Court Opinion

ID: 8037588
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:22:44.331341+00
Date Added: 2024-06-11T16:37:11.808005
License: Public Domain

Simmons, C. J.,
dissenting.
The facts of this case are not in dispute. Both plaintiff and defendant have claims which have been allowed against *853the Luce estate. Their proper allowance is not questioned. The estate is probably insolvent. Were it not, it is obvious this case would not be here. The majority opinion holds that the claim of the defendant is superior to the claim of the plaintiff, and that defendant’s claim (as well as all other allowed claims) must be paid in full before any payment can be made on plaintiff’s claim.
It must be remembered that this instrument was given in 1921. By the decision In re Estate of Griswold, 113 Neb. 256, 202 N. W. 609, it then became and was “a valid contract supported by a sufficient consideration.” (Page 271) It not only became an asset of the plaintiff at that time, but for approximately ten years thereafter during the lifetime of the maker, the plaintiff on its part continued the full performance of the consideration for the instrument. By its terms, the instrument was payable at a discount at the option of the maker at any time after its delivery. The defendant’s claim is based upon promissory notes given in 1922 and 1925 after the instrument here involved had become a binding obligation of the maker. Defendant is a subsequent creditor. The evidence, negatives any fraudulent intent on the part of any party to these transactions. Both claims are unsecured. The majority, therefore, hold that, where there are two unsecured allowed claims, based upon written instruments, which are contracts supported by a sufficient consideration, the claim, junior in time of the origin of liability, is superior, and that the junior obligation must be paid in full before the senior obligation may be paid even in part. I do not agree.
The plaintiff’s assignments of error raise the one general question as to the power of the court to classify defendant’s claim so as to make it a preferred claim to that of the plaintiff.
The proper allowance of plaintiff’s claim, as payable from the assets of the estate of deceased, is established In re Estate of Griswold, supra. Defendant, while admitting the force of this decision, contends that, although the claim of plaintiff may be good as against the heirs of the deceased, *854it is not good as against creditors who have claims based, as is defendant’s, upon money loaned to the deceased.
The applicable provisions of the Nebraska statute are as follows:
It shall be the duty of the judge “to receive, examine, adjust, and allow all lawful claims and demands of all persons against the deceased.” (Comp. St. 1929, sec. 30-601.) The court shall allow time “for the creditors to present their claims for examination and allowance.” (Sec. 30-603.) “On the application of a creditor” further time may be allowed. (Sec. 30-605.) A “claim of the deceased” may be exhibited “in offset to the claims of the creditor.” (Sec. 30-606.) The court shall fix a time for the executor or administrator to pay “the debts and legacies of the deceased.” (Sec. 30-610.) The time for the payment of “debts and legacies” may be extended. (Secs. 30-611, 30-612, 30-613.) “If, after ascertaining the claims against any estate, it shall appear that the executor or administrator has in his possession sufficient to pay all the debts, he shall pay the same in full.” (Sec. 30-614.) “If the assets * * * shall not be sufficient, he shall, * * * pay the debts * * * in the following order: First. The necessary funeral expenses, which shall be a preferred claim only, to an amount not exceeding Two-Hundred and Fifty Dollars ($250.00) for casket and services of undertaker. Second, the expenses of the last sickness. Third. Debts having a preference by the laws of the United States. Fourth. Debts due to other creditors.” (Sec. 30-615.)
“If there shall not be assets enough to pay all the debts of any one class, each creditor shall be paid a dividend in proportion to his claim, and no creditor of any one class shall receive any payment until all those of the preceding class shall be fully paid.” (Sec. 30-616.) “After the expiration of the time limited for the payment of debts,” the court shall order “the payment of the debts and the distribution of the assets * * * among the creditors, as the circumstances of the estate shall require, according to the provisions of this article.” (Sec. 30-617.) “If an appeal shall *855have been taken, and shall remain undetermined, the court =:= * * may or(jer a distribution among the creditors whose claims have been allowed, leaving * * * sufficient assets to pay” the disputed claim. (Sec. 30-618.) When the disputed claim is finally settled, the court shall order it “paid out of the assets retained, to the same extent and in the same proportion as the claims of other creditors.” (Sec. 30-619.)
