Stokes v. Stokes, 206 N.C. 108 (1934)

Feb. 28, 1934 · Supreme Court of North Carolina

206 N.C. 108

GRACE HALL STOKES v. M. J. STOKES et al.

(Filed 28 February, 1934.)

1. Dower O a — Right of dower is superior to creditor’s equity of marshaling.

A widow’s right of dower is superior to a junior lienor’s equity to force a creditor having a first lien on several parcels of land belonging to the estate to first exhaust the security upon property against which the junior lienor has no claim, the widow’s dower having been allotted in the lands having a single encumbrance and she having enjoined the senior lienor from selling the property in which her dower was allotted except as a dernier ressort.

2. Marshaling A a—

The doctrine of marshaling rests on equitable principles only, and will not be invoked against a superior equity, or to the injury of the creditor having the double security.

Appeal by Citizens Bank and Trust Company from Harris, J., at September Term, 1933, of Eeaniclin.

Civil actions (1) for the allotment of dower, (2) to restrain foreclosure and (3) to have securities marshaled, consolidated by consent and heard together as all three of the cases are interrelated.

The facts are these:

1. On 1 January, 1928, O. W. Stokes, a bachelor, executed a deed of trust to the Virginia Trust Company, trustee, on three lots or parcels of land situate in Louisburg, N. C., to secure an indebtedness of $12,000.

(a) The first lot is situate on Main Street, known as the Strother home place, and embraces the Stokes residence, the Albert Wheless residence, the Nobe Medlin residence, and two metal garages.

(b) The second lot is situate on Main Street and known as the Farmers National Bank Building.

(c) The third lot is situate near the railroad track with three houses erected thereon.

2. On 29 May, 1931, C. ~W. Stokes, while still a bachelor, borrowed $5,000 from the Citizens Bank and Trust Company and secured the same by deed of trust to W. L. Lumpkin, trustee, on a storage warehouse (alone insufficient to secure the debt), and the Farmers National Bank Building, the second lot above mentioned.

3. On 1 November, 1931, the said O. ~W. Stokes and Miss Grace Hall were married.

4. On 24 December, 1932, C. W. Stokes died intestate and insolvent, owing a balance of approximately $6,485 on the first indebtedness above mentioned, and $4,780 plus accrued interest on the second.

5. There is no personal property of the estate available for payment of these debts. The deceased left other lands in addition to those covered by the above deeds of trust.

6. On 7 July, 1933, the widow was allotted the Strother home place as dower. The Citizens Bank and Trust Company later intervened and filed exceptions.

7. On 17 July, 1933, the Virginia Trust Company, trustee, started foreclosure under the power of sale contained in its deed of trust. The widow secured a restraining order as against the sale of her dower, except as a denvier ressort. The Citizens Bank and Trust Company secured a restraining order until its right to have the securities marshaled could be determined.

8. The Farmers National Bank Building is the doubly encumbered property. The junior lienor seeks to compel the senior lienor to exhaust its remaining security in exoneration of this property under the doctrine of marshaling. The widow has been allotted the Strother home place as her dower. She seeks to compel the trustee in the deed of trust to exhaust its remaining security before resorting to a sale of her dower.

From a judgment overruling tbe Citizens Bank and Trust Company’s exceptions to tbe allotment of tbe widow’s dower in tbe first case, and bolding that tbe widow’s right of dower is superior to tbe right of marshaling in tbe second and third cases, tbe Citizens Bank and Trust Company, appeals, assigning errors.

Scott B. Berkeley and Wyatt E. Blake for plaintiff, Grace Hall Stokes.

W. L. Lumpkin and Perry & Kitirell for Citizens Bank and Trust Company, intervener.

Stacy, C. J".,

after stating tbe case: Is tbe equity of marshaling superior to tbe right of dower? Tbe answer is, No.

In tbe first place, it should be observed that tbe right of a junior creditor to have tbe common debtor’s assets marshaled is not a lien, or a vested interest, but only an equity to be administered as such. It does not fasten itself upon tbe situation when tbe successive securities are taken, but is to be determined at tbe time tbe marshaling is invoked. Harrington v. Furr, 172 N. C., 610, 90 S. E., 775; 18 R. C. L., 456. It is true, equity pursues tbe right until it meets another of equal or superior rank. 38 C. J., 1367. But, here, tbe widow’s superior right of dower is met at tbe threshhold of tbe administration of appellant’s claim. Holt v. Lynch, 201 N. C., 404, 160 S. E., 469; Blower Co. v. MacKenzie, 197 N. C., 152, 147 S. E., 829. “Dower has long been tbe favorite of tbe law”- — Parser, J., in Pridgen v. Pridgen, 190 N. C., 102, 129 S. E., 419.

While tbe doctrine of marshaling is well established, it is not founded on contract, but rests upon equitable principles only, and tbe benevolence of tbe court; and it is never extended so as to affect injuriously tbe creditor who has tbe double security, or to trench upon tbe rights of tbe common debtor or of third persons.

Thus, in Butler v. Stainback, 87 N. C., 216, it was held that tbe debtor’s right of homestead was superior to tbe creditor’s right of marshaling, tbe Court saying: “To apply tbe principle of marshaling assets in such a case would be an indirect way of subjecting a homestead to tbe payment of debts, when tbe very object of tbe law is to confer a homestead exemption superior to all creditors, and ever consecrated, except so far as it may be impaired by tbe voluntary act of tbe claimant himself.” And this was quoted with approval in Harris v. Allen, 104 N. C., 86, 10 S. E., 127.

Again, in Watts v. Leggett, 66 N. C., 197, it was held that tbe widow’s right of dower is paramount to tbe right of tbe children to enjoy tbe homestead during tbe minority of any one of them. “Dower is paramount to homestead, and tbe children of a deceased husband must enjoy their homestead subject to the dower rights of the widow”— Mordecai’s Law Lectures, 2 ed., Vol. I, 380.

A fortiori, therefore, if homestead is superior to marshaling, and dower is paramount to homestead, the right of dower must be higher in rank than the equity of marshaling.

The remaining exceptions call for no elaboration. The cases were properly decided in the court below.

Affirmed.