IN RE: MACMILLAN'S ESTATE.* MACMILLAN v. DOCKWEILER et al.
From certain portions of the order settling the administrator's final account and decreeing distribution of nothing to him, Gordon Macmillan, a son, appeals. The facts assigned as the basis of the order are that for a valid consideration Gordon assigned all his interest therein, as heir or otherwise, to the other heirs of Herbert R. Macmillan, deceased, share and share alike.
Mr. Macmillan died intestate January 13, 1945. He left as heirs two sons, Gordon and Malcolm R., a daughter, Alice M. Dockweiler, and a grandson, Herbert Macmillan Booth. His insolvent estate included 47 per cent interest in the Thrash lease, an oil property in the east Texas oil field, and 1918 shares of Macmillan Petroleum Corporation. They are the only assets involved in this appeal. Prior to his deceased, he was engaged in a dispute with Gordon as to the extent of the interest each owned in the Thrash lease. That was a factor for the consideration of the brother, R. S. Macmillan, when he qualified as administrator in 1945. However, a compromise was reached and on April 19, 1946, a contract was executed by Gordon and the administrator which contained the following covenants:
‘3. R. S. Macmillan as administrator of the estate of Herbert R. Macmillan, deceased, will quitclaim to Gordon Macmillan all right, title and interest of the estate of Herbert R. Macmillan, deceased, in and to any interest in the Thrash lease or the production therefrom, other than the 47 per cent undivided interest held in trust by Gordon Macmillan for the heirs of Herbert R. Macmillan, deceased.
‘4. Gordon Macmillan waives any and all rights which he has or may have to participate as an heir or distributee in the matter of the estate of Herbert R. Macmillan, deceased, in and to such 47 per cent, and hereby assigns all his interest therein, as heir or otherwise, to the other heirs of Herbert R. Macmillan, deceased, share and share alike.’
The contract was approved by the court.
By virtue of the terms of such writing, Gordon thereafter held the estate's interest of 47 per cent in the Thrash lease in trust for the other heirs, and he asserted no right to participate as heir or distributee of his father's estate in the 47 per cent of its revenues. The estate, therefore, did not convey or otherwise alienate any interest in the lease or its income. The 47 per cent still belonged to the estate of decedent, and at his passing became the property of his heirs as tenants in common, subject to his debts and the expense of administration under the guidance of the probate court and the administrator. Thus the law fixed the title of the interest owned by decedent at death and Gordon assigned all interest he might have had in it by his compromise with the administrator.1 The status thus created poses for determination the following question: Where, in the course of the administration of an intestate's estate, one heir with the approval of the court conveys and assigns to his co-heirs his entire interest in a specific asset of the estate and waives right to all its revenues, are such co-heirs entitled to the immediate and full benefit of the assignment?
In his lifetime decedent acquired his interest in the Thrash lease, but caused its title to be taken in the name of Gordon who claimed a separate interest in his own right. At death, Herbert was insolvent: his debts far exceeded the value of his holdings. Among them were three claims of Gordon aggregating $193,614. After the compromise, Gordon owned 30.666 per cent of the Thrash lease in his own right, while he held as trustee 47 per cent of that lease for the other heirs of decedent. In waiving ‘all rights to participate as an heir or distributee * * * in and to such 47 per cent,’ he ‘assigns all his interest as heir or otherwise, to the other heirs of Herbert * * * share and share alike.’ By virtue of his contract with the administrator, appellant separated himself from every right to the 47 per cent interest, and his co-heirs became absolute owners thereof. Necessarily, such ownership entitled them to the royalties subsequently to accrue from the production of the lease. Schiffman v. Richfield Oil Company, 8 Cal.2d 211, 224, 228, 64 P.2d 1081. Consequently, after the April contract had been approved by the probate court, appellant was entitled neither to any share in the 47 per cent interest in the lease, nor to any benefits arising therefrom. After the royalties from such interest had been paid to the administrator in sufficient amounts to pay all the debts and expense of administration, the entire 47 per cent became the property of the heirs other than Gordon, and they were entitled to all benefits derived therefrom. The contract and conveyances executed by the administrator with the court's approval were as sufficient to convey the total interest in the 47 per cent, after debts and expenses had been paid, as a final decree of distribution could have done. It is clear, therefore, that the revenues from the 47 per cent interest paid the general indebtedness of the estate and the expense of administration.
There is no invalidity in the contract of the administrator with appellant. It must have been contemplated by the lawmakers, for it is statutory that an assignment by an heir must be recognized and given effect upon the settlement of the account that reports it. Prob.Code, sec. 1020; Reed v. Hayward, 23 Cal.2d 336, 342, 144 P.2d 561.
No construction of the agreement is reasonable other than that the phrase employed in ‘hereby assigns' was intended to, and did, convey a present interest in the 47 per cent. As further proof to warrant the conclusion that the 47 per cent was to pass at once to the heirs other than Gordon, he removed 30.666 per cent from the insolvent estate and thereafter enjoyed the revenues therefrom without let or hindrance.2 In the meantime, the 47 per cent interest remained in the treasury of the estate, charged with the obligation to pay the debts and expense of administration in the sum of $93,285.63.
