Court Opinion

ID: 6949671
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:29:52.736097+00
Date Added: 2024-06-11T16:08:02.270753
License: Public Domain

Walker, J. This is a contest amongst the creditors of Wickersham, for priority in the distribution of a fund produced by sale of chattels, upon which they claim to have liens. It is insisted that Miller and Scott have a lien upon this fund, to the extent of their claim against Wickersham, by reason of a mortgage given by him, on this property, on the 12th day of December, 1856, to Matteson and Constant, to secure them against liabilities they had incurred for him, and to indemnify them against the payment of Miller and Scott’s claim, which they then proposed to secure to Miller and Scott by indorsing for Wickersham. It is urged that the lien of complainants is by substitution to the rights of Matteson and Constant, to the extent of their claim on Wickersham. To give the creditor the right to be substituted to the place of the surety of his debtor, the relation of debtor and creditor must exist between the creditor and the surety. The claim on the surety must be valid, binding and capable of being enforced immediately against him. If the relation of creditor and debtor has never existed between them, or having existed, and been terminated by release, or payment, or in any other mode, there can be no substitution. When the surety is liable for the immediate payment of the debt, he may pay it, and resort to the fund he holds, as an indemnity, to reimburse the money he has legally paid for his principal. He is not required to wait until the money is collected by an action, nor will chancery even require it to be paid, if the creditor applies to be substituted to the surety’s right to resort to the fund pledged for his indemnity, but will require the fund to be appropriated directly to the payment of the debt. But unless the surety has the immediate right to pay the debt, mid resort to the indemnity, he has no right to which the creditor can be subrogated. When a debtor conveys property to a trustee for the payment of his debt, it is different, for he then appropriates the property to that specific purpose. And if the trustee fails or refuses to so apply it, a court will compel him to appropriate it to the purpose designed. But in a case where the debtor gives a mortgage to indemnify his surety against loss, he only appropriates the property, to be applied to the satisfaction of the debt, when his surety has become immediately liable for, or has paid the debt under such liability. And until such liability or payment takes place, a court of equity cannot interfere. In this case, Wickersham purchased goods of Miller and Scott on time, with an agreement to give security for payment of the price. But the nature of the security, or the kind of paper to be given does not appear. The bill alleges that he was to give security, but what kind of security, or the person who was to indorse, is not stated. And the answer and proofs equally fail to throw any light on the transaction. The bill nowhere alleges that Matteson and Constant at any time before the purchase was made, agreed to be liable in any event. And if it were true that they had made such an agreement, it is strange that it was not so alleged in the bill, and they required to answer to its truth. Such a fact would be highly important to fix their liability to Miller and Scott, and we presume if it had existed it would have been alleged. The complainants took the deposition of their book-keeper who states, “ That Wickersham came into the store, with a letter, and after he left, Miller informed witness that Wicker-sham wanted to purchase a bill of goods, and that Gov. Matte-son was to accept for the amount of the bill. The letter spoken of was not kept by complainants because, as Miller told witness, Wickersham said he wanted to show it to other parties.” This is not evidence to establish any fact. It is the mere declarations of one of the complainants in Ms own favor, in the absence of the other parties, and called for and proven by himself. The book-keeper does not state that he knew that the letter was from Matteson, that he knew the contents or purport of it, or that he even read or even saw the letter. What it related to, he does not pretend to state. To impose a liability upon Matte-son for the payment of the debt of Wickersham upon these statements, would be to violate all the principles of justice, and the rules governing evidence. If there was such a letter, why not produce it, and if that could not be done, then why not have laid the proper foundation, and proved its contents, or compelled Matteson to make discovery ? No such attempt was made, and it must have been for the reason, that if the letter had been produced, it would not have shown any liability on his part. Nor can we presume from the fact that Matteson and Constant chose to indorse those notes as they did, that it was in consequence of any former liability they were under to Miller and Scott. The bill does not so allege nor does it appear in any part of the record. When Matteson and Constant indorsed these notes, the complainants had it in their power, to bind them for the payment of Wickersham’s debt, by accepting the notes. But they rejected, cancelled and returned the notes to Wickersham. And they by so doing, clearly manifested a design not to rely on