Zollickoffer v. Seth

Alvey, J., delivered the opinion of the Court. The questions in this case arise upon a demurrer to the complainant’s bill, and by the demurrer the facts alleged are admitted to be true. If, therefore, the bill discloses a case to entitle the complainant to relief, the decree appealed from must be reversed, and the cause remanded for further proceedings in the Court below. The right of the complainant to recover from the defendants, or any of them, will depend upon the decision of the two following propositions : 1. Whether, by reason of the death of McIIenry Grafton, and the full administration of his estate by his personal representative, his obligation upon the administra — 368 — tion bond of Alexander H. Seth and John M. Frazier, in which Coates and Grafton were co-sureties, ceased and became extinguished not only as against his personal representative, but also as against his legatees and distributees, who have received his personal estate upon final administration by the executor. 2. The complainant, as executor of Coates, having paid the legacies under Robert Seth’s will, after the administration and distribution of the personal estate of McHenry Grafton, Whether he, the complainant, is entitled to relief for contribution as against the legatees or distributees of the estate of Grafton, in respect to the distributions made to them under the will of their testator ? 1. The administration bond, upon which Coates and Grafton were co-sureties, was given in 1865. Alexander H. Seth, the surviving administrator, with the will annexed, of Robert Seth, is and has been for a long time past utterly insolvent; and John M. Frazier, the other administrator and principal in the bond, died in 1870, also insolvent, and before the estate of Robert Seth was fully administered. Grafton, the co-surety with Coates, died ■in April, 1867, leaving considerable estate, and by his will disposed of his property to his mother and brothers and sisters, and appointed John- M. Frazier and Thomas L. Hall his executors. Coates died in September, 1871, leaving a will wherein the complainant was made executor. In October, 1870, Hall the surviving administrator of Grafton, settled in the Orphans’ Court his second and final account, showing that the personal estate of the testator had been fully administered, and thereupon passed over the property to the parties entitled to receive it under the will of the deceased. In October, 1873, Alexander H. Seth, as surviving administrator of Robert Seth, passed an account in the Orphans’ Court, showing certain balances due to the residuary legatees under the will of his testator ; and — 369 — very soon thereafter suits were instituted on the administration bond, at the instance and for the use of some of such legatees, against the complainant as executor of Coates, and also against Alexander H. Seth, the surviving administrator, and against the executrix of Frazier, and also against Hall, the surviving executor of Grafton. In these suits recoveries were had as against the complainant, ; hut, as against Seth, the judgments were unavailing, because of his insolvent condition, and as against Frazier’s executrix there were no assets to he hound by judgment, and Hall, as the surviving executor of Grafton, successfully resisted recovery against him, on the ground that he had fully administered the estate of his testator before he was notified of the claims. Consequently, the complainant, as executor of Coates, was required and did pay, in 1874, not only the legacies for which judgments were recovered, but other legacies for which the bond was bound, amounting in the whole to the sum of $4765. Upon the facts, as detailed in the bill, the complainant prays that the legatees or distributees of the estate of Grafton may contribute their respective proportions to reimburse him, as the executor of Coates, to the extent of one-half of the amount which he has been required to pay to the legatees under the will of Robert Seth. This application is resisted upon the ground that the estate of Grafton is entirely and completely exonerated from any and all obligation created by the bond, by reason of the death of Grafton and the full administration of his estate before the existence of the claims was notified to his executor, and that, consequently, there is no right of contribution that can be maintained by the complainant as against the legatees or distributees of the co-surety’s estate. That the executor of Grafton was exonerated, if he fully administered the estate and paid it over to the legatees or — 370 — distributees without due notice of the claims, and after giving the notice by advertisement as required by the statute, may readily be conceded. The Code, Article 98, sec. 109, .provides that, “In case all the assets have been paid away, delivered or distributed as herein directed, and a claim shall afterwards be exhibited, of which the administrator hath not notice by the exhibition of the claim legally authenticated, as herein required, he shall not be answerable for the same ; and if he be sued for any claim, and shall make it appear to the Court in which suit is brought that he hath so paid away, delivered or distributed, and the plaintiff cannot prove that the defendant had notice as aforesaid before such payment, delivery or distribution, the Court shall not proceed to give judgment (although the amount of the claim against the deceased may be ascertained,) until the plaintiff shall he able to show further assets coming into the defendant’s hands,” &c. And again, by section 119 of the same Article ot the Code, it is provided, that “ Whenever it shall appear by the first or other account of an executor or administrator, that all the claims against or debts of the decedent, which have been known by or notified to him, have been discharged or allowed for in his account, it shall be his duty to deliver up and distribute the surplus or residue as directed ; provided, that hi,s power and duty with respect to future assets shall not cease ; and after such delivery