20 Jones and Spencer's Super. Ct. Rep. 499

HENRIETTA C. SMITH, Appellant, v. JOHN I. CORNELL, as Executor and Trustee, &c., Respondent.

Subrogation—Eventual liability of party seehing.

One whose own property is eventually liable for a claim, to the payment of which other property is applicable in the first instance, will not be subrogated in the place of the party who held such claim, and to whom the same had been paid out of the property of the party seeking a subrogation, as to the rights which, before such payment, he had to require satisfaction of such claim out of the property which in the first instance was applicable thereto.

Thus, two parcels of land were delivered to an executor, on a valid trust to receive and pay rents during certain lives, and the remainder in fee descended to the heir at law; at the testator’s death, certain taxes were due and unpaid. Pursuant t,o a judgment of foreclosure and sale made June 11, 1883, as to one parcel, and a judgment of sale in an action for dorver made September 20, 1883, as to the other, these taxes were paid out of the proceeds of sale (the executor not having previously paid them out of the personalty), and the surplus funds were paid to the executor as trustee. The testator died January 24, 1883, leaving sufficient personalty wherewith to pay these taxes, which were preferred debts. Letters testamentary were issued February 12, 1883. The heir at law commenced the action February, 1885, praying to be subrogated in the place of the authorities to whom such taxes were paid, as to the amount thereof, and that defendant pay the amount thereof with interest, to her. Defendant, by his answer, set up that he had received all the known assets or personal property of the testator, and that the admitted unpreferred claims against the estate were largely in excess of the assets received by him, including such surplus funds. Plaintiff demurred to the answer, as insufficient in the law.

Held, that the answer presented a good defense.

Before Sedgwick, Oh. J., Van Vorst and Freedman, JJ.

Decided December 7, 1885.

Appeal from judgment entered upon order overrul*500ing demurrer to defendant’s answer, and from such order.-

The complaint avers that the plaintiff is the only child, and heir at law of Gershom B. Smith, deceased ; that Gershom B. Smith died leaving a last will and testament, which was duly proved on February 12, 1883 ; that on the sanie day, the defendant qualified as executor ; that by the third clause of the will, the said Smith devised certain premises owned by him in fee, and known as Nos. 18 and 20 Howard street, in this city, to the defendant Cornell as executor in trust to take charge of and collect the rents and income of such premises during the lifetime of two nephews, Thomas and Benjamin Olipbant, and to pa.y over to three nephews which were named, and upon the further trust, after the death of the two first named nephews, to convey the premises to certain parties named in the will, if they should then be living ; that at the time of the death of the testator, No. 18 Howard street was subject to unpaid, taxes, which, with interest, amounted to about $2,615, and No. 20 Howard street was subject to unpaid taxes, amounting, with interest, to about $1,570 ; that No. 20 Howard street was, at the time of the death, incumbered by two mortgages made by him, one for $7,000, and the other for $3,748 ; that after the death, an action was begun for the foreclosure of the mortgages upon No. 20 Howard street, and a judgment of foreclosure and sale rendered, under which the premises were sold, and out of the proceeds of sale, the amount of unpaid taxes upon the premises, viz., $1,574, was paid, in accordance with the direction of the judgment; that there was a surplus of $1,215, after payment of the taxes, the amount due upon the mortgage, and all other charges, which' surplus was paid to the defendant as trustee under the third clause of the will; that the testator left a widow, Ann E. Smith, who became entitled to dower, and brought her action for it, and in that action judgment *501was rendered that No. 18 Howard street be sold, and it was accordingly sold on October 18, 1883, and from the proceeds the taxes unpaid upon the premises, were paid with interest, in the amount of $2,615, in accordance with the directions of the judgment; that after payment of all charges and expenses, there was a surplus of $3,232, which was paid over to the defendant as trustee under the will; that after the sales of both of the premises, the plaintiff began an action, in which a judgment was duly entered, declaring that the trust described in the third clause of the will, so far as it authorized the defendant to collect the rent of the premises Nos. 18 and 20 Howard street, during the lives of the two nephews, was a valid trust in lands, and vested in the defendant an estate in such lands for the joint lives of the two nephews, but that the trust to convey the fee after the termination of said two lives was not a lawful trust, and did not vest in the trustee any estate ; that upon the death of the testator, the fee descended to the plaintiff as sole heir at law, subject to the life estate described ; and it was further adjudged that each surplus above referred to, was to be deemed real estate impressed with the valid trust, and that, subject to the execution of such trust, the principal of said funds was vested in the plaintiff, and should be paid over to her upon the termination of such life estate, as the owner in fee of the land represented by such funds; that the taxes hereinbefore referred to, in aU $4,185, were a debt or claim against the estate of the testator, which the defendant, as executor, was bound in law to have paid out of the personal estate of the testator in preference to and before payment of any other debts of less degree ; that the testator left personal estate to the amount of $9,000 and upwards, and more than enough to pay said taxes, and by the neglect of the defendant to pay the same, the said taxes were paid from the said lands, in the manner before described by the complaint.

