Summary
holding that a probate court had no jurisdiction to determine whether a contract requiring a decedent's shares of stock to be sold back to a company upon his death was enforceable, stating, "our Probate Courts have primarily been responsible for the preservation and correct administration of property . . . belonging to estates. . . . They have not been primarily concerned with the litigation of serious and oftimes acrimonious disputes"
Summary of this case from Burt v. Rhode Island Hospital Trust Nat. BankOpinion
No. 698031
Decided June 26, 1967.
Probate Court — Jurisdiction — Action on rejected claim — Specific performance — Jurisdiction not increased by Declaratory Judgments Act.
1. A Probate Court has no jurisdiction over the subject matter of a claim which has been rejected by an executor, either on exceptions to the schedule of debts or through the filing of a separate action.
2. The enactment of the Uniform Declaratory Judgments Act, Section 2721.01 et seq., Revised Code, did not have the effect of granting to a Probate Court jurisdiction over any new subject matter.
3. A Probate Court has no jurisdiction over an action for specific performance of a contract of a decedent.
Messrs. Lane, Krotinger, Santora Stone, for plaintiffs, Mainline Construction Company et al.
Mr. Julius B. Amber and Mr. Allan Hull, for defendant, Thora E. Warren, Executrix.
The matter before the court relates to the estate of Francis M. Warren, deceased, of which Thora E. Warren, his widow, is the executrix.
Plaintiff, Mainline Construction Company, has filed a petition for a declaratory judgment, the caption stating that the petition is filed pursuant to Section 2721.05, Revised Code. The defendant is Thora E. Warren, both individually and as executrix of Mr. Warren's estate.
The petition is based upon a contract designated as the "Revised Agreement," executed on October 1, 1961, by the following five parties: The Mainline Construction Company, by Francis M. Warren, President, and Morris A. Davidson, Secretary-Treasurer; Francis M. Warren (the decedent); Thora E. Warren; Morris A. Davidson; and Bess Davidson, his wife.
Francis M. Warren and Morris A. Davidson each owned thirty-nine shares of Mainline Construction Company common stock. Mrs. Warren and Mrs. Davidson each owned one share.
Under the terms of the contract, Mr. Warren and Mr. Davidson each agreed to purchase life insurance in the amount of $40,000, payable to plaintiff, Mainline Construction Company, as beneficiary, and Mainline agreed to pay the premiums on both policies. Mainline agreed further that in the event of the death of Mr. Warren or Mr. Davidson, Mainline would purchase the forty shares owned by the decedent and his wife for $40,000 cash, upon delivery of the stock to it. Mrs. Warren and Mrs. Davidson each agreed to transfer her one share to Mainline upon her husband's death, and to do whatever was necessary to effectuate the transfer of the shares owned by her husband.
There was a provision that the agreement, when executed, "shall become binding upon and inure to its, his or their respective successors, assigns, heirs, executors and administrators."
The petition alleges that although plaintiff has made a proper claim against the defendant in accordance with Section 2117.11, Revised Code, the defendant has refused to honor the claim and carry out the contract.
The refusal appears to be based upon a so-called "Settlement," dated April 2, 1966. Defendant contends that this "Settlement" is a contract and that it impliedly rescinded and superseded the 1961 "Revised Agreement."
Plaintiff contends that the "Settlement" is not a binding contract and does not constitute a rescission of the "Revised Agreement." Consequently, argues plaintiff, the "Revised Agreement" governs the rights of the parties and should be carried out.
Plaintiff prays that "its rights and the rights of defendant herein be construed," and that the court "enter judgment upon said construction." Plaintiff also asks for "such other and further relief as may be deemed just and equitable in the premises."
Defendant has filed a motion to dismiss plaintiff's petition, at plaintiff's costs, for the reason that this court does not have jurisdiction over the subject matter of the alleged cause of action. She contends that although the petition is couched in declaratory judgment language, the allegations show that this is really an action on a rejected claim against the estate (except for the one share owned by Mrs. Warren individually), based upon an executory contract for the transfer of forty shares of Mainline common stock upon Mr. Warren's death, which contract plaintiff wants specifically enforced.
