the claim as it did, or that its action in so doing was error.

But counsel for appellant invites our attention to §4805, Mills’ Ann. Stats. This section, he contends, so qualifies the provision 'above considered, that such demands as the one here involved can only be presented to or recognized by the court, through the administrator; that is to say, such claims must, by virtue of section 4805, be brought before the court as items in the account of the administrator and, if approved, they must be allowed and paid to him and not 'to the person rendering the services for which they are charged.

It becomes necessary, therefore, to carefully examine this statute. It reads as follows:

“Executors and administrators shall be allowed, as a compensation for their trouble, a sum not exceeding six per cent, on the whole amount of personal estate, and not exceeding three per cent, on the money arising from the sale or letting of land, with such additional allowances for costs and charges in collecting and defending the claims of the estate, and disposing of the same, as shall be reasonable, to be alloiued and paid as other expenses of administration.” '

We observe in the first place, that the portion of this section now involved and italicized by us, simply declares in statutory form the authority which was inherent in the court and would have existed as one of its equity powers without the statute. It has long been the rule in equity that when an administrator or executor employs and pays persons for services in connection with the estate, such for instance, as those rendered in the case at bar, he is entitled to reimbursement from the estate therefor through an order of court; provided the services be proper and the amount so charged be reasonable.—Williams on Executors (6th Am. ed. 1877), p. 1971; Barker v. Kunkel, 10 Ill. App. 409.

This statute is not intended, as counsel seems to think, to be exclusive, and to include all expenses, incurred by the administrator in the settlement of the estate. It is simply designed to cover those instances where the -executor or administrator makes advances from his own funds upon the expenses referred to, or makes himself individually liable’ therefor independent of his official character. It does not include claims or demands for services that may be rendered to the estate through employment' by the administrator purely in his official capacity, and which he has not personally secured or discharged.

Manifesting the correctness of this view is the fact that the provision is expressly limited to a single class of administration expenses, viz.‘ ‘ costs and charges in collecting and defending the claims of the estate and disposing of the same”; the purview is restricted to the subject of claims alone. And the words “costs and charges” may also be significant; they may be broad enough to include- such items as attorney’s fees; but their more natural and ordinary purport would embrace witness fees, court costs and only such other expenses as must generally be advanced promptly, from time to time as they accrue. Many other expenses there are that could by no reasonable interpretation be covered by section 4805. This distinction is emphasized in the closing declaration of the statute itself, viz.: “to be allowed and paid as other expenses of administration. ’ ’

The construction of the law contended for by counsel, and announced by some authorities, leads logically to certain results, which, as at present advised, and in view of section 4780 aforesaid, we are not prepared to accept and incorporate into the jurisprudence of this state. For instance, it logically follows from that view that the administrator would not be entitled to insert a claim of this kind into his report and ask the court for an allowance thereof to him, unless he [had actually advanced the money and paid in full the person rendering the services. And so sa.y the authorities:

“It seems also to be settled that an executor will not be allowed counsel fees or for other ser-vices rendered at his own instance unless he has paid them.—Williams on Executors, p. 1860, and notes; Forward v. Forward, 6 Allen 494; Modawell v. Holmes, 40 Ala. 391.”—Barker v. Kunkel, 10 Ill. App. 409.

And it necessarily follows as a corollary that the administrator in making such advances does so at his personal risk. He incurs the hazard that the court in passiiig upon his account therefor may hold the services unnecessary or the amount charged excessive :

“The decisions are uniform that a guardian, executor, administrator or other person acting in autre droit is personally responsible to an attorney employed by him professionally in the execution of his duty, and not the estate , or fund under his care. Nor is this liability in any manner dependent upon the allowance or disallowance by the probate court of the claim of the executor for reimbursement for the money so paid by him. That is a matter wholly between the executor and the court.”—Barker v. Kunkel, supra, 412.

