Montgomery v. Bank of Dillon , 114 Mont. 395 ( 1943 )

I dissent. This cause was first tried in the United States District Court for the district of Montana, determined adversely to the plaintiffs, and appealed to the Circuit Court of Appeals of the Ninth Circuit. The conclusions of the Circuit Court, canfirming the district court in the federal jurisdiction, may be aptly summarized by one expression in the opinion of the Circuit Court of Appeals, which was "Appellant has not made out a case for the intervention of a court of equity under the jurisprudence of Montana." (Montgomery v. Gilbert, 9 Cir., 77 F.2d 39, 45.) Failing to obtain any relief in the federal courts, the plaintiffs on June 15, 1935, commenced an action in the district court in and for Beaverhead county. That action was on trial and under consideration by the trial court for practically a year. Extended findings were made and the district court, presided over by the Honorable William L. Ford of the Ninth Judicial District, held that the plaintiffs were not entitled to any relief. From that decision the matter was appealed to this court. We affirmed the district court. (Montgomery v. Gilbert, 111 Mont. 250, 108 P.2d 616.) We remanded the case however to the lower court for the reason that the sale of the real estate had not been made in accordance with the statute, and directed that such sale and final report of the trustee should be made in accordance with probate procedure.

Pursuant to that opinion, the trustee filed his final account, prayed for its approval and at the same time petitioned for an order authorizing the sale of the balance of the assets of the estate for the purpose of paying the obligations of the estate that had been approved by the executor and the court. After an extended hearing requiring a transcript of approximately 1,000 pages when brought here on appeal, the trial court approved the account and issued its order directing the sale of the real estate as prayed for. The plaintiff again appealed to this court and the majority opinion is the judgment of this court on this last appeal.

In all the actions mentioned that were tried in both the federal and state courts, the pleadings and arguments of the plaintiffs were predicated upon the alleged fraudulent administration of the estate by the executor and conspiracy between the executor and a Dillon bank, one of the defendant creditors to defraud the estate, and it was alleged that conversion of assets of the estate by the executor and the defendant bank of the value of approximately a quarter of a million dollars had been accomplished. In none of the actions mentioned were the plaintiffs able to sustain in any particular any such allegations, and even the majority opinion in the instant action affirms the lower court in regard to all such questions of fraud and deceit and conversion, but the majority hold that by reason of long delay in having the assets sold and disposed of to pay the obligations which had been approved by the executor and the court as legal claims against the estate, the defendant creditor banks were guilty of laches and not entitled to recover the respective amounts due them.

It is conceded that the errors in administering the trust by the executor were made in good faith, and that no fraud or collusion with the defendant banks to defraud the estate, or convert any of the assets to their own use, has been shown. In other words, the matter is now before this court stripped of all the lurid allegations relative to dishonesty and fraud on the part of the executor, and the sole matter that we have to determine is whether the creditors have been guilty of laches in not forcing a sale of the assets to pay their claims at an earlier date. Let us see to what extent the question of laches is involved in this action, and if there were laches chargeable to any party in interest, who that party is.

The consolidated actions that were tried in the district court of Beaverhead county, with the Honorable William L. Ford presiding, were later appealed to this court (111 Mont.) as referred to above. The presiding judge at that time made findings of fact that are clearly supported not only by substantial evidence which under the established rule is sufficient to sustain his judgment, but such findings are sustained by clear preponderance of the evidence, and by a long line of decisions of this court are binding on appeal. The questions determined in the prior action in this court, are, of course, res judicata, except as to the one question of laches, but the merits of the action before us cannot be fully grasped without a careful review of the former action. To accomplish that purpose certain findings by Judge Ford and portions of the testimony received in that trial are recited here.

