Court Opinion

ID: 9339714
Source: CourtListenerOpinion
Date Created: 2022-12-16 19:24:14.867199+00
Date Added: 2024-06-11T17:15:20.764211
License: Public Domain

The Chancellor.
There are two leading questions presented by the demurrer. The first is a question of jurisdiction between the court of chancery and the probate court. The second relates to the rights of the joint and separate creditors of persons composing a partnership. The latter will be first examined. I consider the law well settled upon principles of equal justice and solid reason, that upon the death of one of several partners, a joint creditor has no claim for the payment of his debt out of the separate estate of the deceased partner, until the claims of the separate creditors have been first satisfied. It is true that joint creditors may come into equity to enforce their claim against the estate of a deceased partner, and equity will then consider the claim, as it is considered at law, both joint and several; but this can only be done where the claims of the joint creditors do not come in conflict with those of the separate creditors. In such case the priority of the separate creditors is always preserved. Upon the death of one partner the claim of joint creditors survives against the surviving partner, and is extinguished at law against the estate of the deceased partner, to which they can only resort through the aid of a court of equity, where the advantage thus thrown by accident upon the separate creditors will be preserved. And in such case it makes no difference that the surviving partner is insolvent, if the assets to be administered are purely legal; the separate creditors having acquired a priority at law, and having equal equity, that priority will be preserved. For where the equities are equal the legal right must prevail. A different rule obtains where the assets are purely equitable, and where therefore, both joint and separate creditors would have to seek the aid of a court of equity. In such case neither party having a legal preference, and the surviving partner being insolvent, the claimants would be decreed to take pari passu. It may, I think, be hence laid down, that in administering upon the legal assets of an insolvent partner, his property should be applied to the payment of his private debts, and partnership claims should not be reported for a pro rata dividend. These general rules and *517principles are, I think, fully sustained by the authorities which I .have consulted. They will be found in the cases of Wilder v. Keeler, 3 Paige, Ch. R. 167. McCulloh v. Dashiell’s Administrator, 1 Har. & Gill, 96. Hall v. Hall, 2 McCord, Ch. R. 302. Ridgley v. Carey, 4 Har. & McH. 167; Morgan v. His Creditors, 20 Martin’s Rep. 599; 3 Kent’s Com. 64, 65. I may here remark, that I do not think the statute of this state, in relation to the distribution of insolvent estates, has any bearing upon this case. That statute does not in any way interfere with or change the legal rights of separate and partnership creditors. The rules upon that subject still stand where the common law has placed them.
Upon the question of jurisdiction I have much more difficulty. The decisions of the High Court of Errors, whilst they lay down a very broad and comprehensive jurisdiction on the part of the probate court over testamentary matters, seem to admit that questions may arise in connection with the administration of an estate which would be proper for the decision of a court of chancery. These admissions furnish no very definite idea, as to the jurisdiction of the court touching such matters. I must therefore continue to speculate as to what the excepted questions are, until the High Court of Errors shall lay down some rule that will furnish some more safe and certain guide. One of the cardinal rules upon which this court takes jurisdiction, and one which, perhaps, is less liable to mislead than any other, is, that a plain, adequate and unembarrassed remedy can not be had in the case in any other court. It has not, I believe, been contended, even by the broadest latitudinarian for probate court jurisdiction, that that court could settle and adjudicate upon the conflicting rights and remedies of creditors of an estate which was in the course of administration before it. Suppose the case of a creditor holding a mortgage upon an insolvent estate, which was before commissioners, who rejected his claim to priority, and reported him as only entitled to be paid pari passu with simple contract creditors. Would not this court injoin the commissioners from reporting in favor of the simple contract creditors, until the mortgage lien was first paid and discharged? Could the probate court give the mortgagee an adequate remedy in such case? I think not. The question of who are creditors, and what sum shall be allowed to each, are questions *518referred exclusively to the commissioners, and their report is, I take it, conclusive upon the case. It can do nothing but simply order distribution and payment among the creditors according to the report. How. & H. 409, sec. 80. It will thus be seen that the mortgagee in such case would be wholly remediless unless through the interposition of this court.
The case before me is entirely analagous in principle to the one supposed. The complainants claim as the separate creditors of an insolvent estate; the defendants claim as the joint creditors of a partnership firm, of which the intestate was a member. I have already shown that the complainants, as separate creditors, have a priority at law, and an equal equity with the joint creditors. It is to preserve that priority that entitles the complainants to come into this court, where the party having the legal right with equal equity Will always prevail. This constitutes an exception to the maxim, that equality is equity, in acting upon which the court turns the scale in favor of the party having the legal right.
The bill in this case is then to be regarded as a bill to marshal the assets of an insolvent estate, between separate and partnership creditors; an object involving the exercise of one of the most ancient branches of equity jurisdiction, presenting questions of priority and conflicting rights among creditors, to the adjustment of which the probate court is wholly inadequate. For if the commissioners of insolvency were permitted to report in favor of the joint creditors, I conceive the probate court would be bound under the law to declare them entitled to a pro rata dividend.
I am accordingly of opinion the demurrer must be disallowed.