he shall not be liable for any debt afterwards notified to him ; provided, he shall have advertised as hereinbefore directed,” &c. The succeeding section of the same Article of the Code, prescribes the form of the notice to he given to the creditors of the deceased. The law is very explicit, as it appears from the sections of the Code recited, in providing for the exoneration of the executor, upon his observing certain precautions; but it is to be noticed and borne in mind that it is the executor or administrator personally that is to .he ex — 371 — onerated and discharged, and not the estate of the decedent. It is no where declared or intimated that there should be no remedy for a creditor who may have failed to authenticate and notify his claim to the executor, before final administration ; or that, if the creditor’s claim be not ascertained or provable before such final settlement and distribution, he should be without remedy, notwithstanding his debtor’s assets may be shewn to be abundant, simply because the executor or administrator may have delivered them over to legatees or distributees. It would be strange, indeed, if such were the provisions of the law. • What would be the predicament of an absent creditor, who might be totally ignorant of either the death of his debtor, or of the administration of his estate ? What would become of parties dependent for their protection and security upon official bonds, guardian bonds, trustees’ bonds, and the like, where the breach has not occurred, or, if occurred has not been ascertained at the time of the final settlement and distribution of a surety’s estate, if the position of the defendants in this case be sustained ? Surely the law never contemplated the total discharge of the deceased surety’s obligation in all such cases. In this case, the amounts for which the bond was ultimately liable, were not ascertained until October, 1873 — about three years after the final settlement and distribution of Grafton’s estate. Until these amounts were ascertained, and actually paid by the complainant, as the representative of the co-surety Coates, there was no claim provable by him against the estate of Grafton. Uo laches therefore can be imputed to him in not exhibiting the claim for contribution before distribution of Grafton’s estate by his executor. In England, as is well known, prior to Lord St. Leonard’s Act, 22 and 23 Vict., ch. 35, it was the established practice for administrators and executors to administer their estates under the orders and decrees of the Court of — 372 — Chancery, and one great object in resorting to that jurisdiction by the executor or administrator was to obtain indemnity and protection against all future liabilities after final settlement. The creditors were required to come in and prove their claims under the decree, just as they are required to come in and prove their claims under the notice given by the executor or administrator by the order of the Orphans' Court, in our practice. Those failing to come in and prove their claims before final settlement and distribution of the estate, lost their remedy against the executor or administrator, but not as against the legatees or distributees. Tbe same exoneration of the executor or administrator afforded in England by the decree in chancery, is provided for with us by statute. In the case of Waller vs. Barrett, 24 Beav., 413, an administration suit,. Lord Romilly, the Master of the Rolls, in speaking of the effect of the omission of the creditor to come in and prove his claim under the decree, said : “In the first place, I hold this to be,established by the authorities, that if breaches of covenant have been committed at the date of the decree, and tbe covenantee do not come in and prove under the decree, he will be barred of all remedy against the executors, and that'the executors will be perfectly safe. It is the case of an existing debt, which the creditor does not come in and prove under the decree, and the Court having administered the assets protects - the executors against all future claims. The creditor, however, is not left without his remedy, but that remedy is not against the executor. That principle is so fully established in this Court, that it is unnecessary to cite many authorities on the subject; but this is what Lord Eldoít says in Gillespie vs. Alexander, (3 Russ., 136,) on the subject. ‘If a creditor does not come in till after the executor has paid away the residue, he is not without remedy, though he is barred the benefit of that decree. If he has a inind to sue the legatees to — 373 — bring back the fund he may do so; but he cannot affect the legatees except by suit, and he cannot affect the executor at all.’” The authorities are exceedingly numerous upon this subject, all maintaining the same general doctrine, several of which are referred to by the Master of the Rolls, in Waller vs. Barrett, and, among others, ho refers to the case of Knaichbull vs. Fearnhead, 3 Myl. & Cr., 122, in which Lord Cottenham said: “ Where an executor passes his accounts in this Court, he is discharged from further liability, and the creditor is left to his remedy against the legatees ; but if he pays away the residue without passing liis accounts in this Court, he does it at his own risk.” And to refer again to the case of Waller vs. Barrett, the Master of the Rolls, in another part of his opinion, made these observations: "I am at a loss to cónceive on what principle a debt which may arise hereafter, but which is not now existing, is to be treated on a footing different to an existing debt. The creditor, although advertised for, may be abroad at the time; he may be ignorant of the whole proceedings, and yet if he do not come in and claim, his only remedy in this Court is against the legatees.” And in the case of March vs. Russell, 3 Myl. & Cr., 31, referred to in argument, Lord Chancellor Cottexiiam treated the doctrine as one of the oldest and best established of the Court. He there said:. " That a creditor may follow assets in the hands of the legatees to