Shelly's Appeal

| Pa. | Jul 1, 1860

The opinion of the court was delivered by

Woodward, J.

The defendant’s real estate was encumbered by eight several judgments entered of record in the following order:—

1. Matthias Bitner’s, entered 22d September 1856.

2. Eberly’s, entered 4th May 1857.

3. Michael Free’s, entered 25th August 1858,

4. Judgment of Kutz and Wise, entered 2d October 1858.

5. John Cromlich’s judgment, entered 4th October 1858.

6. Jacob Long’s, entered 8th November 1858.

7. Amos Shelly’s, entered 13th December 1858.

8. Judgment of Rupp and Hall, entered 13th December 1858.

The 1st and 8th of the above judgments were entered on bonds containing an express waiver of all the privileges secured by the exemption law of 9th of April 1849, commonly called the $300 Act; but, in behalf of the intermediate creditors, there had been no such waiver made by Wise, the debtor.

Bitner and Eberly issued executions on their judgments, and levied on the defendant’s land. Whilst the sheriff had both writs' in hand, and before inquisition, the defendant served notice claiming the benefit of the exemption law, and appraisers found that the land could not be divided so as to set off his share to the defendant. A vend. ex. issued on Eberly’s judgment, which brought the money without a sale, and his judgment was satisfied. After-wards, a vend,, ex. was issued on Bitner’s judgment, and the defendant’s land was sold for $800. Having received $9.13 out of the sale of his personal property, the defendant now claims $290.87, the balance of his statutory exemption against all of his judgment-creditors, except Bitner (No. 1), and Rupp and Hall (No. 8).

Bitner has no interest in the question, because, being the first lien-creditor, and holding a waiver, he is entitled, in any event, to be paid out of the fund in court. The decree of the court was in these words: — “From the amount of sale, $800, deduct defendant’s claim, $290.87; the residue of the $800 to be appropriated to the judgments and costs according to priority. This will leave the last judgment of Rupp and Hall, on which there is a waiver, unpaid; this judgment and costs we direct to be paid out of the $290.87, claimed by the defendant, and the residue of that sum paid to the defendant under his claim of exemption.”

The intermediate creditors, whom I have numbered from 3 to 7 inclusive, are the appellants from that decree. Was the debtor entitled to the exemption as against them ?

It is material to observe, that the Act of 1849 exempts $300 worth of the debtor’s property from “ levy and sale on execution or by distress for rent.” Hence, the debtor is bound to give notice and make demand promptly, after he knows a levy has been made. If, as a consequence of such notice, the real estate is found indivisible, the 4th section of the act provides for a sale of it by the sheriff, notwithstanding the debtor’s demand, and entitles the defendant to receive out of the proceeds of the sale, so much as he would have received at the appraised value, had the said real estate been divided.

Now, when Eberly took execution and levied on the defendant’s land, the case had occurred which the act contemplates, and the debtor was entitled to demand the rights secured to him. He made his demand in good time. But that execution was paid off, 'and thus extinguished. The sheriff, however, had levied Bitner’s fi. fa. on the same land; but, as to that writ, Wise had waived his right of exemption. Such waiver is á contract that, so far as regards the judgment-creditor, in whose favour it is made, the debt shall be collectable in the same manner as if the Act 'of 1849 had never been passed; and consequently, if the sheriff had had Bitner’s writ only in hand, he might have disregarded Wise’s notice and demand: Bowman v. Smiley, 7 Casey 226.

Yet, it was that writ, and no other, which was the instrument of bringing into the court the fund that is now to be distributed. What right, it may be asked, has Wise to participate in the distribution ? It was said, in McAfoose’s Appeal, 8 Casey 277, that the debtor’s right to the statutory exemption, exists only sub modo; that it must be claimed under the conditions prescribed ; and that the demand which entitles the debtor to the benefits of the statute, “ must be made in the case which is the instrument of effecting the sale.” And so says the statute; for it gives, as we have seen, an exemption of $300, not against judgment-creditors, who take no execution, but against the levy and sale of such only as proceed by execution.

