Case Name: Fiscus, Administrator, v. Moore
Court: Supreme Court of Indiana
Jurisdiction: Indiana
Decision Date: 1890-01-29
Citations: 121 Ind. 547
Docket Number: No. 15,048
Parties: Fiscus, Administrator, v. Moore.
Judges: 
Reporter: Indiana Reports
Volume: 121
Pages: 547–563

Head Matter:
No. 15,048.
Fiscus, Administrator, v. Moore.
Decedents’ Estates. — Administrator’s Sale to Pay Debts. — Heir’s Share of Proceeds. — Set-Off of Against Debt Due Estate. — Creditors.—A debt due the estate of an intestate from an heir may be retained out of his distributive share of the surplus proceeds of real estate, which has been regularly sold in order to make assets to pay debts, as against one who took a mortgage on the undivided interest in the land sold, the mortgage having been taken pending the settlement of the estate, with knowledge of the indebtedness of the heir. Olds, J., and Berkshire, J., dissent. Ball v. Oreen, 90 Ind. 75, modified.
Same. — Eight of Heirs. — Lien-Holders with Notice. — The right of heirs to participate equally in the estate of their ancestor is superior to that of a lien-holder with notice.
From the Decatur Circuit Court.
J. S. Scobey, for appellant.
W. A. Moon, for appellee.

Opinion:
Mitchell, C. J.
— William Fiscus, late of Decatur county, died intestate, in February, 1885, leaving a widow and seven children to whom his real estate descended as tenants in common. After the death of the intestate Marion Fiscus, one of the heirs, who' was indebted to the estate in a large amount, executed a mortgage, on his individual interest, in certain real estate which he inherited from his father, to secure an individual debt due from him to William A. Moore, the latter having at the time full and complete notice of the debt due from the mortgagor to his father's estate. Subsequently the administrator, by due proceedings for that purpose, obtained an order of the probate court, and sold all the real estate for the purpose of making assets for the payment of debts owing by the intestate. After paying the debts there remained $2,500 of the proceeds of the sale of real estate in the administrator's hands for distribution, but the distributive share of Marion Fiscus was much less than the amount of his debt due the estate. Moore, as the mortgagee, applied to the court for an order on the administrator requiring him to pay the amount of the mortgage debt out of the proceeds of the sale of the land upon which he had taken a mortgage from Marion Fiscus. The order was made accordingly.
The question for decision is whether a debt due from an heir can be retained out of his distributive share of the surplus proceeds of real estate which has been regularly sold in order to make assets to pay debts, as against one who took a mortgage on the undivided interest of the heir in the land sold, the mortgage having been taken pending the settle ment of the estate, with knowledge of the indebtedness of the heir.
That the indebtedness of an heir, or distributee, constitutes part of the assets of the estate, which it is the duty of the administrator to collect for the benefit of the creditors, and other distributees, and that such indebtedness may be deducted from the distributive share of the debtor, are well settled propositions. The right of the administrator to deduct the indebtedness due from a distributee is usually denominated a right of set-off. But, as Lord Cottenham remarked in Cherry v. Boultbee, 4 Mylne & Craig, 442, " the term ' set-off' is very inaccurately used in cases of this kind. In its proper use, it is applicable only to mutual demands, debts and credits. The right of an executor of a creditor to retain a sufficient part of a legacy given by the creditor to the debtor, to pay a debt due from him to the creditor's estate, is rather a right to pay out of the fund in hand than a right of set-off. Such a right of payment, therefore, can only arise where there is a right to receive the debt so to be paid; and the legacy or fund, so to be applied in payment of the debt, must be payable by the person entitled to receive the debt." LaFoy v. LaFoy, 43 N. J. Eq. 206.
The ground upon which an administrator is entitled to retain so much of the distributive share of a distributee as will satisfy a debt due from the latter to the estate is, that the heir or distributee makes a demand upon the administrator in respect to assets in his hands as administrator, and the just and equitable answer in such a case is that the person making the demand has already in his hands assets belonging to the estate in excess of the amount of the distributive share which he is demanding. Jeffs v. Wood, 2 P.Wms. 129; Courtenay v. Williams, 3 Hare, 539 (552); Ramsour v. Thompson, 65 N. C. 628; Woerner Law of Administration, section 564.