whom they have been delivered in ignorance of the creditor’s demand, has been an established principle of this Court from the earliest period, of the decisions in which we have any traces.” And in accordance with these, and many other authorities maintaining the same general principle, Mr. Justice Story has stated the doctrine as one as firmly established as any in the equity jurisprudence of the country. In the 2 vol. Eq. Juris., sec. 1251, the learned author says: "But the legatees and distributees, although there was an original deficiency of assets, are — 374 — not at. law suable by the creditor. Yet be has a clear right in equity, in such a case, to follow the assets of the testator into their hands, as a trust fund for the payment of his debt. The legatees and distributees are in equity treated as trustees for this purpose; for they are not entitled to anything, except the surplus of the assets after all the debts are paid.” This just and equitable doctrine ' formed a part of the system of jurisprudence implanted here from the mother country, and there is nothing in our testamentary system that at all militates against its continued operation. Indeed, it has been fully recognized by this Court in the case of Kent vs. Somervell, 7 Gill & John., 265, 270, and has been applied and acted on in the case of Hanson vs. Worthington, 12 Md., 418, with respect to a legacy erroneously paid. See, also, Somervell vs. Somervell, 3 Gill, 276. Now, in England, by Stat. 22 and 23 Vict., ch. 35, sec. 29, very much the same kind of notice by advertisement is required to be given to creditors to produce their claims to the administrator or executor, as that required to be given by our Code. It is provided that at the expiration of the time named in the notice for sending in such claims, the executor or administrator shall be at liberty to distribute the assets of the testator or intestate, or any part thereof, amongst the parties entitled thereto, having regard to the claims of which such executor or administrator has notice,- and shall not be liable for the assets, or any part thereof, so distributed,'to any person of whose claim such executor or administrator shall not have had notice at the time of distribution. But it is declared that nothing in the Act shall be taken in any manner to prejudice the right of-the creditor to follow the assets so distributed into the hands of the persons to whom distribution may be made; tbe object and design of the Act being to avoid the expense • and delay attending administration • suits, and to afford to the executor or administrator the same protection that — 375 — lie would have under a decree in chancery. Clegg vs. Rowland, L. R., 3 Eq. Cas., 368. This same protection was designed by the sections of the Code to which we have referred, and hence, by the terms of the statute, only the executor or administrator is exonerated from liability upon final administration of the assets, and not the estate or those ‘to whom it has been distributed. That such was the design of the statute is made apparent by comparison of section 108, of Art. 93, with the sections of the same Art. to which we have heretofore referred. By the sec. 108, if a claim be exhibited, and it be rejected or disputed by the executor or adminstrator, he is allowed to retain assets to pay it, provided it be established; but those assets are made liable to other claims, or to be delivered up on distribution, in case the claim retained for be not established ; “and if on any claims exhibited and disputed as aforesaid, the creditor or claimant shall not, within nine months after such dispute or rejection, commence a suit for recovery, the creditor shall be forever barred.” By this provision, not only is the executor exonerated, but he is required to pay out or distribute the money retained, and. the creditor is forever barred all right of recovery against the assets of the estate, no matter in whose hands they are found. No such bar or preclusion is provided in terms with reference* to any claim that has not been exhibited, or which, in the nature of things, could not have been exhibited, before final administration; and hence it may well be concluded that no such bar or preclusion was ever intended with respect to such claims. If, however, a party has a probable claim against an estate, and without sufficient cause, neglects to prove and exhibit it to the executor in due time, it may be that, in any subsequent attempt td pursue the assets in the hands of legatees or distributees, he will be successfully met with the defence of laches. That is a defence that depends upon the particular facts and circumstances of each case — 376 — as disclosed. Here, as we have said, there is no ground for such a defence. Whether the residuary legatees under Robert Seth’s will, had provable claims as against Grafton’s estate, before the settlement of the account by the administrator of Seth, in October, 1813, ascertaining the balances due, is a question that we need not decide. It is certain that they were not bound to prove such claims, and their failure in no manner operated to discharge the obligation of the sureties on the bond. They had a right to resort to all or any of the parties hound in the bond ; and the fact that they resorted to the complainant and recovered the entire amount of their claims from him, operated no prejudice to the estate of Grafton, the co-surety. This is clear upon authority. Watkins vs. Worthington, 2 Bl., 533 to 535 ; Mitchell vs. Williamson, 6 Md., 210 ; Garey vs. Hignutt, 32 Md., 532. We need not say more to justify the conclusion, that, while the executor of Grafton may he exonerated, there has been no discharge from, or extinguishment of, the obligation of the bond, as to Grafton’s estate, by reason of the fact that the estate was administered, and distributed before the claim of the complainant was presented. Such conclusion is hut the natural and irresistible deduction from the principles which we have stated. The authorities relied on by the defendants, as maintaining a doctrine