Case ID: sc-eq_22/html/0161-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Per Curiam,.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Morton & Courteny et al. v. J. P. Caldwell, administrator.
    
    The proper mode of determining the proportions of assets liable to the respective creditors of a deceased debtor, is to assign them according to the amount of the debts as they existed at his death. If upon any of the demands thus taken into consideration, any payments have been subsequently made by a third party, that does not release the proportion of the deceased’s assets originally liable to the creditor, if there still remains due on the demand a balance requiring that proportion to satisfy it.
    Columbia,
    Nov. 1849.
    
      
      Before Johnston, Ch. at Newberry, July, 1849.
    Johnston, Ch. — I am very grateful to the counsel engaged in this cause, for being permitted to reconsider the decision made by me on the 9th inst. which, very shortly after it was delivered, became unsatisfactory to myself.
    The principles involved are of much practical importance, and I think deserved a fuller consideration than I, at the time, supposed, or was able to bestow.
    The case came up upon a report of the Commissioner, and an exception put in by the plaintiffs.
    It may be proper to make a statement of the facts out of which the questions arise:
    Taplow Harriss, the intestate of the defendant, Caldwell, was, in his lifetime, connected with Ledford L. Swindler, in a mercantile concern, trading under the style of Swindler &. Harriss. The plaintiffs are creditors of that firm; having obtained judgments either during the joint lives of the partners, or against Swindler, as survivor, after Harriss’s death. Swindler became insolvent, and has left the State, and is now resident in foreign parts. Under these circumstances, which are stated in the bill, this suit was brought by the plaintiffs against Caldwell, the administrator of Harriss, the deceased partner, to obtain satisfaction of their demands out of his estate.
    Caldwell himself is a creditor of his-intestate, and of the firm of Swindler & Harriss, and also of Swindler, under the following circumstances:
    During the life of ,Harriss, a note for about 3000 dollars was drawn by Swindler, and endorsed by Harriss, intended to be discounted, for the benefit of the firm, at the Branch Bank in Columbia. Upon this note Caldwell put his name as second endorser. The note was discounted, and the firm received the money. Caldwell was sued by the bank, as administrator of Harriss, and judgment obtained against him; and he has been obliged, on behalf of his intestate’s estate, and on his own behalf, to settle the demand. But before he did so, he took steps towards saving himself harmless. After Harriss’s death, but shortly before becoming his administrator, having suspicions (subsequently verified) that his estate might not be able to meet all its liabilities, and of course not able to indemnify him in respect to this bank debt, he called on Swindler, who, it will be remembered, was legally bound as maker of the note, and equitably as survivor of the firm which received its benefit, and obtained from him as assignment of a considerable number of dioses, purporting to belong to Swindler, but embracing among them some which, in fact, belonged to the firm.
    
      This transfer does not purport to have been made or received absolutely or in payment of Caldwell ; but as collateral, to indemnify him as the endorser of Swindler.
    Upon these dioses Caldwell has collected about 1400 dollars. How much of this sum was collected on the individual dioses of Swindler, and how much on the choses of the firm, does not appear; nor, as respects the principal questions presented, is it perhaps necessary to know. From the character of the assigned assets, it is very doubtful whether much more can be realized from them than the $1400 already collected. Certainly not enough to pay Caldwell’s demand, without resorting to Harriss’s estate.
    There was a general reference of the accounts to the Commissioner, without specific directions, or the adjudication of any point in the case.
    On the reference, Caldwell’s claim, as well as those of the plaintiffs, was taken into consideration among the liabilities of Harriss’s estate; and as it appeared that the assets were insufficient to pay the demands, (being in fact good for only 31-| cents in the dollar,) a question arose as to the apportionment proper to be made under the circumstances.
    Caldwell’s demand, as it existed at Harriss’s death, was for 3000 dollars, with the interest which had, then, accrued ; making in all about 3735 dollars. He contended that assets of the estate, proportioned to that sum, were subject to his demand, and should be applied to its extinguishment, if, after deducting what he had already realized from Swindler’s assignment, it appeared, as it did, that there still remained due upon the debt a sum sufficient to absorb them. If, however, the balance still due was less than the proportion distributable to the demand, as it stood at the intestate’s death, then he conceded that only so much of that proportion as was necessary to extinguish that balance should be actually applied to his demand.
    The plaintiffs contended, on the other hand, that the assets distributable to this claim must be proportioned to the amount actually remaining due on it when presented ; that the sum received, in virtue of Swindler’s assignment, must be first deducted, and the proportion of assets accommodated to the balance actually remaining unpaid.
    The Commissioner decided the point against the plaintiffs, and in conformity to Caldwell’s view ; and the plaintiffs renewed their objection by way of exception to his report. I sustained the exception. I now think my decision was hasty and erroneous, and take pleasure in reversing it.
    It is, therefore, ordered that the order of the 9th of July, 1849, made in this cause, upon the Commissioner’s report, and the exceptions taken thereto, be set aside and annulled.
    
