Opinion
Argued June 19, 1889
Decided October 8, 1889
Alexander V. Campbell for appellant.
Walter S. Logan for respondent.
By the order appealed from the whole estate of the testatrix is taken out of the hands of the executor and placed in the hands of a receiver, the executor is absolutely restrained from the performance of his duties, and the debt of this plaintiff is ordered to be paid in preference to all other debts of the testatrix. We are unable to perceive any ground upon which such an order can be maintained. There was no allegation in the complaint in this action that the estate of Mrs. Sharp was at her death solvent or insolvent, and no claim was there put forth that the plaintiffs were entitled to payment of their debt in preference to other creditors of the testatrix, and there is no determination as to the priority of payment by the judgment in the action. All that is determined by the judgment is that the plaintiffs had a debt for the amount claimed and that that debt is to be paid out of the estate of Mrs. Sharp. By the general rules of law the executor became personally liable for plaintiffs' debt contracted by him after the death of the testatrix, and they could only resort to him for payment. But, because of his insolvency, they could, in equity, resort to the estate for the payment of their debt; and the sole effect of the judgment, aside from determining the amount of plaintiffs' claim, is to make it payable out of the estate. The other creditors of the testatrix have had no hearing and no opportunity to be heard as to their claims upon the estate; and they should not without any hearing have their claims postponed until after the plaintiffs' claim had been paid in full. For the purpose of distribution of an estate among the creditors of a decedent the executor does not represent the creditors as to their respective claims upon the estate as between each other. He represents the estate as to all claims made against it, but not as to the mode of its distribution among the various claimants thereon. The statutes provide that such claimants are to be cited in the Surrogate's Court and there heard in reference to their respective claims upon any distribution of the estate. Here, in opposition to this motion, it was shown that Mrs. Sharp at her death owed a large amount of debts and that her estate was, in fact, insolvent. Under such circumstances, the plaintiffs can proceed to collect their judgment only in the modes prescribed by law. The estate is to be settled and administered in the Surrogate's Court, and the judgment may there be presented upon the final settlement of the accounts of the executors, and ordered to be paid pro rata with other debts; or the plaintiffs may obtain payment of the same, or of its proper proportion, in the Surrogate's Court under sections 1825, 1826, 2717, 2718 of the Code.
How the surrogate shall adjust the various claims upon the estate in the hands of the executor need not now be finally determined. The estate of a decedent who leaves debts is, at his death, impounded by the law for all his creditors, and they must share therein if it is insufficient, pro rata, except as the statute in a few cases gives preferences. The creditors are not bound, without their consent, by any provisions contained in a will for the establishment or continuance of any business after the death of a testator; but they have the absolute right to have the estate applied, as soon as the forms of law will permit, upon their debts. So here, unless the creditors existing at the death of Mrs. Sharp in some way consented to the carrying on of the business by the executor, they have the right to insist that the estate, as it existed at her death, shall be used for the payment of their debts and the expenses of administration to the exclusion of debts subsequently created by the executor. ( Stanwood v. Owen, 14 Gray, 195; Pitkin v. Pitkin, 7 Conn. 307.) But if the business was carried on by the executor, with the consent of the original creditors, then different principles must apply in the distribution of the estate among all the creditors. Then the creditors of the business must either share pro rata with the other creditors in the whole estate, or they must first be paid out of that portion of the estate used in the business; and we are inclined to think that the former is the correct rule. If the business was carried on without the consent of the creditors, and the estate has been thereby increased, then the original creditors should probably alone share in the estate as it came to the executor, and the creditors of the business should alone have the increase made by their contribution to the capital of the business. As these questions have not been argued, we ought not now to determine them, as they are new in this state and not without some difficulty.
The orders of the Special and General Terms should be reversed and the motion should be denied, with $10 costs of the motion and the costs of the appeal to the General Term and to this court.
All concur, DANFORTH, J., in result.
Order reversed.