Carr v. Catlin , 13 Kan. 393 ( 1874 )

The opinion of the court was delivered by

Brewer, J.: This was an action on a bond given by the administrator of the estate of Wm. H. Hays deceased, upon taking possession of the partnership property of the firm of Hays & Ludlum, of which firm the deceased was a member. It appears from the pleadings and special verdict that in March 1866 the firm of Hays & Ludlum was composed of Wm. H. Hays and John B. Ludlum; that the 26th of that month Wm. H. Hays died, intestate; that on the 5th of July Samuel S. Ludlum was appointed administrator of his estate; that thereafter the surviving partner filed in the probate court a written refusal to continue the business of the late firm, and a request that the administrator take charge of the partnership property; that the probate court ordered the administrator to take possession of said partnership property, giving a new bond therefor as provided by statute; that the administrator did take possession and give a new bond, the one sued on in this action; that he sold the property and converted the proceeds to his own use; that the partnership property he received was ample to pay all the partnership debts; that the firm of Hays & Ludlum was indebted to the plaintiff in the amount sued for, and that demand was made of the administrator for payment, and payment refused.

1. Administrator; partnership property. Liability on second bond. A great many questions are raised and discussed by counsel in their briefs. We shall notice only those we deem the most important. And first, can this action be maintained without proof of the allowance of the , ' •~ claim by the probate court, or of any settlement in said court by the administrator of the partnership estate? As the record stands, no action is shown of the probate court subsequent to the approval of the bond. After a careful examination of the statute and the authorities we must answer this question in the affirmative. We cannot express our views better than in the language of the able counsel for defendants in error, and so quote from their brief:

The probate court is established by the constitution, (Art. 3, § 8,) and its powers are limited to “such probate jurisdiction and care of estates of deceased persons * * * as may be prescribed by law” It would seem clear that unless there be some “law” specifically prescribing that the probate court shall have the power to allow, classify and order payments of partnership debts out of partnership assets, that no such power exists; it is a well-known rule that the powers of a court of limited jurisdiction are to be found only in the statute which confers them, that such a court takes nothing by intendment or construction. If then this power to allow, classify and order payments is not — to use the language of the constitution — “prescribed by law,” it does not exist, and it cannot with any show of reason be argued that such a power is necessary to the execution of any other power conferred by law upon the probate court. What powers, then, do we find are “prescribed by law?” The first forty-four sections of the act approved 30th July, 1859, the act under which the bond in this case was given, and the proceedings had out of which this action grows, apply wholly to the granting of letters and matters strictly connected therewith. The eight sections next following relate to the disposition of the property of a firm of which the deceased was a member. Sections 55 to 150, inclusive, prescribe the power of the court and the duty of the administrator respecting the money and property of the deceased. Sections 151 to 178 provide for the allowance and classification of demands against the estate of deceased persons, and specify the manner in which different characters of claims are to be paid from the estate of the deceased, and how these claims may be established. The sections then next following (§§180 to 196) prescribe the mode of settlement by administrators, and define the power of the court therein; from 197 to 222 inclusive, the statute prescribes the mode of distribution of the decedent’s estate. And the balance of the statute provides for proceedings against executors and administrators and for appeals; and this comprises all the legislation on this subject. Shall it be claimed that the 151st section (Comp. Laws, 534,) confers the power on the probate court to ■classify the claim of the plaintiff? If there are no partnership assets, and the claim was sought to be made out of the individual property of William H. Hays, then of course the court would have power under that section to classify the demand; and then, to maintain an action on the administrator’s bond, probably it would be necessary to allege an allowance and classification. But such is not the case at bar. Here is a partnership debt, with partnership assets sufficient to pay all such debts, and not a claim that is sought to be enforced against the individual property of the decedent. It is unquestioned law that the partnership debts are to be paid in preference to individual debts out of the partnership assets; yet if it can be maintained that §151 confers the power on the probate court to classify partnership debts, then the entire assets of the firm could or might be employed in the payment of the individual debts of the decedent, so setting aside á rule that has prevailed from time immemorial. Such a construction is surely not to be forced, and can only be conceded when the plain reading of the statute demands it. The legislature is speaking only in this section of the estate proper of the decedent, and providing what claims as against it shall be entitled to preference. No other rational construction can be given to this section, especially when we notice that the whole subject-matter of legislative attention, as shown by the sections immediately preceding and following, is the estate proper of the decedent; and this conclusion, it would seem, becomes entirely irresistible when we consider that this same law-making power which is now speaking of debts of the deceased, and of the property of the deceased, devotes several entire sections of this same law to prescribing what shall be done with claims against a partnership, and what disposition shall be made with partnership effects. The two subjects were before the legislature, and they provided for éach separately; and when a mode is prescribed and a power given to allow and classify one character of claims, if the same power was intended to be given as to the other it would have been as easy to express it. Not having been expressed, it is not only fair, but in accordance with all settled law, that it was not intended to be given.