In Finding No. 11 it was said that William G. Montgomery, the principal plaintiff in the case at bar, "was of age at the time of his father's death, and had been foreman in the operations of the properties of said estate under his father, and continued toact as such foreman and superintendent of said operations afterhis father's death, under said defendant, J.H. Gilbert, asexecutor, until the month of August, 1924, and during said timesaid William G. Montgomery, and his mother, the said Cecelia L.Montgomery, the surviving widow of said deceased, had full chargeof, and control over, all of the operations of the properties ofsaid estate under the supervision of said defendant, J.H.Gilbert, as such executor. That during all of said times the operations of said property were properly and efficiently carried on and conducted by said William G. Montgomery and the said Cecelia L. Montgomery under the supervision of said defendant, J.H. Gilbert, as such executor."

The executor had his office and place of business at Dillon, some sixty miles from the headquarters ranch which was located in the Big Hole, and the Big Hole is not readily accessible to outside points at all times of the year, and at all times the actual physical possession of all the assets of the estate was under the direct control and supervision of William G. Montgomery, the eldest son of the testator, who was foreman of the ranch, looked after the livestock, haying and all matters of ranch management, kept the time of the help, and when an employee was discharged or was paid any wages the checks were drawn by Cecelia L. Montgomery, the widow of the testator. The evidence is too clear to admit of dispute that the widow and the eldest son ran the ranches practically unrestricted, contracted all obligations relative to ranch expenses, and the executor had very little to do about expending the funds of the estate. His principal function in the premises appears to have been to see that funds were always available to take care of the checks issued by Mrs. Montgomery for expenses and obligations incurred by herself and her son as foreman.

Five years or more following the death of the testator, the executor, in accordance with the express command of the testator set forth in his will, permitted the widow and the eldest son to continue to run the ranches in practically the same manner as they had been run by the testator in his lifetime. What was the result?

When the account of the executor was before the district court for approval in 1924 the account was approved and allowed, but the court found the estate to be insolvent and so stated in its order approving the account. This was the financial condition of the estate brought about under the direct management of William G. Montgomery, the son, and Cecelia L. Montgomery, the widow. None of the heirs, either at the time the account of the executor was pending before the court awaiting approval or rejection, or at any other time, challenged any part of the report as submitted, nor excepted to the court's finding that the estate was insolvent. Under such circumstances how can it be said that there is any laches chargeable to the creditors which the record does not show was equally and probably more chargeable to the heirs?

As evidence of the full and complete knowledge of the heirs as to the affairs of the estate, attention is called to the agreement made July 17, 1923, between Mrs. Cecelia Montgomery, the widow, and J.H. Gilbert, the executor. No one can read that document, which was prepared by Mrs. Montgomery's own attorney and executed by her and the executor in the presence of William G. Montgomery, one of the heirs and a plaintiff, and reach any other conclusion. That document appears in Volume 5 of the transcript in the consolidated actions beginning on page 1031, and by its very terms and expressions clearly expresses the concern of both parties as to the solvency of the estate at that time. It is recited in that document that the estate is solvent, but it also sets forth that the indebtedness of the estate at that time to the First National Bank of Dillon was approximately $173,000. In the preamble of that document signed by Cecelia L. Montgomery and its terms discussed and approved in the presence of William G. Montgomery, it is stated: "The said second party has acted as manager of the property and livestock interests in the Big Hole Basin for the executors of said estate * * *." The second party to that agreement was Cecelia L. Montgomery. It is further recited in the preamble of that document that "The said parties hereto are desirous of entering into some mutual agreement so that the said ranch may be operated and if possible sold to the best advantage of the creditors and legatees of the estate." It is specified further in that document that the parties agree that the second party was indebted at that time to the estate in the sum of approximately $22,709.40, and some years later it was reported that the indebtedness of Cecelia L. Montgomery to the estate was some fifty odd thousand dollars for household and family expense for herself and her children. Those matters were determined long ago and are not now contestable. Their correctness is vouched for over the signature of Cecelia L. Montgomery.

As further evidence of the full and complete knowledge of William G. Montgomery and his mother, William G. Montgomery testified on cross-examination as follows:

"Q. Before your father died who kept the time on the ranch? A. I did.