The last foregoing considerations necessarily foreshadow certain other consequences that cannot be ignored. The administrator must be possessed of sufficient resources or- funds to make advancements for attorney’s fees and other expenses incurred by him, or his standing and credit must be such that agents and employees will be willing to depend upon him alone, without reliance upon the estate. Again, the administrator must himself be willing to incur the risk of a disapproval of his accounts by the court, in whole or in part, and a refusal to reimburse him from the estate for administration expenses. Thus a strict adherence to the view urged upon us might render it extremely difficult to secure the services of desirable administrators; and in many instances such adherence would virtually disqualify executors from acting’, although solemnly chosen by the deceased and designated in his will.

On the other hand, the attorney or other person selected might refuse to accept the engagement and render the services required, if he is not allowed to look to the estate for compensation. A rigid application of this rule might place him in a precarious position. The administrator after receiving the services might refuse to recognize a claim for compensation, and a suit against him personally might be unavailing; or the administrator might abscond and leave the claim wholly undischarged. The claimant, being unable to hold the estate, is relegated to an action against the surety upon the administrator ’s official bond; which action, even when it will lie, is often a doubtful and unsatisfactory remedy.

We are not unaware of the fact that some of the cases which adhere to the rule urged, attempt to avoid its objectionable consequences by recognizing exceptions and holding that under certain circumstances the injured claimant may look to the estate. But the exceptions thus carved out only serve to emphasize, more strongly the unreasonableness of the rule, besides demonstrating that the matter involved is not. jurisdictional. And if all the cases .of injustice or hardship were covered by such exceptions, the rule itself would, to say the least, be seriously impaired.

The suggestion sometimes made that this rule is necessary as a check upon fraud, is hot tenable. Collusion between the administrator and claimant could take place quite as readily whether the claim be allowed against the estate and directly to the claimant, or be paid through the administrator. It is the imperative duty of the county court to carefully examine and investigate all demands for expenses in the settlement of estates, and as we have seen, that .court has plenary authority to reject such demands in whole or in part, regardless of the manner of their presentation; its decision being subject to reconsideration, appeal, or review as provided by law. And its facilities for the detection of fraud and the weeding out of fictitious demands are as full and effective when such'demands are presented by the claimant as when they are exhibited by the administrator.

In this connection it is proper for us to invoke a well-known principle of statutory interpretation, that is clearly applicable. Sections 4780 and 4805 above considered, were borrowed verbatim from Illinois. Prior to their adoption in Colorado they had received construction by the supreme court of Illinois. With these provisions in full force, the law there was 'thus stated by Chief Justice Treat:

“The services were performed for the estate and not for Mrs. Eoss personally. The estate received the benefit of the services and ought to make the proper compensation. The appellee was employed on behalf of the estate and had the right to look to the estate for payment. The fact that he was retained by the executrix makes no difference. Her acts rightfully done in her official character are binding on the estate.”—Greene v. Grimshaw, 11 Ill. 391.

The services so referred to were rendered by an attorney in connection with the settlement of an estate; and the court upheld his right to look to the estate for payment, notwithstanding the fact that he was retained by. the executrix and performed the services under her direction.

The rule of interpretation we invoke is, that, subject to certain qualifications which need not be here enumerated, when a statute is thus borrowed from a sister state the construction previously put upon such statute by the highest court of that state is likewise adopted by the legislature borrowing the provision.

The statute of Illinois corresponding to our section 4780 seems to have since been repealed or modified. And in Johnson v. Leman, 131 Ill. 613, the rule is announced that in general, persons employed by a trustee must look solely to him for compensation. But Greene v. Grimshaw is considered and distinguished, the ground of such distinction being the previous existence and effect of this statute. Speaking of that case the Illinois supreme court says:

“The statute "then in force provided that expenses of the settlement of the estate should be allowed against the estate in the second class. ’ ’

And a fair inference from this and other language there employed is, that with this statute still in force, the view of the Greene case, resting upon it, would have been sanctioned and reaffirmed in Johnson v. Leman.

