Opinion
(December Term, 1831.)
1. Where a testator in his lifetime subscribed for stock in the Roanoke Navigation Company, and died without completing the payments, and by his will gave specific legacies, and created a fund for the payment of his debts, it was held, the fund for the payment of debts and the undisposed of residue being exhausted, that the stock in the hands of the heir should be subjected to the payment of the balance due upon the subscription, in exoneration of a specific legacy.
2. Descended lands must exonerate a specific legatee from the payment of all debts for which the heir is bound.
3. The devisor cannot restrain the creditor from subjecting the personal estate; but where the latter has a right to resort to both the personal and real assets, and exhausts the former, a legatee will be substituted to the rights of the creditor against the heir.
4. If the heir pay the specialty debt of the ancestor, he may indemnify himself out of the residue of the personal property.
5. But the legatee cannot be indemnified out of the real estate, unless the debt paid by his legacy be a charge upon the heir.
6. And a subscription to the stock of the Navigation Company being a simple contract debt, the legatee, on payment of it, has no right to indemnify from the real estate.
7. But the subscription creating a specific lien, and being the ancestor's debt, the heir has a right to an indemnity from the residue, and a specific legatee from the real estate.
8. Where land is devised to be sold for the payment of debts, and the surplus given away as cash, it is primarily liable, even between the heir and the residuary legatee.
9. But where the land is charged with the debts, it is taken as only auxiliary to the personal estate, unless the contrary clearly appears to have been the intention of the testator.
10. Real assets in the hands of the heir, as well as personal estate, are the primary funds for the payment of specialty creditors and specific liens; and by specifically bequeathing the personal estate, the testator declares his intention that the land shall bear its own burden.
11. So by a devise of the land the testator declares his intention to exempt it, and hence a devise to the heir prevents the land from being subjected in exoneration of the specific legacies.
12. It is a question of intent; but to change the order of liability requires a clear expression to that effect.
13. And where the testator devised land to be sold for the payment of debts, and gave the surplus to his wife, and also gave her a large legacy and small legacies to others, and directed his executors, in case of a deficiency of the fund for the payment of debts, to sell such property as his wife might point out, it was held that this direction charged the wife's legacy as between her and the other legatees, but did not exonerate descended real estate.
JOHN WASHINGTON in his lifetime subscribed for twenty-five shares of stock in the Roanoke Navigation Company, upon which he paid $65 per share, leaving $35 on each share unpaid at his (174) death.
Badger and Devereux for plaintiffs.
Nash, contra.
By his will, of which he appointed the plaintiffs executors, he devised as follows:
"I give and bequeath to my beloved wife, Delphia, the land whereon I now reside, with all the appurtenances thereon belonging, known by the name of Potter's Bridge plantation, to her and her heirs forever.
"I give and bequeath to my beloved wife the following negro slaves (thirty in number). I give my wife all my household and kitchen furniture, and all my live-stock of every kind whatsoever, and all my plantation tools and utensils, such as wagons, carts, etc.
"I give and bequeath to Mary H. Wortham my negro woman Rhody and her son Burrel, to her and her heirs forever.
"I give and bequeath to James L. Wortham my three stills, and my library of books of every sort, and my blacksmith's tools now in his possession.
"And as to my just debts, I would have them paid as soon after my decease as can with convenience be done, and for that purpose authorize and request my executors hereinafter named to sell my two tracts of land, one lying on the Nap of Reed's Creek, etc., one other tract of land in Halifax County, Commonwealth of Virginia, lying on Little Blue Wing. Should not the proceeds of the land be sufficient to pay my just debts, that my executors sell other property such as my wife shall direct, to complete the payment of my debts. And it is my will and desire that should an overplus remain of the proceeds of the sales aforesaid, then the same shall be and remain with my wife, to her and her heirs forever."
After his death the directors of the Navigation Company obtained a judgment against the plaintiffs, his executors, for the sum of $1,124.96, being the balance of principal and interest due on his subscription, and upon the payment of the amount of the judgment, issued a certificate that "the late John Washington is the owner of twenty-five shares of the capital stock of the Roanoke Navigation Company, on which has been paid $100 per share." (175)
The plaintiffs in their bill averred that the fund created by the testator for the payment of his debts had proved insufficient for that purpose, and alleged that the stock, being real assets, had descended to the wife of the defendant James, who was the only child of the testator, and prayed that it might be subjected to the payment of the debt in exoneration of the specific legacy to the plaintiff Delphia.
The answer admitted all the facts above cited.
