Cox v. Garber ( 1858 )

Woodward, J.

— The plaintiffs object to so much of Seevers’ testimony as speaks of what he intended to put into exhibit C., (the receipt), when it was written. It may well be doubted whether the testimony goes to contradict the receipt. This does not specify the relative rights of the creditors, nor determine whether they were to receive equal benefit. It only says that the assignment is for the purpose of securing the payment of the notes — meaning those of both parties; and it is not clear that an explanation may not be made, as to their position and rights, or that an agreement or understanding upon that point may not be shown. There is no controversy, or question, between Barnett and Seevers & Smith, or either of them.

But the second and principal thought is, that this paper now in question, is only the receipt of Seevers & Smith to Barnett, on obtaining the possession and assignment of the bond, signifying, so far as its own purpose required, and in general terms, the object for which it was given and held. There is no question between them and Barnett. The question is between the two creditors, and this paper was not designed to, nor does it profess to, determine their rights, as between themselves. They are entitled to show their relative positions and rights ; and doing this, is not a contradiction of the paper, in this instance — both because that defines nothing of these, and because the instrument is not between them and Barnett. The duty and obligation of Seevers & Smith, under that paper, will be as fully discharged under one mode of distribution as under another, since the whole object of- it is, to show that they held the bond as assigned for the payment of the notes, -whilst the manner of application — or the proposition of distribution — may consistently exist outside of, and independent of, this receipt between Seevers & Smith and Barnett, it being a matter between the debtor and credit- or, and not between the attorneys and the creditor.

"We do not intend to say, that these attorneys might not take such a course as to bind their clients; nor that Seevers, npon taking the assignment, might not execute such a declaration of trust as to have this effect. But we do not regard the paper given by Seevers & Smith to Barnett, in this light. It is only in the nature of an attorney’s receipt. It is true that all such receipts, specifying to what end the collected funds are to be appropriated, contain a trust, but yet there is a difference between a trust deed, or a declaration of trust, and a mere receipt, and this is of the latter character. It is also to be observed, that the assignment is to Seevers alone, (and from him to Smith), whilst the receipt is by the firm of Seevers & Smith, which latter circumstance is con-elusive of its character. For these reasons, it was proper, in our view, that. Seevers should testify to the circumstances in which the respective claims were received, and tending to show the rights of the two creditors.

The question remaining to be disposed of is, what are the rights of the two creditors in the funds to arise from the sale of the land. It appears in the case, that Smith had obtained the legal title thereto, and at the September term, 1857, the court decreed that he sell the land; and after paying the expenses, that he apply the proceeds to the payment of the demands of the two creditors, in proportion to their amounts, and without preference.

In this decree, we think, the court erred. It is true that courts will favor an equal, or a pro rata, distribution of funds among creditors, but yet they cannot do this at the expense of the jiarties’ agreements, nor of the rights which the law gives to any one of them. It does permit one to secure himself, without reference to others, and in priority to them. And Garber had placed himself in this position. His demand had been first sent to Seevers & Smith, and Seevers had obtained the security of the assignment of the bond. If Cox & Shelly had not actual ¡personal knowledge of Garber’s position, they at least had through the attorneys, who were the same that secured Garber’s claim ; and they have no ground upon which they can drive the latter from his position. His is a prior right, and they have neither right nor equity to oust him from it; nor to come in and stand equal with him. Their claim must be postponed to Garber’s, and they must be content to take the residue, after the payment of his debt.

Judgment reversed.