Case Name: Muldoon, &c. v. Crawford's Administrator, &c.
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1878-06-25
Citations: 14 Bush 125
Docket Number: 
Parties: Muldoon, &c. v. Crawford’s Administrator, &c.
Judges: Chief Justice Lindsay dissenting.
Reporter: Kentucky Reports
Volume: 77
Pages: 125–133

Head Matter:
Case 20 — PETITION EQUITY
June 25.
Muldoon, &c. v. Crawford’s Administrator, &c.
APPEAL EROM LOUISVILLE CHANCERY COURT.
1. Liabilities oe decedent as executor, administrator, guardian, or committee of an idiot or lunatic are to be paid out of the proceeds of real estate sold under an order of the chancellor, in a suit brought by his personal representatives for the settlement of his estate, in preference to other liabilities of the decedent.
2. Proceeds oe real estate sold under a judgment rendered in A SUIT EOR THE SETTLEMENT OE A DECEDENT’S ESTATE, as between creditors of the decedent, are regarded as legal assets, and debts owing by the decedent as executor, administrator, guardian, or committee, on account of estate committed to his hands by a court of record are entitled to priority of payment out of the proceeds of real estate as well as out of the personal estate.
3. Where preference is given to a debt on account oe its character, it does not lose its character when paid by a surety, but retains in his hands the same equitable claim to priority which it had before it was paid.
4. Sureties in decedent’s bonds as executor, administrator, guardian, or committee, who, after his death, have been compelled to dis charge his liability thereon, have a right to be substituted to the preference, to which those to whom they have made payment were entitled.
JOHN B. COCHEAN for appellants.
1. The rule of priority established by section 33, chapter 37, Eevised Statutes applies only to proceeds of personal estate and such funds as come to the'hands of the administrator in virtue of his office.
This rule results from the fact that the only priority established by law is found in said section 33, and as said section is in the chapter devoted to administrators, it is clear that it only speaks of and refers to such property and' effects as usually and legally go into the hands of the administrator.
This conclusion is fortified by section 26 of the same chapter, which expressly provides that an estate held for the life of another shall go to the administrator, and be applied and distributed as personal estate.
2. The act of 1839 was repealed by the Eevised Statutes and the Civil Code of 1854.
3. As to the power and duties of administrators, see Manion’s adm’r v. Lambert’s adm’x, 10 Bush, 297; Eank v. Hill’s adm’r, 8 Bush, 67; Payne v. Pusey, 8 Bush, 567; Herndon v. Lancaster, 6 Bush, 485; Heeter v. Jewel, 6 Bush, 510.
4. The distinction between legal and equitable assets has not' been abolished in this state. (Heeter v. Jewell, 6 Bush, 510.)
5. “ Legal assets are those which the executor takes by operation of law, and which creditors could attach in a court of law. Equitable assets are those which the executor takes by an express charge of the testator, and which a creditor could only reach through a court of equity. Assets are thus denominated legal or equitable according to the kind of remedy open to the creditor, and not according to their own nature.” (Wigram on Wills, 353.)
6. The question in this case is not whether the fund in controversy is “ legal or equitable assets, but whether the proceeds of real estate are subject to the same rule of priority as are the proceeds of personal estate. There is positive law for subjecting the latter and none whatever for subjecting the former, and therefore it is insisted that appellees are not entitled to the priority adjudged by the lower court. (Story’s Eq., sec. 551; Williams on Executors, 1198; Grider v. Payne, 9 Dana, 188.)
JOHN B. COCHEAN and J. F. BULLITT filed petitions for a REHEARING, WHICH WERE OVERRULED.
E. W. C. HUMPHEEY for Eobert N. Miller and Jos. Mitchell, sureties of Crawford.
1. In the distribution of an estate of an insolvent decedent, the wards of such decedent are entitled to priority in the distribution of the proceeds of real as well as personal estate. (Acts of 1705, Virginia, 3 Henning, 375; Act of March 1, 1797, Guardian and Ward, 1 More-head & Brown, 770; Act of February 24, 1797, Executors and Administrators, section 52, 1 Morehead & Brown, 669; Act of February 20, 1839, Settlement of Estates, Loughborough, 240; Act of March 10, 1856, Fraudulent Assignments, etc., sections 2 and 7,1 Eev. Stat. 554-6; Eev. Stat., chap. 37, art. 2, secs. 33-4-5; Gen. Stat., chap. 39,.art. 2, secs 33-4-5; Civil Code, sec. 465; New Code, sec. 428.)
