Byrne v. McDow

GIBBONS, J. It seems to be the settled doctrine of the United States courts, in actions at law on contracts, to disregard pleas of the insolvency of the estate against which $he [410] actions ai-e pending. Such pleas, when founded upon decrees of courts of probate, or courts of ordinary of the several States, constitute no defence against the recovery of a judgment on the debt in suit.—Suydam et al. v. Broadnax et al., 14 Peters 61. But, whilst this is true of the United States courts of law,' it is otherwise in their courts of equity, and a judgment rendered against such an estate, notwithstanding the interposition of a plea of insolvency, will be enjoined at the instance of the representative, and the judgment creditor be compelled to take his place with the other creditors of the estate.—Williams v. Benedict et al., 8 Howard 107. Were it otherwise, the foreign creditor would have a decided advantage over the creditor at home, and the estate of an insolvent, instead of being distributed qually amongst all of the creditors, would be appropriated in many cases exclusively to the payment of a single creditor abroad to the exclusion of all others at home. „ We say nothing of the policy of the decisions of that court, nor would we attempt to defend the expediency of having one rule in courts of law in respect to insolvent estates, and another in equity. As the remedy of the creditor in those courts, for the collection of the debt sought to be recovered, must eventually depend upon the fact whether the estate is solvent or insolvent, we can see no good reason why that question could not as well, (if not with much more projoriety,) be tried by a jury in a court of law, as to be tried by a court of chancery. We think i t clear that, even in a United States chancery court, the mere fact that an estate had been decreed to be insolvent by a State court, would not preclude the creditor from denying the truth of such decree, or from showing that notwithstanding such decree the estate was entirely solvent, when all its assets are fairly stated. It is in cases of actual insolvency that the United States chancery courts entertain bills to enjoin judgments at law ; but, if such insolvency is apparent only, and not actual, we cannot suppose that these courts would permit themselves to be divested of jurisdiction, and their suitors sent to another, and a State forum, to seek their remedies. It is unnecessary that wo should decide whether, or not the chancery court could look behind the decree of insolvency rendered by the State court, on any matter existing anterior to the decree, except actual fraud in its procurement. We deem it en [411] tirely clear that, if, by events occurring subsequent to the rendition of the decree of insolvency, the estate has become able to pay its debts, a court of chancery would not be precluded by the decree merely from such investigation. It is by applying an analogous rule to the case before us that we arrive at our conclusions. The law, as it stood in Alabama in 1840, when the estate of Edwards was declared insolvent, would enable the personal representative to obtain a decree of insolvency on an estate worth much more than it owed. All that the executor or administrator had to do was, to show to the court that the personal property of the estate was not sufficient to pay the debts, and a decree of insolvency was rendered almost as a matter of course, although the real estate of the decedent might have been sufficient to render the estate not only solvent but rich. In such cases, to allow the decree of the State court to divest the United States chancery court of its jurisdiction, would be unreasonable, and the party setting up the insolvency of the estate in that court could not rely upon the decree of the State court, rendered under such circumstances, as conclusive evidence of the fact of insolvency. If that decree was inconsistent with the actual fact, the creditor would, in our opinion, have the right to make it appear; and if it was shown that the estate was in,¡ fact solvent, notwithstanding, the decree in the State court, the creditor would not be driven to a State forum to prosecute his claim, but the bill seeking to enjoin the judgment at law would be dismissed. In the case at bar, if the estate of Edwards is in fact insolvent, as it is alleged to be in the bill, and as it was decreed to be in the Orphans’ Court of Greene County, then it would be obviously unjust and inequitablo to allow the respondent to proceed in his action at law against the complainant, and thereby subject him individually to a liability for the debt; but on the other hand, if such insolvency does not in fact exist, notwithstanding the decree of the Orphans’ Court of Greene County, then we see no reason why the respondent should be deprived .of the remedy which he has adopted for the recovery of his debt. In the application of the complainant to have the estate of Edwards declared insolvent, and for an order to sell the real [412] estate, he shows that the amount of notes, accounts and evidences of debt in his hands, was $9925 87, and that the proceeds of the sale of tho personal property, other than notes &c., in his hands, amounted to the sum of $2921 75 ; making an aggregate of personal assets of $12,857 62. Of tho first item, made up with notes, accounts &c., many of them are represented as doubtful. As a part of the same showing, the debts owing by the estate are shown to be $13,707 46, thus showing tho estate to bo insolvent, as the law then stood, that is, the personal assets were not sufficient to pay the debts. Both parties, on tho hearing before the Chancellor, seem to have relied upon, and offered in evidence a transcript of the record and proceedings of tho Orphans5 Court of Greene County; and by said transcript it appears, that an order was obtained for the sale of tho lauds of said decedent, commissioners appointed to make said sale, and their report of their action as such commissioners. They report that they have sold lands amounting to the sum of $9334 45, and have turned the proceeds over to the administrator. It is further shown by proof that, on ono judgment belonging to tho estate against one Alford, the complainant received in cash, from the sale of lands levied on under execution, upwards of $1000. That judgment was for the sum of $4455 29 ; and besides tho lands sold, there were levied upon, as the property of said Alford, some fifteen or sixteen slaves, which were claimed by third persons, and bond given for the trial of the right of property. Whether any cash has been realized from these trials of the right of property the record does not disclose, nor does it appear what, if any thing, has ever been collected from tho other notes or accounts belonging to the estate. Here, then, we see an aggregate of cash amounting to upwards of $13,256 20 has gone into the hands of the administrator, with which to pay a debt $13,707 46, leaving entirely unaccounted for the balance of the notes and accounts amounting to upwards of $5000, and also the claim suits for the negroes on the largo judgment against Alford. We think it fair to presume, that the complainant has or ought to have collected something on the notes and accounts other than that of the judgment against Alford; and in his silence upon the subject, when he alone is the most capable of rendering, and is in duty bound to [413] render tlie information, we think it but reasonable to presume that ho has collected enough at least to render the estate solvent, and to pay off all its debts. When the complainant’s bill is examined with reference to the proof in the cause, there is, we apprehend, some cause for the allegation in the defendant’s answer, that the complainant has sought by every moans in his power to mystify and conceal the facts in relation to the estate of the said Edwards ; for it must be confessed that, with the means of information in his hands in reference to the affairs of said estate, the bill gives but little light as to its true condition. Our conclusion is, from the proof in the cause, that the estate of Edwards is solvent, and has been so since the sale of the lands belonging to said estate ; and the estate being solvent, the complainant has no right to call upon a court of equity for relief, but the defendant should be permitted to pursue the remedy that he has selected for the recovery of his debt. It follows, therefore, that the Chancellor erred in his decree, and it is here reversed, the injunction ordered to be set aside, and the complainant’s bill dismissed, with the costs of this court and of the court below.