Page was indebted at the time of his decease to Patton �3,000
and upwards, which was" covered by a deed of trust on Mansfield,
one of Page's estates. The executors of Page refusing to act,
Patton, in 1803, took out administration with the will annexed and
gave securities for the performance of his duties. Patton made
sales of the personal estate for cash and on a credit of twelve
months, and received various sums of money from the same; he made
disbursements in payment of debts and expenses for the support and
education of the children of Page and in advance to the legatees.
He kept his administration accounts in a book provided for the
purpose, entering his receipts and disbursements for the estate but
not bringing his own debt and interest into the account. In 1810,
he put the items of his account into the hands of counsel and
requested him to introduce the deed of trust "as he might think
proper," and an account as administrator was" made out, in" which
the" principal and interest of
Patton's debt was entered as the first item. Afterwards, in the
same year, by order of court, the real estate was sold and Patton
received the proceeds of the same.
Held that the sum due
under the deed of trust to Patton should lie charged on the funds
arising from the sale of the real estate, and that having omitted
to retain from the proceeds of the personal estate the sum due to
him by Page, Patton could not afterwards charge the same against
the legal assets, being the fund produced by the personal
estate.
The executor or administrator cannot discharge his own debt in
preference to others of superior dignity, though he may give the
preference to his own over others of equal degree. In some of the
states, this rule would not apply, as there is no difference made
in the payment of debts between a bond and simple contract.
If the creditor appoints the debtor his executor, in some cases
it operates as a release. This, however, is not the case as against
creditors; the release is good against devisees when the debt due
has not been specifically devised.
Page 30 U. S. 305
MR. JUSTICE McLEAN delivered the opinion of the Court.
The legal question arose out of the following facts, which are
substantially stated by the defendant's counsel. Mann Page the
second, having made his will, died in 1803 leaving a large estate,
real and personal, the whole being charged with the payment of his
debts.
The words in the will are
"I do hereby subject all my estate, both real and personal, to
the payment of my debts, and full power is given to my executors to
sell and convey all or any part thereof which in their discretion
they shall deem it most expedient to dispose of for that
purpose."
To his wife he gave a life estate in a part of his farm called
Mansfield, and the residue of it he bequeathed in fee simple to his
two sons, Robert and Mann.
He devised three several parcels of real estate, and, with the
exception of his plate, all his personal property, to his
executors, to be "by them applied, in the first place, to the
payment of his debts, and the balance, if any, to be divided among
his three sons." His daughters were provided for in the will, and
the support and education of his children were charged upon his
whole estate.
The testator, at his death, owed to Robert Patton �3,557 12s.
9p., which debt was secured by a deed of trust, on the Mansfield
estate, dated 12 July, 1799, bearing interest from the date. He
also owed other debts to a large amount, which bound his real
estate.
As the executors appointed by the will refused to act, Patton
took out letters of administration, with the will annexed,
Page 30 U. S. 306
in October, 1803, and gave sureties for the performance of his
duties.
In 1804, he made sales of the personal property on a credit of
twelve months, with the exception of certain sums which were
required to be paid down. The devisees of the real estate took
possession of it. That part which was devised to the executors
seems not to have been in a condition to be sold.
Up to the year 1810, the administrator received, at different
times, various sums of money from the personal assets, and made
disbursements in payment of debts and expenses, for the support and
education of the family, and in advance to legatees.
During this period, he kept his administration account in a book
provided for that purpose, in which his receipts and disbursements
were entered, but the debt due to him from the estate, or the
interest on it, was not brought into the account.
In 1810, he furnished to his counsel the items of his account
and requested him to put it into proper form and to introduce the
deed of trust "as he might think proper."
A statement of the account was made under the direction of the
counsel, in which the first item of the debit was the principal and
interest of the above debt. This account, balanced annually, makes
the administrator creditor, at the end of 1803, the sum of �5,746
12s. 7 p.; at the close of 1810, of the sum of �2,981 12s., 11p.,
and the lowest annual balance exhibited in his favor was, at the
end of 1807, �2,096 6.5 p. In the account, he did not credit the
estate with the amount of sales, but with the amount of collections
only.
Creditors Lloyd, &c., who had liens on the real estate,
brought suits against the administrator and devisees; a sale of the
Mansfield estate was ordered, and a receiver appointed.
