Case ID: ky_58/html/0289-01.html
Source: Caselaw Access Project
Author: {"author": "JUDGE DUVALL", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CASE 50 — PETITION EQUITY
    OCTOBBER 6.
    Chambers vs. Keene, &c.
    APPEAL FROM KENTON CIRCUIT COURT.
    1. To enable the assignee to recover against his assignor upon the implied contract resulting from the assignment, it is indispensable that the assignee should have prosecuted, with reasonable diligence, all his remedies, legal and equitable, against the debtor; and the evidence of the insolvency of the debtor which is furnished by the return of nulla Iona upon an execution is in general indispensable.
    
      2. Upon the assignment of a legal demand the assignee is bound to pursue his legal remedies -with reasonable diligence, and, if ineffectual, he must resort to any equitable remedy in his power. Where a note assigned is secured by mortgage, in whole or in part, the assignee must pursue his legal remedy -with the same diligence as if no such security existed.
    3. The 406th section of the Civil Code does not affect the rights and duties of the assignor and assignee; it only authorizes the personal judgment and judgment for foreclosure in the same action; it is still the duty of the assignee to cause his execution to issue on his personal judgment within a reasonable time; and a delay of nearly two months upon the part of the assignee to issue execution upon his personal judgment against the debtor, is not reasonable diligence, and he thereby forfeits his recourse upon the assignor.
    4. Any rule of practice by which the assignee is prevented from proceeding at the same time to enforce his personal judgment and judgment in rem, should not be adopted.
    Stevenson and Myehs for appellant—
    There was no delay in bringing suit. It was the duty of the court to render a personal judgment as well as a judgment in rem. (Civil Code, section 406.) The judgment as rendered in this case does not amount to a personal judgment which would authorize the clerk to issue execution. (Civil Code, sec. 420.) Appellant cannot be prejudiced by the error of the court in failing to render a judgment in personam. (Scott vs. Cleveland, 3 Mon., 63.) Due diligence did not require him to issue execution upon this irregular judgment.
    If the judgment be held to be in personam, as well as in rem, appellant had the right in his discretion to pursue either remedy, and was not compelled to issue execution before a sale of the mortgaged property. There is no rule prescribing what degree of diligence shall be exercised by the commissioner making the sale. After appellant obtained the order, he was not responsible for any delay in executing it. The court allowed the commissioner the interval between the terms to make the sale; and due diligence was exercised in making it.
    Appellant was not bound to sue out execution for the balance of the debt until after the sale was reported and confirmed; nor was the clerk authorized to issue an execution prior to that time. Appellant ought not to lose his debt because execution did not issue before the sale of the mortgaged premises. The correct practice is not to issue execution until after the sale.
    
      The proof shows that Keene bad been insolvent for two years before the last notes were due. Where a party is in failing-circumstances, the assignee ought to be held to strict diligence; but where the debtor is utterly insolvent, the rule is relaxed. On the subject of diligence see Taylor & Byers vs. Daniel, 9 B. Mon., 53; Thomas vs. Taylor, 2 J. J. Mar., 219; Roberts vs. Atwood, 8 B. Mon., 209.
    Howk is not entitled to a pro rata distribution out of the proceeds arising from the sale of the mortgaged premises.
    MeNZies and Phyob. on same side—
    The correct practice under the 406th section of the Civil Code is not to allow the plaintiff to enforce execution of both judgments at the same time, but to enforce either judgment first at his election. There was, therefore, no want of diligence on the part of Chambers. It was his right to have a sale of the mortgaged property before issuing his execution, especially as the debtor was wholly insolvent.
    Ordinarily the assignee must issue execution ten days after the judgment; but this rule is not inflexible. (Taylor & Byers vs. Daniel, 9 B. Mon., 53; 8 lb., 210; Clark vs. Prentice & Weis-singcr, 3 B. Mon., 586.)
    W. W. Thimble for Howk—
    It was the duty of Chambers to pursue with due diligence all of his remedies at law and in equity, in personam and in rem, before he could hold Howk bound on his assignment. Proof aliunde of insolvency is insufficient. (Smallwood vs. Woods, 1 Bibb, 546; Trimble, &e., vs. Webb, &c., 1 Mon., 103; Whaley vs. Vanhook, 4 B. Mon., 272; Levi vs. Evans, 7 B. Mon., 116; McFadden vs. Finnell, 3 B. Mon., 122; Graham vs. Chatogue Bank, 5 B. Mon., 49; Morrison vs. Glass, 5 B. Mon., 240; Hume vs. Long, 6 Mon., 119; Harnett vs. McGarvy, &e., 4 B. Mon., 393 ; Hunt vs. Armstrong, 5 B. Mon., 399; Baird vs. McElroy, 6 B. Mon., 416; Marr vs. Smith, 7 B. Mon., 189; Burk, &c., vs. Morrison, 8 B. Mon., 133.)
    As Chambers did not use due diligence Howk is entitled to his pro rata share of the mortgaged property on the note of Keene retained by him. (McGlanahan, &c., vs. Chambers, &c., 1 Mon., 43 ; Broadwell vs. King, 3 B. Mon., 452; 5,B. Mon., 49; Thomas vs. 'Wyatt, 5 B. Mon., 135.)
   JUDGE DUVALL

delivered the opinion oe the court:

Keene executed to Howk six notes, dated the 24th May, 1851, four of them for $633 71 each, payable in one, two, three, and four years, respectively; one of the remaining notes was for $10,561 90, and the other for $3,513 80, each payable four years after date. On the same day a mortgage was executed by Keene, to secure these notes, on certain real estate, for the payment of which they had been given.