      5 Stat. 111.
    Stat. 1789, s. 27; 5 Coop. Ill, s. 12.'
    The Statute of 1789, (sect. 26,) while it abolishes prefer-t enees among creditors of equal rank, and virtually entitles each creditor, in case of deficient assets, to a claim on the estate of his deceased debtor, proportioned to his demand, does not, in terms, settle any point of time, in reference to which the respective demands must be examined, in order to determine the relative portions of assets liable to their payment.
    But still it is a fundamental idea in the statute, — a disregard of which must render its due administration intolerably perplexing, if not impracticable, — that the juncture for the purposes of such a calculation is the death of the debtor. It is then the remedy of the creditor ceases as to the person, and is restricted to the effects of the party indebted.
    From this time forward, so completely are these effects appropriated, in the eye of the law, to the satisfaction of the decedant’s debts, that any unauthorized meddling with them is a trespass, for which the wrongdoer is liable to the creditor, as a party injured; and if the interference be by one duly authorized as executor or administrator, he becomes immediately responsible to the extent of the assets in his hands. These rights vest in the creditor, immediately upon the death of the debtor; and he might enforce them forthwith, were he not restrained by statutory impediments of a merely forensic character, which, for reasons of convenience, delay his remedy.
    It would seem that the very end for which the law authorizes the creditor to follow so constantly the goods of his debtor, into whosesoever hands they may come — to wit: the securing of his demands — necessarily implies that cognisance must be taken of the nature, validity and extent of the demand itself, cotemporaneously — strictly so — with the springing up of those rights intended for its vindication; that is, at the death of the debtor.
    Upon the death of a party, possessed of real or personal estate, the law, eo instanti, vests a right of succession, defined and fixed as to its character and extent, in his distributees, legatees or devisees — in the case of realty, directly — in the case of personalty, mediately, through the personal representative. These interests are all recognized ab initio, and whenever the value of the estate is ascertained, their value bears a fixed proportion to it.
    Out of these rights of legatees and distributees arises an argument which seems to be conclusive on the point under discussion. The rights of legatees and distributees are subordinate to and dependant upon those of creditors, inasmuch as they cannot take effect until the latter are satisfied ; and if the former are fixed by the state ol circumstances existing at the death of the intestate or testator, it would seem that the rights of his creditors must be equally settled at the same time. _ ^
    _ Some given time must be assigned for ascertaining the extent of creditors’s claims upon the estate of their debtor. General principles seem to fix that time at his death ; and so far as 1 know, this conforms to uniform practice.
    If a period be assigned for this purpose, it must be adopted in all cases. It would be attended with infinite perplexity, and much injustice, were Courts, fluctuating in their practice, to assign different periods for different creditors.— This is manifest. It would lead to the same perplexity and injustice, though perhaps in an inferior degree, should the period, with respect to a specific creditor, be varied according to circumstances. In the case before us, if Caldwell’s claim be dealt with as proposed by the plaintiffs, he will be worse off for having a claim on Swindler as well as on Harriss, than if his claim were on Harriss alone. Worse off, at least, in consequence of having accidentally realized part of his demand from Swindler before presenting it against Harriss’s assets. If he had thus presented it before getting the money under Swindler’s assignment, he would have been entitled to 31f- per cent, upon his whole demand out of Harriss’s estate ; and, in that case, it is conceded he would have been entitled to receive — afterwards—the 38 per cent, which he got from Swindler.
    But while it is conceded that, by this course, he might have saved 70 per ct. of his debt, it is contended that in consequence of his having received part payment from Swindler before presenting his demand against Harriss, he has accidentally set over for the benefit of Harriss’s other creditors nearly 450 dollars of assets to which he was originally entitled ; thus increasing his loss to nearly 44 per cent, and realizing but little over 56 per cent, of his demand. Can a rule attended with such consequences, and founded upon no better grounds than the mere contingency of the collateral payments being made before or after the presentation, be the rule of law 7 Can that be the rule which puts it in the power of any third party who chances to be surety for a debt, by a partial payment, however capriciously or collusively made, to reduce the amount recoverable from the estate of his deceased principal, to the disappointment and loss of the fair creditor 7
    
