Case ID: nc_128/html/0380-01.html
Source: Caselaw Access Project
Author: {"author": "FuRciies, G. T. Eueoh.es, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JAMES v. MARKHAM.
    (Filed May 30, 1901.)
    1. JUDGMENT — Assignment—Judgment Creditors — Insolvents—> Junior Creditors.
    
    A judgment creditor of an insolvent can not be compelled to assign bis judgment to junior creditors wbo offer to pay tbe judgment debt.
    2. EXECUTION — Sale■ — Judgment—Mortgages—Junior Lienors— Senior Lienors — Marshaling Assets — Equity.
    An execution sale of real property for less than its value should be set aside in equity at the instance of a subsequent mortgagee who had tendered the amount of the judgment.
    AottoN by Mrs. N. V. James, guardian, G. W. Watts, W. II. Rowland and wife, and W. N. Cooper and wife, against E. I). Markham, Sheriff, J. S. Carr, First National Bank, and Morehead Blanking Company, heard by Judge W. A. Hoke and a jury, at October Term, 1900, of the Superior Court of Durham County. From the judgment of the Court, both parties appealed.
    
      Winston & Fuller, and Graham & Graham, for the plaintiffs.
    
      Manning & Foushee., and Guthrie & Guthrie, for the defendants.
   DEFENDANTS’ APPEAL.

FuRciies, G. T.

W. IT. Rowland and W. R. Cooper were partners engaged in the tobacco business in the town of Durham. They were unsuccessful in their business, became embarrassed, and are now insolvent. As such partners, they became indebted to one W. O. Blackmail, for which they executed their firm note; upon this nlote Blackmail brought suit in the Superior Court of Durham Ctounty, and at March Term, 1897, recovered judgment thereon for about $2,000. This judgment was duly docketed and became a judgment lien on their real estate in said county.

This firm was 'also- indebted to the plaintiff Watts, and on the 26th of August, 1897, Cooper and wife executed a mortgage to Watts on one-half interest of the Prize house and lot belonging to said firm, for 'the purpose of securing said debt due Watts. And on the same day the said Chopea* -and wife executed a mortgage to the plaintiff R, Y. James, on a lot or parcel of land of about fifty acres to- secure a debt due her by said firm. And on idle 24th day of September, 1897, the said W. IT. Rowland and wife, and W. R. Cooper and wife executed a deed in trust to E. C. Murray for -the purpose of securing various- creditors of said firm, on three lote, two in North Durham- and one on Main Street, on which W. R. Cooper’s brick storehouse stood. This trust was to secure balance of unpaid taxes, for the year 1896, to- pay the Black-nail judgment, a debt due defendant Clan* of $835.50, the Morehead Banking Company, and the excess, if any, to go to the First National Bank, of Durham, N. C.; and that on the 30th of January, 1899, said Blackmail sold and assigned his said judgment to the defendant Carr, execution having been issued thereon.

The Blackmail judgment, antedated both mortgages and the deed of trust to Murray, and therefore the superior or prior lien upon all the property conveyed in said mortgages and deed of trust.

The judgment being under the control of the defendant Carr, he caused all said property to be advertised for sale on the 6th of March, 1899, and was threatening to sell the two lots so mortgaged to the plaintiffs, Watts and Tames, under said BlaeknaTl judgment. To this the plaintiffs, Watts and James, objected and offered to pay Oarr the Blacknall judgment if he would assign it to' them'. This he refused to do. They then applied to Judge Moore and obtained a temporary restraining order against said sale, returnable before Judge Bryan. This order being in force on the 6th of March, the day the sale Was advertised to take place, it was postponed until the 27th of March, on which day Judge Bryan refused to grant an injunction against said sale, vacated the restraining order, and 'the sale was made of said property so mortgaged to plaintiffs, and the defendant Oarr bid off said property at 81,053.25, alleged by plaintiffs to be worth much more than that sum, and has taken a deed therefor from the Sheriff. The plaintiffs, Waltlts and Janies, were present at said sale, forbade the same, and to'ld the purchaser he would buy a lawsuit.

