Watson v. Rose's Executors

PETERS, C. J. On the 25th day of March, 1860,; Hugh P. Watson procured Charles G. Gunter and Wm. H. Rives to draw a bill of exchange of that date for his accommodation, payable to Howell Rose, for $6,000, falling due in twelve months after date, which was accepted by Watson himself. After this, on the 28th day of March, I860, Watson executed a mortgage to said Gunter and Rives, of one hundred shares of the capital stock of the “ Montgomery Hall Company,” and some other property, to “ save said Gunter and Rives harmless in the premises, and to prevent them, or either of them, from any loss or detriment in their aforesaid accommodation to him,” said Watson. This bill of exchange was passed to Rose by Watson, and Rose thereby became the holder and owner of the same. Said bill was not paid at maturity. Watson died in 1865, and his wife, the appellant, became the administratrix of his estate. Her administration continued until it was ascertained that the estate was insolvent, and so declared. Mrs. Watson then made final settlement of her administration, and was discharged. She was succeeded by William A. Gunter, as administrator de bonis non. Gunter, as such succeeding administrator, sold, by order of court, the property conveyed in said mortgage, as required by law; and Mrs. Watson became the purchaser, at said sale, of said one hundred shares of stock. This sale seems to have been regular, and was regularly reported, and confirmed. It also appears that Rose died, testate, in 1866, and appointed the appellees his executors. Rives also died, and Waller became the administrator of his estate. Judgments were obtained against all the parties to said bill of exchange, some time in 1866. Certain payments were made upon these judgments; some by Mrs. Watson, during her administration of her husband’s estate; and certain other payments were made by said Rives, which it is not necessary to specify more particularly. The proof does not show that the judgment against Watson’s representative was ever filed in the office of the judge of probate, properly verified, within nine months after his estate was declared insolvent. Nothing was ever paid on the judgment against Gunter. These facts are sufficient to make manifest the principles settled in the present opinion. The bill of complaint seeks an [298] account against tbe defendants below, and a subrogation of tbe complainants to tbe rights of Gunter and Rives under the mortgage to them, and a sale of the stock of the “ Montgomery Hall Company,” purchased by Mrs. Watson at the administrator’s sale, as above shown. The mortgage executed by Watson in his lifetime to Gunter and Rives was for their security and indemnity against any loss or damage, which they, or either of them, might sustain by reason of making the bill of exchange mentioned in the mortgage for his accommodation. This bill of exchange created but a single debt, though all the parties to the paper were severally liable to pay the same to the holder. The bill of exchange was payable to Rose, and he was the holder and owner of the same. rTMs made him the creditor of Watson, and, on Watson’s death, this debt became a charge in favor of Rose on Watson’s property. Rev. Code, § 2060. But he was not a party to the mortgage, nor was it made to secure the payment of the debt evidenced by the bill of exchange to him. His claim depended upon his right as a creditor of Watson. The debt arising out of the bill of exchange was really Watson’s debt, and as such it rested as a charge on Watson’s property, in whose hands soever the same might be found, which was not exempt from the payment of his debts. Gunter and Rives were merely his sureties. This is so alleged and charged in the pleadings in the court below. The property conveyed in the mortgage belonged to Watson. By the conveyance, it was subjected to the control of the mortgagees, to be sold for the satisfaction of the mortgage debt; and as such it became a trust fund, or pledge, in their hands, for the payment of the mortgage debt, evidenced by the bill of exchange. It was still Watson’s property, devoted to a certain purpose; that is, the satisfaction of a debt which he was bound to pay as long as it subsisted as a legal claim against him, or his estate. For this reason, it is a well settled doctrine in courts of equity, that a creditor is entitled to the benefit of all pledges, or securities, given to or in the hands of a surety of the debtor, for his indemnity; and this, whether the surety is damnified or not. Ohio Life Ins. & Trust Co. v. Ledyard, 8 Ala. 866. In the case last quoted it is said: “ In the case of Toulmin v. Hamilton (7 Ala. Rep. 367), which, upon this point, is in principle identical with this, we had occasion to consider this question. It was there, upon great consideration, held, that when a deed of trust was given to indemnify an accommodation acceptor, the holder of the paper might resort to the property for the payment of the paper when dishonored.” 8 Ala. 872. This is a right established in equity in favor of a creditor against his debtor. It must, therefore, be shown that the [299] party complaining is a creditor of the person whose property has thus been placed in pledge. If this is not shown, and the relation of creditor and debtor fails, the principle above stated also fails. In the present instance such is the case. After Watson’s death, his estate was regularly declared insolvent; and it does not appear that the claim or debt here insisted on was ever properly filed and verified, in order to save it from the bar of insolvency. The rule established by our statute, in such a case, is expressed in these words: “ Every person, having any claim against the estate declared insolvent, must file the same in the office of the judge of probate, within nine months after such declaration, or after the same accrues, verified by oath