Subsequent to the enactment of these statutes in Colorado, and intervening between the Greene and Joh n son cases, the court of appeals of-Illinois saw fit to give the law in that state a different interpretation.—Barker v. Kunkel, 10 Ill. App., supra. Greene v. Grimshaw is there also referred to and distinguished. The court of appeals, however, follows such attempted distinction with the remark that, “moreover it is manifest from reading the opinion of Treat, 0. J., that the question of direct liability of the estate to the attorney'was very imperfectly considered.”

But with due deference to the learned court making this criticism, we feel constrained to accept the view expressed in the earlier case by the ■ higher tribunal and subsequently referred- to approvingly by the same tribunal. In fact, as already suggested, we do not see how a different interpretation could be given to the statutes above considered. There is here certainly no excuse for not recognizing the rule relating to borrowed statutes and, therefore, rejecting the subsequent interpretation by the Illinois court of appeals.

In deciding this branch of the case, we simply hold that under the Colorado statutes referred to which still exist in substantially the same form, the estate is primarily liable,, for a reasonable expense lawfully incurred in the administration and settlement thereof. And that the county court has jurisdiction .to allow directly to the claimant his demand therefor and order the administrator to pay the same; observing, of course, the statutory classification and requirements in so doing. Our view is that in contracting for or incurring such expenses the administrator acts for the estate; that he acts in his official and not in his private or individual capacity. And this is true whether that official appeals to the court for its sanction before incurring the liability, or takes the hazard of its subsequent approval.

We do not hold that such expenses may not be liquidated by allowance to the administrator. Where he actually advances the same, this course is necessary. And where the administrator and claimant, by contract or otherwise, agree as to the amount of the claim and the latter is willing, there is no reason why it may not he included in the former’s report, and allowed to him. The practice of allowing claims for these expenses to the administrator, is often convenient and desirable. It has been frequently followed in this state, and what we have said is not intended to discourage its continuance whenever adequate and practicable.

An extended review of the authorities upon this question would only lengthen the present opinion without serving any equivalent purpose. But as certain decisions by our court of appeals áre regarded by the parties as pertinent to the discussion, they will be briefly considered.

The case of Lusk v. Patterson, 2 Col. App. 306, is strongly relied on by counsel for appellant. The original claim there in controversy accrued nine years after the death of the intestate and through a contract made by his administratrix. Notwithstanding this fact, the county court allowed it as a demand of the fourth class and entered judgment accordingly. The court of appeals was clearly right in holding that this was error; our statutory demands of the fourth class are limited to debts contracted by the deceased, or resulting from obligations incurred by him in his lifetime.

But the declaration of that court in argument, that the statutory phrase “claims against the estate” applies only to debts of the decedent and that it would be error for the county court to allow as a debt against the estate any claim contracted in the course of administration, is, as we have seen, inconsistent with the clear purport of section 4780. And this suggestion is also true, of the similar intimation made in Pastorius v. Davis, 9 Col. App. 428, and the denial of the county court’s jurisdiction, in Riner v. Husted, 13 Col. App. 526, and Currier v. Johnson, 19 Col. App. 248.

On the contrary, the same conrt in Fleming v. Kelly, 18 Col. App. 28, adopted the view that a claim arising in dne course of administration might be a claim against the estate. In that case an order of the county court allowed the administratrix to' continue the business of her husband pending settlement of the estate. The demand in controversy was for goods purchased by her in so doing. The case of Lusk v. Patterson is carefully considered and the declaration therein, above mentioned, is qualified. Such qualification rests upon the fact that the particular contract involved in Fleming v. Kelly was made and obligation incurred by the administratrix, pursuant to authority of the county court previously given. But if the county court can authorize the administrator to incur a debt in connection with the administration, and then adjudge such debt to be a claim directly against the estate, it assuredly has jurisdiction under section 4780 to hold a similar obligation incurred without its prior authority, also a debt against the estate. And it follows therefore, that the ease of Fleming v. Kelly is in harmony with the interpretation of the law herein adopted.

