Court Opinion

ID: 7091377
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:06:28.934223+00
Date Added: 2024-06-11T16:13:06.266722
License: Public Domain

Wri&ht', C. J.
— The complainants, in this bill, charge that White & Co. released the mortgage with the intention, and for the purpose of defrauding the other creditors; or that, if this is not true, then, that there was some agreement between them and the mortgagors, by which they were in some manner secured, in consideration of said release. All such averments are, however, explicitly denied *30by the several answers of tlie respondents, and we are left to determine the rights of the parties, upon the admitted facts, which are substantially given in the statement of the case.
The property included in the mortgage, was not covered by the assignment, and was not liable to the general debts of the mortgagors. It could only be made liable for the debts stated in the petition, by a written contract, executed by the persons having the power to convey, such contract expressly stipulating that it, (the homestead,) was liable therefor. And, even in such a case, it could not be sold, except to supply the deficiency remaining, after exhausting the other property of the debtor, liable to execution. Code, section 1249. To make a valid conveyance of such homestead, the husband and wife must concur in signing the same. Section 1241.
As a starting point, therefore, we shall regard it as clear and manifest, that unless the taking of the mortgage, by White & Co., gives to the other creditors, a right to inquire into and make liable the homestead of the parties making the assignment, they could not otherwise disturb their debtors in its possession and enjoyment. They could not, because it is, by express provision of the Code, exempt from judicial sale, except when encumbered in the manner before stated. Section 1245. And it is not pretended, of course, that in case of insolvency, it is any more'liable than if the owner was entirely able to pay his entire indebtedness. As to the general creditors, such property has virtually no place or existence. It belongs not alone to the husband, but is wisely set apart, by the law, for the benefit of the family, and is not to be taken from them, until both husband and wife shall die, and there shall be a failure of issue them surviving. Code, sections 1263, 45; Floyd v. Mosier, 1 Iowa, 512.
Does the taking of the mortgage by White & Co., change the principles which would otherwise be applicable ? Is it a matter of any importance to the other creditors, that White & Co. released this mortgage, assuming that *31they have released it, in good faith, and have not taken any other or further security? We clearly think not. If White & Co. had never taken this mortgage, then, as already shown, they would stand in the same position as all other creditors, and would have the same right to their jero rata payments from the effects of their insolvent debtors. The right of the other creditors to inquire into the circumstances of the release, (if it was bona fide,) or to insist that they shall be permitted to stand in the place of the mortgagees, must, it seems to us, be claimed alone upon the hypothesis, that White & Co. have abandoned a security which is, or should be, liable for the general indebtedness, or to the creditors generally. Eor if such property could not be made thus liable, what matters it, whether the mortgagees did, or did not, release it. Chorn & Dickerson, and their wives, might, at their option, execute a mortgage upon their homesteads, to any creditor, but it would by no means follow, that every other creditor, by that act, would acquire a right to subject it to the payment of his or their debts. The extent of the incumbrance, in such a case, would, be to secure the particular debt named, and the clear policy and spirit of the law would be defeated, if it could be made thereby liable beyond the limitation thus fixed, or if the general creditors could claim to be subrogated to the rights of the mortgagees.
We understand the position of White & Co., and their relation to the property so mortgaged, to be this : In the first place, they were creditors of the firm of Chorn & Dickerson, in the same manner as the complainants. Beyond their general right to claim payment out of the general property, or that liable to judicial sale, they procured a lien upon property declared by law to be exempt from execution, which property was not, however, and could not be, except by the concurrence of the owners, subject to the general debts; neither could it be sold, even under the mortgage, until all other property liable to execution was exhausted. Now, suppose they had not released their lien, would they not have been compelled to exhaust all other *32means to obtain payment, before resorting to their mortgage? And if so, had they not a right, and would it not have been their duty, to present their claim to the trustees, under the assignment, and take their proportion of the money arising from the effects in their hands ? Could not Chorn &" Dickerson, if foreclosure proceedings had been commenced, have compelled the mortgagees to first resort to the other funds, and insisted that their homesteads were only liable, under the law, for any deficiency remaining after exhausting the other property ? And if so, could the other creditors claim that, inasmuch as the allowance of the demand of White & Co., and its payment fro rata, had lessened the amount which they would otherwise have received, therefore, they must be compensated, by being let into their rights under the mortgage ? It seems to us not; but that the mortgage was exclusively a transaction between the immediate parties to it, and that the other creditors could in no event claim any advantage or benefit from it. And the release can in no manner change the rights of the respective creditors. White & Co. had a perfect right to execute such a release. As they would have a right to have their demand paid fro rata, while the mortgage remained in full force, so they would after the release. The release was for the benefit of the mortgagors, and upon no fair and legitimate ground could it inure to the other creditors.
