Fillyau v. Laverty

HAWKINS, J. The case before us has been argued very elaborately and ably, and we have given it the consideration due to the importance of the questions involved in the discussion, an importance much enhanced from the likelihood of their frequent recurrence in practice in the Courts of our State. The main points presented for decision are these : 1st. Whether on a bill filed by a creditor of a partnership against the representatives of a deceased partner, it is necessary that the surviving partner should be made a party to the bill after judgment against him at law. 2d. Can a creditor of a partnership, upon its dissolution by the death of one of its members, proceed, at once, in equity, against the estate of the deceased partner, without first showing the insolvency of the surviving partner ? Besides these, there are other questions as to the forms of notices, to be given by executors or administrators to persons having debts or demands against the estate of their testator or intestate — the effect of the statute of non-claim in cases like the present; the mode of exhibition of debts or demands against estates of decedents ; and the effect of the statute of non-claim where equitable rights are involved, or trusts actual or implied. As to the first point, there can be no doubt but that the surviving partner should be made a party to the bill filed against the estate of the deceased partner, for the reason that he is interested in taking an account. Story on Part., 515. Story’s Eq. Pl., 157. Wilkinson vs. Henderson, 1 Mylne & Keen, 582, 589. Burwell vs. Mandeville, Ex. 2 Howard S. C. R., 560, 575. In the latter case, Judge Story remarks, “ In general, the surviving partner is liable at law only, and no decree can be made against him, although he may be made a proper party to the suit in equity, as being interested to contest the plaintiff’s demands, unless some other equity intervenes.” It is true, there had been a judgment at law in this case against the surviving partner and a return of nulla bona upon the execution,, still he may have had effects of the firm in his possession not amena — 101 — ble to the execution, such as liabilities and evidences of debts due the concern. It was moreover a new proceeding, and he might have had an interest in taking the accounts correctly, inasmuch as there might be a remedy over against him by the representatives of the estate by their being substituted in the place of the creditors. The question whether the creditor of a partnership must in the first place pursue the surviving partner at law, before he can proceed in equity against the estate of the deceased partner, is one of difficulty, and from the fact that this is the first time that it has been presented for adjudication in this Court, we have duly considered it; and we give, with due caution, our views on this embarrassing topic. The old English doctrine on this subject, though not entirely clear and settled, was, that the joint creditor must, in the first instance, seek his redress against the surviving partner, and that he had no claim in equity against the deceased partner, unless the surviving partner was insolvent or bankrupt. This doctrine was based upon the general principle that, the joint estate was the first fund for the payment of the joint debts ; and inasmuch as the joint estate vests in the surviving partner, the joint creditors, upon equitable considerations, ought to resort to the surviving partner before they should endeavor to obtain redress or satisfaction out of the assets of the deceased partner. Bishop vs. Church, 2 Vesey, 100. Ex parte Kendall, 17 Ves., 519. Story on Partnership, 514, and cases there cited. This doctrine has been since contravened, and it is now held (says Judge Story,) that all partnership debts are to be deemed joint and several; and consequently the joint creditors have in all cases the right to proceed at law against the survivors, and an election also to proceed in equity against the estate of the deceased partner whether the survivors be insolvent, bankrupt or not. Story on Part., 515. This doctrine was first definitely settled in the case of Devaynes vs. Noble, 1 Mer., 593. The case was pending many years, and was first decided by Sir Wm. Grant, and finally by Lord Brougham, 2 Russell & Mylne, 495. It was followed by other decisions to the same effect, and is now the settled and firmly established doctrine of the English law. Wilkinson vs. Henderson, 1 Mylne & Keen, 582, and other authorities cited on page 514, of Story on Partnership, and in, the brief of counsel for appellants. — 102 — The English decisions upon this point have been adopted, as we have seen, by Judge Story, and regarded by him as settling definitely the law on the subject. So, also, Chancellor Kent, in the 3d book of his Commentaries, page 64, uses this language : “ But relief may be now had in equity against the representatives of the deceased partner having assets, if the surviving partner be insolvent. And it is now held, that a partnership contract, upon the death of a partner, is in equity to be considered as joint and several and to be treated as the several debt of each partner;” citing in a note 3d Merrivale, 393. 3 Paige, 367; and in that note he says : “ A joint creditor may file a bill against the representatives of a deceased partner, though the survivor be not insolvent. He is not compelled to sue the survivor in the first instance.” And then cites the cases of Devaynes vs. Noble, Wilkinson vs. Henderson, 1 Mylne & Keen, 582, and other authorities. We have been referred to some American cases by the counsel for appellee, going the other way, such as 2 Peters, 171. 2 Denio, 585. 