McLearn v. Wallace/Opinion of the Court

This case is brought before this court, by an appeal from the decree of the circuit court of Georgia.

From the evidence in the case, it appears that Archibald McLearn purchased a tract of land in the state of Georgia, on which he established a rice plantation, paid a part of the purchase money, and suffered a judgment to be obtained against him for the balance: that he afterwards died, leaving James H. McLearn, his only son and devisee: that the property of the deceased consisted chiefly of the rice plantation, and the slaves by which it was cultivated; and that under the laws of Georgia, personal as well as real property is bound by a judgment. That the devisee, to obtain possession of the property, gave his own bond, secured by a mortgage on the land and slaves, for the balance of the judgment: he afterwards died, leaving a part of this debt unsatisfied; and that afterwards the mortgage was foreclosed and paid by a sale of the land.

The complainants are aliens, and being nearest of kin to the deceased, claim as heirs, under the law of Georgia, the personal property; and also the proceeds of the real estate, after the mortgage shall have been paid.

The defendants, McLellan and wife, who are more remotely connected with the deceased, being citizens, claim the real estate as heirs, and contend that the debts should have been paid by a sale of the personal property; and that, as the real estate has been sold for this purpose, they insist that the proceeds of this sale should be paid to them out of the personal property.

It appears that after the sale of the land, on application of James Wallace, the administrator, the personal property was sold; and the moneys arising from this sale, as also a surplus, after paying the mortgage, from the sale of the real estate, remain in his hands; and which he is ready to pay over, as the court shall direct. The relationship of the respective parties to the deceased, as set forth in their pleadings, is not disputed.

On the part of the complainants it is contended, that being next of kin to the deceased, under the laws of Georgia they inherit the personal property and are entitled to the proceeds on the sale of the lands. That the personal property goes to them, notwithstanding their alienage is not controverted by the defendants; but they insist that the complainants are not entitled to the proceeds of the real estate.

By an act of the legislature of Georgia, entitled an act to explain and amend the escheat laws, passed the 15th December 1810, it is provided, 'that in all cases where a citizen of this state or of the United States, shall die, or may have died, possessed of or entitled to any real estate, and shall leave no heir who can inherit the same, because of him or her being alien; that in such case the said real estate shall not be held or considered subject to escheat, but the executor or administrator of such deceased citizen shall and may proceed, in the manner pointed out by law, to make sale of such real estate, and pay over the proceeds of such sale to the devisee or devisees named in the will of such deceased citizen,' &c.

The preamble of this act refers only to the estates of citizens of Georgia who bequeath their property to persons residing in foreign parts; but the first section seems to refer as well to cases of intestacy, as where wills have been made.

The complainants contend, that the words in this statute, 'shall leave no heir who can inherit,' should be construed to mean, shall leave no heir next of kin, or devisee, who can inherit, by reason of alienage; that then the real property shall be sold and the proceeds paid over as by the act is required. And that this construction will give effect to the intention of the legislature; which was, to remove the disability of alienage from the next of kin or devisee of a deceased citizen.

It does not appear that a construction of this statute has been given by the supreme court of Georgia; and we think the construction contended for is not authorized by the words of the statute. Where a citizen shall die leaving no heir, must mean not the next of kin, but an heir that may inherit the real estate under the laws of Georgia.

In the present case, the wife of McLellan, though remotely connected with the deceased, is within that degree of consanguinity which may claim the inheritance under the law of descents; and of course the land in question descended to her, and consequently it cannot be sold under the law of escheats, for the benefit of the foreign heir.

This construction is not shaken by the act of the 23d December 1789, which provides that, 'should any case arise which is not expressly provided for by this act, respecting intestates' estates, the same shall be referred to and determined by the common law of this land, as it hath stood since the first settlement of this state; except only, that real and personal estate shall always be considered in respect to such distribution, as being precisely on the same footing.'

The case under consideration is not unprovided for by the laws of the state; as the personal property goes to the next of kin, though they are foreigners, and the land descends to the domestic heir.

In the able printed argument of the complainants' counsel, it is contended that the real estate, equally with the personal, constitutes assets in the hands of the executor or administrator; and a great number of statutes are referred to, in order to sustain this position. The administrator, it is said, may sell the land, and convey it under the sanction of the court; and that in many cases it is sold for the payment of debts, in preference to a disposition of the personal property. And it is stated, that in Georgia there is no marshalling of assets, as in some other states. That the creditor may, in satisfaction of his demand, direct the personal or real estate to be sold at his option; and that the same option may be exercised by the defendant in execution.