As against Eberly’s writ, Wise’s claim could not avail him, because the right of exemption fell with the writ, and the writ was defeated by payment of the debt. As against Bitner’s writ, Wise had no right of exemption, for he had expressly waived it. He had agreed that that debt should be collectable, as if the Act 1849 had never been passed. Between them, therefore, there was no exemption law. As against the other judgment-creditors, the time for demanding the benefit of the act had not come, for they had taken no execution. And if no legal demand had been made, then no legal right existed to participate in the distribution of the fund.

Wise’s rights as a distributee must result from a demand made at the proper time, and which demand could be no otherwise satisfied. But if he defeated the only legal demand he could make, by waiving it as to one of his execution-creditors, and by paying the debt of the other, he can have no interest in the fund raised by a sale of his property. If the fund were more than enough, which it is not, to pay all lien-creditors, he would be entitled to receive the surplus, like any other defendant; but on the footing of the exemption law, he would seem to have no right to share in the distribution.

Yet this rule — that the demand must be made in the case which is the instrument of sale, and if not made effectually there, is unavailable altogether — is to be received with a qualification; for in Hill v. Johnston & Parker, 5 Casey 363, it was held, that though a debtor could not make the demand against a mortgage-creditor, proceeding by levari facias to a sale, yet he might come in upon the fund and claim his $300, as against judgment-creditors who had taken no executions. Though that ruling is, perhaps, hardly reconcilable with the doctrine of the other cases I have adverted to, we are not disposed to change it. Let it stand as an exception to the general rule laid down in McAfoose’s Appeal. As a general rule, it is true, that where a debtor is disqualified to make a legal demand of the benefits of the exemption law, he is not entitled to participate in the distribution of the proceeds of his real estate; but if his disqualification arise from a mortgage and the proceedings thereon, he is, nevertheless, admitted to the distribution.

These appear to be inevitable deductions from the legislation and adjudications applicable to the subject; but, lest they fail to satisfy all minds, another view of the facts before us may be taken, which leads substantially to the same result. It is apparent, from the decree of the court below, that the effect of Wise’s waiver of his right of exemption in favour of Rupp and Hall, the last of his lien-creditors, is to give them a preference over the appellants. Now, by getting first upon the record, the appellants were entitled to a preference over Rupp and Hall. The statutes that regulate liens gave them this preference. The time for asserting their preference is now, in the distribution of the fund into which the law has converted the estate bound by their lions. But the appellants are postponed from their statutory rights, and their legal relations to Rupp and Hall are inverted by the words the debtor chose to introduce into his bond to Rupp and Hall. Is it possible, that the legislature meant a debtor should be able to repeal statutes and unhinge records by the dash of his pen ? The contrary was very distinctly asserted in Bowyer’s Appeal, 9 Harris 214. It was there said by Judge Black, with the apparent approbation.of the whole court, that all stipulations not to claim the $300 made in favour of a particular creditor, are void so far as they are intended to affect others; and that all waivers and all transfers of his right, whether express or implied, enure to the benefit of his creditors in the proper order of their liens.

The doctrine of this ease was recognised by Judge Armstrong in Hill v. Johnston & Parker, 5 Casey 363, a case that did not turn upon a voluntary waiver, but upon an unsuccessful demand made by a debtor against his mortgagee; but Bowyer’s Appeal was followed and made the ground of Judge Thompson’s ruling in Garrett & Martin’s Appeal, 8 Casey 162. It accords well, also, as we have seen, with the opinion of Judge Strong in Bowman v. Smiley, and McAfoose’s Appeal, already cited. What stands opposed to it? Nothing, so far as I remember, except Judge Lewis’s opinion in Johnston and Sutton’s Appeal, 1 Casey 117. That is in conflict with the ruling in Bowyer’s Appeal; and was the case which the court below followed in making the decree now-under review. It is not strange, that some conflict of opinion should occur on a bench so changeable as ours, in respect to the operation of a new and extraordinary statute; but experience and observation tend to confirm us in the soundness of the views advanced in Bowyer’s Appeal.

