Order of Solon ex rel. Dulany v. Gunther

Opinion by Rice, P. J., Andrew Gunther bought of R. F. Dulany a lot, which for convenience may be designated as the Hawkins property, and, to secure payment of the purchase money, gave a mortgage thereon, and on other lots owned by him, which may be designated as the Hartwood property. Afterwards D. J. James erected for Gunther a building on two of the lots embraced in the Hartwood property, and filed a mechanic’s lien against the same for $847. This lien related back to the date of the commencement of the building, May 21, 1896. On September 10, 1897, the Hartwood property was sold at sheriff’s sale under proceedings on a prior mortgage, and, under the act of April 10, 1862, relating to the distribution of the proceeds of sheriff’s sales in Allegheny county, the sheriff reported a schedule of distribution, in which the balance remaining ($1,927.57) after satisfying earlier liens was awarded to R. F. Dulany. On the following day (September 11, 1897), the Hawkins property was sold at sheriff’s sale under a fi. fa. issued hy W. H. Gunther, and was purchased by Mary Gunther for $425. The lien of Dulany’s mortgage was not divested hy this sale. She complied with her bid, and a sheriff’s deed was prepared and ready for delivery, but before it was actually delivered D. J. James presented a jjetition, of which Mrs. Gunther had notice, praying that R. F. Dulany be compelled to resort to the Hawkins property for the payment of his mortgage before being allowed to participate in the distribution of the fund .realized from the sale of the Hartwood property, and that distribution of that fund be suspended in the mean time. Testimony was [333] taken and upon consideration thereof the court refused this petition and confirmed the distribution reported by the sheriff. This decision was put on two grounds, first because it would be inequitable, and unjust to Dulany, to suspend distribution ruitil another fund should have been created; second because it would be inequitable as against Mrs. Gunther, the purchaser at the second sale. As to the first ground the learned judge says: “ The money is now in court which is legally applicable to Dulany’s claim. We are asked to withhold it from him for the reason that he may possibly be able to make it out of other property. This is uncertain. It may be that the other property would not produce more than sufficient to pay the balance of his claim after the appropriation of the entire fund now in court. In that event the petitioner would take nothing by his motion, and Dulany would receive his own without interest. He would thus be deprived of the use of his money without compensation, to give the petitioner a chance to ascertain whether there might be a fund upon which he had no legal claim, but which might in equity be administered in his favor — a chance which might not be realized, as was the result in Morris v. Olwine, 22 Pa. 441.” The rule that a party having two funds to satisfy his demand shall not, by his election, disappoint a party who has only one fund is “founded in benevolence and regulated in its application by the nicest principles of justice.” The rule is never enforced to defeat a superior or even equal right of another. Where both funds’ are in court or under its control, the enforcement of this equity cannot, ordinarily, work injury to the paramount creditor. Kendig v. Landis, 135 Pa. 612, was such a case. But where the proposition is to suspend distribution of the fund in the grasp of the court until another fund shall be created, the burden of proof is cast on the junior creditor who invokes this extraordinary exercise of power to show that the paramount creditor will not suffer loss by the delay. The doubts expressed by the learned judge upon this point are not wholly without foundation in the evidence. Not only was there the possibility that the Hawkins property in its condition at that time would not bring enough to save Dulany from loss by the delay, but there was also the risk of the destruction of the buildings by fire, in which case it certainly would not. In [334] a leading case upon the subject it was said that substitution cannot be made as long as the debt of the prior creditor remains unsatisfied, though it be in part only; “ for” said Kennedy, J., “ until he shall be wholly satisfied, there ought and can be no interference with his rights or securities, which might even by bare possibility, prejudice or embarrass him in any way in the collection of the residue of his claim. Now it is obvious, that such interference cannot be avoided or guarded against with certainty, except it be by the court’s refusing to substitute upon any terms whatever, as long as any part of the elder creditor’s claim remains unpaid : ” Kyner v. Kyner, 6 W. 221. The reason for this rule — which it is conceded is now too firmly fixed to be disturbed (Graff’s Estate, 139 Pa. 69), — applies with equal if not greater force to an application to restrain the prior creditor from participating in the distribution of a fund in court until after he shall have proceeded upon his security and raised up a second fund by the sale of another property ; more especially if such application was not made, and he had no notice that it would be made, before the sale of the property doubly charged. This method of enforcing the equity of a junior incumbrancer is, to say the least, extraordinary, as the learned judge of the court below has well shown. The general rule in this country is as stated by Mr. Bispham, “ that the right of marshalling is usually enforced through the equities of subrogation and contribution: ” Bisph. Eq. (2d ed.) sec. 341. There are exceptions to this general rule it is true; but if the prior incumbrancer has neither done nor* omitted anything which, having regard to the rights of the junior incumbrancer, he ought not to have done or omitted, and the junior incumbrancer has neglected to move or even give notice of his intention until after the land doubly charged has been sold by the sheriff, and the fund is ready for distribution, we think the general rule applies. If, as the case then stands, the enforcement of his equity in the mode here insisted upon would certainty delay the prior incumbrancer, and possibly subject hi pi to loss, it would be inequitable to compel him to take the risk. It ought to be cast on the junior incumbrancer and he should be left to enforce his equity, if he has any, in the usual mode. See Graff’s Estate, 139 Pa. 69. In this view of the case it is unnecessary to decide, whether or not, under the circumstances, it [335] would be inequitable, as against Mrs. Gunther, to grant the relief prayed for or similar relief; and as there is a serious dispute as to the action of the appellant at the second sale, we deem it advisable to express no opinion upon the question, further than to say, that, assuming the fact to be as stated in the opinion of the learned judge of the court below, we see no reason to doubt the correctness of his conclusion. The decree is affirmed, and the appeal is dismissed at the costs of the appellant.