Case ID: ohio-st_31/html/0273-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Welch, 0. J. McIlvaine, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Babbett & Herman and others v. Morgan, Root & Co. & Raymond, Lowe & Co.
    Transcripts of judgments recovered before a justice of tbe peace were filed with the clerk in vacation, in pursuance of tbe statute (S. & C. 1093, sec 490), and the debtor afterward executed a mortgage which was recorded before the next term of the court. In an action to adjust the liens between the mortgagee, the owners of the justice’s judgments, and a creditor who obtained a judgment against the debtor at the next term of the court, and for distribution of tbe proceeds arising from sale of the mortgaged premises : Meld, That the proceeds remaining after deducting the amount due on the transcript judgments should be applied in satisfaction of the mortgage, and that any balance still remaining, together with the amount so deducted, should be applied, pro rata, in satisfaction of all the judgments.
    Motion for leave to file a petition in error to the District Court of Allen county.
    
      This case came into the district court by appeal, and involved the adjustment of conflicting liens upon a fund in the hands of the court, being the proceeds of land of J. M. Doty, sold under an order of the court. Three several parties claimed priority. One of the claims was based on transcripts of judgments rendered by a justice of the peace against Doty, amounting in the aggregate to some $257. The transcripts were filed in the clerk’s office, in vacation, in pursuance of the statute (S. & C. 1093, sec. 490). They were filed on the 7th day of May, 1877. A second claim was that of a mortgage creditor, whose mortgage was obtained and recorded after the filing of the transcripts, and before the next term of the court thereafter. A third party claimed by virtue of a judgment against Doty, recovered at the next term of the court, and which was a lien upon the land. The mortgage claim amounted to $1,066.85, and the court judgment to $792.79. The fund for distribution was from $1,000 to $1,200. By the order and decree of the ■court $257 of the fund, being the amount of the transcript judgments, was directed to be distributed and paid pro rata •upon the transcript judgments and the court judgment; the balance was ordered to be paid upon the mortgage, and if :any thing remained it was to be distributed pro rata between the owners of the judgments.
    The plaintiffs in error are the owners of the transcript judgments, and they now allege that this order of distribution was erroneous to their prejudice in this, that it gives them a pro rata distribution based upon the amount of their own judgments alone, whereas they were entitled to pro rata distribution based upon the aggregate amount of all the judgments, including the judgment in court. They contend that the true order of distribution is this: Pirst give the transcript judgments this larger pro rata dividend; next, satisfy the mortgage ; and if any thing‘is left, give it to the court judgment.
    
      Hughes ‡ Robb, for the motion.
    
      Cunningham $ Brotherton, contra.
   Welch, 0. J.

The act of March 29, 1856 (S. & C. 1098), gives to the judgments of justices of the peace, where transcripts are filed in court in vacation, a lien from the day of filing, “as against the judgment debtor” (and of course as against mortgagees claiming under him), but “as against . . . judgments rendered at the next term of court,” it gives a, lien to such transcript judgments only from the first day of the term. Here are two laws governing the rights of the parties. The one is the law of priority in time, and the other is the law of equality, irrespective of time. The law of priority is the law of the case as between the mortgagee and either or both the other parties, but the law of equality is the law of the case as between the transcript and the court judgments. It seems to me that it is the confounding of these two laws, and the application of them respectively to the wrong parties, that leads to any doubt or confusion as to the respective lights of the parties. This' statute plainly gives the transcripts a lien, as between them and every other claim except the court judgment, from the date of filing; and the law of mortgages as plainly declares that mortgages shall have effect from the date of their being filed for record. It is equally clear that this law of priority as between the transcript and the mortgage, and as between the court judgment and the mortgage, is in no way affected by the provision that the transcripts and the court judglnent, as between themselves, shall have equal lieus. That provision has its whole operation between the two parties. Its effect begins and ends with them, and the rights of all others are left as they would have stood if no suóh provision had ever been made. The whole effect of the provision is to compel each of these two parties, the owners of the judgments, to share pro rata with the other whatever either may acquire by priority over third persons. The provision that the transcript and court judgments, as between themselves, shall take effect from the first day of the term is simply a provision that they shall stand equal—that their liens shall take effect from the same day. The particular day is immaterial, provided it be the same day, because it affects no one but themselves. The first clay of the term was named, because it was the day on which court judgments took effect without any such provision. The provision is the same as if the words had been, “but the-transcripts shall have no priority over court judgments.”

