092-NLR-NLR-V-26-DE-ZOYSA-v.-DE-ZOYSA.pdf
1924.
( 472 )
Present: Bertram C.J. and Schneider J.
DE ZOYSA r. DE ZOYSA.-67—D. C. Colombo, 4,975.
__ Judicial settlement—Nature and scope of inquiry—Claim against executorfor money not recovered through his default—Correct ness of inventorychallenged—Abandonment of debts—Discretion of executor—CivilProcedure Code, chap. LV.t ss. 718 and 7B9.
Where tto hei?s ■ of an estate took over certain properties inpursuance of an auction held among themselves, subject to thecondition that the inequalities' of the shares should be adjusted,—Held, that such an adjustment can only be secured by an actionfor contribution among the heirs. An executor is under noobligation to make such an adjustment.
Proceedings under chapter LV. of the Civil Procedure Code for ajudicial settlement of* an estate provide no means bv which it iapossible to charge an executor in respect of a hypothetical sumwhich he might have received had he administered lhe estate withgreater foresight and diligence.
The correctness of an inventory hied by an executor should bechallenged under section 7X8 of the Code.
An executorhas a discretion to abandon adebt duetoan estate;
but where heabandons' a mortgage debt, heis boundtogive some
prima facie evidence in explanation of his action in' foregoing thedebt.
Section 788 seems' to indicate that an executor may be madeaccountable in a petition for judicial settlement for negligence inthe collection of debts.
The nature and scope of proceedings for the judicial settlement ofan estate explained.
A
PPLICATION for the judicial settlement of the estate of JohnGeogorv Perera Amerasekera who died leaving a last will
dated November 14, 1918. Probate was obtained on June 9, 1914.On February 28, 1916, the heirs executed a deed with reference tocertainimmovableproperties. It had beenarrangedthat an
auctionshould beheld of these propertiesamongthe heirs.
Various properties' were allotted to the heirs as a result of thisauction, each heir being debited with the amount which he orshe bid in respect of the properties assigned to him or her, and thedeed gave effect to this arrangement by mutual conveyances. Inpursuance of an order made- by the District Judge, the executorsfiled comprehensive accounts for the purpose of a judicial settlement.In the accounts filed the executors reported the distribution of theimmovable properties, and stated that the remaining properties
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■were held in common. Certain objections were. filed against theaccounts by one of the heirs; among them being that the executorshad not taken steps to adjust the inequalities in the shares enjoyedby the heirs resulting from the distribution of properties refered to.Various other objections were raised which are fully stated injudgment of the Chief Justice. The learned District Judge over-ruled them.
Elliot, K.C. (with him Jayasooriya), for appellants.
H. J. C. Pereira, K.C. (with him Samarawich rente and Amere-sekere), for respondents.
September 9, 1924. Bertram C.J.—
The questions to be decided in this case arise out of a judicialsettlement of the estate of John Gregory Perera Amerasekera, whodied on February 10,1914, leaving property valued at over
Rs. 500,000. By his last will dated November 14, 1913, he leftthe whole of his property to his five children, subject to two specialbequests of Rs. 1,000 each, appointing his son, Mr. John FinguerPerera, and his son-in-law, Mr. Francis de Zoysa, his executors.The only material passages in the will are as follows:I do hereby
desire that all the movable and immovable property now belongingto me, as well as those to which I may hereafter become entitled,wheresoever they may be situated, sfiall, after my death, devolveshare and share alike on my five children, who can do whateverthey please therewith … I do hereby appoint my eldest
son-in-law, Advocate Francis de Zoysa, and my eldest son, JohnFinguer Perera, to perform the duties concerning the propertiesbelonging to my estate.”
