Chew v. Buchanan

30 Md. 367 | Md. | 1869

Lead Opinion

Stewart, J.,

delivered the opinion of the Court.

In the decision of the question under this appeal, our conclusion is different from that of the Court below; but we have been much aided by their learning and research in pronouncing their opinion.

Whilst some diversity of practice prevails in different States, in applying rules as to priorities in the distribution of funds in Court, in the absence of satisfactory evidence of the intention of the parties interested, some adopting the pro rata rule of distribution — others, the priority of assignment without regard to priority of payment — others, priority in the order of the maturity of the debts without reference to the priority of assignment; there is a universal concurrence in the principle that the intention of the parties contracting, must govern where that can be discovered unless in contravention of some rule of law. Where the meaning of the parties has been expressed, or can be inferred from their acts, there has been no difficulty in disposing of the question.

Their intention must be ascertained by the ordinary rules of construction, and the effect of their acts indicating their purpose, is equivalent to express provision. No particular form of assignment indicative of preference, is essential.

Such we infer was the opinion of the Court below, with which we fully concur, but they did not find any evidence of preference in this case in which we cannot agree with them.

This case is relieved from all embarrassment from conflicting rules, because-not only is the fact of a preference fairly inferrible from the acts of the parties, but they have so expressly declared.

In the mortgage deed from Simmons and wife to Mrs. Tyson, bearing date the 2d March, 1857, it is recited that Simmons is indebted to Mrs. T. in the sum of $8,728.75, for which he has delivered to her three” promissory notes of the same date, drawn by Simmons to her order; one for $2,300, payable in three years; one for $3,214.37, payable in four years; and the other for $3,214.38, payable in five years; all of them to bear interest payable annually; that it was understood these notes should be secured by the mortgage, which contains the proviso, that if Simmons shall pay Mrs. Tyson, or her assigns, the said sum with the interest, at the respective periods limited by the notes, then the mortgage was to be null; and it is further declared to be the agreement of the parties, that until default he made in the payment of the mortgage debt, or of some part thereof, Simmons was to retain the possession of the property conveyed. The mortgage was thus given to secure the payment of the debt indicated by the notes at the time specified, and in case of failure to pay- any part, according to the terms stipulated, Mrs. Tyson had the right to the possession of the property as mortgagee, and which right was transferred to Ghew by the first assignment to him.

On the same day Mrs. Tyson, together with Mr. Tyson, executed to Chew an assignment of this mortgage, referring in the same to the previous mortgage given to secure the payment of the respective amounts mentioned in the notes, and reciting that Tyson and wife have assigned to Chew the note for $2,300, being the first note, payable in three years, and for the purpose of granting to him the full benefit of the security held under the mortgage, it conveys to Chew all the right in the mortgage of Tyson and wife, to the extent of the sum of $2,300, with interest, cost, charges, expenses, &c., so that the said Samuel Chew shall have ‘priority of lien therefor ; as the said Rachel Tyson might or could have held the same, if this assignment had not been executed.” The latter part of this instrument is the usual formality, and has reference to the general interest Mrs. Tyson held in the properly, and should be read as if immediately following the preceding words: “in as full and ample manner,” to give to it its proper meaning and application. It was designed to denote her interest in the property conveyed by the mortgage, and was not intended to limit or qualify the express lien secured to Chew by the language, “ and so that the said Samuel Chew shall have priority of lien,” to the extent of his note.

It was, undoubtedly, the design of the parties, by such words, to afford to Chew a prior lien over Mrs. Tyson, as the holder of the other notes, and her subsequent assignees of said notes could take no greater interest in them than Mrs. Tyson, the assignor, held. These words were inserted, we must presume, for a substantive purpose, and to give to them the meaning we have ascribed, it is not necessary to invoke the rule of construction, that instruments are to be taken more strongly against the grantor. It is the natural and obvious import of the expressions — otherwise, they are mere surplus-age — whereas all the words should have meaning, if consistent with the scope of the instrument.

This assignment, by the understanding of the parties, conferred upon Chew a lien, in advance of all others, upon the mortgaged property, for the payment of the note assigned to him. This was Chew’s position on the 2d of March, 1857. It is admitted that this assignment to him was duly acknowledged and recorded.

On the 3d of August, 1857, Buchanan took an assignment of the same mortgage, so far as Tyson and wife could convey it, which recites the mortgage from Simmons and wife to Mrs. Tyson, and further recites, that the mortgage was given to secure the payment of $8,728.75, “in the manner therein expressed, agreeably to the tenor of three promissory notes,” describing particularly the times of payment.

There is no clause giving to him, or undertaking to do so, any special priority, but other property is embraced in the assignment for his better security, furnishing additional evidence of the understanding of the parties. Buchanan’s assignment was also duly ácknowledged and recorded on the 5th of June, 1860; Clark took a similar assignment from Tyson and wife as given to Buchanan, embracing the additional property, to secure the payment of the note assigned to him. There is no clause giving to him any priority. His assignment was also acknowledged and- recorded. These parties, thus holding transfers of the mortgage, occupy the relation of three several assignees of the three respective notes, with the security of the mortgage appurtenant thereto, according to the tenor of the assignments. This they would have held as an incident to the transfer of the notes, if there had been no actual assignment of the mortgage.

Under these circumstances, with the indicated understanding of the parties, to which reference has been made, with prior lien given to Chew, there is no doubt of his right to priority of payment, in the fund in Court. Such was the manifest intention of all the parties.

