U.S. Supreme Court ROBERTS v. CAY'S EX'RS, 2 U.S. 260 (1796)
2 U.S. 260 (Dall.)
Supreme Court of Pennsylvania
September Term, 1796
Many actions were brought, returnable to January Term 1794, against the defendants, as Executors of Cay, the surviving partner of Clow and Cay, whose affairs were exceedingly deranged; and, on the 11th of January 1794 ( declarations having been previously filed in all the actions) rules were obtained, 'that the defendants plead as of this day, or shew cause to the contrary, &c.;' The declarations were filed, and the rules obtained, under a suspicion (affirmed upon oath) that judgments would be confessed by the Executors, to other creditors, in preprejudice of the several plaintiffs in these actions, which, it was agreed, should all be governed by the decision upon an argument in any one of them.
For the plaintiff, if it was contended by Thomas, that granting an imparlance (particularly where the suit was by original, setting forth the cause of action, and that, in the present instance, is done by filing the declarations) was discretionary, and matter of favour, with the Court; and a variety of cases were cited, in which the imparlance was refused, or granted only upon terms that would prevent an injury to the plaintiff. Skin. 2. pl. 2. 2 Show. 310. pl. 321. 2 Wils. 381. 1 Salk. 186. Ibid. 80. Gilb. H. C. P. 42. 2 Vern. 62. A rule to enlarge the term for pleading, has, indeed, been expressly refused, unless Executors would agree not to plead judgments confessed subsequent to the expiration of the term. 1 Bulst. 122. 8 Mod. 308: But the principle on which Executors are allowed to retain debts due to themselves, is, that they cannot sue; and not being able to sue, so as to obtain a preference in that way, the law gives it them in another. By a parity of reasoning, he who first sues, ought to be first paid. 3 Bl. Com. 18. 19. Shep. T. 479. Esp. 252. Doug. 436. Cro. E. 41. It is true, that counsel, argumentatively, state, in Doug. 436, 'that although
an Executor, or Administrator, cannot pay a debt of the same degree, after action brought and notice given of such action, unless there is judgment for the debt which he pays; yet that he may pay such debt after judgment; and he is intitled to give it a preference by imparlances, and pleading dilatory pleas to the first action, and, in the meantine, confessing judgment for the second demand': But Buller, Justice, says, 'that all legal means may be used to obtain a preference'; and as priority of suit is a legal means, entitled to countenance more than any right of favoritism on the part of executors, the only question is, whether the Court will, under the circumstances of the present case, restrain the exercise of that right, which must depend upon the favor of the Court, in granting imparlances, and allowing dilatory pleas.
Moylan, for the defendants, having averred, that no system of favoritism would be pursued; but that, nevertheless, the executors felt an equitable obligation to discharge, in preference, debts due from the testator for loans of friendship, and clerks, or servants, wages;* proceeded to shew, by numerous quotations, that the right of an executor to give a preference to any creditor, of the same degree, was positive and unqualified. Wentw. 142. 3.4.5. 11 Vin. Abr. 269 pl.4. 1 Sid. 21. Vaugh. 95. Lov. on Wills. 56. Doug. 436. Morg. Att. vade mecum. 196. He analysed the authorities cited for the plaintiff, and insisted, that some of them were contradictory, each to the other; that some of them were obiter dicta; and that some were decided in actions, whose forms and principles were not applicable to the present case: yet, that taken in the gross, a candid exposition would reconcile them to the doctrine, that wherever there was no covin or fraud, an executor may give a preference to a creditor of the same degree. It is true, that they prove, likewise, the discretionary power of the Court, to allow, or refuse, imparlances, according to the weight of the reasons assigned: but, taking into view the deranged state of the testator's affairs, at the time when the motion for pleading was made, there certainly could not be a more proper occasion, than the one now depending, for granting every possible indulgence to the executors. At that time no assets were ascertained; and if the executors could not plead satisfactorily then, the court will not compel them to plead matter, which has since occurred; for, if the rule is made absolute, it must be in relation to the state of things, at the period when the motion was made.
But so far from precipitating the executors into a premature plea, they are entitled, by a liberal and fair construction of the
Act of Assembly, to a delay of twelve months after the testator's death, that they may ascertain the legal priority of his debts. The act of Assembly,* having classed debts in the order in which Executors shall be bound to pay them, adds that, nevertheless, 'executors, or administrators, shall not be prevented from, or damnified for discharging the decedant's just debts, as the same shall come to their knowledge, without regard to the priority of the same, in payment, after the expiration of twelve months from the time of the said decedant's decease.' If, then, twelve months are allowed to specialty creditors, for giving notice of their debts to the executors, so as to preserve the priority prescribed by the law, it is an unreasonable and unjust doctrine to advance, that the executors shall, before the expiration of that period, nay, at the very first term after the death of their testator, be compelled to plead those specialties, of which they may have received no notice, but to which they are still bound to give a preference, in the course of administration. The very force of the expression, that the executors shall not be damnified, if they make the payment after the expiration of twelve months, proves that they would be liable for any previous payment, contrary to the legal rule of priority. There is no provision of this kind in the English statutes; for, in England, a specialty creditor can only secure his preference to simple-contract creditors by giving the legal notice of a suit, in the first instance. The reason of the diversity, however, strengthens the construction contended for. While Pennsylvania was a province (and the fact exists in a great degree, at the present day) the creditors of its inhabitants chiefly resided abroad; and, if executors had been compellable to pay simple contract debts, whenever issue could be joined by the ordinary practice of our courts; or whenever a plea could be exacted in the manner now proposed, the whole of the assets might be absorbed in such payments, before notice could be received of any preferable claims. Hence the necessity of allowing twelve months for giving notice; and hence justice requires that the executors should have the same period, for entering their pleas to actions on simple contracts, which they must otherwise satisfy at their own peril.
