Opinion
03-04-1852
SCHOFIELD v. COX & als.
Cooke, for the appellant. A. Hunter, for the appellees.
(Absent Cabell, P.)
1. A owns a tract of land on which there is a deed of trust to secure a large debt. A sells two thirds of the land to B, and for the purchase money takes from B eleven bonds payable at successive periods, and a deed of trust upon the property sold to secure them: A assigns to C the fifth, sixth and seventh bonds due; and B pays to A either before the assignment, or afterwards without notice of it, rather more than enough to discharge the first four bonds: and then A and B become insolvent. HELD:
1st. That C as assignee of A, is entitled as between him and A, to the benefit of the deed of trust given by B to secure the payment of his bonds.
2d. That C is entitled to have the one third of the land not embraced in his security, applied in the first place to satisfy the first incumbrance, to the relief of the two thirds of the land conveyed by B to secure his bonds.
3d. That the payments beyond the amount of the first four bonds, made by B to A without notice of the assignment, having been made on account, are not to be treated as applicable to the first bond assigned to C; but to the bonds held by A.
2. A living out of the state, D sues out a foreign attachment against him, and attaches the one third of the land which was not sold to B, and also the debt due from B to A; the attachment being issued after the assignment to C. HELD:
1st. As between the attaching creditor and the assignee the latter has the preference.
2d. The whole land being sold together, the one third and so much of the two thirds of the purchase money as is necessary, will be applied to discharge the first incumbrance; and the balance will be applied to pay the assignee.
3d. The attaching creditor proving his debt, is entitled to a personal decree against his absent debtor, though the property attached may be adjudged to the assignee.
This was a proceeding by foreign attachment, commenced in July 1841, in the Circuit court of Jefferson county, by Jesse Schofield against Luther J. Cox as an absent debtor, and Benjamin Ford and Daniel Snyder home defendants, having estate of the absent debtor in their hands. In the progress of the cause, J. & A. H. Herr were, on their petition, admitted as parties defendants, and claimed the fund in the hands of Ford & Snyder, under an assignment from Cox. The facts are as follows:
Cox being seised of certain mill property subject to an incumbrance for 11,537 dollars, sold and conveyed two undivided thirds of it, free from incumbrance, to Snyder & Ford for 21,466 dollars 71 cents, payable in eleven instalments; two of which were for 2333 dollars 34 cents each, and payable on the 28th of March in the years 1841 and 1842, with interest from the date, which was on the 28th of November 1840; and the other nine were for 1866 dollars 67 cents each, and payable at 2, 4, 6, 8, 10, 12, 14, 16 and 18 months after date. To secure the payment of these instalments, Snyder & Ford executed their bonds and a deed of trust on the said two thirds of the property. On the 13th of April 1841 Cox assigned three of the intermediate bonds, to wit, the bonds payable at 8, 10 and 12 months after date, amounting together to 5600 dollars, to J. & A. H. Herr. After the assignment, to wit, in July 1841, Schofield, to whom Cox was indebted in the principal sum of 2317 dollars 89 cents, instituted a foreign attachment suit therefor against Cox, who was a nonresident of the state; and attached Cox's remaining one third of the property, and the debts due him by Snyder & Ford for the other two thirds. Snyder & Ford paid to Cox the two first instalments of 1866 dollars 67 cents each, and made various other payments at different times between the 18th of January and 27th of November 1841 inclusive, to the amount of 5630 dollars 15 cents, making the aggregate of payments made by Snyder & Ford to Cox 9363 dollars 49 cents, of which 4733 dollars 34 cents appear to have been paid before, and 4630 dollars 15 cents after the assignment. Nothing appears to have been paid on account of the assigned bonds. Cox, Snyder & Ford became insolvent, and the whole of the property was sold to satisfy the prior incumbrance. The amount of the sale was 14,000 dollars; of which, after paying expenses and satisfying the prior incumbrance, a surplus remained of 2037 dollars 38 cents, to be paid to the assignees or the attaching creditor, according as the Court should be of opinion that the one or the other was entitled to the same.
The cause came on to be heard in June 1844, when the Court being of opinion that the assignees J. & A. H. Herr were entitled in preference to the plaintiff, dismissed his bill, whereupon he applied to this Court for an appeal, which was allowed.
Cooke, for the appellant.
A. Hunter, for the appellees.
MONCURE, J.
The Court below was of opinion that the assignees were entitled, and dismissed the bill of the attaching creditor. I think the Court below was right.
Let us enquire, first, How the case stands between Cox and his assignees? And secondly, How it is affected by the intervention of the attaching creditor?
