Nebraska Wesleyan University v. Luce Estate ( 1940 )

Rose, J.

This is a controversy between Nebraska Wesleyan University, a nonprofit corporation maintaining an educational institution by that name in Lincoln, Nebraska, plaintiff, and Elizabeth S. Gillon, defendant, over the priority of claims against the estate of George A. Luce, deceased.

In a proceeding to settle decedent’s estate, the county court of Douglas county allowed the claim of plaintiff in the sum of $10,000 on a par with that of defendant Elizabeth ' S. Gillon for $5,433.43.

The claim of the Nebraska Wesleyan University, plaintiff, rests on a subscription or pledge to the university by George A. Luce for $10,000, due and payable at his death. The claim of Elizabeth S. Gillon, defendant, consists of a balance of $5,433.43, due her from decedent’s estate on a promissory note for borrowed money. Seeking subordination of the former claim to that of the latter, defendant appealed from the county court to the district court, where her claim against the estate was decreed to be superior to that of the Wesleyan University. Plaintiff appealed to the supreme court.

Is the claim on the note for borrowed money, like other claims of the same rank, payable from decedent’s estate before applying any funds therein to payment of the subscription or pledge to funds of the university, as held by the district court? This is the question presented by the appeal. Neither the county court nor the district court on appeal disallowed the claim of plaintiff. There is precedent for the sufficiency of the consideration to support the pledge as a claim against the estate of decedent. In re Estate of Griswold, 113 Neb. 256, 202 N. W. 609. Plaintiff contends and argues:

“The question for the court to decide was, should the university’s claim be allowed or disallowed? If allowed, it automatically fell into the fourth or last class of estate claims and was, therefore, on a parity with the claim of Mrs. Gillon and any other fourth class claims.”

The classification of claims upon which plaintiff relies is found in the statute relating to insolvent estates, which provides :

“If the assets which the executor or administrator may have received and which can be appropriated to the payment of debts shall not be sufficient, he shall, after paying the necessary expenses of administration, pay the debts against the estate in the following order: First. The necessary funeral expenses, which shall be a preferred claim only to an amount not exceeding Two Hundred and Fifty Dollars ($250.00) for casket and services of undertaker. Second. The expenses of the last sickness. Third. Debts having a preference by the laws of the United States. Fourth. Debts due to other creditors.” Comp. St. 1929, sec. 30-615.

The view of counsel for plaintiff seems to be that the claim of the university, if valid for any purpose or to any extent, is, under the statute quoted, a debt due to a creditor whose claim is not in the first or second or third class, but is one which automatically falls into the fourth class where claims therein are all of equal rank as to order of payment. The argument on this point is made in good faith to establish what is thought to be a legal right, but it fails to take into account that, from the nature of the contract and the date of its enforceability, the pledge must be held to be conditional as a matter of necessary public policy and of implied intention and understanding between the parties. The instrument itself is in the following language:

“Nebraska Wesleyan Endowment Fund

“Estate Pledge

“$10,000 Omaha, Nebraska, December 9th, 1921

“In consideration of my interest in Christian education and of other subscriptions to this endowment, building and expense fund, I hereby subscribe and promise to pay to the Nebraska Wesleyan University the sum of Ten Thousand and no/100 Dollars due and payable at my death. For value received, subject to the following condition:

“It is understood and agreed that a discount of five per cent, will be allowed on this pledge if the same shall be fully paid prior to my death.

“Omaha District George A. Luce

“Trinity Charge Laura E. Luce.”

George A. Luce died June 21, 1931. It was stipulated that there was no consideration for the instrument beyond what was recited therein — “my interest in Christian education” and “other subscriptions to this endowment, building and expense fund.” M. E. Gilbert, executive secretary of the university from 1925 to 1932, testified that it had an endowment fund, the income from which was used only for operating expenses, and that the pledge quoted was part of the endowment fund, but on cross-examination he stated in answer to a question: “Well, the note was always listed as an asset of the endowment; of course, not being money, it could not be used until it was paid.” The pledge, though contractual in form as against the pledgor, was nevertheless donative as against the other creditors of his estate. While its contractual form created an enforceable right against the decedent’s personal representative and his heirs, if funds were available for the purpose, it was' not a right which in good conscience should be permitted to operate to the prejudice of those who had parted with money or property to the donor in reliance upon his estate. Nor would it be possible to contend, with any deg*ree of plausibility, that the donor, who was a minister of the gospel, in making such a pledge to the cause of Christian education, payable on his death, or a Christian university in taking it, could have intended that it should operate to leave a debit for money, which he found it necessary to borrow, or any other similar obligation, unsatisfied on his death. Under the circumstances, the pledge must be held to be conditional, both as a matter of implied intention and of sound public policy, and to be payable or enforceable only if assets are available for that purpose after the decedent’s actual debts have been paid. The situation presents no difficulty in the classification of claims under the statute. It is the same as if the contract had expressly provided that nothing should be paid thereon, until all the decedent’s just and legal debts had been satisfied. Conditions necessarily may be implied in contracts as a matter of sound public policy and reasonably imputed intention. Thus, it is usually recognized that the contract of a corporation to purchase its own stock is subject to the implied condition that such contract cannot be enforced if the corporation is insolvent or if the rights of creditors are prejudiced. 13 Am. Jur. 809, sec. 787; Fremont Carriage Mfg. Co. v. Thomsen, 65 Neb. 370, 91 N. W. 376. Whether the claim of Wesleyan University should be allowed, with an order directing that it should not be paid until the debts of the decedent were satisfied, or whether allowance should be withheld until such debts had been satisfied, is purely a procedural question that is unimportant, since in either case the result would be the same.

In re Estate of Griswold, 113 Neb. 256, 202 N. W. 609, 38 A. L. R. 858, cited to sustain the position of plaintiff, does not conflict with the views herein expressed. In that case the testamentary character of the instrument and the consideration therefor were the questions discussed and determined. Infringement by donation on the rights of creditors with superior claims and the statute classifying claims against the insolvent estates of deceased persons were not involved, but to guard against even an inference that a donor by his gift might so deplete his estate as to require his creditors to prorate their claims with donee, Judge Redick, author of the opinion, made the following significant observation:

“No difficulty is presented by the suggestion that a donor might so deplete his estate as to require his creditors to prorate their claims with the donee, for a contract perfectly valid between the parties may be void as to creditors.”

The judgment of the district court is in harmony with the conclusion herein reached and is

Affirmed.