In the Matter of the Estate of Charles Rear, Wilson as administrator vs. M.T. Rear. et.

Al
055 Phil. 44 | G.R. No. 31860. October 16, 1930.

Summary: J.J Wilson qualified as special admin of the estate of Charles Rears. At the time of Rear’s death, his estate had an appraisal
value of P20,800, and he owed Fleming 800 and Alano 500. Wilson continued to run the estate, a plantation in Cotabato, but he has
been neglectful in his duty. In fact after roughly three years of administration it shows that the estate, which was appraised at
P20,800, with actual debts of the deceased of only P1,655.54, was all wiped out and lost, and left with a deficit of P1,809.69. In
fact they even had to sell all the property of the estate in order to satisfy the claims of the commissioners which was allowed by
the court. Although the heirs consented to said sale, they now come before the court claiming that Rear has been a neglectful
administrator. The SC held that Wilson should have closed the business and then distributed the estate. Although it was more proper to
have wound up the business of the estate the SC took into consideration the fact that Wilson’s place of business was 300 kilometers
away from the plantation therefore they were more lenient on him.

Doctrine: An executors or administrator ordinarily has no power to continue the business in which the decedent was engaged at the
time of his death; and this is true although he acts in the utmost good faith and believes that he is proceeding for the best interests of
the estate. The penalty for continuing a business of the decedent without authority is the imposition of a personal liability on the
executor or administrator so doing for all debts of the business. The normal duty of the personal representative in reference to such
business is limited to winding it up, and even where the beneficiaries are infants the court cannot authorize the administrator to carry
on the trade of the decedent. However, an exception to the general rule is sometimes recognized; and so it has been held that in order
to settle an estate the personal representative may, in some cases, be permitted to continue a business for a reasonable time. For
example, such personal representative when authorized to postpone the sale of the testator’s effects may generally carry on the
business for a reasonable time with a view to its sale as a going concern. Even in such cases the personal representatives are not,
however, entitled to embark in the business more of the testator’s property than was employed in it at his death.

Facts: July 14, 1925, Charles C. Rera was murdered by some Moros in his plantation in tn Cotabato Province, said area is an isolated
place, without communication except by river, is 17 kilometers away from Pikit and about 70 Kilometers away from the town of
Cotabato. Said plantation consists of public lands.

On November 18, 1925, J. J. Wilson qualified as a special administrator of the estate. The property of the estate was appraised at
P20,8000 of which the commissioners filed an inventory and report, which was signed by Wilson.

By January 4, 1927, the commissioners made and filed a report of claims against the estate, but by reason of the fact that it was
claimed and alleged that the administrator did not have any funds to pay, on March 30, 1927, the court ordered the
administrator to sell a portion of the property. Because of these, on April 26, 1927, and with the consent of the heirs, a petition
was made for authority to sell, under sealed proposal, all the property of the estate, with a view of closing the administration.

On October 10, 1927, the court granted this petition and after due notice, the public sale took place, and the property was sold to
Wm. Mannion for P7,600.

April 26, 1927, Wilson submitted a report covering his administration to that date, which was approved and later set aside on
motion of the heirs of the deceased.

March 23, 1928, Wilson filed his final account which later was amended on June 10, 1928, to which the heirs made numerous and
specific objections, and after a hearing, the court approved the account as filed.

The heirs filed an appeal and assigned the following errors:

1. The Lower court erred in approving the final amended account of the administrator for the following reasons:j
(a) That the alleged disbursements made by the special administrator and the administrator were far in excess of the amount
required to preserve the estate;
(b) That no authority being asked for or granted by the court, all loans or advances, made to the estate, were made contrary to law
and are not legal charges against the estate (Trs., p. 37).
 In the Matter of the Estate of Charles Rear, Wilson as administrator vs. M.T. Rear. et. Al
055 Phil. 44 | G.R. No. 31860. October 16, 1930.
(c) The court erred in admitting, over objection, Exhibits D, E and F.
(d) That Wilson, as special administrator and as administrator, was neglectful and imprudent and he committed waste. He is,
therefore, liable.

2. The lower court erred in refusing to allow the cross- examination and direct examination of witnesses.
3. The lower court erred in denying the request for a reasonable continuance in order to obtain depositions.

