Kunkel v. Fitzhugh , 22 Md. 567 ( 1865 )

Goldsbokough, J.,

delivered the opinion of this Court.

The order ratifying the account stated in this case, must be affirmed. The claim to the allowance of which, the appellant objects, is made by Montgomery Johns, surviving executor of John Johns, on a single bill for $4,000, executed to his testator on the 11th of July 1855, by Peregrine Fitzhugh, with Sarah, his wife, and Sophia Fitzhugh as joint makers and sureties.

The record shows, that Peregrine Fitzhugh, to secure the payment of this obligation, and his sureties from loss on account of the liability thus contracted, executed a mortgage to Sophia Fitzhugh upon six horses, forty mules, six wagons, and the harness and gearing belonging thereto, which were then used by him in his business at the Catoctin Iron Works, of which he was proprietor. Afterwards, on the 25th of Nov., 1856, Fitzhugh, having agreed with the appellant to form a co-partnership for manufacturing iron, sold, and with his wile and Sophia Fitzhugh, conveyed to him an undivided moiety of the property, real and personal, known as the Catoctin Iron Works; the appellant retaining in his own hands, in accordance with the terms of his purchase, $10,000 of the purchase money, to satisfy what was then ascertained and assumed to be his proportion of the liens then existing on the property. The dissolution of this co-partnership occurred on the 21st of April, 1858, when Fitzhugh entered into another engagement with the appellant for the exclusive possession of the joint property, and payment of the co-partnership debts. To secure the performance of this last agreement, he executed a mortgage of the co-partnership property to the appellant, and failing to comply with the conditions stipulated, the appellant then filed his bill for a sale of the mortgaged property, including that covered hy the mortgage to Sophia Fitzhugh; upon which sale was made, and the proceeds of the property, covered by the last mentioned mortgage, separately reported for distribution. At that stage of the case, Montgomery Johns, as surviving executor of John Johns, and holder of the single bill for $4,000, intervened by petition, praying that he might be substituted to the rights of Sophia Fitzhugh, and have payment of his claim out of the proceeds of the property mortgaged to her.

The only material question arising on these facts, is in regard to the right of substitution claimed by Montgomery Johns, which is resisted by the appellant on several grounds. We have, however, concluded, after a careful examination of the appellant’s printed argument, and of the evidence on which he founds his objections, that they are not well taken.

The fund in question was brought into a Court of Equity, upon a proceeding properly instituted hy himself, and he is not now at liberty to dispute the jurisdiction of the Court over the subject matter of the proceeding, nor its power to make distribution according to the equitable rights and priorities of all the parties interested. Even on the theory that the creditor, whose claim is resisted, had a remedy at law which he was bound to exhaust before he could proceed in equity, yet that rule does not apply, when the subject matter of his ultimate equitable remedy is brought into a Court of Equity for adjudication on a proceeding properly instituted by other parties; for jurisdiction in equity, having once attached, it will be maintained for the protection and final adjudication of all the rights and interests involved.

The mortgage to Sophia Fitzhugh was a security for the payment of the single bill referred to in, and filed with the petition of Montgomery Johns; and the simple question is, whether he is entitled to the benefit of that security under the circumstances shown in this case. On that point we have no doubt. The general rule governing in such cases, is well ascertained and defined in the authorities upon this subject. In 1st Story’sEq. Jur.,sec. 638, it is stated to be, “that if a principal has given any security or other pledges to his surety, the creditor is entitled to all the benefit of such securities or pledges in the hands of the surety, to be applied in payment of his debt;” and, again, in sec. 639, that “the surety has the right to call on the creditor to do the most he can for his benefit; and if he will not, a Court of Equity will compel him.” The case of Eastman vs. Foster, 8 Met., 19, is very full on this point. There, it was held that a mortgage, given by the maker of a promissory note to the surety upon it, for the purpose of securing payment of the note, and saving the surety from loss, created a trust and an equitable lien for the holder of the note; that the mortgagee held the property subject to such trust; and further, that the trust would follow the property into the hands of the original mortgagor if released to him before payment of the note, or into the hands of any grantee of the mortgagor, who should take it with actual notice of the trust, even though the holder’s right of action should be barred by the statute of limitations. On these authorities the fact that the principal and his sureties joined in a conveyance to the appellant of an undivided moiety of the property mortgaged to one of the sureties, would seem to have no effect upon the equitable right of the creditor to tbe full benefit of tbe mortgage, and tbe more especially as tbe appellant appears, from tbe evidence, not only to bave accepted tbe conveyance with full knowledge of tbe mortgage, but was allowed to retain in bis own bands a sufficient sum of tbe purchase money to protect bis share or interest in tbe property from tbe creditor's equitable claim to tbe benefit of tbe mortgage to tbe surety.

(Decided March 15th 1865.)

We bave discovered no reason for disturbing tbe account allowing tbe claim of Johns, and therefore affirm tbe order of tbe Court below, with costs to tbe appellee.

Order affirmed.