American National Bank v. Branch

57 Kan. 27 | Kan. | 1896

The opinion of the court was delivered by

Johnston, J. :

The right to a review of the rulings made by the district court is challenged at the outset by the defendants in error, because a great many of the claims that were allowed before the trial were for sums less than is required to give this court jurisdiction. The estate is an entirety, and its value greatly exceeds the jurisdictional amount. It affirmatively appears that each of a large number of the claims is more than $2,000 ; but whether large or small, the claimants were all interested in the trust fund, and a final disposition of the case requires that all should be brought in. The rulings made as to the distribution, therefore, are subject to review, although the claims of some who were seeking to share in the fund may have been very small. (M. K. & T. Rly. Co. v. Haber, 56 Kan. 694.)

The next contention is that the proceeding was not properly instituted. It is said that no petition was filed, no summons or citation was ever issued or served, that no answer was ever made, and no issues formed by pleadings. The applications of the plaintiffs in error were denominated “motions,” and contained a full recital of the facts, and an explicit statement of the relief asked. These motions were verified, and notice of the time of hearing was given to the assignee, who appeared in person and by attorney, resisting the application. The parties whose claims had been allowed and designated as “contingent,” appeared in person and by attorneys at the hearing, contending that they should not be excluded from a share in the estate, and insisting that they were entitled to a pro rata distribution of the assets with all other claimants.

1. Appeal necessary for review. In the matter of the allowance and classification of claims the district court can only acquire jurisdiction to review and supervise the action of the assignee through a proceeding by way of appeal; but in respect to the condition and dis-tribution of the assets of the estate jurisdiction may be acquired upon the petition of a creditor or other person interested in the estate; and if the petition contains good cause, and is verified by affidavit, the court may cause the assignee to be cited before it to answer the allegations of the petition, and abide any order that may be made by the court in the premises, and upon the hearing the court is authorized to make such order as may be deemed fit and lawful for the enforcement of the statutory provisions concerning assignments. (¶ ¶ 376-378, Gen. Stat. 1889.) Although the applications in the present case were designated as motions, there was a substantial compliance with this provision of the statute, and the assignee, having appeared upon the notice as it was served, the failure to issue a formal citation is no longer important. Although no answer was filed, issue was in fact joined ; and all the parties being before the court, and having had a full hearing, the same as if petition and answer had been regularly filed, it is too late to raise any quéstion as to the manner in which the issue was joined. The district court, however, could not in this proceeding modify or change the decisions made by the assignee in adjusting and allowing claims. In this respect the assignee had full jurisdiction, and his decisions were final where no appeal was taken in the manner provided by law. Pie was duly appointed and qualified, a time was fixed by him for adjusting and allowing claims against the estate, and due notice of the same was given to all concerned. The claims presented were based on the contingent liabilities of the company, and upon proof offered the claims were allowed. Undoubtedly he had jurisdiction to adjust and allow claims, and within that jurisdiction his decision, in the absence of an appeal, is final, “unless a creditor or some other person interested has, after a decision is made on any such claim, asked an appeal therefrom.” (¶ 365, Gen. Stat. 1889; The State v. Kansas Ins. Co., 32 Kan. 655; Limbocker v. Higinbotham, 52 id. 700.) The plaintiffs in error could have taken an appeal from the decisions of the assignee in allowing what are called the “ contingent claims,” but, failing in this, they are concluded from questioning the allowance or classification which he made. Whether his determination was right or wrong we will not now decide, as the question is not open for our consideration. The assignee did not undertake to prescribe how or when the distribution of the assets should be made.- It is evident from the language used when the decision was made that he contemplated that a portion, at least, of the contingent claims would be paid by those who were primarily liable for them, or would be made out of the mortgage securities, and evidently he thought that dividends would only be paid upon the amount remaining after the original securities had been exhausted. The distribution, however, was left to the district court, and that court, when its jurisdiction was invoked, was competent to interpret the decision of the assignee and make out such order in the premises as would be legal and just.

2. Security must be exhausted first. The assets of the estate should be distributed upon equitable principles, and it is a recognized rule of' equity that where there are two funds to which a creditor can resort, and other creditors are limited to one ^iem’ former will be compelled to exhaust the fund upon which he has an exclusive lien, and will be permitted to resort to the other for the deficiency only. (Burnham v. Citizens Bank, 55 Kan. 545; Gore v. Royse, 56 id. 771; Wurtz, Austin & McVeigh v. Hart, 13 Iowa, 515 ; Knowles, Petitioner, 13 R. I. 90; Besley v. Lawrence, 11 Paige Ch. 581.) While the assignee allowed the claims of those who held the guarantied mortgage bonds to the full amount, payment of a part of the debts will certainly be realized from the mortgage securities. It would be inequitable to allow these claimants a pro rata dividend on the whole amount of their claims when payment of a part, if not all, of it may be received from the mortgage securities to which they have the exclusive right. It is suggested that, as these mortgages were taken for five and seven years, a considerable time will elapse before the amount of the indebtedness can be accurately known, and before dividends can be declared. It'is unnecessary to postpone the payment of any dividends until it is known how much can be realized on the mortgage securities. The court can approximately determine from information that will be obtainable how large a share of the funds of the estate should be reserved for the payment of the claims of those who hold mortgage securities. The balance may be paid out in dividends from time to time, as it is collected, to the remaining claimants. A distribution may be made among those holding the mortgage securities when they have exhausted their special liens, and then dividends should be declared upon the amount remaining unpaid, and not upon the full amount of tire claims as allowed.

To this extent the judgment of the district court will be modified.

All the Justices concurring.