It is unnecessary to refer to the various statutes of the state, which have been noticed by the counsel for the complainants. They are similar to the statutes of other states, which make the real estate of deceased persons subject to sale for the payment of debts; and, under the sanction of the court, on the application of the administrators, authorize the sale of such estate. But this does not show that, in the ordinary course of administration, the personal property is not the primary fund for the payment of debts. Indeed, from the oath of the executor or administrator, and his prescribed duty, as well as various provisions in regard to the sale of land for the payment of debts, it would seem, that the personal property, in the state of Georgia; as in, perhaps, every other state of the union; should be exhausted, except under peculiar circumstances, before the land can be sold.

The general management of the real estate, it seems, in Georgia, during the minority of the heirs, devolves upon the executor or administrator: and from the representations of certain gentlemen in the state, who have held high judicial stations, it appears, that the executor or administrator does exercise a very great, if not unlimited control over the management of the real estate of the deceased. It is insisted that the real estate descends to the administrator as assets, and that he may bring an action of ejectment in his own name, to recover the possession of it.

As there are no regular reports of judicial decisions in Georgia, we can derive but little aid from the adjudication of its courts on questions which arise under the local law. But in the view which we have taken of this case, it is of no importance to ascertain the respective liabilities of the personal and real estate of deceased persons, for the payment of debts; nor, indeed, what may be the duties of an executor or an administrator in the settlement of an estate. These would be important in a controversy between the representatives of the estate and its creditors. The case under consideration does not arise from the claim of creditors, but it involves the rights of distributees. And these rights are not affected by the ordinary course of administration, but depend upon the peculiar facts of the case.

Had the debt for the payment of which the land was sold, been an ordinary debt existing against the estate, and the payment of which was expected to be made by the common course of administration, there could be little or no difficulty in deciding that it should have been paid out of the personal assets; and as it had not been so paid, to direct, as prayed for by McLellan and wife, that the payment from the real estate should be reimbursed by a sale of the personal.

At the decease of James H. McLearn, his estate, both real and personal, was incumbered by a mortgage, for the payment of which the land was sold. And this mortgage was given in discharge of a judgment which was obtained against his father, Archibald McLearn, in his lifetime, and which bound the real and personal property covered by the mortgage. A considerable part of this debt was incurred, it seems, by the purchase of this plantation. But the argument that the vendor and his assignee have an equitable lien on the land for the purchase money, seems not to be well founded.

That this equitable lien exists equally in the hands of the vendor or his assignee, is a well settled principle; but the lien was discharged by the mortgage, which added a large amount of personal property to the real estate to secure the payment of the purchase money.

To learn the nature of the incumbrance on the estate, we must look to the mortgage and the judgment, both of which created a lien upon the whole property; and also to the debt of the vendor, for which the judgment was obtained. The lien under the mortgage was more favourable to the estate than the lien under the judgment for which it was substituted; as it gave time to the devisee, and placed the estate in his possession and under his control.

With this incumbrance, created in the manner and under the circumstances stated, did this estate, both real and personal, on the decease of James H. McLearn, descend to his heirs. The personal estate goes to the foreign heirs, and the real estate to the domestic; and this gives rise to any difficulty which exists in determining this controversy.

If the whole estate descended either to the foreign or domestic heirs, it would be an ordinary case of distribution; and it could be a matter of little importance whether the mortgage were paid by a sale of the real or personal property. But under the circumstances of the case, it becomes a matter of great importance to the respective claimants, out of which fund this mortgage debt shall be paid. This payment of it out of the real or personal property, will leave but a small balance to the heirs of that fund.

The principles of this case are not changed by the sale of the property. The funds realized from the sale, in equity partake of the same character, and are subject to the same rule as the property which they represent. It is, therefore, a matter of no importance whether the debt has been paid out of the personal or real fund; or indeed, whether it has been paid at all. The court must consider the case as though the real estate were still vested in the South Carolina heirs, and the personal property in the heirs who live in Scotland. In the final decree, it will be necessary to act upon the funds as they now exist in the hands of the administrator.

The important question must now be considered, how this mortgage debt shall be discharged. Shall it be paid out of the real estate, or out of the personal, or out of both?

That the land should not be wholly exempt from this incumbrance, is clear by every rule of equity which applies to cases of this description. In addition to the consideration that the mortgage binds the land, the fact that a considerable part of the debt was incurred for its purchase, cannot be wholly disregarded. Nor would it comport with the principles of equity to make the whole debt a charge upon the land, to the exemption of the personal property; as the lien of the mortgage covers the personal as well as the real property, and as at least a part of the debt was contracted on other accounts than the purchase of the land.

The rights of the foreign heirs, under the laws of Georgia, are to be regarded equally as those of the domestic heirs. Each have interests in the property of the deceased, which are alike entitled to the consideration and protection of a court of chancery.