It is apparent from the petition that plaintiff wants this court to declare that the claim was improperly rejected and that defendant is obligated to transfer the forty shares of Mainline stock to plaintiff.
As noted, the basis of the contention that the claim was improperly rejected is that the 1966 "Settlement" is not a contract, or at least not one binding plaintiff; and that, consequently, plaintiff's right to recover on the "Revised Agreement" is not affected thereby. Thus, so far as the petition shows, the issue relating to the "Settlement" is merely whether or not it is a defense to plaintiff's claim. If the court has no jurisdiction over the subject matter of a rejected claim (a question which will be considered forthwith), it certainly does not acquire jurisdiction from the fact that the alleged defense arises out of a second document.
However, plaintiff contends that the scope of the litigation goes far beyond the matter of a rejected claim, and that the Probate Court has undoubted jurisdiction. This latter contention will be taken up later.
The statute dealing with rejected claims is Section 2117.12, Revised Code, which provides that when a claim against an estate has been rejected, the claimant must commence an action on the claim within a stated period or be forever barred. The reference in the section to Section 2117.09, Revised Code, relating to arbitration of doubtful claims, does not concern us.
The rejected claims statute, with variations not here pertinent, has been in effect for a long, long time. See, for example, Section 6097, Revised Statutes.
Although the statute does not expressly tell us in what court the action must be brought, an unbroken line of case law states that this is a civil action and must be brought in a court of general jurisdiction, and not in the Probate Court. See, for example, McLaughlin v. McLaughlin (1855), 4 Ohio St. 508; Jones v. Green (1901), 21 Ohio Cir. Ct. 96, 11 Ohio Cir. Dec. 548; Flax v. Oppenheimer (Com. Pl. 1938), 12 O. O. 48, 27 Ohio Law Abs. 17; Schroyer v. Hopwood (1940), 65 Ohio App. 443, 19 O. O. 45, 32 Ohio Law Abs. 511, 30 N.E.2d 440; In re Estate of Buchanan (1948), 82 Ohio App. 240, 37 O. O. 557, 81 N.E.2d 409; In re Estate of Koplin (1956), 100 Ohio App. 553, 60 O. O. 421, 137 N.E.2d 424, m/c/o May 2, 1956; In re Estate of Stutz (1964), 1 Ohio App.2d 188, 30 O. O. 2d 212, 204 N.E.2d 248.
In contrast to the rejected claim situation, the Probate Court has jurisdiction over claims of an executor or administrator against the estate. Sections 2117.02 through 2117.04, Revised Code; In re Estate of Stutz (1964), 1 Ohio App.2d 188, 30 O.O.2d 212, 204 N.E.2d 248.
Even in the statute dealing with hearings on exceptions to the schedule of debts, the Probate Court has no jurisdiction over rejected claims. Sections 2117.17, Revised Code; In re Estate of Koplin (1956), 100 Ohio App. 553, 60 O.O. 421, 137 N.E.2d 424, m/c/o May 2, 1956. This is especially significant because under an earlier form of the statute it had such jurisdiction. Section 10509-119, General Code, as amended September 2, 1935.
Section 2101.24 (C), Revised Code, does not help the claimant. That section states that except as otherwise provided by law, the Probate Court has jurisdiction:
"(C) To direct and control the conduct and settle the accounts of executors and administrators and order the distribution of estates;"
But this general language does not offset the more specific provisions of Section 2117.12, Revised Code (the rejected claim statute), as interpreted by the courts. See, for example, Jones v. Green (1901), 21 Ohio Cir. Ct. 96, 11 Ohio Cir. Dec. 548; Schroyer v. Hopwood (1940), 65 Ohio App. 443, 19 O. O. 45, 32 Ohio Law Abs. 511, 30 N.E.2d 440. During all the years in which the above section and its "predecessors" have been in effect, no reported decision has held that the Probate Court has jurisdiction of a suit on a rejected claim.
