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the most simple course, and the one least likely to admit of error, is to preserve the drafts of them with care, and at a convenient time, to number and bind them up together; by that plan, correct and certified copies can at any time afterwards be made out.
ART. X. —SETTLEMENT AND DISTRIBUTION OF INSOLVENT ESTATES.
[A lecture of the late Professor Stearns, of Cambridge, read in October, 1823.]
IN comparing our system of jurisprudence with that of the country from which so great a portion of it has been derived, we shall find few subjects upon which we differ more, or perhaps with greater advantage, than in relation to the disposition of the property of persons dying insolvent. The palpable injustice of the English law upon this head can hardly fail to strike every one, who bestows the least attention upon it. In whatever way the insolvent debtor may have managed his property in his lifetime, equity requires that it should be equally distributed among his creditors at his decease. This obvious principle is, however, in almost every case, entirely defeated by the rules of the common law. In the first place, by the law of England, after the assets (or property with which the debts are to be paid), are collected, the debts must be discharged in a certain order as to priority. For if the executor or administrator should pay those of a lower degree first, and the assets are insufficient to pay all, he will be answerable for those of a higher order out of his own property. The common law prescribes this order. First, he must pay the expenses of the funeral of the de
ceased, the proving of the will, &c. Secondly, all debts due to the king by record or specialty. Thirdly, poor rates, and certain other duties and forfeitures, which are by several statutes entitled to a preference over other debts. Fourthly, he must discharge debts of record, such as judgments, statutes, recognizances, and (according to some decisions,) decrees of courts of equity (3 P. W. 401, n.). Fifthly, debts due by specialty, such as bonds, leases and other contracts under seal. And last of all, debts due upon simple contract, as promissory notes, bills of exchange, and all verbal or unwritten promises. But it is to be remembered, that among debts of equal degree, the executor or administrator is allowed to satisfy the whole of his own debt by retaining the amount in his hands, however many creditors there may be of that class equally deserving as himself. And if no suit is instituted against him, he may pay the whole demand of one creditor, though nothing be left for others of the same degree. By the ancient law, it seems that among simple contracts, servants' wages were preferred to other debts (Brac. l. 2, c. 26.). But in modern practice, this preference, however reasonable, seems not to be recognised. It is also to be recollected that the real estate of the debtor is wholly exempt from liability for his simple contract debts, as well after his decease as in his lifetime. His debts of record are a direct charge upon it; and for debts by specialty, where the ancestor has expressly covenanted for or bound himself and his heirs, the real estate is liable in the hands of the heir; or rather the heir is liable, in consequence of inheriting the real estate, to the extent of its just value. But in contracts by specialty, where the heir is not expressly bound, and in all cases of simple contract, the creditors have no remedy, if the personal estate should prove insufficient for the payment of the debts, unless the deceased shall have charged them upon the realty. This may be done either by devis
ing it to the executor, or any other person, in trust to be sold for the payment of all the debts of the testator; or by expressly charging it with the debts in the hands of the heir. This mode of charging the debts of the testator upon his real estate has given rise to the distinction between legal and equitable assets. The distinction is this: legal assets are such as constitute the fund for paying the debts according to the order of legal priority before mentioned. Equitable assets are those, which being in the hands of a trustee, or charged upon the real estate descended to the heir, can only be reached by the aid of a court of equity. And as equity favors equality, the fund thus obtained is distributed equally among all the creditors, pro rata, (if insufficient to discharge all the debts,) without regard to the nature or grade of the contract. Formerly a distinction was made between a mere power to sell, given by will, or a devise to an executor to sell, and a devise to a trustee: the latter only subjecting the assets thus obtained to equitable distribution. But by recent decisions, the distinction has been disregarded. And it now seems to be settled, that if the real property be in any way devised to the executor, or if it descends to the heir charged with the debts, all the creditors, of whatever degree, shall share it equally. Still, in the case of a debtor dying intestate, courts of equity can give no relief to creditors by simple contract. However large the amount of real property, and however meritorious the creditors, they can receive nothing; the whole descends to the heir, discharged from those debts. Such is the general outline of the law of England upon this subject, so highly important, as it must strike every one, to a commercial country. That it should have remained so long unaltered, while other parts of the municipal law have been greatly improved, may at first view appear extraordinary. But it is to be recollected that the
legislature of that country have always been slow and reluctant in making the most necessary alterations in their judicial system. And, besides, the law upon this subject, particularly the exemption of real property from the simple contract debts of its proprietor, is intimately connected with the law of descent and primogeniture, so essential, (at least in the opinion of some,) to the upholding of the aristocracy of the kingdom. Against such high considerations the claims of justice can hardly be expected to prevail.
A great portion of the improvements in the modern jurisprudence of England have been effected by the rules, and often by the contrivances and fictions of the courts. So important indeed have they become, that at this moment the practical operation of the law could not be endured without them. But the evil in this case is beyond the reach or control of the courts of law. It is only when a creditor can avail himself of the aid of a court of equity, in the distribution of the estate of an insolvent debtor, that he can obtain that justice, which the laws of this country generally afford him in every case of this description.
In the view, which it is now proposed to give of our own laws in relation to the administration and distribution of insolvent estates, their origin and progress in the colony and province of Massachusetts will be traced, and finally their present maturity under the state government. Afterwards the principal points of difference between the law of this, and several of the other states upon this subject, will be noticed.
The first settlers of this country brought with them the laws of their native land, and made them the basis of all their political institutions. They claimed the right of self-government: but it was the right of governing themselves according to the laws of England. To those laws they referred the construction and enforcement of contracts; and by them they regulated all their most important municipal Concerns.
In the colony of Massachusetts, the law of England continued, in relation to the subject we are now considering, until 1677, when the first ordinance was passed, for the equitable distribution of the estates of persons dying insolvent. It directed, that upon information that any person had died intestate, whose estate was insolvent, and insufficient to satisfy all the creditors, the county court, after granting administration, should empower commissioners to receive and examine the claims of the several creditors, giving notice in the town of Boston, the town where the deceased lived, and three next adjacent towns, and allowing twelve months, (or such further time as the court should order,) for the creditors to prove their claims. The commissioners were to allow such debts as they found to be clear and unquestionable; and the court were directed to make just distribution among all the creditors, according to their due proportion. The creditors who failed to make out their claims within the time limited in the commission were forever barred, unless they could find some property of the deceased, not before known, or put into the inventory.
In this first attempt to make an equitable distribution of insolvent estates, no provision was made for an appeal from the decision of the commissioners. It was limited to estates of persons dying intestate; and extended only to the personal property of the deceased. Thus the law continued until the colony was erected into a province by the charter of William and Mary, in 1691.
Immediately after receiving the new charter, the provincial legislature passed an act, in which, after reciting that the estates of most persons within the province consist chiefly of houses and lands, which give them credit; and that some are remiss about paying their debts, and others happened to die before they are discharged, it is enacted and declared, that all lands or tenements, belonging to any per