Allegheny V. R. v. Dickey

Opinion, Me. Justice Geeen: The judgment of William Cunningham against the administrators of William Phillips, deceased, obtained September 8, 1874, was founded upon an indorsement made by the deceased upon a note of his nephew, William Phillips, Jr., a son of Robert B. Phillips. After judgment obtained against both the maker and the indorser, Robert B. Phillips became bail for stay of execution in the judgment against his son. At the expiration of the stay, Robert B. Phillips paid the debt, interest, and costs due on the judgment, and satisfaction was thereupon entered upon both judgments on September 8, 1875. That the payment of the judgment against the principal debtor was an absolute extinguishment of every possible claim against the estate of William Phillips, the indorser, is too plain for argument. It was long ago decided that if, after judgments are obtained against a principal and surety, a third person interposes, and gives his note for the debt, to obtain a stay of execution for the principal, and the surety is afterwards obliged to pay the debt, he is entitled to have an assignment of the judgment on the note of the third person, to indemnify him for such payment: Pott v. Nathans, 1 W. & S. 155. That case simply followed Burns v. Huntingdon Bank, 1 P. & W. 395; and both of these decisions have been many times approved and followed by this court. In Boschert v. Brown, 72 Pa. 372, we held that the equities of a surety exist after the liability of both himself and principal is fixed, both before and after judgment ; that in Pennsylvania a judgment against principal and surety does not extinguish the relation between them; and, if creditors after judgment give time to the principal, the surety is discharged. In the case of Wallace’s Est., 59 Pa. 401, we said: “ It has accordingly been held that a mere volunteer, who. — 94 — without any moral or legal obligation, pays the debt of another, is not entitled to subrogation, to the prejudice of the intervening rights of others: Hoover v. Epler, 52 Pa. 524. Nor is one who becomes surety of a defendant in a judgment, for stay of execution, and afterwards pays the judgment, entitled to a cession of the judgment, so as to have priority to subsequent judgment creditors.” In Schnitzel’s App., 49 Pa. 23, we held that if, after judgment against two, one of whom is surety, a third person at the request of the principal, becomes bail for stay of execution, and on the expiration of the stay the surety be compelled to pay the judgment, he is entitled to subrogation, and may recover therein against the bail. The same doctrine is held in many other eases, which it is not necessary to cite. It will be seen, then, that instead of Robert B. Phillips having any claim whatever against the estate of William Phillips to compel that estate to repay to him the money he paid for his son as bail for stay of execution, he not only had no claim at all, but that if the estate had been obliged to pay the debt, the money could certainly have been recovered of Robert B. Phillips. But Robert B. Phillips did pay the debt, which he was both legally and equitably bound to pay; and not only that, but satisfaction was entered on the judgment against William Phillips in September, 1875. This entry remained until in 1882, when a most amazing proceeding was had. A petition was presented to the court in which the judgment was entered, signed by the same Robert B. Phillips as an individual, alleging that the entry of satisfaction was made inadvertently, and without the consent of the petitioner or the plaintiff, and although it was understood and agreed by the plaintiff and the petitioner that upon payment of the judgment the same should be marked to the petitioner’s use. The petitioner prayed that the entry of satisfaction be stricken off, and the judgment marked to the petitioner’s use. In that proceeding the petitioner was a defendant in the judgment, as administrator of William Phillips, deceased. He was also seeking to be made use plaintiff in the same judgment, by having the entry of satisfaction stricken off after seven years of acquiescence in it on his part. He was thus seeking to be both plaintiff and defendant in the same judgment, but plaintiff in his personal and — 95 — individual right, and defendant in his capacity as trustee for William Phillip’s estate. His personal interest was in direct hostility to his duty as trustee. As a matter of course, there was no opposition to the application. The plaintiff had recovered her money, and she cared nothing about it. But the petitioner, who was endeavoring to obtain an interest adverse to his trust, should at least have resigned his trust, and above all things should have taken testimony to prove the truth of his allegations. But nothing of the kind was done. Without a scrap of testimony being taken, the court made the order striking off the entry of satisfaction and marking the judgment to the use of Robert B. Phillips. The rule was entered May 22, 1882; proof of its service on the plaintiff was made on June 22, 1882, and on the very same day the rule was made absolute, and the judgment was marked to the use of Robert B. Phillips. He was now plaintiff and defendant in the same judgment, and, as a matter of course, the subsequent proceedings were entirely harmonious. A scire facias was issued to bring in the heirs who were identical in interest with Robert B. Phillips— in fact, his own children. The property was sold for a trifle to the counsel for Robert B. Phillips, the same person who presented the petition and had the order made. It is only necessary to say, of such a proceeding as this, that, at the instance of any creditor of William Phillips who was injured by it, it was void for fraud. It is most manifest that the court had no right, even if the facts set out in the petition had been proven, to make the order striking off the entry of satisfaction. Even if the plaintiff