
    Common Pleas Court of Fayette County.
    Fulton v. Griffith, Admr.
    Decided May 19, 1932.
    
      GilbeH Bettman, Attorney General, Rell G. Allen and E. L. Bush, for plaintiffs in error.
    
      Troy T. Junk, for defendant in error.
   Rankin, J.

On the 4th day of January, 1932, the defendant in error filed a petition in the Probate court of this county, the prayer of which petition was for authority to sell certain real estate of his decedent to pay the debts of the estate. The real estate consisted of a residence property in the city of Washington C. H. and a farm of about 140 acres situate in this county. Ira J. Fulton, as superintendent of banks of the state of Ohio, being in charge of the liquidation of the affairs of The Peoples and Drovers Bank, having been made a party defendant to that action filed an answer and cross petition in which he set up a mortgage therefore given by the decedent to said bank, alleging that the conditions of said mortgage had been broken and praying that the premises, being the city property described in the petition, be sold to satisfy said mortgage claim. The North Western Mutual Life Insurance Company, the other plaintiff in error, being a party defendant to that action, by way of cross petition set up its mortgage on the farm property which the decedent had executed and delivered, alleging that the conditions of its mortgage had been broken and asking for a sale of the premises to satisfy its mortgage claim. The court found that the conditions of each of said mortgages had been broken; determined the amounts due on the same; found and determined that said mortgages were the first and best liens on the premises described in the respective mortgages and ordered the premises sold according to the prayer of the petition. When the premises were exposed for sale at public auction the city property was struck off to the superintendent of banks and the farm lands were sold to the insurance company. The sales were confirmed and the administrator ordered to execute deeds. In the entry of confirmation the court found that each of the purchasers had the first and best lien on the respective tracts bid in by them, and that the amount of each of said bids was less than the amount of their respective claims, taxes, penalties and interest thereon “and the costs and expenses herein, including reasonable fees for services performed by the attorney for said administrator in connection with the proceedings herein.” The court made an order for the payment of said attorney fees and it is from such order that this proceeding in error is prosecuted.

The question for determination is, Are the fees for services performed by the attorney for the administrator, in connection with the sale of real estate to pay debts of a decedent entitled to priority over a mortgage claim, where the mortgagee purchases the realty at judicial sale for a sum insufficient to discharge his mortgage claim ?

Addams & Hosford in the new Ohio Probate Practice and Procedure at page 914 answer the above question in the affirmative. In the last edition of Deibel’s Ohio Probate Practice, Section 1118 and note, it is stated in effect that the new section does not make any change in the law on this question. In Volume 10 Ohio Jurisprudence at page 750, Section 740, it is said that it would seem to be the rule under the new probate code that attorney fees would not be entitled to such preference * * *.

The solution of this question depends upon a construetion of Section 10510-46 G. C. which became effective January 1, 1932, the pertinent portion of which section provides:

“The money arising from the sale of real estate shall be applied as follows:

“1. To discharge the costs and expenses of the sale, including reasonable fees for services performed by attorneys for the fiduciary in connection with the sale, and the commission of the executor or administrator thereon for his administration.

“2. To the payment of mortgages, judgments and tax liens” etc.

By comparing the above section with the former analagous Section 10809 we find there has been no substantial change, except that the portion of the former section which we have italicized was not included in the old section.

The question as to the right of an executor or administrator to collect compensation under like circumstances was determined by the Supreme Court in. an early case which has been repeatedly followed in this state. The case to which we refer is that of Stone v. Strong, 42 O. S. 53, in which it was held that:

“If a mortgagee, whose lien is fixed by the court, becomes the purchaser at such sale, the executor or admin- , istrator is not entitled to a percentum compensation on ,that part of the purchase money applicable to the satisfaction of his mortgage.”

On page 57 of the opinion in the above case the court say:

“Can he charge a percentum on the amount of the purchase money going to a lienholder who is the purchaser?

“We think not. His percentum is to be computed on, ‘the money arising from the sale’, for, ‘his administration of the same.’

“Where no money arises, to be administered, there is nothing on which to compute commissions. This percentage was intended to compensate for the trouble and responsibility of collecting and paying out the money * * *. Here the mortgagee is the purchaser-, and so far as the purchase money is applicable to her liens, it operates as a satisfaction of her mortgages.”

We thus see that the Supreme Court has held that where a mortgagee becomes the purchaser of real estate at a judicial sale for an amount less than his mortgage claim, the purchase money is directly applied to the mortgage lien and operates as a satisfaction of such mortgage. That case, therefore expressly holds that under such facts there is no “money arising from the sale.”

The above case was followed by the Supreme Court in the case of Andrews, Assignee v. Johns, et al, 59 O. S. 75. In that case it was held that:

“The term ‘proceeds of real estate sold’, found in Section 6357 R. S., implies money arising from the sale actually received and accounted for as such by the assignee.”

On page 76 the court say that the term “money arising from the sale of real estate”, is synonymous with the term, “proceeds of the real estate sold.”