That feat having been accomplished, the administrator had no further right or power or discretion, Prob.Code, sec. 754, to dominate the 47 per cent interest in the Thrash lease which he and appellant had conveyed to respondents and Malcolm. That interest was wholly in the ownership of the beneficiaries of the trust held by appellant. While they owned it, their property had yielded $37,128.85 which was properly applied by the administrator to the payment of the debts of the estate. Now the total value of the residue of the estate is $24,865.19. This includes the 1918 shares of Macmillan Petroleum stock at its appraised value, to wit, $21,098. Inasmuch as the 47 per cent of the Thrash lease supplied $37,128.85 to pay the debts and expense of administration, the estate is in debt in that sum to the beneficiaries of Gordon's trust. But the solution is much simpler than having them paid by the estate. All of its assets belong to the three heirs other than Gordon. Inasmuch as he has no interest in the 47 per cent, but is entitled to one fourth of the residue outside the Thrash lease, to wit, the 1918 shares of Macmillan Petroleum stock, the trial court properly concluded that inasmuch as one-fourth of the indebtedness ($37,128.85) of the estate is $9,282.21, and since appellant's interest in the estate does not exceed $6,216.29 and since the Macmillan shares and the balance of the assets are worth only $24,865, and since one-fourth thereof is of a value far less than appellant's debt to the other heirs, appellant owns no equity in the residue of the estate. If it has no value in excess of that listed by the appraisers, to cause a sale thereof would result in a useless tax on the estate. To avoid such expense the trial judge afforded appellant a fair and reasonable opportunity and time to establish a greater value in the Macmillan shares than his debt to the estate. Only after he had failed to find a purchaser within fifteen days at an advanced price and had failed to establish its worth greater than the appraised value, the court ordered the judgment under review. The procedure of the trial court in doing substantial justice and at the same time, avoiding expense and delay deserves only commendation.
The order and decree are affirmed.
I dissent. This is an appeal by Gordon Macmillan (hereinafter referred to as appellant) from that portion of the order of the trial court settling the final account of the administrator and decreeing distribution, holding in effect that appellant is entitled to nothing from the estate of decedent, his father, on the ground that he has assigned his right ‘to participate as an heir or distributee’ in one asset of the estate to the other three heirs and as a consequence the proceeds of that asset should not have been used to pay any part of the debts of decedent, and since they were, appellant's share in other assets of the estate must be offset against such sums.
Facts: Decedent died intestate on January 13, 1945, and letters of administration were issued to his brother. He left as heirs two sons, Gordon Macmillan and Malcolm R. Macmillan; a daughter, Alice M. Dockweiler, nee Alice Macmillan; and a grandson, Herbert Macmillan Booth, son of a deceased daughter.
The principal assets of the estate consisted of (1) an oil and gas lease in Texas known as the Thrash lease and (2) 1,918 shares of the capital stock of Macmillan Petroleum Corporation.
During the lifetime of decedent a dispute existed between himself and Gordon as to what portion or share each owned in the Thrash lease. After the death of Herbert R. Macmillan, the administrator and Gordon entered into an agreement dated April 19, 1946, which was approved by the probate court on June 7, 1946. This agreement contained the following provisions:
‘3. R. S. Macmillan as administrator of the estate of Herbert R. Macmillan, deceased, will quitclaim to Gordon Macmillan all right, title and interest of the estate of Herbert R. Macmillan, deceased, in and to any interest in the Thrash lease or the production therefrom other than the 47 percent undivided interest held in trust by Gordon Macmillan for the heirs of Herbert R. Macmillan, deceased.
‘4. Gordon Macmillan waives any and all rights which he has or may have to participate as an heir or distributee in the matter of the estate of Herbert R. Macmillan, deceased, in and to such 47 percent, and hereby assigns all his interest therein, as heir or otherwise, to the other heirs of Herbert R. Macmillan, deceased, share and share alike.’
By this agreement Gordon became the trustee of a 47% undivided interest in the Thrash lease for the heirs of decedent other than himself. In consideration of this agreement the administrator agreed to approve a claim of Gordon, individually, against the estate in the sum of $8,651.74, while Gordon agreed to the rejection of a claim filed by him as trustee in the sum of $99,114.78.'
The trial court made the following finding:
‘The court finds that the sum of $37,128.85 was disbursed from said Thrash lease income to pay the general debts and cost of administration of said Estate, and that the said sum should be considered as a loan to the Estate from the heirs, other than Gordon Macmillan, which should be repaid to them pro tanto from other assets of the Estate, amounting to $24,865.19, included in which sum is $21,098 representing the appraised value of 1,918 shares of the common capital stock of the Macmillan Petroleum Company at $11.00 per share. The court finds that the heirs of said decedent, or their assignees, excepting Gordon Macmillan, are entitled to have distributed to them the whole of said Estate * * *.’