All the notes, except the one last named, together with the mortgage, were assigned by Howk to Chambers, in June, 1851. In September, 1853, Chambers brought suit on the two notes which had matured in May, 1852 and 1853. In May, 1854, he also brought suit upon the third note, it having matured in May of that year. The two actions were consolidated. A personal judgment, and a judgment for foreclosure and sale of the mortgaged property, were rendered in the two actions in October, 1854, which judgments were satisfied by a sale of part of the mortgaged property.

On the 25th of May, 1855, Chambers filed an amended petition, setting up his two remaining notes which had fallen due the day before, and praying a foreclosure and sale of the residue of the property. Howk answered this amendment, alleging that he was still the owner of the note for $3,513 80, which had also fallen due, and praying that so much of the mortgaged property as was necessary might be applied to the payment of his debt. This answer was made a cross-petition against Chambers and Keene.

On the 5th July, 1855, judgment was rendered in favor of Chambers upon the two notes set up in his amended petition, and so much of the mortgaged property ordered to be sold as might be sufficient to pay them. The cross-petition of Howk was continued. The whole of the remaining mortgaged property was sold, and the proceeds applied to the satisfaction of tbe last judgment, leaving an unpaid balance of over $2,000. Howk became the purchaser at both of these sales.

For the balance due on his judgment, Chambers caused an execution to issue against Keene on the 4th of September, 1855, being eleven days after the sale made by the commissioner, and nearly two months after the rendition of the judgment. The execution was returned “no property found,” &c., in November following; and he thereupon filed an amended petition, seeking to make Howk liable, upon his assignment, for the balance due on the judgment against Keene. Howk answered, resisting the relief sought against him, on the ground that Chambers had failed to prosecute, with due diligence, his remedies against Keene.

The circuit judge was of opinion that Howk was discharged from liability by the laches of Chambers, and dismissed the amended petition. To reverse that judgment, Chambers prosecutes this appeal; and the question of diligence is, therefore, the only subject of inquiry.

To enable the assignee to recover against his assignor, upon the implied contract resulting from the assignment, it is indispensable that the assignee should have prosecuted, with reasonable diligence, all his remedies, legal and equitable, against the debtor; and the evidence of the insolvency of the debtor, which is furnished by an execution, and the return of nulla bona, is, in general, indispensable. Upon the assignment of a legal demand, the assignee is of course bound to pursue with diligence all the legal remedies for its enforcement, and, should they prove ineffectual, he must next resort to any equitable remedy of which it is in his power to avail himself. These general principles were established by the earliest decisions upon this subject, and they have been uniformly adhered to ever since. And, accordingly, where the note assigned was secured, in whole or in part, by a mortgage or other equitable lien, the assignee was bound to pursue his legal remedy with the same promptness, in all respects, as if no such security existed; nor was he ever allowed to suspend the legal proceeding until he should first have exhausted his equitable remedy. Such an inversion of the natural and legal order of proceeding would be obviously prejudicial to the interests of the assignor, and was never tolerated.

But it is contended that these obligations and rights growing out of the relation of assignor and assignee, have been essentially modified by the Civil Code, {see. 406,) which provides that, in an action on a mortgage or lien, the judgment may be rendered for the sale of the property, and for the recovery of the debt against the defendant personally.

Under the rules of practice which prevailed before the adoption of the Code, the holder of a note secured by mortgage had the right to bring his action at law for a personal judgment, and at the same time his suit in equity for the foreclosure of his lien; or he might adopt either of the two proceedings, at his option. But, as before suggested, if he held the note by assignment, it was indispensable that he should pursue promptly his legal remedies, in order to preserve his recourse upon his assignor. And the only effect of this provision of the Code has been to authorize a personal judgment, and a judgment of foreclosure and sale in the same action, instead of requiring two distinct forms of proceeding as heretofore. The rights of the assignee, and the duties of the assignor, remain wholly unaffected by it.

It was the duty of the appellant, therefore, to have caused an execution to issue on his personal judgment against Keene, within a reasonable time after the rendition of the judgment. The delay of nearly two months is certainly inconsistent with the reasonable diligence which he was bound by law to exercise. The fact that the debtor is proved to have been then insolvent, neither authorized the delay nor exempts the appellant from its legal consequences. Nor is the delay sufficiently accounted for by the. additional circumstance relied upon, that the appellant was in the meantime prosecuting, in good faith, his equitable remedy, by a sale of the mortgaged property. The rule of practice suggested by counsel, by which the plaintiff is in such cases prevented from proceeding at the same time to enforce both judgments, may be convenient and proper where the rights of none but the immediate parties to the suit are involved, but no such rule of practice is prescribed by the Code, and tbe courts should never adopt it in cases where the rights of assignees may be thereby jeopardized. In the enforcement of judgments of this description upon assigned notes, if either of the two remedies is to be postponed, it should be the enforcement of the equitable lien, for the obvious reason that there would in general be less probability of injury resulting to any of the parties interested. But whatever discretion the court might properly exercise in this matter, if the plaintiff in such cases would preserve his recourse against his assignor, he can do so only by adhering to the inflexible rule of law which requires, as the legal test of diligence, an execution upon his personal judgment, within a reasonable time after its rendition. If he departs from this rule, he does so at his peril.

There appears to be no cross-appeal on the part of Howk^ and for that reason the alleged errors of which his counsel complains cannot be inquired into.

The judgment is affirmed.