Court Opinion

ID: 6273221
Source: CourtListenerOpinion
Date Created: 2022-02-18 15:51:48.104651+00
Date Added: 2024-06-11T08:59:58.555284
License: Public Domain

Opinion by
Rice, P. J.,
Upon the ex parte application of a mechanic’s lien creditor, and without previous notice to other lien creditors, the court appointed an auditor “ to marshal the liens against the premises within mentioned, determine which liens, if any, will be discharged by a sale of said premises and which will remain, also their several amounts and their respective rank or priority.” The auditor reported that all the liens would be discharged by a judicial sale, that the mechanics’ liens of the Robinson Plumbing and Heating Company, and John H. Maride “will be first paid; the mortgage of the Peoples’ Building and Loan Association will next be paid, and the other liens against said property will be liquidated in the order in which they appear upon the certificate of the prothonotary, and made part hereof, taking priority according to date of entry.” The Gehr me*148chanic’s lien was filed after the date of the entry of the Cornmesser judgment, and according to the report of the auditor, the latter judgment was given priority. It is to be noted in this connection that in the petition for the appointment of the auditor, the validity of the mechanics’ liens was not questioned; »n the contrary it was distinctly averred that the mechanics’ liens, evidently referring to all of them, “ were duly entered in this court against said premises.” At an adjourned hearing before the auditor, the counsel for the petitioner interposed this objection, which, in view of the averments of the petition, was, to say the least, remarkable: “ I object to the allowance of any mechanic’s lien or the establishment thereof as a lien against said premises, unless the same be duly proven by proper evidence before the auditor as required by law.” It does not appear that the attorney for the owner of the Gehr mechanic’s lien was present at that hearing, or at any hearing when any question was raised as to the validity of the lien, or as to its having the same rank as the petitioners’ mechanics’ liens. Moreover, the auditor found that by reason of the fact that the building was commenced prior to the Peoples’ Building and Loan Association mortgage, the mechanics’ liens antedated the lien of the mortgage. Notwithstanding this finding, he postponed the Gehr mechanic’s lien, not only to the mortgage, but also to the Cornmesser judgment, which was entered four months after the mortgage. Upon what ground this conclusion was based does not appear in his report, nor in the evidence submitted to him. If he had disallowed the lien altogether, it might be surmised that it was because of the objection heretofore referred to, but as he did not disallow it, it is impossible to explain the finding upon that theory, or.to sustain it upon any theory that has been suggested. But, as tte counsel for the appellant well says, the conclusive effect of a former adjudication cannot be destroyed by showing that it was erroneous, merely. We do not put our decision of this appeal upon that ground, as presently will be shown.
The court confirmed the report nisi on February 2,1898, and on February 8, 1898, no exceptions having been filed in the mean time, the prothonotary marked it confirmed absolutely.
A year or more later a levari facias was issued upon the judgment entered upon the Gehr mechanic’s lien, and in June, 1899, *149the premises were sold at sheriff’s sale. This appeal arises out of the distribution of the proceeds. The point to be decided is, whether or not the report of the auditor appointed to marshal liens was conclusive in that distribution upon the question of priority between the Gehr mechanic’s lien and the Cornmesser judgment ? The learned judge of the court below in a vigorous opinion held that it was not, and in that conclusion we entirely concur.
