{
  "id": 8627541,
  "name": "HELEN G. UNDERWOOD v. A. T. WARD, Administrator of DAVID F. UNDERWOOD, JR., Deceased",
  "name_abbreviation": "Underwood v. Ward",
  "decision_date": "1954-02-24",
  "docket_number": "",
  "first_page": "513",
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    {
      "cite": "131 N.C. 227",
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    {
      "cite": "188 N.C. 200",
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  "last_updated": "2023-07-14T20:51:12.847603+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
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  "casebody": {
    "judges": [],
    "parties": [
      "HELEN G. UNDERWOOD v. A. T. WARD, Administrator of DAVID F. UNDERWOOD, JR., Deceased."
    ],
    "opinions": [
      {
        "text": "Bobbitt, J.\nDavid E. Underwood, Jr., died intestate 30 August, 1953, and the defendant is the administrator of his estate. The decedent and Helen Gr. Underwood, the plaintiff, were husband and wife.\nThe husband purchased a lot in 'Waynesville adjoining the right of way of the Southern Railway Company, referred to as the \u201cSouthern Railway lot,\u201d and erected thereon a large business building having a value of $50,000.00 or more and constructed a railroad sidetrack. He also purchased a 200 acre tract of land in Haywood County, referred to as the \u201cG-wyn Tract.\u201d He had these properties conveyed to himself and his wife as tenants by entirety.\nThey executed two deeds of trust on the \u201cSouthern Railway lot\u201d securing their promissory notes for $20,000.00 and $10,000.00; and the principal balances owing when the husband died were $11,000.00 and $4,911.12, respectively. These notes provided, \u201cFor value received, the undersigned, jointly and severally, promise to pay,\u201d etc. The $30,000.00 thus borrowed was used exclusively in the erection of the .building and the construction of the sidetrack on the \u201cSouthern Railway lot.\u201d\nThey executed a deed of trust on the \u201cGwyn Tract\u201d securing their promissory note for $13,000.00. The principal balance owing when the husband died was $12,886.22. This note provided, \u201cFor value received, the undersigned, jointly and severally, promise to pay,\u201d etc. The $13,000.00 thus borrowed was used exclusively as part purchase price for the \u201cGwyn Tract.\u201d\nIn each instance, the property subject to lien has a value in excess of the debt; and the ability of the plaintiff to discharge in full her liability for these debts is not disputed.\nThe assets of the decedent\u2019s estate available for the payment of debts equal or exceed the estate\u2019s liability for one-half of these debts if such liability is treated as a debt of the First Class under G.S. 28-105. However, such assets are insufficient for the payment of the estate\u2019s liability for one-half of these debts if such liability is on the basis of an unsecured general claim and entitled to participation in the distribution on equal terms with other unsecured general claims.\nThe plaintiff\u2019s assignments of error are addressed solely to Judge Moore\u2019s ruling that these debts are not First Class debts within the meaning of G.S. 28-105 but are liabilities of the decedent\u2019s estate on the basis of unsecured general claims. In our view, Judge Moore\u2019s ruling was clearly correct.\nUpon the execution of the notes the makers became primarily liable, jointly and severally, for the payment thereof; and as between the plaintiff and her husband\u2019s estate the liability of each is for the payment of one-half of the amounts owing when the husband died. This is the explicit holding in Trust Co. v. Black, 198 N.C. 219, 151 S.E. 269. The plaintiff concedes that this is correct but insists that the claim of each of these secured creditors for the debts outstanding when the husband died (or her claim for one-half of that amount should she pay the debts in full in order to avoid foreclosure or for other reasons) is entitled to preferential payment from the general assets of the decedent\u2019s estate. She relies upon G.S. 28-105, which prescribes the order in which debts of a decedent must be paid, and particularly she urges that such debts are within the First Class, namely, \u201cDebts which by law have a specific lien on property to an amount not exceeding the value of the property.\u201d\nUpon the death of her husband, the plaintiff, as survivor in the tenancies by entirety, became the sole owner of the real property. No right, title or interest of any kind passed to the defendant-administrator, for the benefit of the creditors of the intestate, or to the heirs of the intestate. Davis v. Bass, 188 N.C. 200, 124 S.E. 566.\nIt is true that the deeds of trust constitute specific liens on real property of which the plaintiff became and is now sole owner. The question presented is whether these specific liens on her real property require that tbe liabilities of tbe decedent\u2019s estate for these debts be paid as debts of tbe First Class.\nTbe evident purpose of tbe statute relating to debts of tbe First Class is to benefit tbe estate, particularly tbe creditors thereof next in line for payment. Administration of Estates in North Carolina, Douglas, Section 218. In this connection, it should be noted that debts of tbe First Class take precedence over funeral expenses, taxes, and other items entitled to payment before general claims. Tbe priority of tbe First Class is limited to a situation where tbe value of tbe property equals or exceeds tbe amount of tbe specific lien thereon. Thus, tbe personal representative may preserve any equity for tbe benefit of other creditors and of beneficiaries. But where tbe estate and its creditors and beneficiaries have no right, title or interest in tbe real property on which tbe creditor has a specific lien, no equity can be preserved.