Appeal of Nichols

Opinion, Me. Justice Steeeett : In March, 1886, J. F. Bartlett died intestate, seised of an equitable interest in a house and lot, held under articles of agreement, and leaving issue four daughters, two of-whom were minors. The house, which was insured by him, for three years from March, 1885, in the Hamburg-Bremen Insurance Company, for $1,200, payable “ unto the said assured, his executors or administrators,” was totally destroyed by fire about four months after his decease. A question having arisen, whether [434] the insurance money should be paid to the administrator, or to the children and heirs-at-law of the assured, it was agreed, in writing, by the two adult daughters and the guardian of the minors that it should be paid to the administrator, John A. Day, and if it should thereafter be decided by the court that the money belonged to the children he would pay the same to them, otherwise he-would account for it as administrator. The loss was promptly adjusted by the insurance company, and paid to the administrator. In due time he filed his account, but instead of charging himself with the net amount, $1,100, received from the company, he referred to it as having been paid to him in pursuance of the above-stated agreement, and declared his readiness to pay the same to the children of his intestate, or otherwise account therefor as the court might direct. For the purpose of presenting the matter to the Orphans’ Court, the omission to charge himself as administrator with the insurance money was excepted to, and an auditor was appointed to pass upon the question, re-state the account, if necessary, and distribute the balance that might be found in the hands of accountant. The auditor found as a fact, that even including the insurance money as an asset for distribution among the creditors, the estate was largely insolvent; but, notwithstanding this, he held that the children of the intestate were entitled to the insurance money. The court was of the same opinion, and accordingly the decree from which this appeal is taken, was entered. The question thus presented is, whether, the estate being clearly insolvent, the creditors have any claim upon the insurance money? We think they have. The contract under which the money became due and.payable to the personal representative of the intestate, is one of indemnity against a possible loss which actually happened after his decease but during the life of the policy. If his estate, exclusive of the property insured, had been solvent, his children who succeeded to his interest in said property, would undoubtedly have been entitled to the insurance money; but, inasmuch as his estate, including the realty and the sum realized from the insurance policy, is admittedly insolvent, their right is subordinate to that of the creditors. In this state the lands of a decedent, as well as his goods and chattels, are assets for the payment of his debts. When the personal property is exhausted or clearly insufficient, it is the [435] duty of the personal representative, under the direction of the proper court, to resort to the realty, and thus, if possible, satisfy the claims of creditors. In Horner v. Hasbrouck, 41 Pa. 169, 179, it is said, it will be seen, from a brief glance at the history of our Orphans’ Court, how we enforce the principle, never lost sight of in our jurisprudence, that the lands of a decedent, like his goods, are assets for the payment of his debts, and that the right of succession has respect only to so much of his estate as remains after his debts have been paid. When a man dies in Pennsylvania, his real and personal estate comes within the jurisdiction of the Orphans’ Court, to be administered, first of all, for the benefit of creditors, and next for legatees, devisees, and heirs. We usually define the heir to be one on whom the law casts the estate at the death of the ancestor, but with us the estate is cast subject to the jurisdiction of the Orphans’ Court. Heirs are thus postponed to creditors. If it be said, as for some purposes it is correct to say, that the estate vests in the heirs directly the ancestor dies, it must be understood to be a contingent interest, defeasible in behalf of creditors. What really vests in the heir, is the title to the residuum, or, in the language of the act of 1834, the “ surplusage ” of the estate. This is what the law casts on the heir. It can be nothing else, consistently with oür system of administration and distribution. While, strictly speaking, the insurance money in question is not the proceeds of real estate bound by the lien of decedent’s debts, it really represents, to that extent, the realty that was insured and destroyed bjr fire. If the insurance company had elected to restore the lost building, instead of paying the amount of risk in cash, the property would have been immediately subject to sale for the payment of debts. Whether we regard the insurance money as the proceeds of the contract of indemnity and a personal asset in the hands of the administrator, or as representing the building that was destroyed, in either case the claim of the heirs thereto is subordinate to that of the creditors. While we cannot assent to some of the conclusions reached by the learned court in Wyman v. Wyman, 26 N. Y. 253, the general principle, in relation to the right of heirs as against creditors of an insolvent estate, so ably maintained in that case, harmonizes with the views above expressed. [436] It follows from what has been said tbat tbe court below erred in not holding tbat tbe insurance money was distributable among tbe creditors of the intestate. Decree reversed and record remitted, with instructions to distribute tbe fund in accordance with tbe foregoing opinion. Costs of this appeal and expenses of distribution to be paid out of tbe fund.