Nor is a rejected claimant helped by the clause in Section 2101.24, Revised Code, giving the Probate Court "plenary power at law and in equity fully to dispose of any matter properly before the court," because this type of action is not properly before the court.
There being no jurisdiction over an action on a rejected claim, does the Probate Court have jurisdiction by way of a declaratory judgment to determine whether or not the claim should have been rejected?
Section 2101.24, Revised Code, states:
"Except as otherwise provided by law, the Probate Court has jurisdiction:
"* * *
"(L) To render declaratory judgments * * *."
This jurisdiction was first given to Probate Courts by Section 10501-53 (12) General Code, the "predecessor" of the present Revised Code Section supra. It was a part of the so-called "new" Probate Code, effective January 1, 1932.
In another part of the "new" Probate Code, the Legislature adopted a sort of modified declaratory judgments act, applicable only to Probate Courts. The first section of that act, Section 10505-1, General Code, started as follows:
"The Probate Court, in matters within its jurisdiction, shall have power to declare rights, titles, interests and other legal relations * * *." (Emphasis added.)
These two parts of the Probate Code must be read together, with the result that unless a matter is within the jurisdiction of the Probate Court, that court has no power to render a declaratory judgment relating to it.
The declaratory judgments part of the "new" Probate Code (Sections 10505-1 through 10505-10, General Code), was repealed as of October 10, 1933. In its place, the Legislature adopted the Uniform Declaratory Judgments Act, applying to all courts of record. Sections 12102-1 through 12102-16, General Code.
The very first section of the Act (Section 12102-1, General Code), granting to courts of record the power to render declaratory judgments, contained the phrase, "within their respective jurisdictions." Although the "successor" to that section of the General Code (Section 2721.02, Revised Code), omits the quoted phrase, it would be absurd to conclude that the Legislature intended to abandon the jurisdictional requirement. As stated in an excellent article, "* * * it is obvious that a court must have jurisdiction of the subject matter in any action, before it may render judgment." Harper, Declaratory Judgments in Ohio: A Case Study, 28 Univ. of Cincinnati L. Rev. 33, at p. 55, note 82 (1959).
In addition, Section 1.24, Revised Code, explains that in adopting the Revised Code, the Legislature did not intend to change the law as it existed under the corresponding section of the General Code.
It is undeniable that this jurisdictional requirement permeates the entire Uniform Declaratory Judgments Act, no matter how broad the language of a particular section may be.
As a result, if the Probate Court lacks jurisdiction over a particular subject matter, such as an action on a rejected claim, it cannot assert such jurisdiction backhandedly through the device of a declaratory judgment.
This fundamental principle is emphasized by the late Professor Edwin Borchard, a co-draftsman of the Act, in the following passages:
"The language used in the Uniform Act and embodied by implication in the other Acts was designed to indicate that the regular jurisdiction of courts over parties and subject-matter was not intended to be altered * * *." (Borchard, Declaratory Judgments 231 (2d ed. 1941).
"It is an axiom that the Declaratory Judgments Act has not enlarged the jurisdiction of the courts over subject-matter and parties. * * * The limitation of the relief to courts having jurisdiction is sometimes expressed as denying jurisdiction in cases where, even though the facts had been ripe therefor, no affirmative relief could have been granted if sought. In principle this seems correct, for it would hardly be asserted, for example, that a court not having jurisdiction over claims against the State could nevertheless pass a declaratory judgment that the State owed the plaintiff a certain sum." Id. 233-234.
Although Professor Borchard mentions exceptions to the rule, none of them is apposite here.
