Rierson v. . Hanson

Stacy, C. J. Several lines of thought abound among the decisions on the question presently presented. The position of the secured creditor is supported by what is known as the Chancery rule, while that of the unsecured creditors is favored by what is generally denominated the Bankruptcy rule. The subject is exhaustively treated in Merrill v. Panic, 173 U. S., 131, and in note, with full citation of the authorities appearing in L. R. A., 1918 B, 1024-1042. The question here presented is whether the Chancery rule or the Bankruptcy rule shall be applied in the settlement of an insolvent estate, where there is no claim for dower, and the security is insufficient to pay the secured debt. We regard the matter settled in favor of the Bankruptcy rule by what was said in the following cases: Chemical Co. v. Walston, 187 N. C., 817, 123 S. E., *205 196; Askew v. Askew, 103 N. C., 285, 9 S. E., 646; Moore v. Dunn, 92 N. C., 63; Creecy v. Pearce, 69 N. C., 67. Speaking to the point in the last cited case, Pearson, C. J., delivering the opinion of the Court, said: “We considered the question whether in the distribution of the personal estate the Roberts debt (the secured debt) ought to be taken pro rata on the whole debt or on the debt minus the amount that may be realized out of the mortgage. We are satisfied the latter is the true principle; . . . and we adopt the analogy in bankrupt cases where a creditor having collateral security is only allowed to prove the balance after exhausting the collateral security.” The secured creditor points out, however, that in receiverships and assignments for the benefit of creditors, our decisions favor the Chancery rule, Bank v. Jarrett, 195 N. C., 798, 143 S. E., 827; Winston v. Biggs, 117 N. C., 206, 23 S. E., 316, and stressfully contends that one rule ought not to apply to an obligor, while living, and another when be is dead. the argument overlooks the fact that upon the death of an obligor the administration laws, C. S., 93, step in and determine the settlement of bis estate. These have heretofore been construed by us to favor of the Bankruptcy rule. Compare Guaranty Co. v. Hood, Comr., 206 N. C., 639, 175 S. E., 135. Nothing was said in Fertilizer Co. v. Bourne, 205 N. C., 337, 171 S. E., 368, which militates against this position. The appropriateness of the proceeding has not been questioned. Light Co. v. Iseley, 203 N. C., 811, 167 S. E., 256; Walker v. Phelps, 202 N. C., 344, 163 S. E., 727; Trust Co. v. Lentz, 196 N. C., 398, 145 S. E., 776. Affirmed.