Shimp's Assigned Estate, 197 Pa. 128

197 Pa. 128 | Pa. | 1900

Opinion by

Mb. Justice Mestbezat,

The appellant alleges error by the auditor and the court below in not surcharging the assignee with 1189.80, the value of the assignor’s half of the proceeds of the smaller farm for the year 1898. The auditor found that the farm was sold with the understanding that the assignor’s share of the crops for that year should go to the purchaser and that, therefore, the assignee was not required to account for said share in addition to the proceeds of the sale of the farm. There was evidence to support the auditor’s finding of the understanding between the parties at the sale, and no clear error appearing in his finding of this fact, and it having been approved by the court below, we will not disturb it. His legal conclusion from the fact is correct.

It is claimed on the part of the appellant that, as against his purchase money judgment and his judgment waiving the exemption, the assignor had no right to have appraised and set apart to him as a part of his $300 exemption, reserved in the deed of assignment, the one-fourth acre of tobacco, then harvested, but still on the premises unsold, and the landlord’s half of certain wheat growing on the premises at the time of the assignment. The auditor and the court below held that both these items were personal property and as such could be allowed as part of the assignor’s claim for exemption. This is the subject of complaint in the sixth assignment of error.

An assignor has the right to except from his assignment for the benefit of creditors property to the value of $300. He cannot, however, exercise this right out of real estate to the injury of a creditor who has a lien for purchase money or a judgment lien in which the exemption is waived: Bailsman’s App., 90 Pa. 178; Wiley’s App., 90 Pa. 173; Shaeffer’s App., 101 Pa. 45. And if the creditor has acquired no lien on the land or proceeds, he has no standing to prevent the assignor from claiming the exemption reserved in the deed of assignment. If he desires the benefit of the waiving clause in his judgment, he must secure it by execution or attachment against the property reserved: Myers's App., 78 Pa. 452. In this case, Myers recovered his judgment, waiving the exemption, after the assignment and consequently it was not a lien. It was held that he had no claim on the fund assigned. See also Thomas’s App., 69 Pa. 120; Dewees’s App., 2 Penny. 247.

The auditor’s finding of facts relative to the grain in the ground reserved by the assignor is uncertain, indefinite and may possibly lead to an erroneous decision as to the rights of the parties thereto. In his report he says: “ The assignor claimed this exemption at the hands of the assignee, and selected, besides certain goods and chattels, one fourth acre of tobacco and the landlord’s half of certain wheat then growing on one of the farms assigned by him.” In another part of his report, he states that the “tobacco [was] then [at the time of the appraisement] harvested, but still remained on the premises unsold.” The auditor and counsel for the parties have disposed of this assignment of error by the discussion and solution of the question of whether the grain in the ground was severed before the sale of the land on which it was grown and thereby became personal property. The auditor holds that the appraisement and setting apart of it to the assignor under his claim of exemption was a severance. We will dispose of the assignment by a consideration of the same question. The learned counsel for appellant virtually concedes that the auditor’s decision as to the tobacco was right under the authority of Jones’s App., 102 Pa. 285, but he contends that under the same authority the auditor should have held that the wheat in the ground was not severed before the land was sold, and hence was not personal property. There is no exception to the finding of the fact above quoted, and, hence, we are not required to review it under the evidence submitted”to the auditor. According to that finding, the wheat reserved by the assignor was grown on one of the farms assigned. As the auditor has held that it was personal property, we will assume that it was grown on tract No. 1. If it may be successfully contended that the act of the assignee in having it appraised and set apart to the assignor was not a constructive severance of the grain, yet there was an actual severance and setting apart to the assignor of his share thereof in 1898 when.it was harvested in the summer of that year. This was prior to the sale of the land which occurred in the fall of 1898. In this view of the case the auditor’s conclusion is correct.