Probate was obtained on June 9, 1914, but the estate was adminis-tered with that leisureliness which is unfortunately all too commonin Ceylon. On February 28, 1916, the heirs executed a deed of asomewhat peculiar description with reference to certain of theimmovable properties. It had apparently been arranged that anauction should he held of these properties among the various heirs.Various properties were allotted to the heirs as a result' of thisauction, each heir being debited with the amount which he or shebid in respect of the properties assigned to him or her. The deedgave effect to this arrangement by mutual conveyances. A similararrangement was made with respect to a certain quantity of themovable property. After long delays, the District Judge, the lateMr. Wadsworth, on September 2V 1920; made’ a comprehensiveorder with reference to the part ular of the final account to besubmitted by the executors for the purpose of a judicial settlement.After further delays that order was complied with, and compre-hensive accounts were filed. All parties c ,cerned, however, seemed
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to show an indisposition to tackle the accounts thus hied. Attemptswere made to get them examined by chartered accountants, butthis proposal fell through. Finally, one of the heirs, Mrs. 'Valentinede Zoysa, and her husband, hied certain objections, and on March 6,1924, certain issues were framed. Meanwhile, the principal executorwho had actual charge of the administration of the estate, Mr. J. F.Perera, died, and Mr. Francis de Zoysa remained as sole executor.
For the purpose of understanding these issues, a recital of furtherfacts is necessary. In their accounts rendered to the Court, theexecutors reported the distribution of the immovables above referredto, and stated that the remaining properties were possessed incommon. They made a similar report with regard to the movables.The principal immovable property so possessed in common wasknown as the Kannagama estate, which ;was valued in the inventoryat Rs. 2.50,000, or nearly one-half of the whole of the testator'sproperty.
In the distribution* of immovables above referred to, no attemptwas made to equalize the shares of -the various heirs.. Each heirappears to have bid for such properties as he or she desired, andthese properties were duly conveyed to the various bidders. Thetotal values of the properties so assigned to the respective heirswere Rs. 38,800, R$. 25,600, Rs. 11,800, Rs. 30,100, and Rs. 22,200.Mrs. Valentine de Zoysa*, the heir on whose behalf the presentContest is raised, only selected property to the value of Rs. 11,800.It appears to have been assumed that something would be done atsome later stage to equalize the position of the various heirs, butnothing in fact was done. There were. similar inequalities withregard to the movables.'
The objections. raised by the contesting heir and’ her husband,which were subsequently embodied in the issues; may be con-veniently summarized in the following order:— 1 2 3 4
(1)That the executors ought to have taken steps to adjust the
inequalities in the shares enjoyed by the heirs resultingfrom the distribution of immovables and movables above-referred to.. .
(2)That during the time the executors had control of the estate
of the deceased they had mismanaged it by neglectingand allowing immovable properties to run into jungle, andthat the estates had thereby"Suffered damage. ■
(3)That the executors had not properly accounted for certain.
payments made in respect of the liabilities of the estate.
£
(4)That the executors had not properly accounted for the income
derived from the various properties comprised m the estateduring the period for which these properties were in thehands of the executors.
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That the executors had not exercised due diligence in getting
in the amounts due to the estate, and, in particular, thatthey had not put in suit a considerable number of mortgagebonds, and had not enforced several judgments.
That certain lands had been improperly omitted from the
inventory.
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De Zoysa,
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That the executors had not properly accounted for variousarticles of movable property—live stock including cattle,goat, elephants, &c., and stocks of rice, paddy, andgrain.
With regard to these objections and issues, it must be generallyobserved that the first of them shows an imperfect apprehensionof the nature of the title and duties of an executor in Ceylon ; andthat the second of them shows an imperfect apprehension of thenature of a judicial settlement. If the true position had been morefully realized, these issues would not have been accepted, and thisvoluminous case would have been reduced to much more manageabledimensions.
With regard to the first head of the issues as summarized above, -the appellants complain that no steps have been taken by theexecutors to equalize the shares of the properties of the various heirs.It was no part of the duty of the executors to do so. The will* doesnot require them or authorize them to make any distribution of theestate. They are not empowered tjo assign this property to oneheir, and that to another. They are not empowered to sell eitherthe movables or immovables for the purpose of effecting a distri-bution. .All that they are-required to do is €t to perform the dutiesconcerning the properties belonging, to my estate. M That is to say,•they are required to pay the debts, discharge the liabilities, giveeffect to the legacies, and account for the management of the estateso long as it is under their control. Subject to the payment of the•debts and legacies, all the property, immovable and movable, under£he will vests in the heirs m equal undivided shares.