Suppose James H. McLearn had died leaving a will, by which he devised different tracts of land to different persons capable of taking by devise, and the entire real estate was incumbered by a mortgage, or other lien, which, after the will took effect, had been paid by sale of one of the tracts of land. Could a court of chancery hesitate, in such a case, to require a contribution from the devisees, not affected by the sale, so as to make the lien a charge upon all the land? The plainest dictates of justice would require this, whether regard be had to the rights of the devisees, or to the intention of the testator. And is not the case put, analogous to the one under consideration?

By the act of the elder McLearn, his property, both real and personal, was incumbered.

The heirs, both foreign and domestic, of the younger McLearn, who take this property, take it charged with the continued incumbrance. That James McLearn had a right, and was bound to continue this charge upon his property, no one will dispute. He might have left the debt, with the consent of the creditor, if there had been no prior lien, to be discharged out of his estate, as the law authorized; and in such case it would have been payable out of the personal estate. Or he might have made the debt a specific charge on his personal property, or on his real; but he did neither. He charged its payment, in pursuance of the judgment lien, on his property both personal and real.

This lien, as between the distributees, fixes the rule by which their rights must be decided. The domestic heirs cannot claim to receive the land free from the lien of the mortgage, nor can the foreign heirs claim the personal property exempt from it. In equity it would seem that each description of heirs should contribute to the payment of the mortgage debt, in proportion to the fund received. This rule, while it would do justice to the parties, would give effect to the intention of the ancestor. That intention is clearly shown by the lien created on the property, and by the rules of equity, such intention must t be regarded.

The decision of this case must rest upon familiar and well establishe principles in equity; and these principles will be shown by a reference to adjudicated cases. In the case of Pollexfen v. Moore, 3 Atk. 272, it appears, Moore, in his lifetime, agreed to purchase an estate from the plaintiff for 1200 pounds, but died before he had paid the whole purchase money. Moore, by will, after giving a legacy of 800 pounds to the defendant his sister, devises the estate purchased and all his personal estate to John Kemp, and makes him his executor. The executor commits a devastavit on the personal estate and dies, and the estate descends upon his son and heir at law. Pollexfen brought his bill against the representative of the real and personal estate of Moore and Kemp, to be paid the remainder of the purchase money. Mrs Moore, the sister and legatee of Thomas Moore, brings her cross bill, and prays, if the remainder of the purchase money should be paid to Pollexfen out of the personal estate of Moore and Kemp, that she may stand in his place, and be considered as having a lien upon the purchased estate for her legacy of 800 pounds. And the lord chancellor said, 'that the estate which has descended from John Kemp, the executor of Moore, upon Bayle Kemp, comes to him liable to the same equity as it would have been against the father who has misapplied the personal estate: and in order to relieve Mrs Moore, I will direct Pollexfen to take his satisfaction upon the purchased estate, because he has an equitable lien both upon the real and personal estate, and will leave this last fund open, that Mrs Moore, who can at most be considered only as a simple contract creditor, may have a chance of being paid out of the personal assets.'

This case shows, that in England the rule which requires the personal property to be first applied in the payment of debts, is deviated from where the justice of the case and the rights of parties interested, require it.

Had the debt due to Pollexfen been directed to be paid out of the personal property, it would have left no part of that fund to pay the legacy of Mrs Moore; and for this reason the debt was decreed to be paid out of the land. Now if the mortgage debt, in the present case, shall be directed to be paid out of he personal fund, it would defeat the foreign heirs, whose claim to this property under the law of Georgia, cannot be less strong than a bequest.

In 3 Johns. Ch. Rep. 252, it is laid down, as between the representatives of the real and personal estate, that the land is the primary fund to pay off a mortgage. And in 2 Bro. 57, lord Kenyon, as master of the rolls, laid down the same rule: that where an estate descends, or comes to one subject to a mortgage; although the mortgage be afterwards assigned, and the party enter into a covenant to pay the money borrowed; yet that shall not bind his personal estate.

There is no doctrine better established than that the purchase of land, subject to a mortgage debt, does not make the debt personal; and on the question being raised, such debt has been uniformly charged on the land. And this principle is not changed where additional security has been given.

In the case of Evelyn v. Evelyn, 2 P. Wms 659; where A mortgaged the land for 1500 pounds; and his son B covenanted with the assignee of the mortgage to pay the money. He succeeded to the premises after the death of his father, and died intestate. The question was, whether his personal estate, under the covenant, should be applied in payment of the mortgage; and it was decided that the land should be charged, and the covenant was only considered as additional security.