In this state of things, in June, 1810, the plaintiffs, who are
the administratrix, widow, and children of Mann Page, the devisor,
called Mann Page the second, brought this suit against Robert
Patton, administrator, and other representatives of Mann Page the
second, to have a settlement of the administration account, and a
distribution of the surplus. In their bill, they allege that the
administrator had received the personal
Page 30 U. S. 307
assets of the testator, and mixed them with his own, and among
other things complain of his attempting to pay himself the annual
interest upon his debt after omitting it in the account which he
had kept of the administration.
The administrator answered in March, 1811, exhibiting with his
answer the account made out under the direction of his counsel, and
which included the deed of trust.
He admits that he sold
"the personal property, and proceeded to pay the debts due from
the estate, which he may not have paid, according to their dignity,
as he was advised the whole real estate, which was more than
sufficient to pay the debts, was chargeable with them."
On 7 June, 1811, in the case of
Lloyd v. Patton, there
was a consent decree directing
"the commissioner of sales, out of the first installment, which
would fall due on 1 August, to pay costs and charges and distribute
the balance among Robert Patton and others in the order of priority
of their liens, limiting the payment to Patton, whose balance is
unsettled, to any sum that the commissioner and William C. Williams
might agree on, and taking from him a receipt, submitting himself
to any order the court may in future make, for refunding any part
of the same."
In the same cause, on 1 June, 1812, the former receiver being
dead, the court made an order appointing Patton the receiver of the
court, to collect the money remaining unpaid arising from the sale
of the estate, called Mansfield, directing the purchasers to pay to
him the purchase money as it fell due, and directing him to apply
the money so received, in the payment of his testator's debts,
according to their dignity.
Afterwards, in the same year, Patton made a report to the court
showing that of the second installment of the purchase money, he
had received several sums, amounting together to $16,950.80. That
prior to his appointment as receiver, he had received from the
former receiver, the sum of $2,333.13, on account of the balance
reported due to him, on his accounts as administrator, and
"which balance arose principally from a deed of trust given to
him by Mann Page in his lifetime, on his Mansfield estate, to
secure a debt then due, and which
Page 30 U. S. 308
left a balance due the administrator of __ dollars, which he
retained out of the moneys received by him as above stated."
He also stated "that there were several debts due from the sales
of the personal estate which were in a train of collection." There
having been reports made of the administration accounts, exceptions
were taken, the first and fifteenth of which it may be proper to
notice.
In the first is stated the ground on which the plaintiffs insist
that the principal and interest of the debt secured by the deed of
trust ought not to be introduced into the account, as was done by
Patton, under direction of his counsel in 1810, but ought to be
excluded from the account, because it had been excluded in the
administration account kept by Patton in his book.
The fifteenth contains an objection to the manner in which
interest is charged, and alleges in support of that objection, that
the administrator received and mixed the money of the estate with
his own. The account, with the exceptions, was recommitted in June,
1813, and commissioner Nicholson made a report in the year 1815,
crediting the interest on the debt due by the deed of trust,
reporting the principal still due, and Patton indebted as
administrator �375 13s. 3 p.
In November, 1815, an order was made for directing payments by
the receiver, and further accounts. A report was made in pursuance
of this order, stating Patton to be creditor as administrator to
the amount of �57, 12s., 5p.
In 1820, another order was made in both causes directing a
further payment by the receiver and further accounts to be
taken.
Commissioner Barton, in September, 1825, made a report in
obedience to this order in which he states that the defendant
Patton contends that he has now the right to debit his testator's
estate, in the account of his administration, with the amount of
his deed of trust on the Mansfield property.
The plaintiffs object to this charge and insist that
"although the right to charge the personal assets with this debt
once existed, it has been forfeited, not only from the neglect to
exercise it, but by his election to charge it on the funds derived
from the sale of the identical property, upon which there was a
lien to secure it. "
Page 30 U. S. 309
The Commissioner, not undertaking to decide the question thus
raised, presented two statements to the court.
In the first, he placed the principal of the deed of trust,
together with the interest from December, 1814, to the credit of
the receiver. In the second, the same sum was carried as a credit
to the administrator.
Upon the argument of this question, the judges of the circuit
court being divided in opinion, it was adjourned to this Court for
its decision.
Shall the credit be given to the administrator or receiver?