But again, giving credit to the legislature for enacting laws in view of well-established principles of equity and the rights of the creditors of a partnership to the extent of the partnership assets, and examining the provisions of the act under consideration bearing on the question, we think it clear that the legislature did not intend to make the allowance and classification of a partnership debt by the probate court a condition precedent to the right of a creditor of the firm to recover on the bond given either by the surviving partner, or the administrator of deceased member of the firm. The legislature knew that the creditors of the firm had a right to be paid out of the partnership property, and therefore it provided in accordance with the principle of survivorship that the surviving partner should first retain the partnership property; but in order to protect the interest of the decedent, the statute (§47) compelled him to give a bond which required him “ to apply the property to the payment of the partnership debts,” and which also required him to render an account of his doings to the probate court. Two leading -ideas are manifest in this section — the payment of the partnership debts, and the preservation and payment to the administrator of any balance that might be due the estate of the decedent. Could it be claimed that if the surviving partner had given the bond required by the statute, taken the goods and converted them to his own use, that these plaintiffs could not recover against his bondsmen, because their demand had not been allowed, classified and ordered paid by the probate court? Would the probate court have the power to allow a claim that might be presented to the survivor, and the power to order him to pay it? It would be a judgment as well against himself as the estate of the deceased, and where, either in the constitution or statute laws, does the probate court obtain the power or jurisdiction to render judgment against a surviving partner? The constitution says it “shall have such probate jurisdiction and care of the estates of deceased persons as may be prescribed by law,” and not jurisdiction to render judgments 'against living persons on ordinary common-law liabilities. It is true, the law (§ 48) gives the probate court power to cite him to account, and to adjudicate upon the account, as in cases of an ordinary administrator; and this power is a necessary power to protect the interests of the decedent; his duty and obligation is to pay partnership debts, and in adjudicating upon his accounts, if the court should find that he had paid out money of the partnership in payment of other than partnership debts, the court would disallow it “ as in cases of ordinary administration;” and this is all the power conferred by “law” on the probate court over the surviving partner.

But again,, the legislature wisely anticipating the very state of affairs in this case, provided that if the surviving partner should not give the bond, then the administrator of the decedent upon giving bond should be entitled to the possession of the property of the partnership — to be dealt with, how and in what manner? As the other property of the estate? No, for the statute says in express terms “ he shall with the partnership property pay the debts of the late firm.” When? Within a year, or three years, as he pays by statute the other debts of the decedent? No, but “with as much expedition as possible,” and pay the surviving partner his proportion of the excess. Is it not clear thát the legislature intended simply to substitute the administrator for the surviving partner, giving him the same powers with reference to the partnership effects, and imposing upon him the same duties? He is to pay the debts “with as much expedition as possible,” not wait for the process of allowance in the probate court. It is not the debt of an estate, nor of a decedent, nor of an individual he is commanded to pay. In carrying out the trust he is not acting as administrator, nor are his bondmen liable on his administrator’s bond for his misdeeds in the execution of this trust. This has already been decided by this court. (Glass Co. v. Ludlum, 8 Kas., 40, 47.) He is neither more nor less than a special trustee as to this property and this class of debts. He needs no order from the probate court to pay them. By accepting the trust he takes upon himself the burdens of deciding what are debts. While we feel an abiding conviction that upon principle, analogy and reason we are right in our conclusions, we are not without the very best of authority to sustain our position. The case of The State to use of Bredell’s Executor v. Baldwin, 27 Mo., 103, is directly in point, the decision being upon the statute of Missouri of 1845, from which our statute is taken, and the court in that case, page 107, say “the law does not require partnership demands to be allowed by the court.” And the same court, in the case of Green’s Adm’r v. Virden, 22 Mo., 506, hold the same doctrine, and deny to the probate court any power over the partnership assets, or over the surviving partner, except those expressly granted, to-wit, to cite him to account and to adjudicate upon his account.

