Whitmore v. San Francisco Savings Union (1875) · DecisionDepot

Whitmore v. San Francisco Savings Union

Name: California Superior Court Tentative Rulings
Creator: DecisionDepot
License: https://creativecommons.org/licenses/by-nc/4.0/

California Supreme Court Jul 1, 1875 No. No. 3583Published

Before: Crockett, Wallace

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Holding. A creditor's failure to present a claim against an estate within the statutory period does not extinguish the debt or the right to hold security for it, and a court of equity will not compel the surrender of such security without payment of the debt.

Issues

Does the failure to present a claim against an estate within the statutory period extinguish the underlying debt?
Can a court of equity compel a creditor to surrender security for a debt if the claim was not presented to the estate within the statutory period?

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“The failure to present the claim against the estate of Whitmore within the time required by the statute did not operate as an extinguishment of the debt”

“to compel the creditor to surrender his securities, without payment of the debt, would be inequitable”

Synopsis

Effect of xot Ebesbxtih& Cbaim: to Executob fob Abbowaxce.—The failure of a creditor of an estate to present his claim to the executor for allowance, within the time fixed by the statute after publication of notice to creditors, does not extinguish the debt xvithin the sense in which payment would extinguish it, but merely takes away the remedy of the '■ creditor.

When Equity will not Compel a Cbeditob to give up his Sbcueities.—■ If a debtor, before his decease, had conveyed land to a person in trust, to secure his promissory note, and, after his decease, the creditor fails to present his claim to the executor for allowance within the time fixed by the statute after publication of notice to creditors, the executor cannot invoke the power of a court of equity to compel the creditor to surrender his security, or to enjoin the creditor from selling the land under a power contained in the deed of trust.

Opinion — Wallace

By the Court, Wallace, C. J.: The failure to present the claim against the estate of Whitmore within the time required by the statute did not operate as an extinguishment of the debt, in the sense in which payment or accord and satisfaction would operate. [150]In Sichel v. Carillo (42 Cal. 493), we said: “It is well settled with reference to actions for moneys due on contracts, that the statute does not discharge the debt, or in any way extinguish the right or destroy the obligation, but only takes away a remedy. The debt remains unsatisfied and unextinguished. ” Had the statute run during the lifetime of Whitmore, it would, in an action brought against him for a recovery of the demand, have afforded him a defense, not on the ground that the debt itself had become extinguished by the lapse of the statutory period, but that the plaintiff in such action had lost his remedy for its recovery.

So the statute, requiring the presentation of a claim against the estate within the designated period of time after publication of notice to creditors, in order that it may be ranked among the acknowledged debts of the estate, does not operate an extinguishment or forfeiture of the claim, for want of the required presentation, but affords the estate a defense against an action brought against it to recover the demand.

If, however, as in this case, the debt be in fact subsisting and unpaid, neither the debtor in his lifetime, nor his estate after his decease, being solvent, can successfully invoke the power of a court of equity to compel the creditor to surrender securities placed in his hands to secure its payment. The recognized maxim of the court is that he who seeks equity must do equity. (Hughes v. Davis, 40 Cal. 117.) The court would doubtless compel the surrender of the securities upon the payment of the debt, or it would, upon the application of the debtor, direct a sale of the securities, and that the overplus, if any, arising from such sale after the payment of the debt, be paid over to the debtor. This would be to do equity. But to compel the creditor to surrender his securities, without payment of the debt, would be inequitable—as much so as to permit the creditor to retain those securities after such payment had been effected.

Judgment reversed and cause remanded, with directions to sustain the demurrer to the complaint.

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Crockett, J., dissenting: I am unable in this case to agree with a majority of my associates. In Pitte v. Shipley (46 Cal. 154), and Harp v. Calahan (Id. 222), we held that a creditor holding a mortgage lien on the property of the estate of a deceased person must present his claim for allowance within the statutory period, in order to preserve the lien of the mortgage. In my opinion, the same reasoning by which we reached that conclusion applies with equal force to a creditor holding a trust deed on property of the estate, on the face of which (as in this case) it-appears that the property was held in trust, only as security for a debt due from the deceased in his lifetime. Though the dry, legal title may be in the trustee, the equitable title, subject to the trust, is in the estate, and is assets for the payment of debts. The interest of the estate in the property can only be administered through the Probate Court, and to accomplish this it is indispensable that all persons claiming a lien by way of mortgage, deed of trust or otherwise on the property of the estate, should present their claims for allowance. If they fail to do so, the lien is lost.

I do not understand that this proposition is denied or questioned in the prevailing opinion.

But this is a suit in equity, and the defendants invoke the maxim that he who seeks equity must do equity, and insist that it would be inequitable to compel a release of the legal title, except upon payment of the debt. If it be conceded that this rule would apply to a similar action brought by the debtor himself, whose debt had been barred by the ordinary Statute of Limitations, I think it has no application to an action of this character brought by the administrator against a creditor who had failed to present his claim for allowance. The failure to present the claim for allowance abrogates the lien given to secure it. The administrator has no authority to pay it, nor the court to allow it as a demand against the estate, nor could the debt be revived by a subsequent promise. It may be necessary to devote the property to the payment of other debts, or the [152]funeral expenses, the family allowance, or the expenses of administration, which are preferred claims under the probate system.

If a creditor, whose debt is secured by a deed of trust upon the whole property of the estate, and who fails to present his claim for allowance, may nevertheless retain the property and devote it to the exclusive payment of his own debt, he would thereby practically defeat the administration of the estate in the manner prescribed by law. When the debt ceases to be a charge upon the property of the estate, as it does by a failure to present it for allowance, there is nothing inequitable in compelling the creditor to release the legal title, so that the property may be devoted to the legitimate purposes of the administration.

If a different rule prevails this anomaly would result, viz.: That the whole estate might be incumbered by successive deeds of trust, none of which were presented for allowance. The debts would continue to bear interest, and in the meantime the administrator and the Probate Court would have no authority to pay them, and thus the estate would be consumed with interest; and preferred debts, including the funeral expenses and the family allowance, must remain unpaid, until the trustees should see fit to sell the property, or should be forced to do so by a court of equity, in order to ascertain the surplus, if any, coming to the estate. Such a practice would result in the greatest perplexity in the administration of the estate, and that, too, in the interest of a creditor who neglects to present his claim for allowance during the ample period allowed by law for that purpose. The administrator represents all the creditors for the purpose of payment; and other creditors besides those claiming under trust deeds have an equitable lien on all the property of the estate. Those who negligently or willfully fail to present their claims, ought not, in a court of equity, to be allowed to retain the dry, legal title to the prejudice of the more vigilant creditors who have duly presented their claims for allowance. In my judgment, there is nothing inequitable in compelling a release of the legal title by creditors of the estate who fail to pre[153]sent their claims for allowance, and have thereby lost the right to enforce their liens upon the property of the estate.

Mr. Justice McKinstry also dissented.

Whitmore v. San Francisco Savings Union

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Synopsis

Opinion — Wallace

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Dissent — Crockett

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