Page Trust Co v. Godwin

• Decision Date: 18 November 1925
• Docket Number: (No. 302.)
• Citation: 130 S.E. 323
• Court: North Carolina Supreme Court
• Parties: PAGE TRUST CO. et al. v. GODWIN et al.

130 S.E. 323

(190 N. C. 512)

PAGE TRUST CO. et al.

v.GODWIN et al.

(No. 302.)

Supreme Court of North Carolina.

Nov. 18, 1925.

Appeal from Superior Court, Cumberland County; Grady, Judge.

Action by the Page Trust Company and another against R. L. Godwin. J. C. Jones, administrator of J. M. Jones, deceased, and others, in which defendant Citizens' Bank & Trust Company of Benson filed a cross-action against the administrator. From a judgment for plaintiffs against defendant Godwin, and for cross-complainant against defendants Godwin and Jones, defendant J. C. Jones appeals. Affirmed.

On or about September 1, 1919, the defendant R. L. Godwin and wife executed and delivered to plaintiff 10 bonds, of $1,000 each— $2,000 maturing September 1, 1921; $2,000 September 1, 1922; $3,000 September 1, 1923; and $3,000 September 1, 1924. Interest from date payable semiannually. The said bonds were secured by a deed in trust of even date to plaintiff Thomas B. Wilder, trustee, and filed for registration September 22, 1919, Cumberland county registry, on 122 acres of land in Cumberland county, N. C. At the time of this loan, J. M. Jones, who was then living, had a lien on this land, and it was agreed that he should get a part of the money loaned by Page Trust Company to Godwin and cancel his lien, and for the remainder of his debt against Godwin he should take a second mortgage on the land. Jones got the money agreed upon, canceled his lien, and a new note for $4,000 from R. L. Godwin was executed, secured by mortgage on the 122 acres of land. This note and mortgage was dated September 12, 1919, after the Page Trust Company deed in trust to Wilder, trustee, and due December 30, 1920. Notwithstanding the agreement, the J. M. Jones mortgage was filed for record and recorded in Cumberland county prior to the Page Trust Company deed in trust. Some time later J. M. Jones executed to the Page Trust Company an agreement setting forth the facts, and agreed in writing as follows:

"Now, therefore, in consideration of the premises, and of one dollar in hand paid, the said party of the first part does hereby agree with the Page Trust Company that the said incumbrances of R. L. Godwin to Thomas B. Wilder, trustee, for the Page Trust Company, which is registered in Book 257, page 480, Cumberland county, after the mortgage to said Jones, which is in Book 251, page 59, shall have priority and precedence over the said Jones mortgage, and he does hereby formally waive and relinquish any and all rights to priority in security by reason of said prior registration, and agrees that the said Jones mortgage shall be an incumbrance subsequent to that to said Wilder, trustee, as aforesaid."

The above agreement was dated May 15. 1923, and duly recorded June 1, 1923. J. M. Jones, before this written agreement was made, transferred the $4,000 note and mortgage to the defendant Citizens' Bank & Trust Company, of Benson (hereafter called Bank of Benson for brevity), November 4, 1919. and the transfer was filed for registration June 14, 1923. The $4,000 note of R. L. Godwin to J. M. Jones, secured by mortgage, transferred to defendant Bank of Benson, had the following on the back of the note:

"We, as indorsers, for value received, hereby guarantee the payment of this note, and interest, with or without due notice of its nonpayment or protest at maturity, or at any time thereafter. H. L. Godwin.

"J. M. Jones."

The defendant Bank of Benson advertised under the $4,000 note and mortgage the 122 acres of land in Cumberland county. It was sold to a bidder, and J. R. Page increased the bid, in accordance with the statute, and a resale was ordered, but not advertised.

This action is brought against R. E. Godwin and wife, J. C. Jones, administrator of J. M. Jones, deceased, and the Citizens' Bank & Trust Company of Benson: (a) For the recovery of the amount due from R. L. Godwin on his notes to the Page Trust Company, (b) To foreclose the deed of trust securing said indebtedness, (c) For the equitable marshaling of assets in the event that the court held that the Jones-mortgage, now held by the Citizens' Bank & Trust Company, onaccount of prior registration thereof, was a first lien, then that the Citizens' Bank & Trust Company be required to proceed against the estate of J. M. Jones upon his indorsement and guaranty of payment of the $4,000 note, to the end that the land should be relieved of the lien of said first mortgage as far as might be, and the proceeds of the sale of said land be applied to the satisfaction of the indebtedness due the Page Trust Company.