Issue: Whether or not J.J. Wilson’s act of continuing the plantation and incurring losses resulting in a deficit of the net estate was a
negligent act by a special administrator? / Was J.J. Wilson’s act proper? NO/

Discussion:

It appears from the first inventory of December 27, 1925, that the assets of the estate, including real property, coconut trees, and
houses were P15,300, and that the personal property was valued at P5,250, which included 80 head of cattle, carabao and horses of the
value of P4,000. Although he was appointed special administrator on November 17, 1925, he never made any report or filed
any account of any kind until 1927. Neither did he apply to or obtain an order from the court of any nature during that period, and it
appears that the attention of the court was for the first time called to the administration of the estate when the commissioners on claims
asked to have their fees paid; otherwise, the court never made any order of any kind from December 27, 1925, to April 1927. It also
appears that at the time of his death, the only debts against the deceased were one in favor of Sewal Fleming which then
amounted to P800, and one in favor of J. S. Alano for P500. It appears from the amended final report that in the course of
administration, the administrator received the a total of P1, 919. 25 from the specified sources such as selling hogs, payment of old
debts owing to Charles, store sales, and sundry products. (see notes for a detailed list ). YET, it appears that on November 30, 1925,
the administrator sold hogs for P108.50; in July, 1927, he sold one carabao for P100 and two steers for P160; in August he sold
hogs for P79.50; and in September he sold two steers for P180.

Long Story Short, if J.J. Wilson sold the properties of the estate, and was not neglectful in the management of the affairs of the
plantation there would have been no deficit! Yet, the court also took into consideration the fact that he accepted the role of
special administrator under pressure. J.J. Wilson’s place of business is in Zamboanga City which is 300 Kilometeres away
from Charles Rear’s plantation. The court also observed that the management of the plantation was largely left to the discretion of
Felming, and that Wilson did not act fraudulently. (see notes for details)

BUT But even so, he was appointed and qualified as administrator, and the law imposed upon him legal duties and obligations,
among which was to handle the estate in a business-like manner, marshal its assets, and close the estate without any
unreasonable or unnecessary delay. He should have administered the affairs of the estate for the use and benefit alike of all
interested persons, as any prudent business man would handle his own personal business. When appointed, it is the legal duty of the
administrator to administer, settle, and close the administration in the ordinary course of business, without any unnecessary delay.
Neither does an administrator, in particular, without a specific showing or an order of the court, have any legal right to continue the
operation of the business in which the deceased was engaged, or to eat up and absorb the assets of the estate in the payment of
operating expenses. Yet, in the instant case, the administrator on his own volition and without any authority or process of court
continued the operation of the plantation, and in the end, as shown by his own report, the estate, which was appraised at
P20,800, with actual debts of the deceased of only P1,655.54, was all wiped out and lost, and left with a deficit of P1,809.69.

(Degree of Care to be exercised by administrators) The law does not impose upon an administrator a high degree of care in the
administration of an estate, but it does impose upon him ordinary and usual care, for want of which he is personally liable. J.J. Wilson
should have wound up the business and settled the estate in 8 months.

The court then cited Ruling Case Law Vol. 11 Section 142: see doctrine. The same principle is enunciated in Cyc. Vol 18, p.
241: GR: neither an executor nor an administrator is justified in placing or leaving assets in trade, for this is a hazardous use to permit
of trust moneys; and trading lies outside the scope of administrative functions. So great a breach of trust is it for the representative to
engage in business with the funds of the estate that the law charges him with all the losses thereby incurred without on the other hand
allowing him too receive the benefit of any profits that he may make, the rule being that the persons beneficially interested in the estate
 In the Matter of the Estate of Charles Rear, Wilson as administrator vs. M.T. Rear. et. Al
055 Phil. 44 | G.R. No. 31860. October 16, 1930.
may either hold the representative liable for the amount so used with interest, or at their election take all the profits which the
representative has made by such unauthorized use of the funds of the estate.

HOWEVER, considering the fact that Wilson’s home and place of business was 300 kilometers from the plantation, and that in the
very nature of things, he could not give the business of the estate his personal attention, we are disposed to be more or less lenient, and
to allow him the actual operating expenses of the plantation for the first eight months of his appointment amounting to P2,257.45.
Although the expense account of the administrator and the claims of the commissioners are somewhat high, we are also disposed to
allow those claims (personal charges and expenses, court expenses, claims for commissioners, expenses for the first 8 months of
operation, debts against the deceased including taxes for a total of P5, 680.83.

