COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA No. 72334 ESTATE OF CHARLES COGAN, : ACCELERATED DOCKET DECEASED : JOURNAL ENTRY : Plaintiff-appellee : AND : : OPINION : : PER CURIAM : SEPTEMBER 25, 1997 DATE OF ANNOUNCEMENT : OF DECISION : : CHARACTER OF PROCEEDINGS : Civil appeal from : Probate Court : Case No. 1122378 : JUDGMENT : Affirmed DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellee: For defendant-appellant: CHARLES N. HIGGINS, JR., ESQ. JOHN M. DRAIN, ESQ. 8409 Mentor Avenue 3331 Kenmore Road Mentor, OH 44060 Cleveland, OH 44122 2 PER CURIAM: This accelerated appeal arises from the judgment of the Cuyahoga County Probate Court denying a motion to surcharge the executor and granting the final account of the plaintiff-appellee, Estate of Charles Cogan. Charles Cogan died testate on October 31, 1995, naming John Bosco ( executor ) as executor of his estate. The estate consisted of a bank account in the amount of $942.20 and a residence which was sold for $45,100.00. Out of the sale of this residence, the lienholders and mortgagees were paid, including the executor's lien which was filed before the decedent died, for legal services in the amount of $5,500.00. As a result, the estate was rendered insolvent. However, there remained outstanding an unsecured claim from the funeral home for $5,837.70. The funeral home filed a motion to remove the executor of the estate, charging him with neglect of duty under R.C. 2109.24. A hearing was held and during the course of the hearing, the executor voluntarily resigned. Defendant-appellant, John Drain ( defen- dant ) was appointed administrator of the estate and thereafter filed a motion to surcharge the former executor. A hearing on this motion was held before a probate court magistrate, who denied the motion and approved the final accounting of the estate. The probate court adopted this recommendation and this appeal followed. In his first assignment of error defendant states as follows: THE TRIAL COURT FAILED TO COMPLY WITH THE MANDATORY REQUIREMENTS OF R.C. 2117.01 ET SEQ. DIRECTING PAYMENT OF A DEBT OWED BY THE ESTATE TO THE EXECUTOR OF THE ESTATE. 3 Defendant argues R.C. 2117.01 and R.C. 2117.02 require the executor of an estate to submit any claim he has to the probate court for allowance. Applying this reasoning to the instant case, defendant claims the executor did not present his claim for $5,500.00 to the probate court for allowance and thus the amount should be paid back to the estate. The executor maintains his claim was a recorded mortgage lien on the decedent's residence filed before the decedent died and is a secured claim. He asserts a secured claim does not have to be presented to the probate court for allowance, in contrast to an unsecured claim, and therefore R.C. 2117.01 and R.C. 2117.02 do not bar payment of his claim. The executor filed his mortgage lien against the residence before decedent died. This action classified him as a secured creditor. Decedent died testate and the executor distributed the proceeds of the estate paying off all liens, mortgages, and judgments filed against the residence. After this initial distribution, the estate became insolvent and the funeral home's claim went unpaid. However, the record also reveals the executor did not make an application to probate court to allow his claim to be paid, in violation of R.C. 2117.01. Therefore, we are presented with a question of form over substance; should the executor have made an application to the probate court for allowance even though his claim was secured as a result of a pre-existing lien. R.C. 2117.01 pertains to debts due an executor and states: 4 No part of the assets of a deceased shall be retained by an executor or administrator in satisfaction of his own claim, until it has been proved to and allowed by the probate court. Such debt is not entitled to preference over others of the same class. R.C. 2127.38 governs the distribution of proceeds from the sale of real estate following action by an executor. The relevant subsections provide the proceeds should (1) cover the costs and expenses of the sale, (2) pay all taxes, interest, penalties, and assessments, and then pay (3) all mortgages and judgments according to their priority as liens. There is no case law on point so we will construe principles annunciated in similar cases. In Nolan v. Kroll (1930), 37 Ohio App. 350, 351, the court held that when an executor sells real estate for the payment of debts, judgment liens and mortgages incurred prior to decedent's death must be paid from the proceeds of the sale. This must be done prior to the application of such proceeds to the payment of other claims and debts of the estate, except for the payment of costs and expenses in the sale and administration. More recently, in Estate of Helen Durr (1992), Portage App. No. 92-P-0029, unreported, the court held that where an executor sells real estate the lienholders should be paid from the proceeds of the sale and their liens should be satisfied prior to the distribution of any remaining proceeds. These cases establish the principle that a lienholder's claims should be paid before unsecured creditors' claims when an executor sells real estate. 5 Other courts have held that probate statutes should not be used to circumvent the rights of secured creditors. Estate of Lawrence Fleisch (1996), Hamilton App. No. C-950282, unreported. In addition, where the rights of the parties are not clearly defined in law, broad equitable principles of fairness apply and will determine the outcome of each case individually. Blackwell v. International Union, U.A.W. (1984), 21 Ohio App.3d 110, 112. In the present case, the executor's lien on the residence of the decedent, establishing him as a secured creditor, was filed prior to decedent's death. Although the executor did not request an allowance of his claim from the probate court, pursuant to R.C. 2117.01, he nonetheless was still able to have his claim satisfied. R.C. 2117.01 states an executor's claim must be proved to and allowed by the probate court. Presumably, the executor's claim was proved to and allowed by the probate court when the executor presented the accounting of the estate to the probate court. The probate court did not object to the final accounting and there is no evidence that the executor was hiding his claim or participating in any self-dealing, which is what R.C. 2117.01 attempts to prevent. Although the executor should have proceeded more cautiously by presenting his claim to the probate court, his status as a secured creditor and the lack of evidence of self-dealing preserves his claim. Accordingly, defendant's first assignment of error is overruled. Defendant's last two assignments of error are interrelated and will be addressed together. They state as follows: 6 THE TRIAL COURT ERRONEOUSLY EMPLOYED R.C. 2127.38 TO ALLOW FOR PAYMENT OF DEBTS OF THE DECEDENT INCLUDING PAYMENT OF DEBT TO THE EXECUTOR CONTRARY TO THE PROVI- SIONS OF R.C. 2117.01 ET. SEQ AND R.C. 2117.25. THE TRIAL COURT FAILED TO COMPLY WITH R.C. 2117.25 AS TO THE ORDER IN WHICH DEBTS OF THE DECEDENT ARE PAID. Defendant argues initially the trial court erred by allowing the executor to distribute the assets of the estate pursuant to R.C. 2127.38 without first complying with R.C. 2127.011, which mandates that legatees give written consent before an executor is allowed to sell real estate from an estate. However, this only applies to decedents who die intestate. In the instant case, the decedent died testate and the executor was given a testamentary power of sale in the will. Thus, the executor did not have to obtain the consent of any legatee before he sold decedent's residence. Next, defendant argues R.C. 2117.25 and R.C. 2127.38 are in conflict and the trial court erred by relying on the latter statute and disregarding the former statute. This issue was addressed in Noll, supra, and there the court stated these two statutes must be construed together and held these statutes provide that mortgage indebtedness shall be paid from the proceeds of the sale of real estate before payment of funeral expenses. Applying this reasoning to the instant case, the executor properly distributed the proceeds from the sale of decedent's residence. Therefore, defendant's second and third assignments of error are overruled. Judgment affirmed. 7 8 It is ordered that appellee recover of appellant its costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Probate Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. John T. Patton, Judge Diane Karpinski, Presiding Judge Kenneth A. Rocco, Judge N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsidera- ation with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by .