#### Scott’s Appeal. [Smith’s Estate.]

On the distribution of an assigned estate, an auditor found, as facts, that the lien creditors consented to the sale of the real estate, without an order of the court, clear of encumbrances ; that the real estate sold for less than enough to pay all the liens ; that the assignee paid the liens reached out of the real estate fund, and claimed credit in his account for such payment, to which no exception was taken ; that the subsequent lien creditors released their liens, with the proviso that the leases should not bar the claims for payment out of the assigned estate or out of the proceeds of the sale of the real estate. The auditor held, as matter of law, that the subsequent unreached lien creditors could not compel the marshalling of the assets so as to allow subrogation on their part to the pro rata dividend which the prior lien creditors, paid by the assignee, would be entitled to if they had been allowed to participate with the general creditors in the personal fund. The court below confirmed the report of the auditor. *Held,*that the proceedings should be affirmed.

Feb. 10, 1887.

Appeal of A. Scott et al., trading as A. Scott & Son, No. 213, Jan. T., 1886, from decree of C. P. Delaware Co., dismissing exceptions to the report of an auditor distributing the balance in the hands of the assignees for the benefit of the creditors of John Smith, No. no. Paxson and Green JJ., absent.

George E. Darlington, Esq., was appointed auditor to distribute the balance of $4,440.14 belonging to the estate remaining in the hands of the assignees. He reported substantially the following facts:

On Jan. 4, 1884, John Smith and his wife, made a general assignment to William H. Miller and Norris J. Scott, of all the real and personal estate of the said John Smith, in trust for his creditors. The personal estate was appraised at $5,238.60, and the real estate at $15,120.00, making a total of $20,358.60.

At the time of the assignment the real estate was encumbered with the following liens created by the assignor, all of which had matured and were past due: 1, a mortgage of $8,000, held by Caroline Pennock and William H. Miller et al., executors of Caspar W. Pennock, deceased, secüring a bond of like amount given by the said John Smith; 2, a judgment of $2,000, held by the said William H. Miller, one of the assignees, in his individual right; 3, a judgment of $1200, held by the firm of A. Scott & Son; 4, a judgment of $543-32> held by George Drayton; 5, a judgment of $1800, held by the said firm of A. Scott & Son; 6, a judgment of $345, held by *622the said William H. Miller individually; making a total of $13,888.32. The interest was largely in arrears on all of these liens, swelling, to figures somewhat beyond the appraisement of $15,120, the full amount due.

In order to enable the assignees to make sale of the real estate without an order of court, etc., the record lien creditors, among them A. Scott & Son (of which firm Norris J. Scott, assignee, was a member), agreed to release their liens. The property was purchased by Edward Worth for $15,062.92. This was settled for as follows: Mrs. Wm. H. Miller, who was the real owner of the Pennock mortgage, took a new mortgage for $10,000, as a first lien, and Miller took a second mortgage for $2,000. The Pennock mortgage, now $9,440.25, and Miller judgment, now $2,361.55, were then marked satisfied. This left a balance of $3,262.92 in the hands of the assignees. With this, the first Scott judgment, and the Drayton judgment, were paid by the assignees, and satisfied on the records, leaving a balance, after expenses, of $502.54 of the realty fund for distribution, as shown by their account as filed. To enable the assignees to make title, Scott & Son released their lien not reached, with the proviso, “ that nothing herein contained shall invalidate the lien or security of the said judgment upon the other estate of the said John Smith, nor in any wise bar a claim for payment of said judgment out of the proceeds of the sale of said real estate by said assignees, as though the same had never been released.” Miller also released his lien, with the proviso that “ nothing herein contained shall invalidate the lien or security of the said judgment upon the other estate of the said John Smith, nor in any wise bar a claim for payment of the same out of the assigned estate of the said John Smith, as though this release had not been given, nor out of the proceeds of the sale of the above described real estate.”

The auditor reported, on the questions of law, as follows:

“ Mr. Price claims the fund is to be distributed as if no lien claims had been paid, and as if the whole of the proceeds of sale of real estate was here for distribution, less costs, expenses, &c., along with the personal estate funds. Then, that all the record liens are to be first paid pro rata, along with the unsecured debts, out of the personal fund, and the balance of the record liens are then to be paid out of the real estate fund in the regular order as the liens stand. That the bonds of the record lien creditors have a right to a pro rata on the personal fund as if the real estate had not been sold. This position is taken by Mr. Price for the unpaid judgment claims of A. Scott & Son and of Wm. PI. Miller, and not fora dividend to be made by the auditor to the satisfied mortgage and judgments. But those claims on the bonds he presents for the equitable rule of distribution, and for the benefit of the after-lien creditors.

“ There is no question raised against the position, also taken by Mr. Price, for A. Scott & Son and William PI. Miller, that, inasmuch as the real estate fund did not pay their two judgment debts *623in full, both debts in each case are to be considered and treated as one debt, and entitled to a pro rata share out of the personal estate fund on the whole debt, without regard to the amount paid on either out of the real estate fund, and the balance of the said debts, remaining unpaid, are to be paid out of the real estate fund, in the order in which the liens stand on the record, until the whole debt is satisfied, if the fund is sufficient.

*“As*the assignees sold the real estate and divested the mortgages, not by any authority of law, but by an arrangement with the lien creditors, were they not all bound by that agreement, and had the lien creditors not the right to the real estate fund in the order of their priority, and which, by the agreement, was to go to the lien creditors, not by virtue of the assignment, but under their agreement, and as the consideration for letting the real estate be sold clear of their liens ? Having so agreed, and the first mortgage lien creditors having so received full payment and satisfaction of the mortgage, and of the accompanying bond, how can he, or anyone for him, present the bond as an unpaid debt, entitled to any part of the assigned estate? If that could not be done, how can a satisfied bond, not entitled to any part of the fund for distribution, or of the assigned estate, be brought in to affect the distributive shares of other creditors? There is surely an agreement in this case that the purchaser should have the right to either pay off the record liens to the lien holders, or to require them to be satisfied by the sale-proceeds as far as it would go.

