Thames v. Herbert

BRICKELL, C. J. From the earliest period of our legislative history, it has been a settled policy to provide a simple and summary remedy, in the court of probate, granting letters testamentary, or of administration, for the marshaling and distribution to creditors of the assets of an insolvent estate. The personal representative when satisfied of the insufficiency of the assets for the payment of debts, is required in a particular mode to make report of the fact to the court, and of the report notice must be given creditors, who are entitled to contest its truth. If there is ij,o contest of its truth, or if it is unsuccessfully contested, a decree of insolvency is pronounced by the court. The decree ascertains finally the status of the estate as between the personal representative and creditors. — McGuire v. Shelby, 20 Ala. 356; State Bank v. Ellis, 30 Ala. 478. The effect is, to draw to the court exclusive jurisdiction of all legal demands against the decedent, not the subject of pending suits in other tribunals, at the time of the rendition of the decree. Suits then pending, may be prosecuted to final judgment, but on a suggestion, or special plea of the insolvency, the judgment rendered therein is certified to the court of probate, and no execution can issue on it. All the creditors, (excepting those whose claims are in suit at the time of the declaration or decree of insolvency,) are required within nine months after the decree or declaration, to file their claims in the court of probate verified by the oath of the claimant, or some other person who knows its correctness; and a failure to file, by the words of the statute, operates a perpetual bar against the claim. — Code of 1876, § 2567; Puryear v. Puryear, 34 Ala. 555; Sharp v. Sharp, 35 Ala. 572; Bell v. Andrews, ib. 538; Pay v. Thompson, 43 Ala. 434; Murdock v. Rosseau, 32 Ala. 611; Hollinger v. Holley, 8 Ala. 454. The exception of claims on which suits are pending, from the bar of the statute, is the result of judicial decision, which, though in conflict with former decisions, perhaps, ought not now to be disturbed. — Erwin v. McGuire, 44 Ala. 499; Murdock v. Rosseau, supra; McDougald v. Dawson, 30 Ala. 553. The end [344] proposed to be accomplished by the statutes is, that on the files of the court of probate, at the expiration of nine months from the decree of insolvency, open to the inspection of the personal representative, and of all creditors, every claim entitled to share in the distribution of the assets shall be found; and to avoid the introduction of spurious claims, that each claim shall be verified by the claimant, or by some person who knows its correctness, and that it is due. The purpose of the statute is to draw within the jurisdiction of the court of probate all claims against the decedent, and all controversies as to the validity of the claims preferred. Yet all is in furtherance of a speedy distribution of the assets to the creditors entitled to receive them. The claimant is required at the peril of the loss of his demand to file it within a prescribed period, and as evidence of his good faith, and of the justice of the claim, it must be verified. The verification is ex parte, and is not matter of evidence against the administrator, or other creditors, who may assail the validity and justness of the claim. An opportunity to controvert its correctness by the administrator, or by other creditors, the statute affords. The same policy which demands that within a particular period, the claim should be filed, requires that there should be a period within which the contestation of their correctness should be made. The speedy settlement and distribution of the assets, could not be otherwise promoted. The statute therefore requires that if no opposition to a claim filed, is made by the administrator, or by any other creditor, within twelve months after the declaration of insolvency, by filing objections thereto in writing, the claim must be allowed. — Code of 1876, §§ 2574-5. The allowance of the claim, in the absence of an objection within the prescribed time, is a right of the creditor secured by the statute. — Hardy v. Meachem, 33 Ala. 457; McNeil v. Mason, 20 Ala. 772. As to all matters of objection addressed to the validity or justness of the claim, which exist at the expiration of the period prescribed for filing objections, this is the effect of the statute. Though the creditor is entitled to an allowance of the claim free from, or without regard to such objections, the claim is not allowed, it is not sanctioned by the judgment of the court, its amount is not ascertained and declared, until the court renders a decree in favor of the creditor for his rateable proportion of the assets in the hands of the personal representative. After the expiration of the period for filing objections, and before the rendition of this decree, facts [345] may occur which are a valid bar to the demand, or which deprive the creditor of all right in equity and good conscience to share in the distribution of the assets. The statute was not designed to prevent such matters, not occurring within the time prescribed for objecting to the allowance of the claim, from being introduced, and when shown, from operating a bar to the claim. ' The deceased may be liable only as surety, and the principal may pay the debt after the expiration of