Greer, Mills & Co. v. Estate of Riley , 92 Tex. 699 ( 1899 )

This controversy arose in the County Court in course of the administration of the estate of T.M. Riley, deceased. An appeal was taken to the District Court. The nature of the controversy and the case made upon the trial appear from the findings of fact filed by the judge who tried the case in that court. They are as follows:

"At the June term of the County Court of Montague County, Texas, C.H. Boedeker was duly appointed administrator of the estate of T.M. Riley, deceased, and that said administration is still pending in said court.

"That after setting aside the exemptions to the widow which has been done by said County Court, there were not enough assets to pay the debts of the deceased which were duly presented, allowed, and approved by the court.

"That Greer, Mills Co. have a claim against said estate in the sum of $6000 which has been duly verified, allowed by the administrator, and approved by said County Court, and which said debt is secured by a valid mortgage upon certain cattle belonging to said decedent, and was placed by said court as a third-class claim; that W.B. Worsham had a claim of $4900, which was also verified properly and allowed by the administrator and approved by the court and placed as a third-class claim, and his claim was also secured by a valid chattel mortgage upon certain cattle belonging to said estate.

"That the cattle covered by said two mortgages were sold by the administrator under an order of the said court, directing the sale for the purpose of paying off the respective claims secured by such mortgages, and that the proceeds of such cattle failed to pay either of said claims by over $1000 on each claim.

"That during the lifetime of decedent, he had purchased from Lime-stone County seven different and distinct tracts of land, and for the purchase money of each respective tract he had executed his note, a lien being retained expressly upon each tract of the land for the purchase price of such respective tract.

"That Limestone County filed said seven notes, duly verified, with the said administrator, who duly allowed same, and they were each approved by the said court and placed as third-class claims.

"That the said tracts of land were all sold under an order of said court duly made upon the application of Limestone County, and four of said seven tracts sold for more than enough, each, to pay off the purchase price of such respective tract, together with the costs of the sale of said four tracts, including commissions, but the other three of said tracts each brought less than the purchase money due on each respective tract of such three tracts.

"That the costs of the administration in said court amount to $3500, and the excess which said four tracts of land (which sold for more than enough to pay off the lien against them respectively) brought above the liens against them, taken together with all the assets of said estate (which was not covered by valid and approved mortgages and third class claims) was not sufficient to pay said expenses and cost of said administration, but was more than sufficient to pay all costs incident to probating and collecting the amount due Limestone County.

"That there was money which came into the hands of the administrator from the sale of cattle and other personal property on which a mortgage lien existed, in the probable sum of $18,000.

"That over the protest of Greer, Mills Co. and W.B. Worsham, the County Court ordered the administrator to pay to Limestone County all of the proceeds of the three tracts which sold for less than enough to pay the lien against such tracts without allowing any part of such proceeds to be applied to the costs of collecting such debts, and that he ordered against the other four tracts to be paid in full, not deducting anything from debts due on said four tracts for expenses for collecting said four debts.

"That a part of the proceeds of the sale of the cattle on which said Greer, Mills Co. and Worsham had such mortgage lien, was taken to pay the expenses of administration and commissions of the administrator and county judge, including the costs of collecting the debts due Limestone County, which costs and commissions would be about the sum of $300."

Upon the facts so found, the court concluded, as a matter of law, that: "I find that the order of the County Court appealed from is correct, and that Limestone County should not be required to pay any of the expenses or commissions incident to the collection of its said debts, and order the administrator to pay the said four debts in full which were secured by liens on the four tracts which sold for enough to pay such debts respectively, and to pay all of the proceeds of the three tracts which brought less than the debts against said respective tracts, to Limestone County."

The District Court having rendered judgment in accordance with the conclusions so filed and the case having been appealed, the Court of Civil Appeals adopted the conclusions of the trial court and affirmed the judgment.

The effect of the judgment is to make the costs, in the cases in which the proceeds of the sales of the lands were not sufficient to pay both costs and debts in full, an indirect charge upon the proceeds of the sales of the cattle, subject to the mortgages of the plaintiffs in error; and, in our opinion, such a judgment is erroneous. It was held in the case of the City of San Antonio v. Berry, 48 Southwestern Reporter, 496, "that the costs of enforcing a lien are an incident of the debt and become a part of it," and that from the proceeds of the sale the costs are first to be paid. According to the principle established in this court ever since the decision in the case of Robertson v. Paul, 16 Tex. 472, a debt secured by a vendor's lien under an executory contract is not subject to be postponed to the expenses of administration or to other preferred claims under article 2091 of the Revised Statutes. As we think, it does not follow from this, the costs of enforcing such a lien — although an expense of administration — can be charged upon other property subject to some other incumbrances. When the proceeds of the sale of land subject to a paramount lien of the character specified are sufficient to pay the debt and cost of the proceeding for its enforcement, they must be applied to the satisfaction of such debt and costs in preference to all other claims. But when the proceeds are insufficient to pay both debt and costs, the costs must be first paid and what remains is to be appropriated to the debt. The unpaid balance of the debt then stands as an unsecured claim. This results from the principle that the costs become a part of the debt. As such, they have a preference in payment as to the property subject to the lien; but, as to other property of the estate, are no more entitled to priority than the debt itself.

To our minds, it is grossly inequitable to charge the costs of enforcing one lienholder's lien upon the property subject to another's incumbrances.

The judgment of the Court of Civil Appeals and that of the District Court are reversed and the cause is remanded to the latter court with instructions to enter judgment requiring the debt due Limestone County and the costs of its enforcement to be paid in full in every instance in which the proceeds of the sale of the land subject to such debt are sufficient for that purpose; and also requiring that where the proceeds are not sufficient, to pay the costs therefrom and to apply the balance to the payment of the debt. All costs in the County and District courts will be adjudged against Limestone County. It is also here ordered that the county pay all costs which have accrued and may accrue by reason of the appeal and the writ of error.

Reversed and remanded.