No conveyance from the executors is necessary for the purpose ofvesting title in the heirs. Since the decisions of this Court inMohamado Cassim v. Cassim Marikar, 1 De Kroes v. Don Johannes, 22tnd Silva v. Silva* rt must be taken as. settled law that the only titlewhich vests in the executor is such title as is necessary for thepurpose of the administration of the estate, and that devises and .bequests made directly by the testator in favour of the objects of thebounty vest in the devisees and legatees without the necessity ofany formal conveyance from the executor. There, cannot, underour law, be any distinction for this purpose between immovableand movable property. Nor is there any occasion to consider the» (1992) 2 C. Is. R. 72.*J190S) 9 N L. R. 7.
*(1907) 2A.C.R.47.
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question referred to in De Kroes v. Don Johannes (supra),’namely,whether the bequest of all a man’s movable property, is to be regardedas a specific bequest. This is a question which does not arise in thisconnection. It arises only where there is a contest as betweenlegatees. See the judgments of Lord Selbourne and Lord Blackburnin Robertson, v. Broadbent. 1
The result is that, as in the present case, when once the heirs haveentered into possession of the properties either in common or inpursuance of any arrapgement among themselves, the executorsare not further concerned with these properties.
It certainly seems reasonable to suppose that when the heirs tookover certain properties in pursuance of the auction held amongthemselves, it was intended that their shares should ultimately beadjusted, and that the distribution took place on this condition*
It appears to me, however, that such an adjustment can only besecured by an action for contribution among the heirs themselves*An executor is under no obligation and has no power to make suchan adjustment.
I now come to the claim for damages for alleged negligence andmismanagement of estates in the hands of the executors. Theevidence of this alleged negligence and mismanagement was of toemost, vague and shadowy description, but it seems to me quiteclear that this is not claim that can be entertained in a judicialsettlement.
A judicial settlement is a proceeding which was introducedinto our legal system by the Civil Procedure Code/ It was said tohave been derived from the Code of the State of New York. Seeper Middleton J. in Mohamado Jan v. TJssen Bebe. 2 Before it wasintroduced the only procedure for examining an executor’s accountswas an administration action. Note the final words of the judgmentin Silva v. Silva. 2 “ The so-called administration of this estateaffords a most unhappy instance of the disastrous results to toebeneficiaries of these attempts to attain the ends of a properadministration suit by imperfect, summary, and ex parte proceedingsin a suit, the true object of which was simply to obtain probate,and which properly came to an end when probate was granted. ’’I am inclined to think that, to a certain extent, the judicial settlementhas displaced the old administration action. At any rate it seemsdifficult to conceive of an administration action being entertainedin a case which has been already the subject of a judicial settlement.There is a difficulty, however, in this respect ; that though primarilyin an administration action the executor or administrator was onlycalled upon to account for money he himself had received, and notfor what he might have received but for his own default, it wasalways possible, if a prima facie case of “ wilful default ” was made
1 (IS83) 8 A. 0. 812.* (1909) 1 C. L. R. on p. 54.
3 (1878) 1 S. C. C.,p. 51.
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out, to obtain a direction that the executor or administrator shouldaccount upon the footing of wilful default. And in such a case hecould be made responsible, not only for sums which he had received,but for sums which he ought to have received. Subject to one point,which I will discuss later, it seems to me that chapter LV. providesno means by which an executor may be called upon to account onthis basis. It is not possible to charge him with a hypotheticalsum, which he might have received had he administered estatesunder his control with greater foresight and diligence. SeeMohamado Jan v. Ussen Bebe (supra). Any claim ofrthis nature canonly be enforced by an action for devastavit, for the principles ofwhich see Williams on Executors, 10th ed., part IV.t bh. 2, chap.21., section 8.