“ There does not appear to be any agreement that the assignees were to take the fund required for this purpose; and, if the proceeds of sale had been just sufficient to pay all the record liens then no part of this fund would ever have passed into the hands of the assignees for distribution among creditors, and the bonds in such case, not being entitled to receive any further payment from any source, could not be allowed as claims for unpaid debts of the assignor.

“ The assignees would receive their compensation for services in the sale, not from the funds that went to pay these debts, because,, never having handled it, they could not get it from this fund which would pass directly to creditors, but would get it from other funds of the estate, and would be entitled to receive it by reason of being required to give bonds for the appraised value of the real estate, whether the proceeds of sale passed through their hands or not.

“ A mortgage creditor, who had ample real estate .funds realized, out of which his mortgage debt could be fully paid, would not be permitted to claim a pro rata out of the personal fund to the injury of unsecured creditors, and those creditors not to be subrogated to the mortgagee’s rights in the real estate fund.

“ The releases, executed by Wm. H. Miller and by A. Scott & Son, to free the real estate from the liens of their judgments, were executed to enable them to realize full payment of their first judgment at least (as they both appear to have stood ready to protect *624them by their bids), as well as to enable the assignees to sell clear of liens; and the proviso, made in the releases, the auditor construes to mean that they did not relinquish their rights to claim pro rata payment on their bonds out of the assigned personal estate of John Smith, in case the real estate proceeds did not fully pay their judgment claims, and that they did not relinquish their claims on their liens on the real estate fund remaining after the prior liens were paid. For, surely, if the real estate funds had fully paid all the record liens against it, these creditors would have no standing on the personal estate funds here for distribution.

“ The assignor could not have taken away the rights of the lien creditors to the real estate fund by his deed, nor could he have compelled them to accept a pro rata distribution with the general creditors ; therefore the funds must be distributed under the rules of distribution governing assigned estates for the benefit of creditors under a general assignment.

“ The auditor is of opinion, after examination of the Pennsylvania authorities, that, if the assignee can sell the real estate assigned for sufficient amount to pay all the record liens on it, he is fully empowered to do so and to pay those liens out of the purchase money as preferred claims on that fund. But if, to avoid recourse to the courts for an order of sale, where the liens are greater than the property would sell for, or where it is sought to divest a prior mortgage lien, and to sell the property clear of incumbrances, the assignee is forced to enter into an agreement with record lien creditors, for the advantage of all parties interested, to sell the land clear of record liens, and that the liens shall be paid, in the order of their record-standing, out of the proceeds of sale, the assignee may or may not be entitled to receive the purchase money necessary for the payment of such liens; but, if he were entitled to receive it, he would be bound to pay it to the record lien creditors, as agreed to be done, and they would be bound to receive it, and satisfy their liens on the record, and the assignee could not hotch-pot the funds, and drive such record lien creditors to first look to the personal fund for a pro rata distribution, before becoming entitled to receive the amount of their liens from the real estate fund.

“ And the purchaser, at the time he pays over the purchase money, has the right to see that it goes to the lien creditors and not into the general fund, and that the record is cleared of the liens; which would hardly be done unless the money was paid to the lien creditors as per agreement, or the purchaser substituted his mortgage or judgment in the place of the liens to be satisfied.

“ The two creditors here, who are invoking the rule, established in decedent’s estates, that the personal property must be first exhausted in the payment of record liens and other debts before any part of the proceeds of sale of real estate can be taken, were both owners of prior liens that were fully paid and satisfied, and it was to their interest, as it appears, to agree that the property should be *625sold clear of liens, to make it bring a greater price, and that they would take their chances out of such proceeds, as well as in their rights on the personal fund.

“ And, so well was Mr. Miller satisfied with the arrangement, that, in order to facilitate the chances of one of the bidders in the purchase of the property, .and to enable him to run it to a fair and full price, he agreed with him to not only let the amount of prior liens which he controlled remain invested on the security of the property, but he further loaned him $200 more on the same security and took the purchaser’s bonds and mortgages for-$ 12,000.00, which enabled him to pay the'assignees $3,262.92 in cash, out of which Scott & Son could be, and were, paid their prior judgment lien, and George Drayton was paid his judgment lien, leaving a balance of the proceeds of the sale in the hands of the assignees, which is in the fund for distribution.

“ There can be no doubt, by the evidence, that the agreement to sell the real estate, made between the lien creditors and the assignees, was acquiesced in by William H. Miller and by A. Scott & Son, and that they were parties to it, and that the mode of satisfying the record liens was agreed to by them, and that no demand was made, by any lien creditor, or by either assignee, that the purchase money should be paid to the assignees, to be distributed by them under any rule governing the distribution of funds of an assigned estate in the hands of assignees.

“Under the authority of Graeff’s Appeal, 79 Pa., page 146, there is no doubt, and it is not disputed, that, in the distribution of the fund in hand, the two record lien claims of William H. Miller are to be considered as one debt; and he will be entitled to a pro rata distribution from the personal fund on the whole amount of the two liens combined, notwithstanding the first of his liens was paid in full and satisfied out of the proceeds of real estate. And this rule will also apply to the two record liens held by A. Scott & Son. And the balance of the real estate fund in the hands of the assignees, will then be applied to the payment of their after-judgment liens, according to their priority, as far as necessary to pay the whole debt in full, if the fund is sufficient.

