Vankirk Land & Construction Co. v. Josiah Morris & Co.

The bill in this case was filed by judgment creditors of .the Vankirk Land & Construction Company, a corporation, after issue of execution and ■return thereof of no property found It appears from the bill as amended that on the 7th day of April, 1890', the corporation executed a mortgage upon its lands to Worthington, Elliott- and DeBardeleben, and 'in September, 1891,' executed another mortgage upon said lands to the respondent, William H KnoAvles, to secure an indebtedness to him of $1,500. There was another mortgage Avhich purported* to lurve been executed by this corporation to Knowles, to secure an indebtedness of $70,-000. It is averred, however, that the latter mortgage Avas never authorized by said corporation, and that the indebtedness it purported to secure AAas not a debt of the corporation, but was the indebtedness of W. J. Van-kirk, its president, and that the execution of the mortgage had been procured by artifice. It further appears from the bill that Vankirk to.secure said indebtedness to KnoAAdes deposited Avith him a large, number of shares of stock and other securities, the property of Vankirk, and had in addition executed a mortgage upon certain of his real estate. On the 10th day of September, 1894, the corporation and Knowles entered into- a written agreement, vrlnch recited that Knowles held the said two mortgages upon its lands; that Knowles claimed that both mortgages were executed by the corporation, but that the corporation denied the execution of'tlie mortgage for $70,000 and denied that tlie debt.purported, toi *254be secured by it was its debt: It further recited that the corporation desired to issue and sell its negotiable bonds secured by first mortgage upon said lands and said mortgage to Knowles being of record was a hindrance thereto. By the terms of this agreement the corporation promised to pay Knowles on or before the 8th day of February, 1895, the sum of $,65,900, 'the amount claimed by him to be due, with interest from August 8th, 1894, at eight per cent per annum until paid. Knowles agreed that upon the execution of the contract he would deliver to the corporation both of said mortgages upon its lands and cancel them of record. The bill avers that Knowles “complied with that portion of his said contract.”

Section five of said contract is as follows: “That immediately upon the payment to the party of the second part [Knowles] of the said sum of sixty-five thousand dollars with interest then due thereon, ilie party of the second part will forthwith assign, set over and deliver to the party of the first part [The Vankirk Land & Construction Company] all debts, demands and claims he may have or hold against-W J. Vankirk or W. J.- Vankirk & Co. (bv whom the debt secured by the said mortgage is claimed to be due to the party of the second part), and will transfer, assign, set over and deliver to the party of the first part in due form of law all property and'securities, collateral or otherwise-which the-party of the second part has or holds to secure any part of the debt assumed -by this agreement together "with his interest in the Maxent tract and the office property, and also will permit to the party of the first part the right to use any'remedy either at law or in equity, which he, said Knowles, might use as an individual or as trustee to enforce the rights hereby given or collect the money due him from said Vankirk or Vankirk & Company.”

The Vankirk Land & Construction Company failed to pay Knowles any 'part of the $65,000 agreed by it to be paid, and on the -27th day of March, 1895, Knowles obtained a judgment against it for the sum of $68,307.67, no part of which has been paid by said corporation. The bill-avers that-since the rendition of said judgment Knowles had sold and disposed of some- of the stocks and other 'property given him by Vankirk and had re*255ceived therefor the sum of $30,000. The mortgage executed to Worthington, Elliott and DeBardeleben had in the meanwhile been assigned to Morris Adler and foreclosed by him by suit in equity. The land of the corporation was sold under the decree in the foreclosure suit on the 17th day of May, 1895, and purchased by Adler for the sum of $125,000. The amount of the mortgage indebtedness as ascertained by the decree was $159,120. On the 10th day of October, 1895, Knowles sought as judgment creditor of the corporation to redeem the lands from Adler, and tendered him the sum of $125,000 and the further sum of $9,000 lawful charges, etc. The tender 'was declined as insufficient. Knowles thereupon filed his bill to enforce his claim to redeem said lands. The chancellor dismissed his bill and he appealed from said decree. Before the appeal was determined, it was dismissed by Knowles in consequence of some agreement or compromise with Adler by which, it is averred, Knowles “secured the right to have his judgment paid out of said lands formerly owned by the corporation prior to and to the exclusion of other creditors of the company.”

The prayer of the bill is for an account to ascertain the properties pledged by Vankirk to Knowles, Which of said properties had been sold and which retained by Knowles, and their present value; the affiount due Knowles, and the conditions of the contract with Adler. The bill further prays that Knowles be required to exhaust the security afforded him by his contract with Adler on and as to- the lands formerly belonging to the corporation, before he can resort to any of the stocks and securities covered by said contract of September 10th, 1894, and that said stocks and other securities be sold for the payment of complainants’ judgments. The bill was demurred to by Knowles upon many grounds, some of them assailing its equity, and from the decree overruling the demurrer, this appeal is prosecuted.