The counsel for the complainants insist that as a specific lien
was given on the Mansfield estate by the deed of trust, that the
proceeds of the sale of that estate were more properly applicable
to the payment of the debt than the legal assets. In answer to
this, it may be said that although the testator charged his real as
well as personal estate with the payment of his debts, yet it was
the duty of the administrator first to apply the legal assets to
this purpose. The fact that the debt in controversy was secured by
a lien does in no respect alter the principle. It seems to have
been the design of the testator to secure to his devisees the
Mansfield estate, at least until his other property had been
exhausted in the payment of debts.
The legal assets, under the Virginia statute, are required to be
first applied in the payment of debts according to their different
degrees. This is in conformity to the principle of the common law,
and applies as well to debts secured by mortgage as to others.
The facts in the case, it is contended, conclusively show that
the deed of trust was not paid by Patton out of the administration
fund, but out of moneys received from a sale of the real
estate.
The manner in which his administration account was kept; the
interest on the deed of trust, which was charged to this account by
the commissioner, under the direction of Patton; the decree of
1811, which directed the receiver to make a payment to him and
others, according to the dignity of their claims; the
acknowledgment under his own hand, in his report as receiver, in
1812, of having received from the former receiver between two and
three thousand dollars, and that he retained the
Page 30 U. S. 310
remaining balance due him, out of moneys then in his hands as
receiver, which balance arose principally from the deed of trust;
all prove that the deed of trust was principally, if not entirely,
paid out of the funds in the hands of the receiver.
It is insisted that the facts also show a determination by
Patton to give a preference in payments to other debts and to look
to a sale of the Mansfield estate for the satisfaction of his deed
of trust. That, having made his election or application of the
funds in his hands as administrator, it is now too late, as it was
in 1810, to change his purpose. That a change might be productive
of great embarrassment and consequent injury by shifting the
interests and responsibilities of parties. Several authorities are
cited under this head.
8 U. S. 4 Cranch
326;
20 U. S. 7 Wheat.
13;
10 U. S. 6 Cranch
28;
22 U. S. 9
Wheat. 730; 1 Wash. 128.
In a case where the right of applying payments existed and was
exercised by either a debtor or creditor, and notice given, no
change can be made in the credit, except by the consent of both
parties.
On the part of the defendant, it is contended that, it being the
duty of the administrator first to apply the legal assets in the
payment of debts, he cannot, by refusing to do so, throw the burden
of payment on the real estate. That the consent of the devisees, of
which there is no evidence in the present case, cannot authorize
the administrator to take any steps which the law does not
sanction, and thereby make his securities responsible.
If any agreement were made between the administrator and the
devisees that the real estate should be sold for the payment of the
above debt, instead of applying the legal assets, it is insisted
that such a proceeding would be governed by the contract, and
consequently the sureties of the administrator could not be held
responsible. That the fund would be considered as left in the hands
of Patton, under the new agreement, as an individual, and not as
administrator, and for which he could only be responsible in his
private capacity. That for this sum, thus withdrawn from the
administrator, the administration fund must be credited.
If such an arrangement had been made with the devisees, it might
be difficult to come to this conclusion: how any
Page 30 U. S. 311
agreement with them could affect the claims of creditors on the
legal assets and the eventual responsibility of the sureties of the
administrator for a failure in his duty it is difficult to
understand.
The facts of the case show that the sale of the Mansfield estate
was necessary. It was sold under a decree of a court of chancery
obtained by the creditors of the estate, and the application of the
proceeds was made by the court. In that suit, the proceedings of
the administrator were fully investigated. All the items of his
account were examined by the court or by a commissioner under its
authority.
From this examination, it appeared to the satisfaction of the
court that to satisfy specific liens on the estate and other debts,
its sale was indispensable, and it was decreed to be sold.
The testator, by his will, not only subjected his real estate
without reservation to the payment of his debts, but he placed it
in the hands of his executors to be sold at their discretion.
Patton was administrator with the will annexed, and could exercise
all the powers of an executor.
That a sale by him of the real estate would have been valid,
even before the personal assets were exhausted, will not, perhaps,
be denied.