The doctrine of marshalling grows out of the principle that a party having two funds to satisfy his demand, shall not, by his election, disappoint a party who has only one fund: Bispham’s Eq. sec. 340. It is an equitable principle upon which the legal rights of creditors are controlled in order to accomplish an equitable distribution of funds in accordance with the superior equities of different parties entitled to share therein: 2 Bouv. L. Dict. (Rawle) 328. In the absence of a statute conferring it, the power of the court of common pleas, whether sitting in equity, or administering equity according to common-law forms, to marshal liens prior to a sheriff’s sale of land is confined to cases where the equity above referred to is involved. Even in such cases the power is rarely exercised, and never ought to be exercised without first obtaining jurisdiction of the persons to be affected by service of a rule or other proper process. There was nothing said or decided in Handy’s Estate, Larned and Haas’s Appeal, 167 Pa. 552, or in White’s Estate, 178 Pa. 280, which is in conflict with the foregoing conclusions. The marshalling of liens in advance of sale was held to be a legitimate and convenient, if not strictly a necessary, part of the proceedings authorized by the Act of February 17, 1876, P.L. 4. “ It is in the interest of justice to all parties,” said Mr. Justice Mitchell, “ that public sales should be upon ascertained rights not only as to title, but as to the destination of the proceeds. The act of 1876, is a remedial statute passed in aid of this interest. The authority it gives the court having jurisdiction of the assignee, to stay the hands of the sheriff, and of execution creditors proceeding in pursuance of their unquestionable legal rights, is an equitable power to direct the administration of a trust estate for the general benefit of all parties interested, according to their respective rights. In so doing, the court is required to marshal the liens in order to see which are to be *150discharged, and it is a legitimate and convenient, if not strictly a necessary part of this process to ascertain their amounts and priority. Such ascertainment in advance is in furtherance of the purpose of the act to enable assignees ‘ to make advantageous sales of said real estate,’ and the act without any strain will bear this construction.” No further remarks are necessary to show the inapplicability of these cases to the present. No statutory authority for this proceeding can be shown, nor was it necessary in order to protect equitable rights. No equity whatever was alleged in the petition, and none was disclosed in the auditor’s report. We hold, therefore, that the appointment of the auditor, with such powers as were specified in the order upon the mere ex parte petition of a lien creditor alleging no facts which would give the court jurisdiction to adjudicate the questions of priority of lien, the effect upon valid liens of a judicial sale, that might never be made, and the amount due to the lien holders, was without authority of law. The assignee of the Gehr mechanic’s lien was not bound to submit either of these questions to the determination of the auditor or to the court at that time.
But it is said that the attorney for the assignee appeared before the auditor. We are not prepared to say that the mere' fact, and this is all that is asserted in the auditor’s report, that the attorney was present at the first hearing gave the court jurisdiction to decree that in the event of a judicial sale of the premises being made at any time in the future, no matter how remote, the legal order of distribution as fixed by the facts existing at that time should be departed from. It required the passage of an act of assembly to give the court jurisdiction to distribute the proceeds of a sheriff’s sale not paid into court: Hoch’s Appeal, 72 Pa. 53, and cases there cited. In view of what was said and decided in that case, it would seem that the mere presence at one of the hearings before the auditor of an attorney of the lien creditor would not of itself give the court jurisdiction to decree distribution of a fund that might never come into existence. It is unnecessary, however, to discuss the effect of that act of the attorney further, for the court made no such decree as that above suggested. The mere pro forma confirmation of the auditor’s report was not effective to postpone or advance liens (see Henderson & Co. v. Stryker, 164 *151Pa. 170, 177) nor to bind the sheriff, or the court to make distribution in accordance with the auditor’s report, if at the time of the sheriff’s sale made a year and a half later, the conditions were changed. This was the case here. At the time of the sheriff’s sale the two mechanics’ liens given precedence in the auditor’s report had been paid and satisfied of record, and according to the contention of all the parties, the lien of the Peoples’ Building and Loan Association mortgage was not divested by the sale. The conditions being changed, the report of the auditor could not control in part and be set aside in part in the distribution of the fund.
A strained construction is put on the seventh finding of the auditor appointed to make distribution, which is wholly unwarranted, especially when it is read in connection with his other findings. In any view that may be taken of the case, the court was clearly right in holding that the Gehr mechanic’s lien had priority over the Cornmesser judgment. To hold otherwise would have worked gross injustice, and, moreover, would have been a plain misapplication of the principles of res judicata.
In the absence of evidence to show the contrary, the presumption is that the payment to Thos. P. Gehr by the Peoples’ Building & Loan Association at the time he assigned to the latter the mechanic’s lien, was made in consideration of the assignment and not as a payment of the claim. There is no evidence from which the contrary' can be reasonably' inferred.
Whether right or wrong, the allowance of the costs of the first audit out of the fund did not affect the result, so far as the appellant is concerned. He would not have been reached in the distribution even if they had been disallowed.
The decree is affirmed and the appeal dismissed at the costs of the appellant.