these notes for any purpose. And this is made more manifest, from the fact, that they required a different kind of paper. If Wickersham had agreed to give them paper of a different kind, and they were unwilling to modify that agreement, by receiving these notes when offered, they must look to him, for a performance of that agreement. They have no claim on Matteson and Constant, nor does the relation of debtor and creditor exist between them, and consequently they have no right to be substituted to a participation in the fund produced from the sale of property under Matteson and Constant’s first mortgage. The question arises, as to the priority of the liens of the various mortgagees on the property, out of which this fund arises. And to determine this, it may be proper to advert to some of the rules governing chattel mortgages. The law deems posses sion of mortgaged chattels, by the mortgagor, as to bona fide creditors and purchasers, to be fraudulent, unless such possession is provided for in the mortgage. And in That case, if the possession continues with the debtor, after the expiration of the time stipulated for it to so remain, it is equally fraudulent. And persons purchasing or acquiring subsequent liens on the property, do so to the exclusion or postponement of prior incumbrances. Where there are several mortgages to different persons on the same property, and they are all over due, and the debtor is holding possession contrary to the terms of the mortgages, any one of the mortgagees" may take possession of the property by virtue of his mortgage, and by so doing he acquires a preference over the other mortgagees, similarly situated, without reference to the date of his mortgage. Such creditors are in the situation of several purchasers of a chattel without receiving the possession, where the purchaser who first acquires possession, is preferred. And it is upon the principle That where different equities are equal, the person who unites to his equity the possession, is preferred. “ Qui prior est tempore potior est jure.” He who is first in time, is more powerful in law. Upon the forfeiture of the condition in the mortgage, the legal title vests in the mortgagee, and becomes complete upon his obtaining possession. But in some cases, even after a breach of the condition, and possession taken, equity will permit the debtor or his creditors to redeem. Then when the mortgagees in this case obtained possession of the chattels under their mortgages, even if they were over due and fraudulent as to creditors and purchasers, they acquired a preference over all others similarly situated with themselves. It is urged that when Matteson sold this property on time, he became liable at once to pay the other creditors the money. And that he had no right as a trustee, to sell on a credit. The evidence shows that he took possession of the property, and afterwards purchased it in at the sale, by agreement with, and for the protection of Constant, Dodge and himself, under their mortgages. There is no evidence, which in terms, shows that there was any particular disposition to be made of the property. But when it was purchased for their mutual benefit, under their several mortgages, and no specific agreement as to the mode of its future disposition was made, it will be supposed that it was the design of the parties that it should be sold in the mode best suited to protect their several claims. In selling it in the mode adopted by Mattesdn, this object might be better promoted than by retaining it, or forcing it on the market for cash. There was no evidence adduced, showing that it could have been sold, either for a better price or on better terms. He obtained for it the sum it cost the parties, and interest on the deferred payments, from the date of sale. We think from all of the circumstances attending the transaction, wo may safely infer that he acted in pursuance of the design of the parties, in making the sale. If he did not act in accordance with their design, they have failed to rebut that presumption. It is again urged, that Matteson, as trustee, is not entitled to receive a compensation for managing this trust property. As a general rule, a trustee is not entitled to compensation, either for his labor or time bestowed in the care of the trust, unless it is by stipulation and agreement. It is his duty to take all reasonable care of the property, and when necessary for its preservation, he may expend reasonable sums of money, or employ agents for the purpose, and so far as such outlays are necessary, he is entitled to have them refunded. But even in this, courts will guard the fund with jealous care, and be vigilant to prevent the fund from being wasted. Matteson would have a right to be paid money expended for employing agents to hold and preserve the property, in employing the auctioneer and clerk at the sale, to the extent of a reasonable compensation, if it had been claimed. But be is not entitled to a commission or compensation for assuming" the responsibility of becoming a trustee, nor for making the sale to Aldrich: To have entitled himself to it, he should have provided for it, by agreement with the parties. In the pleadings we find nothing requiring, or even authorizing 'the court to state an account between Matteson and Constant, growing out of their dealings with the hotel after the property was reduced to possession and until