"Q. And you kept it correctly? A. Yes.

"Q. After your father died did you continue to keep the time? A. Yes, except for the checking; I didn't do the checking.

"Q. Your mother drew the checks and signed the checks and those checks came into the First National Bank of Dillon A. Yes. * * *

"Q. And they were cashed at the First National Bank of Dillon; that is the only place they could be drawn on? A. They went through the regular course the same as they always had.

"Q. Isn't it also true that your mother requested the vouchers later on to be returned to her for her checking over? A. The vouchers went to the bookkeeper, as I understood, and then they came back to the ranch to be checked against the time book.

"Q. And while they were so being checked against the time book your mother retained those vouchers? A. They were stored at the ranch; they were never called for so they remained there in a box in a desk. * * *

"Q. As to the money, were you aware of your mother having spent money belonging to the estate? A. Yes, she had the checkbook and drew checks whenever she wanted money, or deemed it necessary.

"Q. When did she do that? A. From the time even before my father died, she sometimes checked; and then after my father died she started and drew all the checks.

"Q. From the time your father died she drew all the checks for how long a time? A. All the time I was on the ranch. except that Mr. Gilbert drew at the bank, as executor. Of course, he woulddraw none for the ranch expenses; they were drawn by my mother as the necessity arose.

"Q. Did your mother draw checks for the maintenance of the family, the food they ate and the clothes they wore, and their schooling? A. Yes.

"Q. And were you aware of any of those checks being dishonored or refused or not paid? A. No.

"Q. Were you aware of any restriction upon your mother as to the number of checks she might write, or the amount? A. She was supposed to write as few as possible to hold the expenses as low as possible.

"Q. But the actual checks she did write was to be controlled by her judgment in the matter. A. Yes."

He further testified that after his father's death his brother, Angus Clark, who was foreman at the Dudley and Ajax ranch, was paid $2,625 for back wages due him at the time the father died, without the account first being approved by the court. And likewise an account due the Basin Mercantile Company for $6,958.36, and other accounts payable, were paid by check by the mother without first being approved by the court. Mrs. Mary Montgomery, also referred to as Mrs. William Montgomery, and as Cecelia L. Montgomery, in the transcript in Montgomery v.Gilbert, supra, testified relative to the sale of the ranches:

"Q. When you say that Mr. Gilbert and Mr. Hazelbaker — if you did say that — forced you to sign some papers or deed in Anaconda, what do you mean by that? A. I don't say they forced me; I said they told me I had made an agreement and I would have to sign that paper in addition to the ones I had already signed.

"Q. You don't mean to convey the idea they threatened you or anything like that? A. I don't suppose they would hurt me.

"Q. You were a free agent weren't you? A. Well, I don't know whether you would call it that or not.

"Q. You were except for your indebtedness like lots of us — you were a free agent? A. For the ranches' indebtedness, not mine.

"Q. That is true isn't it, they were trying to arrange some way to clean up this indebtedness and you were willing to cooperate in trying to do that? A. I certainly was. My husband always paid his bills.

"Q. That is the reason you tried your best to meet these obligations? A. I thought I was trying my best.

"Q. You did try your best didn't you. A. I don't know.

"Q. And while on the ranch you conducted it in that respect just as you always did? A. I worked there twenty-eight years.

"Q. Mr. Gilbert, as far as you can tell the Court, did his best to help? A. I thought he was doing his best the same as I was.

"Q. You thought that during all the time you were on those ranches? A. I certainly did.

"Q. And you were there continually? A. It was my home."

