Estate of Riley

California Court of Appeal Jan 23, 1953 No. Civ. 4495Published

Before: Barnard

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Holding. The court held that an executor must demonstrate that borrowing money against estate property is to the advantage of the estate, even when the will grants the executor authority to encumber estate property.

Issues

Whether an executor is required to show the necessity or advantage of a loan to the estate when the will grants the executor authority to encumber estate property.

Disposition. affirmed

Quotations verified verbatim against the opinion

“The appellant’s contention that no showing was necessary, as to the necessity for or the advantage of the loan in question, cannot be sustained.”

“those sections contain provisions which must be followed, including a definite requirement that a showing must be made which satisfies the court that the making of the order sought will be to the advantage of the estate.”

BARNARD, P. J.

This is an appeal from an order denying the petition of the executrix for authority to borrow $43,000 and to execute a trust deed on the estate’s one-half interest in a building in Los Angeles, as security for the loan.

The petition alleged that the appraised value of the estate was $274,320.10; that there was about $3,000 in cash on hand; that the estimated federal and state inheritance taxes amounted to about $62,000, of which $12,000 had been paid; that unpaid claims amounted to about $28,000; that petitioner had theretofore been authorized to borrow $20,000 upon other property; that the will gave the executrix authority to sell or encumber by mortgage, deed of trust or otherwise any part of the estate; that in order to pay the balance of taxes and claims the petitioner has negotiated a loan of $43,000, secured by a deed of trust on the estate’s half interest in this build

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ing, to be repaid in installments of $1,000 a month together with interest at 6 per cent payable monthly; and that it is for the best interest of the estate to make this loan.

Objections were filed by the former wife of the deceased, personally and as guardian of the three minor children of the deceased who were named in the will as legatees, alleging that the estate had been overappraised; that the state and federal inheritance taxes were due from individuals and not from the estate; that the executrix had used certain estate monies to pay her own obligations; that the previous order authorizing the executrix to borrow $20,000 had been made without notice; that the estate was being unnecessarily put to great expense in maintaining another piece of real property, which should be sold instead of borrowing money upon this building; that the estate did not have sufficient income to make the proposed monthly payments of principal and interest on the loan if it were made; that the making of this loan would probably result in a complete loss to the estate of the property on which the lien was placed; and that it was not to the best interest or advantage of the estate to make the proposed loan.

The court found that while most of the allegations of the petition were true, it was not for the best interest of the estate to borrow this money; that there is serious danger that in the event this loan is made the estate would not have sufficient income to meet the proposed monthly payments thereon; and that the estate owns another parcel which can and should be sold for the purpose of acquiring the necessary funds.

Estate of Riley

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BARNARD, P. J.

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