Case ID: ohio-st_61/html/0179-01.html
Source: Caselaw Access Project
Author: {"author": "Spear, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Campbell, Adm’r., v. Sidwell, Ex’x., et al.
    
      Lien holders — Rule as to priority — Time gives better equity, when— Adjustment between vendor's lien, mortgagee's lien and interven-judgmcnt creditor’s lien.
    
    1. As between lien holders having only equitable interests, if their equities are in -all other respects equal, priority of time gives the better equity. But if one has, on other grounds, a better equity than the other, priority of time is immaterial. A fortiori, if one has, in addition, the legal estate, or the right to use the legal title in support of his security, his lien will be given preference, and will not be in any way prejudiced by a lien based wholly on equitable grounds, even though the latter be first in time.
    2. A vendor’s lien will not be given preference over a subsequent botia fide mortgage lien even though a judgment lien intervenes.
    3. If, in such case, the proceeds of sale are insufficient to satisfy both'the mortgage and the judgment lien, there will be deducted from the amount due the mortgagee and paid to the judgment creditor, a sum sufficient to satisfy the judgment, and the balance be paid to the mortgagee.
    (Decided November 28, 1899.)
    Error to the Circuit Court of Belmont county.
    The action below was commenced in the common pleas of Belmont county, September 17th, 1896, by the defendants in error, Elma Sidwell, as Ex’x. of ' Plummer Sidwell, deceased, and Shepherd Davis, to obtain a decree for the sale of certain lands (about 76 acres) in that county, and to have conflicting liens marshalled and priorities determined. Plaintiff’s action was grounded upon a judgment rendered at the January term, 1896, of that court, in a suit commenced May 27, 1895, against John W. Beam et al., for $1,201.32, being balance remaining due as purchase money, and a decree finding the same to be a lien upon the property sold in the nature of a vendor’s lien.
    Nicholas Kuhn, in his answer and cross-petition, set up the recovery, February 27, 1892, by the consideration of the same court, of a judgment against John W. Beam, the then owner of the land, in favor of one Somerville, and afterward purchased by answering defendant, on which a balance remains due, which is and has ever since the date of the rendition of the judgment been a lien upon the land in controversy; that December 19, 1892, execution issued and was levied on said land; that the judgment was purchased for full value and without knowledge of any vendor’s lien.
    Campbell, as Adm’r. of Reuben Ochsenbein, the plaintiff in error, by his answer and cross-petition, set up the execution by John W. Beam and wife, February 27, 1895, of a mortgage on the lands, to secure certain notes, then executed by Beam to Ochsenbein; the delivery for record of the mortgage the same date, its record, and that the same was given for a valuable consideration and without notice of the vendor’s lien.
    At the January term, 1897, the common pleas found due plaintiff $1,273.38; that the same is a lien on the land, and ordered that, in default of payment in five days, the land be sold and the money brought into court, reserving all questions of pri-' ority.
    At the June term following, the sale being confirmed, and the proceeds of sale, $2,700.00, being before the court for distribution, a decree was rendered, ordering the payment, first of costs, second of the judgment to Kuhn, and the balance to Campbell, Adm’r. From this judgment the plaintiffs (the defendants in error) appealed.
    On trial in the circuit court, after order confirming the sale, there was found due the plaintiffs $1,-297.49, and that they had a valid vendor’s lien and the right to enforce it against the premises. Also, due Kuhn $410.25, and that is a valid lien. Also, that there is due Campbell, Adm’r., $1,376.20, and will become due $500, March 1, 1898, $500, March 1, 1899, $500, March 1, 1900, and $500, March 1, 1901, with interest on each from March 1, 1897, all constituting a valid lien on the premises. Coming to distribute the $2,700, proceeds of sale, the court found the facts stated in the petition and answers true, and ordered that, after payment of costs and taxes, there be paid, first, to' the plaintiffs the amount found due them, second, to Kuhn, the amount found due him, and third, the remainder to Campbell, Adm’r.
    Campbell, Adm’r., brings this proceeding to reverse this judgment as to priority of liens and order of distribution.
    
