German Bank v. Leyser

Lyost, J. The answer substantially denies the insolvency of the estate of Peter J. Leyser, deceased. It was certainly the duty of the administrator to .dispose of the estate carefully and judiciously, and the answer avers that if so disposed of the estate would be sufficient to pay all debts chargeable against it. Hence, the question of the sufficiency of the estate in the hands of the administrator to pay the debts of the deceased was put in issue by the pleadings. The sections of the revised statutes (3835 and 3836) under which this action was ‘brought, were first enacted in 1864, and stand as chapter 265 of the general statutes of that year. The statute which authorizes, and on certain conditions compels, executors or administrators of insolvent estates to bring actions to set aside [264] conveyances of real estate made by deceased testators, or in-testates, in fraud of creditors, or to recover personal property so fraudulently conveyed, was then and still is in force. R. S. 1858, ch. 100, secs. 16 to 18, inclusive; R. S., 945, secs. 3832-4. The legislature evidently thought that cases might arise in which it would be desirable that a creditor might proceed directly in his own name, but for the benefit of all the creditors of the estate, to avoid a conveyance of property by the deceased in his life-time, in fraud of their rights. Without statutory authority, the right of a creditor to maintain such an action, except under very special circumstances, had been denied. Bate v. Graham, 11 N. Y., 237. Hence the enactment of chapter 265 of 1864. The remedy there given is clearly cumulative. The creditor may now, in a proper case, compel the executor or administrator to bring the action, or bring it himself. In this case the plaintiff elected to bring the action. Section 3835 authorizes the action to be brought on just apprehension of a deficiency of assets to pay the debts of the deceased, before the fact is definitely ascertained. There is good reason for this. It gives the creditor the benefit of his lis pendens, and enables him, in a proper case, to avail himself of the remedies by injunction and the appointment of a receiver, thus securing the fruits of the litigation if he prevails, which might otherwise be lost. But he can go no further until it is ascertained whether such deficiency exists. If found not to exist, the action will be dismissed without trial. If it is found that the estate in the hands of the executor or adminiskator is insufficient to pay the debts of the deceased, then, and not until then, the action may be tried. This is the plain reading of section 3836: “Such creditor’s action shall not be brought to trial until the sufficiency or insufficiency of the estate in the hands of the executor or administrator to pay the debts of the deceased shall be ascertained. If found insufficient, such action may proceed to [265] trial and judgment,” etc. ITow is this fact to \>e ascertained? by whom or by what tribunal is it to be found? are the questions which this appeal presents for determination. That it must be-ascertained judicially in some form we cannot doubt. Indeed, it seems to be conceded that a judicial determination is required by the statute. The more difficult question is, whether the exclusive forum for that adjudication is the county court. This action differs from the ordinary creditor’s suit only in the circumstance that the debtor is dead. It is essentially of the same nature, and is governed by the same principles. A court of equity tabes jurisdiction of a creditor’s suit only when the usual legal processes to collect the judgment have been resorted to and have proved unavailing. Hence, the necessity of averring and proving the issuing of an execution and its return unsatisfied, as a condition precedent to equitable relief in an ordinary creditor’s suit. Section 3836 was evidently drawn with a view to that principle, for it denies equitable relief unless it is made to appear that the creditor cannot realize his debt by the ordinary processes of administration in the county court. But it goes further by prohibiting a trial of the action until the deficiency of assets in the hands of the executor or administrator is ascertained. This must be ascertained before the trial, and no procedure is prescribed for ascertaining the fact in the circuit court. Had the legislature intended that the circuit court should ascertain it, the statute would, doubtless, have provided merely that judgment should not be given for the plaintiff unless the alleged deficiency was found to exist. Considering, therefore, that the statute denies equitable relief until it has been judicially determined that the ordinary processes of administration in the county court have failed to pay the indebtedness chargeable to the estate; and considering also that such adjudication must be made before the creditor’s suit can be brought to trial, and that the administration of the estate is peculiarly within [266] the cognizance and under the control of the county court,— we think the conclusion is inevitable that the fact of insufficiency of assets must be ascertained by the adjudication of that court. Any different construction of the statute would, in our opinion, be essentially vicious. "When the present case was tried, there wa,s an outstanding equity of redemption in the lands sold under the foreclosure judgment, available to the administrator. Its value was undetermined. The county court should have required the administrator to sell such equity of redemption to the best advantage, and the sale so made would have determined its value. The administrator should then have rendered his final account, and the order or judgment of the county court thereon would be an adjudication of the [value of the assets which came to his hands. The indebtedness chargeable against the estate having already been judicially determined, such order or judgment would also show whether there was a deficiency of assets, and, if made before trial of the creditor’s suit, would fulfill the requirements of the statute. On the proper showing by a creditor, the court would compel the administrator to proceed as above indicated. Until the above or other equivalent proceedings are had in the county court, we are satisfied that the creditor’s suit cannot regularly be tried. Our judgment rests upon the construction of the statute. There was no such question in Flood v. Pilgrim, 32 Wis., 376, or in Filbey v. Carrier, 45 Wis., 469, cited by the learned counsel for the plaintiff. By the Court. — -The judgment of the circuit court is reversed, and the cause will be remanded fo.r further proceedings according to law.