The general principle laid down by Borchard has been recognized in Ohio. See, for example, Sherrets v. Tuscarawas Savings Loan Co. (1945), 78 Ohio App. 307, 34 O. O. 21, 70 239 N.E.2d 127; Dyar v. Bingham (1955), 100 Ohio App. 304, 60 O. O. 261, 136 N.E.2d 444.
Because of this principle, plaintiff cannot find a haven in Sections 2721.03, 2721.04, 2721.05 or 2721.13, Revised Code.
Counsel for defendant has also adverted to the question of the Probate Court's jurisdiction to entertain an action for specific performance of a contract.
It has been held that the Probate Court has no original jurisdiction to entertain an action for specific performance of a contract to sell land, entered into by an executor under authority given to him by the will. State, ex rel. Black, v. White (1936), 132 Ohio St. 58, 5 N.E.2d 163; Hanon v. Robinson (Ct. of App. 1944), 42 Ohio Law Abs. 368, 60 N.E.2d 515.
The same jurisdictional objection is present in an action against an executor or administrator for specific performance of a contract made by the decedent. Jones v. Green (1901), 21 Ohio Cir. Ct. 96, 11 Ohio Cir. Dec. 548 (disputed claim); Fellers v. Belau (Com. Pl. 1961), 87 Ohio Law Abs. 54, at 62, in which the court stated that there is no difference between a contract made by the executor and a contract made by the decedent, in so far as the jurisdictional question is concerned.
Specific performance is an equitable remedy, and, normally, the Court of Common Pleas, as the court of general original equity jurisdiction, has jurisdiction of such an action, and the Probate Court lacks jurisdiction. See the cases cited immediately above and 49 Ohio Jurisprudence 2d 587, Specific Performance, Section 69.
The philosophy behind this general principle is well stated in Fellers v. Belau, supra, at p. 62:
"* * * in our own Ohio history, our Probate Courts have primarily been responsible for the preservation and correct administration of property * * * belonging to estates * * *. They have not been primarily concerned with the litigation of serious and oftimes ( sic.) acrimonious disputes. In Ohio this task has always been the primary responsibility of the Courts of Common Pleas."
Of course, as already noted, where a matter is properly before the Probate Court, that court has plenary power at law and in equity fully to dispose of it, unless the power is expressly otherwise limited or denied by statute. Section 2101.24, Revised Code. That was the reason for the holding in Fellers v. Belau, supra, that if the Probate Court has jurisdiction of a subject matter, it may, in the exercise of its plenary power, order a contract to be performed.
But in an action on a rejected claim, the Probate Court has no jurisdiction; hence, it has no plenary power to grant specific performance.
We must now consider the contention of counsel for the plaintiffs that the scope of the issues goes far beyond the mere matter of a rejected claim.
By leave of this court, five intervening petitions have been filed. The intervening plaintiffs are Morris A. Davidson, Bess Davidson, Richard L. Davidson, Neil A. Davidson, and the Warren-Davidson Company.
A common theme runs through these intervening petitions, namely, that the 1966 "Settlement," attached to the original petition as Exhibit B, is ineffective as a contract binding on the particular intervening plaintiff.
Morris A. Davidson and Bess Davidson admit signing Exhibit B, but say that it was not intended to be a binding agreement, but, rather, a "memorandum of values." Francis M. Warren also signed Exhibit B, and the defendant, the executrix of his estate, takes the position that it is a contract and should be enforced.
Item 1 of Exhibit B states: "Warren to retain W-D, Inc." We are informed that "W-D, Inc." stands for the Warren-Davidson Company, an Ohio corporation. From the intervening petition of the Warren-Davidson Company, we learn the following facts, which are not denied.
(a) The authorized, issued, and outstanding stock of the Warren-Davidson Company consists of 100 shares of common stock.
(b) At the date of his death, Francis M. Warren was the record owner of fifty of these shares. (Parenthetically, the inventory filed by the executrix includes these fifty shares.)
(c) Morris A. Davidson is the record owner of forty shares.
