Annan v. Hays

Page, J., delivered the opinion of the Court. This appeal is from the order of the Court below confirming the report of the auditor distributing the proceeds of the sale of certain real estate made under a power of sale contained in a mortgage. James T. Hays was the holder and owner of two mortgages on the real estate of Joseph Byers; one, a first mortgage to secure a debt of $2,500; another, bearing date the eighth day of June, 1878, junior to the first, to secure ⁵⁰⁶ the payment of a promissory note of the same date for $1,050. On the twenty-third day of July, 1894, Byers executed and delivered to Hays a chattel mortgage, as additional security for the payment of the $1,050, due on the above-mentioned promissory note, and also for the further sum of $605.61, due to Hays on another promissory note.

It may be observed that the last mentioned sum included an amount of $520.82, due on a judgment against Byers in favor of John C. Motter and Robert Biggs, who had agreed to assign the same with all its rights and liens (none of which were waived), to Hays on receipt from him of the amount due thereon. The appellants are the holders of three judgments rendered by a justice of the peace against Byers, amounting in the aggregate to $153.06. They were recorded in the office of the Clerk of the Circuit Court of Frederick, on the 30th of August, 1894, and so became liens subsequent to both the Hays mortgages on the realty of Byers ; but no executions having ever issued thereon, they constituted no lien on the personalty. On the 12th of March, 1895, Byers, “ as agent,” to satisfy the claim of Hays of $605.61 (secured only by the chattel mortgage), and also a claim due by him to his wife, advertised and sold the personalty, realizing therefrom about eight hundred dollars.

Though the notes at this sale were taken in Hays’ name, the proof shows that Hays did not authorize him to act as his agent, or to take the notes in that form, nor did he ratify the sale in any other wise than by accepting notes sufficient in amount to pay the note of $605.61. The residue of the proceeds of sale went as a credit on claims held and owned by Byers’ wife. On the 10th of April, 1895, under the power contained in the mortgage, the mortgagee made sale of the realty. After it had been ratified by the Court, the proceedings were referred to the auditor, who after allowing costs and expenses of sale, awarded the balance to the payment of the first and second mortgages, and the residue in part pay_ ment of the judgments of the appellants. ⁵⁰⁷ The ground of objection to this disposition of the fund is, that Hays having two liens for the payment of the promissory note for $i ,050, one on the real estate, the other on the personalty; and the appellant having a lien only on the land, the familiar doctrine of marshalling applies ; and, therefore, Hays having acted in disregard of duty, by permitting the chattels to be diverted from their liability to the payment of his debt, can now take nothing on account of his second mortgage from the realty, until he has credited the amount derived from the sales of the chattels.

Without pausing to inquire whether there may be found in the special facts of this case more than one reply to this contention, we deem it necessary to consider but one phase of the questions presented by the record. The doctrine of marshalling of assets is founded upon those considerations of natural justice, whereby one is not permitted from wantonness or caprice or rashness to do an injury to another, but is required to so use his own rights, as not to injure, if possible, the rights of another. The equity exists also against the debtor, so that he