Horning's Executors' Appeal

Mi’. Justice Paxson delivered the opinion of the court, The contention here arises upon the distribution of the proceeds 'of the sale of real estate. On the 24th day of December 1874, Joseph R. Hanawalt was the owner of several separate tracts of land in Mifflin county. On that day, Joseph R. Hanawalt and George Hanawalt confessed a judgment to the executors of Robert Horning for $346.40, and this judgment became a lien on all of Joseph R. Hanawalt’s said tracts of land. Subsequently, to wit, on the 13th day of August 1875, Joseph R. Hanawalt mortgaged one of the said tracts to Moore, McWilliams & Co., for $7000. This tract was subsequently sold by the sheriff, under a judgment obtained upon the mortgage, and purchased by the mortgagees for the sum of $1750. The judgment of Horning’s executors being prior to the mortgage, was entitled to payment out of the proceeds, but being a first lien upon other properties, the executors declined to take the moneyj and allowed it to be applied to the mortgage. On the 20th of August 1875, the said Joseph'R. Hanawalt conveyed another of his several tracts of land to John S. Hanawalt, in consideration of $6550, who gave a mortgage for the entire amount. This mortgage was dated January 21st 1876*, and recorded February 5th 1876. It was accompanied by eleven bonds, upon one of which the mortgaged premises was subsequently sold, and the fund in court is the proceeds of that sale. The only question for our determination is, whether Horning’s executors are entitled to take the amount of their judgment out of the fund. Their claim to do so is resisted by the appellees, who are the holders of a portion of the eleven bonds so as aforesaid issued by John S. Hanawalt, and which accompanied the mortgage of $6550, upon the ground that said executors having declined to take the money when they might have done so, out of the proceeds of the sale under the mortgage of Moore, McWilliams & Co.} must now be postponed to the appellees. The court below sustained the position of the .appellees and postponed the judgment of Horning’s executors, upon the ground, mainly, that when John S. Hanawalt took his deed, on the 20th of August 1875, he saw that the judgment held by Horning’s executors was amply secured on the tract mortgaged to Moore, McWilliams & Co., so that there was no probability of his land being called upori to pay it. “But all this,” says the learned judge, “is reversed by the executors refusing to lift the money.” Prima facie, the right of Horning’s executors to be paid out of the fund is clear. They have the first lien. The right of a lien-creditor to pass the first fund and come in upon a subsequent one ig well settled: Bank v. Winger, 1 Rawle 295; Addams v. Heffernan, 9 Watts 529; Hastings’s Caso, 10 Id. 303; Ziegler v. Long, [391] 2 Id. 205: Konigmaker v. Brown, 2 Harris 269; City of Philadelphia v. Cooke, 6 Casey 56; McDevitt’s Appeal, 20 P. F. Smith 373. This general rule, however, is subject to modification where the equity of junior encumbrances requires it. Thus it is a familiar principle, that where a creditor has a lien upon two funds, and a later creditor has a lien upon one only, equity will compel the former to resort to that which will not disappoint the creditor who can resort to but one. The appellees claim, that they have an equity which takes the case out of the general rule above stated. But I am wholly unable to see in what their equity consists. The court below concedes, that if Horning’s executors could have been compelled to resort to the tract conveyed to Joseph R. Hanawalt by John S. Hanawalt, they have a right to come in on this fund, for the reason that they may do voluntarily what the law will compel them to do. It is very clear, that Moore, McWilliams & Co. had an equity which, if asserted, would have compelled Horning’s executors to look to the other lands of Hanawalt for payment before coming upon the tract covered by their mortgage. And this equity is superior to the equity of the appellees, because prior in point of time. If, therefore, Horning’s executors had taken their money out of the proceeds of the sale under the mortgage of Moore, McWilliams & Co., the latter could have successfully claimed to be subrogated to their judgment. This right existed when the mortgage of the appellees was executed, and could not be thereby taken away. It is settled by a line of authority, that where mortgaged land is sold in pieces and at different times, the several pieces are liable for the mortgage debt in the inverse order of their alienation. See Nailer v. Stanley, 10 S. & R. 450; Cowden’s Appeal, 1 Barr 267; Becker v. Kehr, 13 Wright 223; Carpenter v. Koons, 8 Harris 222; Fluck v. Replogle, 1 Id. 405; Lloyd v. Galbraith, 8 Casey 103. The effect of the ruling of the court below is to reverse this order, and place the last purchaser in a superior position to that of the first as regards the payment of a common encumbrance. I have discussed the point made by the appellees as though they were entitled to raise it. ■ I seriously doubt their right to do so. There is nothing in this record to show that they gave notice to Horning’s executors to take their money out of the fund created by the sale on the Moore, McWilliams & Co. mortgage; or that the executors even knew of the existence of the appellees’ mortgage. A lien-creditor is not bound to search for subsequent encumbrances and is not affected with record notice of them. It was held in Taylor’s Executors v. Maris, 5 Rawle 50, that “ the holder of a judgment, a lien on land, a portion of which is covered by a subsequent mortgage, does not, by releasing a part of the land bound by the judgment, impair his right to be paid out of the remainder, including the portion embraced in the mortgage, unless [392] the mortgagee has distinctly notified him of his mortgage before the release, and cautioned him against doing an act by which the mortgagee’s security may be diminished; and the recording the mortgage is not such notice.” This is a sound and reasonable rule. If the interests of junior lien-creditors require that a prior lien-creditor shall do or omit to do a particular thing, it is clear they should give him notice thereof before they seek to hold him responsible for any such acts or omissions. We are of opinion that the court below erred in excluding the judgment of Horning’s executor from participation in the fund. The decree is reversed, and it is ordered that the record be remitted to the court below, with instructions to distribute the fund in accordance with the principles indicated in this opinion ; and that the costs of this appeal be paid by t.he appellees.