How, then, stand the parties here? The transcripts, as between them and the mortgage, fastened upon and secured $257 of this fund, subject, however, to a pro rata division with the subsequent court judgment. The mortgage came in next, and fastened upon what was left of the fond, leaving out the $257. The amount thus secured by the mortgage could not be changed by the court judgment, or any other subsequent lien. It became a fixed fact. If anything still remained, it was taken by the subsequent court judgment, but subject to a like pro rata division with the transcript judgments. In other words, the liens attached according to their priority in time, but whatever wms thus secured by either the transcripts or the court judgment, must be shared in common by both. This seems to be the principle adopted by the court below in marshaling the liens of the parties, and a majority of us are satisfied that it is the right principle. It carries into effect all the provisions of the statute, according to both their letter and their spirit. While, on the other hand, the principle contended for on behalf of the plaintiffs in error disregards the provisions of the statute, both by making the transcripts and the court judgments unequal in right, and also by giving the mortgage more than what was left of the fund at the date of the mortgage. It gives both the transcripts and the moi'tgage more than their due, and instead of 'making the owner of the court judgment equal with those of the transcripts, it gives him nothing.

That we may see more clearly wdiich of the two theories-■contended for is the true one, let us clear the case of fractions and uncertain amounts. This we should do, because the right principle in this case must be the right principle in every similar case, irrespective of the amount of the fund to be distributed, or the relative amounts of the several claims. Suppose, then, that eacli of the three claims here was $1,000, and the fund for distribution only $1,000, how should the $1,000 be distributed? According to the rule adopted by the court below, the transcript judgments would get $500, the court judgment $500, and the mortgage nothing. According to the rule contended for here, and adopted by a minority of this court, the transcript judgments would get $500, the mortgage $500, and the court judgment nothing. The one rule gives the whole fund to'the transcripts and the court judgment, and the other gives the whole to the transcripts and the mortgage. Can any one hesitate to. say that the former is the true and just rule? The transcript lien, in the case supposed, attached and covered the whole fund before the mortgage was executed. There was nothing left for the mortgage to fasten upon. As between it and the transcripts, the latter took the whole fund, and had no court judgment been afterward obtained, it is conceded that they would have held the whole fund. But it is contended, on some principle of reasoning which I fail to comprehend, that the subsequent.rendition of the court judgment had the effect to take half of the fund from the transcripts and give it to the mortgage. That is to say, the recovery of the court judgment works no benefit to its owner, and only inures to the advantage of the intervening mortgage, which, without the judgment, would have been worthless. In other words, a mortgage, worthless while only one lien subsists against the property, is rendered good by a second lien, and that, too, where there is a privity and community of right between the holder of the first and the second. The owner of the second or subsequent lien is made thus to act against the interest of his quasi-partner by taking from him part of what he had already secured and giving it to a stranger. I can well understand why the owners of the transcripts should be affected by the recovery of'the court judgment, and made to contribute to the latter. There is a privity or equality of right subsisting between them, equally as there is between the several owners of the transcripts themselves. They are all in the same. category. But the mortgagee is to all of them a stranger, standing upon his own independent rights, and unaffected by any relations between them. I utterly fail to see why the subsequent recovery of a court judgment should affect him, either for better or for worse, but especially why it should affect him for the better. The principle contended for makes the court judgment a pure godsend to the mortgagee; without it, in the case supposed, he would have got nothing. It virtually makes the mortgagee- claim his rights under or through the court judgment, whereas, in our judgment, the statute- clearly creates a community of rights between the owners of the several judgments, and as clearly leaves the rights of the intervening mortgagee unaffected by the subsequent judgment. The statute says to the owner of the transcript, “ your lien attaches, for the full amount of your claim—no more, no less—from the date of tiling, but subject to the risk that a subsequent court judgment may participate with you;” and it says to the mortgagee, “ your lien attaches from its date, and takes what is left to the amount of your claim, and your rights can not be affected by any subsequent lien.” The objection made to the plan of division adopted by the court below is, that it gives the court judgment priority of right over the mortgage. It does no such'thing. There was nothing left as a subject of competition between the court judgment and the mortgage. The transcripts had taken it all. Had the fund been larger, had it been, say $1,100, instead of $1,000, so that $100 had been left unabsorbed by the transcripts, that $100 would have-been a subject of competition between the court judgment and the.mortgage, and the mortgage, and not the court judgment, would have taken it. As to what had been already taken by the transcripts, the court judgment and mortgage are not brought into conflict at all. What the court judgment gets, it gets from the transcripts, and not by competition with the mortgage. What difference does it make to the mortgagee -whether the owner of the transcripts keeps the whole amount secured by his lien, or whether he divides it with the owner of the court judgment ? The mortgagee has no interest in it, and it is none of his business what becomes of it, or how it is divided.

