WEBB v. PILLSBURY ET AL (1943)

Plaintiff appeals from a judgment of dismissal entered after demurrers to her first amended complaint were sustained without leave to amend.

Recitals of the amended complaint disclose this factual background:

In 1924 plaintiff, then known as Letitia Dorothy Wallace, entered into a written contract with Franklyn L. Hutton by the terms of which he agreed to pay her $1,000 per month for the period of her natural life, or until her marriage, in which latter event payments were to be reduced to $500 per month. It was further provided that, should Hutton predecease plaintiff, then there should be paid to her from his estate the sum of $100,000, if unmarried, or, if married, the sum of $50,000, in lieu of further monthly payments.

A second written agreement was entered into by the same parties January 18, 1929. Plaintiff had married subsequent to the 1924 compact and was in the process of obtaining a divorce when the 1929 writing was executed. Without any condition as to marriage or otherwise, the new contract stipulated that Hutton should pay to plaintiff during her lifetime the sum of $1,000 per month and should provide by will or otherwise, in the event he predeceased her, for the payment to her of the sum of $100,000, which sum was declared to be a direct charge against his estate. As consideration for the covenants to be performed by Hutton it was provided that plaintiff should convey to him certain specified real property.

Defendants' relation to the litigation stems from a contract dated April 30, 1940, whereby Hutton conveyed to defendant The Beverly Hills National Bank and Trust Company as trustee certain real property in Los Angeles County. This trust instrument provided that one designated parcel of land should be forthwith conveyed to defendant Pillsbury as compensation for services theretofore rendered, that as to the remainder of the land it should be improved, subdivided, sold and otherwise handled subject to written directions of defendant Pillsbury, the proceeds and income from the operations to be paid by the trustee to Hutton and defendant Pillsbury as in said trust provided. By explicit terms of the indenture the trustor was empowered to terminate the trust and to retake possession of the trust properties should defendant Pillsbury predecease him. Reciprocally it was provided that in event of the death of the trustor before that of defendant Pillsbury, then the trust should terminate and the corpus thereof, with all assets, real and personal, should be transferred to Pillsbury “as his own and separate property.”

Hutton died testate in Florida, December 5, 1940. Domiciliary administration of his estate was had there, and ancillary administration in California. No provision was made in his will for the payment to plaintiff of $100,000 or any other sum. In fact no mention was made of her claim.

Thereafter and within the time allowed by law, plaintiff filed a creditor's claim in the sum of $100,000 against Hutton's estate in the ancillary proceeding in the Los Angeles County Probate Court. No other creditor filed a claim against the Hutton estate, and time within which claims might be filed expired October 16, 1941. After filing her claim plaintiff requested the administrator to bring action against defendants to set aside, as in fraud of creditors, Hutton's conveyances to defendants under the trust agreement of April 30, 1940. This request was refused. Then plaintiff and the administrator entered into a “compromise agreement,” later approved by the probate court, by which, in settlement and compromise of her claim of $100,000, the sum of $23,500 was paid to her by the estate, and the administrator executed an assignment in writing conveying to her all the right, title and interest of the Hutton estate in and to the properties involved in the trust of April 30, 1940, and assigning to her any and all causes of action in law or in equity to recover the real property or any part thereof, and further assigning to her all the right and title of the estate or its administrator in and to the trust agreement itself. The real property involved in the trust is of less market value than $76,500, the unpaid portion of plaintiff's $100,000 claim. Hutton at the time of his death was insolvent, in the sense that the assets of his estate were insufficient to pay his creditors, and particularly to pay plaintiff's claim. Likewise, it is claimed, he was insolvent when he made the transfer in trust, and at that time his assets were less than the amount required to pay his probable liability on existing debts as they matured. Neither was there consideration for the transfer.

All these matters, alleged in the verified amended complaint, must be accepted as facts for the purpose of passing upon the issues here involved. The question is: Do such facts, when accorded full verity and taken as a whole, state a cause of action against defendants?

The complaint is in three causes of action.

In the first count appellant sues as assignee of the administrator, claiming that she, by assignment, acquired the administrator's statutory right as conferred by section 579 of the Probate Code to prosecute an action to set aside fraudulent conveyances made by deceased in his lifetime.

Under the second cause of action appellant's claim is that the administrator's assignment to her was in effect a conveyance of real property by which she acquired title thereto, and she seeks to quiet title as against the cloud imposed by the fraudulent trust agreement of April 30, 1940.

Finally, in her third cause of action, appellant adopts the theory that she is still a creditor of the estate to the extent of a claim unsatisfied in the amount of $76,500, and as such creditor she has a right to proceed to set aside the conveyances alleged to have been made in fraud of creditors.

Basically appellant's right of action depends upon whether or not the personal representative of deceased Hutton's estate had the power to transfer to a creditor his statutory right to bring suit to set aside conveyances fraudulently made by deceased in his lifetime. This statutory right of the personal representative to maintain such action derives its authority from section 579 et seq. of the Probate Code. It is there provided that if the decedent in his lifetime conveyed property with intent to defraud creditors, “and there is a deficiency of assets in the hands of the executor or administrator, the latter, on application of any creditor, must commence and prosecute to final judgment an action for the recovery of the same for the benefit of the creditors.” Further provisions set out the manner of distribution of assets so recovered.