The remaining and most important question for our consideration is the action of the auditor and court below in awarding to the Andrews mortgage precedence over the McMurdy judgment in the distribution of the fund in court. The facts are fully found and reported by the auditor and need not be restated here. The auditor held that the holders of the mortgage had a right to insist upon the payment of the McMurdy (Risk) judgment of $8,000 so far as needed for their relief out of the fund produced by the sale of tract No. 1. With the exception of a small sum, this excludes the McMurdy judgment of $2,000 from participation in the fund for distribution. The reason assigned by the auditor for his position is that the McMurdy judgment having lost its lien on tract No. 1, the holder of the Andrews mortgage had the right, under the equitable doctrine of subrogation, to be substituted to the rights of the McMurdy (Risk) judgment against the fund raised by the sale of tract No. 1, and consequently to have his mortgage paid out of said fund in preference to the McMurdy judgment. The arguments of the auditor and of the learned counsel for the appellees in support of the auditor’s decision are based upon the familiar doctrine that where a creditor has a lien on two funds of his debtor, and another creditor has a subsequent lien on only one of these funds, if the prior lien creditor resorts to the fund common to both liens and consumes it, he shall permit the subsequent lien creditor to use the broader security for the satisfaction of the restricted lien out of the funds which it cannot reach. Jt is contended by the appellees that this rule is applicable to the case in hand and controls it in favor of the mortgage creditor. The appellant does not deny the principle of subrogation asserted by the appellees, nor that it should be applied in a proper case, but he maintains that the auditor and the court below erred in holding that it was applicable to the facts of the case in hand. He contends that his equities are at least equal, if not superior to, those of the holders of the mortgage and that, therefore, he is entitled to the fund for distribution.

The doctrine of subrogation is well established and is said by Chancellor Kent to be founded in natural justice. In Delaware & Hudson Canal Company’s App., 38 Pa. 516, Justice Strong, speaking for the court, says: “ This (subrogation) is an equity against the debtor himself, that the accidental resort of the paramount creditor to the fund doubly incumbered, shall not enable him to get back the other fund discharged of both debts.” In Ziegler v. Long, 2 Watts, 206, after asserting that the rule of subrogation is well settled, Justice Sergeant says: “ But this principle must be employed, like all other rules of equity, to the attainment of justice; it is not to be used to overthrow the equity of another person, and thus work injustice.” In Wallace’s Estate, 59 Pa. 405, it is said : “Subrogation is founded on principles of equity and benevolence, and though it may be decreed whore no contract or privity exists between the parties, it is not to be allowed except in a clear case, and where it works no injustice to the rights of others. The principle which governs in all cases of substitution is one of equity merely, and it is to be carried out in the exercise of a proper legal discretion, with a due regard to the rights of others; and it is not to be used to overthrow the equity of another; and thus work injustice.” Tn Budd v. Olver, 148 Pa. 197, the court says : “Subrogation is a matter of grace, not of right, and is a creature of pure equity. It will never be decreed where it works injustice.” “The doctrine of subrogation,” says Justice Clank in Robeson’s App., 117 Pa. 638, “is of purely equitable origin; its application is always controlled for the promotion of justice; it will never be enforced, therefore, to defeat a superior or even an equal equity in another.”

Applying these well recognized principles of subrogation to the facts of the case in hand, we must determine the equities of the parties to this controversy. It will be conceded that if the McMurdy judgment had been revived and had still retained its lien at the time of distribution, it would have been paid out of the proceeds of the sale of tract No. 1, in preference to the McMurdy (Risk) judgment. This would have been so by reason of its legal, and not equitable, status. But having lost its lien and, hence, its right to participate in the distribution of the fund from tract No. 1 prior to the payment of the McMurdy (Risk) judgment, did this fact thereby create in the Andrews mortgage a superior equity entitling it to subrogation against tract No. 1? The mortgagee loaned his money to Shimp, took his mortgage and secured his lien on tracts Nos. 2 and 3 in 1882. On the day the mortgage was entered of record, the McMurdy (Risk) judgment was entered against Shimp which was the first lien on tracts Nos. 2 and 3 and the third lien on tract No. 1. At that time, the McMurdy judgment was the second lien against tract No 1, and a fund arising from a sale of it would have been applied to that judgment as against the McMurdy (Risk) judgment.

Such was the legal status of the judgments and mortgage at the time the latter was taken and entered of record. From this state of the record and the fact that the mortgagee took a security for his debt that was restricted to tracts Nos. 2 and 3 and was a second lien thereon, it must be assumed that he did not anticipate the payment of his mortgage out of the proceeds of tract No. 1 by reason of an equity superior to that of the holder of the McMurdy judgment. At that time he had no lien on tract No. 1 oí the fund it might produce, and was not in a position to invoke the rule of subrogation against the McMurdy judgment. His rights against the debtor and his property were then clearly fixed, and he had no superior equity which would enable him to enforce his claim against tract No. 1, in preference to the McMurdy judgment. The mortgagee must be regarded as having taken his mortgage subordinate not only to the prior lien but also to the superior equity of the appellant.