I am aware that this holding is apparently in conflict with the rule laid down in Choteau v. Thompson, 2 Ohio St. 115. There, as is claimed to be the ease here, two of three several parties were held to be equal in right, while a third was held to be superior to one of them and inferior to the other. But the cases are unlike in their essential facts. The subject of the lien in that case was a building, to the erection of which two of the parties had themselves contributed—it was to a certain extent a thing of their own creation. It was only by construction that the lien which preceded and the lien which succeeded the mortgage were held to be equal in right. There were equitable reasons for giving the prior one of these liens the preference over the other. There was the absence of direct statutory provisions fixing the rights and relations of the parties, and the "court seem to have marshaled the liens upon an equitable rather than upon a legal basis. Without undertaking to say that the rule there adopted was not the right one for the case,'we are unwilling to extend it to cases like the present, -where the analogy is not perfect. Properly'speaking, it is not true, in either case, that two of three parties were equal, and the third was superior to one and inferior to the other. It can not be true in any case. The thing is morally and legally as well as mathematically impossible—just as impossible as an inclined level, a crooked straight line or a square circle. What we mean, when we say that a third person is superior to one and inferior to the other of two equals, is that he is superior to one of them in onerespect, and inferior to the other in a different respect. In the present ease, as to the $257, the judgment creditors are equal, and they are all superior to the mortgagee. As to so much of the remaining fund as is necessary to satisfy the mortgage, the mortgagee is superior to all the judgment creditors; and as to any remaining balance of the fund the judgment creditors are all equal, and all, of course, superior to the mortgagee. Nor do we think the cases of Brazee v. Bank, 14 Ohio, 318; Halliday v. Franklin Bank, 16 Ohio, 533, should be regarded as authorities necessarily in conflict with the decision of the court below. The facts in those cases, as well as the statutory provisions on which they stand, are essentially different from those of the present ease. There was in those cases at least an apparent conflict or repugnancy between different statutory provisions, which rendered it difficult to apply them to the facts of the cases. No such conflict or difficulty exists in the present case. The court below adopted substantially the principle established in the case of Day et al. v. Munson et al., 14 Ohio St. 488; and we think it the correct principle. ■ Motion overruled.

McIlvaine, J.,

dissenting. The fund to be distributed is insufficient to satisfy the liens. The liens are held by three classes or grades of creditors, which have been tersely designated 'as transcript, mortgage, and judgment creditors. These liens accrued, in point of time, in the order named, and I affirm that the rights of these creditors must be preferred in accordance with the exact order of time in which their liens attached. The first in time is first in right; the' second in time, second in right; and the last in time, last in right.

The right of each class depends solely upon statutory law. The right of the judgment creditor is founded on section 421 of the code, which provides : “ The lands and tenements of the debtor, within the county where the judgment is entered, shall be bound for the satisfaction thereof, from the first day of the term at which judgment is rendered.” The right of the mortgage creditor is based on the act of March 18, 1838, which provides : “That all mortgage deeds do and shall take effect and have preference from the time the same are delivered to the recorder of the proper county, to be by him entered on record.” - The case shows that the mortgage was delivered for reéord previous to the first day of the term at which the judgment was rendered; hence it is perfectly clear that, as between the mortgage creditor and the judgment creditor, the latter has no right to the fund until the former is fully satisfied.

The right of the transcript creditors rests upon section 490 of the code, which provides: “ Such judgment, if the transcript shall be filed in term time, shall have a lien on the real estate of the judgment debtor from the day of filing; if filed in vacation, as against the debtor, it shall have a lien from the day of filing, but, as against other transcripts filed in vacation and judgments rendered at the next term of the court of common pleas, it shall have a lien only from the first day of the next term of said court.” The case shows that these transcripts were filed in vacation next preceding the term at which the judgment was rendered, and before the time when the mortgage was delivered for record. Hence, it is conceded that the lien of the transcript creditors is superior to the lien of the mortgage creditor; and it has been shown that the lien of the mortgage creditor is superior to that of the judgment creditor.

The whole difficulty in the case is in determining the relative rights, under section 490, between the transcript creditors and the judgment creditor. It is assumed that their rights are equal. This I deny. I concede, that as between themselves, their liens are concurrent; but as between themselves, the lien of neither commenced to run until the lien of the mortgage had vested ; and yet, as between the transcript creditors and the mortgagee, the liens of the former vested before the mortgage was delivered for record.

