Evans v. Fisher ( 1866 )

IIaNdy, C. J.,

delivered the opinion of the court.

This is an appeal, by the heir-at-law of Samuel W. Evans, deceased, from a decree of the Court of Probates, ordering a sale of the real estate of the deceased, for the payment of his debts.

It appears, .by the record, that the will of the deceased was admitted to probate in January, 1860, by which he directed that his property should be kept together until January, 1864, and that his debts should be paid by the proceeds of the crops; that the executors received credit on their inventory for the slaves and other personal property of the deceased, amounting to the sum of $156,000, including five hundred bales of cotton destroyed by the two armies during the progress of the recent war; and that the slaves were either lost to the estate by emancipation by the government, or by their desertion to the Federal forces; that, but for these losses, the property of the estate would have been amply sufficient to pay the debts of the testator ; and in consequence of these losses, the personal estate was insufficient to pay the debts. Under these circumstances, the executors filed their petition, praying that the personal estate should be decreed insolvent, and that the real estate should be decreed to be sold for the payment of the debts. The petition was granted in both respects, and this appeal is taken from so much of the decree as orders a sale of the real estate.

We are not called upon, in this case, to. determine whether the credit allowed to the executors for the losses of personal property sustained by means of the war or of the action of the government, was proper or not; or whether the decree of the court, declaring the estate insolvent, was correct or not under the circumstances of the case. No objection is here urged on either of those grounds; and the action of the court, in both these respects, must be here taken to be correct. We are only to determine here what is the result of these facts upon the rights of the heir-at-law, and of the creditors of the estate respectively, in relation to the real estate of the testator.

It is insisted, in behalf of the appellant, that the real estate of the testator descended, immediately on his death, to the heir, who was entitled to hold it subject to a condition subsequent that it should be necessary to pay the testator’s debts; which necessity could only arise by the personalty being insufficient, at the time of his death, to pay his debts ; and, if the personalty was sufficient, at the time of his death, for that purpose, that the heir then took the estate exonerated from -the debts, and that no supervening insufficiency, resulting from any cause whatever, could render the real estate liable for the debts.

The earnestness with which these views have been urged by eminent counsel, has induced us to give them more consideration than we had supposed they deserved.

We will first consider what were the general rules of law in relation to the liability of the property of a deceased person for the payment of his debts.

By the common law, all the personal property of which a person died possessed, became liable to his debts; but his real estate of freehold descended to the heir, and was chargeable only with debts due by specialty, in which the deceased bound himself and his heirs, and was not subject to the payment of simple contract debts, nor even of specialties unless the instrument indicated an intention to bind the heir. But these rules have been materially altered by acts of parliament passed at vari, ous times; and, by tire act of 3 and 4 William IT., chapter 104, the land of every debtor, whether copyhold or freehold, which he had not charged with, or devised subject to, the payment of his debts, is made assets, to be administered in equity, for the payment of both simple contract and specialty debts, reserving to creditors by specialty, in which the heirs are bound, the same priority which they originally possessed. And now, by the law of England, legal assets, for the payment of the debts, of the deceased, are defined to be, “ those portions of the property of the deceased of which his executor or heir may gain possession, and in respect whereof he may be made chargeable, by the process of the ordinary tribunals, and without the necessity of equitable interference; ” and they consist, first, of the personal estate to which the executor or administrator is entitled by virtue of his office; and, secondly, of the real estate descended or devised, except where the devise is for the payment of the debts. Adams’ Eq. 252, 253. And Mr. Jarman says, that the result of these statutes is, “ that every description of property now constitutes assets.” 2 Jarman on Wills, 543, 4th Amer. edition.

In this state of the law, it has never been doubted in England, that both the real and personal estate were equally liable to creditors; and that it was discretionary with the creditor, if his debt was of such a nature as to bind both the real and personal estate, whether he would resort to the personalty in the hands of the executor, or to the real estate descended or devised. 2 Williams’ Exrs. 1532, Part 4, Book 1, chapter 2, section 1 (5th Amer. ed.). And,of course, if there was a deficiency in either, for any cause, to pay his debt, that would not affect his right to proceed against the other fund, which was equally liable for his debt.

