In re Estate of McCune

• Decision Date: 31 October 1882
• Parties: IN THE MATTER OF THE ESTATE OF MCCUNE, HOLLIDAY, Administrator, Appellant.
• Court: Missouri Supreme Court

76 Mo. 200

IN THE MATTER OF THE ESTATE OF MCCUNE, HOLLIDAY, Administrator, Appellant.

Supreme Court of Missouri.

October Term, 1882.

Appeal from St. Louis Court of Appeals.

REVERSED.

This was an appeal taken by Samuel N. Holliday, administrator of the estate of John S. McCune, deceased, from an order of payment made by the probate court of the city of St. Louis. The facts of the case, about which there was no dispute, were made known to the probate court by a report of the administrator, in which he prayed the court to declare a dividend, and were substantially as follows: The administrator had in his hands assets to the amount of $124,000, while demands had been allowed in the fifth class to the amount of $247,000. These bore interest at different rates, some ten, some eight and some six per cent, and the interest amounted in the aggregate to $84,000. Several of the creditors, at the time of proving their demands, held real and personal securities, but had since realized. As to the basis of distribution the report contained the following suggestions:

1. It is claimed by some of the said creditors, that this court should declare a dividend on the face of the respective claims, as allowed, without regard to any payments that have been received from the proceeds of the sales of collaterals, not exceeding the balance due in any case, and without regard to the rate of interest borne by the claims respectively.

2. It is claimed by other creditors, that the interest borne by the claims shall not be regarded until the face of said claims shall have been paid in full, but that the claims which have been partly paid from the proceeds of sales of collaterals or deeds of trust, shall first be diminished by said respective payments, and the dividend declared on the balance of the said claims.

3. It is further claimed by others of said creditors, that this court shall declare the dividend on the aggregate amounts due each creditor at the day that the dividend shall be declared, deducting from claims all that has been received thereon respectively from sale of collaterals or proceeds of sales under deeds of trust, and adding interest to date of dividend declared, at the rate borne by each claim.

4. It is further claimed by at least two creditors, that this court should declare the dividend on the aggregate amount due each creditor, principal and interest, on the day the dividend is declared, without deducting from said claims any sums received after they were allowed, from proceeds of sales of deeds of trust or collaterals.

The probate court having considered this report ordered the administrator to pay fifty per cent on the face of all the fifth class claims without reference to the interest borne by said claims respectively, and without regard to any amounts that had been paid on said claims, or any of them, from the proceeds of sales of collaterals or deeds of trust, since said claims were allowed, not exceeding, however, the balance due on any claim. From this order, the administrator appealed successively to the circuit court and the St. Louis court of appeals, by both of which courts the judgment of the probate court was affirmed.Dryden & Dryden for appellant.

1. It is the amount of a demand, and not the face of a demand, that, in respect to such demand, furnishes the lawful basis for the apportionment of assets of a decedent's estate among creditors. Wag. Stat., p. 105, § 29; Ib., p. 109, § 11. These sections of the statute provide not that the demands shall be paid and the assets be apportioned in proportion to the faces of the “demands, but in proportion to their amounts.” The face of a demand is one thing and the amount of a demand is another and a totally different thing. The face of the demand in the sense of the order appealed from, is the sum which was due at the moment of the allowance; the amount of the demand in the sense of the statute governing apportionments is what is due, whether more or less than the face, at the time of the apportionment. Accrued interest is an integral part of all demands resting in judgment. Wag. Stat., 783, § 3. The law so much regards interest as part of the creditor's demand, that, in case of partial payment, it will apply such payment to the interest first, in the absence of direction by the parties. Riney v. Hill, 14 Mo. 500; Johnson v. Johnson, 5 Jones Eq. 167. The judgment creditor has the same right to have satisfaction of his interest, by “sale of property,” as he has in respect to the principal.

Every one is entitled to the benefits and advantages of his contracts lawfully made. A contract for ten per cent interest is lawful, and is of greater value (all other conditions being equal) than a contract for six per cent interest. To apportion the assets of an insolvent estate among creditors whose demands thus bear different rates of interest, in the proportions which the principal only of the several demands bear to each other, is to rob the better contract of its lawful benefits and advantages, and to reduce it to a level with its inferiors, a power possessed by no court. The face rule not merely robs the creditor of the legitimate benefits of his contract, but it gives rewards to the negligent, and administers stripes to the diligent. That is to say, as he who longest delays proving up his claim, thereby procures the incorporation of the largest amount of interest in his allowance, he stands on a better footing than he who has proved up earlier.

2. A debt which has been partially paid, insofar as it has been thus paid, is not legally the object of an apportionment of assets of a decedent's estate. ( a) They are required by law to be apportioned to the demands entitled to participate therein, “in proportion to their amounts.” §§ 29, 11, supra. ( b) The sum which the creditor is actually entitled to be paid on his demand--not some fictitious or fancied amount--but the real amount payable, is the sum which the statute, in terms, prescribes as the amount to which the apportionment must be made. ( c) The legal and logical result of the partial payment of these allowances by the sale of securities, was the extinguishment of the debt pro tanto, and the destruction of the relation of creditor and debtor between the claimants and the administrator, as respects so much of the debt as was thus paid. If the debts were extinguished pro tanto, and the relation of creditor and debtor was destroyed, as supposed, then it follows, necessarily, that thereafter the demands, so partially paid, consisted, and could only consist, of the balance remaining unpaid. That balance constituted the amount of the creditor's claim and the amount entitled to apportionment. ( d) As the secured creditors had not realized on their securities at the time of proving their debts, they had the right to prove for the full amount. But if they had sold the securities, there is no doubt they could only have proved for the balance due them. ( e) If the effect of the application of the proceeds of collaterals to the partial payment of the secured debt before allowance be to extinguish the debt pro tanto, and to limit the creditor to the allowance of the balance merely, and hence to the receipt of dividends on such balance only, by what logic will the application of such proceeds, after allowance, be held to have any other or different effect? In both instances, payment is the thing accomplished--payment of the same debt--payment, too, from the same source. The only difference being, a difference in time.

Glover & Shepley and A. J. P. Garesche for the secured creditors.

At common law the creditor has the right to rely upon all the funds he has for payment of his whole debt, and until that is paid from some source, to resort to all sources for its payment, and this rule is not altered by the fact that the debtor dies insolvent. Mason v. Bragg, 2 My. & Cr. 448, (overruling Greenwood v. Taylor, 1 Russ. & Myl. 185;) Rome v. Young, 1 Yo. & Col. 204; 1 Story Eq. Jur., (11 Ed.) p. 665, § 633; Moses v. Ranlett, 2 N. H. 488; Loomis v. Farnum, 14 N. H. 120; West v. Bank of Rutland, 19 Vt. 403; Shunk's Appeal, 2 Pa. St. 304; Bair & Shenk's Appeal, 1 Norris (Pa.) 113; Findlay v. Hosmer, 2 Conn. 350; Clarke v. Henshaw, 30 Ind. 146; Miller's case, 82 Pa. St. 114; s. c., 22 Am. Rep. 754; Jervis v. Smith, 7 Abb. Pr. (N. S.) 217; Mason's Appeal, 89 Pa. St. 404; Morton v. Caldwell, 3 Strobh. Eq. 166; Midgely v. Slocomb, 2 Abb. Pr. (N. S.) 275. Nothing in our statute changes this rule.

2. The administrator not being a party...