It is evident that the legislature classified all demands against a deceased as “claims;” that, when allowed, they become “debts” payable from the assets of the estate, that, if the assets are insufficient to pay the debts, said debts shall be classified and paid in the order specified in section 30-615, Comp. St. 1929, and that, if there are insufficient assets to pay the debts of creditors in any one class, “each creditor shall be paid a dividend in proportion to his claim.” The term “creditor,” as used in the statute, means the person who is the claimant against the estate, and, when the “claim” is allowed, the person to whom the “debt” is payable. The statute is complete in itself and is clearly intended to cover any situation that might arise in the administration of estates in Nebraska. It necessarily follows that plaintiff’s claim as well as the claim of the defendant fall within the classification of “debts due to other creditors,” and that, if the estate of the deceased is insolvent, each creditor (including the plaintiff) “shall be paid a dividend in proportion to his claim” on a parity with, and not subordinate to, any other creditor whose debt is in that classification.
The following authorities support the conclusion above stated.
“In most jurisdictions the word ‘claimant’ is used synonymously with ‘creditor,’ and the word ‘claim’ with ‘legal demand for money.’ The word ‘claim’ is also used synonymously with ‘demand,’ or ‘debt.’ ‘Creditors of the estate’ have been defined as persons who are such or become such because of dealings or transactions with the decedent during his lifetime. Their claims are debts or obligations with the origin of which the personal representative had nothing to do. The phrase ‘creditors of the decedent’ is more appropri*856ate as a designation of such creditors, however, in order to distinguish them from persons contracting with the executor or administrator upon the credit of the latter and of the estate; for it is settled in most of the states that creditors who become such after death of the decedent need not, and cannot, present claims and must rely on the individual liability of the representative.” 3 Bancroft’s Probate Practice, 1351, sec. 753.
“ ‘Creditors’ of an estate are only those who have become such because of dealings or transactions with the testator in his lifetime, concerning whose claim the personal representative has nothing to do originally.” 3 Schouler on Wills, Executors and Administrators (6th ed.) 2361, sec. 2711, footnote 2.
“The priorities of debts are governed wholly by the law of the jurisdiction in which the representative acts and from which he derives his authority.” 24 C. J. 418.
“The common-law order of priority still exists in so far as it has not been expressly abrogated or superseded by the local administration laws; but the power of state legislatures to regulate the priorities of claims against decedent’s estates is well settled, and the common-law rules have been very generally superseded by statutes, differing widely in the various jurisdictions, classifying the debts of decedents and specifying the order in which they shall be paid, or even, sometimes, abolishing all preferences and placing all debts on an equality with respect to the right of payment. The provisions of the local statutes fixing the order of payment are mandatory; they cannot be changed or disregarded by the court or by the representative, * * 24 C. J. 420.
“In the modern administration of estates there are no priorities among creditors except as given by statute.” 24 C. J. 422.
“If an estate is solvent, there is no need for classifying its obligations according to priorities. But if solvency is doubtful and a dividend is to be declared, or if insolvency is established, the various obligations must be classified *857according to their relative standing.” 3 Bancroft’s Probate Practice, 1739, sec. 1037.
“The court, in classifying obligations of an estate, has no authority to change the order prescribed by statute.” 3 Bancroft’s Probate Practice, 1740, sec. 1037.
“We have already seen, that executors and administrators are bound, in the payment of the debts of their testators and intestates, to observe the order of priority established by law.” Woerner, The Law of Decedents’ Estates, 316, sec. 364. ■
“When the time for proving or exhibiting debts has expired, or when, in those states in which classification is determined by the time of presentation, the time for proving the preferred class has expired, it is the duty of the executor or administrator to lay before the court a complete statement of the condition of the estate, showing what assets are in his hands, and what funds immediately available for the payment of debts; also the amount of debts proved against the estate, or admitted; what claims, if any, have been presented and not allowed, or which may be' in suit and remain undetermined; and all other matters necessary to enable the court to ascertain the solvency or insolvency of the estate, and determine the amount of the dividend if insolvent. The court will thereupon decree the payment of the debts which have been proved, in the order of the classes to which they were assigned, each class to be paid in full before the next inferior class receives anything ; and when the assets are sufficient to pay a part, but not the whole, of the debts of any one class, the creditors of that class will be payable pro rata." Woerner, The Law of Decedents’ Estates, 350, sec. 401.