      Driggs & Heinlein and W. V. Campbell, for plaintiff in error.
    We claim that the mortgage lien is superior in equity to the vendor’s, and that in distribution of the fund should have been preferred. The mortgagee occupies the position of a bona fide purchaser for value and without notice, and a secret equity such as the vendor claims cannot prevail again him. For the purpose of making his security effectual the mortgagee, by virtue of the mortgage, was seized of the legal title. Harkaider v. Leiby, 4 Ohio St., 604; 2 Kent’s Co., 129; Allen v. Everly, 24 Ohio St., 97. This principle was completely ignored by the circuit court in its order of distribution.
    Had Beam conveyed these premises to plaintiff in error, for value, and without notice that the purchase money had not been paid, it could not be claimed that the purchaser took the premises charged with a vendor’s lien; and the case made is not different in essence from that. ‘ A lien superior in right should not be postponed to one inferior.
    The case of Day v. Munson, 14 Ohio St., 488, prescribes the rule applicable to this case, and applying that rule, it leads to this result: Take the whole fund, $2,700; deduct from it $410.25, the lien due the judgment creditor, and we have remaining $2,-289.75, applicable to the mortgage; then take whole fund, $2,700, and deduct therefrom the lien of vendor, there will remain sufficient to satisfy the judgment, but the balance being appropriated by the mortgage, nothing would remain for the vendor.
    Again, suppose the mortgagee had stepped in before trial and paid off the claim of Kuhn. Would not the mortgage lien have then been satisfied before applying any part of the proceeds to the vendor’s lien? So, according to the claim of the vendor, his lien takes precedence over the mortgage only because of there being a judgment lien for some amount; and no matter how small the amount, if the principle applies, it makes a lien superior which, under all other circumstances, would have been inferior in every respect. There is no principle of law or equity that would warrant such finding.
    The cases of Brazee v. Bank, 14 Ohio, 319; Holliday v. Bank, 16 Ohio, 533, relied upon by defendants in error, when carefully analyzed, do not support their contention.
    The order of distribution of the circuit court should be reversed.
    
      Jas. M. Rees and C. L. Weems, for defendants in error.
    The question is, What is the order of priority among these three liens? It is settled in Ohio, and cases need not be cited, that a vendor’s lien is superior to the lien of a subsequent judgment against the vendee. We call the court’s attention, however, to the fact that this superiority does not rest on an arbirtrary statute, but upon equity, morality and justice. The vendor’s lien is founded on value parted with. The judgment is a volunteer. The vendor’s lien is specific. The judgment lien is general. It is settled in Ohio and cases need not be cited, that a judgment is .superior to a subsequent mortgage. This is so because the statute makes it so. . It is settled in Ohio, and cases need not be cited, that a mortgage for value, bona fide, without prior notice of a vendor’s lien, is superior to it. This is not because of any moral claims, but because “ among equal equities the law prevails.” Pomeroy’s Equity, Sec. 417.
    The vendor was just as “ innocent ” as the mortgagee. We think the only recognized moral and equitable superiority among these liens, is that of the vendor’s lien over the judgment, and call attention to it because the rule of distribution contended for by plaintiff in error produces the remarkable result that this inferior judgment (inherently inferior) gets paid and the vendor’s judgment gets nothing.
    Assuming, however, that the judgment is equitably superior, as well as legally, to the mortgage, and the mortgage to the vendor’s lien, we have this state of facts: The vendor’s lien is superior in equity to the judgment, the judgment to the mortgage, the mortgage to the vendor’s lien. What is their order of precedence? — for we contend that this latter question must be met. Some principle or criterion must be adopted for ranging these liens in an order of priority. It can never be done by being controlled by the particular figures that exist in this case. (See the last sentence on page 276, 310 S., in the opinion in Babbett & Herman v. Morgan Root & Co.)
    