But it is insisted that the doctrine of election does not apply
to this case; that as administrator, Patton had a right to retain
the amount of his own debt, out of the personal assets and that it
was extinguished so soon as personal assets to that amount came
into his hands; that this effect is produced by operation of law,
and requires no sanction or election by the administrator. His
right being thus fixed, it is contended that he cannot waive it to
the injury of his securities.
This point is urged with earnestness and ability by the
defendant's counsel, and a number of authorities are referred to in
support of it. Toller's Law of Executors 295; 1 Com.Dig. 476; 3
Bac. 10; 3 Bl.Com. 18; 1 Salk. 299, are cited. Blackstone lays down
the doctrine of retainer, as
"a remedy by mere operation of law, and ground upon this reason,
that the executor cannot without an apparent absurdity commence a
suit against himself; but having the whole in his hands, so much as
is sufficient to answer his demand is by operation of law applied
to that particular purpose. "
Page 30 U. S. 312
This doctrine is sanctioned in all the cases referred to, and is
believed to be no where controverted. But this right of retainer
must be exercised under certain restrictions. The executor or
administrator cannot discharge his own debt in preference to others
of superior dignity, though he may give the preference to his own
over others of equal degree. In some of the states, this rule would
not apply, as there is no difference made in the payment of debts
between a bond and simple contract.
In the case of
Warkford v. Warkford, cited from 1 Salk.
Parnell, Justice, said
"There would be a great diversity where the obligee makes the
obligor executor, and where the obligor makes the obligee executor,
for in this last case, the debt is not extinct, but only upon
supposal, that the executor has assets; but in case of failure of
assets, the executor may sue the heir. Indeed, where the executor
has assets, the debt is gone, but that is because he may retain and
pay himself. Not where a personal action was suspended, by the act
of the party, it could never be revived."
Holt, Chief Justice, in the same case said
"If the obligor make the obligee or the executor of the obligee
his executor, this alone is no extinguishment, though there be the
same hand to receive and pay, but if the executor has assets of the
obligor, it is an extinguishment, because then it is within the
rule that the person who is to receive the money is the person who
ought to pay it; but if he has no assets, then he is not the person
that ought to pay, though he is the person that is to receive it;
and to that purpose is the case of 11 Hen. IV 83, and the case of
Dorchester v. Webb, 1 Cro. 372."
In the case reported in Hobart, page 10, the court said, when
the obligor makes the executrix of the obligee his executrix, the
action is at least suspended and then the rule is that a personal
action once suspended is extinct; but the other reason is the
surer, that when assets were left, the debt was presently satisfied
by way of retainer, and consequently no new action can be had for
that debt.
The case of
Woodward v. Lord Darcy, reported in 1
Plowden, is cited. In that case, the court said that the reason why
the action is lost forever is because, in judgment of law, he is
satisfied before, for if the executor has as much goods in
Page 30 U. S. 313
his hands as his own debt amounts to, the property in these
goods is altered and vested in himself -- that is, he has them as
his own proper goods, in satisfaction of the debt, and not as
executor; so that there is a transmutation of property by the
operation of law, without suit and execution, for inasmuch as
Windham here could not have an action against himself as executor,
the operation of law is equivalent to a recovery and execution for
him; and the property is as strongly altered as it could be by
recovery and execution.
If the creditor appoint the debtor his executor, in some cases,
it operates as a release of the debt. This, however, is not the
case as against creditors, though the release is good against
devisees, where the debt due has not been specifically devised.
On these authorities it is contended that the debt of Patton was
extinguished as early as the year 1804, he having received personal
assets to the amount of it, at that time, and that the payment of
these assets, in discharge of other debts, does not prevent this
legal consequence. If the debt be once extinguished, it is urged
that no act of Patton could revive it. He could not make a contract
with himself, nor could he, by any agreement with the devisees,
renew the old obligation.
It will be observed that all the decisions referred to were made
in suits prosecuted by executors or their legal representatives, to
recover debts which, as executors, they had a right to retain.
That in such cases the right of action is gone cannot be
disputed. The executor cannot sue himself, and for this reason he
is authorized to retain the amount of his debt out of the assets in
his hands. The right of action, being once extinguished, cannot be
revived either by the executor or his legal representatives. On
this point, the authorities are decisive, and, although some
difference of opinion seems to have been entertained as to the
extinguishment of the debt, yet it is in effect extinguished, as
the legal right to enforce the payment of it is gone. On this
principle were the adjudications made which have been cited. The
question under consideration does not arise on a suit prosecuted by
Patton for the recovery of his debt. If it did, the application and
force of the
Page 30 U. S. 314
authorities would be conclusive. In such a case, his debt would
be considered as extinguished by the extinguishment of the right of
action.