“After the preferred debts have been discharged, all liabilities of the deceased, of any kind or nature, not included in one of the preferred classes, are entitled to be paid pro rata * * Woerner, The Law of Decedents’ Estates, 315, sec. 363.
“The rule now generally prevailing is that, aside from any preferences that may be provided for by statute, claims *858of creditors against a decedent are, in case of the insolvency of his estate, to be paid pro rata.” 21 Am. Jur. 622, sec. 423.
“Once the assets have been applied in payment as far as they will go down the range of priority classes, claims in the last class to be reached can only be paid pro rata.” 3 Bancroft’s Probate Practice, 1736, sec. 1035.
“Within any particular class of claimants, no one is entitled to preference over any other; * * 3 Bancroft’s Probate Practice, 1737, sec. 1035.
Now let us consider the majority opinion.
It first holds that plaintiff’s claim rests upon an instrument “due and payable” at death. As above pointed out, at the option of maker it was payable during his lifetime. The importance of this distinction is apparent. The majority next state: “The view of counsel for plaintiff seems to be that the claim of the university, if valid for any purpose or to any extent, is, under the statute quoted (sec. 30-615, Comp. St. 1929), a debt due to a creditor whose claim is not in the first or second or third class, but is one which automatically falls into the fourth class where claims therein are all of equal rank as to order of payment.” Nothing in plaintiff’s brief justifies the inference that plaintiff doubted that its claim was “valid for any purpose or to any extent.” On the contrary, plaintiff contends that its claim is valid for all purposes. If the plaintiff’s claim (and the defendant’s also) does not fall “in the fourth class where claims * * * are all of equal rank as to order of payment,” where, under our statute, does it fall? The majority opinion does not answer that question, and it should be answered. There is no other statutory class into which either the plaintiff’s or the defendant’s claim can fall, and within that class, there is no distinction and no priority. This court has no right or power to create an additional classification, or to create priorities within a class. (See authorities cited herein.) It is axiomatic that courts do not have legislative powers.
It is a “fundamental principle that the courts cannot set aside valid legislative acts or engraft amendments upon *859them merely because the judges deem the legislation unwise or even unjust.” Paxton v. Sutton, 53 Neb. 81, 73 N. W. 221. Is not the court doing exactly that in the instant case?
Contrary to the statement in the majority opinion, the plaintiff does not rely upon the Gristuolcl case to sustain its position that it is entitled to payment on a parity with the defendant. It relies upon that case to sustain its position that it has a claim properly allowed based upon a contract supported by a sufficient consideration and one that it has performed. It relies upon the statutes of this state to sustain its position that the claim is entitled to be paid pro rata with the claim of the defendant.
The majority opinion states that “Infringement by donation on the rights of creditors with superior claims and the statute classifying claims against the insolvent estates of deceased persons were not involved” in the Grisiuold case. Agreed. But who determines what are superior claims ■ — this court or the legislature? The authorities state that the legislature has that power, and our legislature has said what claims shall be superior to the one here in question* by giving preference to (1) funeral expenses, (2) expenses of the last sickness, (3) debts having a preference under the laws of the United States. No other statutory preference exists. In my opinion, a preference is specifically denied by section 30-616, Comp. St. 1929.
The majority opinion states that plaintiff’s claim should not be paid until “after decedent’s actual debts have been paid” and until “decedent’s just and legal debts” have been satisfied. How is plaintiff’s allowed claim distinguished from an “actual” “just” or “legal” debt? By statute, hereinbefore cited, an allowed claim is a debt of the estate. Obviously, plaintiff’s claim should not have been allowed unless it was an actual legal claim, which, when allowed, became an actual legal debt of the estate. Defendant does not appeal from the allowance. This court should not place plaintiff in the position of presenting a fictitious, unjust, illegal claim, of having it allowed, and then insisting upon payment. Yet, it must be conceded that, in order to sus*860tain its reasoning, the majority opinion places plaintiff in such a position.