While conceding, as they must, this to be the status of the McMurdy judgment at the date of the entry of the mortgage, the appellees contend, and the auditor so held, that this condition of the rights of the parties had been changed by the failure of the appellant to revive his judgment, and that this act of omission on his part had so far inured to the benefit of the holders of the mortgage as to give them a superior equitable right to the fund from tract No. 1. In support of his position, the auditor argues, that as to the rights of the mortgage creditor the omission to revive the McMurdy judgment had the same effect as the payment of the judgment, and that the present rights of that judgment grow only out of the position it acquired at the date of the revival in 1889, and that the hardship which will follow the payment of the mortgage creditor out of tract No. 1 was created by the holder of the Mc-Murdy judgment himself.

If this wore a question of lien only, the position of the auditor would be correct. The new or revived judgment of Mc-Murdy is effective as a lien on tract No. 1 only from March 22, 1889, the date of its revival. In this view, it would be the ordinary case of the holder of a paramount lien having two funds with which to satisfy his claim, and the holder of an inferior lion but one of two funds out of which to realize his claim. The rights of the junior lien incumbrancer to subrogation would be clear and would be enforced. But the creditor’s lien on more than one fund is not the only consideration that moves equity to interpose its powers and to enforce the right of subrogation. Before it interferes in behalf of the creditor, he must, as we have seen, show that his claim is one of benevolence, that its enforcement will work no injustice to another but will thereby attain the ends of justice, and that its equities are not only equal, but superior to, that of the contesting claimant. Subrogation never takes place to the prejudice of any other right: Graff & Co.’s Estate, 1B9 Pa. 75.

Viewed in the light of these principles, wherein does the mortgage claimant possess superior equities to the holder of the McMurdy judgment? As we have observed, he loaned his money and took his security with the knowledge of the fact that the McMurdy judgment was a lien on tract No. 1, and that he could have no equitable claim through the Mc-Murdy (Risk) judgment against tract No. 1, superior to the appellant’s judgment. The records gave him notice of that fact. He was, therefore, not induced to part with his money or invest it upon the faith that this security would take precedence over the McMurdy judgment. On the contrary, he loaned his money to Shimp with the knowledge that all his rights to enforce repayment of it out of the proceeds of tract No. 1 were subordinate to those of the McMurdy judgment. What then was the effect of the holder of the McMurdy judgment permitting it to lose its lien on tract No. 1? It gave no precedence to the mortgage as a lien on the tract, nor are we able to see how it raised a superior equity in its behalf to the fund arising from tract No. 1. The failure to keep alive the lien of the McMurdy judgment did not injure the mortgage creditor, nor in any way prejudice his claim. It was a matter with which he had no concern and, having no lien on the tract bound thereby could not be advanced in the order of liens on the tract. If, however, he is permitted to take the fund for distribution by reason of the-McMurdy judgment having lost its lien, he will deprive the holder of that judgment of a fund to which the latter would otherwise be entitled. This would be the only effect produced by the neglect of McMurdy to revive his judgment and it would be most inequitable and unjust. The mortgage creditor never had a legal claim to the fund for distribution, and there is no reason in good conscience why equity should interpose in his behalf or award it to him to the prejudice of the rights of a claim which he, the mortgage creditor, must recognize as prior and superior to his own claim.

The learned auditor thinks that the loss of the lien of the McMurdy judgment had the same effect, so far as the mortgage was concerned, as if it had been paid. In this view, the auditor overlooks the fact that the equity invoked in eases of subrogation is not against the creditor but the debtor. If the debtor had paid the McMurdy judgment, equity would, as against him, have subrogated the mortgage creditor and awarded him the fund, and thus have prevented the debtor from receiving the money while the mortgage debt remained unpaid. But in the present case, the refusal to subrogate the mortgage creditor to tbe rights of the paramount creditor will not give the money to the debtor but to a creditor more meritorious than the mortgage creditor.

The auditor further asserts that the injustice that would be done McMurdy by the enforcement of his alleged lien will be occasioned by McMurdy himself by failing to revive his judgment. This assumes that McMurdy owed a duty to the mortgage creditor to keep his judgment alive. This would be true if the failure to do so did any injustice to the holder of the mortgage, but, as we have said, McMurdy’s action in not reviving his judgment in no way affected the mortgage or its lien. With equal or greater propriety it may be said that if the mortgage creditor desired to avail himself of tract No. 1 in payment of his claim, it was his duty to secure a lien on it instead of restricting his lien to tracts Nos. 2 and 3.

We are of opinion that the equities of the holder of the Mc-Murdy judgment are at least equal, if not superior to, those of the mortgage creditor and that, therefore, the latter cannot be subrogated to the rights of the McMurdy (Risk) judgment, so as to participate in the proceeds of the fund arising from the sale of tract No. 1.

The decree of the court of common pleas is reversed and the record is remitted in order that distribution may be made in accordance with this opinion, the appellees to pay the costs of this appeal.