This is not a case where a party has a right to marshal assets or securities. It is true that the general rule is, that if a creditor has two funds out of which he may make his debt, he may be required to resort to that fund upon which another creditor has no lien. Story’s Eq. Jur., section 559. And yet we are not to take this rule without some qualifications. Eor instance, it is never applied, unless it can be done without injustice to the creditors, or other party in interest, having a title to the double fund, and also without injustice to the common debtor. Ib., sections 560, 612.
Apply the general rule, without the qualification, to the *33case at bar, and how does it stand. To compel White & Co. to resort their mortgage, they must have been in a situation to make their debt out of the property so mortgaged. But how can such a rule' possibly have any application, when the law expressly provides, that they shall not resort to this fund, or shall not enforce this lien, until they have exhausted the other property. If it was a mortgage upon other property, not thus exempt, then the rule might be applied; but certainly not, where the law expressly inhibits them from enforcing their lien, except upon a contingency that could not occur, while there were any assets liable to the payment of their debts. In a word, the difficulty in the whole argument of complainants, is, that it assumes that the homestead, as well as all the other property, ought, by reason of the mortgage, to be thrown into the common fund, and that they, by that act of their debt- or, have1 acquired some right to control the disposition of the mortgage; whereas, to our minds, it is a matter of entire indifference, whether the mortgage was, or was not, given — was or was not released. Eor, if given, and released, or not released, the property would still be as completely beyond their control, or beyond any right of theirs to interfere with its management, as if it had remained unincumbered. If, by possibility, it could be made liable to their debts, as a part of the common fund, they might complain. But it can work no prejudice to them, nor is it inequitable or unjust, to hold that White & Co. may release, at their option, a mortgage upon property which the common creditors could never, under any circumstances, reach.
And ii we apply the further thought, that the general rule is not to be applied, when it will work injustice to the common debtor, the argument, we think, becomes conclusive. The law gives to these debtors, the right to claim this property as exempt, and sets it apart for the benefit of their families. By the concurrence of those who may convey it, it may be incumbered. But, by compelling White & Co. to resort, in the first instance, to their mortgage, or by subrogating the other creditors to their rights, 1 *34we would defeat the plain policy of the law, and work most manifest injustice to the common debtors. By one act, and in a particular manner, they subjected the exempted property to the payment of a particular debt, but not until all their other property was exhausted. Now, can it be taken from them, after they have succeeded in releasing this incumbrance, and in a manner unknown to the law, and in direct violation of their rights, and the spirit, policy, and letter of the Code ?
But, finally, it is urged that there is nothing to show that the premises named in the mortgage, are used as a home by the debtors; and that until this is shown, they are not the homestead, and, therefore, not exempt. The bill charges, however, expressly, that the property so mortgaged was the homestead, and used as a residence by the respective mortgagors. The answers also set up and assert the same fact. Indeed, that the property mortgaged was exempt, as a homestead, or the homesteads of the two members of the firm of Chorn & Dickerson, is an admitted and conceded fact throughout all the pleadings. And if the parties, (and especially the complainants,) have treated the property thus, and given it this name, by which its character is clearly and conclusively shown, it is not necessary for the respondents to aver or allege that it was actually used as a home. If it was the homestead, then, pf course, it must have been so used, to give it that character.
Decree affirmed.