For the Plaintiff, in reply. The act of Assembly was not intended to embrace cases, in which executors were compelled to make payments by a due course of law; but only cases, in which they voluntarily undertook to discharge the testator's debts. Before the passing of the act, an executor could never voluntarily pay a simple contract debt, without taking an indemnification
against specialty creditors; and, it was only to obviate this inconveniency, that the provision was made, authorising such payments, without regard to any priority, after the lapse of twelve months from the testator's death. But the fallacy of the opposite construction most forcibly appears, when it is remembered, that executors or administrators are required by law, to make distribution of the residuum of the testator's effects, among his next of kin, at the end of a year; and yet, it is said, that 'till the end of a year, they cannot even be compelled to make payment of his debts. Again: the law requires, that administrators shall render their accounts to the register of wills, &c.; within a year; and yet, if within the year, they are not compellable to pay the debts, there can be no accounts to render.
By the Court. There does not exist a doubt in our minds, about the genuine meaning of the act of Assembly. It would be attended with the most inconvenient and pernicious consequences, to determine, that a creditor could not compel a payment from his debtor's estate, nor even bring a suit against the executors, for a period of twelve months. The order of paying debts, obviously respects voluntary, and not compulsory, payments. Such was the construction coeval with the act; and there has not, to this time, been a single departure from it.
With respect to the other ground of argument, we were in hopes that some compromise might have been effected. But, we do not hesitate to declare, that although the Court has discretionary power to grant, or to refuse, imparlances, we do not think, that the circumstances of the present case would justify a special interposition, to compel the executors to plead at the first term, contrary to the usual course of practice. The executors have an unquestionable right, generally speaking, to give a preference to any creditor of the same degree; and the preferences proposed to be given by the defendants, are certainly not of a covinous, or illiberal nature.
The Rule discharged.
Before the Court had delivered their opinion on the principal case, Ingersoll suggested, as a collateral consideration, whether Promissory Notes, discounted at the Bank of Pennsylvania, were placed on a footing with protected Bills of Exchange, in point of priority of payment, by the following provision in the 13th section of the Act of Incorporation. 'All notes or bills, at any time discounted by the said Corporation, shall be, and they are hereby, placed on the same footing as foreign bills of exchange; so that the like remedy shall be had for the recovery thereof against the drawer and drawers, indorsee and indorsors, and with like effect, except so far as relates to damages, any law, custom, or usage, to the contrary thereof in anywise notwithstanding.' 3 vol. Dall. Edit. p.330. Ingersoll observed, that previously to this provision,
there were two points of discrimination between Promissory Notes and Bills of Exchange: 1st. Promissory Notes were taken by the indorsee, subject to all the equitable circumstances, to which they were subject in the hands of the indorsor. 1 Dall. Rep.441. And 2nd. Protested Bills of Exchange were entitled to a priority in payments by executors, or administrators. The Legislature meant, in the case of Bills and Notes, discounted at the Bank of Pennsylvania, to abolish all distinction between those commercial instruments; and the expression of the act is sufficiently comprehensive to effectuate that object.
But, it was answered, by Moylan, Thomas, and M. Levy, that the Act of Assembly only applied to the remedy upon a Promissory Note; and did not alter the nature and character of the instrument. The existing mischief, intended to be removed, was the right of set-off, claimed by the drawer against the indorsee; and even upon the words of the two acts, it was remarkable, that the priority is given by the first to protested Bills of Exchange; whereas the second places Promissory Notes on the same footing as Foreign Bills of Exchange.
By the Court. Though the question is not regularly before us, we have no objection to intimate our opinion, that Promissory Notes are not entitled to the same priority as Bills of Exchange. The Act of Assembly applies only to the case of desalcation. Footnotes
[ Footnote * ] Moylan offered to sign an agreement that such preferences alone should be given; and the proposition, though not adopted, seemed to be approved both by Court and Bar.
[ Footnote * ] The act here referred to, has been repealed and supplied, 3 vol. Dall. Edit. p. 527. It may be found, however, in Galloway's Edit. of the Province Laws p.32. See 1 vol. Dall. Edit. p.57. (C)