    It cannot be done by starting arbitrarily with one of these liens taking out a certain amount for it and passing it along the line in an attempt to find a resting place for it. This is illustrated by the argument of our adversaries.
    We think there is a satisfactory principle that can be invoked. That principle is the analogy of the rule, “where there are equal equities the first in order of time shall prevail.” (See Pomeroy’s Equity, Sec. 413, et seq.) It is true that no two of these equities are equal, but it is true that they happen to be so related among themselves that the three cannot be arranged in order of preference. When we try it we have a circle. The impossibility of arranging two equal equities in any order of inherent preference compels a resort to the test of time. The impossibility of ranging these three equities in any order of preference makes a resort to the same test reasonable. (See tbe paragraph an page 321 in the opinion in Brazee v. Lancaster Bank, 14 Ohio, 319.)
    Our opponents rely on Day v. Munson, 14 Ohio St., 488. It seems not to have occurred to them that in the case put of the fund being exactly one thousand dollars, and each of the three liens one thousand dollars, the rule applied in Day v. Munson would give the entire fund to the first lien (the vendor’s lien), while their reasoning would give it all to the mortgagee. This shows conclusively that there must be some radical difference between the reasoning in Day v. Munson and the reasoning of our adversaries. This difference is not hard to find. In Day v. Munson the court were not, as here, dealing with a case where the first lien was merely inferior to the third, but with a case where, as to the third lien, the first was void. Here each of the three liens exist. None is void. Each is a lien on the whole fund. Their equitable priorities travel in an endless circle. Day v. Munson, rests upon its own facts and conditions.
    The judgment of the circuit court should be affirmed.
   Spear, J.

Whether or not a vendor’s lien should be given preference over a tona fide mortgage solely because a judgment lien intervenes, is the question presented by the record in this case. To recapitulate briefly, it jnay here be stated that the land was sold and conveyed by Sidwell and "Davis, and possession given, prior to February 27,-1892; that on this last named date the judgment now owned by Kuhn was rendered, and levy of execution on the land made December 19, following, and that the mortgage of the purchaser to Ochsenbein was left for record February 27, 1895. At the date of the decree there was due the vendor $1,297.49, due the judgment creditor $410.25, and owing on the mortgage $3,376.20. The proceeds of sale are $2,700.00.

It was the judgment of the circuit court that the vendor’s lien should be given such preference, and that conclusion is sought to be maintained by counsel for defendant in error on the ground that the only recognized moral and equitable superiority among the liens is that of the vendor’s lien over the judgment, and that any determination as to priority other than preferring the vendor’s lien, works the inequitable result of paying the judgment, inherently inferior, while the vendor gets nothing.

Before discussing the real point of controversy it may be proper to consider briefly the character of the respective claims. The lien of a vendor after conveyance for unpaid purchase money, as between vendor and purchaser, his heirs and others acquiring title with notice of the equity, has been recognized and enforced in this state since its settlement, although in many of the states of the Union the rule does not prevail. It is founded upon the equitable proposition that he who has gotten the estate of another ought not to retain it without paying the full consideration. The principle does not exist at common law. The remedy is purely of equitable cognizance and the lien, as recognized in this state, is not an unqualified one, for, if it be shown that the vendor depends upon, takes, or looks to any other collateral security, the lien does not attach. As held in Williams v. Roberts, 5 Ohio, 36, where the vendor took notes with personal security, he did not retain a lien on the land; although, as held in Boos v. Ewing, 17 Ohio, 500 (by a divided court), the taking of a mortgage on the land sold to secure payment of purchase money, does not extinguish the prior equitable lien, but it remains as against a judgment obtained between the date of the mortgage and the time of record. Nór does the rule in any case give the vendor priority over a bona fide purchaser. This is upon the clear ground stated by Chief Justice Marshall in Bayley v. Greenleaf, 7 Whea., 46, thus: “To the world the vendee appears to hold the estate divested of any trust whatever; and credit is given to him in the confidence that the property is his own in equity as well as at law. A vendor relying upon this lien ought to reduce it to a mortgage, so as to give notice of it to the world. If he does not, he is in some degree accessory to the fraud committeed on the public by an act which exhibits the vendee as the complete owner of an estate on which he claims a secret lien. * * * The lien of the vendor, if in the nature of a trust, is a secret trust; and although to be preferred to any subsequent equal equity unconnected with a legal advantage, or equitable advantage which gives a superior claim to the legal estate, will be postponed to a subsequent equal equity connected with such advantage.”

We have here, then, a claim to priority on the part of the vendor based upon a condition purely equitable. The claim of the judgment creditor is fixed by statute and is purely legal. That of the mortgagee is also statutory, but it rests, also, on equitable considerations, inasmuch as he has parted with his money upon the faith of a condition, as to title and possession, existing by reason of the voluntary act of the vendor. He has not only a lien upon the property, but has a conveyance of the estate by way of pledge, and is in the position of a bona fide purchaser with a right to use the legal title for the purpose of making his security effectual. Ranney, J., in Harkrader v. Leiby, 4 Ohio St., 611; Anketel v. Converse, 17 Ohio St., 11; Allen v. Everly, 24 Ohio St., 97. It is apparent that the position of the parties before the court is not equal; indeed it is apparent that they stand in positions of marked inequality, and that the rule that where there are equal equities the first in order of time shall prevail, will not aid in determining the issue.