Hpon these facts, briefly stated, the plaintiffs, Watts, J ames, Cooper and Rowland, have brought this action against E. D. Markham, Sheriff, J. S. Oarr, Eirst National Rank of Durham, and the Morehaad Banking Company, to b'ave said sale set aside, the deed from the Sheriff to Oarr annulled and cancelled, and to' have the rights and liens of the parties declared, and ithe proceeds arising from a sale of said uropertv, to be miade under order of Court, applied according to the rights of the parties.

Since this action was commenced, the defendant Carr has commenced actions against E. 0. Murray individually, aud as trustee, against E. C. Murray and others, and R. V. James, guardian, against Mrs. R. Y. J ames, guardian, against E. C. Murray and E. C. Murray, ‘ trustee, W. R. Cooper, W. IT. Rowland, Creo. W. Watts, Mrs. R. V. James, guardian, and tibe Moretead Banking Company, and against W. IT. Rowland and oitihers. All of these aetions appearing to the Court to involve in some manner the same transaction, were consolidated by the Court — J. S. Can* objecting to said consolidation.

The Court submitted four issues .to. the jury. The first was as to Whether ¡tibe execution sale made by the Sheriff was irregular and contrary to the course of the Court; and, upon this issue, the jury were instructed if they believed the evidence to answer* “No.” The second issue: “Was said execution sale wrongful and contrary to the rights 'and equities of R. V. Jam'es and Geo.. W: Watte, and would tire same, if allowed to stand, cause them irreparable damage ?” On this issue, the Court instructed the jury that if they believed the evidence to answer “Yes.” The other issues were as to the distribution of the fund .arising from, 'the sale of said property, and are answered in the judgment of the Court. These statements present 'the case for discussion.

The plaintiffs, Waltibs and James, and the defendants, Carr, the First National Bank, of Durham, and the Morehead Banking Company, were ail creditors 'of the firm of “Rowland & Cooper.” ■ The firm -was insolvent, but each creditor had dome security for its indebtedness. The Blackmail judgment, owned by defendant Carr, was secured by a statutory Men on all the real estate owned by Rowland & Cooper. This property was, after the docketing of said judgment, conveyed by mortgages or in trust by Rowland & Cooper to. secure tire plaintiffs, Watts and Jam'es, as. above set forth, and also to secure the $835.50 debt due defendant Carr, the Bl'acknall judgment, the First National Bank, and the Morehead Banking Company, as above set forth.

It is conceded that the Blacknall judgment has tire priority and must be first paid. And it is admitted that the defendant Carr, being tihe owner of this judgment, h'as a. general control of its enforcement. Rut while the Sheriff is the officer of the law, he is to a certain extent the agent of the plaintiff in the execution, when he is specially directed to act. And what he does under the special direction of the plaintiff in the execution, and not necessary to be done for the enforcement of his execution and tire collection of the debt, if hurtful to others, he is responsible for; and the fact that the Black-nall debt was secured by a judgment lien made no difference ; it was the same, in effect, as if it had been secured by a prior mortgage on all the property. Sheldon on Subrogation, sec. 77; 14 Am. & Eng. Enc. (1st Ed.), 711; James v. Hubbard, 1st page Chan. Rep. 234. The plaintiffs,Watts and Tames, being junior lienors, were interested, parties and had 'the right to have the superior lien (die judgment) so enforced as not to damage them, if this could be dome w'i’thout damage to the superior lienor. And plaintiff© say this could have been done by selling other property upon which they had no lien; and that in order that this might be done they offered to pay the defendant Oarr the Blackmail judgment if be would assign it to them. This he was not boatnd to do: But it goes to show the good faith of the. plaintiffs and to establish their equities. Sheldon, supra, sec. 12; Arnold v. Green, 116 N. Y., 572.

