Wise v. Shepherd

Trumbull, J. The case presented by the bill, is this. In October, 1840, Ross obtained two several judgments for $605.27 each, and costs — one against J. B. Shaw, the principal; the other against D. Price, his security for the same debt. Subsequent to these judgments, Price executed a mortgage to James Gibson, of location No. one, township 4 north, range 10 west, containing twenty-five acres, which was duly acknowledged and recorded December 29,1840. In April, 1841, the Wises recovered a judgment against Shaw for $1,491.05. In November, 1846, alias executions were issued upon the judgments against Shaw, and levied upon various tracts of land owned by him, which were subsequently sold, and the proceeds applied upon the judgments in favor of the Wises, leaving the older judgment in favor of Ross, of which the Wises had at that time become the owners, wholly unsatisfied. In April, 1847, Gibson foreclosed his mortgage against Price; and in September of the same year the mortgaged premises were sold under the decree of foreclosure, and purchased by the complainant, Shepherd. In the month of October following, the same premises were sold on an execution issued upon the judgment against Price as security for Shaw, and purchased in by the Wises. The proceeds of Shaw’s property applied upon the judgment in favor of the Wises, were more than sufficient to have paid off the Ross judgment; and the object of the bill was to have them so applied, thereby relieving the property mortgaged from the lien of Ross’s judgment, and securing the same to the complainant, by setting aside the sale made on the execution issued upon the judgment. The Circuit Court overruled a demurrer to the biH, and defendants declining to answer further, entered a decree upon bill and exhibits granting the relief sought. The rendering of this decree is now assigned for error. The contest is between parties, both of whom have just claims, which ought to be satisfied. The question, then, is, who has the superior equity to subject the property mortgaged by Price to the payment of his debt; the mortgagee or the Wises ? for if the sale made under the execution issued upon the Ross judgment is permitted to stand, it is in effect permitting the Wises to obtain satisfaction of their judgment against Shaw out of Price, at least to the extent of the value of the property of Price taken in satisfaction of the Ross judgment. It is clear that the Wises possessed no other or greater rights over the property of Price than did Ross, from whom they purchased the judgment. As between Ross, Shaw, and Price, Shaw was bound in equity to pay the debt to Ross. Price was the mere security for Shaw, and ought not in justice to have his property subjected to the payment of his principal’s debt, while the principal has property of his own, subject to the same debt, amply sufficient to discharge it. According to the authority of the cases of Ex parte Kendall, 17 Ves. 520, and Dorr v. Shaw, 4 Johns. Ch. R. 17, the Wises could not have compelled Ross to satisfy his demand against Shaw and Price out of the property of the latter, so as to leave the estate of the former to be applied in satisfaction of their judgment, because it would be unjust, as between Price and Shaw, to compel the former to pay the debt of the latter. It is a familiar principle, that where there are two creditors of one debtor, the first having two funds to which he may resort for the satisfaction of his debt, and the second only being able to reach one of the funds, the first shall resort for satisfaction of his debt to that fund which he alone can reach, and thus leave to the junior creditor the only means he has for obtaining payment of his demand. This course is equitable as to all parties, and does injustice to none. Lanoy v. Duke of Athol, 2 Atk. 446; Everton v. Booth, 19 Johns. 492; Hayes v. Ward, 4 Johns. Ch. R. 132. But this principle, as shown by the cases of Ex parte Kendall, and of Wood v. Shaw, has never been extended to a case where one of the two creditors has a lien for his debt upon two funds belonging to two separate debtors, and the other has a lien only upon the fund belonging to one, so as to compel the first to make his debt wholly out of that debtor whom the other creditor cannot reach, unless the relation between the debtors be such as to make it equitable that the debtor having but the one creditor should pay the whole demand against him and his co-debtor, and thus leave the property of his co-debtor free to be taken in satisfaction of the claim against him alone. Gibson comes within the exception. He held a mortgage upon the real estate of Price, against whom and Shaw, Ross had previously obtained a judgment, which was a lien upon the real estate of both the debtors. Price, however, was a mere security for the debt due Ross, and as between these parties it would be equitable all round, that Ross should first exhaust the property of Shaw before going upon that of Price, or if Price was compelled in the first instance to pay the debt to Ross, he would then be entitled to the control of the judgment against Shaw for the purpose of reimbursing himself, what he had been obliged to pay as his security. Not so, however, with the Wises. Their relation to the debtors Shaw and Price was entirely different from that of Gibson. Their judgment was against Shaw, the principal in the debt to Ross, and it would be doing the grossest injustice to Price to compel him to pay the debt to Ross, for the purpose of leaving Shaw’s property free to be applied in satisfaction of another debt which he owed the Wises. Ebenhardt’s Appeal, 8 Watts & Serg. 327. The Wises doubtless ought to have satisfaction of their debt, but equity will never sanction a principle which, though it may do justice to creditors, will work iniquity to debtors. There is another reason why the complainant, who is substituted in the place of Gibson, the mortgagee, and is to be regarded as the purchaser of the mortgaged premises at the date of the mortgage, has the better equity. The mortgage is of an earlier date than the judgment against Shaw, in favor of the Wises. At the time the mortgage was executed, the premises were subject to the lien of the judgment in favor of Boss, and the equities, as between Boss and Gibson, who were the only persons that then had claims against Price, evidently were, that Boss should resort in the first instance to the property of Shaw, the principal, and if possible make his claim out of his estate. The right of Gibson to insist that Boss should first resort to the property of Shaw, before touching the mortgaged premises, had attached before the Wises obtained their judgment; and that right could not be divested either by a transfer of the Boss judgment to the Wises, or by their obtaining a subsequent judgment against Shaw. Reynolds v. Tooker, 18 Wend. 591; Neef v. Miller, 8 Barr, 347. The equity contended for by the Wises, did not arise till after that of Gibson had become fixed, and it could not be permitted to prevail without overturning his prior, and therefore better equity. He stands in the position of the first purchaser of part of the real estate of a judgment debtor, in which case the creditor may be required to sell, in the first instance, that portion of the debtor’s estate still remaining in his hands; and where there have been several sales by the debtor at different periods, the creditor may be required to sell in the inverse order of the alienations. Gill v. Lyon, 1 Johns. Ch. R. 446; Clowes v. Dickenson, 5 Johns. R. 235; James v. Hubbard, 1 Paige, 228. The decree of the Circuit Court is affirmed with costs. Decree affirmed.