[CHANCERY DIVISION.]

CHAMBERLEN V. CLARK ET AL.

Administration-Deficiency of assets-Liability to refund-R. S. O. ch. 107, sec. 30-Secured creditors.

The R. S. O. ch. 107, sec. 30, which enacts that on the administration of the estate of a deceased person, in case of a deficiency of assets, all debts shall be paid pari passu, not only abolishes privilege among creditors, but places them in the same position with respect to each other as legatees; and a creditor receiving payment in full, either in an action against the executor or by the voluntary act of the latter, must refund the excess above his proportionate share at the instance of other A secured creditor need not bring his security into hotchpot as a condition precedent to ranking on the estate, his lien being expressly preserved by the Act.

creditors.

Petition filed by the plaintiff praying that certain creditors of the estate of William Clark, deceased, whose claims had been paid in full by the executors, be ordered to recoup to the estate the sum received by them above the amount to which they would be entitled in respect of their claims upon a ratable distribution of the assets of the estate amongst all the creditors.

The plaintiff was the holder of a mortgage made by the said late William Clark, to whom he had advanced certain sums of money. About two years after Clark's death the plaintiff filed his bill of complaint to realize his security, and in the event of a deficiency for administration of the estate. An account was taken upon the mortgage, and there was found due to the plaintiff the sum of $2,180.39. The property was then offered for sale, and after several attempts to dispose of it was finally purchased by the plaintiff, with the authority of the Court, for $1,000, leaving therefore the sum of $1,180.39 still due to the plaintiff from the estate. petition, in addition to setting forth the above facts, alleged that the executors in administering the estate of the testator, and in collusion with certain of the creditors, wrongfully paid off and satisfied in full the claim of certain

The

creditors that the executors were insolvent, and the plaintiff was unable to recover from them the balance of his claim that the petitioner had applied to the several creditors paid as aforesaid, to recoup to the estate the excess above their pro rata share of the amount so paid to them and they had refused to refund.

February 22, 1882. H. Cassels, for plaintiff. Under the cases of Taylor v. Brodie, 21 Gr. 607,and the Bank of British North America v. Mallory, 17 Gr. 102, the plaintiff is entitled to the order prayed for. In the case of legatees the law is plain that they can be called upon to recoup to the estate the surplus over their pro rata share: Gillespie v. Alexander, 3 Russell 130; Divies v. Nicholson, 2 DeG. & J. 693: and R. S. O. ch. 107 has placed creditors and legatees on the same footing.

Moss, Q. C., contra. There is a wide distinction between the position of creditors and legatees, and the fact that legatees may be called upon to refund furnishes no argument for creditors being compelled to do so. The one takes as a matter of bounty, the other by right; and although there may be good reason for not allowing one legatee to be paid in full to the exclusion of others, still a creditor who succeeds in collecting his debt should not be deprived of the reward of his diligence. A testator might create by covenant a debt for which his estate would be liable for twenty years, and it would seem an extraordinary doctrine that would allow a creditor, years after debts had been paid, to call upon other creditors to refund. The only case in plaintiff's favour is Taylor v. Brodie, cited on the other side, but that case does not contain the principle involved here. Taylor v. Brodie, was overruled by Doner v. Ross, 19 Gr. 229, where it is laid down by the full Court that a creditor who has been paid cannot be made to refund. In the present case the plaintiff has got his remedy against the executors, which is all he is entitled to. The rule that legatees can be called upon to refund does not apply where they are in the same class: Hilliard v.

Fulford, L. R. 4 Chy. D. 389: in which case it is clearly laid down that as between legatees of the same class, those who have been paid cannot be called upon to refund. The case of In re Radcliff, L. R. 7 Chy. D. 733 authorizes an executor to make payment up to the time of administration proceedings; if then the executor can be allowed payments made up to that time, the creditor should be allowed to hold them. In the present case the payments have been allowed by the Master and cannot now be objected to. In any case, the plaintiff must either come in as a creditor from the beginning or from the time his claim is ascertained. If he be a creditor from the beginning he should bring his mortgage into hotchpot. If he be considered a creditor from the time his claim is ascertained, and so he has elected, as a subsequent creditor he cannot upon prior creditors who have been paid to refund. G. H. Watson and J. Pearson, for other creditors who had been paid by executors.