For further evidence of the full and complete knowledge of all that was being done in regard to the ranch, its finances and its management, we turn again to the findings of the Honorable William L. Ford, the trial judge. Finding No. 12 of the trial court was as follows: "That both the said William G. Montgomery and Cecelia L. Montgomery were fully advised and had full knowledge of the outstanding and unpaid claims and accounts incurred by the deceased during his lifetime for labor, provisions, and supplies in the operation of his properties and ranches, and for family, household and other purposes, and the amounts due and payable thereon. That all of said claims andaccounts were audited and approved for payment by the saidCecelia L. Montgomery, and payment thereof directed by orders orrequisitions in writing upon the said defendant. J.H. Gilbert, assuch executor, and the vouchers, evidencing such payments down tothe 21st day of February, 1921, were returned to said Cecelia L.Montgomery, who had them in her possession at the time of the filing of said executor's first account of his administration of said estate on the 13th day of May, 1924, and which account was settled, allowed and approved by this court on the 24th day of May, 1924."

Finding No. 13 was as follows: "That within the time prescribed by said notice to creditors, duly verified claims against said estate were presented to said executor aggregating the sum of $169,914.64, and were thereafter allowed and approved by said executor and by the Judge of this court. That within the time so prescribed by said notice to creditors, claims for the purchase price of said cattle, purchased by said deceased just prior to his death, and claims and accounts against said decedent and his estate for labor, provisions and supplies in the operation of his ranches, and for family, household, and other purposes, were likewise presented to and were paid by, said executor without the affidavit of their correctness prescribed by statute; but all such claims andaccounts, so paid by said executor, were justly due, were paid ingood faith, and the amounts so paid were the true and correct amounts of such indebtedness over and above all payments or setoffs, and that at the time of the making of such payments theestate of said deceased was solvent. That all of the said claims and accounts so presented, without affidavits of their correctness, and allowed and so paid, appear and are set forth in said executor's first account, and the payments so made by him were approved by this court by its order duly given and made on the 24th day of May, 1924, settling, allowing, and approving said account after due notice thereof having been given."

In conclusion of law No. 2, Judge Ford said: "* * * the complaint fails to state a cause of action and the evidence is insufficient to authorize the interposition of a court of equity and grant equitable relief upon the facts pleaded by the plaintiff and the evidence adduced in support thereof."

Conclusion of law No. 3 is in part as follows: "* * * plaintiff is estopped and precluded from saying or contending that the said will was not legally admitted to probate and the said defendant, J.H. Gilbert, legally and regularly appointed the executor thereof."

Conclusion of law No. 4 is as follows: "That there was no conversion of any of the funds or property of the estate of said deceased by the said defendant, J.H. Gilbert, as executor of the last will and testament of said deceased, or by any of the other defendants in said cause, and there was not actionable fraud in the administration of said estate by the defendant, J.H. Gilbert, as such executor, or by any of the other defendants therein, and no collusion between said defendant Gilbert and said defendant, The First National Bank of Dillon, Montana, or any of the defendants, to deprive the plaintiff of any of the property bequeathed to him by the terms of his father's will."

Upon whom do the adjudicated cases place the blame for laches, if laches were shown, under relations such as are shown by the record to have existed between the heirs, the executor and the creditor banks?

On the question of laches the plaintiffs confidently rely upon the old case of In re Estate of Crosby, 55 Cal. 574, which was cited in the case of In re Tuohy's Estate, 33 Mont. 230,83 P. 486, the opinion of the court by Chief Justice Brantly, as to the status of a claim after its allowance and approval were dealt with in the different phases relative to that question, but that opinion does not follow the California Court's decision relative to laches. Section 1545 of the Code of Civil Procedure of California is substantially similar to our section 10219, Revised Codes. The California section was repealed subsequent to the time judgment in the Crosby Case was rendered. But it was repealed several years prior to the commencement of the instant action in the Montana court. I am of the opinion that a judgment grounded upon a repealed statute is not entitled to serious consideration.