Thus, in Waterman on Set-Off, section 210, it is said ; " The right of the executor or administrator to retain in such cases depends upon the principle that the legatee or distrib utee ' is not entitled to his legacy or distributive share, while he retains in his own hands a part of the fund out of which that and other legacies or distributive shares ought to be paid.' " And, in Ranking v. Barnard, 5 Madd. Ch. 28, the court said, in substance, that it was clear the executor had the right to satisfy the legacy by applying the funds in his hands, and that this right existed against an assignee of the legatee as well as against the legatee himself.
It is contended, however, that the right to retain the amount of a debt due from a distributee to the estate, out of his distributive share only obtains in case the fund to be distributed arises out of the personal estate, and that it does not apply when real estate has been sold and the fund for distribution is derived from that source.
We can perceive no reason for such a distinction. Of course, where the administrator of an estate holds a claim, as such, against one of the heirs or distributees, he is entitled to avail himself of all the rights and remedies ordinarily available to any other person under like circumstances ; no greater and no less.
If the administrator is driven to pursue the ordinary remedy to collect a debt due the estate from an heir, he stands like any other creditor, and is put to a race of diligence with others; but if in the proper course of administration, funds which constitute assets of the estate come into his hands by operation of law, which he holds as administrator, in the distribution of which an heir or legatee asserts a right to participate, it is always a sufficient answer that the claimant has. already in his hands more than his share of the assets of the estate.
A proceeding by an administrator to acquire priority in respect to real estate which has descended to the heir, so as to charge upon it a debt due the estate, is one thing, while a proceeding by an heir or his grantee to compel the administrator to pay money which he holds in the capacity of ad ministrator, is quite another, in case the heir has already received all he is entitled to out of the estate.
The distinction is clearly drawn in LaFoy v. LaFoy, supra. In that case a bill was filed for partition of real estate among certain devisees. An attempt was made to charge the share of one of the devisees with the amount of a debt due from him to the estate of the testator. In an opinion holding that this could not be done, the court says : " The devisee of lands occupies no such relation to the executor as that which exists between legatee and executor. No act is necessary, on the part of the executor, to put the devisee in full enjoyment of the estate devised. The opportunity, therefore, could not arise for the executor to retain the debt of the devisee to the testator out of any demand which the devisee might seek to enforce against the executor." It was very properly held that inasmuch as the executor could only acquire a lien upon the land devised, by becoming an actor, and instituting pro-need ings appropriate to that end, the debt could not be so charged in a partition proceeding. Campbell v. Martin, 87 Ind. 577, is distinguishable from the present case upon the same principle.
In Smith v. Kearney, 2 Barb. Ch. 533, it was held that the fund which the executor sought to retain did not come to his hands in the character of executor, but merely as an accident, and that the right of set-off did not obtain ; for that reason there is nothing in that case opposed to our conclusion in the present case.
Any reasoning which fails to appreciate the distinction between an attempt to enforce a lien or charge upon the real estate which has descended to an heir by an independent proceeding, and an attempt by an heir who is indebted to the estate, or by his assignee or mortgagee, to compel the payment to him of a distributive share which has come into the hands of the administrator by operation of law, must necessarily lead to a conclusion that is " wide of the mark."
As has been seen, the present is a case where real estate has been sold, in the regular process of administration, for the purpose of making assets with which to pay claims against the estate. Now, if the heir, or his assignee, or a purchaser from him, were here claiming a distributive share of the personal assets of an estate, and at the same time retaining, by an indebtedness, a much larger part of the assets than the amount of his claim, there could be no question of the administrator's right to withhold the distributive share and apply it on the debt due the estate.
Can it make any difference that the assets arose from the sale of real estate, especially in a case where it appears that the assignee or mortgagee knew of the indebtedness when he acquired his lien upon or interest in the land ? In the recent case of Koons v. Mellett, post, p. 585, it was held, after full and careful consideration, that one who had obtained a judgment against a devisee of real estate, which was after-wards sold in pursuance of the terms of the will, acquired no better right to participate in the proceeds than the devisee himself had, and that the administrator, with the will annexed, had the same right to set off a debt due from the devisee to the estate as if the latter himself were claiming to participate in the fund. Manifold's Estate, 5 Watts & Serg. 340; Springer's Appeal, 29 Pa. St. 208; Strong v. Bass, 35 Pa. St. 333; Nickerson v. Chase, 122 Mass. 296; Askew v. Douglass, 3 Atl. R. 263; Snyder v. Warbasse, 11 N. J. Eq. 463; Smith v. Smith, 13 N. J. Eq. 164. The principle which ruled the cases cited is decisive of our judgment in the present case.