It would Ho violence to the contract of the parties, and to the principles and practice of Courts of Equity, to permit these various assignees to divide the proceeds of the mortgage ■property, pro rata, when not-sufficient to secure payment of all the notes, and thus exclude the prior lien of Chew, whose assignment, besides holding the express lien, was the first one made, and was first recorded, and transferred, the note first due and payable.

Finding abundant evidence and authority to guide us in disposing 'of the question of distribution, from the transactions of the parties, it would be superfluous to decide wbat would liave been the effect if there had been no such indication of the agreement of the parties, or to consider the effect of the transfers under our Eegistry laws.

(Decided 12th March, 1869,)

We think the auditor’s account A, giving to Chew the . benefit of his preference, should have been ratified, and the case is remanded for further proceedings, in conformity herewith.

Decree reversed and cause remanded.

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Dissenting Opinion

Baiítol, C. J.,

delivered the following dissenting opinion:

The decision of this case depends entirely upon the construction of the assignment made by Tyson and wife to Samuel Chew. Unless the intention of the ‘parties to that assignment plainly expressed in the instrument, or clearly indicated by their acts as disclosed in the record, was to confer on the assignee a preferred lien or priority for the payment of the note assigned to him, in preference to the other notes secured by the mortgage, then the rule adopted by the Court below, in directing a pro rata distribution of the fund among the several assignees, was correct.

I hold the principle in such case to be clear, that different parties holding respectively the several notes, or being entitled to the several instalments or portions of the debt secured by one mortgage, stand in equali jure; and if the property conveyed by the mortgage be insufficient to pay the whole debt, they are entitled to participate pari passu in the fund.

On that question I concur wfith the ruling of the Supreme Court of Pennsylvania, in Donly vs. Hays, 17 Berg. & Rawle, 400, which has been followed by subsequent decisions in that State, and in Ohio, Mississippi, Tennessee, California and Missouri, and which appears to have been recognized also in New York, in Van Rensellaer vs. Stafford, 1 Hop. Ch. R. 569.

Such rule seems to me to be consistent with reason and justice. Where several parties are interested as part owners of a claim, secured by a mortgage or other pledge, if the security should prove inadequate to pay them in full, it is equitable that it should be divided among them ratably. This principle appears to me to be applicable to the case of a mortgage to secure an entire debt, payable in instalments. The mortgage is as much a security for the last instalment as the first; and as between the several holders of the security, whether as original parties, or by assignment, there is no equitable ground for preference or priority.

The only qualification to this rule is where the assignor, by guarantee or otherwise, becomes liable to the assignee for the payment of the instalment or part of the debt assigned. In such case the assignor, if he continues to hold the other portion of the debt, would not be allowed to participate in the fund, until the instalment due the assignee has been fully paid.

The effect of a contrary rule would be to lead to a mere circuity of action; for the assignor, thus remaining responsible, would be liable to the assignee for any deficiency, and for that reason would not be permitted to claim any part of the fund to the exclusion of the claim of the assignee.

In this case the assignment from Tyson and wife to Chew was made without recourse; they were in no manner liable as guarantors or sureties for its payment. Chew, as purchaser, became entitled to a part of the claim secured by the mortgage, to the extent of the-note for $2,300, and the mortgage was assigned to him pro tanto; leaving Tyson and wife entitled to the other notes, and entitled also to participate with him to that extent, in the common security. That right was transferred by the subsequent assignments to Buchanan and Clark.

It is not denied that it was competent for the mortgagees, by the assignment to Chew, to confer on him a priority or preference, which would entitle him to be first paid out of the fund, and postpone to his claim the other notes secured by the mortgage, either in their hands or in the hands of subsequent assignees; and if such were the force and effect of the assignment to Chew, he is entitled to have the benefit of priority in the distribution of the fund. The duty of the Court is to give effect to the intent of the parties. After a careful examination of the terms of the assignment to Chew, I do not find any such intent expressed in the instrument, or implied by the acts of the parties.

By the assignment of the note for $2,300, the mortgage, being merely incidental or appurtenant thereto, yrould have passed to the assignee pro tanto, without any express assignment of the mortgage itself; this instrument conferred upon Chew no better rights, so far as the question of priority is concerned, than he would have held under the assignment of the note, unless by its terms there was secured to him the right to have priority of payment over the other notes secured by the mortgage. The appellant has contended that such is the effect of the words, “ so that the said Samuel Chew shall have priority of lien therefor/’ found in the assignment. If these words stood alone, without any qualification, they might be susceptible of the construction contended for by the appellant; but they are followed immediately in the same sentence by the words, “ as the said Kaehel Tyson might or could have held the same, if this assignment had not been made.” These last must be construed as limiting or qualifying all the preceding words in the same sentence of which they form a part, and it seems to me to negative any intention to give to Chew, the assignee, any other priority of lien than that which was secured by tbe mortgage itself, and was held by Tyson the mortgagee.

Taking the whole instrument together, it seems to have been the intention of the parties, that Chew, who had purchased the note and taken it without recourse, relied upon the security of the mortgage to that extent, and was content to take such priority of lien as was secured by tbe mortgage, and held by the mortgagee. If the intention had been to give to him a prior claim or lien for the note so assigned to him, over the other notes secured by the mortgage, I think more plain and appropriate words would have been used.

Being of opinion that the construction given to the assignment by th¿ Court below was correct, I think the decree ought to be affirmed.