The complaint asked as relief that the plaintiff “may *502be subrogated in the place and stead of the authorities of the city of New York, to whom, such taxes were paid, as to the amount thereof; that such amount and interest thereon be adjudged to be a preferred claim against said estate in favor of the plaintiff as taxes due at the time of the death of the testator ; and that the defendant, as such executor of the will of said G-ershom B. Smith, deceased, may be adjudged to pay the plaintiff the amount of said taxes and interest as such preferred claim, out of the personal estate of the deceased in his hands after deducting only his lawful commissions and the charges of administration.”

The action was begun in March, 1885.

The answer alleged: “ First, that the admitted claims of unpreferred creditors against the estate represented by him are largely in excess of the assets received by him as alleged in the complaint, and that defendant has received all the known assets or personal property belonging to the testator at the time of his death. Second, that said surplus funds were paid into the hands of the defendant pursuant to orders of the court entered in the actions of foreclosure and dower alleged in the complaint, on the application of this defendant and with plaintiff’s consent, she being a party to said actions, as was also this defendant.”

The plaintiff demurred to this as insufficient in law.

The court overruled the demurrer and ordered judgment for defendant dismissing complaint, with leave to plaintiff to withdraw demurrer on payment of costs.

The following opinion was rendered at special term:

Ingraham, J

“ Assuming that the complaint alleges a good cause of action, I think the defense that the claims against the estate are largely in excess of the assets, including the amount of the surplus funds received by the executor as described in the complaint, is a good defense to the cause of action set up in the complaint.

“It is clear that the plaintiff would not be entitled to *503the judgment she demands. The trust in the will by the testator, so far as it authorizes the trustee to rent the property and collect the rents and profits, and to pay the same to the beneficiary named, is valid, and that vested the title to the land during the lives of the beneficiaries in the trustee. During such period, the trustee would therefore be entitled to the possession of the premises, and, under the judgment entered, would be entitled to the surplus realized on the sale of the premises. The only judgment that could be granted would be, that the executor pay to himself, as trustee under the will, the amount of the taxes paid, to be held under the valid trust contained in the will.

“The trustee would, therefore, be a devisee of the testator, and would be liable for his debts to the extent of the estate that was devised to him by the decedent (Code, § 1843).

“ The demurrer admits that the admitted claims of the unpreferred creditors are in excess of the assets of the estate, including this fund.

“'It is apparent, therefore, that the judgment directing the executor to hold this fund under the trust contained in the will, would merely render necessary another proceeding to compel the trustee to pay the debts of the estate out of the trust funds in his hands.

“In an action between the same parties to recover taxes on certain other real estate that had been purchased by plaintiff, the general term of this court appear to have held, that under such circumstances, the action could not be maintained.*

“ I think, therefore, the demurrer should be overruled, with costs, plaintiff to have leave to withdraw demurrer on payment of costs.”

The plaintiff did not withdraw the demurrer, and judgment was thereupon entered, dismissing the complaint, with costs.

From such judgment plaintiff appeals.

*504Stilwell & Swain, attorneys, and Benjamin M. Stilwell, of counsel for appellants, argued:

I. The plaintiff had an estate in the lands which were sold, and applied to the payment of the taxes in question, for which she was not liable, and which should have been paid by the defendant as executor,, and is therefore entitled to subrogation, in the place and stead of the corporation authorities of the city, as a preferred creditor of the estate.

II. An executor is required by law, before paying any general creditor, to pay, out of the personal estate, all taxes imposed upon the lands of the testator, and unpaid at the time of his death ; and it is admitted that the defendant as such executor had in his hands sufficient funds to pay the taxes in question, and neglected to pay them, and they were collected from the plaintiff’s land. Whether or not the claims of unpreferred creditors against the estate exceed the assets, is entirely immaterial. It cannot be claimed, that because the assets are not sufficient to pay the general creditors, the executor is excused from paying the preferred creditors, to pay whom he has abundant funds in hand. Nor can the defendant, as executor, claim an offset or counter-claim, against the plaintiff’s claim or that of the defendant as trustee, on the ground that the plaintiff, as heir-at-law, or that the defendant, as devisee, may become liable for the general debts of the testator, because of the insufficiency of the assets. Neither the heir-at-law nor the devisee is liable to the executor, but only to creditors ; nor can the executor maintain any action against the heir-at-law, or devisee, to recover the value of the land descended (Code, § 1848). Even the creditors have no cause of action against the heir-at-law or devisee until the expiration of three years after the issue of letters testamentary (Code, § 1844), which time has not yet expired.