First. How does the case stand between Cox and his assignees? There appears to have been no agreement between Cox and Snyder & Ford for the payment of the prior incumbrance by the latter out of the purchase money; though Cox may have looked to that as the source from which he was to derive the means of making such payment; and Snyder & Ford had a right to rely upon it as their indemnity against such incumbrance. But Cox on the one hand was bound to discharge the incumbrance, and (dependent on that obligation) Snyder & Ford on the other were bound to pay off their bonds as they became due; and there was a lien by deed of trust on two undivided thirds of the property to secure the payment of these bonds as they became due to Cox or his assigns. Gwathmeys v. Ragland, 1 Rand. 466. Of the eleven bonds given by Snyder & Ford to Cox, four amounting together to the sum of 7933 dollars 35 cents, became due before the three bonds assigned to J. & A. H. Herr became due; and four amounting together to the same sum became due afterwards. Snyder & Ford having, as before stated, paid to Cox 9363 dollars 49 cents, had more than extinguished the four bonds which became due before the three bonds assigned to J. & A. H. Herr. So that at the time of the sale of the property under the prior incumbrance, two undivided thirds of it were as between Cox and his said assignees, bound in the first place for the payment of the three assigned bonds; and if Cox had discharged his obligation by paying off the prior incumbrance, the three assigned bonds would have been fully paid out of the proceeds of sale of the said two thirds.
The case then stood thus. The prior incumbrancer had a lien on the whole property. The assignees had a lien on two thirds of it: And the property was insufficient to satisfy both liens. In this state of things a Court of equity, on the familiar principle of marshalling securities, would charge the prior incumbrance first upon the third of the property on which the assignees had no lien, and then upon the other two thirds; so that the property left, after satisfying the prior incumbrance, would be property on which the assignees had a lien and would be applicable to its discharge. And if, as was the case here, the whole property was sold and the proceeds applied to the payment of the prior incumbrance, the surplus would be considered as arising from the sale of the subject on which the assignees had a lien, and be therefore applicable to the payment of the assigned bonds. Cox certainly could not object to this mode of marshalling the securities for the benefit of his assignees. He was bound to indemnify not only them but the obligors against the prior incumbrance.
It is contended by the counsel for the appellant that J. & A. H. Herr must recover as assignees of the bonds at 8, 10 and 12 months, or not at all; and that the record shews that the greater part of these three bonds was paid by Snyder & Ford to Cox without notice of the assignment. I do not think so. The two bonds at two and four months were discharged. The other payments amounting to 5630 dollars 15 cents appear not to have been applied to any particular bonds. If they were applicable to the bonds as they became due, they would still leave due the whole of two and part of the third of the assigned bonds; which would greatly exceed the amount of the surplus in controversy; and the right of the assignees to such surplus would therefore not be affected. But while it might be proper, so far as the obligors are concerned, to apply their payments to the bonds in the order in which they became due, without regard to the assignment of any of them, supposing they had no notice of such assignment, it would not be proper, as between the assignor and the assignees, to apply any of the payments to the assigned bonds. And if such application were made for the benefit of the obligors, the assignees would be entitled to be indemnified out of the bonds remaining in the hands of the assignor.
But secondly, How is the case affected by the intervention of the attaching creditor? I think not at all. It is well settled that the attaching creditor stands on no better footing as to the thing attached than that on which his debtor stood at the time of the attachment. 2 Rob. Pr. 207, and the cases cited by the counsel for the appellees. In this case therefore the attaching creditor Schofield can no more object than can his debtor Cox to the marshalling of the securities for the benefit of the assignees as before stated.
I think the decree ought to be affirmed; at least so far as it gives priority to the assignees over the attaching creditor. But instead of dismissing the bill of the latter, the Court should have given him a personal decree against the absent debtor, according to the case of Williamson v. Gayle, 7 Gratt. 152.
ALLEN and DANIEL, J's, concurred in the opinion of Moncure, J.
BALDWIN, J. did not see the opinion, but concurred in the decree; which was as follows:
The Court is of opinion, that on the principle of the decision of this Court in the case of Williamson v. Gayle & al., 7 Gratt. 152, there is error in the decree appealed from in this case as between the appellant and the appellee Cox, in dismissing his bill as to the said Cox, instead of giving him a personal decree against that defendant for the amount of his demand and his costs in the Circuit court; but that there is no error in the residue of the said decree. It is therefore decreed and ordered, that so much of the said decree as is above declared to be erroneous, be reversed and annulled, with costs to the appellant against the appellee Cox; and that the residue of the said decree be affirmed with costs to the appellees J. & A. H. Herr. And this Court proceeding to render such decree as the said Circuit court ought to have rendered in lieu of so much of the decree aforesaid as is above declared to be erroneous, it is further decreed and ordered that the appellant do recover against the appellee Cox the sum of two thousand three hundred and seventeen dollars and eighty-nine cents, with interest thereon from the 11th day of November 1840 till paid, and his costs by him expended in the prosecution of his suit in the said Circuit superior court.