(d) Neil Andrew Davidson and Richard Lawrence Davidson each owns five shares.
Item 2 of Exhibit B recites, in part: "W-D-Inc to convey to Davidson in return for all claims and stock in W-D, Inc all land," with certain exceptions and retaining certain easements. Admittedly, the "Davidson" referred to is Morris A. Davidson.
If the "Settlement" (Exhibit B) is a contract, Item 2 appears to obligate Morris A. Davidson to transfer his forty shares of Warren-Davidson Company stock to the company, and apparently to have the other ten shares transferred also — the consideration being the conveyance of the land to him by the company.
Since the promisee of this obligation, if it is an obligation, was Francis M. Warren, the obligation runs to his estate.
Although the estate of Francis M. Warren has now succeeded to whatever rights the decedent had in the alleged contract, it is noteworthy that Mr. Davidson's obligation under Item 2, if any, is merely to transfer his stock to the company, not to the estate.
But even if we assume that, in effect, this is the same as a promise to transfer the stock to the estate, we are met with a jurisdictional impasse. The stock is no part of the estate, and Mr. Davidson's position, still assuming that Exhibit B is a contract, would be that of a debtor to the estate, in the sense that he is obligated to carry out the terms of an executory contract or respond in damages.
In asking the court to hold that Exhibit B is not a binding agreement (as he does in his intervening petition), and that it does not revoke, cancel, or modify the 1961 "Revised Agreement," Mr. Davidson is really asking us to declare that he is not under a duty to transfer the fifty shares of stock. In essence, this would amount to a decision that he has a valid defense to any action brought against him by the executrix for the enforcement of this item of the "Settlement," or for damages for its breach.
Whether we regard such an action as based upon a debt or for the specific performance of a contract, the Probate Court is without jurisdiction of the subject matter.
An action by an executor upon a disputed debt allegedly due the estate is cognizable only in a court having general jurisdiction of such a subject matter, not in the Probate Court. See Collins v. Reiering (1923), 18 Ohio App. 408, 2 Ohio Law Abs. 616. This principle appears so well settled that the jurisdictional question is ordinarily taken for granted. See, for instance, McDonough v. Zollner (Muni. Ct. 1938), 27 Ohio Law Abs. 36, 12 O. O. 86 (suit for rent on contract); Schildmeyer v. Schildmeyer (Com. Pl. 1918), 20 Ohio N. P. (N.S.) 123, 27 Ohio Dec. (N. P.) 466 (action on note). An arduous search has failed to turn up one Ohio case where this type of action was brought in Probate Court or where there was the slightest hint that it could be brought there.
There is certainly an analogy, so far as Probate Court jurisdiction is concerned, between an action by an executor for payment of a debt and an action for specific performance of a contract. Besides, we have already noted that the Probate Court does not have original jurisdiction of an action for specific performance. Although the authorities we cited were actions in which the executor was the defendant, there is no conceivable reason for making a distinction merely because the executor is the plaintiff.
There being no jurisdiction of the subject matter, we cannot enlarge our jurisdiction through the employment of the Uniform Declaratory Judgments Act, as previously explained. Hence, we cannot make a declaration the effect of which would be to hold that Morris A. Davidson, by reason of the invalidity of the "Settlement," has a defense to a possible action brought by the executrix to enforce that alleged agreement.
As a matter of fact, Mrs. Warren, as executrix of her husband's estate, has already brought an action in the Court of Common Pleas for specific performance of the "Settlement," and, presumably, in that action Mr. Davidson will have an opportunity to present his defense.
Returning to the provisions of the "Settlement," by Item 3 Mr. Davidson is to assume an obligation of the Warren-Davidson Company to Mainline on a note for $14,000, plus interest. Of course, he denies liability on the ground that the "Settlement" is not a contract. This issue is no closer to Probate Court jurisdiction than the issue raised by Item 2. If the "Settlement" is a contract, he must pay the debt to Mainline; otherwise, he is not bound to pay it. The issue is part and parcel of the specific performance action already referred to. It is not related directly to the administration of the estate.
