Hamilton v. Schwehr

34 Md. 107 | Md. | 1871

Brent, J.,

delivered the opinion of the Court.

In October, 1867, the appellant, Hamilton, leased to Frederick Schwehr, two lots lying in the City of Baltimore, one on the Southwest corner of McHenry and Sterrett streets, and the other (adjoining) on the West side of Sterrett street. On the same day, a mortgage was executed by Schwehr to Hamilton, on these two lots, to secure the payment of four thousand dollars — part of which was for a debt already due, and the other part for advances to be made, to enable Schwehr to erect five houses on the lot upon the West side of Sterrett street. Such advances were to be made as the houses progressed, and were in fact made and paid according to the terms of the mortgage.

In February, 1888, Schwehr executed to Hamilton another mortgage on the same two lots, for the purpose of securing to him a further indebtedness of two thousand five hundred dollars. After the recording of the first mortgage, and before the recording of the second, the houses oil the Sterrett street lot were commenced, and certain material men, who furnished the materials for their erection, have filed their lien claims against this lot. They proceeded in equity to enforce their lien, and Hamilton also filed a bill to foreclose his mortgages. The cases of Hamilton and the material men tvere consolidated and the property sold by trustees. The amount realized from the sale was not sufficient to pay the lien claims of the material men, and the two mortgages held by Hamilton. The proper distribution of this fund was prevented by objections filed to the auditor’s report, and from the ruling upon them, by the Court below, the present appeal is taken.

The first error alleged is the apportionment of costs as directed by the Court below. The question of costs, as was said by this Court in the case of Mears & Moulton, 30 Md., 145, “isa matter resting in the sound discretion of the Court, from the exercise of which no appeal will lie.” Courts of Equity in this State always exercise a discretionary power upon the subject of costs, and if the decree is in others respects right, it will not be disturbed, even if in the judgment of this Court there was an improper direction as to the party or fund charged with their payment.

The other question presented is the proper distribution of the fund between the respective lien claimants. It is now too well settled to admit of any question, that a person, having an interest in one only of two. funds, has a right in equity to compel a party, having an interest in both, to resort to the .other, if necessary for the satisfaction of both debts. 1 Story’s Equity, sec. 633, and authorities there cited.. That this general principle would apply to the case before ns, if the only question was between the first mortgage of Hamilton and the lien of the material men, seems to be clear. The interest of the material men in the lot on Sterrett street, when perfected under the law creating their lien, is as full and extensive as that of a mortgagee. They have the same right of sale and entitled to the same priorities over subsequent incumbrances.

There is nothing in the objection that the lien is only statutory, and cannot, therefore, be enforced in any other way. or to any greater extent than is given by the Act creating it. It must, beyond question, be perfected in strict conformity with the Act, but when so perfected it may be governed by other rules and principles than those specially designated in it. The lien of a judgment upon real estate exists alone by force of statute, and that to the extent only of the interest of the debtor. It is no where provided in the statute creating it, ihat it shall be such a lien as Courts of Equity are to respect in the marshalling of assets. Yet the general equitable doctrine of marshalling has always been applied to a lien of that description and the propriety of doing so has never been questioned. If the doctrine is applied to mortgages and judgments, there can be no reason why it should not equally apply in favor of claimants holding a mechanics’ lien.

In the case of Kenny vs. Gage, and others, 33 Vermont, 307, which was in equity, the principle is recognized that a mechanics’ lien stands upon equal ground with a mortgage, and ¡affects legal and equitable rights to the same extent. In the case of The Olympic Theatre, reported in 2 P. A. Brown, 284, the doctrine of marshalling was applied between mortgages upon two lots, and claimants holding a mechanics’ lien on but une of them. The mortgages were directed to be paid out of the proceeds of sale of one of the lots, leaving the other for the payment of the lien creditors.

If, therefore, the question of distribution in this case was between the first mortgage of Hamilton only and the mechanics’ lien claimants, the rule of marshalling, if necessary for the payment of both liens, would be applied, and the mortgage directed to be paid out of the fund arising from the sale of the McHenry street lot, leaving the Sterrett street lot to be applied to the payment of the creditors holding the mechanics’ lien.

Is this equitable right affected by the second mortgage to Hamilton? We think not. It will not be questioned that he took the lots mortgaged subject to the lien of the first mortgage on both of them, or of the mechanics’ lien on one. These liens, at the time they attached, carried with them as incidents the right of the parties respectively to such equities as would render them available and productive. Of these was the equitable right of the holders of the mechanics’ lien to have marshalled the fund arising from these lots, if it was necessary to pay both their debt and that secured by the first mortgage. This equity existed before the second mortgage to Hamilton was made, and cannot be affected or destroyed by the conveyance to him. He must, therefore, be held to have taken it subject to the prior equity of the holders of the mechanics’ lien. Hastings’ Case, 10 Watts, 303; N. Y. Life Ins. and Trust Co. vs. Vanderbilt, 12 Abbott’s Prac. Reps., 460. But it has been insisted in the argument, that this equity will not apply where third parties are interested. This doctrine extends only to cases in which the rights of third parties have intervened before the second lien was created. All the authorities, cited in support of it, are cases of settlement of a part of the mortgaged property, in which the parties obtained liens after the settlement, and sought to put the mortgage upon the settled property, so that the unsettled portion might be unincumbered for the payment of their liens. The case of Barnes vs. Racster, 1 Younge & Collyer, 401, (20 Eng. Chan. Reps.,) was very strongly relied upon by the appellant’s counsel, but upon examination, it is also a very different case from the one before us. In that case there were four mortgages, the first was given to Barnes on Foxhall, the second to Hart-wright also on Foxhall, the third to Barnes on Foxhall, and No. 32, not only for a new indebtedness, but also as further security for the debt named in the first mortgage, and the fourth to Williams on Foxhall and No. 32. The Foxhall tract uo.t being sufficient to pay the two first mortgages, Hartwright, the holder of the second mortgage, sought to put Barnes upon No. 32 for the payment of his first mortgage. This the Vice Chancellor refused to direct, but not upon any ground inconsistent with the view we have taken of the case now before us. On the contrary, his reasoning strongly intimates that the relief asked for by Harkoright, would have been granted, if the first mortgage to Barnes had been given upon both Foxhall and No. 32, although he says he expressly reserves his opinion ■as to what “would have been the rights of Hartwright and Williams had Barnes' security upon No. 32 preceded and not been subsequent to Hartwright’s security on Foxhall.” But the case is inapplicable to the present one, because unlike the security of Barnes upon Foxhall and No. 32, the security under the first mortgage on the lots upon McHenry street and Sterrett street preceded, and was not subsequent to, the lien on the lot upon Sterrett street.

(Decided 17th February, 1871.)

We think the decree of the Court below was right, and it ■will be affirmed.

Deoree affirmed.

Miller, J., dissented.