Yet it is “the general rule of the English and American law, that the personal estate is the primary fund for the discharge of the debts, and is to be first applied and exhausted, even to the payment of debts with which the real estate is charged by mortgage.” 4 Kent’s Com. 521 (8th ed.). This rule bad its origin, in England, in the superior importance attached to real estate under their political system — -which continued, to some extent, even after the common law rule above referred to was abolished by statute; and it has been acquiesced in and sanctioned, as a rule of practice, by American courts generally, as a mere matter of expediency. But it has never been held, either in England or in this country, that the real estate was not chargeable with the payment of' debts, equally with the personalty, or that, in ease of any deficiency of the latter, without the 'fault of the creditor, the real estate was not chargeable with the debts. And, indeed, the rule of priority appears to be a mere rule of administration of assets, where those of both kinds are admitted to be equally liable for debts, without regard to the condition of each other. See authorities cited in note to 2 Williams’ Exrs. 1526, 1532.

The alteration of the rule in England proceeded on the just policy to make the whole of a man’s property, of which he died seized and possessed, liable to the payment of his debts, because such a rule was most consonant to principles of honesty and justice. And, for the same reason, this policy has been very generally, if not universally, adopted in the States of this Union. Chancellor Kent says, that “ the rule prevails generally in the United States that the lands, descended to the heirs, are liable equally in all cases with the personal estate.”

The legislation of this State is in entire accordance with the rules and policy now established in England, and prevailing generally in the United States.

The first provision on the subject is in article 80, Rev. Code, 443, as follows:

“ The goods, chattels, personal estate, choses in action, and money of the deceased, or which may have accrued to his estate after his death, from the sale of property, real or personal, or otherwise, whether he died testate or intestate, shall be assets, and shall stand chargeable with all the just debts and funeral expenses of the deceased, and the expenses of settling the estate; and the lands, tenements, and hereditaments of the testator or intestate, shall also stand chargeable for the debts, over and above what the personal estate may be sufficient to pay, and may be subjected to the payment of debts, in the manner hereinafter directed, saving" to the widow her right of dower.”

Then it is provided, that when any executor or administrator shall discover that the personal property will not be sufficient to pay the debts, he may petition the Court of Probates for a sale of the lands of the deceased, and lie shall then exhibit a full, just, and true account of the personal estate, and of the debts due from the deceased; and that the court shall give notice of the application, and shall afterwards hear the proofs on both sides ; and if the court shall thereupon be satisfied that the personal estate is insufficient to pay the debts of the deceased, and that the land ought to be sold for that purpose, it may make a decree for that purpose. Rev. Code, 445, articles 88, 89.

Again, the executor or administrator is required to take all proper steps to ascertain whether the estate will be solvent or insolvent; and if it be ascertained that the estate, both real and personal, will be insufficient to pay the debts of the deceased, he shall exhibit a true account of the personal estate and assets, and a true list of the lands of the deceased, and a schedule of the debts; and if it shall appear that the estate is insolvent, the court shall make an order for the sale of the lands, and the proceeds of the sale and all other assets shall be equally distributed pro rata among all the creditors. Ib. 448, article 98.

It is manifest that the effect of these statutes is to render the real estate of the deceased chargeable with his debts, “ over and above what the personal estate may be sufficient to pay; ” and they were plainly founded on the policy, which so generally prevails in this country, to subject all a man’s property to the payment of his debts. But the rule' of priority in the application of the personalty before the real estate to that purpose, which prevails both in England and in the States of this Union, is also established.

But the question here presented is, whether, if the personalty be sufficient at the time of the testator’s death, and afterwards turn out, for any cause whatever, without fault on the part either of the heir or of tlie creditors, to be insufficient to pay the debts, tbe creditors can resort to tlie real estate for that purpose, through the executor and in the Court of Probates.

In support of tlie negative of tbis proposition, it is said that the lauds vested in the heir immediately on the death of the deceased, subject to the condition that they should be liable to the debts, if it should become become necessary to apply them to that purpose, by reason of the insufficiency of the personalty. But we do not consider this view tenable.