Item 4 involves Mainline's claim against Mrs. Warren, which, as already noted, was rejected by her. It is unnecessary to go into the details of this item. Items 5 and 6 are completely irrelevant.
The intervening plaintiffs other than Morris A. Davidson have no direct interest in the assets or administration of the estate or in the will.
For example, Bess Davidson, who asks for the same relief as Morris A. Davidson, is merely the owner of one share of Mainline and is not the owner of any shares of Warren-Davidson.
Richard L. Davidson and Neil A. Davidson each owns five shares of Warren-Davidson. Each prays the court to find that Exhibit B is void as to his interest in the Warren-Davidson Company.
Intervening plaintiff, the Warren-Davidson Company, after setting forth the details of its stock ownership and stating that it was not a party to Exhibit B, says that Exhibit B purports to affect its ownership of certain real property, and asks the court to determine that Exhibit B is null and void as to this plaintiff's assets and shareholders.
Counsel for plaintiffs attempt to bring the instant case within a group of Ohio decisions holding that the Probate Court has jurisdiction to determine whether certain property belongs to the estate or to some outside person claiming ownership. They argue that here, as in those cases, the matter relates to the inventory and is thus within the jurisdiction of the Probate Court.
Among other things, they say that the amount of Warren-Davidson Company stock constituting assets of the estate depends upon the validity and construction of Exhibit B.
The trouble is that counsel's analogy does not hold up. The cases cited by them deal with disputes over the ownership of certain assets. I will not prolong this already too lengthy opinion by citing more than a couple of them. Bolles v. Toledo Trust Co. (1940), 136 Ohio St. 517, 27 N.E.2d 145; In re Estate of Morrison (1953), 159 Ohio St. 285, 112 N.E.2d 13.
In the instant case, there is no question about the ownership of any estate assets. At his death, Francis M. Warren owned thirty-nine shares of Mainline and fifty shares of Warren-Davidson. No one denies this. Nor does anyone assert ownership by the estate of shares held by others.
As already pointed out, the issue involves the specific performance of an alleged contract to transfer shares, a matter not cognizable in the Probate Court. None of the cases cited by counsel deals with this situation.
Counsel also cite cases upholding the jurisdiction of the Probate Court in other situations. In all of them there exists a specific statutory basis for the jurisdiction, and, again, none of them deals with the situation before us. See, for example, Bauman v. Hogue (1953), 160 Ohio St. 296, 116 N.E.2d 439; Wolfrum v. Wolfrum (1965), 2 Ohio St.2d 237, 208 N.E.2d 537.
When all is said and done, the present lawsuit boils down to two main subject matters. The first relates to the rejection by the defendant of Mainline's claim. We have seen that the Probate Court has no jurisdiction of this.
The second concerns the question of whether Mr. Davidson is bound by his alleged contract with the decedent to transfer fifty shares of Warren-Davidson stock. We have seen that this, too, is not a subject matter over which the Probate Court has jurisdiction.
The other matters raised by the intervening petitions have no direct relationship to Mr. Warren's estate, even though some of them may indirectly affect its value.
It is obvious that plaintiffs can get no help from Section 2101.24, Revised Code. The case law denying jurisdiction in the matters under consideration developed despite the presence of that section and its "antecedents." Likewise, Sections 2721.03 and 2721.04, Revised Code, relating to declarations construing contracts and other writings, are of no avail to the plaintiffs, for only a court having jurisdiction of the subject matter may entertain an action under their provisions.
Even the broad language of Section 2721.05, Revised Code, was not intended to add to the jurisdiction of the Probate Court.
DECISION
The defendant's motion to dismiss the plaintiff's petition (which presumably extends to the intervening petitions) for want of jurisdiction of the subject matter is sustained, and the actions are dismissed at the plaintiffs' costs.
Actions dismissed.