The majority state that plaintiff’s argument “fails to take into account that, from the nature of the contract and the date of its enforceability, the pledge must be held to be conditional as a matter of necessary public policy and of implied intention and understanding between the parties.” Let us examine that. The parties to the instrument were a minister of the gospel and an institution of higher learning in this state. They were fully competent to express their intent in the written contract, which the one executed and the other accepted and performed. Their contract was valid, legal, and enforceable as written. (See Griswold case.) This court now, 18 years later, writes into that contract a condition, based upon “an implied intention and understanding,” that the maker’s estate was not to be liable therefor until all other claims were fully paid. This court has said: “While a court may construe and enforce contracts duly entered into, it is not the province of the judiciary to make contracts for parties.” TePoel v. Shutt, 57 Neb. 592, 78 N. W. 288. In my judgment, the majority are now making a new contract for the parties after one is dead and the other has performed.
The majority state the condition is there “as a matter of necessary public policy.” The public policy of this state, as declared by the cited legislative provisions, is controlling upon the courts. The courts have no right to ignore or override that declared public policy.
In State v. Price, 129 Neb. 433, 441, 261 N. W. 894, this court quoted with approval the following from Mieyr v. Federal Surety Co., 97 Mont. 503, 34 Pac. (2d) 982: “What is the ‘public policy’ of a state and what is contrary to it is not to be measured by the private convictions or notions of the persons who happen to be exercising judicial functions, but by reference to the enactments of the lawmaking power, and, in the absence of them, to the decisions of the courts. When, however, the legislature has spoken upon a particular subject and within the limits of its constitutional powers, its utterance is the public policy of the state.”
*861“No duty of this court is more manifest and exacting than the duty to avoid trespassing upon the province of the legislature. * * * It is not for this court to determine the legislative policy, nor to criticize that policy when adopted by the lawmakers. If apparently matters have been omitted in legislation which would have been supplied if brought to the attention of the lawmakers, it is not within the province of the court to supply such omissions.” Gaster v. Estate of Gaster, 92 Neb. 6, 137 N. W. 900.
Subsequently in the opinion the majority repeat their statement about “implied” conditions, “sound public policy,” and “imputed intentions,” but do not cite any authority, judicial or statutory, to sustain their position. I am not unmindful that the majority state: “Thus, it is usually recognized that the contract of a corporation to purchase its own stock is subject to the -implied condition that such contract cannot be enforced if the corporation is insolvent or if the rights of creditors are prejudiced.” (Citing 13 Am. Jur. 809, sec. 787.) However, this is not a contest between a stockholder and a creditor. It is a contest between two creditors who have allowed claims which fall into the same statutory classification. Obviously, the cited authority is not in point. The majority also cited Fremont Carriage Mfg. Co. v. Thomsen, 65 Neb. 370, 91 N. W. 376. It is interesting to note that in that case the corporation was not insolvent, and the stockholder recovered on his contract of repurchase. So, I submit that the majority opinion stands without support of any authority. Surely, if the reason of the majority is sound, judicial decision could be found to support it.