\n\u201cTbe statute being in derogation of tbe equity of a pro rata distribution, should be strictly construed so as not to confer a priority over other creditors unless clearly called for.\u201d Baker v. Dawson, 131 N.C. 227, 42 S.E. 588; Hospital Asso. v. Trust Co., 211 N.C. 244, 189 S.E. 766.\nTbe exact wording relating to debts of tbe First Class now appearing in G.S. 28-105 goes back to Section 24, Chapter 113, Laws of North Carolina 1S68-69. \"We are unable to find any decision or intimation that tbe statute applies other than in situations where tbe property subject to tbe lien was a part of the decedent\u2019s estate. If the contention of tbe plaintiff were accepted, two persons could execute and deliver their promissory note for money borrowed; as security therefor, one of them could execute a deed of trust on bis separate property, tbe other giving no security; and upon tbe death of the person who gave no security it could be asserted that the liability of bis estate for the amount due on the note is a First Class debt under G.S. 28-105 payable in full ahead of all other debts for tbe reason that such debt was secured by a specific lien on property. No such intention can be discerned when tbe context and purpose of G.S. 28-105 are kept in mind. Tbe fact that tbe plaintiff is tbe widow of tbe decedent and is now tbe sole owner as tbe surviving tenant in an estate by entirety rather than sole owner when tbe notes and deeds of trust were executed affords no basis for distinction in relation to tbe applicability of tbe portion of G.S. 28-105 dealing with First Class debts.\nIt is plain that \u201ca specific lien on property to an amount not exceeding tbe value of such property\u201d as used in G.S. 28-105 refers only to property which passes to and becomes a part of tbe decedent\u2019s estate and which, upon payment of a debt of tbe First Class, is preserved free of lien for tbe creditors and beneficiaries of tbe decedent\u2019s estate. Tbe statute has no reference to specific liens on properties owned by others and in which the decedent\u2019s estate has no interest.\nIf the creditors bad a specific lien on property belonging to the decedent\u2019s estate, they would be required to exhaust their security and then would be permitted to file claim only for the balance of the debt due after allowing credit for the proceeds of sale. Rierson v. Hanson, 211 N.C. 203, 189 S.E. 502. Since they have no specific lien on property belonging to the decedent\u2019s estate, the estate\u2019s liability is for the debts and, as between the plaintiff and the defendant, for one-balf of the amount thereof, without allowance of credit for what is or may be realized from property now owned solely by the plaintiff.\nTbe judgment below is predicated upon a correct ruling on tbe single question presented by this appeal and is therefore Affirmed.",
        "type": "majority",
        "author": "Bobbitt, J."
      }
    ],
    "attorneys": [
      "S. Q. Bernard for plaintiff, appellant.",
      "Morgan & Ward for defendant, appellee."
    ],
    "corrections": "",
    "head_matter": "HELEN G. UNDERWOOD v. A. T. WARD, Administrator of DAVID F. UNDERWOOD, JR., Deceased.\n(Filed 24 February, 1954.)\n1. Executors and Administrators \u00a7 15c: Husband and Wife \u00a7 \u2014\nWhere husband and wife execute notes jointly and severally promising to pay moneys used by them in the improvement or purchase of property held by them by entireties, each is primarily liable, jointly and severally, and upon the death of the husband, his estate is liable only for one-half the balance remaining due at his death, without credit for any sums realized from the property after his death.\n2. Husband and Wife \u00a7 15d\u2014\nUpon the death of the husband, the wife becomes the sole owner of lands held by them by entireties, and no right, title or interest of any kind passes to the estate of the husband.\n3. Executors and Administrators \u00a7 16\u2014\nTlie provision of G-.S. 28-105 that debts constituting a specific lien on property to the amount not exceeding .the value of the property shall be paid in the first class of priority is solely for the purpose of preserving the equity in property for the benefit of the creditors and beneficiaries of the estate, and the statute can have no application when the property subject to the lien is not a part of the assets of the estate, even though the estate be liable for the payment of the debt secured, or any part of it.\n4. Same: Husband and Wife \u00a7 15d\u2014\nHusband and wife were jointly and severally liable on notes secured by liens on lands held by them by entireties. Held: Upon the death of the husband, the liability of his estate for one-half the balance due on the notes at the time of his death is not a debt coming within the first class of priority, since even though the debt is secured by specific lien on the property, the property is not an asset of the estate.\nAppeal by plaintiff from. Moore, J., Resident Judge of the Twentieth Judicial District, heard 8 January, 1954, in Chambers in Sylva, N. C., by agreement, from Haywood.\nControversy without action duly submitted in accordance with the provisions of Gr.S. 1-250, heard upon an agreed statement of facts. The facts on which decision of the question presented on appeal must be made are stated in the opinion.\nS. Q. Bernard for plaintiff, appellant.\nMorgan & Ward for defendant, appellee."
  },
  "file_name": "0513-01",
  "first_page_order": 557,
  "last_page_order": 561
}