Gordon v. Hazzard

The opinion of the court was delivered by Mr. Justice M'cGowan. The pleadings are not'in the ‘‘Case,” but we suppose the facts from the report of the referee, T. M. Gilliland, Esq., may be stated with sufficient fulness to make the points intelligible. On June 1, 1879, William M. Hazzard, administrator of the estate of A. G. Trenholm, executed to G. A. Trenholm-& Son (William L. and P. C. Trenholm) two separate bonds, dated June 1, 1879, and conditioned — one for the payment of $9,000, on or before June 1, 1882, with the interest annually; and the other for a like sum on or before June 1, 1883, with the interest annually — and to secure these bonds executed a mortgage of even date therewith, covering the premises described in the complaint (which we assume was regularly recorded). On April 4, 1881, G. A. Trenholm & Son made a promissory note to Mrs. May D. Gordon for $4,803.45, payable one year after date, and assigned to her, as collateral security for its payment, the bond of Hazzard last maturing, viz., that due June 1, 1883. On April 12, 1881, Mrs. Fannie A. Trenholm loaned George A. Trenholm & Son $1,700, and it was then agreed that the bond of Hazzard, payable in 1883, should stand as a security for the payment of that loan, after the payment of plaintiff’s note. On February 29, 1884, G. A. Trenholm & Son executed to Mrs. M. Y. Macbeth their promissory note for $1,514.43, payable 12 months after date, with interest every 6 months ; and on March 26, 1884, they executed to Mrs. A. H. Trenholm their promissory note for $1,950, payable 12 months after date, with [353] interest every 6 months. This note is now held by D. H. Mc-Collough, guardian. As collateral security for the payment of these two notes, G. A. Trenholm & Son assigned the bond of Hazzard, administrator, first maturing, to wit, the bond payable in 1882, upon which bond all payments made by Hazzard had. been credited. The note to Mrs. Macbeth recites the note to-Mrs. Trenholm, and vice verm; and each of these notes declares, the assignment of the bond payable in 1882 as collateral security for the payment of itself and the other. On the bond payable in 1882, there was due on June 1, 1884, the sum of $3,815.36, and there is now due on it $3,815-.-36. with interest from June 1, 1884. On the bond payable in 1883, there was due on June 1, 1884, the sum of $9,000, and the referee finds that this sum is now due, with interest; but it is alleged that Hazzard, on December 23, 1887, paid to Paul C. Trenholm, as agent for the plaintiff, $336.24, to be credited on the bond held by her; and it is claimed that said sum should be credited on the bond held by plaintiff Plaintiff now brings this suit to foreclose the mortgage, and contends that, by reason of its earlier assignment, the bond payable in 1883, and securing her note, is entitled to priority of payment out of the mortgaged property. The defendants, Mrs. M. Y. Macbeth and D. H. McCollough, on the other hand, maintain that the bond payable in 1882, and securing their notes, is the first to mature, and is therefore to be first paid out of the mortgage fund. The referee did not agree either with the plaintiff or the defendants, but held, as between the assignees, there was no priority; that both bonds were parts of the debt secured by the mortgage, and the different assignees were entitled to prorate the mortgage fund between them, according to their respective proportions. Both parties excepted, and, after hearing argument upon the exceptions, Judge Wallace, by short order, confirmed the report, and ordered it to stand as the judgment of the court, giving leave to apply at the foot of the decree for such orders as may be necessary to carry it into effect. From this decree both parties again appeal. Plaintiff’s Exceptions.- — “(1) The referee, upon the facts found by him, erred in holding, as matter of law, that the bond [354] assigned to the plaintiff should be paid pro rata with that assigned to Mi’s. Macbeth and Mrs. A. H. Trenholm out of the proceeds of the mortgaged property. (2) Upon the facts found, the referee should have held, as matter of law applicable thereto, that the land assigned to the plaintiff, having been assigned to her more than three years before the assignment of the other bond to Mrs. jMacbeth and Mrs. Trenholm, was entitled to priority of payment out of the proceeds of the mortgaged premises. (3) That where two bonds secured by one mortgage, given by the same person at the same time, are transferred to different persons for value, at different times, the first assignee is entitled to priority of payment out of the proceeds arising from the sale of the mortgaged property before the latter assignee. (4) That the subsequent