Appeals of Fourth National Bank

123 Pa. 473 | Pa. | 1889

OpinioN,

Mr. Justice Paxson :

| It was decided in Donley v. Hays, 17 S. & R. 400, that where a number of bonds are secured by a mortgage, and the holder of said bonds had parted with a portion of them, retaining some himself, and the sum realized by a sale of the mortgaged premises was insufficient to pay them all in full, that distribution must be made pro rata. This principle has been recognized and followed in a number of cases, j It is sufficient to mention Mohler’s App., 5 Pa. 418; Perry’s App., 22 Pa. 43; Hancock’s App., 34 Pa. 155; Hodge’s App., 84 Pa. 359. If there were nothing else in this case we would be constrained to reverse the court below and adopt the views of the master. pBut there is a principle involved which did not enter into any of the cases cited. The Penn Bank was indorser upon each of the notes issued by Holmes, Lafferty & Co., and which were secured by the mortgage in question. When, therefore, the Penn Bank negotiated these notes with its indorsement thereon, it occupied the position of surety to the holders. ]

' The Germ'an National Bank of Allegheny is the holder for value of $15,000 of these notes; Thomas Hare, agent, is also the holder for value of $15,000 more of said notes. Together they amount to more than the fund for distribution. The American Exchange National Bank held the remaining three of said notes, amounting to $20,000, as collateral security for an indebtedness of the Penn Bank. The indebtedness of the latter to the American Exchange National Bank has been fully paid out of other securities held by the latter, and the notes would have been returned to the Penn Bank but for the fact that, just prior to the assignment by the latter to Henry Warner for the benefit of its creditors, an attachment was issued in New York by the Fourth National Bank of that city, appellant, and served upon the American Exchange National Bank as garnishee of the Penn Bank, j This attachment is pending in the Court of Errors and Appeals of New York, and we cannot speculate as to its result.

Such an attachment would be worthless in this state, for the well-settled rule is that the debt must be attached in the hands of the debtor; the mere evidence of the debt not being the subject of attachment. In any event I do not see how the attachment in New York can possibly result in more than the transfer of the notes in question from the garnishee bank to the attaching bank, in which ease the equities of the latter would rise no higher than the equities of the Penn Bank. The equities of the American Exchange Bank would not pass to the Fourth National by operation of law or the mere transfer of the notes, for the reason, amongst others, that the Penn Bank has paid the former, bank in full, and as it is no longer a creditor it has no equities. Under such circumstances the Fourth National would stand in the shoes of the Penn Bank,, so that this case must be disposed of precisely as if that bank was the owner of the $20,000 of notes in question. The fact-that it is now represented by its assignee for creditors does not alter the position in any degree. We have said so often that the assignee is but the representative of the assignor, standing in his shoes, enjoying his rights only, that we are almost weary of repeating it. Yet it seems as necessary to say it now as it ever was. I will refer only to two of the numerous cases that, might be cited upon this point: Wright v. Wigton, 84 Pa. 163; Morris’s App., 88 Pa. 368.

V We come now to the question what is the position of the Penn Bank as a claimant upon this fund ? / If it had not become surety on the notes held by the Germán National Bank and Thomas Hare, agent, it would be clear, under Donley v. Hays and the other cases cited, that the fund would have to be distributed pro rata among all the holders of the notes, including the Penn Bank. But that it is such surety is a vital fact in the case. There was no question' of a surety or a guaranty in Donley v. Hays or the other cases referred to. Yet in Mohler’s Appeal and in Hancock’s Appeal the fact that a guaranty of the bonds by the party selling them might affect his rights as a claimant upon a portion of them, was clearly foreshadowed. The principle adopted by the auditor that “ equality is equity ” is very well in its place, but it is not always adopted in distributing a fund among creditors. Such distributions are made upon equitable principles. Thus, it sometimes happens that a creditor who has a first lien is not entitled to take the fund. It was ruled in Himes v. Barnitz, 8 W. 39, that “ In the appropriation of the proceeds of a sheriff’s sale, though a party claimant had a prior judgment, yet, if insolvent, he shall not take the money raised, to the prejudice of another subsequent judgment creditor to whom he is bound as surety for the payment of his judgment.” Why, then, should the insolvent Penn Bank, which stands as surety on the appellee’s notes, take the fund which in equity and good conscience should go to the holders of those notes ?

Worrall’s App., 41 Pa. 524, is directly in point. The syllabus of that case, which embodies the principle decided, reads: “ Though a claimant to the proceeds of a sheriff’s sale of the personal property of his debtor has the prior execution,' he cannot by virtue thereof, if insolvent, receive the fund to the prejudice of a subsequent execution creditor, for whose claim he was bound as the surety of the debtor, but the proceeds will be appropriated to the latter claimant.” It was said by Justice Woodwakd, in delivering the opinion of the court, that it would be inequitable to permit a joint debtor who is insolvent to divert a fund from a creditor to whom he owes it, into his own irresponsible pocket. It is true, upon the face of the papers the Penn Bank is entitled to a pro rata share of the fund in question. But it is equally bound to the appellees -upon its indorsements. Equity would require that the Penn Bank should hand over its share of the notes as soon as received to the appellees for whom it is surety. Equity will apply it as it would he the duty of the Penn Bank to apply it, by handing it over directly to the appellees. J

The decree is affirmed, and the appeals dismissed, at the costs of the respective appellants.