The defendant Citizens' Bank & Trust Company filed answer, in which it claimed that it held a first lien upon said land on account of prior registration of the Jones mortgage, and it purchased the $4,000 note for value before maturity and without any notice of any defect, and asked that it be declared a first lien on the land (the testimony of plaintiff on the trial did not controvert this fact), and by way of cross-action demanded judgment against the administrator of Jones upon the indorsement and guaranty of said note by said J. M. Jones, and for a foreclosure of the mortgage. Defendant J. C. Jones, administrator of J. M. Jones, after answering plaintiffs' complaint, "prays that this action be dismissed, and that he be allowed to go hence without day and recover of the plaintiffs his costs in this action."

From the testimony of witness J. R. Page, for plaintiff bank, the evidence was in accordance with the above-stated facts.

Upon the evidence and admission In the pleadings, the court below rendered judgment, in substance: (1) For $10,000 and interest according to bonds against R. L. Godwin, less credit of $1,531.99, as of June 1, 1922 in favor of Page Trust Company. (2) That Bank of Benson recover of R. L. Godwin, as principal, and J. C. Jones, administrator of J. M. Jones, deceased, as indorser and guarantor, the sum of $4,000 and interest from December 1, 1921, and they be taxed with the cost; Godwin, as principal, and Jones, administrator, as indorser and guarantor. (3) Appointing commissioners to sell the land and the fund distributed from the proceeds. Defendant Bank of Benson has a first and prior lien on the fund arising from sale of land. As between Page Trust Company and J. C. Jones, administrator of J. M. Jones, the Page Trust Company, under its contract with J. M. Jones, is equitably entitled to a first lien thereon, and is equitably entitled to have the Bank of Benson proceed against the estate of J". M. Jones for the collection of its judgment, to the exoneration of its lien under said mortgage as far as may be.

It is further considered and adjudged by the court that the moneys arising from the sale hereinbefore provided for, after deduction of cost and expenses to be allowed by the court, be applied as follows: (1) To the satisfaction as far as may be of the judg ment herein pronounced in favor of the Bank of Benson, N. C, and the residue, if any, to be applied as far as may be to the satisfaction of the judgment herein pronounced in favor of the Page Trust Company, and that the Page Trust Company be, and to the extent of any moneys so paid upon the judgment in favor of the Bank of Benson, subrogated to the rights of the Bank" of Benson in its judgment against J. C. Jones, administrator.

From the judgment rendered, J. C. Jones, administrator of J. M. Jones, assigns the following as error and appeals to the Supreme Court:

"That his honor erred in allowing the paper writing called a contract between J. M. Jones and the Page Trust Company, registered in Book 299, page 36, to be introduced and read in evidence. That it was error in his honor to hold that the plaintiffs, at the close of the evidence, were entitled to the judgment pronounced. That it was error in giving judgment against the defendant J. C. Jones, administrator of J. M. Jones, as indorser and guarantor. That it was error to tax the defendant J. C. Jones, administrator, with any of the costs of this action. That it was error to hold that the Page Trust Company is equitably-entitled to have the Bank of Benson proceed against the estate of the said J. M. Jones for the collection of its judgment, to the exoneration of its lien under the mortgage. That his honor erred in holding that the Page Trust Company is subrogated to the rights of the Bank of Benson in its judgment against J. C. Jones, administrator. That the motion for judgment as of nonsuit should have been allowed."

Godwin and Bank of Benson did not appeal.

Averitt & Blackwell, of Fayetteville, for appellant.

Clifford & Townsend, of Dunn, for appellees.

CLARKSON, J. [1, 2] In 38 C. J. p. 1366. "Marshaling Assets and Securities, " the following is laid down:

"The doctrine of marshaling assets is an old equitable doctrine, founded in natural justice and recognized in every enlightened system of jurisprudence, governed entirely by principles of equity, well recognized in this country. It is not an absolute rule of law. In some jurisdictions the doctrine is recognized by force of statute; such statutes being merely declaratory of the general equity rule. Marshaling is not founded on contract, nor is it in any sense a vested right or lien, but rests upon equitable principles only and the discretion of the court."

Bynum, J., in Jackson v. Sloan, 76 N. C. p. 309, says:

"The rule of equity is that, when one creditor can resort to two funds for the satisfaction of his debt, and another to one only of the funds, the former shall first resort to the fund upon which the latter has no claim, as that by this means of distribution both may be paid.

And it is an analogous principle of equity that where a debtor whose lands are incumbered by a judgment lien sells one portion of it, the creditor who has a lien upon that which is sold and upon that which is unsold shall be compelled to take his satisfaction out of the undisposed of land, so that thus the creditor and the purchaser both...