Sterling v. Brightbill

The opinion of the Court was delivered by Kennedy, J. If this were the ordinary case, where the first of two or more judgment or other lien creditors of the same person, having two funds from which he ,may satisfy his debt, and the others being posterior in point of time, having only one of the funds within their reach, the court might interfere, so as tó give the junior creditors the benefit of the security of the first, upon their paying him the amount thereof, and permit them to use it against that fund, up.on which they had no claim under their own securities, for the purpose of rendering all effective. But that is not this-case, it is of a more complex character. The first judgment creditor here is the creditor of two persons, who stood upon the record as his joint debtors, both owning separate real estates at the time of the rendition of the judgment, which became bound by it; and the other creditors are, some of them, the separate creditors of one only of these two debtors, and the rest of the other. In the ordinary case first mentioned, there being but one and the same debtor, he, of course, stands in the same relative situation to each of his creditors; their claims are alike just as against him, and it can make no difference to him how the funds are marshalled in their application to the payment of his debts. He can have no good reason to object to them, [231] who are posterior in point of time, being subrogated to the rights of the first for the purpose of obtaining payment of their claims. But it is obvious, that where the second fund, which the first creditor has for the payment of his debt, is the estate of a second person, who is not the debtor of the one claiming to be subrogated to the rights of the first creditor, that this second person may have rights which would render it very unjust and inequitable to make the substitution. For instance, if he be only a suretjq what could be more unjust? A surety, in this respect, has claim to great favour; and, instead of allowing the security to be used to his prejudice, courts, upon his paying the debt, will permit him to have and to use all the securities which the creditor held against his principal, for the purpose of reimbursing himself. He is entitled to a preference as regards the right of subrogation; and against him, I apprehend, no such right can be given or exercised in favour of any subsequent creditor of his principal. The Harrisburg Bank had the first lien here under this judgment against John Ritchey and John Elder jointly as partners; but for the debt coming to Jacob Brightbill, in right of his wife, who now claims to be subrogated to the rights of the bank, John Elder is in no respect liable. It is the proper debt of Ritchey alone: and without ascertaining whether Elder may not be a creditor of the estate of Ritchey to an equal or greater iamount than the one half of the debt paid the bank by Ritchey’s estate, it is manifest that great injustice might be done to Elder by making his estate liable to the payment of Ritchey’s debt. The principle of equity which the counsel of Brightbill here invokes, though well settled, “must be employed,” as is said by Mr Justice Sergeant, very correctly in Ziegler v. Long, 2 Watts 206, “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.” Now, it must be observed, that neither Elder nor Ritchey’s personal representatives are parties to or notified of this proceeding, though it may be said that Elder’s assignee is; but to make the subrogation asked for, would not only affect the rights of the assignee, but those likewise of Elder himself. Neither was there any evidence adduced, showing what interest each had in the partnership, whether'they were equal or not; or that there ever was a settlement between them of their partnership accounts, in which it was found that they were even, or that there was no balance due from Ritchey to Elder. There being no evidence to this effect, it seems to have been considered by the court below, that in the absence of all such evidence, it ought to be intended that their interests in the partnership were equal; and that, anterior to the payment of the bank debt out of the estate of Ritchey, there was no indebtedness of the one to the other, and that Elder, thereby, became debtor to the estate of Ritchey for one half of the debt so paid. It is possible that the court may have been led into this notion from what Chancellor Kent, in speaking on this subject, [232] said in the case of Sells v. The Administrators of Hubbell, 2 Johns. Ch. Rep. 397. He there says, “ the estate of each partner ought to be charged with the debt in equal portions, provided their interests in the partnership were equal. This is the intendment in the first instance; and it would be a thing almost of course for equity to allow the representatives of the deceased partner, who had to pay the whole debt, to be substituted in place of the creditor, in order to receive from the surviving partner, or his estate, a moiety of what they had paid. Nothing could stay this proceeding but the allegation of the surviving partner that he was the creditor partner, and that the estate of the second partner owed him a balance, as much or more than that it had been obliged to pay. This would render it requisite to take and state an account between the partners, before the court could interfere in any way to enforce the claim for contribution.” But the chancellor does not go so far as to say, that, in the absence of evidence showing their respective interest in the partnership, they are to be presumed to be equal; but would rather seem to say that where this is made to appear, it shall be intended in the first instance that they ought to be charged with the debt in equal portions. This point, however, was not before the chancellor in such a way as to require a decision from him on it; and it, therefore, may be, that, if it had been necessary for him to have adjudicated upon it, he, upon applying his mind more closely to it, would have come to a different conclusion. For in a subsequent case of Dorr v. Shaw, 4 Johns. Ch. Rep. 17, where a bill was filed by a subsequent judgment creditor of D. S. alone, against a prior judgment creditor of D. S. and P. S. jointly, to compel the defendant, who had sued out execution upon his judgment, and levied on the separate real estate of D. S., P. S. being the separate owner of real estate also bound by the judgment, which the defendant subsequently to his judgment bought of P. S., either to cease all proceedings upon his judgment and execution, or to assign the same to the plaintiff, on being paid the debt, interest and costs. Chancellor Kent dismissed the bill because it was not shown positively and distinctly that P. S. ought to pay the debt; yet I do not see why it might not