Fritch v. Citizens' Bank of Reading

Opinion by Mb. - Justice Mitchelu, To avoid confusion from the somewhat complicated facts [287] presented by this appeal, it is well to look first at the strict legal rights of the parties, and then to any special equities that may affect the enforcement of such rights. The fund for distribution arose from the sale of real estate held in four different ways: first, as the individual property of T. L. Fritch; second, as the individual property of M. L. Fritch; third, as the joint property of T. L. and M. L. Fritch, and fourth, as the joint property of T. L., M. L. and L. L. Fritch. It is not clear whether some part of the fund was not also derived from the sale of personal property of T. L. and M. L. Fritch. If so, it should be set apart and distributed according to its own rules. As to this however the facts are not sufficiently presented to call for any further remark. Outside of some small claims for dower, etc., not in contest, the liens on this fund in the order of their priority were, first, judgment of the Second National Bank for $1,000 against all three of the debtors, jointly and severally; second, third and fourth, judgments of the Citizens’ Bank for $30,000, the Allentown Bank for $10,000, and the Allentown Bank for $950, all entered on the same day against T. L. and M. L. Fritch; fifth, judgment of the Allentown Bank against T. L. and M. L. Fritch for $5,000; and sixth, judgment of Sarah L. Fritch against L. L. Fritch for $4,950. On this schedule the legal distribution would have been first, to lien No. 1, the judgment of the Second National Bank, in full, which would have exhausted all of the fund arising from L. L. Fritch’s land lieldin common, and secondly, to liens Nos. 2,3 and 4 pro rata, which would have exhausted the balance of the fund. The first equity presented was by L. L. and Sarah L. Fritch, claiming that as L. L. Fritch was only a surety in lien No. 1, the judgment of the Second National Bank, and as there was enough money from the estates of the principal debtors to pay this lien in full, therefore, so much of the fund as represented L. L. Fritch’s individual estate should be reserved for his individual lien creditor. The auditor found the fact to be that L. L. Fritch was a surety only, but refused to reserve that part of the fund, for reasons which will be noticed later on. The holder of liens Nos. 2, 3 and 4, having purchased lien No. 1, requested the auditor to confine his distribution to it to that part of the fund which was derived from the share of L. L. Fritch in the undi [288] vided lana held by the three brothers, and to leave the rest of the judgment as a continuing lien against his individual estate. This the auditor did. This course was a clear and substantial error, to the injury of L. L. Fritch, as surety, and S. L. Fritch, as his lien creditor, by taking the surety’s property to pay the debt of his principal while there was property enough of the latter available for that purpose. The equity of the surety to have the principal debtor’s property first exhausted is indisputable, but the auditor was of opinion that neither he nor his creditor was yet injured or in such peril as to be entitled to relief, and further that “ the party whose rights are claimed to be used must be fully satisfied before an equity will arise to the party claiming to use them.” This is quite true, but it does not reach the present case. There is money enough to pay lien No. 1 in full out of the funds of the principal debtors to it, and were the Second National Bank and this appellant the only parties concerned, there could be no possible question of the right of the appellant to the relief asked. And this right accrued to him the moment his position as surety was established. He was not bound to wait until he had actually paid the principal’s debt. On the other hand, liens Nos. 2, 8 and 4, being restricted to the fund from T. L. and M. L. Fritcli’s estate, have an equity to compel lien No. 1 to take satisfaction out of L. L. Fritch’s portion, and if these were the only parties concerned this equity would be indisputable. But with all the parties being claimants, it is equity against equal equity, and neither can prevail. To put it in compendious form, the Second National Bank has a lien on the joint fund and on the individual fund of L. L. Fritch; the Citizens’ Bank has a lien on the joint fund only; Sarah L. Fritch has a, lien on the individual fund only; as against the Second National Bank each of the others has an equity to compel it to seek satisfaction out of the fund which the intervener cannot reach. It is clear that neither can have an advantage as against the equal equity of the other. And so, in general, wherever the application of this equity in the ordering of execution or distribution to liens is met by a countervailing equity of equal force in favor of another lien, the strict rule of legal priority must be followed. The purchase of the first lien by the holders of the second, [289] third, and fourth, and the pooling of their claims, gave them no additional rights. The equity of Sarah L. Fritch against the Second National Bank could not be taken away by the sale of the latter’s claim to the intervening lien holders. They must stand on their own rights. As between themselves they may pool their claims and modify their rights at will, but as against others their rights remain unchanged. No principle analogous to tacking has ever been recognized in this state. Burk, Thomas & Co.’s Appeal, 89 Pa. 398, does not sustain this contention. What that case decided was that a creditor may release or withdraw his levy on fi. fa. against personal property without affecting the lien of his judgment on the land, even though the purpose of withdrawing the levy was to let in another fi. fa. on another judgment held also by him. But this is very different from destroying the legal or equitable rights of lien holders. An additional reason assigned by the auditor for refusing the equity of L. L. Fritch as surety was that, as to the judgments of the Citizens’ and Allentown Banks, his brothers were sureties for him, thus creating “ between the three an interchangeable and rebounding liability and suretyship for each other’s debts.” But this appears to be an inference from the fact that the judgments were founded on notes, on some of which L. L. Fritch’s name appears as maker or indorser, and that some of these notes were for liabilities growing out of a paint business in which he was a partner. But this inference is not justified by anything that appears. The circumstances under which the notes were made were not shown, and the giving of the judgment by T. L. and M. L. Fritch alone would lead to the presumption that they alone were primarily liable. The strongest conclusion that could fairly be drawn from the facts would be that he was a joint debtor with his brothers on the notes. There was no evidence that he was the principal debtor and his brothers only sureties. On the whole case we are of opinion that the equities being equal the distribution must be made according to the legal rights of priority among the liens. Decree reversed, and distribution directed to be made in accordance with this opinion. Costs to be paid by the appellees.