Smith v. McLeod, 38 N.C. 390, 3 Ired. Eq. 390 (1844)

Dec. 1844 · Supreme Court of North Carolina

38 N.C. 390, 3 Ired. Eq. 390

BENJAMIN B. SMITH vs. JOHN McLEOD.

Whenever a collateral security on the property oí the principal is given to or obtained by a creditor, by whatever means, it amounts to a specific appropriation of those effects to the debt, and therefore the surety is entitled to the benefit of it, as well as the creditor ¡ and the creditor is under a duty to the surety, which will be enforced in equity, not wilfully to impair the security or omit to enforce satisfaction of it.

The act, directing that injunctions shall issue but within four months after the rendition of a judgment at law, is only directory to the Judges; and forms no ground for dissolving an injunction, after the defendant has appeared and put in his answer to the'bill.

The cases of Cooper v. Wilcox, 2 Dev. & Bat. Eq. 90, Nelson v. Williams, Ibid. 118, and Pugh v. Maer, 4 Hawks, 362, cited and approved.

Appeal from an interlocutory order of the court of Equity of Wake County, at the Fall Term 1844, his Honor Judge Caldwell presiding, which order directed the injunction, which had been obtained in this case, to be continued to the hearing. The facts disclosed by the bill and answer were as follows.

On the 26th of October, 1839, William W. White, gave a bond for the sum of $1,641 16, in which Johnson Busbee and the plaintiff joined, as his sureties; and which came by assignment to the Trustees of the Rix Hospital Fund. They brought an action on the bond in Wake County Court, and obtained judgment against all the obligors in November, 1842; from that, the defendants appealed,- and at the next term of the Superior Court, which was on the 1st Monday of April, 1843, judgment was rendered against White, Busbee and Smith, and the sureties for the appeal. At the same term of the Superior Court,-a judgment was rendered in favor of one Johns, for about $600, against the same persons ;■ and also one, in favor of one Atkins,- for about $700, against White, Búsbee and Smith. The three judgments made, together, upwards of $3,000. Writs of fieri facias were taken out on all the judgments, and delivered to the Sheriff, in April 1843, and served on certain property of White on the 4th day of May, following; and that was all the property he had.

At May term 1843, of Wake County Court, which was on the third Monday, the defendant, John McLeod, obtained two judgments against the said White and Busbee for $3,269 72, in the whole, besides costs; and at the same time judgments were rendered in favor of other persons, against White and Busbee, for about $1,530 28.

A few days before the County Court, but after the issuing of the executions from the Superior Court, Johnson Busbee conveyed to Trustees, all his visible estate, (except certain of his slaves,) upon trust, to sell and pay certain debts of his own, which exceed in amount the value of the effects assigned.— Writs of fieri facias were taken out in May, on the judgments in the County Court, and delivered to the Sheriff; and, as the latter executions could not reach the property conveyed by Busbee, in his deed of trust, and those from the Superior Court could, because their teste was prior to the execution of the deed, McLeod requested the Sheriff to serve the executions from the Superior Court on the property conveyed by Busbee, and leave the property of White and the negroes óf Busbee, which he omitted to convey, for the satisfaction of the County Court executions. But the Sheriff declined doing so, and levied the executions from the Superior Court on the said negroes of Busbee, as being of prior teste, and entitled to the preference, and, subject thereto, he levied the County Court executions on the same property of White, and the same slaves of Busbee; and he made known, that he would apply the proceeds of sale to the executions according to their legal priorities ; and White and Smith united in a request to him, that he would do so. With the view of saving his own debts, Me Leod then purchased the judgment of the Trustees of the Rix Hospital, and took an assignment of it, and gave the Sheriff notice thereof, and, inasmuch as none of the executions designated auy of the parties as sureties, he again required the Sheriff not to proceed further on the Rix Hospital’s execution, against the property of White and the negroes of Busbee, so levied on, but to sell the same under the other executions.— ^ut ®*ier^i at l'1Q instance of White and Smith, still persisted in his previous determination, and, in consequence therejjcLeo¿ withdrew the Rix Hospital execution, from his hands. The Sheriff then sold White’s property for $2,372 50, and Bnsbee’s negroes, that were left out of his deed, for $2,9-67 15; in all, $5,339 65. He did not, however, pay over those moneys to the plaintiffs in the executions, but returned the special matter and submitted it to the Courts to decide, to which of the creditors, and in what proportions, it should be paid. After the sale, McLeod again delivered to the Sheriff the Rix Hospital execution, and required him to serve it on the property of Smith, and on that of Busbee, conveyed by the deed of trust; which he did, and returned the levies to the Superior Court, at October term, 1843. At that term, it was also decided, on the Sheriff’s return, that the executions from the Superior Court in favor of Johns and Atkins, should be first satisfied out of the proceeds of White’s property, and the residue of the whole sum of $5,339 65, applied to the the judgments in the County Court, pro rata. McLeod then sued out a venditioni exponas on the levy on the property of Busbee and Smith returned on the Rix Hospital’s execution and delivered it to the Sheriff on the 20th day of October, 1843.

