In re the Judicial Settlement of the Accounts of Watson , 100 N.Y.S. 993 ( 1906 )

Scott, J.:

It is very obvious that the executors cannot justify their payment of $10,423.55 to Mrs. Corbit, merely by proof of the judgment in her favor rendered upon the reference of her claim. Hot only did they make no real defense to the claim, but the executor Watson, who was a witness upon the reference, and who confessedly knew all about the transactions between Mr. Corbit and his wife, did not lay all the facts before the referee. It is made very plain from the evidence and the circumstances that the executors desired to pay Mrs. Corbit’s claim (doubtless honestly deeming it an equitable one), but so far doubted its legal validity as to be unwilling to pay it unless protected by a judgment. If such a judgment had been fairly obtained by the claimant after all the facts had been laid before the ’court, it would have been a sufficient answer to the effort now made to surcharge the executors’ accounts with the amount paid. But under the circumstances disclosed by the record, we must agree with the referee that the judgment affords no defense to the executors. It follows that the judgment should -be left out of view and the liability of the executors tested as" if the payment had been a voluntary one, with full knowledge of the facts. Mrs. Corbit’s claim, as submitted to the executors, states that she “ intrusted to the said Joseph Corbit for investment and to - be dealt with by him for the benefit of this claimant ” the sum of $3,000 in cash and a farm of the value of $6,000. Her precise . claim, therefore, is that this money and the proceeds of the farm were to be invested for her. It is not claimed or suggested that the money was loaned or paid for any other purpose than that of investment. The first investment was in the Eighth avenue leasehold, the title' to which was taken in the joint name of Mr, and Mrs. Corbit. This was paid for partly by mortgage and partly by the transfer of Mrs. Corbit’s farm and partly in cash. Mrs. Corbit’s contribution was her farm, valued at $6,000. Mr. Corbit paid in cash in closing the transaction $5,750,_ and subsequently paid off a mortgage of $3,000 upon the property, making his cash contribution towards the purchase $8,750. Thus it appears that Joseph Corbit contributed to the joint investment .in the Eighth avenue property $2,750 more than; was contributed by his wife. When the two joint.investments were transformed into two separate investments by the exchange of the Eighth avenue leasehold for two houses in ¡Ninetieth street of identical character and value, the house taken by Mrs. Corbit was more heavily mortgaged by $500 than was that taken by her husband. He, however, more than equalized this discrepancy by paying off a mortgage of $2,500 on Mrs. Gorbit’s house, thus leaving it less heavily mortgaged than was his own by $2,000. The net result was that Joseph Corbit, after paying out for the joint property $2,750 - more than his wife had contributed, had caused to be conveyed to her, in exchange for her one-half of the venture, a house equal .in every way to the one he took himself, upon which -he had so reduced the mortgage load that it was less by $2,000 than the amount for which his house was mortgaged. In other words, by the cash expenditure of $4,750 more than his wife had contributed, he had given her the better of the transaction by $2,000. • It is true that, as the referee has found, Corbit also received from his wife, at some time,’the sum of $3,000 in cash, but even charging him with this, the exact investment of which is not traced, the fact remains that he expended $1,750 more than his wife contributed or paid to him. There is certainly nothing in these facts to indicate that Mr. Corbit treated his wife unfairly, or took any advantage of the trust and confidence which she reposed in him. On the contrary, he seems to have treated her not only fairly blit even generously. It is true that the investment turned.out unfortunately, but there is nothing to indicate that this resulted from anything more than an error of judgment; from the consequences of which Mr. Corbit, suffered as well as his wife.. Under these circumstances we are unable to see that Mrs. Corbit' had any just or valid claim against her husband’s estate for the amount intrusted to him for investment. It remains to consider whether the executors were liable for the amount they paid upon this unfounded claim. It is the.general rule that if an executor or administrator assumes to pay a demand which has no legal foundation, and could not have been recovered, the claim may properly be disallowed upon his accounting (Dye v. Kerr, 15 Barb. 444), and if he negligently allows, an invalid claim to go to judgment without making an honest contest, the judgment will afford him no shield, and he may properly be charged with this amount. ' (Matter of Saunders’ Estate, 4 Misc. Rep. 28.) Of course, an executor is not to be charged as an insurer of the validity of every claim which.he pays even without the protection of a judgment, but if there be no judgment effective for his protection, he must at least show that in paying the claim, as in other acts of administration, he employed such prudence and such diligence in the care and management of the estate or property as, in genera], prudent men of discretion and intelligence employ in their own like affairs. (King v. Talbot, 40 N. Y. 76.)' Do the executors show that they exercised such diligence and prudence in paying Mrs. Corbit’s claim, or rather in consenting that «lie have a judgment for it ? We think not. They knew, or at least one of them knew, and the others are chargeable with knowledge, the exact facts respecting the investment which Mr. Corbit had made; they had at least so much, doubt asto the validity of the claim as to be unwilling to pay it without a judgment, and yet, when the claim had been rejected and referred, they not only made no defense, but actually refrained from laying the true facts concerning the transaction before the referee, finder these circumstances, we are unable to see that they used any degree of prudence or diligence whatever in defending the estate, certainly not such as any prudent man would exercise if such a claim were made against him personally, finder the facts, as they now appear, which differ materially from those which were shown upon the former appeal (101 App. Div. 550), we are of opinion that the referee was right in surcharging the executors’ accounts with the amount paid to Mrs. Corbit in satisfaction of her judgment. With respect to the other items called into question, viz., the interest paid on mortgages and the commission charged by the executors, we also agree with the learned referee.

The decree is, therefore, affirmed, with costs to the respondents.

Clarke and Houghton, JJ., concurred; O’Brien. P. J., and Ingraham, J., dissented.