    I have said that the rule contended for stood upon no better ground than the mere contingency, whether the collateral payment happened to be made before or after the demand was presented as against the estate of the deceased. To this it may be answered, that the ground is just as good, and the contingency no greater, than if the collateral payment had happened to have been made (as by one, for instance, to whom the deceased was only surety) before and not after the death of the deceased ; in which case the assets of the de- ' ceased would only be liable to the creditor in proportion to the balance of the debt remaining open. The effect of such a payment would be clearly as has been stated. There is a clear distinction, however, between the two cases — we are speaking now of debts due by an estate. In the former case the estate was never debtor beyond the balance left after-payment. In the latter case it was indebted for the whole demand; and the executor having received assets, became himself the debtor to the extent of their value. Shall he claim exemption from his own debt, upon the mere fetch of its having been partially paid before calling on him ? And shall his claim of exemption be effectual, while he has funds in his hands sufficient to pay the balance? If the creditor would be an equal sufferer in both cases, the injury in the former case is one which no rule could avert. Not so in the latter case.
    McCaw v. Blewet, 2 McC. Ch. 90, 91.
    A case which may well occur, and probably often does occur, may be put to illustrate the working of the rule contended for. Suppose two persons jointly and severally bound to the same creditor for a specific sum. Both have died, each leaving an estate able, by due apportionment, to pay exactly one half of the debt. It is barely imaginable that payment should be made to the creditors by the repiesenta-tives of the two estates at the same juncture of time. And if the payment by one should precede that of the other, the consequence, by the rule contended for, would be that the creditor would be deprived of one-fourth of his debt, though the assets were sufficient conjointly to pay it in full, and the executor of each stood chargeable with assets for one-half of it.
    In all the cases I have observed upon, it is impossible to conceive what injury the collateral payment has worked to the estate of the deceased debtor, or to his other creditors.— On what grouud of justice, then, or of common sense, should the creditor be deprived of his original claim upon the assets of the deceased, so far as it may be necessary on his part to insist on it ?
    It is at the death of a party that the value of his estate is ascertained with a view to partition, and all advancements made by him are estimated with reference to their value at that time. How can the clear value of his estate distributable be determined, without taking into consideration and deducting his debts as then existing?
    It would appear from all these views that the proper mode for determining the proportions of assets liable to the respective creditors of a deceased debtor, is to assign them according to the amount of the debts as they exist at his death. If upon any of the demands thus taken into consideration, payments have been subsequently made by a third party, that does not release the proportion of the deceased’s assets originally liable to the creditor, if there still remains due on the demand a,balance requiring that proportion to satisfy it. If, however, the balance thus left does not absorb the proportion, whatever of it remains becomes the subject of further consideration. If the party who made the payment was only surety for the debt, I suppose he will become entitled, by way of reimbursement, to an assignment of the residue of the proportion liable to the debt on which his payment was made. If, however, he himself was primarily liable for the debt, and of course not entitled to such assignment, the residue of the proportion must become the subject of a new apportionment among the other creditors of the deceased.
    This appears to be a proper place to consider an argument presented by the plaintiffs’s counsel. It was said that where part of the debt has been discharged by a third party, subsequent to the death of the deceased debtor, the balance is the debt really presentable from thenceforth, inasmuch as nothing beyond that balance is recoverable from the estate ; and that, when presented, the proportion of assets liable to it must correspond to its then existing amount. No doubt this balance is all that can be recovered. Judgment, as for the debt, cannot be given for anything beyond it. But the judgment for the debt is one thing, and the judgment against the executor, on the plea of plene administravit prceter, in respect to assets in his hands, bound for the debt, is another.— And how does it appear that the quantum of assets liable to the debt, as it stood chargeable on the debtor’s estate at his death, does not still remain liable to the balance that yet remains due on it? How does it appear that, being liable for the whole, it is not liable for a part?