It is to be noted that the code itself contains no prohibition against the assignment by the personal representative of this right of action. Neither does it provide that such assignment may be made. As far as the language of the code is concerned, a right of action is expressly conferred upon the administrator, and an orderly procedure for the exercise of that right is prescribed.

Little benefit is to be derived from the study to which counsel directs our attention as to the growing tendency of the law to recognize the assignability of all causes of action, that nonassignability is the exception (3 Cal.Jur. 42) and that even actions sounding in fraud may be assigned. Jackson v. Deauville Holding Co., 219 Cal. 498, 27 P.2d 643; Wikstrom v. Yolo Fliers Club, 206 Cal. 461, 274 P. 959. Nor are we helped by the conflicting authority as to the right of a bankruptcy trustee to assign a cause of action to set aside a fraudulent conveyance made by the bankrupt. Glenn, “Fraudulent Conveyances and Preferences,” § 132, vol. I, 1940 edition; In re Rosen, D.C., 15 F.Supp. 516; Parker v. Hand, 299 Ill. 420, 132 N.E. 467.

Likewise case law is meager. Nothing directly in point has been cited in the reported volumes of this state. An old (1858) Michigan case, Morris v. Morris, 5 Mich. 171, contains language most favorable to respondents' contention. In that case, the administrators of decedent's estate sold and assigned to a creditor certain promissory notes secured by mortgage executed in favor of decedent. In a suit to foreclose the mortgage the creditor–assignee sought to avoid the effect of endorsements showing partial payment of the notes by the claim that there was no consideration for the endorsements and consequently they were void as against creditors of deceased. Such could not be done, the Michigan court held, saying: “An act, void as against creditors, is good between the parties, and can only be attacked by creditors by some method recognized in law. The statute * * * provides that * * * an administrator may institute proceedings to avoid such dispositions made by the intestate, as were fraudulent against creditors. * * * He can not assign any such right.” The reasoning of that case is persuasive here, especially in view of the similarity between California and Michigan statutes.

Furthermore, consideration of the fundamental legal situation here involved leads to the conclusion that appellant by the assignment under which she claims acquired no right to bring suit to avoid the trust conveyance. An administrator is the creature of statute, must act within the authority of the law which creates him, and his powers cannot be exercised except according to the provisions of law. 11b Cal.Jur. 210, 211. When such powers are fixed by statute “there is no inherent right to assume or exercise any power not conferred, or to depart from the procedure outlined.” Perry v. Superior Court, 29 Cal.App.2d 114, 84 P.2d 250, 252. A complete procedure is provided by the Probate Code for the recovery of property fraudulently conveyed by decedent in his lifetime (§ 579 et seq.), and when such procedure does not provide for the sale, transfer or assignment to others of the right to sue, conferred by statute upon the personal representative, and upon him alone, it cannot be assumed that there is any inherent power in the executor or administrator to assign such right. Indeed sound policy wisely withholds from the personal representative the power to alienate his right to sue. Such procedure, if permitted, might very conceivably allow a purchaser from the estate to speculate in frauds, would permit one creditor to benefit at the expense of another, would place such actions beyond the control of the courts, and would otherwise defeat the equitable purposes of the established statutory procedure.

That plaintiff is the only creditor of the Hutton estate does not give her any more favorable status so far as her power to act as assignee is concerned. Putney v. Fletcher, 148 Mass. 247, 19 N.E. 370; Richman v. Ady, 211 Iowa 101, 232 N.W. 813. The statutory provisions, if binding at all, are binding upon all creditors alike, whether one or more in number, and are controlling generally without specific exceptions as to the number of creditors involved.

As to appellant's second cause of action, which in effect is one to quiet title to the trust property which she claims was conveyed to her under her compromise agreement with the administrator of the Hutton estate, it must fall by its own statement of facts. Primarily the property in question was not a part of the Hutton estate. It was alienated by him in his lifetime and vested legal title in the grantee as to all persons except creditors of the grantor, “who may question it in a proper proceeding.” Moore v. Schneider, 196 Cal. 380, 238 P. 81, 82. If the Hutton estate had been the owner of the property it could have been sold and transferred only in the manner prescribed by the Probate Code for the sale of real estate belonging to the estates of deceased persons, and no claim is made that such was done in the present instance. It is obvious that the instrument under which appellant claims the property conveyed nothing to her (Holland v. McCarthy, 177 Cal. 507, 171 P. 421), and, therefore, that she cannot maintain a quiet title action upon such a basis.

Neither can appellant maintain her suit in the role of creditor of the Hutton estate, as she seeks to do in the third count. Having compromised her claim against the Hutton estate, and having received substantial benefits under the compromise, she cannot any longer assert that she is a creditor.

It is apparent that appellant has not followed the course contemplated by statute, and that she does not allege facts sufficient to permit her to resort to any remedy other than that which the statute makes available to her.

In view of the conclusions as above indicated we deem it unnecessary to discuss questions as to the illegality of the original contract between plaintiff and deceased and other kindred subjects elaborately argued by respondents.

The judgment is affirmed.

GOULD, Justice pro tem.

W. J. WOOD, Acting P. J., and McCOMB, J., concurred.