Perhaps it would have been well, if the court had set out by denying the capacity of the debtor to waive the statutory exemption in favour of any creditor. It might have been urged in support of such a view, that the legislature intended a benefit to the family of the debtor, rather than to the debtor himself; and that his caprice or will, tempted as they might be by the creditor, should not defeat the legislative benefaction in favour of those who were dependent upon him. But this reasoning would not do for the bachelor debtor, who had no family; and such debtor we have had before us. Besides, it seemed almost absurd, that a party who was competent to contract a debt should be held incompetent to waive an incidental privilege tendered to him personally in respect of that debt. •

Our position is taken; we have recognised in all the cases the capacity of the debtor to make the waiver, and have held it a binding contract betwixt him and the creditor in whose favour it was made; but we are admonished to go no farther by way of enabling debtors to defeat the operation of statutes. If, by waiving his rights in behalf of the last creditor on record, he may make bim the first, he defeats not only the beneficent purposes of the exemption law, but all those statutes which recognise priority of lien, and forbid assignments to preferred creditors. To illustrate this, suppose a debtor’s land produces just $300, and he has several judgment-creditors. As between themselves, the first creditors in point of lien are legally entitled to be first paid; but as between all of them and the debtor, he is entitled to the fund. Such are the relations which the law establishes. But by waiving his rights in favour of the last of his creditors, the debtor virtually assigns his estate to that creditor, and reverses the relations which the law has established. It may be said, that the prior creditors are not injured, since the estate would have gone to the debtor, and not to them, if the preferred creditor had not taken it; but the question is, who gave the debtor power to control the distribution of his estate among his lien-creditors ? Primarily, the whole of his estate belonged to his creditors, to be distributed among them according to priority of lien. The legislature, from motives of humanity, permitted him to take $300 of it to himself. Refusing the proffered bounty, he leaves it to be distributed as if there was no exemption law. The legislature did not mean to give him the privilege of saying which of his creditors should have his estate. The exemption is to be of a specific portion of the land, if possible, and therefore it is not to come into the distribution at all; but if it cannot be set off in specie, the distribution of proceeds is to be made on the same principle, — to the debtor himself, if entitled, and, if not, to the creditors in their record order.

Such, and only such, is the legitimate operation of the exemption law; and therefore what was thrown out in Bowyer’s Appeal is worthy to be followed, notwithstanding the doubts which were expressed in Johnston and Sutton’s Appeal, 1 Casey 117.

Admitting that Wise did all that was necessary to entitle him to participate in the distribution, he could not give to Rupp and Hall a legal preference over creditors who were prior to themselves; but, by waiving the exemption in favour of Bitner, the first lien-creditor, he gave to subsequent creditors an equitable right to compel Bitner to take his satisfaction out of the $290.87, which would have belonged to himself and Wise. The effect of sustaining Wise’s rights as a distributee, is to divide the proceeds into two funds — one of which belongs to Wise, the other to his creditors generally. But Bitner has a lien on both funds — the other creditors on one only. The debtor is common to them all. This, then, is a fair case for the application of the equitable principle which forces Bitner upon the fund that the other creditors cannot touch. If that is more than sufficient to pay Bitner, the surplus must fall into the other fund, and not go to Wise, because his release to Rupp and Hall forbids him to take it, and causes it to enure to the benefit of all the creditors in their order.

In the peculiar circumstances of the ease, the distribution which we mean to make, will be accomplished by reversing the decree, and ordering the whole fund to be distributed among the lien-creditors, in the order of their liens upon the record.

And now,'to wit, 25th May 1860, this cause having been argued and considered, it is ordered and adjudged, that the decree of the Court of Common Pleas be reversed, and that the fund in court be distributed among the judgment-creditors of David Wise, in the order of their liens respectively.