“ Therefore, the only question in this case appears to be: Is there an inflexible rule of law that requires all debts of an assignor (whether or not secured on real estate and previously fully paid and satisfied out of proceeds of such real estate by agreement of the lien creditors and assignees) to be brought in for a pro rata distribution on the funds arising from the sale of personalty, as the fund out of which all debts must be first paid; and can such rule be invoked by lien creditors, who are parties agreeing to such payment and satisfaction of such liens, for the purpose of increasing the balance of the real estate fund, from which their after-lien debts may be paid ? Or, in other words, can William H. Miller and A. Scott & Son require the auditor to distribute a pro rata share of the per*626sonalty fund to the satisfied mortgage lien of Caroline Pennock, executrix, for the purpose of increasing the real estate fund to the amount said mortgage lien or the bond accompanying the same would have received from such personalty fund if the fund had been first distributed and the bond had been presented for payment; and this, to enable said parties to get .a preference over general creditors by an award to a satisfied mortgage obligation, already paid from assigned property on which it was a first lien, by the sanction of these parties, and thus diminishing the pro rata share of general creditors and increasing the real estate fund for the benefit of said two lien creditors?

“ In Graeff’s Appeal, the assignment is in trust for all the creditors, pro rata, without regard to the nature of the securities; and it is held, the creditors are equitable owners. Also, further, that Graeff was not an equitable owner of as many separate shares as he had distinct debts (he owned three judgments, two of which had been paid in full from proceeds of sheriff’s sale of real estate, and the third was partly paid in same manner). His interest was to the extent of his whole claim on the estate. It cannot alter the case that the real estate was the first resorted to. This was for the benefit of the other creditors. It might have happened that the proceeds of that fund would have paid his whole debt, or so much of it that his pro rata dividend on his whole claim would have more than paid the balance. Of course he would be entitled to no more than his entire balance. Some of his debts being paid in full and the judgments- being satisfied, did not, pro tanto, extinguish his title to come on the assigned estate as one of the original cestuis que trust, until his entire interest was extinguished, and the fact that the pro rata is ascertained by an auditor before the amount was made on the mortgage ought not to make any difference.

“Morris *v.*Olwine, 22 Pa. 442, held that creditors having judgments on the real estate, had not only a right, but the law imposed it upon them as a duty, to resort to the personal estate as the primary fund for the payment of debts. If that was sufficient for the purpose, the real estate was entitled to exoneration. This obligation may not exist where the creditor has two remedies, both of which may be pursued until he obtains full satisfaction, but the accumulation of remedies certainly does not diminish his rights. ( The court appears to hold that a judgment creditor has a right to resort to the personal estate for the payment of his whole debt, without regard to his lien on the real estate; that right is not injured by any lien which he may have by mortgage on the land.) The only change in his condition produced by the assignment is that, instead of resorting to an execution, he must resort to the assignee.

“ The rule applicable to his case, as stated in Shunk & Freedley’s Appeal, 2 Pa. 309, is that ‘ lien creditors may have recourse to the personal estate, as the primary fund, for their whole demand, in the first instance, and subsequently to the land for the residue.’ If *627the other creditors think the land is more than sufficient to discharge the liens, this may be ascertained in the way adopted by the common pleas, or they may, if they agree, discharge the liens by the application of the personal estate in the first instances and then divide the proceeds of the real estate pro rata among themselves. They have no equity beyond this.

“ Miller’s Appeal, 35 Pa. 482, says: ‘The extent of the creditor’s interest in the assigned estate is fixed by the deed of trust. It is, indeed, equitable; but, whatever it was, he took it under the deed and it was only as a part owner that he had any standing in court when the distribution came to be made. If the collateral security be against the same debtor, and proof sufficient to discharge the debt, it may entirely relieve the assigned fund from one drain upon it, or, by subrogation, the remaining claimants may avail themselves of the satisfied creditors’ rights to it. Miller’s right to participate in the distribution at all is only a right in equity; it requires the aid of a chancellor, and that aid will not be given if the whole debt be paid.’ Strictly accordant with this view, we understand - to be the decisions in this state, in Morris *v.*Olwine, 22 Pa. 441; Keim’s Appeal, 27 Pa. 42.

“ Shunk’s Appeal, 2 Pa. 304: In this case the estate was assigned for creditors generally. At the time of the assignment, there were several judgments and other liens on the real estate. The as-, signees declined to sell, being uncertain whether the purchase money would pay these liens and enable them to make title. The lien creditors agreed they should sell, reserving their right to the proceeds, amounting to about $44,000. This was done and, by an arrangement, some of the liens were allowed to remain and credited as payment to the purchasers, so that but about $13,000 was received by the assignees. The court below, Krause, P. J., says: ‘ Estates are held to be equitable assets in chancery, which are made subject to the payment of debts by the act of the debtor, and which, without his act, are not answerable for such purpose. The instrumentality of that court is necessary to their distribution, and this it always withholds from creditors who refuse to bring into hotch-pot what they may have received out of legal assets, on the principle that equality is equity. But equity follows the law, and adopts the rules of the courts of law, wherever estates are made legal assets by statute; and then it enforces claims, charges, and antecedent liens in rem according to their priorities, whether or not those claims, charges, &c., or the assets be legal or equitable: 1 Story, Eq. 520, 524. Now, all the debtor’s property in Pennsylvania is a legal fund for the payment of demands upon him — his chattels are so at common law, and his lands are expressly made so by statute; in which case it is seen that equity follows the law. It is not perceived, therefore, that this principle in equity of enforcing equality in distribution is applicable here; nor that the other principle is applicable which seems to result from the doctrine of marshalling securities. It is true that, wher*628ever it can justly be done in this state, creditors are so placed by the courts as to restrain those who have a claim on two funds from taking away all the chances another may have on one of them of obtaining satisfaction; but there is no principle which takes from a creditor any part of his security until he is completely satisfied: 19 Johns. 493. And, consequently, if the lien creditors here have a right at all to come on the personal property, they have it without going into hotch-pot, or surrendering part of their real estate securities. As between them and the other creditors, the principle of either marshalling assets or securities is inoperative and can only be applied in the case of a contest for a surplus beyond the amount of incumbrances, between the assignor and creditors who are not secured by liens. Here, however, there is not a surplus, but a deficiency.....In a case like this, therefore, in which the assignor imposes no terms, prefers no creditors, expresses no special intent, but hands over an insufficient real and personal estate for distribution according to law, the court, it would seem, must base its orders and decrees on the principles stated, and consequently distribute the fund arising from personal effects pro rata among all the creditors, and thus ease the land, pro tanto, of its burden, whether the claims be secured by liens on the realty or not. ... In this case, the sale was made with the concurrence of the incumbrancers; the assignees showed a commendable zeal for the interests of creditors and enlarged the fund by judicious management; and for that reason, commission is allowed them on the whole amount charged in their account.’ The per'curiam opinion says that "nothing is plainer than that lien creditors *may*have recourse to the personal estate as the primary fund for their whole demand in the first instance and subsequently to the land for the residue. Why should they not do so here ? Because it it said that the lien creditor last in order of payment released his judgment, in order to enable the trustees to make a title at private sale, instead of pressing a sale by the sheriff, by which they affirm they may have been prejudiced. But, as the fact is stated by the auditor, and it stands uncontradicted by evidence, this creditor did not release the judgment, but only his lien on the land, which he might well do without releasing his debt. The opinion of the court is entirely satisfactory as to the principles involved, and it is unnecessary to add to it.’

