Virginia-Carolina Chemical Co. v. Walston

• Decision Date: 31 May 1924
• Docket Number: 72.
• Citation: 123 S.E. 196,187 N.C. 817
• Parties: VIRGINIA-CAROLINA CHEMICAL CO. v. WALSTON ET AL.
• Court: North Carolina Supreme Court

123 S.E. 196

187 N.C. 817

VIRGINIA-CAROLINA CHEMICAL CO. v. WALSTON ET AL.

No. 72.

Supreme Court of North Carolina

May 31, 1924

Appeal from Superior Court, Edgecombe County; Bond, Judge.

Controversy without action by the Virginia-Carolina Chemical Company against L. E. Walston, administrator, W. M. Moore, deceased and another. From decree rendered, both parties appeal. Error.

Before the mortgagee can enforce his security against the widow's dower, he must first take his claim out of the personal estate of the husband, if there are sufficient assets, but, if estate is insolvent, the other creditors are entitled to have the mortgagee exhaust his collateral security by sale of the two-thirds of land not embraced in the dower and the reversion in the dower land before sharing in the personal estate, in which case the mortgagee's claim will be reduced by whatever amount he derives from the sale of his collateral security, and only the balance of his claim will share ratably with other creditors in the personal estate, and, if in such case the personal estate is not sufficient, he is entitled to collect residue out of widow's dower in land assigned as security for his debt notwithstanding C.S. § 93.

Where purchase-money mortgage is issued at time of conveyance, no dower right can attach to the title superior to the right of the holder of the purchase-money mortgage.

Controversy without action. The essential facts agreed are as follows:

(1) Corbett & Moore was a partnership composed of R. L. Corbett and W. M. Moore, and prior to March 21, 1923, did a mercantile business in Macclesfield, N. C.

(2) W M. Moore, a member of said firm, died on March 21, 1923, and L. E. Walston duly qualified as administrator of his estate.

(3) After the death of W. M. Moore, J. S. Howard and R. L Corbett were appointed receivers of the partnership assets of Corbett & Moore, and they are now duly administering same under orders of court.

(4) The partnership firm of Corbett & Moore is indebted to the plaintiff in the sum of $12,357.84; and the full amount of said claim has been filed with the receivers and also with the administrator of the estate of W. M. Moore, deceased.

(5) The assets of Corbett & Moore are not sufficient to pay more than 35 per cent. of the claims of the partnership creditors, and R. L. Corbett, the surviving partner, is insolvent.

(6) W. M. Moore died seized and possessed of several lots or tracts of land, in which his widow, the defendant Sue K. Moore, was entitled to dower; but the same were incumbered by deeds of trust in excess of their value, except a one-half interest in one lot in Macclesfield. All of said tracts of land have been sold at foreclosure sales under the respective deeds of trust. Two of said lots were conveyed to B. T. Pittman, trustee, to secure balance of purchase price of $8,200 on said lots, and brought only $7,600 at trustee's sale. Sue K. Moore joined in the execution of all the deeds of trust, relinquishing her dower interests therein.

(7) The estate of W. M. Moore, deceased, will not exceed $9,000 in value, his individual debts amount to approximately $3,000, and the liabilities of the partnership firm of Corbett & Moore will exceed $62,000.

(8) The defendant Sue K. Moore has filed a claim with the administrator for what she alleges to be the present cash value of her dower interest in the several tracts of land sold under the trust deeds as aforesaid, estimating such dower upon the basis of the value of the several tracts as fixed by such sales.

Upon the facts agreed it was adjudged by the court:

"(1) That the claim of the plaintiff against Corbett & Moore, which has been filed with the administrator of W. M. Moore, is entitled to pro rate in the assets of the estate of W. M. Moore with the individual, open, unsecured creditors of W. M. Moore upon such portion of such claim as shall remain unpaid after first crediting thereon all dividends received from the estate of Corbett & Moore, the copartnership primarily owing the same, i. e., that such claim is allowable against the estate of W. M. Moore only to the extent of the balance due thereon, after crediting dividends received in the settlement of the partnership estate of Corbett & Moore.