Another claim made by the appellants, which cannot, in myopinion, be entertained, is the claim that certain properties of thetestator have not been included in the inventory. If the correctnessof the inventory is to be challenged, it should be challenged undersection 718. A judicial settlement is a proceeding of a limitednature. Its scope is indicated by the provisions of the chapter, andin particular by the provisions of section 789. A judicial* settlementproceeds upon the footing that the inventory is a full and trueinventory of the estate.
The proper scope of the judicial settlement required in this caseis thus a comparatively limited one. It-is reduced in effect to thesepoints—
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The discharge of all the liabilities of the estate.
The realization of all its assets.
The accounting for all income received during the period of
management.
With regard to the first of these heads, the proceedings of theexecutors are not now challenged, and we need, not concern ourselveswith them.
With regard to (c) the accounting for income received duringthe period of management:I think that the learned Judge has
dealt with this matter in rather too summary a manner. Theappellants filed a list (B I) of nineteen properties yielding income inrespect of which they alleged that the executors had not accounted.An issue was framed: 4 4 Have the executors accounted for the incomefrom all the immovable properties, and, in particular, have theyaccounted for the income of the following ? ” Twenty-six propertiesare enumerated, besides thirteen leasehold properties. On this issueall that the learned Judge says is: 441 find that the executors haveaccounted for the income of all the immovable properties groupedtogether as property at Kurunegala and Bagama up tc the time ofthe distribution, and that they are not liable to account for incomeafter the distribution. ” As I say, I think this is too summary, and
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further inquiry. is called for. Undoubtedlyv the executors are notresponsible for. the income of any of these properties after they werehanded over .to the heirs. But probate was granted on June 9,1914, and the deed of distribution was not executed till February28, 1916. Mr. Pereira says that the_ actual handing over of propertieswas before that date, but he cannot tell us how long beforethat date. It is alleged, on the other hand, by the appellants thatthough Kapnagama estate was possessed in common from the date
of the “ distribution, ” they themselves were prevented fromentering it. Unfortunate as it is that these proceedings should befurther protracted, I think that the executors should be called upon
' to render a further account enumerating the immovable propertiesindicating those which are income-bearing properties and thosewhich are not, setting out the income derived from each propertyupto to the' date when the executors ceased to be in control, and show-ing how the income so derived is accounted for. It will be opento the executor to show that in fact possession was taken by thea heirs at a date earlier than the execution of the deed, just as it will
be open to any of the heirs to show that possession was not deliveredtill a later date. The learned Judge must then allow the appellants
•an opportunity for challenging any item of this account, and must
adjust his fin&l order accordingly.
;
There remains the question of the realization of the debts due to*the estate. These comprised a very considerable number of mort-gage bonds—fifty-four in all. Seven of these were put in suit, and•of these seven, five were marked “ not realized. ” Thirty-two wereassigned to a creditor of the estate in respect of goods supplied to thecamp at Ragama. The remaining fifteen were not sued upon at all.The executors stated that the non-recovery of these bonds is due tothe difficulty of tracing some of the mortgagors, the lack of fundsbelonging to the estate, and the difficulty experienced in realiznig.■the amounts lent even after1 the institution of actions. One of thebonds, is for Rs. 1,000, four of them for Rs. 500 each, and the rest for•minor sums. It was field in Mohamadu Jan v. Ussen Behe (supra)'that the .administrator has-a discretion to abandon a debt due tothe estate which, in the exercise of his common sense and judgment,he considers to be irrecoverable. The same principle is laid downby Romilly M.R. in Clack v. Hollandt 1 and provision is now madeto this effect in England by statute. « Even accepting this principle,however, it seems to me that where an executor abandons mortgage"bonds in this way, he ought to be prepared to give some prima facieevidence to explain why it was not worth while to sue upon thesebonds. The same remarks would apply to certain judgmentsobtained in the testator’s lifetime which were not enforced. Itwas declared, however, by Middleton J., with the concurrence of' Wendt J. in Mohamadu Jan. v. Ussen Bebe (supra)t that " if the parties
1 {1855) 1 Beav. 271.