“ Mason’s Appeal, 89 Pa. 404, in the opinion of the auditor, cannot govern this case; that was the distribution of a decedent’s estate, and the court expressly says: ‘ But this is not a question of equities or of the marshalling of assets. Nor is it a question of election by creditors between funds. On the contrary, it is a matter of the payment of debts in the order prescribed by the Act of Assembly.’ And then goes on to show what the Act of Feb. 24, 1834, provided. The court below held, inasmuch as there were two funds for distribution at the same time, and the estate was insolvent, that the judgment creditors *may,*but are not obliged to, claim *629a dividend out of the personal estate and then resort to the real estate fund for any deficiency. In this the supreme court held the court below was wrong, for the reasons above given, and that the judgment creditor could not elect or change the rule prescribed by the Act of Assembly.

“ By examination of Shunk & Freedley’s Appeal, 2 Pa. 304, and Morris *v.*Olwine, 22 Pa. 442, referred to in this case, it will be found that the supreme court in those cases distinctly says that lien creditors *may*have recourse to the personal estate as the primary fund for their whole demand, but it is not laid down as an absolute rule, in assigned estates, that they must do so where the real estate fund is sufficient to pay the whole lien debt, and the personal estate insufficient to pay all the debts in full, there being no Act of Assembly requiring such rule of distribution in assigned estates.

“ The court, in Mason’s Appeal, say they concede there is no equity in a record lien creditor’s right in a decedent’s estate to throw the judgment creditors upon the personal fund, in the first instance, to the manifest injury of the general creditors; while,in the other cases before alluded to, the decisions of the court on questions decided are based on equitable rules laid down by the court.

“ In Sheffy’s Appeal, 97 Pa. 321, the court says: ‘The land was sold subject to the mortgages [being sold under the Act of 1876 by order of court], and the proceeds belong to creditors whose liens were divested.’ This surely must also be the case where the liens are divested by agreement between the lien creditors and the assignee in order to empower the assignee to sell clear of liens. The court further says: ‘ In pursuance of his obligation, the purchaser paid the mortgagees, but if anything were due them *they would*have the right to receive a dividend out of the personal estate fund on the whole amount, *if necessary*for their entire payment. Had they not been paid and come in on that fund, to the extent of appropriations to them out of said fund, other creditors would have equitable rights of subrogation so as to recover back said appropriations out of the land.’ ‘ *The mortgagee had the right to look to the land alone for payment, whether the debtor made an assignment or not.'*‘ The purchaser of the assignor’s equity of redemption, or his legal title, paid the mortgages, and the posterior judgment creditors have no right of substitution; counsel have failed to cite a precedent showing that, where an anterior lien has been paid by the debtor, or one who stands in the debtor’s shoes, a posterior lien creditor shall be subrogated to the rights of the anterior.’

“The Act of Feb. 17, 1876, was passed to enable the assignee to sell, under order of court, the land of the assignor, which is encumbered to such an extent that it is impossible to definitely ascertain whether a sufficient amount can be realized to discharge all the liens, and whereby the titles made by the assignee are regarded as doubtful, &c. A sale under this Act does not divest the lien of a mortgage which is prior to all other liens upon the same property, *630except other mortgages, ground rents and the purchase money due the commonwealth.

“ It is not necessary to resort to this Act when the assignee gets consent from all the lien creditors that the land shall be sold clear of liens, and those creditors agree to protect their own liens at the sale and to enter satisfaction on the same so as to give the purchaser a clear title, as was done in the case before us.

“ In Burkholder’s Appeal, 94 Pa. 525, it is held, confirming the ruling in preceding cases, ‘ that, under the Act of Feb. 17, 1876, the land is converted into money, and at the same time discharged from all such then existing liens as are intended to be divested by the sale; and that the liens so divested are to be paid out of the proceeds of sale according to their priority on the day of confirmation, with interest to that date.’ If that is the rule under the Act of 1876, it is difficult to conceive why the same rule would not hold as to ■ the payment of liens on the land, where the liens were divested under the agreement of the lien creditors by the assignee’s sale, and where it is not otherwise provided in the agreement.