the prescribed period. Or 'the creditor may have a security by way of mortgage, or pledge, which he may render available, extinguishing the claim. In either event, if he was allowed to participate in the distribution of the assets, it would not only work injustice, but would defeat the policy which pervades the statute, of securing equality to the creditors. The objections to claims which are unavailable, if not filed within the prescribed period, are objections founded on facts or matters then existing, and not objections founded on matters subsequently occurring, which could not then have been made the ground of objection. Such objections may be interposed at any time before the court renders a decree distributing to the creditor his rateable proportion of the assets. The objections to the claim of the appellant, were of matters occurring after the period prescribed for filing objections, and if they are well founded — if they constitute a valid defense against the claim, it was the duty of the court to entertain them. The claim of the appellant is for moneys received by the intestate of the appellee, Herbert, of the corpus of the appellant’s statutory separate estate, received by the intestate as her husband and trustee. After the filing of the claim, and the expiration of the period for filing objections to its allowance, the appellant filed her bill in equity averring the intestate had used the moneys in the purchase of certain lands and in making improvements thereon. Further averring a sale of the lands by the administrator-in-chief under a decree of the Court of Probate, the payment of the purchase-money to him, and praying that the said purchase-money be declared trust funds and appropriated to the payment of her claims. A final decree was rendered declaring the appellant was entitled to recover said purchase-money, and the same not equalling the claim of the appellant, when paid was to be credited thereon. Payment thereof having been made, on these facts the appellee objected to the allowance of the balance of the claim, and to a decree distributing to the ap [346] pellant any portion of the assets in the hands of the administrator. The objection was sustained, and the balance of' the claim disallowed. The argument in support of the objection, is, that a pursuit of the proceeds of the sales of the lands, on the ground of a trust, is inconsistent with a claim as a creditor against the assets in the hands of the administrator. It is a rule of very general application, just in its operation and consequences, that a party shall not claim in repugnant rights, and that he shall not take a benefit without bearing the burden which may be incidental to it. But we are unable to see of what application the rule is to these facts, or the repugnancy between the claims the appellant has preferred. When a trustee, or other person standing in a fiduciary relation, employs the trust funds which may be in his hands, in the purchase of lands, and takes the conveyance to himself, the cestui que trust may, at his election, charge the trustee personally, or claim the purchase as having been made for his benefit and take the land. — Tilford v. Torrey, 53 Ala. 120; 1 Lead. Eq. Cases, 277-8; 1 Perry Trusts, §§ 127-8. If he elects to take the land, of course he could not subsequently, unless the election was made under such circumstances, that a court of equity would not hold him bound by it, assert any claim against the trustee pei’sonally. All such claims would be satisfied by taking the land, and the recognition of the purchase as an investment of the trust funds. But if he elects to pursue the trustee personally, he may use his hold on the lands, as a security for the payment of the funds employed in their purchase. If from the land, he obtains satisfaction only in part, there is no greater repugnancy in his pursuing the trustee for the remainder, than there is in the mortgagee pursuing the mortgagor personally for the balance of the debt the property mortgaged may fail to pay. The adoption of the argument of the appellees would enable the trustee-to profit by his wrongful acts at the expense of the cestui que trust, and would lead to consequences manifestly inequitable. The cestui que trust would be compelled to accept whatever injudicious or unauthorized investments of the trust funds-the trustee may make, or to relinquish them, and all security they afford, standing in no other attitude than that of a mere creditor, while the trust funds would swell the assets in which all creditors participate. It was a clear equity of the appellant to follow the trust funds into the lands purchased and improved with them by the trustee, and to charge them with the repayment of the trust funds. So, as was declared [347] by the decree of the Court of Chancery, she could pursue in the hands of the administrator the purchase-money he had derived from their sale. Thereby she did not elect to take the lands as having been purchased for her benefit, but simp>ly to charge them with the repayment of the trust funds. Satisfaction in part only having been obtained, for the remainder, as a creditor having exhausted her securities, she was entitled to a rateable proportion of the assets iu the hands of the personal representative. The Court of Probate erred in disallowing her claim, and the decree must be reversed, and the cause remanded.