2. Probate court; jurisdiction over surviving partner. 3 written in-construction u 0' A second question of. importance is this: No citation was ever issued by the probate court to the surviving partner as provided for in §49 of the administrator act: ~ ° 7 (Comp. Laws, 520.) That section reads: “In case gUrYiying partner, having been duly cited for that purpose, shall neglect or refuse to give the bond required,” etc., “the executor or administrator on the estate of such deceased partner, on giving a bond as provided in the following sections, shall forthwith take the whole partnership estate,” etc. It is earnestly insisted by counsel for plaintiffs in error that such citation was jurisdictional, and that “the probate court had not power or jurisdiction to make any order in relation to the partnership property, or to assume jurisdiction over the same, or to require Samuel S. Ludlum to give the bond mentioned in § 50 of said act, and that therefore the bond sued on is void, because the proper steps had not been taken to divest the rights of John B. Ludlum, or to confer power to control the property on the administrator of the deceased partner.” We think that this citation is a matter personal to the surviving partner, and that while he may insist on his right to the possession of the partnership property until after such citation, and a refusal or neglect to give the statutory bond, yet that when he comes voluntarily into the probate court and declines to take any further charge of the partnership property he waives the necessity of any citation, and cannot thereafter object that none was served upon him ■ and that the objection to the subsequent proceedings which he is estopped from making, no one else can make for him, or for themselves. It is jurisdictional in the sense that a summons is. It brings the party into court. But when a party voluntarily appears in court, it is unnecessary to inquire what if any process has been served upon him. Counsel also criticises the paper filed in the probate court by John B. Ludlum, and says that “its legal effect was simply a refusal on the part of John B. Ludlum to continue the business of the late firm, and a request that the administrator of Wm. H. Hays deceased (whoever he might be) should take charge of his (John B. Ludlum’s) interest in the property of said firm — thus in substance merely appointing such administrator, whoever he might be, his agent to take charge of the property.” The paper is addressed to the probate judge, and reads: “I as the surviving partner of the late firm of Hays & Ludlum do refuse to continue the business of the late firm, and request that the administrator of Wm. H. Hays deceased take charge of my interest in the prop-erty of said firm,” etc. We think there is no difficulty in giving proper effect to this writing. True, it purports to be a refusal to continue the business instead of a refusal to give the bond, as named in the statute; but every instrument must be construed in the light of the circumstances under which it is executed. One or the other, the surviving partner or the administrator, was to take the property, give bond, and close up the partnership business. By this paper the surviving partner comes into court and in unmistakable language declines in favor of the administrator. No form of refusal is prescribed. This was sufficient.

5 Administrapartnership property. Again, counsel insist that the bond sued on is void because the conditions in it are not any of them the conditions speci^ccl in the statute. The statute, § 50, provides that “ before proceeding to administer upon such partnership property, as provided in the preceding section,” the administrator shall give bond “conditioned that he will faithfully execute that trust, with no unnecessary waste or expense.” The form of a bond is not given in this case, as it is for the surviving partner, or in ordinary administration. In order to understand what trust is intended, we must refer to the preceding section. There it is provided that he shall take the whole partnership estate into his possession, and with it pay the partnership debts with as much expedition as possible, and return to the surviving partner his proportion of the excess if any there be. Now, the bond in this case (which seems to have been in part copied from the form given for a bond of a surviving partner,) covers all these points. It recites the refusal of the surviving partner, and that the administrator has taken possession of the partnership property, and the first condition is, that he shall “faithfully execute the trust incurred by such act with no unnecessary waste or expense.” If this had been all, we think the bond would have been sufficient. It however goes on and specifies more in detail the obligation assumed by the administrator.

6, .. . . torTwifSt acciues. Again, it is urged that if defendants in error had any cause of action it was barred before suit was brought. The petition was filed Oct. 24th, 1868. The verdict shows that the debt was due from Hays & Ludlum to defendants in error on the 6th of July, 1865, more than three years prior thereto. But no cause of action could arise on the bond until it was given, and that was" in 1866; none against Ludlum, in his individual capacity, or against his sureties until after a breach of the condition of the bond, and a conversion of the goods to his own use. When the administrator assumed the charge of the partnership estate the defendants in error had a valid claim against that estate. He had ample means to discharge that indebtedness. Instead of so doing he converted those means to his own use, and thereby created a personal, liability against himself and the sureties in his bond, which dated from the time of such conversion.

We do not think the amendments to the petition were so radical as to make the last petition present a cause of action substantially different from that in the first.

Other questions have been presented by counsel for plaintiffs in error in their brief, but we cannot stop to discuss them at length. We have endeavored to examine them all carefully, and after such examination we are satisfied that no substantial error appears in the record, and that the judgment must be affirmed.

All the Justices concurring.