But it is insisted in favor of the vendor that a satisfactory principle can be invoked for application here, in analogy to that rule. It is conceded that the judgment is superior to the mortgage, and the mortgage to the vendor’s lien, and that no two of the equities are equal, but, the vendor’s lien being superior to the judgment, it is insisted that the equities are so related among themselves that the three cannot be arranged in order of preference, for when we try it we have a circle, and hence the impossibility of arranging two equal equities in any order of inherent preference compels a resort to the test of time, and when that becomes necessary such test in law is a reasonable one, and should prevail. The problem cannot, it is claimed, be solved by starting arbitrarily with one of these liens, taking out a certain amount for it, and passing it along the line in an attempt to find a resting place for it, for it cannot stay there. If an amount should be reasoned into the pocket of the mortgagee, no one could deny the right of the judgment creditor to snatch it away, and when it reached that place, no sufficient answer could be made to the vendor’s demand to take it from the judgment.

The solving of puzzles is often an interesting mental pursuit, but the duty of the court is to settle controversies between litigants rather than to disentangle perplexing mental problems. If the issues can be determined by the application to the facts of just and well settled legal principles, we need not concern ourselves whether the result fully satisfies the ingenuity of the mental juggler or not. The question is, who, among these parties, under the facts, is entitled to the proceeds of sale?

1 Pomeroy’s Eq., Secs. 413, and following, are cited as offering support to the position of counsel. It is difficult to see how this author aids the contention. He quotes approvingly and at length from Rice v. Rice, 2 Drew., 73, a purely equitable case, where the Vice-Chancellor treats the test of time in this wise. He says: “The rule is sometimes expressed in this form: ‘As between persons having only equitable interests, qui prior est tempore potior est jure.’ This is an incorrect statement of the rule, for that proposition is far from being universally true. * * * Another form of stating the rule is this: ‘As between persons having only equitable interests, if their equities are equal, qiñ prior est tempore potior est jure.’ This form of stating the rule is not so obviously incorrect as the former, and yet even this enunciation of the rule (when ’accurately considered) seems to me to involve a contradiction. For when we talk of two persons having equal equities or unequal equities, in what sense do we use the term ‘equity’? For example, 'when we say that A, has a better equity than R, what is meant by that? It means only that according to those principles of right and justice which a court of equity recognizes and acts upon, it will prefer A. to B., and will interfere to enforce the rights of A. as against B. And, therefore, it is impossible strictly speaking, that two persons should have equal equities, except in a case in which a court of equity would altogether refuse to lend its assistance to either party as against the other. If the court will interfere to enforce the right of one against the other on any ground whatever, say on the ground of priority of time, how can it be said that the equities of the two are equal; i. e., in other words, how can it be said that the one has no better right to call for the interference of a court of equity than the other? To lay down the rule, therefore, with perfect accuracy, I think it should be stated in some such form as this: ‘As between persons having only equitable interests, if their equities are in all other respects equal, priority of time gives the better equity; or, qid prior est tempore potior est jure.’ I have made these observations, not of course for the purpose of a mere verbal criticism on the enunciation of Ihe rule, but in order to ascertain and illustrate the real meaning of the rule itself. And I think the meaning is this: that in a contest between persons having only equitable interests, priority of time is the ground of preference last resorted to; that is, that a court of equity will not prefer the one to the other, on the mere ground of priority of time, until it finds upon an examination of the relative merits there is no other sufficient ground of preference between them. Or, in other words, that their equities are in all other respects equal; and that if the one has on other grounds a better equity than the other, priority of time is immaterial.” And, Mr. Pomeroy sums up, in Sec. 415, thus: “It follows from this explanation of the principle that when several successive and conflicting claims upon or interests in the same subject matter are wholly equitable, and neither is accompanied by the legal estate, which is held by some third person, and neither possesses any special feature or incident which would, according to the settled doctrines of equity, give it a precedence over the others wholly irrespective of the order of time — under these circumstances the principle applies, and priority of claim is determined by priority of time. There are, however, many features and incidents of equitable interests which prevent the operation of this rule, and which give a subsequent equity the precedence over a prior one, as will be fully shown in the next chapter. The principle embodied in this maxim lies at the foundation of the important doctrines concerning priorities, notice, and the rights of purchasers in good faith and for a valuable consideration, which so largely affect the administration of equity jurisprudence in England, though to a less extent in the United States, and which are discussed in the following chapter.” And why does it not necessarily follow, as a converse proposition, that if the legal estate is held by one of the claimants, or he has a right to use the legal title, then priority of time is immaterial? See, also, Hume v. Dixon, 37 Ohio St., 66, where it is held that the rule that as between equities in all respects equal the older will prevail does not apply when the junior equity is superior in merit. To like import is an observation of the author of Jones on Mortgages, Sec. 1078, that: “The mere fact that the vendor’s lien is the elder equity, is not sufficient to give it preference. It is only when the equities are in all other respects equal that priority of time gives the better equity.”

