Nichols v. Harsh & 87 Other Cases

• Decision Date: 21 June 1926
• Docket Number: No. 37653.,37653.
• Citation: 209 N.W. 297,202 Iowa 117
• Parties: NICHOLS v. HARSH AND 87 OTHER CASES.
• Court: Iowa Supreme Court

202 Iowa 117

209 N.W. 297

NICHOLS

v.HARSH AND 87 OTHER CASES.

No. 37653.

Supreme Court of Iowa.

June 21, 1926.

Appeal from District Court, Union County; A. R. Maxwell, Judge.

Action upon a claim filed against the estate of J. B. Harsh, deceased. The claim was not filed within 12 months after the giving of the notice of the appointment of the administratrix of said estate. The court disallowed the claim, and dismissed the same, and the claimant appeals. Reversed and remanded.Carr, Cox, Evans & Riley, of Des Moines, for appellant.

Higbee & McEniry, of Creston, for appellee.

FAVILLE, J.

It appears that for many years the decedent, J. B. Harsh, operated a private bank in the city of Creston, Iowa, under the name of the Land Credit Bank. It now appears that Harsh was the sole owner and proprietor of said bank and, that the name “Land Credit Bank” was a mere trade-name used by the said decedent.

On or about the 23d day of April, 1920, one Mathews and his wife executed and delivered to the said Land Credit Bank a promissory note for the principal sum of $1,200, bearing interest at the rate of 6 per cent. per annum. The note recited that it was secured by a mortgage, or deed of trust, which is a first lien on real estate in St. Claire county, Mo. The note was due May 1, 1925. Before maturity, the Land Credit Bank transferred said note to appellant by written indorsement thereon, which is as follows:

“Creston, Iowa, May 10, 1920.

For value received, the Land Credit Bank hereby sells and assigns the within bond or note and coupons thereto attached to J. W. Nichols, and guarantees the payment of the same within two years from maturity, with interest. Land Credit Bank, By J. B. Harsh, President. Attest: H. T. Scurr, Cashier.”

Appellant's claim against the estate of Harsh was filed December 11, 1924, and he alleged that said note did not mature until May 1, 1925, and that whether the said note would be paid when due he had neither knowledge nor information sufficient to form a belief, but asserted that, in the event said note was not paid when due, he relied upon the said guaranty of Harsh. It is also alleged, and shown by the record, that at the time of the filing of said claim the estate of the said decedent was open and unsettled. The prayer of appellant is that the said claim may be allowed as a valid claim against the said estate, and that the assets of said estate be not distributed so long as any liability, contingent or otherwise, may exist by reason of said claim.

Harsh died June 19, 1923. Appellee was appointed and qualified as administratrix of his estate, and gave due notice of her appointment as such administratrix on July 9, 1923. Appellant's claim was not filed until December 11, 1924. Under the statute, it being a claim of the fourth class, it was not filed within time for allowance. Code, § 11972. Appellant urges two grounds upon which he claims the statute of limitations with regard to the filing of fourth-class claims should not be available against him: First, it is appellant's contention that said claim is a mere contingent claim, and that it is not necessary that the same be filed within 12 months; and, second, it is urged that there are “peculiar circumstances” which entitle the claimant to equitable relief in respect to the time of filing said claim, as contemplated by Code, § 11972.

Code, § 11964, is as follows:

“Demands not yet due may be presented, proved, and allowed as other claims.”

Code, § 11965, is as follows:

“Contingent liabilities must be presented and proved, or the executor or administrator shall be under no obligation to make any provision for satisfying them when they accrue.”

[1][2] We have held that the section providing that claims of the fourth class shall be filed within 12 months from the giving of the notice does not apply to certain so-called “contingent claims” against an estate, under certain circumstances. The holding is not, however, to the broad and general effect that any and all “contingent claims” against an estate may be filed after the 12-month period. There is no such pronouncement. A few citations will illustrate.

In Savery v. Sypher, 39 Iowa, 675, we considered claims that did not exist against the estate in any form at the time of the decedent's death, but arose thereafter, and we held that such a “contingent claim” was not barred by the statute.