It has been held by this court, that, under our statutes, the lands of the deceased are liable to the payment of his debts equally with the personalty, the latter being only first required to be exhausted; that they are subject to administration for the payment of his debts, “as of the assets of the deceased, at the time of his death f and that, in the contingency of the deficiency of the personalty, they become as completely subject to the payment of debts as the personalty and assets, upon the same principle as the personalty — their liability, as such, homing relation back to the death of the deceased. Lee v. Gardner, 26 Miss. 541, 542. It is true, the legal title descends to the heir, who is entitled to enjoy the estate until 'the contingency arise when the land may be required to be appropriated to the payment of t^e debts. But he holds it subject to the charge of the debts of the ancestor, which may be enforced whenever it is found that the personal assets are insufficient to pay the debts. This charge is affixed to the lands by law, at the time of the testator’s death, though it may not be enforced until the deficiency of the personalty be ascertained; and the heir holds the legal title, in the interim, subject to this charge, whenever it shall be made to appear that the necessity for enforcing it has arisen. It is- a case of a chcvrge on the lands, and not that of a title held on condition subsegumt.

Again, it is contended that the deficiency must exist at the time of the death of the deceased, in order to mate the real estate chargeable; and that the question of the sufficiency of the personal assets must be tested by their condition at the time of his death.

We do not think that the statutes will admit of this construction, for several reasons:

1. It is not consistent with their phraseology. The first provision is, that the lands “ shall be chargeable for the debts over and above what the personal estate may be sufficient to pay; ” that is, may, in the cowse of adrrwnistfration, be found to be insufficient. This language is prospective, and is. not reconcilable with the idea that the liability of the lands was to be governed by the condition of the personal estate at the time of the death of the deceased. Then the executor is required to give notice for the presentation of claims, and creditors are allowed two years to present them. Again, “ when the executor or administrator shall discover that the personal estate wild not be sufficient to pay the debts,” he may apply for the sale of the lands. Thus, the application to sell the lands may be made whenever the executor shall discover the insufficiency of the personal assets. He is not limited to any particular time in taking the step, nor to the condition of the personal estate at any particular time. The terms employed exclude the idea, that the step is to depend upon the condition of the personal estate at any other time than when he shall discover that the personal estate, in due course of administration, “ will not be sufficient ” to pay the debts. Again, the executor is required, at tb|> time of presenting his petition, to exhibit “ a full, true, and just accownt of the personal estate ” of the deceased. This clearly appears to contemplate that the personal estate may be different in amount or value at the time of the application to sell the lands, from what it was at the time of the death of the deceased. For, otherwise, there could be no necessity for this account at the time of making the application; since there would already have been made and returned to the court an inventory, showing the amount and value of the personal estate at the time of the death of the deceased. The account referred to must have refei'ence to the condition of the estate at the time of the application. Again, it is provided, that, if on the hearing of the petition “ the court shall be satisfied that the personal estate is insufficient to pay the debts,” a decree may be made for the sale of tbe lands; wbicb sliows that it was tbe condition of tbe personal estate at tbe time of tbe bearing tbat was intended to control tbe action of tbe court.

Tbe language of these various provisions appears to look to tbe condition of tbe estate as it was, in tbe due course of administration, at tbe time of'tbe application for the sale of the lands, and at its bearing; and cannot have reference to tbe time of tbe death of tbe deceased.

