Schoolfield's Administrator v. Rudd

Judoe Simpson delivered the opinion of the Court. This suit in chancery was brought by the administrator of William Schoolfield, deceased, under the act of 1839, (3 Siat, Law, 240,) to have a settlement of the estate, and a decree for the sale of so much of the real estate of his intestate, as might be necessary for the payment of debts. The whole estate, both real and personal, having proved insufficient for this purpose, and a debt against the estate having been presented, which it is insisted should be paid in full before general creditors are paid any portion of their debts, it becomes important to decide whether it is a preferred debt under the statute, and-entitled to the precedence claimed for it. It appears that the intestate had been appointed administrator of the estate of John King, dec’d., and in that capacity had obtained possession of assets to a considerable amount. Before his death, a suit in chancery had been instituted against him by the distributees claiming the balance in his hands after the payment of debts-Having died during the progress of the suit before any decree had been rendered, an amended bill was subsequently filed, making his sureties in the administration bond parties, and praying a decree against them. The suit was carried on without his administrator having been made a party, and a decree finally obtained in favor of the distributees against his sureties for the sum of four hundred and eighty nine dollars, and seventy one cents. Three of the sureties allege that they have paid the amount of the decree to the distributees, and claim the same preference which the distributees were [292] entitled to against the general- creditors of the administrator. A surity who has paid a fiduciary debt (or his principle is entitled to stand in the place of his'principal, and if the debt were a preferred debt under the statute of 1839, for the settlement of estates, the surety has a right in equilyto the benefit of such preference. —But to authorize such substitution, there must be proof of the payment of the debt, and that it was paid in-discharge of a legal liability .- Under the provisions of the fourth section of the statute of 1839,. this debt which the intestate owed- in his fiduciary character to the distributees, was to be paid' in full before the creditors not having preferred- debts-were entitled to any part of the estate. Does the- payment of the debt by the sureties essentially change its character, and divest it of this right of priority? At the time of the intestate’s death, he owed this debt,, which was then a charge upon his estate, and had a right to the precedence which the sureties now claim for it. The doctrine is well established, that in equity,the surety who has paid the debt, is entitled to stand in the place of the creditor, so far as to have the same preference over general creditors, which the creditor himself wmuld have had if the debt had remained unpaid.This principle would seem to apply with peculiar force in a case like the present one, where the sureties might have required the distributees to preslmt the claim against the estate of the administrator, or might have done it themselves by appropriate pleadings, and obtained for it the preference now claimed. Having paid it, there is no good reason why its .priority should be thereby lost, and in our opinion the sureties retain the same right to have it considered as a preferred debt,, that the distributees had before its payment. We are aware that this Court, in the case of Buckner vs Morris, (2 J. J. Marshall, 121,) and in the case of the Mason County Court vs Lee, (1 Monroe, 249,) decided that a surety having paid a specialty or judgmezzt debt, did not become a specialty or judgment creditor, but was a simple contract creditor, and only entitled to rank as such. But the question in those cases, was as to legal priority, and not as to the effect of equitable substitution. If, however’, they should be understood as having settled the doctrine, as the law stood before the passage of the act of 1839, that the surety was not either in law or equity, entitled to the preference over simple contract creditor’s which the specialty creditor had whilst the debt remained unpaid, we think the law [293] regulating the administration of estates, has been so essentially changed by the act of 1839, as to justify a, change of this doctrine, so far as it. can have any application to the question under consideration. The statue gives preference to certain debts, not with reference to their dignity according to common law principles, but with a viéw to equitable considerations, which entitle them, to such a preference. As there was no equity in the legal priority which the specialty creditor had over the simple contract creditor, but it was rather opposed to the equitable doctrine of equality, there might be no .good reason wrhy the surety in a specialty debt, should after it was paid by him, be regarded more favorably than any other simple contract creditor. But where the preference is given to the debt, upon thei ground that it is equitably entitled to it from its charac4 ter, without any regard to its dignity as-a judgment or specialty debt, it does not lose its equitable character when paid by the surety, but retains in his hands the same equitable claim to priority which it had before it was paid. Admitting this debt to be entitled to rank as a preferred debt, still it is contended that it should not haive been allowed, because there was no legal and competent evidence, either of its amount, or its payment by the sureties. This, we think, is a valid objection. The suit in chancery which was carried on against the sureties of the.* administrator, without having made his personal rep-f resentative a party, furnishes no evidence against his* adroinistator, of the amount which he owed in his fiduj ciary character at the time of his death, to King’s dis4 tributees. Nor is there any evidence in the record, that!, the sureties have paid the amount of the decree against them, nor have they by appropriate pleadings, to which King’s heirs would be necessary parties, demanded the payment of the debt to King’s distributees, as one for which they are bound as sureties, and desire to have settled for their indemnity. . But as exceptions were not taken to this debt on this ground in the Court below, the sureties will be allowed [294] time, if they can do so, to establish by appropriate proceedings, to which the administrator of William School-field must be a party, the amount to which King’s distributees were equitably entitled, and they may also-prove that they have paid it 1o the distributees. Money received by an attorney for his client ltept distinctand not mixed with the money of the attorney, is not to be administered — does not enter into the estate. W. C. Marshall for plaintiff; J.fy W. L. Marian for defendants. 1 Only one other question is made that requires notice. The intestate had collected, a short time previous to his death, a debt for E. Langhorn of $124 75 cents, tie had collected it as an attorney, on a suit brought for the purpose, and informed the agent of the plaintiff) in his last illness, that he had received the money for him. After his death, one hundred dollars of the money was found in his pocket book, enclosed in a paper, and endorsed by him so as to show that it was the same money collected by him for E. Langhorn. The agent was present when the pocket book was opened, and took the money into his possession, and the question presented is, whether or not it is to be regarded as part of the estate of the intestate. As the money did not belong to him, but on the contrary, was the identical money received by him for his client, and as it was kept separate and not mixed with his money, it did not enter into or form a part of his estate, and should not be so considered. But the Court, for the reasons mentioned, erred in allowing the debt claimed by the sureties in the administration bond. Wherefore, the decree is reversed and cause remanded for further proceedings in conformity with this opinion. The plaintiff in error is entitled to his costs against the defendants, Isaac Baker, Peter PL Rudd and George B. Schoolfield only.