For other reasons the Crosby Case is not in point here. In that case the deceased left no will and the heirs were the wife and a minor child. The party who was made administrator held the principal claim against the estate in the nature of a judgment obtained against the deceased during his lifetime. A petition for sale of the real estate to pay the claim was not made for seventeen years after the claim was allowed by the probate court. The decision recited the conclusions of Chancellor Kent as to the duty of the executor or administrator of an estate as to diligence in administering such a trust, citing the particular case where Chancellor Kent's wording was found. That commendable treatise by Chancellor Kent has no application to the present case. No will was involved requiring the executor to continue operating the estate property in a manner similar to that of its operation under the deceased during his lifetime, and no debtor other than the one who petitioned for the sale of the real estate. As I read the opinion, the heirs remained on the premises for seventeen years after the debtor's claim was approved by the probate court before the debtor petitioned for the sale of the real property. No excuse was made for the long delay and obviously none existed. The court there said: "It would be the extreme of hardship, if not of injustice, to allow, at this late day, the heirs and their grantees to be disturbed in the quiet and peaceable possession of the property in question." These words of the court suggest that the heirs continued to live on the property for the seventeen years, that the creditor deferred petitioning for a sale of the real property and that in the meantime other parties became interested in the property as grantees. No such state of facts is before us in the instant case. Here the heirs had abandoned the property when the operation of the ranches became unprofitable, and the Crosby Case is not in point for many other reasons.

The record shows, and Judge Ford so found, that continuous efforts were put forth by the executor to sell the property from time to time but without result. It appears quite clear that the creditors and the executor were helpless. Judging it from the amount, the indebtedness had undoubtedly become a tremendous burden on the Dillon bank. The estate was insolvent in 1926, and continued to be insolvent for many years thereafter, and is insolvent now, and owing to the business, industrial, and economic conditions of the country, of which the court will take judicial notice (Great Northern Ry. Co. v. Weeks,297 U.S. 135, 56 S. Ct. 426, 80 L. Ed. 532; Ohio Bell Tel. Co. v. PublicUtil. Comm., 301 U.S. 292, 57 S. Ct. 724, 81 L. Ed. 1093; Taylor v. Kuzman Feldspar Co., 41 Ariz. 376, 18 P.2d 649; In reMcCafferty's Estate, 147 Misc. 179, 264 N.Y. Supp. 38; FederalLand Bank v. Garrison, 185 S.C. 255, 193 S.E. 308; Weaver V.Grunbaum, 31 Cal. App. 2d 42, 87 P.2d 406; Purdie v.Roche, 304 Mass. 647, 24 N.E.2d 674; Dallas etc. Co. v.Brooder, 55 Wyo. 109, 97 P.2d 311), there was no market and a sale could not have been effected then and thereafter any more than prior to 1926, when every effort was made to find purchasers without avail.

But admitting for the sake of argument only that the creditors were guilty of laches. can the plaintiffs, who come into court seeking equity and having contributed to the causes of insolvency, lay all the blame therefore upon the creditors?

"He who consents to an act is not wronged by it." (Sec. 8744, Rev. Codes.)

"Acquiescence in error takes away the right of objecting to it." (Sec. 8745, Id.)

"No one can take advantage of his own wrong." (Sec. 8746, Id.)

Section 10219, Revised Codes, confers upon both the plaintiff and the defendant the reciprocal and mutual right to apply for and obtain, if the court so approve, an order of sale of the assets of an estate that is being administered and when that right exists the plaintiff is precluded from maintaining an action in equity for an alleged neglect to have property of the estate sold when a remedy was at hand at all times. From the record as a whole and the judicial knowledge of the court of the financial conditions that maintained during that period, one can hardly escape the conclusion that both the creditor banks and the executor and heirs and all parties interested in the estate believed that by holding on there was a possibility of making a fortunate sale and that all might recover what they had lost by the depression in prices.

There was no duty imposed by statute upon either the plaintiffs or defendants to apply for an order of sale, but the right is conferred upon both. Each may act but the statute compels neither. It is settled law that under such circumstances there could be no laches as to one and not as to the other, and if there were laches each would be chargeable therewith. It was said in the case of City of Parkersburg v. Baltimore O.R.Co., 4 Cir., 296 Fed. 74, 83: "Surely the defendant was guilty of no delay of which the plaintiff was not equally guilty. If the parties are equally guilty of delay, neither can avail itself of the delay of the other as laches."