2. This view of tbe phraseology is fully sustained when we consider tbe spirit and policy of these statutes.

Tbat policy evidently was to subject all a deceased person’s property, real as well as personal, except such as was positively exempt, to tbe payment of bis debts, in tbe due course of administration ; and the only difference, in respect to tbe liability of both kinds of bis property for tbat purpose, consisted in tbe order of application. But both were equally bound in the course of administration appointed by law. From tbe very nature of tbat trust, it must have been considered tbat it must require time to administer tbe estate, to give to creditors and others interested in it tbe benefit of the assets, and to determine its condition. And positive provisions are made, looking to tbe necessary delays. Tbe creditors are prohibited from bringing suit until tbe expiration of nine months after tbe grant of administration. Two years are allowed for tbe production of claims against tbe estate, and many other delays are necessarily incident to tbe administration, and final settlement of it. During all this time, tbe personalty is subject' to all tbe accidents wbicb may in any way affect it. To suppose tbat tbe Legislature intended tbat tbe rights of creditors against tbe real estate should be fixed by tbe condition of tbe personalty at tbe time of tbe testator’s death, or even of tbe grant of administration— when they, were prohibited from suing, and when, in tbe course of administration to wbicb they were compelled to submit, all tbe personal assets might be lost to them without their fault— would be to convert tbe administration into an instrument of oppression, and to defeat tbe very policy plainly intended by tbe statutes — to give to creditors tbe benefit of all tbe property of tbe deceased, by debarring them of their rights against a most material part of it. It would be clearly contrary to that policy to say that the creditors’ rights were to be determined by the condition of the estate at a time when they had no power to enforce their debts by suit or otherwise, and that they should accept the mere fact of its sufficiency at that time, as a satisfaction of their debts against the estate, without regard to the circumstances which caused the assets to be lost to them. It was by and through the administration of the estate, that the creditors’ debts were to be paid. They were compelled to await the course of that administration, and hence it is manifest that their right should be determined by the condition of the estate at the time when they were to have the assets applied to the payment of their debts, in the due course of administration, and that they should not be lost by reason of its condition at a time when they were powerless to have the assets applied to the payment of their debts, or in any manner to obtain the benefit of them.

According to the argument of counsel for the appellant, if the personal assets were sufficient in value at the time of the testator’s death, and, afterwards and before they could be applied, in the due course of administration, to the payment of the debts, they became depreciated, without any fault of the creditors, or of the executor, so that they were insufficient to pay the debts; or if, by the act of God or other sufficient legal cause, they were destroyed and totally lost; the loss would fall on the creditors, and the real estate would be exonerated from the debts. If this were a correct view of the subject, the result would be that a part of the fund charged by law with the payment of the debts, would be preserved to the use of the heir; and the creditors, who were intended by law to have the benefit of that fund, in case of the insufficiency of the personalty, would be deprived of that right, without fault on their part, and without remedy, the land remaining to the benefit of those who were bound in law to appropriate it to the discharge of the ancestor’s debts. This would be to discharge a part of the fund intended by law to be subject to the payment of debts, and in palpable violation of tbe policy of tbe law, and of tbe purposes of natural justice intended to be accomplished by it.

It appears, therefore, to be evident, that tbe sufficiency of tbe personal assets which tbe law contemplates as exonerating tbe real estate from tbe debts, must be tested by tbe condition of tbe personalty as developed in tbe due course of administration, and when in that way tbe assets are to be applied to the payment of tbe debts. No time is positively-fixed by tbe statutes when tfie deficiency is to be ascertained, but it is clear that it must be referred to tbe course of administration; for in no other way could tbe policy of subjecting tbe real estate to tbe payment of tbe debts be made effectual, or tbe necessity of tbe application be judicially ascertained.

Tbe authorities relied on by counsel for tbe appellant do not sustain tbe view on this point contended for by them.

Tbe cases in 1 P. Williams, 494, and Noel v. Robinson, 1 Vernon, 94, were cases between legatees', and it was held that tbe legatees who bad been'paid their legacies in full would be compelled to refund, in proportion, to an unpaid legatee, if there was an original deficiency of assets to pay all tbe legacies, and tbe executor was insolvent; but not, if there was no such original deficiency, and there bad been a waste by tbe executor; tbe reason of the distinction being, that tbe other legatees, in tbe first instance, bad received more than their just proportion of tbe assets; but, in tbe second, no more than their proportion. This is tbe rule as between legatees. But tbe-rule is different as between creditors and tbe legatees; and it is settled, that on waste by tbe executor, a legatee who has been paid must refund in behalf of a creditor. Hardwick v. Mynd, 1 Aust. 112; Anon., 1 Vernon, 162; Lupton v. Lupton, 2 Johns. Ch. R. 614, 627. Mr. Williams states tbe rule thus: “When tbe testator’s funds, at tbe time of bis death, are not sufficient to pay both debts and legacies, it is clear that an unsatisfied creditor can compel a satisfied legatee to refund, whether tbe legacy was paid to him voluntarily or by compulsion; and he has the same right, although the testator's funds, at the time of his death, were sufficient to pay both debts a/nd legacies'' 2 Williams’ Exrs, 1308,1309 (5th American edition). And the legatees are liable to a creditor when the executor has misapplied or wasted the assets, and beoome insolvent (Stuart v. Kissam, 2 Barb. Sup. Court R. 493); and if the undisposed of assets are exhausted and are insufficient to pay the debts. Doriocourt v. Jacobs, 1 La. Ann. 214. Judge Story states the reason of these distinctions to be, that legatees are always compellable to refund in fmor of creditors, because the latter lime a priority of right of satisfaction out of the assets. 1 Story’s Eq. Ju., section 92, and the cases there cited. And the same principle is applicable as between the creditors and the heir.