its sale to Aldrich. And unless such a case were made by the pleadings, the court has no power to state their accounts, growing out of this transaction. That is a matter with which the other parties have no concern. They were not parties to it, nor was it necessary for the preservation of the property, so far as we can see. It seems to have been a losing business, and it is not right that this fund should be applied to cover that loss. The other creditors not being parties to the transaction, have no interest in the board bills due the hotel, or debts and liabilities incurred on its account. These are matters between Matteson and Constant, and outside of the issues involved in this case. The court below erred in allowing Matteson a solicitor’s fee, to be taxed on the fund as costs in the case. The statute regulating fees of officers, provides for no such fee as that of an attorney or solicitor; and the court must, in-taxing and allowing costs, look to the statute as its warrant of authority. While the court of equity has a discretion in awarding costs in chancery causes, it must confine that discretion to the fees allowed by the statute. It is conceded by all the parties in interest, that Dodge’s mortgage was a prior and first lien on all the money arising from a sale of the silver-plated ware, and that his debt was more than sufficient to absorb the whole of that portion of the fund; and, as his mortgage embraced no other portion of the property, it is confined to that alone. McCabe and Van Ness, although holding a junior mortgage to those of Matteson and Constant, dated December the 12th, 1-856, after the first of June, 1857, and until the 6th of that month, had an equal right with them to have reduced the property to possession under their mortgage falling due in the month of May previous. But failing to do so, Constant acquired a superior lien by. his mortgage of the 6th of June, 1857. And when Matteson and Constant obtained possession under this latter mortgage, and those of the 12th of December, 1856, they acquired a superior lien under all these mortgages, to that of McCabe and Van Ness. But all of these mortgages, except that of Constant of the sixth of June, were postponed by the mortgage to Russell and Parsons of the 27th June, 1857, which was not due when possession of the property was taken. Their mortgage would stand as a lien next in order after Constant’s second mortgage, and prior to his and Matteson’s mortgages of December 12th, 1856. And the claim of McCabe and Van Ness, the claim of Miller and Scott, and the claim of Dunn, were "all postponed to Dodge’s claim, Constant’s claim under his second mortgage, Russell and Parsons’ claim, and the claims of Matte-son and Constant under their mortgages of the 12th December, 1856. We are of opinion that the decree of the Circuit Court should be reversed, and that the proper decree to which the parties are entitled under this record, should be entered in this court. Decree reversed. Note.—The following is the decree directed to he entered: It is therefore considered and found by the court, that the sum of seven thousand four hundred and eighty-nine dollars, for which the said property was sold by said Matteson to said Aldrich, is a trust and proper fund for distribution among Wickersham’s creditors, who are parties to this bill; and that the same, collected and yet to bo collected under the two notes of Aldrich last falling due and now unpaid, is in the hands of and held by said Matteson as trustee for said creditors. The court, from the record in this case, finds that the costs of the court below, and of this court, are properly chargeable on the said fund. The court further finds that there was due to the said Joel A. Matteson, as the assignee of the said R. V. Dodge, on the 19th day of November, 1858, from the said T. D. Wickersham, the sum of four hundred and ninety-four dollars and eight cents, as appears from the proofs in the record herein. The court further finds from the proofs in the record, that there was due to the said Archibald B. Constant, from the said Wickersham, on the 19th day of November, 1858, the sum of one thousand nine hundred and fifteen dollars and fifty cents, under his claim secured by mortgage of the 6th of June, 1857. The court further finds from the proofs in the record, that there was due from the said Wickersham to the said David A. Russell and Jacob Parsons, on the 19th day of November, 1858, the sum of six hundred and thirty-one dollars and ninety-eight cents, on their claim secured by mortgage of the 27th June, 1857. The court further finds that there was due to the said Joel A. Matteson from the said Wickersham, on the 19th day of November, 1858, the sum of two thousand four hundred and sixty dollars and fifty-six cents, on his claim secured by mortgage dated the 12th day of December, 1856. The court further finds that there was due to the said Archibald E. Constant from the said Wickersham, on the 19th day of November, 1858, the sum of two thousand four hundred and sixty dollars and fifty-six cents, secured by mortgage dated the 12th day of December, 1856. The court further finds that there was due to William McCabe and John Q. Van Ness from the said Wickersham-, on the 19th day of November, 1858, the sum of twelve hundred and ten dollars and thirty cents, under their mortgage dated the 9th day of March, 1857. The court further finds