III. The real estate, upon which these taxes were imposed, having been sold under prior incumbrances, and the proceeds distributed, as required by law, no action could be taken by the executor in the surrogate’s court, *505under section 2750, to reach these lands or their proceeds, for the purpose of applying them to the payment of the debts. These proceeds could only be reached by creditors under sections 1848-9. The fact that the plaintiff as heir-at-law, and the defendant as trastee and devisee, are liable to the creditors of the testator, to the extent of the estate, right and interest in the real property which descended, or was devised to them, would seem to be a good reason why they should recover from the executor these taxes, which are in effect a part of the value of the real estate, in order that they may be in funds to pay the debts for which they are liable.

IV. The learned judge below, in holding, that to sustain this demurrer and give judgment for the plaintiff in this action, would only render necessary another proceeding to compel the trustee to pay the debts of the estate out of the funds in his hands, overlooked the fact that such proceedings against the devisee could be instituted by the creditors, and, after they had exhausted their remedy, against the heir-at-law {Code, § 1849). The fact that the plaintiff, or the defendant as her trustee, may hereafter, under certain contingencies, be called upon by creditors to account for the moneys recovered in this action, would seem to furnish no reason why the plaintiff and the defendant as her trustee should not recover the same from the executor. If the heir-at-law is responsible for the debts of the testator, it is not to be presumed that she will refuse to pay them, or that any action will be necessary to collect the same to the extent of her liability.

A. J. McCidlough, attorney, and Horace Secor, of counsel for respondent, argued:

I. Even if plaintiff, as heir-at-law, were entitled to payment of these taxes, in preference to other debts, she wrould not be entitled to the judgment asked. In that event, the judgment would direct the defendant to add the amount of the taxes to the surplus funds already in his hands, and hold the *506entire amount upon the trust set out in the complaint, the life tenants having the same rights as plaintiff, as reversioner.

II. A complete answer to this action arises from the fact that the admitted claims against the estate represented by the defendant, are largely in excess of the assets received by him, including the amount of the surplus funds received by him. It therefore appears that if these taxes were paid out of the personalty, the decedent’s real estate would have to be sold to pay his debts. As it is, this surplus will have to be applied to that purpose. So that, if plaintiff succeeded in this action, the amount of her recovery would be followed in a proceeding by the executor to apply it to the payment of testator’s debts. Therefore, the dismissal of plaintiff’s complaint saves circuity of action, and under the rule which forbids circuity in legal proceedings—circuitus est evitandus : in accordance with which a court of law will endeavor to prevent circuity and multiplicity of suits, where the circumstances of the litigant parties are such that, on changing their relative positions of plaintiff, and defendant, the recovery by each would be equal in amount (.Broom’s Leg. Max. 343, et seq.). The demurrer was properly overruled, and the complaint dismissed.

Per Curiam.

This judgment should be affirmed, for the reasons adduced by the learned judge below in his opinion.

It appears from the facts averred in the complaint and answer, that if the taxes had not been paid out of the proceeds of the real estate, the executor, in the ordinary performance of the duties of his office, would have paid, in the first instance, the taxes out of the personal estate, then he would have applied the remainder of the personal estate to the payment of unpreferred claims, and, there being a deficiency, would have sold in proper proceedings the land, so far as necessary to provide for the deficiency; *507or the creditors not paid, would have applied to have the land sold (Code, § 2749, et seq.).

The fact that before there appeared to be any deficiency, the property had been sold in actions of foreclosure and for dower, would not have affected the application of whatever surplus there might have, been, with or without taxes first deducted ; for that surplus would be treated as if it were real estate (Code, §§ 2797, 2798). And the application of the defendant’s estate as trustee would have been postponed to the application in the first place of the remainder in fee in plaintiff (Code, § 2764).

As it stands, if the taxes be deemed paid, there will’ be a less deficiency of assets to pay the unpreferred claims, and the plaintiff’s estate will be to that extent relieved from the former obligation to pay the deficiency. If the amount of taxes that have been paid were now separated from the personal estate, and placed in the defendant’s hands as trustee, as real estate, it would, in the end, have to respond to the deficiency, that by the answer, admitted by the demurrer, it is certain there would be. And then the plaintiff would stand where she does now. In the end, the plaintiff will get all the interest she is entitled to have in the testator’s personal or real estate. The defendant, as executor, represents the right of creditors, and can interpose any equity in their behalf that they could interpose in person. If these views be correct, this action is simply to change a method of administration, when the change asked will not benefit the plaintiff pecuniarily.

The judgment should be affirmed, with costs, with leave to plaintiff to withdraw demurrer upon payment of the costs of the demurrer, and of the appeal.

Smith v. Cornell
20 Jones and Spencer's Super. Ct. Rep. 499

Case Details

Name
Smith v. Cornell
Decision Date
Dec 7, 1885
Citations

20 Jones and Spencer's Super. Ct. Rep. 499

Jurisdiction
New York

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