It is to be kept in mind that the contention here is wholly between the vendor and the innocent Iona fide purchaser. There is no dispute between the judgment creditor and that purchaser. The purchaser concedes that between himself and the judgment creditor the law gives a preference to the lat-' ter, and that is an end of it as between them. Nor does the judgment creditor deny that as between him and the vendor, considered alone, the vendor’s claim is prior. In such a situation how can it reasonably be claimed that the superior position of the mortgagee should be subordinated to the inferior one of the vendor? It must be perfectly plain (that any legerdemain which results in rewarding the negligent vendor, at the expense of the vigilant, mortgagee, would prove, if not a fraud upon the law, at least a defeat of it and a sacrifice of justice. We are unable to see any good reason for such action. The claim seems unconscionable. The vendor comes into court asking to obtain favor over one who has trusted to the condition of title and possession which he himself created. Were it not that there, is an intervening judgment no one would he bold enough to make such a claim. Though a refusal of it works to the advantage of the judgment creditor, how can the vendor be heard to complain? He is no worse off by reason of it. We think he cannot. Such result takes nothing from him, and that it takes something from the mortgagee is, using plain terms, no concern of his. When the mortgagee advanced the money and took the mortgage, the land was, in law, and according to the public records to which all have recourse to ascertain titles, the property of the mortgagor subject only to the lien of the judgment. As well put by counsel for plaintiff in error, “the mortgagee had then the right to pay off, or purchase, the judgment, and had he done so no possible claim could have been advanced by the vendor as against the mortgage.” Why should the court now put the mortgagee in a worse position than he placed himself in then? We think it should not. Nor need we mourn the result as to the vendor, arising from the satisfaction of the judgment. It is common knowledge that tradesmen, and others, as matter of ordinary commercial usage, extend credit upon the faith of title to land as shown by the public records. Credit is given to one in possession with record title, “in the confidence that the property is his in equity, as well as law.” We make no criticism upon the rule that in a controversy simpiy between a vendor’s lien and a subsequent judgment lien, the former will prevail, but it need not be matter of special regret that the rule is not always, and under all circumstances, available to the vendor. It should be enough to say that it is not available in this case because its application would work manifest injustice.

Our conclusion is that the mortgage stands before the vendor’s lien, but second to the judgment, and that in distribution, there should, after payment of costs and taxes, be first deducted from the amount due on the mortgage a sum sufficient to pay the judgment which should be paid to the judgment creditor, and the balance be paid to the mortgagee.

The precise question has not been heretofore presented to this court so far as we are aware, although questions somewhat analagous have been passed upon. Counsel for plaintiff in error cite Day v. Munson, 14 Ohio St., 488, as determining the issue here in favor of the mortgage. A distinction between the case is sought to be drawn by opposite counsel on the suggestion that in that case the first chattel mortgages were void, which cannot be said of the vendor’s lien. They also insist that the case cited rests upon its own facts and conditions. With tbis last proposition we agree. It is true, too, that the court in the report of that case remarks that the plaintiff’s mortgages, not having been re-filed, pursuant to statute, are void as to the third mortgage. There is no special significance in the term “void.” Characterizing the plaintiff’s mortgages as “void” did not discredit them- save as to the third mortgage. The case at bar, also, rests upon its own facts and conditions. Its determination against the vendor, as before remarked, results from the inherent weakness of his claim.

The judgment of the circuit court as to the distribution of the proceeds of sale will be reversed and the cause remanded to that court with direction to enter an order of distribution in accordance with this opinion.

Reversed.