In re Auditor's Report of Sheriff's Sale of L. Schlesinger's Real Estate , 1 Law Times (N.S.) 15 ( 1879 )

Opinion by

Handley, J.,

The questions involved in this case were argued with great force’. The brief of counsel, on each side, shows very great research and thought. Notwithstanding it is alleged the learned auditor erred in his law, after a careful examination of each question raised and the authorities cited, we fail to find any serious error.

The important question in this whole case is — did the assignment of the Building Association stock as collateral divest the title of Schlesinger so far as to prevent sale on execution ? We are of the opinion that such an assignment does divest, for the time being, title in the original owner.

Where a customer, by indenture, assigned a number of shares in a life insurance company, then standing in the name of the customer on the books of the company, sub» ject to redemption on payment of a sum of money there^ in mentioned, and with a power of sale, an entry of this assignment was made in the insurance company’s ledger, which company afterwards refused to recognize this trans» fer. It was held that the notice of assignment was suffix cient, and that the circumstances sufficiently showed the bankrupt not to be the reputed owner of the shares at the time of the bankruptcy. Exparte Masterman, 2 M. & A., 209; Grant on Banking, 154.

So where A. insured the life of B., payable to A. on the death of B., immediately afterward A. assigned the policy to his banker as security-for a loan or advance which was also secured by a mortgage of real property. Tt was held that the company had no right to call upon A- and the bankers to interplead, and the bill was dismissed with costs. Dessborough vs. Harris, 3 Eq. Reports, 1058. See also Butchart vs. Dresser, 10 Hare 453; 4 De. G. M. & G 542; Exparte Dobson 2 M. D. & D. G. 685.

The English doctrine here explained is fully sustained in our courts.. In the case of Hanna vs. Holton, 28 P., F.Smith 334, it was held that the assignment of a collateral security to a creditor, to. hold for the security of his debt, establishes á privity of contract which invests him with the ownership of the collateral for all purposes of domim ion of the debt assigned.

Where one was indebted to a bank in a sum much larger than the value of some stock of the bank, he owned, and it was verbally agreed that he should transfer the stock as collateral security for his indebtedness, and a power of attorney was accordingly drawn up for that purpose, it was held that this agreement operated as an assignment of the stock in equity. Lightner’s Appeal, 1 Norris, 301. But where a creditor takes a mortgage? note, or other chose in action only as security for a preexisting indebtedness, and not for money advanced at the time, lie is not a purchaser for value, Petrie vs Clark, 11 S. & R. 377; Irwin vs. Tapp, Ibid 419; Hartman vs. Dowdel, 1 Rawle 282; Twelves vs. William, 3 Wharton 485; Depeau vs. Waddington, Ibid 220; Trotter vs. Shippeu, 2 Barr 358; Ludwig vs Highly, 5 Barr 139; Kilpatrick vs. Muirhead, 4 Harris 123; Ashton’s Appeal, 23 P. F. Smith 162.

It was the duty of the creditors here to have strictly pursued the mode pointed out by the statute when they or ginally proceeded against the stock held in the name of Schlesinger, notwithstanding it was assigned to the Building Association as collateral security. There was an equity of redemption in Schlesinger, sleeping, it is true, but nevertheless ready to tap at the conscience of a chancellor sitting in equity at the moment the loan to the Association was paid. 1 Purd. Dig. 639, § § § 29, 30 & 31; Com. vs. Watmough, 6 Wharton 117; Lex vs. Potters, 4 Harris 295; Weaver vs. Huntingdon R. R. Co., 14 Wr. 314.

The fund in court represents all that Schlesinger’s real estate sold for. Here, therefore, is a creditor stripped of all his tangible or valuable property, save only his equity in the stock of the Association in question. It is to this fund the jurisdiction of this court has attached. Jurisdiction having attached, equity comprehends within its grasp all incidental matters necessary to enable it to make a full and final distribution, and therefore to terminate litigation while it affords a perfect remedy. Souder’s Appeal, 7 P. F. Smith 502; Rice’s Appeal, 29 P. F. Smith 182.

Subsequent to the assignment of this stock as collateral security, and subsequent to the sale of the same on the Barrow & Co. execution, Barrow & Co. sued out their execution on the first day of December, 1877, and attached these five shares of stock according to law- Several other creditors did the same prior to the filing of the report of the auditor in court. How far this estopped these creditors from denying that this stock was yet the property of Schlesinger need not be decided under our present views of this question.

We must, therefore, overrule the exceptions in this case and direct the fund in court to be distributed as directed by the auditor.

Exceptions overruled and report confirmed.