Case ID: sc-eq_24/html/0139-01.html
Source: Caselaw Access Project
Author: {"author": "Johnston, On.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

A. W. Thomson, Ex'or. of J. Palmer, vs. E. M. Palmer and others.
    
    Separate judgments were recovered on the same note against a principal and his two sureties; after the death of the principal, R. one of the sureties, paid the amount under a stipulation that the judgment and execution against the principal should be assigned to him, which was subsequently done: Held that R. was entitled to be paid, as a judgment creditor, out of the assets of the principal.
    Costs recovered in a suit at law, against the executor of an insolvent estate, are not to be paid out of the assets of the estate; if the executor, by mis-pleading, make himself personally liable therefor, he must take the consequences, and cannot charge them to the estate.
    Where, after an order enjoining all the creditors of a testator from suing the executor, some of the creditors sued the executor, they were ordered to pay not only their own costs at law, but the costs of the executor also.
    Where a bill is filed by the executor of an insolvent estate to enjoin creditors from suing at law and to have the estate administered in equity, and the choses, money, &c. of the estate are turned over to the Commissioner, the executor is only entitled to have a schedule and'statement reported of what he has turned over; he is not entitled to credit for the choses turned over, except prima, facie: for, if it should turn out that any of the choses are not good, through the laches or fault of the executor, he should be charged with the amount.
    Nor is the executor entitled to commissions, as for paying away money in debts and legacies, &c. for choses and money turned over to the commissioner.
    
      Before Johnston, Oh. at Union, June, 1848.
    Johnston, Ch. This case comes up on the report and supplemental report of the commissioner, to which the plaintiff has put in eight, and the creditors of the testator two exceptions.
    1. The plaintiff’s 1st exception is, “ because the commissioner has allowed Thomas Reeves’s demand, the surety of the testator, to rank as a judgment debt, whereas justice to the simple contract creditors required that it should rank as a simple contract debt.”
    I have no hesitation in overruling this exception. By the evidence, it appears that Reeves and Williamson were sureties to a sealed note, given by Palmer to one Wells, of Georgia. Wells sued all the parties separately, in the Federal district Court, and obtained judgments and executions. After Palmer’s death, the execution against Reeves being levied on his land, he paid the amount to the agent of Wells, under a stipulation that the judgment and execution against Palmer should he assigned to him, which was subsequently done.
    It has been determined in the law courts- of this State, that where a surety pays off an execution against his principal, under an understanding that the. execution should be kept open for his benefit, the payment does not extinguish the lien, so far as it can operate in his favor. The law of this Court is, that when a surety pays a debt of his principal, he has a right to have all the securities held by their creditor assigned to him; much more is he entitled to it where the payment was made, as in this case, upon the condition that the assignment would be made.
    The lien now insisted on, was a subsisting lien at the death of Palmer, and what difference can it make to the other creditors, whether the creditor himself enforced h or claimed its benefit, or assigned it to another, that he might do so ? The exception is overruled.
    The 2d and 3d exceptions will be taken up with the creditors’s 2d exception.
    4th. The plaintiff’s 4th exception is, “ because the commissioner’s report has overcharged the executor on the interest account, having charged compound interest, without a moment’s rest.” This exception proceeds upon a misconception of the scheme and calculations of the report, as will appear from an attentive examination of the report. The exception is overruled.
    5th. The ,5th exception is, “ because the commissioner has not credited the executor with the cash, notes and bonds handed over by him to the commissioner, to the amount of several thousand dollars.” 
    