assignee can only get what the assignor has to give at the time, and, as between the first assignee of one of the bonds and the assignor retaining the other bond, the assignee, upon foreclosure, is entitled to be first paid out of the proceeds of sale, before the assignor can come in, and the referee erred in not applying this principle of law to the facts as found by him in the case. Defendants’ Exceptions. — “(1) That his honor, Judge Wallace, erred in not holding, as matter of law, that the bond securing the notes held by these defendants, being the first to mature, is therefore entitled to payment in full out of the proceeds of the mortgaged property, before any part thereof can be applied to the bond securing the plaintiff’s note. (2) That his honor also erred in confirming the referee’s finding that there is due on the bond securing plaintiff's note the sum of $12,561.16, and thus failing to credit thereon the payment made by W. M. Hazzard, administrator, to P. C. Trenholm, on account of the interest on said bond, &c. The question raised here is certainly a very interesting one, and, from the fact that the parties interested take such entirely opposite views of their rights, we should infer .that the precise question had never been clearly settled in this State. If we could take time from other ’engagements, it might be profitable to go fully into the subject, but, under the circumstances, that is impossible. In reference to the subject of the rights of assignees [355] of parts of a debt secured by mortgage, Mr. Pomeroy says there are three distinct and different views : (1) One which gives priority to the assignment first in the order of time; (2) another, which, disregarding entirely the date of the assignment, gives priority to that part of the debt first falling due; (3) and still .another, which gives none of the assignees any priority, but holds that all of them are entitled to a pro rata of the proceeds from the mortgaged property. He remarks that the first — giving priority simply from the date of the assignment— is “a peculiar rule,” based upon the no tion that, as between the mortgagee who assigns one note and retains the other, the assignee is entitled to the preference; and, the first assignee having thus apriority as against the mortgagee, any subsequent assignee could only succeed to this position of the mortgagee, and so the assignees would all take in the order of their assignments, &c. He thinks the correct rule is, that which gives priority to the note first falling due, upon the ground that the notes falling due at different times are like successive mortgages. But he proceeds as follows : “Another rule had been adopted by the courts of several States. Upon the same condition of facts, they hold there is no preference or priority whatever among the various assignees. The terms [times] of their respective assignments, or of the maturing of their notes, are alike immaterial. All the assignees are entitled, as among themselves, to share pro rata in the security of the mortgage and in the proceeds of the mortgaged premises, if there is not sufficient to pay all in full,” &c. See 3 Pom. Eq. Jur., § 1201, and numerous authorities in the nots from Michigan, Pennsylvania, Tennessee, Mississippi. Texas, and other States. This latter view, as it seems to us, is the most in accordance with equity. The mortgage debt, though in two bonds, was an entirety and secured by one mortgage. If the debt, for the sake of convenience, was put in the shape of two bonds, payable at different times, it was nevertheless the mortgage debt, as much as if, instead of two bonds, there had been but one, with two instalments, payable at different times. In the absence of any express stipulation on the part of the assignor, an assignee, in taking an assignment of a particular instalment, knows precisely [356] what proportion of interest he is acquiring in the mortgage security. To the extent of that interest the mortgage follows and secures him, and no further. If he gets what he bargained for, he has no right to complain. One of the cardinal maxims of the court is, that “equality is equity.” We think that, so far as the question has been touched in this State, the doctrine is indicated that, as between assignees of different parts of a mortgage security, there are no priorities. See Muller v. Wadlington, 5 S. C., 342; Adger v. Pringle, 11 Id., 530. As to the alleged payment of $336.24 to P. C. Trenholm, as the agent of Mrs. Gordon, the Circuit Judge made no ruling, and that, of course, is not adjudged, but is left open for further inquiry. The judgment of this court is, that the judgment of the Circuit Court, with the exceptions stated, be affirmed. Mr. Chief Justice Simpson concurred.