6 Con., 258. Pendleton vs. Phelps, 4 Day, 477, and others. But to these stands opposed a very recent decision, Nelson, et al., vs. Hill, 5 Howard, 133. The Court in this case uses this very cogent and explicit language: “ It is now a rule of law too well settled to be shaken, that the creditor of a partnership may, at his option, proceed at law against the surviving partner, or go in the first instance into equity against the representatives of the deceased partner.” So, too, the Supreme Court of Alabama, in a case reported in 8 Alabama Reports, 577, remarks: “ It is true, by the common law, upon the death of a partner, the remedy was gone at law, against his personal representatives, but in equity the liability was held to continue, and it is said could be enforced by bill whether the survivors were solvent or otherwise. Story on Part., 514, and cases there cited. Indeed in this respect, it is now recognized as the well settled doctrine, that there is no distinction between the debts due from partners and those due from other joint debtors. In equity all are considered as joint and several, and the creditors may pursue the personal representatives of the deceased joint debtor or partner, whether the survivors are insolvent or otherwise.” The Court then refers to a decision in the case of Marr vs. South — 103 — wick, et al., 2d Porter, 351, as having been made in opposition to the foregoing principles, and clearly by the above language expresses its dissent to that decision. Upon a review of the whole subject, we feel constrained to side with the English rule, as adopted by the highest legal tribunals in our own country, and such text writers as Judge Story and Chancellor Kent. We deem it consonant with reason and justice, that creditors should possess every facility of enforcing their demands against the estates of those who contracted the obligations, without being obliged to await the law’s delay, by being forced in the first place to pursue the surviving partner, before they can come upon the estate of the deceased partner ; nor can we see any good reason why the death of one of the partners should place the creditor, as to the efficiency of his remedy, in a worse position than if the death had not occurred. Credit is far from being given in any instance to partners on account of their partnership effects, but creditors look, and they have a legal right to do so, not only to those effects, but to the separate property of the individual partners. The lex mercatoria regarded the contract of partners as joint and several, and Courts of Equity have, we think, very wisely adopted that principle. At common law, the rule was different, being then regarded as a joint contract. In Abbot vs. Smith, 2d Black., 949, Chief Justice DeGrey remarks, “ that a contract when made with partners is originally a joint contract, but may be separate as to its effects, and that each is answerable for the whole, and not merely for his proportionable part.” Creditors certainly cannot complain because a two-fold remedy is afforded them; nor should the heirs or representatives of the deceased partner be querulous — for we cannot see that any prejudice can accrue to them, by the ability of the joint creditors to render them primarily liable; for if the estate of the surviving partner be solvent, they have a remedy over by virtue of the subsisting equities ; and if it be insolvent, it is very certain that the estate of the deceased partner is liable to the payment of the debt. Sir John Leach, in the case of Wilkinson vs. Henderson, 1 Mylne & Keene, 582, bases his decision upon the ground — “that the estate of the deceased partner is, at all events, liable to the full satisfaction of the creditors, and must, first or last, be answerable for the failure of the surviving part — 104 — ner; that no additional charge is thrown upon the assets of the deceased partner by a resort to them in the first instance, and that great inconvenience and expense might otherwise be occasioned to the joint creditors:” Besides the foregoing reasons, we coincide with the modern rule, as being more compatible and more in consonance with the policy of our statutes, in relation to the settlement of estates of deceased persons. It is the province of every Court, where the policy of law is clearly discernible, to carry out that policy, unless militating against the letter and spirit of the Constitution. Cases of individual hardship may, no doubt, occasionally arise, from the enforcement of this principle, but this is preferable to the infraction of the laws, regulations, or policy of a State. All our statutes in relation to the estates of decedents bear upon their face the determination, that estates shall be settled as speedily as possible. The Legislature saw the evil results which would almost inevitably ensue, if estates remained a long time unsettled, arising from the expenses of administration, the detention of property from the legitimate and appropriate owners, the presentation of stale demands, and the litigation springing out of them. To obviate these mischiefs, various statutes were passed, all having the same objects, all converging to one point, the speedy settlement. of estates. Among them is the one invoked by the appellants, which is in the following words : “ All debts and demands of whatsoever nature, against the estate of any testator or intestate, which shall not be exhibited within the said two years, shall be forever barred : Provided, That the executor or administrator shall, by advertisement, to be published once a week for the space of four weeks, in some newspaper printed in the State, give notice to all creditors, legatees and persons entitled to distribution, that their claims and demands will be barred at the expiration of the period aforesaid, unless exhibited within the same” — with a saving to married women, infants, &c. Much stress is laid upon the fact, that this statute is of a stringent nature, but for that reason it is not to be disregarded ,• and if the law-making power prescribes a rigid rule, a