    The commissioner has misconceived the purport of the exception, in his judgment overruling it. The exception does not call for an account of the commissioner’s administration of the funds, but merely asks that the executor he credited with the funds turned over. I do not think the executor is entitled to credit for the choses turned over, except prima facie. If it should turn out that any of the choses are not good, through the laches or fault of the executor, he should he charged with the amount. But he is entitled to have a schedule and statement reported of what he has turned over to the commissioner, and, in this view, the exception is sustained.
    6th. The sixth exception is, ‘•'because the report does not credit the executor with full commissions,” &c. The exception has been explained into an assertion that the executor is entitled to commissions, (as for paying away) for choses and money turned over to the commissioner. I do not think (as I have often ruled without an appeal) that this is paying away money in debts and legacies, &c. within the meaning of the statute, and the exception is overruled.
    7th. The seventh exception will be considered with the 2d exception of the creditors.
    The creditors’s two exceptions remain for consideration. The first of them is, “because the executor of Palmer is not entitled to a credit for the judgment of the Bank against A. W. Thomson, as a judgment debt at the death of the testator, inasmuch as the debt upon which the judgment was recovered was upon a simple contract, and the judgment was recovered since the testator’s death. This item, in the report, is set down at $674 66, with $20 costs.” The exception does- injustice to the report. The commissioner does not charge the estate with the judgment recovered against Thomson, as, in itself, a judgment against the testator, or ranking as a judgment against the estate at his death. But regarding the liability of the estate to Thomson as a simple contract liability, the commissioner allows him the lien of another judgment, which the commissioner conceives he held as collateral security to indemnify him on that contract. The tacts are these, as stated by the commissioner in his judgment upon the exception. A note was discounted in the Bank in 1828, endorsed by John Anderson, Z. P. Herndon, M. B. Bo-gan and Daniel A. Mitchell, for about $1500, and as security to his indorsers, Palmer, the testator, and his father, gave a confession of judgment for $1500, with interest from 2d July, 1828. The execution under this judgment was lodged in the sheriff’s office, July' 5th, 1828, in the coroner’s office, July 30th, 1828, and again in the sheriff’s office, July 19th, 1831. On the 14th June, 1832, Herndon, one of the indorsers, made the following indorsement on the execution: — “ The judgment in this case having been given to secure the plaintiffs as indorsers of the defendants to the Bank, and the note upon which they were in-dorsers as originally made, having been taken out of the Bank and new indorsers given, leaving out my name, this is to certify that I have no other interest in the judgment, and assign to the remaining indorsers all my interest in the same, June 14th, 1832. Z. P. Herndon.” There is the following indorsement on the execution, without date, — “I assign all my right and interest in the within execution to those who may indorse for the said D. and J. Palmer. (Signed) John Anderson.” “ This fi. fa. belongs to D. A. Mitchell, W. K. Clowny, John Rogers and A. W. Thomson,” was also a memorandum in the haud writing of John Rogers, late clerk, who, as well as Anderson, is dead. There is also the following indorsement, without date, “ Received $13 90, attorney’s and my cost. (Signed) B. Johnson, sheriff,” Thomson took a confession from Palmer for $909 69, April 17th, 1842, on a note dated January 1st, 1841. Judgment against Thomson was obtained on a note indorsed by him in Bank, dated October 12th, 1841, which judgment he paid off, amounting, as before stated, to $674 66. The commissioner has allowed him the benefit of the first mentioned judgment to the extent of this payment, and I cannot say that there is not some intrinsic evidence in the circumstances favoring this conclusion. Still, it must be remembered this is a claim touching the rights of other creditors of the estate, and should be well supported. It is true, every party to the transaction is dead, except Hern-don, Thomson and Clowny, and the latter may be interested. Still I think there must be better evidence, accessible. Has the Bank been examined to shew that the indorsement of 1841 was in renewal of that of 1828? Upon the present evidence I should (but with great hesitation) incline to sustain the commissioner’s conclusion. I could not say it was grossly erroneous. If creditors wish to investigate the matter furlhfer, they may go before the commissioner. If not, the exception is overruled.
    2nd. The creditors’s second exception is, “ because the commissioner ought to have charged the estate with the costs on the suits at law, brought by the creditors against the executor, as a preferred debt, or at least of equal degree with the demands upon which the costs accrued. And if the estate is not chargeable, the executor is liable, personally, for costs. First, for the preferred debts, inasmuch as there were ample funds known to the executor to pay the debts; and, secondly, he is liable, on the grounds of his plea and defence in all the cases.” Connected with this, is the plaintiff’s 2d exception. “ Because the commissioner has charged the estate of Jeffrey Palmer with $382 12-|, the costs of the plaintiffs, incurred in about twenty-five suits, which plaintiffs had sued at law after they were enjoined by the order of this Court, and most, if not all of them, had rendered their demands to the commissioner of this Court under the orderalso, his third exception, “ because the funds of an insolvent estate are not liable for costs incurred by creditors suing the estate; hut the creditors thus suing, must pay the costs out of their share of the funds of the estateand his seventh exception, “because the report should have appropriated a fund to pay the costs in this case, and the costs to which the executor was put in defending himself in some twenty or twenty-five cases, in which the commissioner has taxed the costs of the plaintiffs, as stated in his report.”
    The fact is, the commissioner has made no decision or recommendation, either as to the costs of the case or any other costs, and the exceptions are intended to elicit a judgment from the Court upon the subject. There is no difficulty as to the costs of this case. They must be allowed out of the estate, and the commissioner is so instructed. With respect to the suits at law there is more difficulty. The testator died 14th July, 1842. 'The executor qualified 13th January, 1843. His first bill was filed 14th June, 1843, for leave to sell the real estate, in order to pay the creditors, on which, of the samedate, Chancellor Johnson passed an order that a rule be published for three months, requiring testator’s creditors to bring in and establish their demands by the first of the succeeding December. What suits had been brought before this order does not appear, but there is a list of suits brought, seven in number, and on simple contract debts, the 6th and 23d September, 1843. To six of them, the executor pleaded the general issue, and gave notice of the plea of flene administravit, but did not put in the plea. To the seventh, which was a Summary Process, he pleaded the general issue and gave notice of the plea of flene administravit prater, and decree passed for plaintiff. On 23d February, 1845, writs were lodged in some other cases on preferred or specialty debts; in one of which, no plea was put in: in the other six, the plea was the general issue. None of these creditors were actually enjoined from bringing their suits, although they were required to establish them before the commissioner. I do not think they can legally be made liable for the costs. From the pleadings, the executor was, in most of the cases, liable for them personally. But I think, under the difficulties of his position, as disclosed in the previous stages of this litigation, his conduct must be held to have been that of a faithful trustee, and he is entitled to these costs out of the estate. In other words, the first alternative of the creditors’s second exception, presents the true rule in this case.
    It is ordered that the foregoing opinion stand as the decree on the several exceptions.
    It is further ordered, that the report be recommitted, to be reformed according to this judgment.
    In obedience to the above order of his Honor, Chancellor Johnston, re-committing the report to be reformed, the commissioner made a second report, which came up, on exceptions, before his Honor, Chancellor Dunkin, in June, 1849, who pronounced the following decree.
    Dunkin, Ch. This cause was heard on the commissioner’s report, prepared under the decree of Chancellor Johnston. The exceptions are substantially the same as those made to the former report, which were heard by Chancellor Johnston, and on which he has pronounced a decree. It seems to me to be a great abuse to put parties to the expense of two sets of exceptions, two reports of the commissioner, upon the same exceptions, and the trouble of investigating the matter, simply to ascertain that the points have been made, and have been determined by a preceding Chancellor, whose judgment is conclusive until reversed by a higher tribunal. A difficulty may sometimes occur as to the time at which the appeal should be taken, but no such difficulty exists in this case, and, moreover, the practice to which the Court has adverted, affords no aid or protection, if the party or his solicitor has erred in judgment.
    It is ordered and decreed that the exceptions be overruled, and that the report of the commissioner be confirmed and become the judgment of this Court.
    The complainant appeals in this case from the decrees made by Chancellors Johnston and Dunkin, and will insist on the same grounds in the Court of Appeals, that were taken as exceptions to the reports of the commissioner made in the case.
    The creditors also appealed, on the following grounds, viz:
    1st. Because the executor of J. Palmer is liable, personally, for the costs of the suits at • law, by his false pleas and unnecessary defence.
    2d. Because the executor of Palmer ought not to be allowed the judgment of John Anderson and other vs. Daniel Palmer and Jeffrey Palmer. There is evidence on the fi. fa. in this case that it has been satisfied, and there is no evidence of any connexion between this judgment and the note indorsed by the executor for J, Palmer, which was many years after.
    