“ In Gould’s Estate, 6 W. N. C. 563, Penrose, J., of the orphans’ court, holds that it is a general principle of equity that, if a claimant has two funds to which he may resort, a person having an interest in one only has a right to compel the former to resort to the other, if that is necessary for the satisfaction of both. This principle applies whenever the election of a party having two funds will disappoint the claimant having the single *fund;*and a court of equity will, if necessary, control that election, and compel the one to resort to that fund which the other cannot reach. The illustration of this given by Story is the case of a mortgage and the ordinary specialty creditors of a decedent, the latter having the right ' to compel the former to resort first to the mortgage security; and he will be allowed to claim against the common fund *only what the mortgage on a sale consented to by him is deficient to gayl*

“Keim’s Appeal, 27 Pa. 43, rules that a creditor, who has alien upon a particular portion of the assigned estate, and out of the sale of a part of which he realizes a portion of his claim, is entitled to his pro rata dividend on the whole claim out of the general assets in the hands of the assignee to an amount sufficient to pay the balance of his demand in full. This ruling applies to the unpaid judgment claims of A. Scott & Son and of William PI. Miller. Patten’s Appeal's Pa. 160, is to the same effect. So, also, is Brough’s Estate, 71 Pa. 460, and Miller’s Estate, 82 Pa. 113.

“The opinion of Judge Futhey in Harris’s Estate, 1 Ches. Co. 81, appears to confirm the position taken by Mr. Price, that, on the distribution of an assigned estate, the personal property *shall*be distributed among all the creditors, whether their claims be secured by lien on the real estate or not, and that, where the first record lien has been paid in full out of the proceeds of the real estate on which it was a lien, the second unpaid lien creditor may compel the mar*631shalling of the assets among all the indebtedness of the assignor, existing at the date of the assignment, and have pro rata distribution made to the first lien creditors out of the personal estate before the real estate fund can be applied to that first lien debt. The learned judge applies the rule of distribution in decedents’ estates to assigned estates and says it is a well settled rule in the distribution of assigned estates; but no authorities are cited to show in what cases the rule has been so settled. It is questionable whether the learned judge would have held such a rule in the case before us, where the real estate was sold clear of liens by agreement of the lien creditors who reserved their legal and equitable rights on the real estate fund as well as the personal, and where the first mortgage creditor, in pursuance of that right and his right of election, took a first mortgage lien on the property from the purchaser in full payment and satisfaction of the bond and mortgage claim held against the assignor, and satisfied such lien claim of record, and where the creditor, who now invokes the rule set up, was a party to the agreement for the sale.

“The judgment debt of George Drayton stands in the same position as the Pennock mortgage, he having received his whole debt from the real estate sale, as he elected, and as he had a right to do, being a party to the agreement for the sale. Certainly, if the auditor is correct that distributions in assigned estates are governed by rules of equity, this would hardly be.

“In Clark’s Estate, 2 Ches. Co. 118, Judge Futhey expresses the same opinion as he did in Harris’s Estate, although the question was as to the right of a creditor, whose debt was secured by bond and mortgage lien on real estate and which had not been paid, to have recourse to the personal fund which had been assigned for the benefit of all the creditors. There can be no question as to the right, it having been settled by abundant authorities, as his honor says, and many of which Judge Futhey cites in his opinion on this point.

“ If the auditor found that the position taken in the able and earnest argument of Mr. Price, and that the views of Judge Futhey, as expressed in the cited cases of Harris’s Estate and Clark’s Estate, were fully sustained by supreme court decisions of this state, and that such rule applied to this case, he would cheerfully decide the case in accordance with those views and that rule as thus laid down. But failing to be convinced that those views are correct, and that the supreme court has ever intended to go so far in the distribution of assigned estates, he cannot allow the Pennock mortgage bond, nor the George Drayton bond, to be forced on to the personal fund for a pro rata share, to the injury of the general creditors, as neither of said parties are here claiming any such right.

“ The pro rata share of William H. Miller, to which he would be entitled out of the personal estate on the whole amount of his two judgment claims, added to the amount he has been paid out of *632the proceeds of the real estate, being more than sufficient to pay his whole debt (under the ruling in Miller’s -Appeal, 35 Pa. 482, and Graeff’s Appeal, 79 Pa. 146, ‘that his interest is to the extent of his whole claim on the estate, and that it cannot alter the case that the real estate, on which the judgments were liens, was first resorted to ; this was for the benefit of the other creditors; it might have so happened that the proceeds of that fund would have paid his whole debt, or so much of it that his pro rata dividend on his whole claim would have more than paid the balance; *of course he would-be entitled to no more*than his entire debt ’), the balance of the unpaid claim of William IT. Miller must be first allowed out of the personal estate before a pro rata dividend is allowed to the other creditors, to make an equitable distribution among them all.”

Exceptions to the auditor’s report, distributing the fund as above indicated, were, inter alia, as follows, by A. Scott & Son:

“ 3. The auditor erred in finding that, because the land was, by consent of certain lien creditors, sold clear of their incumbrances, those claims were not entitled to share in the distribution of the personal estate, and that there was any agreement to that effect by such creditors.”

“ 4. The auditor erred in finding that the Pennock mortgage and the Drayton judgment were paid out of the real estate fund under the agreement and by the sanction of William IT. Miller and A. Scott & Son, after-judgment creditors.”

“ 5. The auditor erred in finding that the proceeds of the real estate, applied to the payment of the record liens, passed directly from the purchaser to the creditors, or that there was any agreement to that effect on the part of 'either the purchaser, assignees or any creditor.”

“ 8. The auditor erred in finding that George Drayton, a judgment creditor, was a party to the agreement of certain creditors to sell the land clear of incumbrances.”