have been said, at least with equal propriety, in this last case, in the absence of proof showing the contrary, that as the record of the judgment showed the debt to be owing by them as joint debtors, without making any distinction between them, it was to be intended in the first instance that it ought to be paid by them in equal portions. The chancellor, however, thought otherwise, and accordingly decided, that as the plaintiff claimed to be preferred upon principles of equity and benevolence, he ought to show clearly and positiveljr that he was entitled to it upon grounds that left no room for raising objections against it, founded, as it would seem, even upon conjecture. His language, in illustration of the principle which governed his decision is very applicable to the present case. He says, “ if both judgments had been against D. S. only, the rule that the prior creditor must be [233] thrown first on the fund, not reached by the second judgment, might be applied. But here we have no means of knowing'whether A or B ought to pay the debt; and it might be unjust, as between these two original debtors, if the court should interfere and charge the debt upon one of them instead of the other. They are not before us, and we have nothing in the cause to guide us in making a selection between them. The consequence is, that we cannot interfere in the case.” He then refers to the opinion of lord Eldon in ex-parte Kendal, 17 Ves. 520, which he recites seemingly with entire approbation, who says, “ We have gone this length, if A has a right to go upon two funds, and B upon one, of the same debtor, and the funds are the property of the same person, A shall take payment from that fund, to which he can resort exclusively, so that both may be paid. But it was never said that if I have a demand against A and B, a creditor of B shall compel me to seek payment from A, if not founded in some equity giving B for his own sake, as if he was a surety, &c. a right to compel me to seek payment of A. It must be established, that it is just and equitable that Jl ought to pay in the first instance, or there is no equity to compel a man to go against A who has resort to both funds.” According to the principles laid down in these cases, which certainly commend themselves strongly to every discerning mind for their adaptation to promote mutual justice, it ought to have been shown beyond doubt, that the estate of Ritchey had a right to go upon the estate of Elder for one half of the money paid out of it to the bank. But this could only have been shown by proving in the first place, that Elder and Ritchey were equal partners in their joint concern, “for the benefit of which the debt was created.” And then, in the second place, that upon a final settlement of their partnership and other accounts, Elder was indebted to Ritchey or his estate: or that there was nothing due from the latter to the former when the estate of the latter paid the bank debt. No evidence, however, was offered as to either of these facts, but the affirmative would seem to have been presumed by the court in both instances. This, we think, was not sufficient to justify the court in coming to the conclusion, that Elder, from the state of the accounts as betweeen him and Ritchey’s estate, was hound to pay one half of the amount of the debt paid to the bank. That there ought to have been satisfactory and positive evidence adduced, establishing this latter fact beyond doubt, is deducible from legal analogy as well as from the nature of the thing itself. From the principles already laid down, it is perfectly certain, that unless Ritchey’s estate had the right to claim contribution from Elder, and presented itself in such a point of view as to show clearly that the right existed, Brightbill can have no claim as the creditor of Ritchey’s estate; for it is only in right of Ritchey that he can pretend to claim contribution. But the money paid to the bank out of Ritchey’s estate was paid in discharge of a partnership debt, owing by Ritchey and Elder as such to the bank, and without a previous settlement [234] of the partnership account, showing that this bank debt ought to have been paid by Ritchey and Elder in equal portions; Ritchey, if he were living and had paid the debt, could not aet claim to have contribution allowed him in the manner it was here. His only remedy would be by an action of account render against Elder; in which all their partnership accounts would have to be brought into view, and to be stated and settled by auditors appointed for that purpose; by whom each of the parties might be compelled to answer interrogatories, upon oath or affirmation, in- regard to matters of fact appertaining thereto; and unless it appeared upon such settlement, taking the money paid the bank info the account, that Elder was indebted to Ritchey, the latter could pretend to no right to contribution. Again, were Ritchey living, it cannot be questioned but a previous settlement of their partnership accounts made in someway, either amicably or otherwise, showing a balance struck in favour of Ritchey, and that Elder was his debtor, would be indispensably necessary, in order'to establish that he was entitled to contribution. Even to enable him to maintain an action of assumpsit to recover it, this at least would be requisite. This is well settled by abundance of authority, which seems to prove pretty conclusively, that no intendment or presumption can or ought to be made in his favour, from the mere circumstance of the money’s having been paid in discharge of a partnership debt, for the purpose of giving him a right to demand contribution. This doctrine has been established with a view to protect the partner, against whom the claim is made for contribution, from paying, unless upon the principle of equalizing their profit and loss according to their respective interests in the partnership, it shall appear that he is bound to do so. This being the case as against Ritchey himself were he alive, there is not even the shadow of reason why his representatives, or any one of his creditors, should be placed on a more favourable footing. We, therefore, think that Brightbill did not show himself entitled to claim any portion of the money arising from the sale of the land sold as the property of Elder. But that the residue of the money remaining after- satisfying Hummel & Libkecher’s judgment against Daniel Ferguson, subject to the lien of which Elder became the owner of the land, must be appropriated towards paying the judgment of Sterling v. Elder; and if any surplus should remain, then it is to be paid to Alexander M. Piper, who purchased the land of Elder, and to whom the latter assigned it subject to those claims, directed to be satisfied first out of the money arising from the sheriff’s sale. Judgment reversed.