150 Ind. 588 | Ind. | 1898
David J. Mackey owned several parcels of real estate, estimated to be of the value of $200,000.00, upon which were certain judgment liens of about $13,000 in favor of parties not here interested. Mackey gave to the First National Bank, appellee, a mortgage on parts of said real estate, referred to, for convenience, as No. 1, for about $100,000. Thereafter he executed to one Cook, as trustee, a conveyance of the remaining parts of said real estate, which we will refer to as No. 2, the purpose of the trust being the sale of parcels included in No. 2, and the application of the proceeds to certain claims for a large sum owing to the Bank of Commerce, appellant. Still later the Bank of Commerce purchased the judgments mentioned. The trustee sold a large part of No. 2 and applied the proceeds to the claims of the appellant, other than said judgments. In a foreclosure proceeding instituted by the appellee, First National Bank, the question was made as to the rights of said appellee to require said judgments, so held by said appellant, to be made first from the property No. 2. The lower court held that they should be so enforced, and this appeal is from that holding.
The learned counsel for the appellant makes this concession: “Of course the general doctrine that where a creditor has access to two funds for the payment of his debts, and another creditor is confined to one of those funds, the dominant creditor will be compelled in the first instance to exhaust the fund upon which the other creditor has no security before resorting to the latter, is conceded.” It is practically con
In Bispham’s Principles of Equity, section 27, it is said: “The doctrine of marshaling grows out of the principle that a party having two funds to satisfy his demand shall not, by his election, disappoint a party who only has one fund. Thus, a party who has a mortgage on two parcels of land, ought not, in fairness, to resort in the first instance to one of them, upon which there also happens to be a junior mortgage which is not otherwise secured; for in so doing the junior mortgagee- might be altogether cut out. Equity, however, is loath to interfere with the rights of a creditor to enforce payment out of any of his securities, and therefore the remedy usually afforded to the junior disappointed mortgagee is to substitute him to the rights of the paramount mortgagee as against the other property.” The same proposition is announced and illustrated by the author in section 340, et seq., of the same work. In section 341 it is said that “the equity of marshaling would seem to be capable of being carried into effect in one of two ways, either, first by restraining the party against whom it exists from using a security to the injury of another, or, second, by giving the party entitled to the protection of this equity the benefit of another security in lieu of the one of which he has been disappointed. In other words, the right might be enforced either by injunction against the paramount creditor, or by subrogation in favor of the junior creditor.” In the ■ same section it is further said: “The rights of every1 one can be protected, and there is no harm in throwing the paramount creditor at once on the singly charged fund. So,, too, when the paramount creditor
In Fetter on Equity, p. 256, it is said “that a person having resort to two funds shall not by his choice disappoint another having one only. The practice adopted in the early days was to summarily forbid the creditor with two funds to touch that which was the sole resource of the other. The remedy by injunction is, however, rarely applied in modern times. The usual course is to permit the double creditor to enforce his claim as he pleases; but, if he chooses to resort to the only fund on which the other has a claim, that other is subrogated to all his rights against the fund to which otherwise he could not have resorted.”
In Jones on Liens, sections 1045, the same rules are stated, and wherever stated, are fortified by abundant authority.
One contention on behalf of the appellant is, that while the right to require enforcement of the judgment against No. 2 alone existed at all times, prior to the execution of the trust deed, after that time it did not exist; that the right was not fixed, but was inchoate and to be enforced only with reference to conditions existing at the time of enforcement. If this were true, the rule that subrogation was the more modern and approved remedy would be defeated, since subrogation depends upon the previous conduct of the dominant creditor, either in disregarding his duty to seek the property not covered by the junior lien, and in enforcing it against that upon which the junior lien rests, or, as said by Bispham, where he “has been guilty of some negligence or default.” The
It is insisted, however, that the enforcement of the rule under the circumstances in this case is an injury to the appellant, now the dominant creditor by the purchase of the judgments, and that equity will not enforce the rule to the injury of a third person. As to the ownership of the judgments, we observe no stronger equity in the appellant than in the assignor, the original judgment creditor. Nor do we perceive that the trust deed added anything to the equities of the appellant, under the judgments, as against the appellee. Equity forbade the assignor of the judgments to enforce them so as to disappoint the appellee. In other words, good faith demanded that the
The trust deed and sales under it, for the appellant’s benefit, had the effect to release the property from the lien of the judgments, as to the appellant, and such release would operate as a relinquishment of the right to go upon No. 1 for the judgments. Alsop v. Hutchings, 25 Ind. 347; Turner v. Flenniken, 164 Pa. St. 469, 30 Atl. 486, 44 Am. St. 624.