The exceptions were dismissed in the following opinion, by Clayton, P. J.:

“ The deed of assignment conveyed both real and personal estate for the benefit of creditors. Some of the debts were secured by mortgage, some by judgment, while a large number of the creditors had no security for their claim. The land was not worth, at the time of the sale, the amount of the incumbrances. The assignee, therefore, could not make a title to the land, as no one would buy it subject to the incumbrances. In such a case, the assignee could not procure an order of court under the Act of 1876, without the assent of the lien creditors; for, where the land is incumbered to more than its value, the general creditors have no interest in it, and it is against the policy of the law to permit them to disturb fixed liens without the assent of the person having the lien: *633John’s Estate, 36 Leg. Int. 86. Without some agreement, therefore, between the assignees and lien creditors, the land could not have been sold, nor the liens be in any way disturbed. To overcome this difficulty, the assignees and lien creditors, including the exceptants, entered into an agreement. The creditor holding the first mortgage, agreed to take a new one from the purchaser for the full amount, and satisfy the old one. The exceptants agreed, with other judgment creditors, to satisfy their judgments in favor of the purchaser, and to substitute the fund for the land. It is admitted that this arrangement was beneficial to all the creditors, by encouraging bids and by securing a purchaser for the full value of the lands. The new mortgage taken for the old one was for the sum of $10,000. The condition of the sale was that that amount should remain on mortgage. It will be observed that the mortgage to Pennock’s executors for $9,440, stated in the account as paid by the assignees, was in fact only transferred. The consideration for the new mortgage was the old one. The alleged payment was a mere fiction for the purpose of carrying out the arrangement before alluded to.

“ The exceptants now claim that the fund is to be distributed in the same manner and according to the same rules as if the whole purchase money, $15,062, were now in the hands of the assignees, whereas, in reality, only $5,062 was realized from the sale. They invoke the rule that the personal estate is the primary fund for the payment of an insolvent’s debts, and they ask that the holder of the old bond upon the satisfied mortgage, shall be compelled to come in on the fund raised from a sale of the personalty and -have his pro rata share credited upon his debt, and the balance only be charged against the fund arising from the sale of the land. The effect of this would be to lessen the claims against the real estate fund to the exact extent of the pro rata awarded to the mortgage bond from the personalty; thus letting the judgments of Miller and Scott & Sons in on the real estate fund, without which they would not be reached. By this ingenious arrangement, the two judgment creditors not reached by the real estate fund would be paid at the expense of the general creditors.

“ I am inclined to the opinion that such would have been the proper rule of distribution, if there had been no agreement and the land had been sold without the condition for the transfer of the Pennock mortgage. In the face of that agreement, it is quite clear that such a distribution would be manifestly unjust.

“ I am also inclined to the opinion that the rule of law for the distribution of an insolvent decedent’s estate applies to a fund raised by an assignment for the benefit of creditors. I can see no good reason why the rule should be different. It would be an unnecessary complication to apply one rule to an assignment by deed for the benefit of creditors and another rule where the assignment is by death. Justice is to be administered not according to our abstract notions of equity, but according to the law of the land. *634Equity always follows the law. It will not do to say the rule of law for the distribution of an insolvent decedent’s estate is unjust. Whatever is law is justice and equity.

“ The question is not whether the rule shall apply equally to both cases. We concede that it should. The real question is, whether the fund shall not be distributed in accordance with the agreement that raised it ? It is very clear that the distribution of this fund by the rule invoked by the exceptants would violate the essential terms of the agreement by which the fund was raised. Without enumerating all the violations of the agreement, it will be sufficient to name a very apparent one.

*“*The deed of assignment gave no authority to sell more than the assignor’s interest in the land. The assignee could not divest the Pennock mortgage, even by an order of court, without the assent of the holders. A sale, therefore, by the assignee by an order of court and with the assent of all the other lien creditors would not have divested this mortgage. The- only fund, therefore, under the most favorable sale the assignee could have made, would have only raised $5,062, and no power of the law could have compelled the holder of the mortgage to come in for a pro rata share of the personalty if he wished his investment to remain, and the debtor did not see proper to require him to present his bond against his personal estate.

“ It is also clear that the rule only applies to the distribution of an actual, not a fictitious, fund. Let us look at the effect of requiring the holder of the new mortgage to present his old bond for a dividend in the personal estate. The only consideration for the new mortgage was the old bond and accompanying mortgage. Any payment on account of the old bond must necessarily be a payment on account of the new one. This would very much complicate matters and might have the effect of causing the mortgagees to sue out their mortgage, while they could prove that the payment on the old bond was only a fiction to give a subsequent judgment creditor an advantage over other creditors equally meritorious. Many other instances might be given but these are sufficient to sustain the view taken by the auditor.”

The court thereupon dismissed the exceptions, confirmed the report and decreed distribution in accordance therewith. A. Scott & Son then took this appeal.

*The assignments of error*specified the action of the court below, 1, in dismissing the exceptions, confirming said report and decreeing distribution as indicated; 2-5, in dismissing the exceptions as above, quoting them; 6, in not awarding a pro rata share of the net personal estate to all the creditors, secured and unsecured, and then awarding the net proceeds of the real estate to the lien creditors on their claims thus reduced, in their order; 7, in not awarding to the bond accompanying the Pennock mortgage a pro rata share *635of the net personal estate, and in not then decreeing the same to Scott & Son, on their judgment for $1,800, by way of subrogation; 8, in not awarding to the judgment for $2,000, held by William H. Miller, a pro rata share of the net personal estate, and in not then decreeihg the same, (in excess of what was required to pay the after judgment of Mr. Miller, for $345,) to Messrs. A. Scott & Son on their judgment for $1800, by way of subrogation; 9, in not awarding to the Drayton judgment a pro rata share of the net personal estate, and in not then decreeing the same to Scott & Son, on their judgment for $1800, by way of subrogation.

*Edward A. Price,*for appellant.