2. Cases decided under act of February 20, 1839, Loughborough, 240; Commonwealth v. Barstow, 3 B. Mon. 290; Fitzhugh v. Fitzhugh, 6 B. Mon. 4; Bull v. Bull, 8 B. Mon. 332; Schoolfield v. Eudd, 9 B. Mon. 291; Curie v. Curie, 9 B. Mon. 309; Place v. Oldham, 10 B. Mon. 400.
3. Cases decided under sections 33-4-5, article 2, chapter 37, Eevised Statutes. (White v. Carrico, 2 Met. 232; Salter v. Salter, 6 Bush, 624; Martin, Cobb & Co. v. Curd, 1 Bush, 327.)
4. “ The best and surest mode of expounding an instrument is by referring to the time when and circumstances under which it was made.” This maxim is often applied in the construction of statutes. (Broom on Legal Maxims, 502.)
5. “ No interpretation of a statute can be admitted which is inconsistent with the language'of the act fairly understood and considered with reference to the previous state of the law, nor any which, although consistent with the words used, can not give them some reasonable operation.” (Potter’s Dwarris on Stat. 207, 218, 209, note 23.)
6. It is an established rule of statute construction to look beyond the letter of the act, and to ascertain the intention of the legislature from the context, the subject-matter, the effects and consequences, the reason and spirit of the law. A technical construction is forbidden.” (Eev. Stat., chap. 21, see. 16; Gen. Stat., chap. 21, sec. 16; 1 Kent’s Com. 461-2, s. p.; Mason v. Bogers, 4 Litt. 377.)
7. “ For the sure and true interpretation of all statutes in general, four things are to be discerned and considered: 1. What was the common law before the making of the act; 2. What was the mischief and defect against which the common law did not provide; 3. What remedy the legislature hath resolved and appointed to cure the mischief; 4. The true reason of the remedy. (Potter’s Dwarris on Stat. 184; 1 Kent’s Com. 464, s. p.)
8. Long acquiescence in the construction of a statute is strong evidence that such construction is true. (Eobinson v. Swope, 12 Bush, 24-5.)
9. Where a law antecedent to a revision of the statutes has been settled by judicial construction, such construction should be given to the regulation on the same subject in the revision unless there is a manifest intention of the legislature that a different one should prevail. (Yates’s case, 4 Johnson; Overñeld v. Sutton, 1 Met. 621; Allen v. Ramsey, 1 Met. 637.)
10. The true distinction between legal and equitable assets is to be found, not in the character of the property, nor in the nature of the forum, nor in the remedy of the administrator, but in the remedy of the creditor. (2 White & Tudor’s Leading Cases in Equity, Silk v. Prime, 88 notes, side-page; 2 Williams on Executors, 1520, side-page; Snell’s Principles of Equity, 502; Smith’s Manual of Equity, 267.)
11. “In distributing legal assets equity follows the law and respects legal priorities, but where assets are the growth of equitable jurisdiction and the fruit of equitable principles, equity will pursue its great law of equality in proceeding to their distribution. (2 Tudor & White’s Leading Cases in Equity, Silk v. Prime, 88 notes, side-page ; 1 Story on Equity, sections 553-4; Adams on Equity, 256, side-page.)
12. The common-law rule as to liability of real estate to payment of debts restricted such liability within a narrow compass, i. e. where the heir was expressly bound with the ancestor by specialty. But where there was a devise charged with or for the payment of debts, a creditor couid subject the land in equity, the devise being held to create an equitable trust. (Adams on Equity, 253-4-5, side-pages.)