corresponding rigid 'observance must follow, and is as much a duty, as though the rule was more mild, qualified, or equitable. Legal morality can draw no dis. tinction. — 105 — This statute is virtually a statute of limitations, passed not only for the security of the legal representatives, but for the benefit of the heirs and distributees, to effect the speedy and final settlement of estates. By it, and the statute preceding it, (section 2,) the executor or administrator is enabled to ascerfain what debts or demands are due by the estate, so that hé can discover whether the estate is solvent or not; while it enables the distributees or legatees to demand distribution of the estate, unless it be necessary for the administrator or executor to retain it longer in his hands, for the purpose of paying debts. If a creditor of a partnership, in case of its dissolution by the death of one of its members, was obliged to exhaust his legal remedies against the surviving partner, before he could proceed against the estate of the deceased partner, the result would be, that the estate would necessarily be kept open and unsettled in many instances for a long period, owing to tedious litigation; and this would be, we have seen, against the policy, and I may add also, the explicit declarations of our statutes. The statute, too, seems to have contemplated the idea that legatees and distributees should take their portions, discharged from all claims not exhibited within two years ; because the bond they give, upon receiving their portion, refers to debts or demands appearing within two years, after granting the letters testamentary, or letters of administration. If, therefore, the contract of partners be joint and several in equity— if the joint creditors can proceed primarily against the estate of the deceased partner, and such we deem the law to be — we are clearly of the opinion that such creditor should exhibit his demand within the time prescribed by our statute. Having an option, he should exercise it; possessing a right, he should pursue it, within the terms of the law. If he does neither, he waives his remedy, and is es-topped by a statute, as obligatory in a Court of Chancery as at law. As to the form of the notice published by Meacham, the administrator of Wilder, we deem it sufficiently correct. It is in these words : “ All persons having any claims against the estate of William D. Harrison, deceased, are hereby warned to present them to the subscriber within the time prescribed by law, or they will be forever — 106 — barred of recovery; all those indebted to the estate are requested to make immediate payment.” It embodies, we think, substantially the requirements of the statute ; and although it does not contain the words, “ creditors, legatees and persons entitled to distribution,” still we think the words, “ all persons having any claims against the estate,” are of so comprehensive a character, that they include and embrace within their meaning, “ creditors, legatees and persons entitled to distribution,” upon the principle that the major includes the minor. The statute prescribes two notices, one to be published four the other eight weeks. Whether the one to be published for the latter-period was so published or not does not appear, but the one before the Court, from its substantial conformity to the requisitions of the section containing the statute of non-claim, must be taken by the-Court as a sufficient compliance with the proviso of that section. By the first statute (sec. 2,) the advertisement is merely directory,, while by the second (sec. 6,) it is the condition upon which, on its being complied with, the statute applies as to barring debts or demands. As to the question, what shall constitute an exhibition of a-debt or demand against an estate, we think there should be actual presentation of the claim within the time prescribed, or something-done by the party equivalent to it. The presentation need not be in any particular form, but sufficient to give such notice to the executor or administrator of the existence of the debt or demand, its character and amount, as would enable-him with reasonable certainty to provide for its payment. Mere knowledge on the part of the executor or administrator of the existence of the claim is not enough. The' party holding the claim or demand must pursue some measures to present his demand, and not remain passive, or sleep upon his right. The bringing a suit or action at law or in equity, we would regard as equivalent to an actual presentation, and we think that a debt, though not due, is embraced' within the intention of the statute. In this last point, we are sustained by the decisions in Alabama. Jones’ Ex’rs vs. Lightfoot, 10 Ala. R., 26. King & Barnes vs. Moseley, 5 Ala. R., 610. Pinkston vs. Huie, 9 Ala., 262. The Court, in the case of Pendleton vs. Phelps, indicates an opinion in accordance with the one by us expressed, for it remarks — 107 — “ This is different from the case of a demand payable at a future period. We think that the words “ debts or demands,” clearly cover debts not due. If A promises to pay B fifty dollars in a year from the date of the promise, it certainly creates a debt on the part of A. It is the obligation or contract that,creates the debt. In the words of counsel it is debitum in praesenti solvendum in futuro.” It is said that the statute of two years does not bar equities (where there is no concurrent remedy at law) any more than the statute of five years, and that the heirs and distributees of Harrison’s estate are trustees for the debt due by their intestate as a member of the firm of Harrison & Wilder. By way of response to these propositions we will cite the case of the Executors of Fisher vs. the Executors of Tucker, 1 McCord Ch. R., 169. It was in the first place decided by Chancellor Wattes, and after-wards affirmed on