Backhouse v. Patton
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 rateably to creditors, as their claims were ascertained by the court, a decree was made on the 12th of June 1820, against Patton, as commissioner and administrator; whereby it was ordered and adjudged, that he should pay a certain sum, to be rateably apportioned among certain creditors therein mentioned.
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 the 24th of November 1820. After the return of this report, to wit on the 15th of 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 the 12th day of 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 the 12th of June 1820, amounting to twenty-three thousand three hundred and twenty-two dollars fifty-six cents, 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 the 12th of 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, rateably, 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 twenty-three thousand three hundred and twenty-two dollars fifty-six cents, adjudged against Patton by the decree of the 12th of June 1820, ought not to go to the credit of his responsibility as administrator; and that his sureties cannot claim more than its rateable apportionment, according to the amount of their respective responsibilities of commissioner and administrator.
Mr Haynes, for the complainants, argued:
That the sureties of Patton as administrator could not avail themselves of any defence which could not avail their principal.
2. If the whole amount of the decree of 1820 should be placed to the credit of Patton's responsibility as administrator, it would give his sureties an illegal and inequitable priority over the other creditors
3. It would virtually repeal the law requiring bonds and security for administrators.
4. It would make the realty a guarantee for the faithful administration of the personalty, by releasing the sureties for such administrators.
Mr. Patton, on the part of the representatives and sureties, read the argument of Mr Chapman Johnson.
The argument urged, that the true question before the court is whether the payment as made shall be applied first in satisfaction of the balance due from the administrator; and next, in satisfaction of that due from the commissioner; or shall be applied rateably to the satisfaction of both. The rule for the decision of this question must be found either in the decrees of the circuit court; or in the general principles of law governing the application of payments.
It was admitted that the court had the whole fund under its control, as well the legal assets, which under the law of Virginia are the personal estate of the intestate, as the equitable assets, the proceeds of the real estate; and could have directed the payment out of either fund. But it was argued that no directions had been given by the court on this point; and therefore the inquiry was as to the manner the amount of the decree should be applied by the law.
The authorities from the common and civil law, and the general doctrine as to the appropriation of payments, established the following principles by an entire harmony between those codes.
1. The debtor making the payment has the primary right to direct its application.
2. If he does not exercise this right, it devolves on the creditor.
3. If neither exercises it, within the time allowed by law, the law itself makes the application. 1 Evans's Pothier on Obligations (London edition), part 3, art. 7, rules 1, 2, 3, 4, 5, and notes, page 363 to 374. Comyn on Contracts, part 2, ch. 2, § 8, page 216 to 228. 16 Vin. Ab. Payment, M, 227. 1 Merivale's Rep. 585. 2 Strange, 1194.
The debtor's right to make the application, however limited in point of time, is not restrained as to the manner. It is not necessary that he should declare the application in express terms. It is sufficient, if from circumstances it may be fairly inferred that the payment was made in satisfaction of one of the debts. Newmark vs. Clay, 14 East, 239. Tayloe vs. Sandiford, 7 Wheat. 14.
Although by the civil law, as stated by Pothier, the debtor is required to make the application at the time of the payment, this is not the doctrine and rule of the common law. This has been so decided by this court in the Mayor of Alexandria vs. Patton, 4 Cranch, 317. Cited also, 1 Wash. 128. United States vs. Kirkpatrick, 9 Wheat. 720. 2 Barn and Cress. 65. 9 Com. Law Rep. 25.
It cannot be contended that Patton was indebted to the creditors of Hunter, as administrator, and as commissioner of the court. The only debt due by him, before the decree, was as administrator. As commissioner of the court he owed them nothing, and was not authorised to pay them any thing, except as directed by the decree of the court.
When the decree of 1820 directed him, the administrator and commissioner, to pay specific sums, this was a personal decree, and he became indebted to them as an individual; his fiduciary character was merged in the decree, and to each creditor he became indebted separately. When the debts so made due were paid, the creditor had no election to make, no application to declare. The right of the creditors to appropriate the payments had then nothing to do with the case; and the right of the debtor to appropriate continued, on the authorities referred to, up to the period of the decrees in the circuit court.
As to the rule 'that if both the debtor and creditor omit to appropriate payments, the law will apply them according to its own notions of justice;' the following cases were referred to. 1 Vern. 24. 2 Brownlow, 207. 12 Mod. 559. 1 Lord Raymond, 287.
The application contended for is warranted by the situation in which the administrator was placed. He was bound to appropriate the fund to the discharge of his obligations as administrator, in preference to any claims on him as commissioner; and the law will look at these considerations, and make the same application. As administrator he had given bond, which subjected him to many actions. Duties as administrator exposed him to heavier responsibilities than as commissioner; his oath of office obliged him to pay the debts of the intestate out of the legal assets.
It was also contended that the fifth rule in Pothier (374), which declares 'that if different debts are of the same date, and in other respects equal, the application should be made proportionably to each,' was applicable to this case. For this rule was also cited, 1 Vern. 34. 2 Chan. Cases, 83.
Mr Justice M'LEAN delivered the opinion of the Court.