Court Opinion

ID: 6234436
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:29:13.666082+00
Date Added: 2024-06-11T08:57:59.909578
License: Public Domain

The opinion of the court was delivered, by
Williams, J.
It is clear that, under the law as settled in Miller’s Appeal, 11 Casey 481, and reaffirmed in Patten’s Appeal, 9 Wright 151, and in Bair & Shenk’s Appeal, 19 P. F. Smith 272, Howard Hinchman was entitled to a dividend on the whole balance of his account as it stood at the date of the assignment. What the amount of the actual balance was, depends on the fact whether he took the Brough note for $5000, and the Gabley note for $5200, as collateral security, or as absolute payment of so much of his account. The auditor and the court below have found that he took these notes as collateral security, and not in part satisfaction of his claim; • and we see no sufficient evidence to justify us in setting aside their finding. There was then no error in allowing Hinchman a dividend on the full amount of his account at the date of the assignment, though he may have subse*462quently received payment of the Brough note from Greenawalt, Harglerode and Montgomery, the accommodation endorsers.
But there was error in allowing the endorsers a dividend on the amount of the note if they had paid it. It was not a debt of Peter Brough at the date of the assignment. It was held by Hinchman merely as. collateral security for the payment of his claim, and, therefore, was not entitled to any portion of the assigned estate. Hinchman could not have claimed a dividend on it, nor can the endorsers, until'Hinchman’s claim is fully paid. If Hinchman had realized all but $5000 of his claim out of the assigned estate, Greenawalt, Harglerode and Montgomery, as endorsers of the note which he held as collateral security, would have been liable to him for its full amount. As shown in Miller’s Appeal, Hinchman became the equitable owner of a portion of the assigned estate by virtue of the deed of assignment, which could not' be diminished by the payment of the collaterals which he held. He had two funds or securities for the payment of his claim — the assigned estate and the notes transferred to him as collateral security; and he has a. right to exhaust both, if necessary, to satisfy his claim against Brough. His legal right is superior to the equity of the endorsers, or rather they have no equity until he is paid; and then, if any portion of the assigned estate remains, they would be entitled to be subrogated to Hinchman’s rights under the assignment as it respects so much of his claim as they may have paid. It follows that the auditor erred in allowing them a dividend on the amounts which they had respectively paid Hinchman on the Brough note. These dividends (notes, item 25) must therefore be disallowed, and the said sums distributed to the creditors entitled thereto under the assignment. We see no other error in the distribution, but for this error the decree must be reversed, and the record remitted to the court below with instructions to correct the distribution in conformity with this opinion.
Decree accordingly, and it is further ordered that the costs of this appeal be paid one-half by the appellants and one-half by the appellees, Greenawalt, Harglerode and Montgomery.