On the 29th of March, 1844, the plaintiff filed this bill against McLeod, in which he prays for relief and an injunction. It states, that the plaintiff applied to Busbee to join in the suit, and that he had refused, and has become insolvent, and makes the same allegations as to White. Upon tho bill and the usual affidavit of the truth of its allegations, an injunction was granted in vacation.

The answer sets forth the facts much as they appear in the foregoing statement. It admits, that White is insolvent and has no property; and it states, that Busbee’s assignment did not include any debts that might be due to him, but it admits that he has no visible property except that assigned, and that he is reputed to be insolvent. The defendant denies, that, when he purchased the judgment from the trustees of the Rix Hospital, he knew that Smith and Busbee were ties, though he now admits such to be the fact. The answer' further insists, upon the delay in filing the billy for more than „ , „ . , . . . , , ,. four months after the decision of the court as to the application of the money raised by the sheriff.

The defendant moved upon his answer for a dissolution of the injunction, but his Honor refused the motion, and ordered the injunction to stand until the hearing, but-allowed the defendant an appeal.

Iredell for the plaintiff,

relied on the cases of Cooper v. Wilcox, 2 Dev. & Bat. Eq. 90, and Nelson v. Williams, 2 Dev. & Bat, Eq. 118.

Badger for the defendant.

To arrange the executions in such manner, and to apply the property liable to all and each of them, so as to produce satisfaction of all, was the duty of the sheriff without any instructions to that effect from McLeod. The whole amount of the executions in his hands, was more than $8,000. The three Superior Court executions were for about $3,329, and the lien of these overreached Bus-bee’s deed of trust, while the County Court executions for more than $4,000, were tested subsequently to that deed, and, therefore, could not authorise a seizure of the property conveyed by it. By applying Busbee’s property in the hands of the trustee, wholly to the satisfaction of the Superior Court executions, and the other property of Busbee with that of White, to the County Court executions, the satisfaction of all would be produced. If it is the duty of the sheriff to endeavor to procure satisfaction of all executions in his hands, then he was bound to make such application. If all the executions had come into his hands at the same time, no doubt can be made, that he was bound so to levy them, as to produce entire payment of them all, and, as necessary to this end, to seize under the elder executions, that property of Busbee, which was not liable to the junior. What difference is produced by the fact of the levy upon White’s property, before the junior executions came into his hands? Nothing is gained by the delivery to the sheriff; executions, by our law, having priority amongst themselves, as well as a lien upon the debtor’s property, from their teste, and not from their delivery. Nor is specific right of satisfaction out of property seized under an execution, gained by such seizure as against other executions, for, by the decisions of this court, the proceeds of a sale are to be applied to all executions in the sheriff’s,hands at the time of the sale, according to their priorities, without regard to the time of delivery, or to the process under which the seizure is made. Up to the sale, all the property of all the parties, liable under the executions, was a fund subject to the satisfaction of all the debts, so far as any legal application of the same by the sheriff could produce that result. When, therefore, upon the delivery of the junior executions, the sheriff found, that, to apply the property seized under the senior executions to these latter, would leave the former unsatisfied, it became his duty to seize the property of Busbee conveyed by the deed, and apply it wholly to the satisfaction of the senior executions; and seize and sell the property of White under the junior ones, because it was then apparent, that, by this course only, could all be paid, and he was bound to pay all, if he could.