    The argument — that because the balance now due is all that can be recovered, therefore the assets liable must be proportioned to that balance — proves too much. According to that argument, it can make no sort of difference as to the residue of assets liable whether the partial payments were made by a third party or by the personal representative himself. The judgment for the balance due on the debt., it is said, must govern as to the proportion of assets in respect to which the representative is to be personally liable. Now suppose the executor to have had originally in his hands assets equal to three-fourths of the creditor’s demand, and to have made a payment equal to one-fourth of it. Thus : suppose the demand to be 8000 dollars at the death of the testator, and the- assets in the hands of the executor equal to 6000 dollars. Before taking an exact account of the liabilities of the estate, he ventures to pay on this demand 2000 dollars. The balance on the debt is thus reduced to 6000 dollars, and he has yet in hand 4000 dollars. Now this balance of the debt (6000 dollars) is what the creditor is entitled to judgment for. If the assets liable to this recovery be in the proportion of three-fourths, his judgment will be conclusive on the executor as to assets to the extent of 4500 dollars — 500 dollars beyond the balance of assets in his hands. To this the executor certainly would object. Or the judgment in respect to assets might be for three-fourths of the 4000 dollars in the executors hands ; by which the creditor would lose 1000 dollars more of his debt, while there were assets to pay it — and he as certainly would object. The only way to escape these consequences, so far as I can see, would be to apportion the assets according to the amount of the debt at the death of the testator, and charge the executor accordingly ; which it would be just to do, he having the assets in hand, and being properly chargeable in respect to them; at the same time giving him credit for the amount paid out of them to the creditor entitled. But this is precisely the rule to which the plaintiffs object, when they say that the balance due on the debt at the time suit is brought, is to be the measure of the judgment as to assets, because it is the amount the creditor is entitled to recover as the debt due him.
    The truth is, and these considerations prove it, that the judgment for the debt has nothing to do in fixing the amount of assets to which it is entitled. The principal judgment, in relation to the debt, is entirely distinct from that which is given upon the plea of plene administravit prater. The former goes only for the balance of debt due ; the latter for the assets which have come to the executor’s hands, distributable to the particular creditor, and not already paid over to him. When, therefore, an executor pleads plene adminis-travit prater, he should have reference to the state of the assets and the liabilities at the death of his testator, and assign the just proportion to each creditor at that time; and if he has made payments to the suing creditor, he should take credit out of his proportion of assets thus assigned.
    This extended consideration of the subject, it appears to me, would have been unnecessary, and the question rendered very plain, if Caldwell had administered on Harriss’s' estate, and become entitled to its assets before he received the money from Swindler. He could not have retained for his whole demand, as a preferred debt; but he certainly could have retained for his due proportion ; and, indeed, that amount would have been regarded as actually paid to him, according to our decided cases. As it is, it would not be straining the facts of the case' or the legal principle arising from them, to say that he had such right of retainer, and had actually re- ( ceived payment out of Harriss’s assets before he received payment from Swindler, for this latter money was not collected under the assignment until after administration; and the assignment was not payment, nor taken as such, but only as collateral security.
    On the whole, I am satisfied the view of the commissioner was correct; and, therefore, it is ordered that the exceptions be overruled, and the report confirmed; and that the debts be paid accordingly. The costs to be first deducted.
    If it be desired to have an account of the partnership assets assigned to Caldwell, beyond the amount already realized by him, and set down in the report, this can be effected only by making S windier a party. The same observation occurs, if it be desired, by way of contribution or indemnity to Harriss’s estate, to have an account of Swindler’s own assets included in the assignment. He must also be made a party, if it be desired to have an account of the partnership assets not included in the assignment, or to obtain any decree against himself, as individually responsible, either in his capacity of survivor or otherwise.
    In all these respects both parties have an interest in making him a party ; and leave is given to make him a party, either by amended or supplementary bill, or cross bill, as they may be advised.
    I had some doubts whether even the decree which I have made in favor of the plaintiffs, as against Harriss’s estate, could be properly made without making Swindler a party, and having an account of the partnership ; Harriss’s estate not being liable to them, as partnership creditors, until the partnership assets are exhausted. But as it is alleged that Swindler is insolvent, I have assumed that the partnership assets in his hands are wasted, especially as neither party has raised any objection contrary to such assumption.
    The plaintiffs appealed, on the following grounds:
    1st. That his Honor, the presiding Chancellor, erred in overruling the exception put in by the plaintiffs to the Commissioner’s report.
    2d. That the $1408 31, collected by Caldwell out of the effects assigned to him, was, in effect, so much money paid by Swindler on the note, and operated to extinguish the demand fro tanto; and Caldwell ought to be considered as a creditor of Harriss’s estate to the amount of the balance of the demand only, in fixing the share of the assets to which he is entitled as creditor.
    3d. That his Honor ought at least to have decreed to the plaintiffs, the creditors of Harriss, so much of the assigned effects as shall remain after the note shall have been
    
      4th. That his Honor erred in holding it to be necessary to make Swindler a party — seeing that he has departed from the State, and is insolvent.
    
      Pope, for the motion.
    
      Garlington, contra.
   Per Curiam,.

This Court concurs in the decree of the Chancellor: and deems it unnecessary to add anything to his observations. It is, therefore, ordered that the decree be affirmed. and the appeal dismissed.

Decree affirmed_•