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entitled to a distribution think that he, the administrator, has beennegligent in so deciding or fraudulent, they would have their actionof devastavit. But the Court on a judicial settlement cannot, Ithink, charge the administrator with motleys that have not yetreached his hands. ”
I confess that I hesitate to follow this opinion. As at presentadvised, I cannot see that it is consistent with the terms of section 739
. A judicial settlement under that paragraph is conclusive “ thatthe money charged to the accounting party as collected is all that wascollectible at the time of the settlement on the debts stated in theaccount. ** If after a judicial settlement one of the heirs brought anaction for devastavit in respect of negligence in the collection of debtsdue to the estate, it appears to me that he will be met by thisstatutory conclusion. Further, section 738 seems to indicate that,if a debt due to the estate were lost through an executor negligentlyfailing to sue for it until it was prescribed, the executor would beaccountable in the judicial settlement. If this reasoning is sound,an executor in a judicial settlement is accountable, not only formoney which he actually collected, but also for money which heought to have collected and failed to collect through his own default.Fortunately it is not necessary for us to give a decision on this point,because the executor has voluntarily undertaken to file furtherexplanations, in so far as it is possible for him to do so, of the masonswhy these mortgage bonds were not put in suit or realized and whythe judgments referred to were not enforced.
With regard to the complaint raised as to the numerous andmiscellaneous articles of movables* which belonged to the estate,and the failure of the executors to account ior them, I think this wasbased upon the erroneous supposition that it was the duty of theexecutors to distribute this property or to sell it and distribute theproceeds. No doubt it is possible that some small earnings mayhave been derived in the use of some of these articles, but I think itis' impossible in a family estate of this description, after the lapseof so long a time, to enter into such questions with particularity.The movable assets of the estate appear to have been appropriatedfry the heirs with the consent of the executors, and one would assume,to a great extent, by mutual consent. I do not think any sub-stantial case has been made out for any further inquiry on this partof the executors* accounts.
There is one final point to be mentioned. Mr. Elliot seemed 'tocontend that when a Court authorizes a judicial settlement andproceeds “ to take the accounts ” under section 730, it is itselfresponsible for the auditing of * every item in the account. No •Court could sustain such a burden. The manner in which such an*account should be taken is fully explained in the final part of the*judgment of the Court in Fernando v. Fernando. 1 The case in-1
*11878)13. C. C.,p. 52.
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whicjh the procedure is there explained was an informal adminis-tration suit, but the principles there explained are equallyapplicable to a judicial settlement under our Code.
In my opinion, the case should go back to the learned DistrictJudge for further inquiry with regard to (a) the income of theincome-bearing properties up to the date when they were handedover to the heirs either severally or in common; (b) the mortgagebonds not put in suit or realized, and judgments not enforced, andfor any readjustment of his final order which he may think necessaryas a result of his inquiries. In making these inquiries the learnedJudge will, no doubt, make allowance for the fact that the executorwho acted as the principle executor is dead, and that the explanationavailable may consequently not be so full as they would- have beenif he had also survived. For the purpose of the final 'adjustment,the order of the learned Judge should pro formd be set aside.
With regard to the costs, the victory in the Court below, wascertainly in the main with the executor. ^Nevertheless, there wascertainly good ground for the demand for a judicial settlement.The accounts filed by the executors were only filed as a result of theappellants’ agitation, and even after the inquiry which has beenheld, it cannot be said that they are altogether satisfactory. Ithink it would be a hardship that the appellants should be requiredto pay the costs of the proceedings’ in the Court below. I wouldmake no order as to the costs of the proceedings in the Court belowor in this Court, and would leave the costs of further proceedingsto the discretion of the learned District Judge.
Schneider J.—I agree./
Set aside and sent bach.