In Shunk’s Ap., 2 Pa. 304, it was held that lien creditors may have recourse to the personal estate as the primary fund for their whole demand in the first instance, and subsequently to the land for the residue. This was followed by Morris *v.*Olwine, 22 Pa. 441, in which it was held, that creditors, having judgments on the real estate of a debtor, at and before an assignment for creditors, had not only a right, but the law imposed it upon them as a duty, to resort to the personal estate as the primary fund for the payment of debts, — that this right remained the same after the assignment as before, and that the only change in their condition produced by the assignment was that, instead of resorting to an execution, they must resort to the assignee. Then came Keim’s Ap., 27 Pa. 42, which held that a mortgage holder has a perfect legal and equitable right to demand and receive the whole debt from the mortgaged premises and the personal fund, in the hands of an assignee for the benefit of creditors. The application of the rule was simply the carrying out the common law principle that all of a debtor’s chattels were the primary fund for the payment of his debts: Shunk’s Appeal, above; 4 Kent’s Com., 420.

The same rule is applicable to the distribution of insolvent estates of decedents: Ramsey’s Ap., 4 Watts, 71; Mason’s Ap., 89 Pa. 402.

It is true, that, as to decedent’s estates, it is governed by statute, but it was the rule of the common law prior to the statute, which is simply declaratory of the common law. In Mason’s Appeal, the court says that assigned estates and insolvent decedents’ estates are analogous. Assigned estates are still governed by the rule of the common law, and if assigned estates and decedents’ estates are analogous, it follows that the common law rule has the same force and effect as the statute, and that the rule is precisely the same in both cases.

The rule is further shown in that class of cases which decides that, by the deed of assignment, the creditors became joint owners and proprietors of the assigned estate, in the same proportions as their debts bear to the whole amount of debts due by the assignor, and that their rights on the personal fund, are not diminished by any collaterals they may hold: Miller’s Ap., 35 Pa. 481; Patten’s Ap., *63645 Pa. 151; Brought Est, 71 Pa. 460; Graeff’s Ap., 79 Pa. 146; Miller’s Est., 82 Pa. 113.

The principle of these cases has also been applied to decedents’ estates, showing that, as to *assetsfor*creditors, they are also analogous, and the same rules are applicable to both: Hess’s Est, 69 Pa. 272; Mason’s Ap., 89 Pa. 402.

In Graeff’s Ap., 79 Pa. 148, and Mason’s Appeal, above, the court speaks of the possibility of the personal fund being distributed first, and says that, had it been so done, it is clear that such proceeds must have been applied pro rata to all the creditors, including the judgment creditors who are secured upon the real estate, and then decides that the fact of this not being done, makes no difference, as to the right of a creditor to have the fund so applied in distribution, without regard to the order of procedure or as to where or what fund is brought into distribution.

The use of the word “ may ” in Shunk’s Appeal was not for the purpose of indicating what lien creditors might or might not do, but what they had an absolute right to do and what they were absolutely bound to do. This is clearly shown in Morris *v.*Olwine, where the court says that it is a duty to resort to the personal estate, for the purpose of exonerating the real estate.

Mason’s Appeal is not distinguished by the fact that it was a decedent’s estate, as shown in the above argument. Neither does the phrase in the opinion, “ nor is it a question of election between funds,” indicate that there could be an election between funds. The language was used for the purpose of leading down to the true question, which was as to the order prescribed by law. This is shown by the next succeeding phrase in the same opinion, which reads, “on the contrary, it is a matter of the payment of debts in the order prescribed by the Act of Assembly.”

The decisions in the lower courts have been against the doctrine of election in Harris’s Est., 1 Ches. Co. 81; Clark’s Est., 2 Ches. Co. 1x8.

A lien creditor would have no more right to release the personalty, and take all his claim out of the realty, than he would have to release the realty, and take it all out of the personalty. The ownership is fixed by the deed, and at that *time;*and the rule of distribution, arising from that ownership, remains unalterable. There can be no question, therefore, that a lien creditor does not have such a right of election as is contemplated by the auditor, and, as an abstract principle, it would not prevent the application of the rule of distribution in favor óf the appellants.

Independent of that, however, the creditors who were paid never made any election of funds. There is not a scintilla of evidence in the case to show it. The liens of the Pennock estate, and of Messrs. Miller and Drayton, were covered by the proceeds of sale. They were past due. The assignees had covenanted with the purchaser of the real estate for a clear title; interest was running *637on the liens against the estate; and, having abundant funds in their hands, the assignees paid the claims and had them satisfied of record. The creditors took their money without any concern as to where the fund came from, and without caring.

The fact of the payment of the liens and their satisfaction of record, makes no difference in the determination of the right of the appellants. If a distribution has been made by the assignees that departs from the regular order, the court will, on the settlement of their accounts, order the distribution as though the proceeds of the personal estate had been distributed first, in which case such fund would have been distributed pro rata among all the creditors, and the proceeds of the real estate to the lien creditors in their order : Harris’s Est., above; Clark’s Est., above; Mason’s Ap., above..

In Graeff’s Ap., 79 Pa. 146, the court below took the same ground on this point as did the auditor in this case, but this court reversed the court below.

The payment of the record liens in this case fully satisfied the creditors receiving the same; but such payment did not extinguish the right of the appellants, as one of the assignor’s original cestui que trusts, to have such liens paid out of the personal fund, to the extent of the pro rata shares.

If such payment of liens has been made, the after lien creditor is entitled to subrogation: Clark’s Est., above; Sheffey’s Ap., 97 Pa. 317. In which case, so far as they existed as debts payable out of the personal estate, no part of them is paid or extinguished, for the effect of subrogation is to consider them in full life, and enjoying all the rights of the original creditors: Hess’s Est., 69 Pa. 272; Mosier’s Ap., 56 Pa. 76.