Pursuant to this finding the probate court made an order that the assets of the estate be distributed to the heirs, excluding appellant, unless he, within 15 days from the date of the said order, establishes to the satisfaction of the court that the them market value of the Macmillan stock exceeded $17.50 per share.
Thereafter on May 29, 1952, an order was made by the probate judge reciting that no proceedings having been initiated for the purpose of establishing the value of the stick, distribution was ordered as specified above.
This is the sole question necessary for us to determine:
Did the probate judge err in finding that the administrator of decedent's estate improperly used the sum of $37,128.85, which he received as a distribution from appellant as trustee of the Thrash lease, subsequent to April 19, 1946 (the date of the agreement above referred to), to pay debts of the estate, and charged such amount against appellant's share in the balance of the assets of the estate?
This question must be answered in the affirmative and is governed by these pertinent rules:
(1) All the property, real or personal, of a decedent dying intestate is chargeable with the payment of his debts and the expenses of administration of the estate. (Probate Code, secs. 3001 , 7542 ; In re Estate of King, 19 Cal.2d 354, 357, 121 P.2d 716.)
(2) An administrator may use his discretion in determining what property to sell to pay debts subject to a showing upon the return of a sale that facts support the exercise of his discretion. (In re Estate of George, 123 Cal.App. 733, 737, 12 P.2d 86.) It necessarily follows that he may use his discretion as to what cash assets he may use to pay the debts of the estate.
(3) An assignee of an heir stands in his assignor's shoes, and is entitled to no more than the assignor would be entitled to. (See cases in 11b Cal.Jur. (1934), Executors and Administrators, sec. 1297, note 8, p. 800; Blair v. Hazzard, 158 Cal. 721, 725, 112 P. 298; Smith v. Barrick, 41 Cal.App. 28, 31, 182 P. 56.) If an heir conveys his interest in an estate he conveys such interest only as will remain to him after satisfying the debts of administration. (In re Estate of Moore, 57 Cal. 437, 442; Hamilton v. Elvidge, 132 Cal.App. 21, 26, 22 P.2d 239. See cases cited in 9 Cal.Jur.(1923) Descent and Distribution, sec. 27, notes 6 and 7, p. 479.)
Under the foregoing rules it is clear that appellant, in conveying all of his right to participate as an heir in the 47% of the Thrash lease belonging to the estate, could and only did convey such interest as he might have after administration of the estate and upon distribution. Therefore, since the administrator in his discretion, of which there is no showing of an abuse, saw fit to use the income received from the Thrash lease to pay debts of the estate, this was proper. (See rule (2), supra.) This result is consonant with the agreement of April 19, 1946, between appellant and the administrator wherein appellant waived all of his right as an ‘heir or distributee,’ and assigned his interest as ‘an heir or otherwise.’
The agreement clearly contemplated appellant was assigning whatever rights he might have as an heir or distributee and not any personal right. He, of course, could not have assigned any interest in the estate so as to free it from the obligation to creditors and the expenses of administration. See In re Estate of Dobbins, 36 Cal.App.2d 536, 541, 97 P.2d 1051, 1054, where Mr. Presiding Justice Moore says, ‘* * * Always, when during administration an heir conveys his interest in any part of an estate in probate, such conveyance is subject to the perils of the proceeding. If, for any necessity, a sale of the assets of the estate should be ordered, it might alienate to an utter stranger the very property affected by such conveyance.’
The proceeding should be, in my opinion, remanded to the probate court with instructions to enter a decree in accordance with the views just expressed.
1. Gordon's claim of a personal interest in the lease may have arisen out of his asserted claims against his father for services and otherwise. His separate interest was not defined until his agreement with the administrator.
2. The record is not clear that Gordon held any interest for himself prior to Herbert's demise.
1. Section 300 of the Probate Code reads as follows:‘When a person dies, the title to his property, real and personal, passes to the person to whom it is devised or bequeathed by his last will, or, in the absence of such disposition, to the persons who succeed to his estate as provided in Division II of this code; but all of his property shall be subject to the possession of the executor or administrator and to the control of the superior court for the purposes of administration, sale or other disposition under the provisions of Division III of this code, and shall be chargeable with the expenses of administering his estate, and the payment of his debts and the allowance to the family, except as otherwise provided in this code.’
2. Section 754 of the Probate Code reads as follows:‘In selling property to pay debts, legacies, family allowance or expenses, there shall be no priority as between personal and real property. When a sale of property of the estate is necessary for any such purpose, or when it is for the advantage, benefit, and best interests of the estate and those interested therein that any property of the estate be sold, the executor or administrator may sell the same, either at public auction or private sale, using his discretion as to which property to sell first, except as provided by Sections 750 and 751 of this code.‘The executor or administrator in making any such sale may sell the entire interest of the estate in the property or any lesser interest or estate therein.’
MOORE, Presiding Justice.
FOX, J., concurs.