that on the same day, there was due to the said Walter T. H. Miller and Solomon Scott from the said Wickersham, the sum of one thousand six hundred and thirty-seven dollars and fourteen cents, for goods sold to him. And the court further finds that the said Wickersham was indebted to the said Charles Dunn, on the 19th November, 1858, in the sum of one thousand seven hundred and forty-seven dollars and ninety-four cents. And the court further finds that the foregoing claims are properly and of right entitled to a distribution out of said fund in the order as hereinafter decreed. It is thereupon ordered and decreed by the court, that the said Joel A. Matteson, within ten days after the filing of this decree with the clerk of the Supreme Court of the second grand division, pay out of the said fund, all of the costs in this cause, as well in the Sangamon Circuit Court as of this court, and a fee of fifty dollars to A. Campbell, master in chancery, as a part of the costs of the court below. It is further ordered that the said Matteson be and he is allowed to retain and hold, out of the said fund, the sum of two hundred and seventy-four dollars and-twenty-five cents, the amount of said fund to which he is entitled by his first lien thereon, as assignee of the said Dodge, it being the proceeds of the sale of the silver-plated ware. It is further ordered and decreed, that the said Matteson, next in its order of priority of lien, within ten days after filing this decree as aforesaid, pay out of said fund, to the said Archibald E. Constant, the sum of one thousand nine hundred and fifteen dollars and fifty cents, with interest, from the said nineteenth day of November, 1858, at the rate of six per cent., until paid, it being the sum so found due to him, under his mortgage of 6th June. It is further ordered and decreed by the court, that the said Matteson next pay in the order of distribution and priority, out of said fund, to the said David A. Bussell and Jacob Parsons, within two days after this decree shall be filed as aforesaid, the sum of six hundred and thirty-one dollars and ninety-eight cents, with six per cent, interest, from the said 19th day of November, 1858, until paid, it being the amount so found to be due to them, as aforesaid. It is further ordered and decreed by the court, that the said Matteson be permitted and authorized to hold and retain, out of said fund, the sum of two thousand four hundred and sixty dollars and fifty-six cents, with interest thereon, at the rate of six per cent., from the 19th day of November, 1858, until the filing of this decree, it being the amount so found due him under his mortgage of the 12th December, 1856. And that he pay to said Constant, out of the said fund, the sum of two thousand four hundred and sixty dollars and fifty-six cents, with six per cent, interest, from the 19th Nov. 1858 until paid, the amount found to be due him under his mortgage of December 12th, 1856. And that in distributing and paying these two latter claims, that the sum which has been already collected on said fund and which shall not be exhausted by the payment of the costs, the sum to be retained under the Dodge claim, Constant’s claim, under his second mortgage, and Bussell and Parsons’ claim as herein decreed to be paid, shall be equally divided between the said Matteson and Constant, on their said claims under their mortgages of the 12th December, 1856, and that the half thereof to Constant, be paid to hint by the said Matteson, within ten days from the filing of this decree. And it is further ordered and decreed, that so soon as the money shall be collected on Aldrich’s note, falling due on the first day of July, 1859, the same shall in like manner be equally divided between the said' Matteson and Constant, on their claims under their mortgages of the date of December 12th, 1856, and that the said Matteson pay to the said Constant, one-half thereof, within ton days after the same shall be collected. And it is further ordered and decreed, that when the money shall be collected on Aldrich’s note, falling due the first day of July, 1860, the balance of their claims under their mortgages-of the 12th of December, 1856, be paid and satisfied with interest thereon, if said fund shall bo sufficient for that purpose, and if not, that then the same be equally d ividcd between them. And that said Matteson pay to the said Constant, his share of the fund arising from the last of said notes, within ten days after the same shall be received and collected. And it is further ordered and decreed, that if there shall still remain any portion of said fund, after paying the several aforesaid sums and interest, that such balance be distributed and divided in pro rata proportions between the said Miller and Scott, on their claim of $1,637.14, McCabe and Van Ness, on their claim of $1,210.35, and the said Dunn, on his claim of $1,747.94, and that the said Matteson pay to each of them, such pro rata portion on their claims, out of the balance of said fund as aforesaid, if any balance there shall be, within ten days after the same shall be collected. And it is further ordered and decreed, that if the said Matteson shall fail or refuse to pay any or either of said sums of money within the time, or in the manner specified, that an execution or executions may issue for the collection thereof, in the same manner as upon judgments at law.