13. Whenever real estate is by statute made liable for the payment of debts of the decedent, then it constitutes legal assets, which must be distributed according to the legal rules of priority. (1 Story on Equity, section 552 a; Adams on Equity, 253 note, 254 note, side-pages; 3 Red-field on Wills, 134, 237-8; Bloodgood v. Bruen, 2 Bradford’s Surrogate, 8; McCandlish v. Keen, 13 Grattan, 633; Goodchild v. Ferret, 5 Beavan, 398; Charlton v. Wright, 12 Simons, 274; Lovegrove v. Cooper, 2 Smale & Giffard, 271; Bull v. Bull, 8 B. Mon. 332.)
YOUNG & BOYLE on same side.

Opinion:
JUDGE COFER
delivered the opinion of the court.
But two questions are presented for decision on this appeal:
1. Are liabilities of a decedent as executor, administrator, guardian, and committee of an idiot or lunatic to be paid out of the proceeds of real estate, sold under order of the chancellor in a suit brought by the personal representative for a settlement of the estate, in preference to other liabilities of the decedent, or are such proceeds to be distributed in such manner as to produce, as nearly as possible, equality among all the creditors of such decedent?
2. If such preference exists as to the proceeds of the realty, have those who were sureties for the decedent upon his bond as executor, administrator, guardian, or committee, and who, after his death, have been compelled to discharge his liability thereon, a right to be substituted to the preference to which those to whom they have made payment were entitled?
1. Section 33, article 2, chapter 39, General Statutes, which, so far as it affects this case, is the same as section 33, article 2, chapter 37, Revised Statutes, in force when the rights involved in this decision accrued, provides that if the personal estate of a decedent be not sufficient to pay his liabilities, then the burial expenses of such decedent, and the cost and charges of the administration of his estate, and the amount of the estate of a dead person, or of a ward, or of a person of unsound mind, committed by a court of record to and remaining in the hands of a decedent, shall be paid in full before any pro rata distribution shall be made, and that all other debts and liabilities shall be of equal dignity, and paid ratably in the administration of his estate.
This section speaks only of personal estate, and can not, by its own force, extend to and include the proceeds of real estate sold by order of the chancellor for the payment of debts which can never lawfully come to the hands of a personal representative by virtue of his office for the purposes of administration. And there is no statute now in force in this state which in terms regulates the administration of the proceeds of the real estate of a decedent. "We must therefore determine the question under consideration by the rules of equity.
Equality is equity, and the chancellor who regards all debts as in conscience equal, and therefore equally entitled to be paid, will, in the administration of equitable assets, so distribute them as to produce as nearly as possible equality among .all the creditors. (Story's Equity, sec. 553.) But in the ad ministration, of legal assets, courts of equity follow the rules of law, and give the same priority to the different classes of creditors which is enjoined by the law. (Ibid. 553.)
If the proceeds of real estate sold in an administration suit are to be regai'ded as equitable assets, then the chancellor, following his own favorite maxim, "equality is equity," will, in a case like this, distribute the personal assets under the statute supra, in the payment of the liabilities of the decedent as executor, administrator, guardian, or committee, and then out of the proceeds of the realty, make all other creditors equal to those preferred in the distribution of the personal estate; and having thus made all equal, will distribute the residue pari passu among all classes of creditors. But if the proceeds of realty are legal assets, then the chancellor must follow another of his maxims, " equity follows the law," and give the same priority in the administration of the proceeds of the realty which the law gives in the administration of personal assets.
The question to be decided, then, is whether the proceeds of land sold under a judgment rendered in a suit for the settlement of an estate are legal or equitable assets.
Counsel for the appellants insists that such proceeds are equitable assets, and cites Story's Equity, section 551; Williams on Executors, 1198; and Grider v. Payne, 9 Dana, 188, in support of that view, while appellees' counsel insist that since land has been declared by statute to be subject to the payment of debts of all grades, it is legal assets.
