Mason's Appeal , 1879 Pa. LEXIS 165 ( 1879 )

Mr. Justice Paxson

delivered the opinion of the court, March 24th 1879.

In this.case there were two funds for distribution; one the proceeds of the personal estate; the other the proceeds of the sale of the real estate. The court below distributed the real estate fund first, and applied it to the payment of the judgments which were liens during the lifetime of the decedent, and then applied the personal fund pro rata to all the claims, including the judgments of Mary Dean and the appellant. The result was that all the judgments were paid in full, except the judgment of the appellant, which was thrown entirely upon the personal fund, and of course received only its pro rata dividend. From this decree of distribution an appeal was taken to this court, upon the ground that the court below should first have applied the personal fund to the payment of all the debts pro rata. The effect of this would have been that the lien-creditors would have received a dividend out of the personal estate, which would have so reduced the' amount of the encumbrances as to let in the judgment of the appellant upon the real estate fund, and paid him in full. There -would of course have been a corresponding reduction in the dividend to the unsecured creditors, who were confined to the personal fund.

By the law of this state, all of a man’s debts become a lien upon his real estate when he dies. For the purposes of distribution, however, judgments recovered during the lifetime of a decedent are entitled to priority over general creditors out of the proceeds of the real estate.

The personal estate is the primary fund for the payment of debts, including such as were liens upon the real estate. I know of no rule of law better settled than this. It hardly needs the citation of authorities, and I refer to only a few, that are conveniently at hand: 4 Kent’s Com. 420; Walker’s Estate, 3 Rawle 229; Ramsey’s Appeal, 4 Watts 71; Hoover v. Hoover, 5 Barr 356.

If, therefore, the administrator had filed a partial account, containing only the proceeds of the personal estate, it is clear that such proceeds must have been applied fro rata to all the creditors, including the judgment-creditors, who are secured upon the real estate. This would have produced the precise result claimed by the appellant. So much was admitted by the learned judge of the Orphans’ Court, but inasmuch as there were two funds for distribution at the same time, and the estate was insolvent, he held that the judgment-creditors’ may, but are not obliged to, claim a dividend out of the personal estate, and then resort to the real estate fund for any deficiency; and further, that in this case the appellant has no superior equity which entitles him to throw the judgment-creditors upon the personal fund, in the first instance, to the manifest injury of the general creditors. I concede there is no equity in the appellant’s claim. But this is not a question of equities, or of the marshalling of assets. Nor is it a question of election by creditors between funds. On the contrary, it is a matter of the payment of debts in the order prescribed by the Act of Assembly. As before said, the personal estate is the primary fund for the payment of debts. Until that is exhausted, or shown to be insufficient, the law will not permit the administrator to sell the real estate, and then only so much thereof as may be necessary to make up the deficiency of the personal estate. The Act of 24th February 1834, Pamph. L. 77, Pur’d. 421, provides that “ all debts owing by any person within this state, at the time of his decease, shall be paid by his executors or administrators, so far as they have assets, in the manner following, viz.: 1. Funeral expenses, medicine furnished and medical attendance given during the last illness of the decedent, and servants’ wages not exceeding one year; 2. Rents not exceeding one year; 3. All other debts, without regard to the quality of the same,-except debts due the Commonwealth, which shall be last paid.” There is no distinction here between solvent and insolvent estates; the order of paying debts is the same in either case. Nor is there any question of equities or of marshalling of assets; it is an order of the payment of debts which must be observed in all cases. The executor or administrator has no discretion ; he shall pay — is the imperative command of the statute— in the order therein prescribed. Hence, when personal estate comes to his hands, he must apply it first to the preferred debts specified in the act, and then to “ all other debts without regard to the quality of the same;” and for this he is responsible upon his official bond. Nor can this order of the payment of debts be changed by any arrangement between a class of creditors and the administrator. In the case in hand, had the personal estate been sufficient for the payment of all the debts, including general and lien-creditors, it is too plain for argument it would have been the duty of the administrator to have so applied it, and thus to have relieved the real estate for the benefit of the heirs. The same principle must be applied though the estate be insolvent.

No authority can be found in this state to sustain the position of the appellees: Ramsey’s Appeal, 4 Watts 71, is the only ease in point that I have found, or that has been called to our attention, and that is with the appellant. It is not well reported, but enough is clear to show that there were two funds, as here : the one real and the other personal; and one of the main questions was whether the personal fund should be first applied pro rata among all the creditors. This appears from the following exception: “ There was error in not decreeing the personal fund to be first applied to the payment of the debts of the deceased, according to the Statute of Distribution, and then applying the fund raised by the sale of the real estate, to the payment of the liens upon it.” It was said by Mr. Justice Rogers in delivering the opinion of the court: “ The personal fund, including of course the money arising from the sale of the land not bound by judgments obtained in the life-. time of the deceased, must be distributed in the first place, among the creditors in the order prescribed by the act. It is made the duty of an executor or an administrator to pay all the debts of the intestate in the manner therein prescribed. * * * The personal property of a decedent is the primary fund for the payment of all debts ; and this is as true of a judgment, which is a lien on the real estate in the lifetime of the decedent, as of any other debt. It is only in case there is an insufficiency of personal estate that an Orphans’ Court will order a sale of real estate to pay debts.

Ramsey’s Appeal was decided nearly half a century ago. Its principle was recognised and followed in the somewhat analogous case of Shunk & Freedley’s Appeal, 2 Barr 304, where there was a fund for distribution in the hands of an assignee for creditors. Shunk & Freedley’s Appeal was cited and approved in Morris v. Olwine, 10 Harris 442. I know of no case in conflict with Ramsey’s Appeal; certainly no such case was cited upon the argument. ■That it has not been questioned is persuasive evidence of the general approval of the profession of the pi’inciples it established.

The decree is reversed at the costs of the appellees, and it is ordered that the record be remitted to the Orphans’ Court, with directions to make- distribution in accord-' anee with the principles indicated in this opinion.

Mr. Justice Mercur dissented.