But if the sheriff was not absolutely bound in law so to do, at least, it must be conceded he could, if he chose, lawfully so have done. Either position produces the same result in the decision of this cause. For what has McLeod done ? He has compelled the sheriff to do, not other or more than he ought or lawfully might have done, but less. He has compelled him to withdraw the property of White from one only of the Superior Court executions, whereas it ought to have been withdrawn from all these. But surely the plaintiffs cannot allege, as an injury to him, that, by the action of McLeod, that result has been produced, which, without that action, the law required or permitted to be produced.

The Judge, in the court below, grounded his judgment upon the decision of this court in Nelson v. Williams, 2 D. & B. Eq. 118, but it is respectfully submitted, that this case does not support, but is indirectly opposed to his-judgment. There an execution had been, by agreement between the creditor and the surety, levied upon the property of the principal, for the indemnity of the surety, and afterwards was assigned to another creditor, who had a deed of trust upon the same property made subsequently to the execution. The assignor raised the execution, sold under his deed, and then sought to charge the surety, and the case was decided upon the express ground that it was unjust to withdraw the execution in favor of a creditor, who had no specific claim on the property, and that the sheriff should have been allowed to enforce the execution, which was the only process in his hafids. Here McLeod had a specific claim and lien on the property of White under his County Court execution, and it was not unjust in the Rix Hospital to assign, nor in him to take their judgment, in order, by his control over it, to give effect to his own execution ; and, here, also, instead of preventing the sheriff from the discharge of the duty which the law under those circumstances required of him, McLeod has enforced its peiformance.

It is therefore contended, on the part of the defendant, that if the plaintiff has sustained any loss by the action of the defendant, he has sustained no injury, and has no equity for relief by'injunction in this court.

Again: If he ever had such equity, he has lost it by delay.

The Revised Statute, “ Courts of Equity,” see. 12, prohibits the issuing of an injunction after four months from the judg-< ment, except in the cases therein mentioned, and this case is not one of them. On this appeal and sheriff’s return, the Su-perior Court ordered the application of the money raised, and a venditioni exponas, against the property of the plaintiff and Busbee ; that ven. exp. was issued and placed in the sheriff’s hands five months before the plaintiff’s bill was filed and the injunction awarded.

At all events, the judge erred in retaining the injunction for the whole amount. For the plaintiff’s complaint is, that the property of White, his principal, should have been apto the three Superior Court executions; but if this had done, there would have remained due upon the Rix Hospital judgment assigned to McLeod, nearly a thousand dollars. According to his own ground of equity, the injunction should have been dissolved as to this amount.

Ruffin, C. J.

The question, on which the merits of this case depend, has been fully settled by previous decisions of this Court. The judgment of the court of law was perfectly correct, that none of the money in the Sheriff’s hands was applicable to the debt in the name of the Rix Hospital; for the question there was between the plaintiffs in the several executions, and, as this execution had been withdrawn before the sale, the Sheriff could not apply any of the money to it, but was bound to apply it to the executions under which he made the sale. But, still, the question remained, what effect the conduct of the creditor, in withdrawing the execution under the circumstances then existing, ought to have on his right in equity to raise the debt out of the surety. We think it clear, that, as far as he would have got satisfaction out of the property of the principal debtor, if he had let the execution have its course on the levy, to that extent the surety is discharged. The cases of Cooper and Arrington v. Wilcox, 2 Dev. & Bat. Eq. 90, and Nelson v. Williams, Ibid. 118, are directly in point. The principle is, that, whenever a collateral security on the property of the principal is given or obtained, it amounts to a specific appropriation of those effects to the debt ; and, therefore, the surety is entitled to the benefit of it as well’ as the creditor, and the creditor is under a duty to the surety not wilfully to impair the security or omit to enforce satisfaction on it. It was urged on us at the bar, that there was a distinction between the case of Nelson v. Williams, and the present in this; that in the former, the security on the property of the principal by the fieri facias was, at the instance of the surety, and by an agreement between him and the credit- or, and was expressly for the purpose of obtaining an indemnity to the surety. It might be replied, if necessary, that in point of fact,- this is substantially the same ease. Rut it is not necessary to compare the cases in that respect; for the truth is, that the circumstances alluded to, though noticed in the opinion of the Court, because existing in that case, had no influence upon the decision. Care was taken to let that be seen by saying, that “the surety is entitled to every collateral security which the creditor gets into his hands, and that, as soon as it is created,- and by whatever means the surety’s interest in it attaches, and the creditor cannot impair it.” Several instances of the application of the principle, are then noticed,in which the supposed securities were not obtained at the instance of the surety. The wrong done to the surety by the creditor, is not defeating an effort by the surety to obtain an indemnity •, but it consists in this, that the creditor has a security for his debt on the principal debtor’s own property, and has destroyed or departed with the same to the prejudice of the surety. Therefore,- it was said in Nelson v. Williams, that it was immaterial by what means the security was created, and,- in so saying, the Court adopted the language of Loam Eldon. In Mayhem v. Crickett 2 Swans. 191, he said “the circumstance, that the plaintiffs (the sureties) did not know that the defendants (the creditors) held a warrant of Attorney, was of no consequence ; because sureties are entitled to the benefit of every security which the creditor had against the principal debtor; and whether the surety knows of the existence, of those securities or not is immaterial.” Upon that ground, he held in that case,- that where the creditor had taken a separate judgment against the principal debtor, and took his goods in execution, and then withdrew the execution — all, without the knowledge of the surety — it was a discharge of the surety. In the present case, the sureties knew of the security created by the levy on the principal’s effects, and it was the only means of saving themselves from loss, and they urged the creditor to proceed on it; but he withdrew the execution for the express purpose of throwing the loss of this debt upon the sureties, because, thereby, he hoped to save another debt of his own, the execution for which was posterior to that of Hospital.