It then appears that 'tire judgment lieai, which Iras been declared by this Court tlo be in effect, a statutory mortgage; is of mo greater dignity than if it had been a mortgage of prior date; that the action of the Sheriff, in selling the lots mortgaged to plaintiffs, under the advice and direction of defendant Carr, had ím greater effect oar the rights of the plaintiffs than if it had been made under the powers in a mortgage. And, if such a ©ale, made under the powers contained in a prior mortgage, would be set aside, the Sheriff’s sale of the 27th of March should be set aside. Welch v. James, 22 How. Prac. Rep., 474. That case is so much like 'the one under consideration, we take tibie liberty of quoting the head-notes: “Where an assignee of a judgment, which wtas a lien upon separate parcels of land belonging to the judgment debtor, one of which parcels wias subsequently conveyed to a bone fide purchaser, sold the latter premises on his judgment with a full knowledge that his judgment could be collected out of the o>bher unincuanlbered property of the judgment debtor, and after a tender of the amount of the judgment had been made to him without objection, upon which sale the assignee became the purchaser; held, thaft the sale be set aside with costs of the motion, and perpetual stay respecting the land in question, until the remedy against the other property had been exhausted.” And the Oourt in discussing the Case says: “It is quite evident that both the assignee and the Sheriff have been acting throughout with a view of favoring Titteworth at the expense of Dorr and Griswold. They persisted in selling Hie property in question after all the facts had been brought home to their knowledge, and in. the face of Dorr’s remonstrance and forbidding the sale, and Hie assignee even refused to take his money and assign the judgment.”

It is true that in 'this case the other property of Rowland and Oooper was not unincumbered, for the plaintiffs, Watts and James, 'held junior mortgage liens upon it. But so far as the defendant Carr’s judgment was concerned, it was. unin-cumbered. And it is also, true that Watts and James were not absolute unconditional purchasers.; .'but they were bona fide purchasers for valuable consideration. Potts v. Blackwell, 56 N. C., 449; Southerland v. Fremont, 107 N. C., 565.

Holding as we do, that the sale of these lots, so mortgaged to the plaintiffs, Watts and James, was not necessary to protect the assignee Oarr and to secure the payment and satisfaction of his judgment, and that said sale was prejudicial to the rights of Hie plaintiffs, Watts and James; that said as-signee was the purchaser at said sale for much less than its value, and that no vested righto of -third persons have intervened ; that it is a proper ease for equitable interference and that there was no error in the judgment of the Cburt below in setting aside said sale and ordering the cancellation of the Sheriffs deed,” eitc.

This being done, the question is presented as to> the application of -tire money arising from tíre sale of said property. And as it is agreed that there will ntot be a sufficient amount to pay all the debts named in the assignment to the defendant Murray; and as it seems that by some arrangement the property assigned to him has been sold and the proceeds are now deposited in bank subject to the order of E. 0. Murray, trustee, he-will proceed to paiy the Blaeknall judgment now belonging tio the defendant- Oarr, and then -tire' other debts named in said deed of trust in tire order -therein provided, leaving the plaintiffs, W'at’bs and James, to look to the property mortgaged to •them for the payment of their debts. This is made upon the understanding -that -there is a sufficient amount of property, conveyed in the- assignment of the 4th of September, to pay off all debts, including the Blackmail judgment, having liens prior to the 26th of August, 1891, this being the date of plaintiff’s mortgages. But if this is not so, then the defendant Clan* may sell tinder his judgment tire land conveyed to the plaintiffs, if said judgment be not satisfied. 2 Sitory Eq. Jur., sec. 1233; Bank v. Creswell, 100 U. S., 630; Clowes v. Dickenson, 5 Johns. Ch. Rep., star page 235. The judgment of the Court below is full and explicit in detail, and is

Affirmed.

PuaiNtiuKs’ Appeal ik Same Case.

Eueoh.es, C. J.

The matters involved in this appeal have been considered and disposed of in the defendants’ appeal in the same case.

Affirmed.