Cases in their essential features quite like the present are Appeal of Robeson, supra, and Kendig v. Landis, supra. In the first, Graham owned two tracts of land subject to two judgments in favor of Woods. Upon the Hale tract he gave two mortgages, and later gave one upon the Decatur tract. Both tracts were sold under the judgments, and the proceeds brought into court for marshaling. The appeal was on behalf of the mortgagees of the Hale tract, claiming precedence in distribution over the mortgage on theDecatur tract. The court said: “If the contest were one between the appellants and the debtor alone, can it be doubted that the appellants would in equity be entitled to have Woods resort to the proceeds of the Decatur tract in order that they might avail themselves >of the proceeds of the Hale tract? As the equity is
“But when the appellees subsequently recorded their mortgage upon the Decatur tract, it is contended that, as mortgagees, they acquired a lien, and that their equity was equal to that of the appellants; that the equities were in equilibrio. We do not think so. The appellants acquired against Graham, the mortgagor, the right to have his other lands, not included in the mortgage, applied first to the payment of the earlier judgments which were liens against them. This right it was not in the power of the mortgagor to defeat by confessing judgments to other creditors, or by contracting subsequent debts. Bona fide purchasers, and perhaps mortgagees, might be unaffected by an equity of which they had no notice in fact. Hoff’s Appeal, 84 Pa. St. 42. But when the appellees took their mortgage they could plainly see that the Woods judgments were entered as first liens against the Decatur tract, and that their mortgage in the regular course of distribution, could not be paid until these judgments were satisfied. It is true that it appeared by the records that the Woods judgments were liens also upon the Hale tract, but the same search would show the existence of the appellants’ mortgage. The appellees, in the absence of proof to the contrary, will be presumed to have taken their mortgage with full knowledge of all the facts disclosed by the record, and would thus be affected with notice of all the equities, which, owing to the peculiar condition of the respective liens, the appellants had as against the Woods judgments.”
From the case of Kendig v. Landis, supra, we quote as follows: “The appellant has two funds out of
“The application of the familiar rule that where one creditor has two funds out of which to make his money, and another creditor has but one, the creditor having the two shall first exhaust the fund upon which the other has no claim, would throw the appellant upon the Manor farm. This rule must prevail, unless the appellant has an equity which would make the application of the principle unjust in the particular instance. The reason why he objects to it is that he is the holder of a second judgment which is also a lien upon the two properties, but as to the Millers-ville property, it is subsequent to the mechanics’ claims. Hence, he desires to first absorb the Millersvilie fund, in which case his second judgment is good upon the Manor farm. In this, however, he has no equity. When the mechanics put their work and materials upon the Millersvilie property, they could see, of course, that it was bound by the lien of appellant’s first judgment. But they also knew that the same judgment was a lien on the Manor farm, and that said farm was amply sufficient to pay it. Withdhis knowledge, they had a right to expect that the appellant
Counsel for appellant rely with confidence upon Gilliam v. McCormack, 85 Tenn. 597, 4 S. W. 521. We make no effort to distinguish between that case and the general rules and authorities upon which we rely for our conclusion. It seems to support the appellant’s contention, but, with deference, we submit that the weight of authority, and the' necessary force of the rule of equity involved, lead to the conclusion we have reached. The rulings of the lower court were correct. The judgment is affirmed.