It is clear that the bill fails to present a case for mar-shalling securities The common debtor of complainants and Knowles is the Vankirk Land & Construction Company.- It has no interest in the contract between Know] es .and Adler. Its interest in the lands, the subject of that *256agreement, passed to Adler by the sale under the decree of foreclosure, leaving only the statutory right of redemption, which it never attempted to exercise. That contract is purely personal to Knowles. Nor has the common debtor, the corporation, as will be shown, any interest in the securities pledged by Yanldrk. These securities were and are the property of Vankirk subject to the rights of Knowles as pledgee and mortgagee. Complainants are not creditors of Vankirk. The doctrine of marshalling securities between judgment creditors is thus stated by Story: “The same principle applies to one judgment creditor who lias the right to go upon two funds and another judgment creditor who has a right upon only one of them, both belonging to the same debtor.” — 3 Story Eq. Jur., § 634.

Nor would the complainants be entitled to a marshall-ing of securities as prayed were it conceded that the corporation has an interest in the securities pledged by Vankirk. The contract between Adler and Knowles, as we have said, was purely personal to Knowles and did not arm the creditors of the corporation with- the right to demand that Knowles should first collect his claim out of Adler. Such result finds no sanction in the doctrine of marshalling of assets.—Moses Bros. v. Home Building & Loan Association, 100 Ala. 465; Ex parte Kendal, 17 Ves. 520. The bill, thereforé, as a bill to compel Knowles to obtain satisfaction of his debt out of his contract with Adler is without equity. The complainants misconceive the effect of the contract of September 10th, 1894, between the Vankirk Land & Construction Company and Knowles. That contract was not an agreement upon the part of Knowles to sell the' stocks and other securities referred to in it to the corporation in consideration of its payment of the $65,000. It was merely an agreement to transfer to the corporation the claim of Knowles against Vankirk together-with the securities deposited by Vankirk for its payment, in the event the corporation paid the $65,000 which it claimed was Vankirk’® debt and not its own. This was the agreement to which Vankirk assented. That this was the agreement is further made, manifest from section six thereof, which provides that in the-*257event tile corporation paid Knowles the $65,000, Knowles should enter into an agreement -with sureties to indemnify the company, if it should be subsequently ascertained, that the debt from Vankirk to him did not amount to f65,000; and Vankirk in his assent to the: contract, stipulated that his signature should “not bd taken nor construed as an admission on his part that'any particular amount is due by him to said W-. H.Knowles or his assignees herein contemplated.” Had the ' corporation paid the $65,000 as it had agreed to do, • and the claim of Knowles against Vankirk and tM hy-pothecated securities been assigned to it, it could not ■ have held the securities as its own, nor have sold them as its property. It could only have sold them as pledged ' for the payment of Vankirk’s debt. Vankirk would have ' had the right, by the terms of the agreement to which he assented, to pay to the corporation the amount of his : indebtedness to Knowles and retain the securities: And if the actual amount of his indebtedness to Knowles had been less than $65,000 paid by the corporation, it would-none the less have been compelled to surrender the' hypothecated securities to him, and look to Knowles for" redress under his contract of indemnity. On the otheb hand, if Vankirk did not redeem his securities, and they had been sold by the corporation, the proceeds of such sale in excess of the actual amount of Van-kirk’s indebtedness to Knowles, would not have belonged to the company, but to Vankirk, and it would have had to account to him for the same. The surplus value, therefore, belongs to Vankirk and not to the corporation. ‘ The bill, however, fail's to aver that the corporation had paid any part of the $65,-000 to Knowles. Indeed, it. may be affirmed from the facts alleged, that it -appears that it has not. Under the view we have taken of the contract of September 10th, 1894, it is a matter of no consequence to complainants whether the balance due Knowles from Vankirk is one dollar or the full amount claimed by him. The limit of their recovery from the securities would be the balance they paid Knowles, whatever that balance may be. There could be nothing to apply to the payment of their judgments. Their *258offer to pay the balance which may be found upon an accounting t:o be due to Knowles, is nothing more than an offer to pay that balance in order that they may collect it again from the securities. This would be useless. A court of equity never does a useless thing. Com-plianants having shown no interest which they can subject to the payment of their judgments,- their bill is without equity The decree of the city court must be reversed, and a decree will be here rendered sustaining the demurrer

Reversed and rendered.