Descended lands must pay all debts for which the real estate is liable, in exoneration of all but residuary legacies, or of other lands specifically devised for the payment of debts. And if the creditors go upon the personalty, the legatees may have an indemnity out of the realty. This is an old rule of the court of chancery. (Ch. Ca., 2 pl. 4.) It is founded on this: that a man who is able to pay all his (176) debts, and has something over to give away, may give it as he chooses. He cannot, indeed, restrain the creditor from resorting to any fund made liable to him by law. But if the creditor will, through mere caprice or convenience, go upon that fund which the testator meant for a particular donee, instead of that other left open alike by the law and the testator for his satisfaction, the donee shall be reimbursed out of the latter. And as to debts due by specialty in which the heir is bound, this principle has been extended to the protection of pecuniary legatees — much more specific legatees. Hanby v. Roberts, Amb., 127; Galton v. Hancock, 2 Atk., 430; Aldrich v. Cooper, 8 Ves., 396. If, therefore, the heir be made to pay such a debt, he may reinstate himself out of the executor, if there be a residue; because both at law and in this Court that is liable before land; but if there be no residue, but only things given away in legacies, he cannot, but must rest under the burden. E converso, if such legacies be applied to the discharge of such a debt, the legatee shall be reinstated by standing in the place of the satisfied creditor. Hanby v. Roberts, supra. It follows that in no case in England can the legatee be reimbursed out of the land for a simple contract debt paid out of his legacy; for the heir was not liable for that to the creditor, to whose rights and remedies only is the legatee substituted. It is the same here; because simple contract creditors can have recourse to the land only after exhausting the personalty, and therefore the legatee cannot ask the land to replace that personalty — which would be an absurdity, as was held in Miller v. Johnston, 7 N.C. 194.
This is a debt by simple contract, as the subscription does not purport to have been made by deed, and the charter does not make the heir liable. Merely as a debt, then, it would not entitle the plaintiff to relief.
But the charter expressly makes the stock, as well as the person of the subscriber, liable for a balance due on it. It is as legislative mortgage, which creates a specific lien. Rev., ch. 959, secs. 1, 8.
In that case the heir or devisee of the land has the same right to ask exoneration out of the general residue of the personalty as he had in the case of the specialty, unless the ancestor or devisor (177) was a purchaser of the estate, while under the encumbrance; for residuary legatees are ex vi termini only entitled to the surplus after payment of debts. But in like manner also as before, specific and even pecuniary legatees are protected, or rather are to be indemnified. Oneal v. Mead, 1 P. Wms., 693 is an instance of this, where the legacy was specific, and the mortgaged freehold devised. The devisee took it cum onere. Rider v. Wager, 2 P. Wms., 335, and Tipping v. Tipping, 1 id., 370, carry the rule to pecuniary legacies. In the former there were both specific and pecuniary legacies; and it was held that neither should be defeated, but the devised land must pay the debt with which it was specifically charged. Much more is this the case where the land descends; for such lands are liable before estates devised, which are always specific. Ch. Ca., 2 pl. 4.
The general maxim, however, that the personalty is, as it is sometimes called, the primary and at others the natural fund for the payment of debts, has been much pressed, and many cases cited in support of it. Not one of them is denied; but they are misapplied. They relate to the case of land devised, charged in the will with the payment of debts. If, indeed, lands be devised to be sold for the express purpose of paying debts (as is here directed about the Blue Wing and Nap of Reeds land), and the surplus given away as money, there can be no doubt they are first liable, even as between them and a residuary legatee, unless some express interest is given to another in the land fund; for the residue is not given there in its general sense, after payment of debts, but it means the residue of the personal property after taking out such parts as are before given away. But where lands are merely charged, a question arises. Are they to pay before or after the personalty? And the general rule is that unless the contrary clearly (formerly, expressly) appear, the personal estate is to be first exhausted, and the real is only auxiliary; the charge being considered as an act of honesty in the testator to have his debts of all sorts certainly and speedily (178) paid, and not to change the fund in the first instance, to which resort is to be had. The law fixes the burden on the personalty, and that can only be altered by the testator; and the intention on his part to alter it is not inferred upon slight grounds. Charging the land is not sufficient. However anxiously it is done, that will not of itself have the effect of exempting the personalty, says Lord Rosslyn in Taitt v. Northwick. And Lord Thurlow says in Samwell v. Wake, 1 Bro. C., 144, and at several other times, that the testator must not only charge the real estate, but must show his purpose that the personal should not be applied before the latter will be exempted. Many minute criticisms on wills have been made to ascertain the intention in this respect. The final result of the discussions has been that unless the personalty, although specifically bequeathed, be expressly or clearly exonerated by other parts of the will, a charge upon the lands will not have that effect. The reason is that after one fund becomes fixed with the debts or a particular debt, that fund can be relieved only by plain words postponing its liability and substituting another fund in its place. A general charge will not do, because that may as well be considered the creation of an additional fund, in aid of that already liable, as the provision of a sole fund for the payment of debts. But it is entirely different where the personalty is specifically bequeathed and the lands descend. So essentially different are the cases that I should not have felt bound to notice at large those cases of a charge, but for the purpose of exhibiting clearly their leading principle, which, in another point of view, has an important application to this case, adverse to the defendant.