and Robert B. Phillips had agreed that upon payment by him of the judgment, it should be marked to his use, such an agreement would not be obligatory upon William Phillips without his consent; and, as there was neither allegation nor proof of any such consent, as a matter of course there was no power in the court to make such an order. But the matter was many times worse than this, when it is considered that there never was a particle of proof that even an agreement was ever made between the plaintiff and the defendant for keeping the judgment open. It was an ex parte order, made without a scrap of proof. When the petition was presented, and the rule to show cause was obtained, the petition had served its only possible purpose. Of course, it — 96 — could not be read or used as proof of the facts it recited upon the hearing, and there was no answer of the plaintiff filed, and hence nothing upon which the order could be made. It was simply a void order. As a matter of course, it could never have been made if the estate of William Phillips had been really represented; and herein consists a second ground of fraud on the part of Robert B. Phillips in obtaining a personal judgment in his own favor against the estate of which he was administrator, and that, too, without a particle - of proof of any facts which would entitle him to such a judgment. The fraudulent character of the transaction is greatly intensified by the consideration that the real facts of the case were all in utter and absolute antagonism to the right of Robert B. Phillips either to have the entry of satisfaction stricken off, or the judgment marked to his use; and these facts were not only known to himself, but were of his own creation. It is impossible to conceive of any more palpable, manifest, glaring instance of fraud than is here disclosed. But, as if this were not enough, the application to strike off the entry of satisfaction was not made until long after the lien of the original judgment had expired, and until after the rights of another creditor had intervened. The Allegheny Yalley Railroad Co. had brought a suit against the estate of William Phillips, deceased, in December, 1875, within less than two years after his decease, for a very large sum of- money, which culminated in a judgment in January, 1888, for upwards of 1466,000, after a long and severely contested litigation- That company was in time to acquire a lien against William Phillips’s real estate. It was not until 1882 that the present scheme was matured, the result of which, if it was successful, would be to deprive this creditor of all recourse to the real estate of the decedent. The circumstances of the long delay after the entry of satisfaction was made, and the manner in Avhich the plan adopted was hurried through, without any notice to creditors, Avithout proof of any facts, and long after any claim of Robert B. Phillips had become barred by the statute of limitations, would be such strong and persuasive proof of a fraudulent intent in fact, that it is difficult to believe that any jury could resist them, if they had an opportunity to pass upon the case. As a matter of course, the right of subrogation is an equitable — 97 — right, and cannot be set up against intervening rights; and, as the present plaintiff had- asserted and prosecuted its claim in due season, it cannot be defeated by the application of that doctrine. It is alleged, and not denied, that the claim of the railroad company was adjudged in the Orphans’ Court, upon the settlement of the account of Robert B. Phillips as administrator, at over #800,000, in May, 1880. It was two years after this before the scheme for getting rid of that adjudication, as a lien upon the real estate of the decedent, was devised and put in motion. It was seven years after the judgment against Robert B. Phillips, administrator of William Phillips, was discharged by the same Robert B. Phillips, by paying off the judgment against his son for which he was bail for stay; and that satisfaction was entered, presumably by his authority, before the application to strike off the entry of satisfaction was made. It was three years after the statute of limitations had closed against the claim of Robert B. Phillips, if he had ever had one against his dead brother’s estate by reason of the payment of his son’s debt. In the mean time he had no judgment or mortgage against William Phillips; ho commenced no action, and filed no copy of any claim, statement, debt, or demand, against the estate of the deceased within five years; and it is beyond all question that any claim for the direct recovery of the money paid by him was absolutely barred by the statute of limitations. In the case of Fink v. Mahaffy, 8 W. 384, one Hays obtained judgment against Quiggle, Fink, and Mahaffy, the two fórmelas principals, and the latter as surety; and in 1828 Mahaffy paid the judgment. In 1836 he made application to be substituted to the place of the plaintiff in the original judgment, so that he might recover the amount from Fink. The court below allowed the substitution, but this court reversed the order, and said: “ Moreover, his demand is barred by the statute of limitations; and if the doctrine of substitution is one of mere equity and benevolence, as it has been said to be, it will not be' enforced at the expense of a legal right. The substitution was therefore improvident. Order reversed, and assignment of the judgment stricken out.” This doctrine has been many times followed, and never questioned. In the case of Bank of Penna. v. Potius, 10 W. 148, we said, of a similar application: “ But — 98 — be this as it may, yet there are objections to the substitution claimed, arising in this case out of the act of limitations, which cannot, as I can perceive, be surmounted. The money, as clearly appears, was paid by the indorsers to the bank more than five years before the attempt at substitution; and this, of itself, forms