appeal in the Court of Appeals in South Carolina. The circumstances of that case are very similar to the one at bar. Heriot and Tucker were copartners in trade, and they became indebted to James Fisher in the sum of £1100. Tucker, one of the firm, died, leaving Heriot the surviving partner. A bill was filed against the estate of Tucker by the Executor of Fisher, the creditor, on not being able to procure payment from Heriot, alleging his insolvency. The defendants rested their defence upon the statute of limitations. The Chancellor uses this language : “ The books furnish no case in which a Court of Equity has ever felt at liberty to dispense with the operation of the statute against a legal demand, unless there has been some extrinsic equity to authorize it. The cases are numerous to the contrary, but I will only refer to the following: In Read vs. Read, 5 Ves., 744, the Court would not, on a bill for mesne profits, decree an account for more than six years, because more could not be recovered at law. And it is then said that the circumstance of being obliged to sue in equity, does not alter the nature of the action for mesne profits. And in Hovenden vs. Amnesly, 2 Sch. & Lef., 680, Lord Reddesdale says : “ Courts of Equity are bound to yield obedience to the statute of limitations upon all legal titles and legal demands.” “ It is manifest that the present demand was originally a legal one, and the circumstance of bringing it into this Court will not, as was said by the Court in the — 108 — case of Reade vs. Reade, alter its original nature. It is stated to have been for goods sold to the firm of Heriot and Tucker, the remedy for which was exclusively a legal one while the partners were alive, or while the survivor of them was solvent.” The Chancellor decreed that the bill be dismissed. Sir Thomas Plummer, Master of the Rolls, says, that after a bar has been fixed by statute to the legal remedy, the remedy in a Court of Equity in analagous cases has been confined to the same period-He then stated it to be clear that had the claim in question before him been a claim of a legal estate in a Court of law, the remedy would have been barred by the statute of limitations, and it was therefore, clear, that being an equitable claim, the remedy was equally barred in a Court of Equity. 3 Brown Ch. R., 630. Angell on Lim., 24. “ Courts of Equity,” says Lord Reddesdale, “ are not within the words of the statute, because the words apply only to particular legal remedies, but they are within the spirit and meaning of the statute, and have been always so considered.” Angell on Lim., 25. “ Whenever,” says Sir Thomas Plummer, “ any statute has fixed the period of limitations, by which the claim, if it had been made, in a Court of law, would have been barred, the claim has by analogy, been confined to the same period in a Court of Equity.” And the Supreme Court of the United States say, that Courts of Equity are no more exempt from statutes of limitations than Courts of law. Ib. 26. Melicot vs. O’Donnel, 1 Ball & Beatty, 156. Thomas vs. Heirs of Harvie, 10 Wheat., 149. Ib. 168, 170. 3 Bro. Ch., C., 639, note. 4 Harrington, 274. The contract of partnership is dissolved by the death of one of the partners. At law, the estate of the deceased partner cannot be proceeded against by the joint creditors, because the contract being joint, all the original parties should be joined. Of course, the surviving partner cannot be, because different judgments would have to be given. The resort of the joint creditor against the estate of the deceased partner must be in equity. Now does this, as a result, change the original legal contract into such an equity as to prevent the bar of the statute ? A change of remedy from one at law to one in equity, should not have such a result, and more especially in the face of the words of the statute “ all claims or demands of whatsoever nature.,” — 109 — To say that the statute should not be a bar in a ca'se like the present, would be an evasion of it. The pleadings create an issue of fact, whether the claim or demand was presented or not within the two years. It is not pretended that it was presented until the 6th December, 1841, being after the expiration of the term prescribed by the statute. We consider the other point, that the legatees and heirs of Harrison are trustees for this demand, as untenable. There is certainly no express trust, and if one is merely constructive, the statute docs apply. In the case of Townshend vs. Townshend, 1 Brown C. C., 554, the Court say — “Then, as to trusts being an exception to the statute of limitations, the rule holds only between trustees and cestui que trusts. It is true that the trustee cannot set it up against his cestui que trust; but this is merely the case of a trustee by implication, and as such, affected by an equity — but that equity must be pursued within some reasonable time. Both courts of law and equity preserve an analogy to the statute of limitations.” In Lockey vs. Lockey, Prec. in Ch., 518, the Lord Chancellor was of opinion, that when one receives the profits of an infant’s estate, and six years after he becomes of age he brings a bill for an account, the statute of limitations is as much a bar to the suit, as it would be to an account at law. In Webster vs. Webster, 10 Ves., 93, a bill for an account and payment of a debt was filed against defendant, who pleaded the statute, and though regarded in equity as a trustee, the plea was held a good one. See also 194-5-6 of Angell on Limitations. These authorities are cited in the case in 1st McCord, already re. ferred to, and the Court in that case also confirmed the views we have taken as to this last question. With these views, we think, therefore, there was error in granting the decree in the Court below, and it is ordered, adjudged and decreed that the bill of complainant be dismissed.