      Thomson, for complainant.
    
      Herndon, for the creditors.
    
      
       For a full understanding of this and the 7th exception, see this case as reported, 3 Rich. Eq. 33. R.
    
   Johnston, On.

delivered the opinion of the 'Court.

Though the subjects embraced in this appeal are numerous, it is deemed necessary to take notice of only the three or four of them that were regarded of importance in the argument.

And, first, the claim of Reeves as surety of the testator. The opinion expressed in the decree of June, 1848, meets the approbation of this Court. We deem it unnecessary to add any thing to the reasoning of the Chancellor on this point: and merely refer, for additional authority, to the case of King vs. Aughtry, (3 Strob. Eq. 149) in which a surety who paid off a joint judgment against himself and his principal, after the principal’s death, was declared entitled to have it set up, in equity, against his estate.

With respect to costs. This Court is satisfied that the direction to allow the costs of this suit out of the estate was correct, and according to usage. With regard to the costs incurred at law, by both parties, it is necessary to distinguish between those incurred before, and those incurred after the 15th-of June, 1843. It now appears that, after the order of the 34th of June, 1843, which was brought to the view of the Chancellor, (and which merely provided for calling in the creditors,) another order, dated the next day, was passed by Chancellor Johnson, enjoining them from proceeding at law. The creditors who sued after that order, were in contempt; and, so far from being entitled to ask this Court to give them costs, are liable to an order that they pay all the costs, of both parties, in those suits: and it is so ordered.

With respect to costs of suits brought before the order of injunction, the determination must depend upon other principles. It is ruled at law, in .the case of Hutchinson vs. Bates, (1 Bail. 111) that the cost part of judgments obtained against insolvent estates, (such as this of Palmer, which with the addition of the realty, is not good for hardly a tenth part of the debts) forms no part of the judgment against the assets. To allow them that effect, would not only entitle the suing creditor to take the proportion of assets properly assignable to his demand, but to absorb the proportions of other creditors, in payment of his costs.

Upon the principles of that case, the creditors who sued at law before the injunction, are not entitled to their costs out of the estate. If any of them are entitled to them against the executor personally, it must be owing to his mis-pleading, (of which the commissioner will enquire, on further reference;) and, in that case, he must bear the consequences.

The view now taken, shows that the allowance to the executor of his costs at law, out of the estate, was unnecessary and improvident, and so much of the decree is overruled.

The only remaining question relates to the judgment, the lien of which is claimed by the plaintiff, in consequence of the payments made by him to the Bank as surety of his testator. In the investigation, which the Chancellor allowed to be made at the instance of creditors, the burden of clearing up the transaction should have been thrown on the plaintiff; and it is so ordered.

It is ordered that the decree of June, 1848, be reformed according to this opinion, and in all other respects that it be affirmed : that the decree of Chancellor Dunkin be set aside; and that the reports be re-committed to the commissioner for further investigation upon the points above indicated, aad to be reformed according to the foregoing directions.

Dunicin and Dargan, CO. concurred.

Decree reformed.