U.S. Supreme Court
Backhouse v. Patton, 30 U.S. 5 Pet. 160 160 (1831)
Backhouse v. Patton
30 U.S. (5 Pet.) 160
In Virginia, the moneys arising from the sale of personal property are called legal assets in the hands of an executor or administrator, and those which arise from the sale of real property are denominated equitable assets. By the law, the executor or administrator is required, out of the legal assets, to pay the creditors of the estate according to the dignity of their demands, but the equitable assets are applied equally to all the creditors in proportion to their claim.
Legal and equitable assets were in the hands of an administrator, he being also commissioner to sell the real estate of a deceased person, and by decree of the court of chancery he was directed to make payment of debts due by the intestate out of the funds in his hands, without directing in what manner the two funds should be applied. Payments were made under this decree to the creditors by the administrator and commissioner without his stating or in any way making known whether the same were made from the equitable or legal assets -- a balance remaining in his hands, unpaid to those entitled to the same, the sureties of the administrator, after his decease, claimed to have the whole of the payments made under the decree credited to the legal assets in order to obtain a discharge from their liability for the due administration of the legal assets. Held that their principal having omitted to designate the fund out of which the payments were made, they could not do so.
Where debts of different dignities are due to a creditor of the estate of an intestate, and no specific application of the payment made by an administrator is directed by, him, if the creditor applies the payment to either of his debts by some unequivocal act, his right to do so cannot be questioned. Query whether the application must be made by the creditor at the time, or within a reasonable time afterwards. chanrobles.com-red
There may be cases where, no indication having been given as to the application of the payment by the debtor or creditor, the law will make it. But it cannot be admitted that in such cases the payment will be uniformly applied to the extinguishment of a debt of the highest dignity. That there have been authorities which favor such an application, is true, but they have been controverted by other adjudications. Where an administrator has had a reasonable time to make his election as to the appropriation of
payments made by him, it is too late to do so after a controversy has arisen. And it is not competent for the sureties of the administrator to exonerate themselves from responsibility by attempting to give a construction to his acts which seems not to have been given by himself.
This cause came before the Court on a certificate of a division of opinion in the Circuit Court of the United States for the Eastern District of Virginia. In that court a bill was filed on the equity side of the court for the recovery of debts by John Backhouse's administrator, and others.
The facts of the case, as agreed on the argument, were:
James Hunter died testate and insolvent, charging his estate, both real and personal, with the payment of debts. This suit was originally brought by Rebecca Backhouse, administratrix of John Backhouse deceased, one of the creditors, in the Circuit Court of the United States for the middle circuit of Virginia against said Hunter's executor, who dying during its pendency, Robert Patton, the defendant, was appointed administrator de bonis non, with the will annexed, and gave bond and security accordingly. The suit having abated by the death of the executor, was revived against Patton. In 1803 it was decreed that the real estate should be sold for the payment of debts, and Patton and others were appointed commissioners for that purpose, to hold the proceeds of such sale subject to the order of court.
In the management of the estate, divers sums of money came into the hands of Patton, both as commissioner and administrator. After various alterations of the parties by death and otherwise, and divers interlocutory decrees ordering payments to be made ratably to creditors, as their claims were ascertained by the court, a decree was made on 12 June, 1820, against Patton, as commissioner and administrator, whereby it was ordered and adjudged that he should pay a certain sum, to be ratably apportioned among certain creditors therein mentioned. chanrobles.com-red
It was also ordered by said decree that a commissioner of court should examine and report upon the administration accounts of said defendant. This examination was had and a report made on 24 November, 1820. After the return of this report, to-wit on 15 June, 1821, it was decreed that the said defendant should pay a further sum, to be apportioned among the creditors as therein directed. Upon this decree executions were issued and returned "nulla bona." Whereupon a supplemental bill was filed, seeking to make the sureties for the faithful administration of Patton accountable for his waste.
One of his said sureties failed to appear and answer, and the bill, as to him, was taken pro confesso; the other appeared and answered. When the cause came on for hearing against the sureties, the insolvency of Patton and the amount of assets which came to his hands to be administered on were not controverted. Patton having made satisfactory arrangements to secure the payment of the sum adjudged against him by the decree of 12 June, 1820, as to the present question, it was considered as paid. It was contended by the defendant that the whole sum adjudged to be paid by Patton, under the decree of 12 June, 1820, amounting to $23,322.56, should go to his credit as administrator.
At the hearing in the circuit court, the questions presented by the counsel of the parties, and argued before the court, were the following, to-wit:
"1. Whether the whole of the said payments made by the said Robert Patton, under the said decree of 12 June, 1820, was to be applied entirely to the debt due from him as commissioner of the court for the sale of the real estate, so as to leave his sureties for due administration liable for the whole balance in his hands as administrator de bonis non, or"
"2. Whether the payment ought to be applied to the debt due from R. Patton, as administrator, on his administration account, or,"
"3. Whether the payment ought to be applied to the debts due by him in both characters, as commissioner of the court and as administrator de bonis non, ratably, in proportion to the amounts of those responsibilities? "
The court holding the negative on the first question, and being divided on the second and third, they were adjourned to the Supreme Court.
The complainants by their counsel contended in the circuit court that the whole sum of $23,322.56, adjudged against Patton by the decree of 12 June, 1820, ought not to go to the credit of his responsibility as administrator, and that his sureties cannot claim more than its ratable apportionment according to the amount of their respective responsibilities of commissioner and administrator. chanrobles.com-red