The solution of the difficulty, however, is plain and easy. It is found in the answer to this question : "What right did the transcript creditor secure by the filing of a transcript of his judgment ? The statute answers: Such judgment as against the debtor shall be a lien on the real estate of the debtor from the day of filing. "When the transcript lien was thus secured, the real estate of the debtor was not incumbered by either the mortgage or subsequent judgment, so that the entire estate of the debtor was bound for the payment of the transcript lien. Such, unquestionably, is a true statement of the legal right of the transcript creditors, upon the facts existing on the day of the filing of the transcripts; and as between them and the mortgagee, who subsequently came into the shoes of the debtor, the right to appropriate the entire estate of the debtor to the payment of their claims, if necessary, is beyond dispute. The right, however, of the transcript creditors to appropriate the entire estate, if necessary, to the payment of their .claims, is subject, by the law under which it was secured, to a condition thus expressed : “ But as against' other transcripts filed in vacation and judgments rendered at the next term of the court of common pleas, it (such transcript) shall have a lien only from the first day of the next term of said court.” So that while the transcript creditor is entitled to full payment, as against the subsequent mortgagee, he is only entitled to full payment, as against subsequent judgments, which become liens on the first day of the succeeding term, when the estate of the debtor on which the liens attach is sufficient to pay all the judgment liens. While there is no provision for letting in a subsequent mortgage until such transcript creditor is fully paid, there is, likewise, no provision for letting in subsequent judgments until all mortgages prior thereto are fully satisfied. The true rule, therefore, for distributing the proceeds of such estate is apparent. The transcript creditor is entitled to such portion of the proceeds as he would receive if there had been no mortgage, and the mortgagee, as if there had been no subsequent judgments.

The proposition, that the transcript creditor, by filing his transcript, secured a lien only on , so much of the debtor’s estate as was equal in value to the amount of his judgment, is a fallacy; and it is equally fallacious to hold that such transcript lien was secured for the benefit of subsequent judgment creditors. The lien of the transcript attached to the whole estate, aud for the sole benefit of the transcript creditor. The only limitation upon his right is found in the lien itself, which is declared to be concurrent with that of a subsequent judgment. But a subsequent judgment creditor has no interest in the lien of the 'transcript creditor. Ilis rights must be worked out through the strength of his own lien, and not through that of the transcript creditor. There is no community of interest between these parties. Their claims are as adverse, between themselves, as they are against the intervening mortgage. No proposition can be plainer than this one. It is apparent on the face of the statute. The decree helow took from the fund realized from the sale of this estate a sum equal to the amount of the transcript judgments, and divided the same, pro rata, among the transcript and subsequent judgment creditors, and gave the balance to the mortgage creditor. Now-, the prorating of the amount of the transcript judgments among the transcript and subsequent judgment creditors, must have been decreed upon either one or the other of the following grounds: 1. That all these judgment creditors had a joint or common interest in the lien of the transcripts; or 2. That the liens of the several judgments were equal in point of right. I have already shown that the first theory is false, and the second can only be true on the hypothesis that the several liens were equal in point of time. There is no doubt the decree was based on this latter hypothesis. It is true that the statute makes them to be concurrent; but in order to make them concurrent, as between themselves, the inception of the transcript lien is expressly postponed to the date of the inception of the latter judgment lien; and, therefore, if the equality of these several liens, as among themselves, can be maintained, it is clear that they must all be postponed to the lien of the mortgage, which antedates the time fixed by the statute, as the commencement of the concurrent liens of the judgments; while the court below, in order to maintain the supposed equality among all the judgment creditors, must have advanced, contrary to the express provision of the .statute, the lien of the subsequent judgment to the date of the filing of the transcript, in order to give it preference over the intervening mortgage.

The true meaning of this section (490) of the code is found in its plain and unequivocal terms; hence, liens of the transcripts and the subsequent judgment became concurrent aud equal in all respects, from and after “ the first day of the next term of said court,” and then only in case no intervening rights had accrued. Where the rights of third parties have intervened, the prior lieu of the transcript is preserved; for the statute provides that the transcript shall have a lien from the day of filing the same, as against the debtor, aud, of course, against any one standing in the debtor’s shoes. Nor does the intervention of such rights create, enlarge, or advance the right of the subsequent judgment creditor. The only lien of such creditor is created by section 421 of the code, which binds the debtor’s lands aud tenements from and after the first day of the term at which the judgment is rendered; and such lien is inferior to a prior mortgage, whose rights are secured under the mortgage act.

The only right given to such subsequent judgment creditor, by section 490 of the code, is to insist that the residue of the fuud, after satisfying the prior mortgage, shall not be reduced by the payment to the transcript creditors of a greater portion of the fund than they would have been entitled to receive if the mortgage had not intervened.