In Wickham v. Hull, 102 Iowa, 469, 71 N. W. 352, the action was upon a claim of a receiver for assessment upon stock in a national bank. The record showed that at the expiration of the time allowed for filing claims the bank was open and transacting business in the usual way and thereafter suspended, and we held that the “contingent liability” for an assessment upon the stock was not barred by the statute under such circumstances. We said:

“The claim did not exist at the time of Mr. Hull's death, but has arisen since as a liability against his estate.”

In Security Fire Insurance Co. v. Hanson, 104 Iowa, 264, 73 N. W. 596, there was involved the liability of a surety on the bond of an insurance agent. The action was against the heirs of the surety, and was brought after the estate was closed. By the terms of the bond the obligor bound his heirs, executors, and administrators. We held that the claim was not subject to the limitations provided for in the section.

Other cases might be cited. An examination of the authorities discloses that the so-called “contingent claims” which it has been held can be filed after the statute of limitations has run are all cases of an entirely different character from the claim in the case at bar.

The terms “contingent claim” and “contingent liability” are not easy of accurate definition, and are frequently used without technical accuracy. Nor are said expressions always used in the same sense and with the same meaning. To illustrate: A party executes a warranty deed with the usual covenants running with the land. Immediately upon the execution and delivery of said deed there is a “contingent liability” on the part of the covenantor for a breach in the covenants of the deed, but no “contingent claim” for any such possible future liability could be filed against the estate of the covenantor. Reed v. Pierce, 36 Me. 455, 58 Am. Dec. 761. Again, the case of Wickham v. Hull, supra, is a good illustration of this general class of so-called “contingent liabilities” or “contingent claims.” The owner of stock in a national bank has a “contingent liability” at all times that the bank may become insolvent, and that he may be subject to an assessment on this stock. But no claim could be filed against the estate of such a stockholder until the necessity for such assessment had been determined and fixed. Such a claim, however, is referred to as a “contingent claim,” and the liability as a “contingent liability.”

We might multiply the illustrations of this class of so-called “contingent claims” growing out of “contingent liabilities.” We have held, and properly so, that claims growing out of “contingent liabilities” of the general kind and character above referred to are not within the class of claims that must be filed within the statutory period of limitations. Such contingent claims need not be filed until the liability arises in some form against the decedent or his estate. It is not true that, because claims of this kind are sometimes, and often, referred to as “contingent claims,” or claims arising out of “contingent liabilities,” and are held not necessarily to be barred by the statute of limitations, that any and all claims that are designated as “contingent claims” or that arise out of a “contingent liability” can be filed against an estate, regardless of the statute of limitations.

Code, § 11965, expressly recognizes the necessity of filing claims based on “contingent liabilities,” and requires that such claims must be presented and proved within the statutory period, or the executor or administrator shall be under no obligation to make any provision for satisfying them when they accrue. The claim of appellant is not in the general class of so-called “contingent claims” first above referred to, but it is clearly within the class of contingent claims intended to be, and in fact, covered by the provisions of section 11965.

[3] It is true that the liability of a guarantor on a promissory note is secondary and not primary. His obligation is to pay the debt in the event the debtor cannot do so. The undertaking is collateral. First National Bank v. Drake, 185 Iowa, 879, 171 N. W. 115. But there is a definite obligation outstanding from the moment of the execution of the contract of guaranty. In a quite proper sense, it may be said that the guarantor is at all times from the inception of the instrument a “debtor” thereunder. Although his liability may be secondary, there is a continuing liability under the obligation from the inception of the instrument.

The owner of stock in a bank is, however, not a debtor by virtue of being such stockholder, until an assessment has been made upon his stock. The covenantor in a warranty deed is not a debtor, and is under no obligation to pay until the covenant is in fact breached. The surety on a bond is not a debtor, nor liable as such, until the conditions of the bond are broken. But the absolute guarantor on a negotiable promissory note is under a direct and positive obligation thereon, and is in a quite proper sense a debtor at all times after the execution of the contract of guaranty. The amount of his indebtedness may eventually be determined by a “contingency,” but there is a continuing obligation to pay.

We are of the opinion that the obligation of a guarantor on a promissory note is one of the very “contingent liabilities” contemplated by the statute, and which must be presented and proved within the time fixed thereby. In order, therefore, for appellant to preserve and secure his claim against the estate of the decedent, it was...