Patton, as administrator, having received personal assets,
instead of paying his own debt pays others of equal or inferior
dignity, and the question is presented whether by doing so he has
forfeited his claim. It is not in proof that at any one time he had
in his hands money enough from the personal estate to discharge his
debt. As before remarked, he sold the personal property, generally,
on a credit of twelve months.
He seems to have preferred realizing the interest annually upon
his own demand, knowing that it was secured by a lien on the real
estate. He postponed the payment of the whole, or a part of this
debt, until the realty was sold, and discharged it out of the
proceeds of such sale.
Is there any principle of law which will apply this payment, as
a credit to the administration account, or that will consider the
fund to have been withdrawn from the administrator?
The law presumes his own debt to be satisfied when assets come
to his hands to the amount of it, there being no other debts of
higher degree. But may not this presumption be rebutted by an
application of the money in the payment of other debts? This seems
to have been done by Patton. In the maintenance and education of
the children and in payment of other debts than his own he applied
the personal assets.
If the doctrine contended for be correct, that it was not in the
power of Patton to waive the operation of law by which his own debt
would be discharged so soon as assets of sufficient amount came
into hands; it would seem to follow that having applied the assets
to other purposes, his own debt becomes forfeited, and the right of
retainer completely extinguished. The argument does not stop short
of this consequence.
Under this view of the case, to destroy the right of retainer in
the administrator it is only necessary to show that he had in his
possession legal assets sufficient to pay his debt, and that there
were no other debts due by the estate of higher dignity. These
facts being established, if the principle be correct, as
effectually destroy the existence of the debt and the
Page 30 U. S. 315
right of retainer as if the debt had been paid. It can be of no
importance how the legal assets were applied. Being in the hands of
the administrator, the law applies them in discharge of his debt,
it is contended, in defiance of his own acts and intentions; if
this be not the case, if the administrator may postpone the payment
of his own debt a day or a month, and give a preference in payments
to other demands, he may extend the time at his discretion, and if
he may discharge his own debt, after paying other debts of equal
amount and of no higher degree, out of the legal assets, he may
continue to give the preference to other claims, and eventually
discharge his debt out of any moneys which may come into his hands
as representative of the estate.
Is the debt paid so soon as the legal assets shall come to the
hands of the administrator?
That the right of action is gone, is admitted; because a man
cannot sue himself: and this right being once extinguished cannot
be renewed.
This rule is founded on reason and justice and is well
established by repeated adjudications. But can the principle be
extended so as to extinguish the right of retainer where assets
equal to the debt have been received and applied in the payment of
other demands? Such a rule would be contrary to reason and justice,
and is not believed to be law.
The language used in some of the decisions referred to would
seem to favor the construction contended for by the defendant's
counsel, but the point presented in all the cases was, whether the
action could be sustained. The right of the administrator to retain
the money in his hands for the discharge of his own debt is as
unquestionable as if it had been paid to him on executions. It is
his own, and he may retain it as such. This is the case put by some
of the judges in illustration of the principle, but it is nowhere
said that a waiver of this right is an abandonment of it.
Lord Hardwicke in 2 Atkyns 411, says
"If the executor happens to be a bond creditor himself, the
court never directs that if any sums come into his hands, he should
from time to time, by piecemeal, discharge the principal and
interest of his own debt, for he may first discharge all other
demands before his own, and unless it appears that a considerable
sum was
Page 30 U. S. 316
left in his hands sufficient to pay off his bond entirely, over
and above what was due upon other demands, there could be no ground
for the exception taken."
The principle is here stated correctly, and applies to the
question under consideration.
That an administrator or executor may retain the amount of his
debt out of the assets in his hands is a principle which grew out
of the necessity of the case. If such a right did not exist, the
executor or administrator would be in many cases without remedy.
The principle was intended for his benefit, and not to mislead or
entrap him.
It is a right which he may postpone if in doing so he does no
injury to the estate, and such a question can only be made by the
devisees or their heirs. If he shall pay debts not on interest and
permit his own to run on interest, it may become a question whether
he be entitled to interest. But his right to pay himself, so long
as assets shall remain in his hands, is clear.