While it is quite true, as is contended, that upon the death of the ancestor the title to real estate descends to and vests in the heir, the fact must be kept in view that unlike the rule at common law the heir, according to the terms and policy of the statutes in this State, does not take an absolute title. Pending the settlement of the estate of his ancestor, the descent is subject to be intercepted and the title divested whenever the personal representatives make it appear that the sale of the land is necessary to make assets for the payment of the ancestor's debts. The statute not only gives the administrator the right, but makes it his duty, when the personal property is not sufficient, to convert the real estate into assets for the payment of debts. Where this right is asserted, and the lands are sold and conveyed, the title to the land which descended to the heir is completely divested. And although the heir may have sold and conveyed the land, the conveyance made by an administrator under the order of the court is not in anywise affected or impaired by the previous encumbrance or conveyance by the heir. This conclusion logically results from the fact that under the statutes of our State the real and personal property of an intestate descend to the same persons and in the same proportions, and both are equally chargeable with the payment of his debts, with the exception that the personal estate must be exhausted first. Nelson v. Murfee, 69 Ala. 598.
At the common law the title to real property vested absolutely in the heirs upon the death of the ancestor, and was not subject to be made assets for the payment of debts. Under the statute in force here it is as completely subject to the debts of the intestate as is the personal estate ; and even though the administrator waste the personal estate a purchaser of the real estate from an heir is not protected. Nettleton v. Dixon, 2 Ind. 446.
It is not in the power of a third person to impair, or embarrass the personal representative in the settlement of an estate by dealing with the heirs, upon the supposition that their interest is of a certain or fixed character. Nor can the other heirs be deprived of some portion of their estate by the intervention or intermeddling of a stranger, so as to destroy the equality of descent and distribution.
The right of heirs to participate equally in the estate of their ancestor is superior to that of a lien-holder with notice. Foltz v. Wert, 103 Ind. 404 (411); McCandless' Appeal, 98 Pa. St. 489.
It frequently happens that the assets of an estate consist largely of debts due from the heirs to the ancestor. If it were possible for an heir, immediately upon the death of his ancestor, to convey or encumber his interest in the real estate, so that after paying the debts of the ancestor, his grantee or mortgagee might participate in the surplus equally with other heirs who had received, or who owed the ancestor nothing, the most manifest injustice and inequality would result. The law always presumes that an ancestor meant that his heirs should share equally in his estate. Ruch v. Biery, 110 Ind. 444 (449).
As was pertinently said in effect in Weakley v. Conradt, 56 Ind. 430, a purchaser acquires precisely the right and interest which the heir has from whom he takes a conveyance ; nothing more nor less. Duvall v. Speed, 1 Md. Ch. 229; Baker v. Griffitt, 83 Ind. 411.
Until the estate is finally settled he is bound to know that the sale of real estate may become necessary in order to make assets for the payment of debts, and he is bound to know that when the land is converted into money, by operation of law it becomes money assets in the hands of the administrator, and that it is subject to all the incidents of other assets, regardless of the source from which they arise.
For certain purposes the administration and distribution money thus acquired may be treated as having the qualities, and as the representative, of the real estate, but it is nevertheless money which has come into the hands of the administrator by operation of law in the course of administering the estate.
Any procedure which the heir or his grantee or assignee may institute to get it out of the administrator's hands, brings into operation and makes available to the latter any right of set-off, or to retain it as against any legitimate debt owing by the heir to the estate, through whom he claims as assignee. Johnson v. Hoyle, 3 Head, 56.
The claim of the assignee is not a claim to an interest in land, but it is a claim to an interest in the assets of the estate ; whatever interest he has is an interest in the estate, and he takes that interest precisely as his assignor held it.
Filed Jan. 29, 1890.
The doctrine of Ball v. Green, 90 Ind. 75, is opposed in some respects to the conclusions reached in Koons v. Mellett, supra, and in the foregoing opinion, and to that extent must be deemed modified.
The judgment is reversed, with costs, with directions to the court below to proceed in consonance with this opinion.