Quinnipiac Brewing Co. v. Fitzgibbons , 73 Conn. 191 ( 1900 )

The relation of the principal parties in this case to each other, and to the property described in the complaint, may be briefly stated in this way: In January, 1895. Fitzgibbons was the owner of lots A and B, worth $3,100 over and above the mortgages placed by him thereon, and by a conveyance, which was voidable as against the plaintiff, he then transferred said lots to his wife. Subsequently, in 1895, he and his wife, by a deed in which both joined, mortgaged said lots A and B, the title to which then stood in the wife's name, and also lots C, D and E, which last three were her sole property, to the Derby Savings Bank, to secure a loan of $3,350, the entire proceeds of which loan were used by the wife in the purchase and improvement of lot E. After this, the plaintiff, having obtained judgment against Fitzgibbons and a judgment lien thereon upon lots A and B, foreclosed said lien as against Fitzgibbons and his wife, and is now the sole owner of said lots, subject to the three mortgages thereon, which the plaintiff now owns, and also to said mortgage of $3,350 to the Derby Savings Bank, now held by the Home Trust Company.

When the present suit was commenced, then, the plaintiff was the owner of lots A and B; Mrs. Fitzgibbons was the owner of lots C, D and E; and the Home Trust Company was the holder of the Derby Savings Bank mortgage, which covered the entire five lots.

In one of its claims for relief, which was however not pressed in argument, the plaintiff asks that the mortgage held by the Home Trust Company be declared void, as against the plaintiff, as the owner of lots A and B, but, upon the facts agreed to, it is clearly not entitled to that relief. That mortgage was made by both Fitzgibbons and his wife, at a time when one or the other, or both, owned lots A and B; it was made in good faith and for money then actually loaned; and it was made long before the plaintiff had any interest whatever in lots A and B. That mortgage is a valid one, upon the agreed facts, upon all the land covered by it, and the plaintiff holds lots A and B subject to said mortgage.

It being conceded that the plaintiff is entitled to a foreclosure of the three mortgages described in the first three counts of the complaint, the important question in the case is whether it is entitled to the relief sought under the fourth count. Under that count the plaintiff asks for, what is called in its brief, a marshalling of the securities held by the Home Trust Company, in such a way as to relieve, as far as may be, lots A and B from the mortgage held by that company; in other words, that the Home Trust Company shall be compelled to exhaust lots C, D and E, before resorting to lots A and B; and if it cannot have this relief, then it asks that the Home Trust Company shall be ordered to assign its mortgage to the plaintiff upon payment by the plaintiff of said mortgage debt and interest in full. Whether the plaintiff is entitled, as against the Home Trust Company, to have the securities thus marshalled, is the first question.

"In general usage the term `to marshal' means to arrange or rank in order; in the sense in which it is used in courts of equity, it means so to arrange different funds under administration that all parties having equities thereon may receive their due proportions." 8 Ency. of Laws of Eng. p. 227. The principle applied in such cases is that he who has a right to resort to two funds, in one of which alone another has a subsidiary interest, shall be compelled to exhaust the one to which the other cannot resort, before coming upon the one in which both have an interest. Savings Bank v. Creswell,100 U.S. 630, 641; Ayres v. Husted, 15 Conn. 504, 516; 3 Pom. Eq. Juris. § 1414. As a general rule, however, before a court of equity will marshal securities between two persons, it must appear (1) that they are creditors of the same debtor, (2) that there are two funds belonging to that debtor, and (3) that one of them alone has the right to resort to both funds. 2 Sw. Dig. (1st ed.) p. 155; Ayres v. Husted,supra, 516; Stevens v. Church, 41 Conn. 369; 3 Pom. Eq. Juris. § 1414; 8 Ency. of Laws of Eng. p. 228. Thus, it is said that if A holds a claim against C and D, secured by a mortgage upon the lands of each, and B has a claim againstC alone, secured by a second mortgage upon C's land subject to A's mortgage thereon, B has no right to ask that A shall be compelled to exhaust D's land before resorting to the land of C, because A and B are not creditors of the same debtor, and the two funds do not belong to the same debtor; but if in such a case some equity exists which would give C the right to insist that D should pay the entire debt — as if C were a mere surety for D — then B, as claiming under C and through that equity, would have the right to ask that A should exhaust D's land before resorting to the land of C. See the illustrations given, and authorities cited, in Ayres v.Husted, supra, pp. 516, 517.

Upon this view of the law and upon the facts in this case, it may be, as the defendants claim, doubtful whether the plaintiff, as against the Home Trust Company, is entitled to the form of relief now under consideration. That question it is however unnecessary to decide here, for we are satisfied that the plaintiff is entitled to the other relief which it seeks, and that this relief is sufficient under the circumstances.

For the purposes of this case the plaintiff must still be regarded as a creditor of Fitzgibbons. If lots A and B, which the plaintiff now owns, had not, when foreclosed by it, been subject to the mortgage now held by the Home Trust Company, the plaintiff's debt would have been paid by the land; but as the land was subject to that mortgage the plaintiff's debt exceeded the value of the equity taken, and unless the plaintiff can have lots A and B relieved from that mortgage, its debt is not paid in full, and it still may be regarded, notwithstanding the foreclosure of its judgment liens, as a creditor of Fitzgibbons. Ansonia National Bank's Appeal,58 Conn. 257. The plaintiff's debtor, Fitzgibbons, does not now own any property, and unless the plaintiff can satisfy its judgments out of lots A and B, it cannot satisfy them at all. The Home Trust Company holds security upon lots A and B, and also upon land of Mrs. Fitzgibbons, which latter is alone worth double the value of the mortgage debt.

As between the plaintiff and Fitzgibbons, his wife must in equity be regarded as the sole debtor of the Home Trust Company; for the loan was made to her, she received the money, and she expended it in the purchase of property of which she is now the sole owner and in which her husband has no interest whatever that can be reached by his creditors. It is true that her husband joined with her in the mortgage deed and note, and is legally liable with her for the mortgage debt; but in equity, and as between themselves and this plaintiff, the husband is a mere surety for her. Equitably it is her debt alone, and it is her duty to pay it, and to exonerate lots A and B therefrom. Kennelly v. Kelly, 51 Conn. 329.

The defendants claim that upon the agreed facts the husband could not compel the wife to exonerate lots A and B from the Home Trust Company mortgage, and that the plaintiff, claiming under the husband, stands in no better position. While the first of these claims may be true the last is not. The husband could not obtain such relief, simply because he had conveyed lots A and B to his wife, and as between themselves that conveyance was valid and as to her he had no further interest in said lots. Had he, as to her, continued to be the owner of said lots, and had then mortgaged them as surety for her sole debt, we think he could have compelled her to exonerate them from the mortgage. Now, as between the husband and wife and his creditors, lots A and B continued to be the property of the husband alone; and his creditors, acquiring an interest therein under him, stand where he would have stood if he had not made the conveyance to his wife at all. Under such circumstances the plaintiff is entitled to relief where the husband might not be.

It thus appears that the Home Trust Company holds a mortgage upon lots A and B; that as between Mrs. Fitzgibbons and the plaintiff claiming an interest in said lots under her husband, it is her duty to exonerate said lots from said mortgage; and that she in effect refuses to do this, and the Home Trust Company refuses to assign said mortgage to the plaintiff on payment in full of the debt secured thereby. Under these circumstances we think the plaintiff is entitled to have an assignment of the mortgage upon payment of the mortgage debt to the Home Trust Company.

The Superior Court is advised that the plaintiff, upon paying the debt in full due to the Home Trust Company under the note and mortgage now held by said company by