Again; in my judgment, the construction given to section 490, by the court below, would necessarily lead to this absiird result, namely: it would give to the subsequent judgment creditor a pro rata share of the fund secured by the transcript lien in a case where the intervening right was acquired by an absolute purchase of the estate as well as by the mortgage deed.

It has been suggested that my construction of these statutes is unsound for the reason, that it enlarges the right secured by the mortgage, in case a judgment be taken after the lien of the mortgage is vested, or in other words, when the mortgage lien attached it was subject to the payment in full of the transcript judgment, whereas, by reason of a subsequent judgment, which is admitted to be inferior to tbe mortgage, the right of the mortgagee is postponed only to a partial payment of transcript judgments.

The trouble with this suggestion is that, as a legal proposition, the premise is false. I admit that when the mortgage lien attached it was inferior to the transcript liens, and that it must ever remain so; but the extent of the right secured by the transcript creditors was not then ascertained or ascertainable. The extent of that right depended on the fact whether or not a subsequent judgment would be rendered. The lien of the transcript creditors was subject to this future contingency, whereas, the mortgage lien was subject only to the rights of the transcript creditors, which rights could be determined only by future events. So that the lien of the mortgage is no more'enlarged by the subsequent judgment than it would have been by a partial payment of the transcript judgments, and in a legal sense such payment -would not have affected the legal status of the mortgage creditor. His lien remains the second lien upon the premises as it was from tbe date of the record of the mortgage. Nothing more, nothing less.

The decree below involves the proposition that the transcript creditors, in their effort to secure themselves, become trustees for the benefit of the subsequent judgment creditors. A lien, which was intended by the statute for their own benefit, is converted, by judicial legislation, into a trust for themselves and others, simply because a mortgage lien, inferior to their own, is created and declared, by statute, superior to subsequent judgment liens. To illustrate this proposition, we will suppose, in approximation to the facts of this case, that the amount of the transcript judgments was $250—the mortgage $1,000, the subsequent judgment $750, the value of the estate $1,000. If the mortgage had not intervened, the judgments would have been paid in full. But the mortgage having intervened, the $250, secured by the transcript liens, are distributed pro rata between them and the subsequent judgment creditor—giving one-fourth or $>62.50 to the transcript creditors, and the balance secured by their liens, to wit, $187.50 to the subsequent judgment creditor, who acquired no lien until the whole estate, plus $250, had been consumed by creditors, whom the law preferred to him.. This decree does not only affect the mortgagee, but it takes from the parties first in time and first in right—the transcript creditors—three-fourths of their security, and gives it to a party whose lien first attached, when the estate was insufficient to satisfy pre-existing liens.

While I regret the necessity for dissenting in this case, I may in justification say that, in my opinion, the exact question, in principle, has been heretofore decided by this court, in the very carefully considered case of Choteau v. Thompson, 2 Ohio St. 114. That case, as I understand the majority of the court, is not intended to be overruled. An effort is made, however, to distinguish between it and the present case, but in my judgment, the distinction is without a. difference in principle. In that case, as in this, a mortgage lien intervened between two other liens of different dates, but which were declared to be concurrent as between themselves. The cases are sought to be distinguished on the ground that the supposed equality, between the first and last liens in that case, was determined by the court upon a certain construction of the statute under which they arose, -while in the present case, the equality is declared by the statute in express terms. In each case, I insist, the question was controlled, by force of the statute. In Choteau’s case the lien which preceded and the lien which succeeded the mortgage were created under the mechanic’s lien law, and in determining that these liens were concurrent, the court considered many facts and circumstances not germain to the case before us; but after the question of equality was ascertained in that case, it stood, upon all fours, with the present; aud hence, in determining the question in this, by the authority of that case, it is of no importance what facts and circumstances -were considered by the court in settling the concurrence of the first and third liens.

For all the purposes of this case, Choteau’s case may be stated thus: A lieu was secured under the mechanic’s lien law upon certain real estate. This lien was subject to a ratable distribution of the proceeds of the property with other hens subsequently secured under the same statute. Afterward a mortgage lien was created on the same property, and after that other liens under the mechanic’s lien law were taken. The case was before this court on appeal reserved, and the fund was directed to be divided among the several leinors as follows: That the leinor first in time should receive what he would be entitled to receive, if the mortgage had not intervened; the residue should be applied to the satisfaction of the mortgage, and if any balance remained, it should be given to the holders of the subsequent liens taken under the mechanic’s lien law.

My judgment is in eutire accord with this decision.

Gilmore, J., concurred in the dissenting opinion