In view of the foregoing conclusion upholding the jurisdiction of the county court to allow expenses of administration directly to the claimant, as claims against the estate, it is obviously unnecessarj^ to consider whether appellants’ objection to the judgment sanctioning relator’s claim constituted a collateral attack thereon; that is to say, whether in this action against the -surety upon the administrator’s bond the validity of relator’s original judgment in the county court can be challenged. In holding that the original allowance of the claim was legal and regular, we necessarily hold that the judgment based upon such allowance is impervious to this kind of attack.

Certain other questions are presented and earnestly urged as grounds for reversal of the judgmént below. It is claimed that the second amended complaint, upon which the case was finally tried, does not state a cause of action.

One of the defects charged against this complaint is that it fails to allege the filing for allowance with the county court of relator’s claim within one year after the issue of letters of administration. By reference to section 4780, aforesaid, it will be seen that the provision requiring claims to be filed within this period only applies to the “other debts and demands” specified in the fourth subdivision thereof. And hence this averment, if essential, is limited to those debts or demands which were incurred by decédent in his lifetime. But the claim here in controversy arose, as we have seen, in connection with the settlement of the estate, and was, therefore, properly. classified with claims of the second elass. Moreover, even if the provision requiring demands to be exhibited within a year from the granting of letters were not expressly limited to the fourth’ class, yet it could not have been the legislative intent that the same should apply to claims incurred during the process of administration; for in many instances the services would not be rendered and the expenses incurred till long after the expiration of that period.

It is- also objected that this complaint omits to aver the entry by the county court of an order for the distribution of the funds among claimants and the failure of the administrator to obey such order. No such averment was necessary in the present case. The judgment itself is full and complete against the administrator. And a special order directing that officer to pay the same was not necessary. Such separate order is usually made upon exhibition of the administrator’s accounts for settlement, and is then only required when there are not sufficient assets or funds to pay the whole of the debts established against the estate. But in this ease the existence of such sufficient fund is shown both by allegation and proof.

Another defect pointed out on behalf of appellant is that the second amended complaint does not allege that the estate had sufficient assets or funds to pay all the claims, including that of relator. Assuming that such an allegation is important, this objection must also be denied. The amendment incorporated by order of court on December 11, 1902, fully supplied the missing averment.

The allowing of this amendment is the basis of another challenge and is strenuously insisted upon as error. The specific criticism in this connection is that the motion to amend came too late. It is admitted that the amendment might have been allowed during tire trial. But the power of the court to do so after the trial was concluded, is denied.

The rulings in this cause as to both pleadings and -procedure were liberal. But such liberality is accounted for in part by the fact that only two terms of court per year were held in Custer county, and each of those terms was usually of very short.duration. It was, therefore, important for the court to exercise as much latitude as possible out of term time in matters pertaining to preparation for trial, particularly to the making up of issues.

The amendment of the complaint attacked in this case did not operate to change the cause of action. It only served to render more complete the statement of the cause of action originally pleaded and always relied on. Such amendments are liberally allowed in the interest of justice. The court of appeals of this state discussing the subject employs the following language:

“The granting of leave to amend is within the sound discretion of the court, which should be liberally exercised in the interest -of justice, and unless in consequence of its exercise some disadvantage has resulted to the adverse party, the decision is no ground f.or reversal.”—Davis v. Johnson, 4 Col. App. 551.

No particular period in the progress of the trial is fixed at which the pleadings cease to be amendable. And -amendments similar to the one now under consideration may, under proper circumstances, be permitted at any time before final judgment. Such was the rule at the common law and the code procedure has certainly introduced no restrictions. This court has declared:

“Under our system of procedure the amendment of pleadings during the progress of the trial is, in the exercise of a reasonable judicial discretion, liberally allowed. And sometimes such amendments are permitted after verdict.”—Seymour v. Fisher, 16 Colo. 199.