(As to exhibits D and E,) It is very apparent upon their face that the entries in Exhibits D and E were not made in the ordinary course
of business, and even if they were, they would not be evidence of the payments without the corresponding receipts or vouchers. That is
to say, to entitle the administrator to credit for money paid out in the course of administration, he should submit and file with the court
a corresponding receipt or voucher.

Holding: The order of the lower court approving the final account of Wilson as administrator is reversed and set aside, and a
judgment will be entered in favor of the heirs and against the administrator for P3,839.22, with interest thereon from
November 7, 1927, at the rate of 6 per cent per annum, without prejudice to any remedy which the heirs may have against the
bondsmen of the administrator. The appellants to recover costs. So ordered

Collateral Matters:
Counsels:
J. A. Wolfson and Lionel D. Hargis, for Appellants.
Juan S. Alano and Pastor Kimpo, for Appellee.

Ponente: J. Johns

Supreme Court First Division Members: Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Romualdez and Villa-Real, JJ., concur. Ostrand, J., reserves his vote.

Notes:

(Details of the Long Story Short Version) Strange as it may seem, the above is the only account which was ever rendered of the livestock which was appraised at
P4,000, and yet no specific objection was ever made or filed to the final account of the administrator for his failure to render any other or different account of the
livestock. Even so, it appears that the sale to Mannion was made by and with the consent of the heirs, and that the deed was intended to convey all of the property to
him described in the inventory, except that of a perishable nature and some personal effects. It further appears from the amended account that the total amount of cash
received by the administrator, including the sale to Mannion was P9,519.25, and that the total amount of cash disbursed by the administrator was P11,328.94, leaving a
deficit or balance due and owing from the estate of P1,809,69. It also appears that the amount of Fleming’s note at the time it was paid was P1,003.40, and that the taxes
for the years 1925, 1926, and 1927 amounted to P152.14, and the claim of J.S. Alano amounted to P500. That is to say, at the time they were paid, the actual claims
against the deceased was P1,655.54. Here, it will be noted that the value of the personal property of the estate at the time of Wilson’s appointment, appearing over his
own signature was P5,800 which included 80 head of cattle, carabao and horses of the value of P4,000. That is to say, at the time Wilson was appointed, his estate had
personal property of the value of P5,800, and when the amended final account was filed the actual debts of the deceased, including interest and accumulated taxes, was
P1,655.54.

In this situation, it was the legal duty of the administrator to at once apply to the court for an order to sell the personal property to pay the debts of the deceased and the
expenses of administration. It also appears from the amended final account that the expenses charged by the administrator was P750.94; that the court expenses,
including attorney’s fees was P693.20; and that the claims of the commissioners was P322.90, the total of which is P1,767.04. That is to say, that the total of all claims
against the deceased, including interest and taxes was P1,655.54, and that the whole amount of the court costs and expenses of administration was P1,767.04, the total
of which is P3,422.58. That is to say, at the time of his appointment, it appears over the administrator’s own signature that the value of the personal property of the
deceased which came into his possession was P5,800, and the whole amount of claims against Rear at the time of his death and the court costs and expenses of
administration was P3,422.58. That is to say, if the personal property of the estate had been promptly sold, when it should have been, and sold for its appraised value, all
the debts of the deceased and the court costs and expenses of administration would have been paid, and the estate would have a balance left of P2,377.42. Instead of
doing that, and without any order, process or authority of the court, the administrator, as appears from his amended final account, continued the operation of the
plantation and the employment of Fleming as manager at a salary of P200 per month, and a large number of men, so that at the time of the filing of the amended final
account, the total expense for labor was P2,863.62, and the amount of the manager’s salary was P4,533.33, the net result of which was that all of the property of the
estate was consumed, lost or destroyed, leaving a deficit against the estate of P1,809.69. Whereas, if the administrator had followed the law and promptly sold the
personal property, all of the debts of the estate would have been paid, and it would have a cash balance in its favor of P2,377.42, and all of its real property
left, which was appraised at P15,000.