United States v. Shaw (In re McLouth's Estate)

• Decision Date: 05 September 1939
• Docket Number: No. 38.,38.
• Citation: 290 Mich. 311,287 N.W. 477
• Parties: In re McLOUTH'S ESTATE. UNITED STATES v. SHAW.
• Court: Michigan Supreme Court

290 Mich. 311

287 N.W. 477

In re McLOUTH'S ESTATE.UNITED STATES

v.SHAW.

No. 38.

Supreme Court of Michigan.

Sept. 5, 1939.

Proceeding in the matter of the estate of Sydney C. McLouth, deceased, wherein John C. Shaw, administrator de bonis non of the estate of Sydney C. McLouth, deceased, petitioned the probate judge for the ascertainment and allowance of the excess of a claim against the estate over and above the amount of a claim of the United States of America against the estate as a claim in favor of the estate against the United States. From a judgment allowing the claim against the United States, the United States appeals.

Judgment affirmed and case remanded for certification to the probate court.Appeal from Circuit Court, St. Clair County; Fred W. George, judge.

Argued before the Entire Bench.

John C. Lehr, U. S. Atty., and Peter P. Gilbert, Asst. U. S. Atty., both of Detroit, and O. P. M. Brown, Sp. Asst. U. S. Atty., and Carl F. Farbach, General Counsel, U. S. Maritime Commission, both of Washington, D. C., for the United States.

Stewart & Black, of Port Huron (Howell Van Auken, of Detroit, of counsel), for appellee.

NORTH, Justice.

Except as hereinafter noted the factual background of this case will be found In re McLouth's Estate, 281 Mich. 191, 274 N.W. 759, hereinafter referred to as a former appeal in this litigation. From the facts there stated it appears a claim against the McLouth estate in favor of the Ingram-Day Lumber Company was finally reduced to judgment in the supreme court of the United States. Ingram-Day Lumber Co. v. McLouth, 275 U.S. 471, 48 S.Ct. 153, 72 L.Ed 378. The date of this judgment was January 3, 1928. Pending this litigation in the federal court McLouth had died in 1923. With accrued interest and costs the adjudicated claim was ultimately allowed in the probate court of St. Clair County against the McLouth estate in the sum of $58,089.04. For reasons noted in our former decision and because of an act of Congress (Merchant Marine Act, 49 Stat. 1987, U.S.C. Title 46, Sec. 1113, 46 U.S.C.A. § 1113; quoted in margin hereof¹) appellee herein asserts that the United States government as an assignee or successor to all the rights and liabilities of the United States Shipping Board Emergency Fleet Corporation (herein designated as the Fleet Corporation) is obliged to reimburse or indemnify the McLouth estate as to its liability on this $58,089.04 claim. At the outset we may note, as held on the former appeal, we are of the opinion that appellee's contention in this particular is sound.

Another claim against the McLouth estate in the amount of $40,165.48 in favor of the United States Government was reduced to judgment in the federal courts. Shaw v. United States, 6 Cir., 75 F.2d 175. This adjudicated liability was also filed as a claim in the St. Clair probate court proceedings in the McLouth estate. Later the administrator of the estate succeeded in establishing his contention of right to satisfy this latter liability of the estate by having it set off or allowed pro tanto against the government's liability to reimburse the estate for the Ingram-Day Lumber Co. claim of $58,089.04. This was the controversy decided In re McLouth Estate, supra.

After our former decision the administrator, on November 20, 1937, petitioned the probate judge, acting in the place of commissioners on claims, for the ascertainment and allowance of the excess of the Ingram-Day Lumber Company claim over and above the government's claim as a claim in favor of the McLouth estate and against the United States Government. The uncontroverted difference in amount between these claims, allowance being made for accrued interest, is $23,628.97. By reason of the above-noted judgments, as embodied in this record, the amount of the damage to the estate was fixed or liquidated in case of failure of performance of the indemnity settlement agreement (outlined in our former decision), which failure is shown to have occurred. From the probate court's order granting the administrator's petition and allowing this claim in the amount of $23,628.97 as of December 8, 1937, in favor of the estate, the government appealed to the circuit court. On hearing in the circuit court the allowance of the claim was affirmed; although this result instead of being reached after a full hearing on the merits was reached because of a seeming abandonment of the proceedings in the circuit court by the government's representatives. From the judgment entered in the circuit court the government has brought the instant appeal. As stated in appellant's brief:

‘But a new question is presented on this appeal, namely, whether the Probate Judge, acting as Commissioners of Claims, possessed jurisdiction to allow an affirmative judgment against this Appellant-a question that was not presented on the former appeal (i. e. the appeal In re McLouth estate, supra).

