Leib v. Stribling

Robinson, J.

delivered the opinion of the Court.

The late Ferdinand Stansbury leased from George E. Vickers, four lots of ground on North Gilmor street, in Baltimore City, and at the same time borrowed of him twelve hundred dollars for the purpose of improving said property. To secure the payment of this loan, Stansbury mortgaged his leasehold interest in the four lots.

Vickers and wife then entered into a written agreement with Stansbury, stipulating that upon the erection by him of four dwelling houses on said lots, and upon the payment of the twelve hundred dollars thus loaned to him, they would convey in fee simple, a lot of ground on the east side of Vincent alley.

The four houses on Gilmor street were subsequently sold under proceedings instituted by mechanic lien creditors, and after the payment of Vickers’ mortgage, the balance of the proceeds was insufficient to pay the mechanic lien claims.

Stansbury having died without leaving personal property enough to pay his debts, his interest in the Vincent alley lot was sold under a general creditors’ bill.

The appellant, assignee of a mechanic’s lien claim contends, that inasmuch as Vickers had a lien both upon the Gilmor street houses, and the Vincent alley lot, for the payment of the twelve hundred dollars due him, and the said debt having been paid entirely out of the proceeds from the Gilmor street houses, the mechanic lien creditors are entitled to be subrogated to Vickers’ lien on the Vincent alley lot, and are therefore entitled to a priority in the distribution of the proceeds arising from the sale of said lot.

It appears however, that before the mechanic lien claims were filed against the Gilmor street property, Stansbury mortgaged his interest in the Vincent alley lot, to one *288 Corneliüs Stribling, to secure the payment of eight hundred dollars, and the appellees contend that this mortgage is entitled to a priority over the claim of the appellant.

Where a creditor has a lien upon two funds for the payment of his debt, and a subsequent creditor has a lien upon one fund only, the doctrine of marshalling of securities, by which the creditor having a lien upon two funds will he compelled to resort to that fund which is not common to both, is not founded on contract, hut rests solely upon equitable principles. • ■

In such cases, no injustice is done to the creditor having liens upon two funds, because in any event his debt is paid; whereas by the application of the doctrine, the debt of the subsequent creditor may also he paid.

To the end therefore, that both debts may be paid, it is but just to compel the creditor having a lien upon two funds, to resort to that upon which a subsequent creditor has no lien; or if the prior creditor has been paid out of a fund not common to both, to subrogate the subsequent lien creditor, to the rights of the prior creditor, as against the fund to which such subsequent creditor had no lien.

But this equity will not beenforced against intervening-liens having a superior equity. Thus in Averall vs. Wade, Lloyd & Gould’s Rep., 252, where a party seized of several estates, and being indebted by judgment, settled one of the estates upon his son Thomas, and subsequently acknowledged other judgments, Lord Chancellor Susden, held that the subsequent judgment creditors had no right to make the settled estates contribute.

Now in this case, Stansbury mortgaged his interest in the Vincent alley lot to Stribling, before any proceedings were instituted by the mechanic lien creditors against the Gilmor street houses, Stribling was therefore a purchaser for a valuable consideration without notice of the appellant’s equity, and it would be manifestly unjust under such circumstances, to subrogate the mechanic lien credi *289 tors to Tickers’ lien on the Vincent alley property as -against the Stribling mortgage.

But it was argued that although the mortgage was prior in point of time to the filing of the mechanics’ lien claims, yet such claims when filed became liens on the Oilmor street houses from the time the erection of the houses began, and that the houses were in fact begun before the mortgage was executed.

Under the Code it is true, the lien relates back to the commencement of the building. But this is founded upon statutory law, in order to protect the material man against liens and claims against the building, subsequent to its commencement. But it furnishes no reason why a Court of equity should marshal securities to the prejudice of a bona fide purchaser of other property, upon which the lien did not operate, and of which he had no notice. Bugden vs. Bignold, 2 Y. &, C. C. C., 37; Gibson vs. Seagrim, 20 Beav., 618; Stronge vs. Hawks, 4 De G. & J., 632; Miller vs. Jacobs, 3 Watts, 437 ; McGinnis’ Appeal, 4 Harris, 445 ; Reynolds vs. Tooker, 18 Wend., 591 ; Orris vs. Newell, 17 Con., 97; Mechanics’ B. & Loan Ass’n, 1 McCarter, 219; 4 Grattan, 47.

It was also contended that Stansbury had no interest in the Vincent alley lot, such as would pass under mortgage. This question, however, we consider settled by Alderson vs. Ames & Day, 6 Md., 52 .

He was entitled to a conveyance of the property upon the erection of the houses on Grilmor street, and the payment of the loan of twelve hundred dollars. The houses were begun and in the course of being erected when the mortgage of Stribling was executed, Stansbury had therefore an equitable interest, which he could convey by mortgage.

No exceptions are filed by the representative of Stribling to the fees allowed by the auditor to Thomas E. Clendinen and Joseph B. Merryman for professional services.

*290 (Decided 26th March, 1879.)

As the proceeds from the Vincent alley lot are to be applied to the payment of the Stribling mortgage, it is very clear the appellant has no right to object to the audit on this ground.

The orders of the Court below passed on the 13th Feb.,, 1818, and the 13th March, 1818, will therefore be affirmed.

Orders affirmed.