On page 71 the court say:

“The term ‘proceeds’ when used in connection with sale, means a sum of money derived from the sale of property. If money be derived from the sale, then it has yielded ‘proceeds,’ and an order distributing such ‘proceeds’ may follow; if none have been so derived then there are no funds in the hands of the court for distribution * * *. But where no proceeds have been collected and accounted for, the proper order would seem to be one which would provide for such necessary costs as the statute authorizes, and satisfaction of the liens, and for a conveyance which will vest in the purchaser all the title of the assignor at the time of the assignment, and thus close out the trust as regards that piece of property, and not an order attempting to distribute that which is not within the control of the court. Now where the land exposed for sale by an assignee, which is incumbered by a mortgage constituting a first lien has been bid in by the mortgagee for a sum less than the amount owing on his mortgage, there can be no ‘proceeds’ in the sense of money for distribution, for the legal effect of the bid and sale, followed by confirmation and deed, is only to satisfy the mortgage, and the debt pro tanto, and vest in the mortgagee, purchaser, the equity of redemption of the assignor, and is not to produce a fund for distribution. It has never been the law or practice in this state to require a mortgagee, purchasing under such circumstances, to pay the amount of his purchase either to the officer making the sale, nor into court. The reason is that having already the legal title subject to the equity of redemption of the mortgagor, the purchaser is in a sense the owner, and requires only a satisfaction in a legal manner of the equity of redemption, and of any subsequent liens, followed by possession, in order to give him a complete title to the land.”

Section 10510-46 G. C. provides that:

“The money arising from the sale of real estate shall be applied”, etc. But under the state of facts which we are considering there was no “money arising from the sales and consequently nothing out of which the court was authorized to order payment of attorney fees. Where real estate is sold at judicial sale and the mortgagee bids in the premises for an amount less than his mortgage such sale amounts to nothing more than a satisfaction of the “mortgage, and the debt pro tanto” and extinguishment of the equity of redemption. Under such facts, as we have seen, the purchaser, mortgagee, is requird to pay nothing because of his purchase, except such costs as ordinarily are incurred in foreclosure proceedings. In this case the conditions in each of the mortgages had been broken and the mortgagees were the legal owners of the real estate and the only interest which the decedent had therein was an equity of redemption. By the purchase by the mortgagees they simply retained that which was already theirs.

The costs which a mortgagee is required to pay, under such circumstances are discussed in the case of Andrews, Assignee v. Johns, et al, supra, at page 279:

“The court having found that the land was bid off by the owner of the first lien for a sum less than his debt, taxes and costs, an order that the purchaser pay such taxes as were due and such costs as might properly be required of him under the statute, which would be¡> such costs, and such only, as were made necessary by the foreclosure, and upon such payment a deed be made by the assignee, would have met the situation as it existed and worked out the proper result.”

See also: Insurance Company v. Dennull, 21 Ohio App., 363, 365.

Prior to the adoption of the probate code it was held, in the case of Klimper v. Klimper, 12 Ohio Ap. 332; 31 O. C. A. 267, that where property was purchased at administrator’s sale by one other than the mortgagee, the fees of the attorney were entitled to a preference over a mortgage claim on the land so sold. That decision was based upon “the provision of Section 10809 G. C. and upon authority of Stone v. Strong, 42 O. S., 53.” In other words that court held that the term “costs and expenses of the sale,” found in old Section 10809 G. C., included attorney’s fees.

Still, in a later case decided by the same Court of Appeals, being the case of Watson, Adimx. v. Watson, 24 O. Ap. 45, 156 N. E. 241 (motion to certify overruled, 25 O. L. R. 244) it was held, that:

“In sale of property by administratrix, fees of administratrix and her attorney cannot be charged as against mortgageee of property, who becomes purchaser at judicial sale, on that part of purchase money applicable to satisfaction of his mortgage.”

It would seem that these two cases can be reconciled only upon the one theory, that in the Klimper case there was money arising from the sale, while in the Watson case there was no money so arising.

So, we see that, according to the decisions of the Court of Appeals of the First Appellate District, the adoption of the new Probate Code has no effect whatever in the solution of the question we are now considering.

The Court of Appeals of the First District also say (after commenting on the case of Stone v. Strong, supra, and Young v. Stone, 55 O. S. 125,) in the case of Insurance Co. v. Dennull, 21 O. Ap., at page 365:

“It seems to us that the two cases above cited settle the question that when property is sold at a judicial sale and bid in by the mortgagee for a sum that only satisfies its mortgage, and when the mortgagee pays such costs as it would be compelled to pay in a foreclosure action, the court does not have authority to compel the mortgagee to pay an attorney’s fee as in partition.”

By the enactment of Section 10510-46 G. C., we fail to find any apparent attempt on the part of the legislature to place attorneys’ fees on a higher plane than the compensation of the executor or administrator, It would, therefore, seem that the rule of law which denies to the fiduciary the right to compensation in such cases would also preclude allowance of attorneys’ fees in like cases.

By a new section in the Probate Code, Section 10510-10, the legislature provided that the fees of the executor or administrator and of his attorney shall be a charge only against the interest of the decedent in cases where there is a sale of a fractional interest of the decedent in connection with the sale of the other interests in real estate.

The Probate Court ordered payment of an attorney fee of $89.00 in connection with the sale of the property bid in by the Superintendent of Banks and then found there was a deficiency on the bank’s mortgage of $65.89, This being true there was money arising from the sale in the amount of $28.11, which should be ordered paid pursuant to Section 10510-46.

The judgment of the court below will be reversed and cause remanded with instructions to disallow the attorney’s fees except as above stated.  