The moneys arising from the sale of the Mansfield estate were
applied in payment of debts under the orders of the court of
chancery. The decree in 1811 directed Robert Patton and others to
be paid "in the order of priorities of their liens." These and
other facts connected with it show that the debt due on the deed of
trust was referred to which constituted a lien on the estate.
In the year 1812, Patton reported to the court that he had
retained out of the moneys in his hands as receiver the balance due
to him. This payment was sanctioned by the court.
It appears then that a court of chancery has sanctioned the
payments which have given rise to this controversy. On a full
investigation of the administration account, it directed the
payments to be made out of the equitable fund. Had that court
considered the claim of Patton as satisfied by failing to apply in
its discharge the moneys arising from the sale of the personal
property, the payments would not have been decreed.
Debts to a large amount were paid out of the proceeds of the
real estate, under the sanction of the court. Must these, as well
as Patton's debt, be credited to the administration fund? Was
Patton obliged to pay his own debt? Was he not at liberty to
release it? And if he had done so, could there
Page 30 U. S. 317
have been any just ground of complaint by his sureties? Is not
their complaint, as now made, equally groundless?
Patton has received payment of a part or the whole of his deed
of trust, out of the equitable assets, under the decree of a court
of chancery. This payment cannot be transferred to the
administration fund, and entered as a credit to the administrator;
nor is the administrator, under the circumstances of the case,
entitled to a credit on any other principle, for the amount. It
should be credited to the fund out of which the payment was
made.
MR. JUSTICE JOHNSON, dissenting.
As I understand the decision just delivered, it affirms a
principle to which I certainly cannot yield my assent.
As the will charges the real estate as well with the maintenance
and education of the children as the payment of debts, and there
does not appear to have been at any time in the administrator's
hands a sum sufficient to pay off his whole debt, I am satisfied
that it is not a case of extinguishment, and that the payments made
to the maintenance and education of the children, and the
satisfaction of debts of an inferior order, are not to be imputed
to the administrator as payments upon his own bond. They were
voluntary payments, it is true, but they were made in pursuance of
the will. But as to all other sums arising out of the personalty,
and which were not applied to either of those purposes, but in fact
sunk and wasted in the administrator's hands, I am clearly of the
opinion that they are to be imputed to him as payments on his own
bond, and that
pro tanto, he could not be permitted to
apply the proceeds of the real estate to the satisfaction of his
debt; it was in fact a repayment on a debt which he knew to be
satisfied.
And as to the amount paid, respectively, to the maintenance and
education of the children, having an interest in the proceeds of
the realty; I have no idea that they can be permitted to come upon
the sureties of the administrator, for the amount so paid on their
account. Indeed, upon the whole, it appears to me to be one of
those cases of common misfortune in which the court ought to leave
the parties as it finds them. If the personal assets were in fact
in existence, it would be a different case, and there might be an
equity in the heirs now to
Page 30 U. S. 318
come upon the assets for indemnity; supposing that they might
originally have compelled the administrator to apply the personalty
in relief of the real estate. But when the assets are in fact
wasted, I cannot conceive that a court of equity would ever compel
the sureties to pay up the administration bond for the relief of
the heirs. Their liability is legally confined to the demands of
creditors and distributees alone, and I can see no equity in
subjecting them directly or indirectly to the general equity of the
heirs, in stretching that liability beyond its strict legal
limits.
MR. JUSTICE BALDWIN also dissented from the judgment and opinion
of the court.
This cause on to be heard on the transcript of the record from
the Circuit Court of the United States for the Eastern District of
Virginia, and on the points and questions on which the judges of
the said circuit court were opposed in opinion, and which were
certified to this Court for its opinion in pursuance of the act of
Congress for that purpose made and provided; and was argued by
counsel, on consideration whereof it is the opinion of this Court
that the debt of Patton, or such portion of it as was paid out of
the proceeds of the sale of the real estate, should be credited to
that fund, and not to his account of the administration fund.
Whereupon it is ordered and adjudged by this Court that it be
certified to the judges of the said circuit court that the debt of
Patton, or such portion of it as was paid out of the proceeds of
the sale of the real estate, should be credited to that fund, and
not to his account of the administration fund.