That principle is that the order of liability once existing between two funds can be changed only by the intention of the testator; and to show such intent, express or plain words are indispensable, so as to make the intent manifest.
Where lands descend, they, as well as the personalty, constitute a primary fund for the satisfaction of specialty debts and specific (179) liens. And the testator, by giving away the personalty by specific bequests, is held to show his intention that the land shall bear its own burden, unassisted. Hence, they may be called the order in which by law those funds, thus situated, are to pay. That order will not be disturbed but upon a plain intent, as if the land be devised to the heir. He takes, indeed, as heir, because the better title. Yet as denoting the intent, he shall for this purpose be considered as a devisee, who always holds exempt from debts until all the personalty is exhausted, unless the devise be for payment of debts, or there be a charge in terms which place the land in front of the personalty. No doubt, the whole is under the testator's control; and he may even effectually declare that lands descended shall be eased by his general personal residue, or even his particular legacies. But it will be admitted by every one, after considering the before mentioned cases and the principle on which they are founded, that to do that the words must be indeed strong.
It is argued that those in this will are sufficient. There is no residuary clause. That fund is therefore liable. The will gives to the wife the land on which the testator lived, a considerable number of slaves by name, his furniture, his stock and plantation utensils. There is then a specific legacy to his niece Mary of two slaves, and some other small specific legacies. The testator then directs his debts to be paid as soon as possible, "and for that purpose," he says, "I authorize my executors to sell two tracts of land lying, etc., and should not the proceeds of the land be sufficient to pay my debts, then that my executors sell other property, such as my wife shall direct, to complete the payment." And he gives the surplus of the sales of the land, if any after payment of debts, to his wife. The argument is that here is a direction to sell of the wife's legacy to supply any deficiency of the lands; that it must be of that legacy, because she is to point out the property — otherwise, she might defeat the other legatees by taking theirs. The position is thus far correct; for upon the deficiency of the funds provided, the legacies to the (180) wife and others would abate. That the testator did not mean; but, as between themselves, that the wife's legacy should pay the debts. And this is all that he did mean. When it is put that he intended also that the wife should pay all the debts out of her legacy, in exoneration of lands descending cum onere, the argument fails. There is no reason for giving the words that sense — much less a reason from the expression of a clear, manifest intent. The words are satisfied without that. We see why the wife is directed to pay, in favor of the legatees: because but little was left to them; because uncertain whether the sales of the land would not discharge all debts, and the surplus of them is given to her. It might as well be argued that this special direction — upon the score of intent — relieves the general residue for the benefit of the next of kin, as the descended lands for the benefit of the heir. We are not speaking now of the rule between those funds as established law, but of the substitution by the testator of another fund in case of both. As far as his words go, they denote his purpose to exempt one as much as the other. But other reasons were in the testator's mind — partly in favor of the small legatees, to ease their legacies, and partly in favor of the wife, to restrain the general power of the executors to sell any part, and give the selection to her. How, then, following Lord Thurlow, can we say, here is a declaration that the real estate descended (being the fund before fixed) shall not be applied? The words were used for a different purpose, and were satisfied without this. Consequently, there must be an account to ascertain whether the personal estate not given away and the proceeds of the land sold have been administered; and the stock being real estate by the charters, and descended, must be declared subject for any deficiency of those funds for the payment of the balance due for the stock, or of debts by specialty in which the heir is bound.
PER CURIAM. Declare that the balance due on the original subscription is a specific lien on the stock, and that it is liable to refund to (181) the plaintiffs that part of the subscription which they have paid, unless the undisposed of residue of the personal estate, and the proceeds of the two tracts of land devised for the payment of the testator's debts, be found inadequate to pay for the said stock and all the other debts of the testator; and direct a reference as to the sale of those lands, and an account of the undisposed of residue and of the administration of the plaintiffs; and let the clerk, in taking said account, distinguish such debts as were due upon specialties wherein the heir was bound.
Cited: Swann v. Swann, 58 N.C. 299; Palmer v. Armstrong, post, 270; Graham v. Little, 40 N.C. 411; Kirkpatrick v. Rogers, 42 N.C. 46; Pate v. Oliver, 104 N.C. 468.