‘Appellant's challenge to the jurisdiction of the Probate Judge rests not alone upon the immunity of the sovereign, but also rests upon the contention that the same statute that created the right to apply a set-off in favor of the Estate and provided the remedy, also imposed a condition which affected the existence of the right and prohibited the special tribunal in which the right might be asserted from giving any consideration to a set-off which was invalidated by the condition imposed, i. e., if the set-off was barred by the Michigan Statute of Limitations. This last contention might have been but was not raised on the former appeal.’

At the oral argument appellant definitely took the position that the only questions presented by this appeal are:

I. Did the probate court have jurisdiction to allow the claim of $23,628.97 in favor of the estate and against the government?

II. As to this claim, has there been due process of law so that the government is bound by the adjudication?

It is appellant's contention that each of these questions should be answered in the negative.

In presenting its contention that the probate court was without jurisdiction to allow the claim of $23,628.97 against the government, appellant in its brief has framed the issue as follows: ‘Since decedent's claim against the Emergency Fleet Corporation for breach of contract accrued to decedent or to decedent's estate more than six years prior to the date decedent's administrator exhibited said claim in off-set to the claim of appellant against the estate and hence was barred by limitations (Section 13976, Compiled Laws of Michigan, 1929) did the Probate Judge, acting either as Commissioners of Claims or as a Probate Court, possess jurisdiction to allow the claim exhibited in favor of the estate, as a set-off or otherwise, in view of the prohibition in Section 15682 (Compiled Laws of Michigan, 1929) against allowance of any claim barred by the statute of limitations?’

We quote the statute under which the probate court asserted its jurisdictional right to adjudicate the issue.

‘When a creditor against whom the deceased had claims shall present a claim to the commissioners, the executor or administrator shall exhibit the claims of the deceased in offset to the claims of the creditor, and the commissioners shall ascertain and allow the balance against or in favor of the estate, as they shall find the same to be; but no claim barred by the statute of limitations shall be allowed by the commissioners in favor of or against the estate, as a set-off or otherwise.’ C.L.1929, Sec. 15682; Stat.Ann. 27.2829.

Jurisdiction. The issue as to jurisdiction is presented by the italicized portion of the above-quoted statute. Appellant contends that (1) since its obligation to pay the Ingram-Day Lumber Company claim had outlawed, the probate court, acting solely under authority of the statute just quoted, was without jurisdiction to render judgment in favor of the estate; and (2) that the question of jurisdiction may be raised at any time pending final adjudication. As to the first of the above contentions appellant cites Davis v. Mills, 194 U.S. 451, 24 S.Ct. 692, 48 L.Ed. 1067;United States ex rel. Texas Cement Co. v. McCord, 233 U.S. 157, 34 S.Ct. 550, 58 L.Ed. 893, and numerous other cases. The proposition is this:

If a statute creating a new right of action contains within itself limitation of jurisdiction over subject matter or express limitation of time within which the new right of action must be presented, failure of compliance with such limitation defeats the right of action.

It is true that the quoted statute vests commissioners on claims with power to adjudicate set-offs, which power would not exist except for the statutory provision; but subjecting and limiting the exercise of this power by mere reference to our general statute of limitations, which is commonly applicable to all courts, did not add to or constitute in the statute a jurisdictional element. This provision only specifies that commissioners on claims in deciding set-off issues, like our courts, are governed by the provisions of our general statute of limitations. Without this directory provision the operation of the statute would have been the same. A like provision is not contained in the statutory provisions for general hearing of claims by commissioners, but nonetheless a claim barred by the statute cannot be allowed by commissioners. A special or distinct limitation of time for asserting a set-off before commissioners is not embodied in this statute; such, for example, as the express limitation of two years for bringing a statutory action under the blue sky law. See Bigelow v. Otis, 267 Mich. 409, 255 N.W. 270.

‘A positive distinction seems to be made between cases in which the limitation of time for bringing suit is contained in the statute which creates the liability and right of action and general statutes of limitations of the rights of action existing under other statutes or under the common law.’ Bement v. Grand Rapids & I. R. Co., 194 Mich. 64,...