The fault with the majority opinion is that it adopts the argument and reasoning that was rejected in the Griswold case, and, contrary to that decision, treats the Luce note as a gift, without a consideration, and not as a valid contract based upon a sufficient consideration. For the majority next state: “The pledge, though contractual in form as against the pledgor, was nevertheless donative as against the other creditors of his estate. While its contractual *862form created an enforceable right against the decedent’s personal representative and his heirs, if funds were available for the purpose, it was not a right which in good conscience should be permitted to operate to the prejudice of those who had parted with money or property to the donor in reliance upon his estate.” Again no citation of authority is given. What is the effect of this statement? First, as between the plaintiff and the beneficiaries of the estate of the “pledgor,” the instrument is a contract founded on a sufficient consideration. (Such is the holding in the Gris-wold case.) Second, as between the plaintiff and the defendant (another creditor), the instrument was a donation, a gift. A gift is a voluntary transfer of property “without any consideration.” A gift “not only does not require a consideration, but there can be none; if there is a consideration for the transaction it is not a gift.” 28 C. J. 620. It is obvious that the instrument cannot be both a contract based upon a sufficient consideration and a gift without any consideration. Yet the majority reason that this instrument is a valid contract, the proper foundation for a claim allowable against the estate, and a gift not good as against “other creditors.” Not only is that so, but the question of whether it is a contract or a gift is made to depend not upon anything said or done by the parties at the time the' instrument was executed, but upon the question as to whether or not the maker’s estate is solvent 11 years after' the contract “and/or” gift was made. The majority reach the somewhat remarkable conclusion that, if the estate is solvent, then this instrument is a contract based on a sufficient consideration, and if the estate is insolvent, then it is a gift without consideration, good as against heirs, but not good as against “other creditors.” Such a result is not based upon either good reasoning or good law.
The syllabus likewise classifies the plaintiff’s claim as “a pledge or donation,” refuses to recognize its status as a debt of the estate, contrary to the holding in the Griswold case, and refuses to recognize its statutory status as an allowed debt of the estate.
*863But in any event, the plaintiff has an allowed claim against the estate. Defendant has an allowed claim against the estate. The majority cite section 30-615, Comp. St. 1929, which provides that “debts due to other creditors” are in the fourth class. The majority, ignoring the fact that the legislature provided no priorities within that, class, construe the instrument to create priorities within the class and state: “The situation presents no difficulty in the classification of claims under the statute.” If well-defined and long-established rules cited herein are to be ignored, then I admit no difficulty is presented.
However, the majority entirely ignore section 30-616, supra, which provides: “If there shall not be assets enough to pay all the debts of any one class, each creditor shall be paid a dividend in proportion to his claim.” By section 30-617, supra, the county court is required to make an order for the payment of debts “according to the provisions of this article.” I have heretofore quoted from several recognized authorities all to the effect that the statutory provisions are mandatory, that legislative classifications are controlling, and cannot be changed or disregarded by the courts, and that, in case of insolvency, creditors within a class are to be paid pro rata. Our statute is in accord with those texts. The majority cite no authorities to the contrary. Is every one out of step, including our legislature, and excluding a majority of this court? Where is the authority for this court to ignore the statutes classifying claims and providing for pro rata payment within a class?
Bearing in mind the fact that plaintiff’s claim is an allowed claim or debt of the estate, is not the effect of the majority decision to set aside that allowance and allow the claim conditioned upon there being assets in the estate from which it can be paid after all other allowed claims are paid ? If so, where is the authority, statutory or otherwise, for this court to enter such an order ?
If this court has the power to create classes A and B within the statutory claims of the fourth class and put all claims except the plaintiff’s in class A, then what is to pre*864vent the court from hereafter creating as many subclasses as there are claims, and ordering their payment in the order that the court may deem wise and just and in accord with a “necessary public policy?” Does not the court thereby invade a field that has been fully covered by legislative provisions ? Does it not in eifect repeal the statutory order of payment of claims ? Has not this court violated the constitutional injunction that “no' person or collection of persons being one of these departments (legislative, executive and judicial) shall exercise any power properly belonging to either of the others except as hereinafter expressly directed or permitted?” Const, art. II, sec. 1. Where is the direction or permission to this court to invade this field wherein the legislature has fully directed what shall be done?
In my opinion, the courts do not have the authority to enter the order here affirmed. We should not disturb the probate law of this state with.reference to the classification of claims in order to prevent what, to some of us, appears to be an inequitable result. If this opinion becomes the law of Nebraska, then every probate judge will feel that he has the right to determine “as a matter of necessary public policy” whether or not the payment of one claim in an insolvent estate should be preferred to another, and instead of having an orderly payment of claims, based upon the statutes, we will have the payment of claims based upon the personal views of the 93 probate judges of this state.