“At common law the court has power to allow an amendment of the pleadings in a case until final judgment; and authority is given» by statute in most of the states to. allow amendments after as well as before judgment by the insertion of new allegations material to the case.”—1 Enc. Pl. & Pr. 605.

The amendment here challenged simply introduced into the amended complaint the words “and which sum of $301.23 is sufficient to pay 'all debts in.cluding all costs of administration”; it was tendered' for the purpose of meeting an objection offered by defendant; the application to amend was made after the evidence of plaintiff had closed, defendant offering none, and after the court had adjourned the term, taking his decision under advisement; it is stated in a subsequent notice that notice of the application was served upon defendant; the motion was supported hy a strong affidavit showing persuasive grounds in its favor; the court held the decision and this application to amend, in abeyance until the opening of the succeeding term, when the amendment was allowed nunc pro tunc as of the date of trial; the parties not being present, the cause was continued until the next succeeding term of court, and notice of the order, permitting the amendment and granting the continuance was duly served upon defendant; the cause came on for further hearing pursuant to such continuance, the evidence previously introduced being, without objection, allowed to stand, and plaintiff offering soffte additionál testimony; defendant tendered no proofs and the judgment, now under review, resulted.

In allowing this amendment the court undoubtedly exercised a very broad discretion. He did not impose terms, and there was some delay and a little added expense. But it does not appear that defendant suffered material prejudice thereby; it was given opportunity to appear and resist the application; and when the same was allowed a continuance to the next succeeding term of court was ordered, although defendant was not present or represented and preferred no request in the premises; it was duly notified of the granting.of the amendment and of the continuance; the cause was then reopened and defendant was given ample time and opportunity to make any changes in its answer desired, and to prepare and present any proofs made necessary by the amendment. Under the circumstances we cannot say there, was such an abuse of discretion, as requires a reversal of the judgment.

But one further objection is deemed worthy of consideration; it questions the manner of pleading the judgment of the county court in the second amended complaint. The allegation thus excepted to, after stating the rendition of the services by relator and the amount of his claim therefor, proceeds as follows: '

“That said administrator -was duly notified of-the same and that thereafter the said claim was duly adjudged by said court to be a claim of the second class against the said estate and justly due to plaintiff, and the said administrator was by the judgment of said court duly required to pay the same in the regular administration of said estate. That the said judgment so rendered by said court was in all respects in due form of law and is now in full force and effect.”

It is urged that this allegation should have contained the date of the judgment or at least the term of court at which it was rendered; also that the word “adjudged” so employed is insufficient compliance with section 65 of the Civil Code. Referring to the latter criticism; the code permits judgments to he pleaded by simply declaring that the same were ‘ ‘ duly given or made, ’ ’ without stating the facts conferring jurisdiction. The pleader in this instance uses the phrase “duly adjudged” and he also avers that the judgment was rendered “in due .form of law.” These phrases fully cover the statutory language. A matter could not he ‘‘ duly adjudged” and such judgment he entered “in due form of law,” without the same having been “duly given or made.”

Referring to the other criticism we .suggest: that in the first place, the date of this judgment was proven, without objection, at the trial; and, secondly, that’while it is proper in pleading a judgment to allege the date thereof or the term of court at which it was rendered, yet it is not always necessary to do so. No issue was made or question raised in the present case rendering the allégation of the date of this judgment important or essential.

But it is sufficient to say with reference to both of these particular strictures that they do not go to the sufficiency of the complaint in stating a cause of action. And that as that pleading was not challenged by demurrer, they must be regarded as having been waived.

The opinion heretofore filed will be withdrawn, and the judgment' of the court below will be affirmed.

Decision en banc. Affirmed.