of the claimant, or some other person who knows the correctness of the claim, and that the same is due, or it is forever barred.” Rev. Code, § 2196. This statute has come under frequent discussion in this court since the proclamation of the Code in 1853 ; and in all the later cases it has been uniformly construed to mean that the words “ forever barred ” operate to destroy the debt which has not been duly verified and filed. In the case of Murdock v. Rousseau’s Adm’r (32 Ala. 611), the court say: “We think the effect of this language is to destroy the claim as a subsisting debt.” See, also, Sharp v. Herrin, 32 Ala. 502; Bell v. Andrews, 34 Ala. 538; Puryear v. Puryear, 34 Ala. 556; Sharp v. Sharp, 35 Ala. 576; Ray v. Thompson, 43 Ala. 451. If the debt against Watson’s estate was destroyed, as it was by the failure to file it properly verified as required by law, under the decree of insolvency, the relation of creditor and debtor between Rose and Watson, or between the personal representatives of their estates, was also destroyed. Then, at the filing of the bill of complaint in this case, there was no debt owing by Watson, or Watson’s estate, to Rose, or Rose’s estate. Consequently, Watson’s property was not subject to be sold for its satisfaction. The debt against Watson’s estate having been discharged by the proceedings in the insolvency, his property could not be seized for its payment. Such was its situation as to Rose, or Rose’s estate. Then, it passed to Mrs. Watson on the administrator’s sale, free of this charge. By the failure to file the claim under the decree of insolvency, the same was, in effect, relinquished forever. It cannot, therefore, be enforced in the manner here attempted. If this should be allowed, the discharge on the insolvency would amount to nothing. It is proper to add, that the principle thus established does not apply to Gunter and Rives, the mortgagees.. They are still liable to Rose’s estate, if the claim has been properly presented to Rives’s administrator, but only in the event this has been done as to Rives’s estate. They may still enforce their [300] rights under the mortgage, whatever they may be. Upon this question we decline to express any opinion. Note by Reporter. — On a subsequent day of the term, in response to an application for a rehearing by the appellees’ attorneys, the following opinion was delivered: — The decree of the court below is erroneous. Therefore, let the judgment of the court below be reversed, and judgment will be entered here, dismissing the bill at the costs of the appellees. PETERS, C. J. This application for a rehearing merely seeks a review and reversal of the conclusion arrived at in the original opinion. It does not seem to me that the authorities relied on to justify such a course are sufficient to sustain it. The representatives of Rose do not show any debt in Rose’s favor, against Watson, or Watson’s estate. Rose’s equity depends upon his debt; when this is gone, his equity is gone. It is a well-settled principle, that the laws affecting a contract at the time it is entered into, become, in effect, a part of its stipulations. 4 Wall. 535, 550; 8 Wheat. 92; 1 How. 319; 2 How. 612; 12 Wheat. 231; 6 Cranch, 87; 9 Pet. 359; 10 Cal. 570. In this case, the bill of exchange, and the judgment rendered upon it, were subject to be extinguished in case of Watson’s death and the insolvency of his estate, by a failure to file the same in the office of the judge of probate within nine months after the declaration of insolvency, verified as required’ by law. Rev. Code, § 2196. This was not done, and the claim in favor of Rose’s estate, against Watson’s estate, was thereby forever barred. This has been too long the settled law of this court to be now disturbed. Piad the statute of the bar of insolvency been incorporated into the bill of exchange, or the judgment upon it, it could not have been more potent to destroy the rights depending on the bill of exchange or the judgment than it is, upon the failure to file the claim as required by the statute. This is a condition of the contract and the judgment, by which Rose, on receiving it, pledged himself to abide. If he failed to file his claim on the insolvency of Watson’s estate, he released that estate from its payment. The property conveyed in the mortgage to Gunter and Rives is still, in equity, the property of Watson’s estate; and as such it has been sold to Mrs. Watson; and her equity is superior to those claiming under the judgment, which is barred. She is entitled to the protection of the bar of the decree of insolvency, to the same extent at least that Watson’s estate is entitled to be protected. If this were not so, then Mrs. Watson would be coerced to pay a debt for Watson’s estate, which it is shown that Watson’s estate does not owe. [301] We are unwilling to extend the principle relied on by the ingenious and learned counsel for the appellees to such a case as this. They do not show a superior equity to Mrs. Watson. Our attention has been called to the case of Mahone v. Haddock et al. (44 Ala. 92), as in conflict with the decision in this case upon the question of the extinguishment of the claim here insisted oh by the effect of the statute of non-claim. In Mahone v. Haddock, supra, the claim was a vendor’s lien. In that case, we followed the decision in Duval’s Heirs v. M'Losky, 1 Ala. 708. This latter case has never been overruled; and we feel that there is sufficient distinction between the two cases, to justify a refusal to disturb either. It will be time enough to discuss such equities as Gunter or Rives may be supposed to have under the mortgage in this case, when they are specifically sought to be enforced in their favor, or in favor of either of them. In this case, we deem it improper to do more than to settle the equities between Mrs. Watson and Rose’s estate. The rehearing is denied, with costs.