a good defence for the sureties on the sheriff’s bond. That a substitution cannot, under such circumstances, be permitted, is ruled in Fink v. Mahaffy, 8 W. 384. The doctrine of substitution, being one of mere equity and benevolence, will not be enforced at the expense of a legal right. A surety, therefore, as is there held, whose claim against his principal for money paid on a judgment against them has been defeated at law, cannot be substituted for the plaintiff in the original judgment. On the same principle, he cannot be substituted where his claim is barred by the act of limitations. It would be unjust to deprive the sureties of a defence which would be available if the indorsers are put to a suit on the sheriff’s bond.” In Rittenhouse v. Levering, 6 W. & S. 198, we said: “ Where the surety has done no act, before his claim is barred at law, manifesting his intention to put himself in the place of the original creditor and thereby subrogating himself to his rights, the remedy is only for money paid. Where he has omitted to bring suit in proper time, or to do some act equivalent thereto, he cannot afterwards be subrogated to the rights of the creditor.” It is not necessary to continue the citations. The same doctrine was applied in Farmers Bank v. Gilson, 6 Pa. 57, and Stout v. Stout, 44 Pa. 459. It is perfectly manifest, therefore, that, had the attention of the learned court below been drawn to the question as to the right of Robert B. Phillips to the subrogation which he asked, it must necessarily have been refused. But the present plaintiff was not a party to that proceeding, and had no day in court to interpose an objection. It certainly cannot, however, be deprived of its rights in consequence of that circumstance; and we so held in Douglass’s App., 48 Pa, 223. In that case a decree of subrogation was obtained by a surety within two years after he paid the debt, but not until one day after the sheriff’s sale of the land under a prior judgment. The money was claimed under the decree. We said: “It is insisted, however, that the decree of the court, ordering the subrogation of Wat — 99 — son to the rights of Coulter, was conclusive upon the auditor, and also upon all claimants to the fund for distribution. But of what was it conclusive ? Not, surely, of the claim that Coulter’s judgment was a lien upon the land of McMasters when the sheriff’s sale was made. It was, no doubt, an adjudication that Watson had a right, as against his principal, to use the judgment ; but it gave him no right at law. Notwithstanding the decree, he was but the holder of an equity. The decree of subrogation is only a form. It is the right to subrogation which is the substance. After the 1st of February, 1864, Watson was therefore in no better situation than he was before. His equitable right was liable to postponement, because of his laches, as fully as if subrogation had never been decreed. Consequently an award of the fund in court was no attack on what the court had done. It left the decree of subrogation untouched; hence there was nothing to preclude the appellant from asserting his claim to the fund in preference to any equitable claim of Watson.” So, here, although Robert B. Phillips had no right whatever to his decree of subrogation in any possible point of view, both on account of his laches and on account of this absence of any meritorious claim, yet, without disturbing the decree, it is only necessary to hold that it cannot be used to displace the rights of a bona fide, legitimate creditor, who had asserted his rights as vigorously and as rapidly as the law permitted. In the same line is Harner’s App., 94 Pa. 489, in which we held that where A. advanced money to B. taking his judgment therefor, and there was an entry of satisfaction upon a previous judgment, and upon the application of the equitable assignee of the previous judgment the court struck off the entry of satisfaction, that this would not defeat the right of A. to the proceeds of the sheriff’s sale, as against the prior judgment. The satisfaction being regularly marked upon the docket, and so marked by the authority of one who, prima facie, had full power to do so, this was all A. was required to look to. It was not his business to inquire about equities to which he was not a party, and of which he had no knowledge. It is said in the present case that, after the order of subrogation was made, the judgment was assigned to Mr. C. C. Dickey, and it is assumed that ho had rights as an innocent assignee. It is scarcely necessary to say that this claim is not worth a mo100 merit’s thought. There was no proof that he ever paid a penny for the assignment,’ and, if he had paid valuable consideration, it would not have helped the claim a particle. He was most fully acquainted with all the particulars of the transaction, both in his character as counsel for Robert B. Phillips as administrator, and also in his character as counsel for Mr. Phillips as an adverse litigant to himself as trustee. In the case of Wilhelm’s App., 30 Pa. 478, this court so fully exposed the effect of the acts of one who was an executor of a decedent, setting up, and attempting to carry through the courts, an agreement in which he was privately interested against his duty as executor, that a mere reference to the case is sufficient. There the executor was not nominally a party to the litigation, adversely to himself as executor. But here he is. He is both plaintiff, as an individual, and defendant, as the legal representative of the estate against which he sought to obtain a decree for his own benefit. Such a situation is absolutely intolerable, and we have no hesitation in pronouncing the order of subrogation as absolutely void for fraud in fact, as well as for constructive fraud. Worse than all this, it had no kind of merit upon which it could stand for a moment.. Both the assignments of error are sustained. Judgment reversed, and new venire awarded.