The case of Turner v. Ellis, 24 Miss. 173, which is relied on, was a petition by an administrator de bonis non, to sell the real estate of the deceased for the payment of debts; and a party who had purchased the lands from the heirs, pending the administration, resisted the application to sell, on the ground that the original administrator had neglected to administer certain personal property, and to apply it to the payment of the debts, in consequence of which the estate had become insolvent. It was held, that if the personal estate had become insufficient in consequence of the devastmit or neglect of duty of the administrator, the heir-at-law could successfully resist the application to sell the lands on that ground; and that the creditors’ remedy was by an action on .the administrator’s bond. It does not appear that the administrator and the sureties on his bond were insolvent, and nothing is said as to the rights of the parties in that contingency.

Payne v. Pendleton, 32 Miss. 320, also relied on, was a petition of like nature; and it appeared, from the proceedings in relation to the administration, that there were assets in the hands of the administrator largely exceeding the amount of the debts brought against the estate, which had never been administered or accounted for by the administrator. It was held that that was good ground for l’efusing to decree a sale of the lands; and if the assets were wasted by the administrator, the creditor’s remedy would be against the administrator and sureties on his bond, and that the devastmit would be no good ground for ordering a sale of tibe lands, unless tbe creditor bad exhausted all remedy against the administrator and his sureties. "*

It is to be observed that neither of these last two cases gives any support to the position that the question of sufficiency of the personal assets is to be determined by the condition of the estate at the time of the testator’s death; but, on the contrary, they appear to recognize the principle that the sufficiency is to be determined dining the course of administration. But they both hold that in case of a devastamt, the creditor’s remedy would, at least in the first instance, be upon the administrator’s bond; and the last holds that the lands should not be decreed to be sold in such a case unless the creditor had exhausted his legal remedy against the administrator and his sureties. Thus the ultimate liability of the lands for the payment of the debts, in case of insufficiency of the personalty, and of the insolvency of the administrator and his sureties, is recognized. And that rule appears to be founded in good reason, and to be sustained^ by the authorities above cited.

The extent to which these cases go is, that the lands will not be decreed to be sold, in the first instance, when the insufficiency of the personalty has been occasioned by the neglect of duty or the devastamt of the administrator. They do not touch the question here presented, of cm insufficiency produced by causes for which the executor was not Moble, and on account of which the creditors were without remed/y ; for we assume that there was no liability on his part, since it is conceded by both parties.

It is plain that, as this case is here presented, there "was no recourse of the creditors against the executor, and that no remedy was left them but the sale of the real estate for the payment of their debts. It is not pretended that the loss of the personalty was in anywise attributable to the fault or laches of the creditors; and-, hence, all the rights which the law gave them, against the estate of the testator, were retained in full force.

The case presented, then, is simply one where the creditors had two funds chargeable with the payment of their debts — ■ primarily, the personal assets ; and, on the ascertained deficiency of that, secondarily, the real estate, of the testator. The former ♦has been lost without any fault on the part of the creditors, leaving their debts unsatisfied; and the simple question is, whether the fund secondarily liable should not be appropriated to the payment of the debts.

It is said that the case is analogous to that of a levy on personal property sufficient to satisfy an execution at law, where, after the property is taken out of the defendant’s possession by the sheriff, it is wasted or lost under circumstances which would render the sheriff liable; in which case the execution would be satisfied as to the defendant. But this is expressly on the ground of the loss of the property to the defendant, and by act of the sheriff which would render him liable; for if the property be not actually taken from the defendant’s possession, or, after being taken, it be lost under circumstances showing no fault on the part of the sheriff, and that would discharge him 'ffrom liability — as the act of God or of the public enemy, or the act of the law — the execution would not be satisfied as to the defendant. Wade v. Watt, Noble & Mobley, at this term.