The case of Grider v. Payne was unlike this, and was not decided on the ground that the proceeds of land sold under the statute were equitable assets. The facts were these: Payne was the surety of Grider & Campbell in a replevinbond to the Bank of the Commonwealth. Grider and Campbell both died and Payne paid the debt. Campbell left a will in which he charged his real estate with the payment of his debts, and his estate proving insufficient for that purpose, Payne claimed to be substituted to the rights of the bank, and in that way asserted priority over the other creditors to the extent of the debt he had been compelled to pay to the bank as the surety of Grider & Campbell. That claim was based on a clause in the charter of the bank which provided that, in the administration of estates, debts due to the bank should be of superior dignity, and be first paid by executors and administrators.
The court held that the power given in the will, to sell the testator's real estate for the payment of his debts generally, raised a trust for the purpose specified, and that the proceeds of the realty were therefore equitable assets and distributable pari passu among all the creditors, and that as the language of the charter only embraced executors and administrators in the direction to prefer the bank to other creditors, it only gave the bank priority of payment out of the legal assets.
The decision was not based on the ground that the proceeds of the land were equitable assets because they arose from the realty, but because the will, having directed the land to be sold to pay debts, charged it with a trust, and because of the trust the assets were equitable. This was in accordance with a long line of precedents holding that the proceeds of land charged by the decedent with the payment of debts were equitable assets. (1 Story, section 552; Bispham's Equity, section 532.)
It is true that legal assets are in a certain sense a trust fund, and that they are so is the foundation of the jurisdiction of courts of equity to compel their application to the purposes of the trust, that is, to the payment of debts, and the surplus, according to the directions of the will, if there be one, and if not, then according to the statute of distributions. Such a trust is created by the law, and must be executed as the law directs, and as the law has prescribed the order in which debts are to be paid, the chancellor will follow that order just as he will iu other cases follow the directions of the maker of the trust in its execution.
But when a decedent has devised his real estate to be sold to pay his debts, or has charged his debts upon his real estate, he is the maker of the trust, and unless there be some rule of law to control his action, the chancellor will execute the trust according to the directions contained in the will; and in the absence of any directions in the will or rule of law to the contrary, he will distribute according to the equitable maxim, and pay the debts ratably. Since our statute has made land subject to all the debts of the decedent, it has been held that a debtor could not, by charging his debts upon his real estate by will, give creditors a preference to which they would not otherwise have been entitled, and in so holding the court gave an intimation at least that land is to be regarded now as legal assets. (Bull v. Bull, 8 B. Mon. 332.)
Judge Story says that legal assets are such as come into the hands and power of the personal representative, or such as he is entitled to, virtute officii, to dispose of in the course of administration. In other words, whatever an executor or administrator takes qua executor or administrator, or in respect of his office, is to be considered legal assets. But he does not say that nothing else is to be regarded as legal assets; but on the contrary says expressly that when real estate is by statute made liable for the payment of debts, then it constitutes legal assets (Story's Equity, sec. 552, a); and that view is sustained by the opinion of the Court of Appeals of Virginia in McCandlish v. Keen, 13 Grattan, 633, and also by Goodchild v. Ferrett, 5 Beavan, 398, and Charlton v. Wright, 12 Simons, 274; and in Lovegrove v. Cooper, 2 Smale & Giffard, 271, it was distinctly decided that the proceeds of land made subject by statute to the payment of debts, and which had been sold under a decree in a creditor's suit to settle the estate, were legal assets.
These authorities, we think, warrant the conclusion that for the purpose of ascertaining the right of priority as between creditors of a decedent, the proceeds of his real estate must be regarded as legal assets, and it follows from that conclusion that debts owing by a decedent as executor, administrator, guardian, or committee, on account of estate committed to his hands by a court of record, are entitled to priority of payment out of the proceeds of real estate as well as out of the personal assets.
2. The second question seems to be settled by the opinion of this court in the case of Schoolfield v. Rudd, 9 B. Mon. 291. It was there held that when preference is given to a debt on account of its character, it does not lose its character when paid by a surety, but retains in his hands the same equitable claim to priority which it had before it was paid, and it was accordingly held that the surety of an administrator, who, after the death of his principal, had been compelled to pay money due from his principal as administrator, had the same right to priority that the persons had to whom he made payment.
The judgment of the court below conforms to these views, and must therefore be affirmed.
Chief Justice Lindsay dissenting.