Lowell v. Est. of French ( 1881 )

The opinion of the court was delivered by

Royce, Ch. J.

N. W. French in his lifetime signed or became liable upon the notes which were allowed by the commissioners upon his estate as surety for the French Brothers. After the allowance, the French Brothers, who were principals upon said notes, made payments to the appellants, which were endorsed upon said notes. French Brothers became insolvent after said allowance was jnade ; and made an assignment in Maine, and the payments made to the appellants were made by the trustees under said assignment. N. W. French’s estate was insolvent; and in the decree of distribution made by the Probate Court the payments, so made to the appellants, were deducted from the allowances made by the commissioners; and the amounts remaining due were taken as the basis upon which the dividend was made. An appeal was taken from the decree so made, the appellants claiming that a dividend should have been decreed to them upon their claims as allowed by the commissioners. It was the primary duty of the French Brothers to have paid the notes, and thus relieved the surety and his estate from all liability; and it is admitted that if the payments had been made before the notes were presented for allowance, only such sum could have been allowed as appeared to be due. In the distribution of an insolvent estate we see no reason why a payment made by the principal after the allowance should not be treated in the same way that it would have been if made before. In both cases the payment reduces the liability of the estate. While it is true that the payees had the right to regard the surety as a principal, and to enforce his liability as a principal until they had obtained full satisfaction, yet, where there is only a limited fund from which to obtain satisfaction, and the question is made how that fund shall be distributed, creditors, whose claims are equal in right are entitled to share equally in such distribution. Our statute upon the subject of the distribution of insolvent estates requires that that rule shall be observed. If the rule claimed by the appellants should be adopted, no such equality could be preserved; and creditors might obtain dividends upon claims that the estate was not liable for, thus being preferred to other creditors whose claims against the estate were unquestioned. This would be in conflict with all the statutory provisions pertaining to the settlement and distribution of insolvent estates. The payment made to the First National Bank of St. Johnsbury, and which was deducted from the allowance before a dividend was decreed to it, was made from the funds of the principals, so that its case is, in principle, like the cases of the other appellants. In in re Howard, Cole Co., a well-considered case decided in the U. S. District Court, 4 Nat. Bank. Reg., it was held that where the holders of notes, after they had proved the full amount of their claims against the bankrupt estates of the indorsers, received part payment from the makers, they were entitled to dividends only on the amount due when the dividends were declared, only.

There was no error in the judgment of the County Court, and it is affirmed, and ordered to be certified back to the Probate Court.