Here, there was no taking of the property from the possession of the heir, by the creditors or for their benefit; for the cotton and negroes appear to have remained on the plantation of the testator, in accordance with his will, until the cotton was destroyed and the negroes deserted or were set free by the act of the law. Nor is there any liability for the loss, on the part of the executor, as is admitted. The creditors have, therefore, no recóurse oh any one on that account.

It is also said to be resolvable on the principle of a person having a large estate and indebted to an inconsiderable amount compared to the value of his property, who made a settlement or gift of a small part of his property to Ms wife or children, leaving amply sufficient to pay his debts; and afterwards, at a distance of time, Ms Remaining property should be lost or squandered so as not to leave sufficient to pay his debts — in which case, it is said, the property conveyed would be exonerated. But the validity of such a conveyance is at least questionable. If it could be mamtained at all, it would be on the equitable principle, that the creditor had lost his claim against the property conveyed, by his laches in not pursuing his claim against the remaining property of the debtor for an unreasonable length of time, when he might have done so ; and that it would be inequitable to subject the property conveyed after such laches. But we intend to express no opinion upon such a case, and only to say that it bears no analogy to the case before us. There was no laches imputable to the creditors in this case ; for there was no time, so far as the record shows, when they could have subjected the personal assets to the payment of their debts. But the property appears to have been “ kept together ” in accordance with the testator’s will'; and that certainly is a justification to the executor, and to th ecreditors if they acquiesced in it, so far, at least, as the heir-at-law is concerned, in not selling the property for the payment of the debts. But the fact that the executor was allowed credit for all this property, and that no objection is made to the action of the court below in that respect, must be taken as conclusive in the case as here presented, that no neglect or omission of duty was committed by the executor, and that no fault is imputable to the creditors. It must be taken that the conduct- of both was without wrong.

Again, it is said, that since the personal assets were lost to the estate through the action of the government, it must be presumed that the government will make reparation for the injury; and that the compensation thus rendered will inure to the benefit of the creditors, and that they should be remitted to that, because it was the primaryfundforthepayment of their debts.

But that resource cannot be regarded, by the law, as a fund to which creditors must be remitted. It has no existence in law, and depends wholly on the discretion of the government, both as to its being granted, and. as to the persons to whom granted; and it is, at best,very problematical, and exceedingly improbable, of ever being realized. The-right of creditors, therefore, to proceed against a fund which is clearly liable for their debts, cannot depend on what the law cannot regard as a fund to which the creditors may resort. And the only view that the law can take of the fund proceeding from the personal estate here, is to consider it as lost.

But, if this resource could be taken into consideration in this case, it should not affect the rights of the creditors. We have above seen that both the real and personal assets were equally bound for the payment of the debts; and the general rule in such case is, that the creditors may resort to either, when the other cannot be subjected. But a party whose rights are affected by the subjection of a fund in which he is interested, is not without remedy, under the doctrine of marshalling of assets. The equitable rule in reference to such cases is, that “ if a person, having a claim upon two funds, chooses to resort to the only fund upon which another has a claim, that other person shall stand in his place for so much against the fund, to which otherwise he could not have access.” 2 White and Tudor’s Eq. Cases, Part 1, marginal page 63, Aldrich v. Cooper, and notes of cases there cited.

And it is an established rule, that if the creditor proceed against the real estate, descended or devised, the heir or devisee, who has sustained the loss, shall be allowed to stand in the place of the specialty creditor, to reimburse himself out of the personal estate in the hands of the executor. 2 Williams’ Exrs. 1532. According to this rule a legatee or the heir would be entitled to the benefit of whatever fund may accrue to the estate by compensation made by the government, after the payment of all debts, if the lands which descended to the heir-at-law should be first appropriated to the payment of the .debts, unless that result should be interfered with by the terms of the grant from the government.

But, apart from this, it is clear that the fund arising from the personal assets having been lost without the fault or wrong of the creditors, they are entitled to have the real estate applied to the payment of their debts.

The decree of the court below is in accordance with this view, and it must be affirmed.