In Marshall v. Meyer, 118 Iowa 508, 92 N.W. 693, 694, it was said: "There is no laches apparent on the part of the defendant which should not apply as well to the plaintiff. There is nothing to indicate that he has been less diligent in asserting his legal rights than has the plaintiff."

The same contention that is made here as to laches in failing to take action when there was no duty or obligation to do so was made in a very recent case of Dowd v. Glenn, (Cal.App.),129 P.2d 964, 968, where it was urged that the respondents in that case were barred by laches for failure to redeem the property involved. In rejecting such contention the court said: "Finally, appellant urges that the trial court erred in not holding that respondents were barred by laches in failing to redeem the property; in other words, that, under the deed of trust they had the right to pay assessments and to be secured therefor, but neglected to exercise it. Whatever right existed,no duty was imposed upon respondents to pay the delinquent taxes, and their failure to do so was not a waiver by them of their interest as beneficiary and trustee under the deed of trust. In addition, it may be said that the defense of laches is intended to protect the innocent, not those who seek tocircumvent a statutory provision to the detriment of another."

In the case of In re Tuohy's Estate, supra, 33 Mont. on page 248, 83 P. on page 491, Chief Justice Brantly, speaking for the court where the question of laches was in issue, said: "Under the circumstances we think it would be unjust to the creditors to permit these appellants to assert that the debts finally found to be due from the estate should not be paid."

In the recent South Carolina case of Charleston LibrarySociety v. Citizens Southern Natl. Bank, 23 S.E.2d 362 at page 364, the court said:

"Now taking up plaintiff's second contention that the defendant hospitals are not in a position to charge laches because they are in pari delicto, we find that from the time the will was probated in 1922 to the year 1934, neither plaintiffs nor defendants did anything. Can either charge the other with delay for that period? Clearly not. There was no more duty to know and to act upon the one side than upon the other. Both are held to the same degree of diligence and in a Court of Equity neither party can charge as laches against the other a failure to know and act according to information which was as much within his range of observation as in that of the other party.

"`Where both parties were equally at fault, neither can assert laches against the other; and where each of the parties seeks affirmative relief against the other in reference to the same transaction, neither may assert that the other was guilty of laches.' (30 C.J.S., Equity, sec. 114. Also National City Bank v. International Trading Company, 1932, 167 Wash. 311, 9 P.2d 81)".

I am unable to find anywhere any decision where the facts have any similarity to those involved in the instant case where the courts have varied from the rule that laches cannot be invoked when the delay is due to litigation by the party alleging laches. (See 30 C.J.S., Equity, sec. 125, p. 548, sec. 127, p. 550; 5 Pomeroy's Equity Jurisprudence (1 Pomeroy's Equitable Remedies), par 35, page 60; Boyd v. Northern P. Ry. Co., C.C., 170 Fed. 779, affirmed in 9 Cir., 177 Fed. 804, and again affirmed in228 U.S. 482, 33 S. Ct. 554, 57 L. Ed. 931.)

I can find nothing in the record to justify any contention that the defendants considered the estate closed after the executor's final account was filed, noticed, approved and allowed. In Finding No. 30 by the Honorable William L. Ford in the consolidated cases appealed to this court and determined as shown in Montgomery v. Gilbert, supra, Judge Ford found that the trustee "does now hold and operate the same [the property of the estate] as such trustee for the benefit of the creditors of his trusteeship, and the legatees and devisees named in said will and testament of said deceased." This should finally show that there was no intention at any time, as it appears from the record, that the executor or the banks intended to do anything more with the property than to recover the money they had advanced to protect the estate and turn any residue that remained to the heirs.

The judgment of the lower court should be affirmed.