It was said at the bar, that the Sheriff might have arranged ^ executions so as to raise the largest possible amount of the execution debts, by satisfying the Superior Court executions out of the property of Busbee and Smith, and applying White’s property and Busbee’s negroes, that were not conveyed, to the County Court executions; and that, if the Sheriff had done so, those sureties could have had no redress against him.— And it was thence inferred, that the defendant is not to blame for bringing about a state of things, for which the Sheriff, if effected by him, would not have been responsible. But the consequence does not follow. The Sheriff proceeds in obedience to his writs, and therefore their mandates justify him, and he is not bound to enter into any equities between any of the parties. But, if the creditor attempts to have a use made of the writ, which, however legal, is inequitable, a Court of equity will reslrain him. Therefore, the legal irresponsibility of the Sheriff, for discharging the property of the principal debt- or and seizing that of the surety, Eason v. Petway, 1 Dev. & Bat. 44, does not establish the liberty of the creditor to bring about the same state of things. It may be true, also, that the Sheriff and the creditor might arrange the executions, or, if the expression may be allowed, marshall the debtor’s property, so as to raise the largest sum for the creditors. But that can only be allowed in equity, if at all( in respect of a defendant, who is liable for all the debts, and whose property is in such a state, that only a portion of it can be reached by one of the executions, while another execution may cover the whole. Such, for example, may be the case of Busbee ; against whom all of the judgments both in the Superior Court and County Court, were rendered. To him, therefore, it was immaterial, as White’s property was insufficient to pay them all, whether this or that one had the benefit of that property. For that reason it may also be, that the creditor might properly obtain satisfaction of the itix Hospital execution out of the property conveyed by Busbee in the deed of trust. But, with those questions we now have no concern. They arise between persons not before us. Smith was liable only for the judgments in the Superior Court and was not a party to those in the County Court. The only question which arises upon this appeal from an interlocutory decree is, whether the injunction should be continued for any and what part of the debt, so as to restrain the creditor from raising it from the present plaintiff. Now, as between Smith and the creditor, the latter is bound, as we have seen, not to have given up the securities he had for the debt. Even if he could, as against Busbee, levy the whole of the debt out of his property, yet he could not rightiully do so in respect to Smith’s responsibility; because as soon as Busbee’s property had paid the debt, an action would arise to him against Smith for contribution, whereas White’s property, as far as it went, would, if applied, have been an absolute discharge to all concerned. When, therefore, the execution was levied upon White’s property and also upon Busbee’s negroes, and was the preferable lien upon both of those funds, McLeod ought not to have discharged those properties therefrom, and caused them to be applied otherwise. It is clear, therefore, that the injunction should have been continued, at least, partially. And as far as we can conjecture, it might properly have been dissolved for, probably, tinee or four hundred dollars, or even a little more. But in the present state of our information, we are unable to see the precise sum, for which the injunction should have been continued, or for which it should have been dissolved. In the first place, it is admitted, that White’s property brought $2,372 50, and that the executions of Johns and Atkins, said to be about $1,-300, exclusive of interest and costs, were satisfied thereout. With that application of the fund, the plaintiff, Smith, has no cause of complaint, inasmuch as he, like Busbee, was bound for both of those debts as well as that to the Rix Hospital. ■