In the case of Waring v. Ward, 7 Ves. 334, Lord Eldon says: 'the principle upon which the personal estate is first liable in general cases is, that the contract primarily is a personal contract; the personal estate receiving the benefit: and, being primarily a personal contract, the land is bound only in aid of the personal obligation to fulfil that personal contract.' It has long been settled, therefore, that upon a loan of money, the party meaning to mortgage, in aid of the bond, covenant or simple contract debt, if there is neither bond nor covenant; his personal estate, if he dies, must pay the debt for the benefit of the heir. But suppose a second descent cast; and the question arises, the personal estate of the son, and his real estate, descended to the grandson: then the personal estate of the son shall not pay it, as it never was the personal contract of the son.

And this is the well established rule on this subject. If the contract be personal, although a mortgage be given, the mortgage is considered in aid of the personal contract; and, on the decease of the mortgagor, his personal estate will be considered the primary fund, because the contract was personal: but if the estate descend to the grandson of the mortgagor, then the charge would be upon the land, as the debt was not the personal debt of the immediate ancestor.

And so, if the contract was in regard to the realty, the debt is a charge on the land. It is in this way that a court of chancery, by looking at the origin of the debt, is enabled to fix the rule between distributees.

In the case under consideration, the mortgage was given by James H. McLearn, but it was not given to secure a debt created by him. The mortgage merely changed the security, but did not affect the extent of the judgment lien. And this judgment was obtained, chiefly, for the purchase money of the estate. In effect, the debt for which the judgment was obtained against Archibald McLearn, and for which the mortgage was given, constituted an equitable lien on the land; and had the mortgage covered only the land, it must have been considered the primary fund. The debt for which the mortgage was given, was not the personal contract of James H. McLearn, but the contract of his ancestor in the purchase of the estate. But if the contract was personal, and might have been a charge on the personal estate devised to James H. McLearn, yet the character of the debt, in this respect, is changed in the hands of the present heirs. In the language of Lord Eldon, this debt cannot be a charge on the personalty, because it was not created by the personal contract of James H. McLearn.

This, under the authorities cited, would be the rule for the payment of the mortgage debt, if James H. McLearn had not executed a mortgage on the personal as well as the real property, which, as devisee, he received from his father.

This mortgage on the personal property cannot be considered in the light of additional surety to the lien which before existed. If it could be considered in this light, the land would still be the primary fund, and the personal mortgage as surety or auxiliary to the land. But this mortgage can in no respect be considered as additional surety. It might have been so considered in reference to the equitable lien of the vendor for the purchase money, as such lien was limited to the land; but the lien of the judgment obtained against the ancestor of James H. McLearn, and for which the mortgage was substituted, extended, as before remarked, to the personal as well as real estate of the defendant.

The debt then for which the mortgage was given did not arise from the personal contract of James H. McLearn, but by the contract of his ancestor; and the mortgage was given in discharge of the judgment. This created no new lien upon the personal property. It come to James H. McLearn under the will of his father, subject to the lien of the judgment. The mortgage then did not and was not intended to create any new charge upon the personalty; but to continue, in a different from, that which already existed.

In this view the charge on the personal estate can no more be disregarded than the charge upon the real; and in this respect this case differs from the cases referred to. The charge on both funds, under the mortgage, may be compared to a will devising the funds to the respective heirs now before the court, as the statute provides; and leaving the debt as a charge upon his real and personal property. Can any doubt that such a bequest would be considered by a court of chancery as a charge upon both funds? Now, although James H. McLearn has made no will, as in the supposed case, yet he gave a mortgage to continue the charge on the personal property which existed under the judgment; and the law of Georgia fixes the rule of descent. This act of the ancestor, connected with the Georgia law of descent, gives as decided and clear a direction to the property, both real and personal under the mortgage, as if in his last will James H. McLearn had so devised it. Both funds being charged with the mortgage debt must be applied to its payment, in proportion to their respective amounts. And as the property, both real and personal, has been converted into money, the proportionate part of each can be applied to this payment without difficulty.

And any debts of the estate not covered by the mortgage must be paid out of the personal fund.

As the decree of the circuit court was not made in conformity to this view of the case, that decree must be reversed; and the cause remanded to that court, with instruction to enter a decree in conformity to this opinion.

This cause came on to be heard on the transcript of the record from the circuit court of the United States for the district of Georgia, and was argued by counsel; on consideration whereof, it is the opinion of this court, that the mortgage debt should be paid out of the real and personal property embraced by the mortgage pro rata: whereupon, it is ordered, adjudged and decreed by this court, that the decree of the said circuit court in this cause be, and the same is hereby reversed; and that this cause be, and the same is hereby remanded to the said circuit court for further proceedings.