call

H. Cassels, in reply. The last clause in sec. 30, ch. 107, R. S. O. expressly saves the rights of parties who hold securities, and it was therefore not necessary that plaintiff's mortgage be brought into hotchpot. As to Dinworthy, for whom Mr. Moss appears, he took in payment of his claim a piece of land, and the Bank of British North America v. Mallory, supra, decides that when a creditor is paid in full out of the lands, he may be called on to refund.

receives

in

Moss, Q. C. By leave of the Court. A creditor who by means of an execution against the personal representative payment in full out of the lands, can be made to refund, because it is only by a fiction lands are said to be the executor's hands, and the only remedy of the injured creditors would be against the creditors who have got the advantage; but in the case of goods, the unpaid creditors have their remedy against executors: Doner v. Ross, 19 Gr. 229. In the present case it was the executors who conveyed the lands, so there is nothing in objection.

the

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March 8, 1882. PROUDFOOT, J.-The bill was filed by a mortgagee against the executors of the mortgagor for a sale of the mortgaged property, and in case of deficiency for an administration of the mortgagor's estate. A sale has taken place, and has resulted in leaving a considerable sum due to the plaintiff. An account has been taken of the estate, still leaving a large sum due to the plaintiff and other creditors who have proved their claims. The executors in administering the estate paid a number of the creditors in full.

This petition is now presented, alleging the insolvency of the executors, and praying that the creditors who have been overpaid may refund the excess received by them above what their proportionate share of the assets amounted to.

The R. S. O. c. 107, s. 30, abolishes all distinction between creditors in administering the estate of an insolvent deceased debtor, and directs that all debts shall be paid pari passu and without preference or priority of debts of one rank or nature above another, but without prejudice to any lien existing in the debtor's lifetime on any of his real or personal estate.

This statute while putting an end to any privilege among creditors, appears in another aspect to place them on the same footing as legatees; for while legatees were only entitled to their legacies after the debts were paid, by this Act creditors are only entitled to so much of the assets as will pay them pro ratâ. And as legatees who had received their legacies before payment of the debt. might be called on to refund, so creditors who have received payment in full, without provision for a pro rata payment, should also be liable to refund. The object of the Act can be secured in no other way. Nor would it appear to be of any importance whether the assets consisted of real estate or of personal estate. In both cases they are assets, and must be distributed pro rata. Nor does it make any difference whether the creditors have been paid as the result of an action, or by voluntary payment. The

unpaid creditors have the right, under the statute, to enforce an equal distribution, and although the conduct of the executor may preclude him from resisting a claim, that will afford no answer to the action of the creditors.

The absence of a precedent for compelling a creditor to refund under the former law, where debts had not been paid according to their legal priority, is not a conclusive argument against such a proceeding being competent. Under that system, as between creditors of equal degree there could have been no right to have a refund, as the executor might prefer one to another, or if the creditor got paid otherwise in full, as by execution, he might retain it. And there would seldom be a case of an executor paying debts of an inferior degree when he had notice of debts of a higher degree unpaid, and if he had no notice he Would have been protected. But instances are not wanting in which actions involving a similar principle by an executor against a creditor have been sustained. In Clark v. Houghan, 2 B. & C. 149, an executrix had committed a devastavit by paying a debt she ought not to have paid, and she was held entitled to recover it from the person to whom it was paid in an action in her representative character. The money paid was assets, the payee was not entitled to receive it, and when recovered it

would again be assets. A devastavit was a wrong which could be corrected in that way. Now payment of more than a proportionate share is a devastavit, the creditor is not entitled to receive it, and according to that case might be called on to refund in an action by the executor. Of a somewhat similar nature is Pooley v. Ray, 1 P. Wms. 355, where a mortgage came to an executor, who received the money and paid it away to the testator's creditors. afterwards appeared that the mortgage had been satisfied in the testator's lifetime. It was held that the executor must refund, and must have his remedy over against such creditors as by mistake he had paid. Lord Cowper compared it to a debt recovered by the executor by action and paid to creditors, and the judgment after

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