It was therefore immaterial to White and his sureties, whether the deficit exist as a balance due on one of the exeT cations or as balances on all of them. After satisfying Johns and Atkins, there would be a residue of ten or twelve bunddollars of the proceeds of White’s property applicable to Rix Hospital’s judgment; which would, probably, leave $700 or $800 thereof, to be paid by Busbee and Smith. Busskare thereof, was raised out of the sale of his negroes. We speak of it as having been raised, because, although, as between the creditor and Busbee, the former may still be at liberty to proceed upon the levy on this execution on the other property of Busbee, yet, for the purpose of exonerating Smith in this Court from liability for Busbee’s half of White’s deficit, the money is to be considered as having been raised, inasmuch as (he sales of Busbee’s property, on which the execution was levied, and which was applicable to it in the first place, exceeded Busbee’s share of the deficit, and has been received by McLeod. Therefore, the injunction should have been dissolved only for the amount of Smith’s share of the deficit — supposed to be, as before mentioned, three or four hundred dollars. Probably, that could soon have been estimated by the master, from the executions and Sheriff’s returns, shewing the debts, interest and costs. And if either of the parties had so moved, it would have been the correct course to have ordered that estimate, and required the plaintiff to pay into Court his half of the balance found, and on those terms only continued the injunction. But, as the Court could not ascertain the balance from the pleadings, and there was no computation asked for, but the defendant moved peremptorily for a dissolution generally of the injunction, we do not see what course the Court could have pursued, other than that, which was adopted, of continuing the injunction to the hearing ; at which time only can the Court refer a cause to the master, properly speaking, for an account.

The court holds that the delay in filing the bill, for more than four months, is not a ground for dissolving the injunction in this case. Perhaps it may he the proper construction of the act of 1800, that it embraces only those cases in which the bill is founded on an equity existing at the time the judgment at law was obtained — which seems to be the obvious purview of the act. But whether that be so or not, we are of opinion, that when the defendant answers, and the plaintiff’s equity is apparent upon the answer itself, the injunction should not be dissolved, although it may have been at first improvidently granted. The legislature did not mean, that no relief should be given in the court of equity against a judgment at law more than four months old. The act has never been regarded as a statute of limitation, constituting a peremptory bar to a bill, or to granting an injunction. It is directory to the Judges out of court not to grant injunctions on the bill, and the usual affidavit of the plaintiff to its truth; and it was not meant to alter the jurisdiction in court. By the original course of the court of equity, an injunction was not ordinarily granted before answer or a default in not answering. But as our courts sit but twice in the year, and only for short periods, it became necessary to authorise a Judge to grant the writ ex parte in vacation. Then the restriction of the act of 1800 was provided as a proper guard against the abuses, that might grow up from those preliminary injunctions. But when the time comes for a defendant to answer, and he fails to do so, or he comes in with his answer, and upon its face an equity for the plaintiff is seen, the old jurisdiction of the Judge in court exists to award an injunction, as ancillary to the relief, to which the plaintiff will unquestionably be entitled in the progress of the cause. Therefore, if, in such a case, an injunction had been granted by a Judge in vacation, however improvident! y, it would be idle to dissolve it; because in thé next breath the court would be obliged to award one on the answer to the same effect. That the act has not been regarded as creating a bar, upon the very short period mentioned in it, is seen from the case of Pugh v. Maer, 4 Hawks. 362; in which it was held, that where the defendant is fully secured, by the payment of the money into court, the purpose of the act is fulfilled, and the injunction may properly be awarded on the bill in vacation, after the time prescribed in the act.

Per Curiam, Ordered to be certified accordingly.