at variance with that here asserted, are the cases of Waters vs. Riley, 2 H. & J., 305, and the United States vs. Price, 9 How., 83. But these cases are entirely dissimilar to the one under consideration, as from a short statement of the principles upon which they were decided will appear. The first, that of Waters vs. Riley, was the case of a joint bond, executed before the Act of 1811, ch. 161, where the sureties had died, and upon a question of the right of contribution between the representatives of the sureties on such bond, it was held, that, — 377 — as on a joint bond tbe remedy at law survived against the surviving obligor, and was totally lost as against the representative of him who first died, therefore, chancery would not revive the remedy thus lost, in the absence of fraud, accident or mistake; and, consequently, there was no right of contribution in such case. But there, it is manifest, the whole difficulty grew out of the inherent nature of the contract itself. Each party was supposed to have contracted with reference to such condition in the contract, that the death of one obligor devolved the entire obligation of the bond on the survivors. With this legal obligation thus fixed by the death of the surety first dying, the Court of equity refused to interfere, but left the parties to stand where their contract placed them. And so in the case of United States vs. Price. In that case there were joint and several bonds given for duties, and the United States having recovered a joint judgment against all the obligors, thus electing to treat the contract as exclusively joint, and afterwards the surety dying, it was held that the United States could not be allowed to proceed in equity against the executor of the deceased surety for the purpose of holding the assets of his estate responsible for the judgment. The question there was, whether a Court of equity would interfere to give' a remedy against the personal assets of a deceased surety, when the .remedy at law had been lost by the election of the obligee to take a joint judgment on a joint and several obligation. The reasoning of the Court, from which it wras concluded in the negative, was, that the obligation of suretyship arises only from positive contract, and that where a surety enters into a joint and several obligation with his principal, the obligee and all the parties are supposed to be aware of the doctrines of law connected with such securities, and to incorporate them therein, as part of the contract. That the obligee knows the bond will entitle him to either a joint or several judgment, at his election ; he knows also — 378 — that he cannot have both, that his bond is extinguished hy his judgment, or merged in it, as a security of a higher nature, and he knows that if he elects to take a joint judgment, and neglects to have execution levied in the lifetime of the surety, his personal estate will be discharged at law; and being discharged at law, the estate should not be held answerable in equity. Whether this reasoning was sufficient for the case to which it was applied, we 'are not called upon to determine; it is sufficient for us to say that the case is quite distinguishable, both in principle and reason, from the one now under consideration. Here the bond is joint and several, and there has been no joint judgment recovered thereon; and nothing has occurred which, from the nature and inherent qualities of the contract, could operate to discharge the obligation created by the bond. Therefore, neither the case of Waters vs. Riley, nor that of the United States vs. Price, has any application here whatever, to say nothing of the operation of the Code, Article 49, section 1, to remove the technical grounds of discharge relied on in those cases. 2. As to the question of the complainant’s right to contribution as against the legatees who have received the estate of the deceased co-surety, that has been virtually answered affirmatively in what has been said in reference to the first question considered ; and we think it clear beyond doubt. If the bond was still liable at the time of payment, the implied obligation, founded in natural justice and equity, was operative to entitle the surety or his personal representative paying the debt to contribution from the estate of a deceased co-surety. The burthen discharged was common to both estates; and the equitable obligation which binds one surety to contribute to another, as often declared, springs up at the time the relation is entered into, and is consummated when the surety has paid the debt. It is perfectly well settled that the right of contribution exists as against the representatives of a deceased — 379 — co-surety, for payment after his death, by reason of the implied obligation which arose at the time the common suretyship was entered into. Bachelder vs. Fiske, 17 Mass., 464 ; Bradley vs. Burwell, 3 Denio, 62, 66 ; 1 Lead. Cas. Eq.,p. 167 ; and here, inasmuch as the estate of the co-surety was administered and distributed before payment was required to be made to the legatees under Seth’s will, the legatees or distributees receiving the assets belonging to the estate of the co-surety Grafton are liable to make the same contribution that the executor could have heen required to make, if the assets liad not been delivered or paid over. There is neither justice nor principle that would entitle them to stand in a more favorable position than the executor, with respect to the claim. They hold the assets of the estate of the deceased as trustees, as to valid, enforcible debts remaining unpaid ; and they have no beneficial interest in such assets until such debts are all discharged. Each legatee or distributee is liable to make contribution in due proportion to the amount received by him. Gillespie vs. Alexander, 3 Russ., 130. (Decided 8th March, 1876.) It follows that the decree of the Court below must be reversed, and the cause remanded, that further proceedings may be had upon the overruling of the demurrer of the defendants. Decree reversed, and cause remanded.