In Sheffy’s Appeal, the party seeking subrogation was the purchaser of the equity of redemption, under an agreement to pay the mortgage, and he stood in the shoes of the assignor debtor, and a payment by him as purchaser was the same as though made by the assignor. As no one could claim any right through a payment by the assignor, out of funds not belonging to the assigned estate, neither could any right be claimed through the payment by one who stood in his shoes. That this was the reason why the court ruled against him is shown by the fact that, as to certain lands in Northampton Co., which the assignee had sold for the nominal price of $1, subject to a mortgage, and which was paid off by the purchaser, the court took á different view, and said that there might be good reason for allowing him a dividend on the amount of that mortgage, but it did not appear that his judgment had been entered in that county. As the right to subrogation can only be claimed by one who is an after lien creditor on the land, he could not invoke it, because he did not occupy that position.

Here there was no privity between the purchaser and the creditors. His only liability for the purchase money or any part of it was to the assignees. It was his right to see that all liens on the *638land were either paid or satisfied, because, without that, he was not bound to take the land; but he was under no obligation to pay any lien creditor. Neither are the parties, who claim the benefit of the equities here, the purchasers, as was the case in Shefiy’s Appeal, but simply judgment creditors who certainly occupy as good a position as, in Sheffy’s Appeal, the party claiming subrogation did concerning the land in Northampton county.

But the auditor holds that, as the land was sold under an arrangement that divests all liens and produces a fund, a new rule of distribution is set up; that the liens are payable exclusively out of the real estate fund; that the lien creditors have no claim on the personal estate; and that anyone who is a party to the arrangement, is estopped from setting up any such claim through the liens so paid. There was no evidence of an agreement on the part of Scott & Son to such payment. The Drayton judgment was paid by the assignees by their own check. Scott & Son never made any agreement relative to it, and were powerless to have prevented it, if such course had been necessary or advisable. It was paid from moneys actually received by the assignees.

The citation of Burkholder’s Appeal, in the auditor’s report, probably shows how he fell into the error of supposing that, because the fund was raised by an agreement, the lien creditors could be paid only out of that fund. The auditor evidently labored under the impression that liens discharged by a sale under the Act of 1876 were payable exclusively out of the fund. The statement of the court, in Burkholder’s Appeal, as to the order of payment, was but a reiteration of the language of the Act, which says, “ the proceeds arising therefrom shall be appropriated to liens extinguished by virtue of such sale according to their priority,” and was not the establishment of any new rule of distribution under equities. The language of the Act was merely to provide for the disposal of the fund raised by a sale thereunder, and not intended to limit the rights of any of the lien creditors to require those ahead of them to go elsewhere for payment. The equitable rule of distribution was not disturbed.

To give the Act the construction that the auditor has, would enable assignees to defeat the rights of after creditors to force the paid lien creditors to go to the personal fund, by simply applying to the court for a sale, and thus make the Act a great instrument of injustice. Conceiving that his construction of the Act of 1876 was the correct one, the auditor concludes that an agreement of creditors that raised a fund would be an analogous case, and that the rule applicable to one would apply to the other.

He has put a mistaken construction on both, for, while it is proper to distribute the fund to the lien creditors in their order, that method does not destroy or take from an after lien creditor any right he may have had to force the other claims on to the personalty.

*639But, assuming that an agreement to sell clear of liens would produce the effect the auditor claims here, Scott *Si*Son certainly-saved all rights they had in the personalty, whatever they might be, by the proviso of their releases.

In Shunk’s Appeal there was an agreement similar to the one in this case, and the court permitted the rule for which the appellants are contending. That case rules the present contention.

*H. C. Howard,*with him *J. T. Reynolds*and *Robinson & Green,*for appellees.

Mason’s Appeal and Ramsey’s Appeal are decided upon the ground that the statutes required the personal estate to be first exhausted. Shunk & Freedley’s Appeal and Morris *v.*Olwine, do not decide that lien creditors must have recourse to the personal estate as the primary fund for the whole demand in the first instance, and subsequently to the land for the residue, regardless of the equities of the case, and of the wishes of the creditor himself.

’ The Act of Feb. 17, 1876, authorizing the sale of real estate' in assigned estates, expressly provides that the proceeds arising therefrom shall be appropriated to liens extinguished by virtue of such sales, according to their priority: Burkholder’s Ap., 94 Pa.

522. Therefore, if the real estate, in the case at bar, had been sold under an order of court, precisely the same disposition must have been made of the proceeds as was made by the decree below.

It is no answer to say that the real estate was not sold under an order of the court, and hence the statute does not apply. Certainly we are not to have two modes of distributing an assigned estate. This court will never sanction such a thing; particularly where the mode of distribution fixed by the statute is fair and equitable, while the substitute proposed is not only inequitable but positively unjust to those creditors of an insolvent who may be so lenient as not to exact the security of a judgment bond for their claims.

The auditor had no power to re-distribute a fund which the accountants had already distributed. He cannot do anything more than distribute the balance standing on the assignees’ account: Benson’s Ap., 48 Pa. 159.

If the distribution asked for by the appellants is to be adopted, it can only be by reason of the fact that all liens were divested by the assignees’ sale, under the agreement, and the whole fund thus brought into the assignees’ account. As this result would be highly injurious to those creditors not parties to such agreement, they cannot be prejudiced thereby.

Sheffy’s Ap., 97 Pa., 321, practically rules this case. Precisely the same argument was pressed upon the court in that case. The court there says: “ Because the assignee became purchaser and holds a judgment, he cannot manipulate the estate to his advantage, as a creditor, beyond what he would have did he appear only as a lien creditor.” The appellants here have, by the decree below, what *640a lien creditor is entitled to, under the authorities. They have no legal or equitable right to any more.

Feb. 21, 1887.

Per Curiam,

We have given to this case a careful examination and consideration. Notwithstanding the able and zealous argument of the counsel for the appellants, we are not able to discover any error in the decree. The satisfactory reasoning of the auditor, affirmed in the opinion of the court, fully sustains the conclusion at which both arrived. It is not necessary to add anything thereto.

Decree affirmed and appeal dismissed at the costs of the appellants.

In syllabus to above case, the word “leases” should read “releases.”