Reynolds v. Tooker & Hait

By the Court,

Bronson, J.

[593] The whaling company purchased the bank judgment to protect ttieir title to the ship. For all the purposes of this motion they stand in the place of the bank—having neither gained nor lost anything, as against the junior judgment creditors, by taking the assignment. It was said that the company, as assignees of the bank, were bound to pursue the lien on the ship. They were bound to do so, if that course was obligatory upon the bank before the transfer, and not otherwise. If the bank could discharge the levy on the ship and still pursue the other property, the assignees could do the same. The question then is, what were the rights.of.the judgment creditors as between themselves, and also in reference to the interests of third persons ?

[594] As between the judgment creditors, and without regard to the rights of third persons, the bank should have resorted in the first instance to the ship for the satisfaction of its judgment. The ship and the other personal property of the debtors, Tooker & Hait, may perhaps be regarded as two funds, upon both of which the bank execution had been levied; while the junior judgment creditors could only reach one of those funds—the ship having passed beyond the influence of their executions. It is a just and equitable principle, that where there are two creditors of one debtor, the first having two funds to which he may resort for the satisfaction of his debt, and the second only being able to reach one of the funds, the first shall resort to that source for obtaining payment which is exclusively within his control, and thus leave to the- junior creditor the only means he has for obtaining satisfaction of his demand. This course works no injury to either creditor, but does justice to both. (Evertson v. Booth, 19 Johns. R. 492. Hayes v. Ward, 4 Johns. Ch. 132. 1 Hopk. 469.) It is upon the same principle of doing equal justice to all as far as may be practicable, that a creditor having a lien upon real estate, part of which has been alienated, may be required to sell in the first instance that portion of it which still remains in the hands of the debtor; and where there have been several sales by the debtor at different periods, the creditor will be required to sell in the inverse order of the alienations. (Clowes v. Dickenson, 5 Johns. Ch. 235. 9 Cowen, 403, S. C. James v. Hubbard, 1 Paige, 228.) Although these rules are derived from courts of equity, I think they may be enforced by this court by way of controlling the proper execution of its process.

[595] The creditors in the two junior judgments insist that the principle which hits been mentioned establishes their right to the money in the hands of the sheriff; that the bank, (or its assignees,) having relinquished the fund over which it had exclusive control, and which was sufficient for the satisfaction of the debt, had no right to resort to the other property, and thus deprive the junior judgment creditors of the only fund which they could reach. This argument would be unanswerable if it did not overlook the important consideration that the whaling company had purchased the ship and paid the full price for it before the junior judgments were recovered. The ship was delivered and the title passed to the company on the 7th of June, and the payments to Tooker & Hait were completed on the eighteenth day of that month. The judgments of the applicants, were not obtained until the twenty-eighth; and until that time they had no lien, either legal or equitable, upon the property of their debtors. It must not be forgotten that it is a ride of equity on which the applicants rely. It is never applied where it will work injustice. Indeed, the party who seeks to enforce it must show affirmatively that it would be equitable .in relation to all parties to afford him that kind of relief. (Dorr v. Shaw, 4 Johns. Ch. 17. Ex parte Kendall, 17 Vesey, 20.) What then were the equitable rights of the whaling company at the time the applicants recovered their judgments ? They had purchased and paid for the ship, and were entitled to hold it as against all the world—subject only to the lien of the bank execution. They did not agree to pay off that charge, but took the property subject to it, for the reason that they had no other alternative. What then were the equities as between the bank and the whaling company, the only persons who at that period had any valid claims upon the property of Tooker & Hait? It was most evidently just that the bank should resort in the first instance to the other property of the debtors, and not touch the ship until they had exhausted all the other means within their reach for obtaining satisfaction of the judgment. This course was required by the rule of equity, which has already been considered. It was the only practicable mode of doing equal justice to both parties. The right of the whaling company as purchasers, to insist that the bank should first resort to the other property before touching the ship, had attached before the junior judgments were recovered ; and that right could not be divested by any subsequent act of the debtors, as by making a further sale of their property,, or confessing judgments to other, creditors. The equity set up by the applicants consequently did not arise ; and it cannot be allowed to prevail without overturning the prior, and therefore better, equity of the whaling company. It is no doubt just that the junior judgment' creditors should be paid,' but they cannot reach the money in the hands of the sheriff without interfering with the rights of the creditor, who had gained a valid preference over them.

It was the duty of the bank, while it held the judgment, to sell the other property before resorting to the ship. By purchasing the judgment, the whaling company did not destroy their equity, but acquired the legal means of enforcing it. The proper course has been pursued by the sheriff, and he must be left, as in other cases, to apply the money derived from the sale of the personal property to the oldest execution in his hands.

As this was a fair question in relation to the rights of different parties and the duty of the sheriff under the process of the court, and has been properly presented for consideration, no costs are ordered. Motion denied.