Opinion ID: 1798740
Heading Depth: 1
Heading Rank: 2

Heading: Marshaling of Assets.

Text: Appellant requests that it be protected by the doctrine of marshaling of assets if this court affirms the determination of priority made by the trial court. In 4 American Law of Property, this doctrine is defined as follows: The paramount mortgagee of a tract, parcels of which have been transferred or mortgaged to persons under circumstances giving to them a right of marshaling against other portions of the property, must not do anything to defeat the rights of such persons if he knows of them. The knowledge must be actual, not constructive through the recordation of subsequent conveyances or mortgages of portions of the mortgaged property. However, if the paramount mortgagee does have actual notice of subsequent alienations or mortgages of parcels of the mortgaged property, he acts at his peril in releasing from the mortgage any part of the property against which the marshaling equity runs. Hence if he releases such a part, under such circumstances, he must deduct from the debt, before enforcing his lien against the property in the hands of these persons, the value of the property released which they had a right to have him apply to the debt before resorting to the property held by them. [7] Appellant points out that when plaintiff satisfied the October mortgage on June 19, 1961, plaintiff's mortgage included those properties comprising parcels B and C in the mortgage. However, appellant's junior mortgage was only on that parcel described in the October 3, 1960, mortgage as parcel C. Appellant urges that the judgment of the trial court be amended to provide that should the public sale be insufficient to satisfy the amounts due both plaintiff and appellant, the value of the released mortgage on parcel B be determined, and that such value be credited to appellant. Appellant concedes that it cannot be determined whether it has been prejudiced by the release of Parcel B until the foreclosure sale of Parcel C has been held and it is determined whether there is an insufficiency of proceeds to satisfy both plaintiff's and its mortgages. We conclude that appellant's rights with respect to application of the aforequoted rule of marshaling of assets has been fully protected by the modification made in the judgment by the order of January 28, 1965. Under this modification, if the sale produces insufficient proceeds to pay both plaintiff's and appellant's mortgages, the issue of marshaling of assets can be fully considered and examined at the time of the court's hearing on motion to confirm sale and distribute the proceeds thereof.