(2) That the indebtedness against the two tracts of land conveyed by W. M. Moore to B. T. Pittman, trustee, being for purchase money, and the indebtedness being in excess of the value of the land, the defendant Sue K. Moore, widow of W. M. Moore, is not seized of such a dower interest therein as would entitle her to prove any claim against her deceased husband's estate by reason of the foreclosure sale of said land under said trust deed.

(3) That as to the other parcels of land the defendant Sue K. Moore is entitled to have the present cash value of her dower interest therein ascertained without respect to the mortgages thereon, such present cash value to be ascertained upon the basis of the value of such land at the time of the death of W. M. Moore, and to have her claim for dower in the amount of the present cash value thereof as so ascertained allowed as an open, unsecured claim against the estate of W. M. Moore, and she is entitled to pro rate thereon with the other open, unsecured creditors of W. M. Moore.

(4) That the defendant Sue K. Moore has not waived her right to dower, and is in no wise estopped to set up and claim reimbursement out of the personal estate of W. M. Moore on account of the sale of her dower interest under the several trust deeds signed by her for the purpose of releasing her dower interest as security for the payment of the several amounts secured by such trust deeds, but that such claim has no priority over the other unsecured claims against the estate of W. M. Moore, deceased."

Upon exceptions duly entered, both sides appeal, assigning errors.

M. V. Barnhill, of Rocky Mount, for plaintiff.

W. O. Howard, of Tarbaro, for defendants.

Plaintiff's Appeal.

STACY J.

There are only two questions presented by plaintiff's appeal, and they arise upon the following exceptions and assignments of error:

"(1) For that his honor erred in holding that the claim of plaintiff is allowable against the estate of W. M. Moore only to the extent of the balance due thereon, after crediting dividends received in settlement of the partnership estate of Corbett & Moore.

(2) For that his honor erred in holding that the defendant Sue K. Moore has not waived her dower right."

It is the general rule in equity that partnership creditors are entitled to have the partnership assets first applied to the payment of the debts of the partnership, and the separate and private creditors of the individual partners are entitled to have the separate and private estate of the partners, with whom they have made individual contracts first applied to their debts. The individual property of the respective partners is not to be applied in extinguishment of partnership liabilities until the separate and individual creditors of said partners have been satisfied, so that neither class of creditors may be allowed to trespass on the fund primarily liable to the other, until the claims of that other shall have been paid in full. Thus only the excess of either fund would go in aid of the other; and this upon the principle that joint creditors should first look to the joint estate and individual creditors to the separate estate of the partners, as joint creditors have presumably extended credit upon the faith of the firm assets and the individual creditors on the faith of the separate estates of the respective partners. Hassell v. Griffin, 55 N.C. 117; 20 R. C. L. 1026.

But this reasoning does not obtain with respect to general partners, where, by statute, as with us, they are made jointly and severally liable for the debts of the partnership; for the very good reason that the force and effect of the statute, to all intents and purposes, is to convert the creditors of the firm into individual creditors of each member of the partnership. C. S. § 3259; Norfleet v. Ins. Co., 160 N.C. 327, 75 S.E. 937; Allen v. Grissom, 90 N.C. 90; Mode v. Penland, 93 N.C. 292; Hassell v. Griffin, supra. Hence, where the liability of partners is both joint and several, the inference is entirely permissible, and so understood among our merchants and in business circles that credit is extended quite as often upon the reputed solvency of the individual members a partnership, as upon the strength of the assets of the firm.

Speaking to this question in Rankin v. Jones, 55 N.C. 169, Pearson, J., said:

"In Hassell v. Griffin, ante, 117, it is decided that the English doctrine, i. e., where, in consequence of the death or bankruptcy of a partner, a fund, composed of the effects of the firm and individual effects, is to be applied under the direction of a court of equity, the firm creditors are first to be paid out of the effects of the firm and the individual creditors out of the individual effects, the excess of either fund, if any, going in aid of the other, is so far affected by our statute making all contracts joint and several, and giving an action at law against the personal representative of a deceased joint obligor, that, in this state, individual creditors have no equity to insist that the individual effects shall be first applied to the payment of their debts. Whether the other branch of this doctrine obtains here, so as to give firm creditors an equity in regard to firm effects, is a question that we are not now called on to decide; because the doctrine, even in England, is not applicable to a case like that now under consideration."

And in Hassell v. Griffin, 55 N.C. page 119, the same learned justice further observed:

"So, according to our law, a

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