Stowe v. Powers

116 P. 576, 19 Wyo. 291, 1911 Wyo. LEXIS 18

• Court: Wyoming Supreme Court
• Decided: June 14, 1911
• Docket: No. 633
• Status: Published

Opinion

Potter, Justice.

This is a proceeding in error for the review of an order of the District Court in Big Horn county denying a motion to dissolve a temporary injunction. The material facts are as follows: E. A. Powers, defendant in error, is the holder of two promissory notes for $6000 and $1500 respectively, executed and delivered to him by the Worland Hotel Company, a corporation, and Charles H. Worland. The first note is dated July 9, 1906, and the second, October 15, 1906. The interest on the first note is represented by interest notes executed by the same parties. To secure the first note the Worland Hotel Company executed and delivered to Powers a mortgage of the same date as the note cpvering certain lots in the town of Worland in said county of Big Horn, and Charles H. Worland executed and delivered to him a mortgage upon 240 acres of land in said county, described as the west half of the S. W. quarter of section 26, the west half of the N. W. quarter of section 35, and the east half of N. E. quarter of section 34 in township 47, range 93 west of the sixth principal meridian. To secure the second note Worland executed and delivered to Powers another mortgage of the same date as the note covering the same lands described -in his mortgage above mentioned, together with all water rights, ditches, flumes, laterals, etc., conveying water to and upon said lands and particularly all interest, right, title in and to any stock, shares or equity in the two canals known as the Big Horn and Bluff canals..

The plaintiff in error, Edward E. Stowe, holds a note .for $6000, dated November 4, 1905, executed and delivered to him by said Charles H. Worland, and two mortgages and a quit claim deed executed by Worland to secure the. same. One of the mortgages and the quit claim deed bear the same date as the note, and the former covers the same lands described in the mortgages executed by Charles H. Worland to Powers, with the exception of the S. W. quarter of the S. W. quarter of section 26, and in addition thereto, the N. E. quarter of the S. E. quarter of section 27, and three small tracts described by metes and bounds and to be known as certain specified lots in the town of Worland when platted, one of said tracts being located in the S. E. quarter of the N. W. quarter of section 26, and the others in the N. E. quarter of the S. W. quarter of said.section, all in the township and range aforesaid. That mortgage also includes the water rights, and describes them in substantially the same manner as they are described in the second mortgage of Worland to Powers. The quit claim deed describes 320 acres of land in section 27, said township and range, and the S. W. quarter of the S. W. quarter of section 26, the latter being the forty acre tract embraced in the two mortgages to Powers that is not covered by Stowe’s first mortgage. The other mortgage to Stowe is dated December 11, 1907, and describes the N. E. quarter of the S. E. quarter of section 26, all of the two forty acre subdivisions in which are located the separate tracts described by metes and bounds in Stowe’s first mortgage, and the N. W. quarter of the S. W. quarter of section 26. That mortgage and the quit claim deed also include the water rights.

It thus appears that Stowe’s first mortgage is a prior lien upon all of the land embraced in the mortgages to Powers, except one forty acre tract; that his quit claim deed is a prior lien on that tract; that his first mortgage is the only lien upon one forty acre tract in section 27; that his quit claim deed is the only lien upon 320 acres in section 27;' that his second mortgage is the only lien upon the N. E. quarter of the S. E. quarter of section 26, the fourth in point of priority upon the N. W. quarter of •the S. W. quarter of said section; and that his two mortgages constitute the only liens upon the S. E. quarter of the N. W. quarter, and the N. E. quarter of the S. W. quarter of section 26.

By notices dated September 17, 1909, Stowe was proceeding to foreclose his two mortgages by advertisement, each notice stating that the property therein described would be sold for the purpose of foreclosing the mortgage by the sheriff of Big Horn county, or in his absence by his deputy, on the 23rd day of October, .1909. The notice of sale under the first mortgage omitted the tracts therein described by metes and bounds, but stated that the same would be offered for sale with other land under the second mortgage. The notice under the second mortgage omitted the N. W. quarter of the S. W. quarter of section 26, stating that it would be offered for sale with other lands under the first mortgage. The last mentioned subdivision is the one covered by both of the Stowe mortgages, and also by both of the mortgages to Powers; and the tracts omitted from the notice of sale under the first mortgage are covered by Stowe’s second mortgage as aforesaid by the description of the legal subdivisions in which they are respectively situated.

Before the date of sale as fixed by the foreclosure notices aforesaid, the said E. A. Powers commenced this action against the Worland Hotel Company, Charles H. Worland, Edward E. Stowe, and Felix Alston, Sheriff of Big Horn county, to recover judgment upon the notes held by the plaintiff, Powers, and to foreclose the mortgages given to secure the same, and to require the defendant, Stowe, to first exhaust the property covered by his liens and not covered by the plaintiff’s mortgages. It is alleged in the sixth cause of action that the mortgages of plaintiff are a first and prior lien upon the S. W. quarter of the S. W. quarter of section 26, and are subsequent and inferior as to the remainder of the lands therein described to a mortgage given by the defendant Worland to Stowe. By this allegation the apparent priority of the quit claim deed of Stowe upon the subdivision mentioned seems to be ignored. The fact that Stowe holds the quit claim aforesaid in addition to his mortgage to secure the indebtedness of Wor-land to him is alleged, and that the plaintiff has no lien upon the premises therein described. It is also alleged that Stowe is proceeding to foreclose his mortgage upon lands subject to the junior liens of the plaintiff, and copies of the foreclosure notices are attached to the petition as a part thereof. Because of the omission from the property advertised by the notice to be sold under the first mortgage of the separate tracts therein described by metes and bounds, it is alleged that the notice is insufficient and it is alleged that the notice under the second .mortgage omits advertising those tracts for sale. It is further alleged that the premises described in the petition (such description including all the property covered by the various conveyances above mentioned) are wholly insufficient in value to pay and satisfy the claims of the plaintiff and the defendant Stowe; that the property is of such character that it produces a large amount of revenue, the hotel property being rented, and the farm property being seeded to alfalfa and other crops and requiring careful attention and husbandry in order to preserve the same for the creditors, and that a receiver should be appointed to take charge of, manage and handle said property until the final termination of the suit.

The prayer of the petition is that a temporary injunction may be granted restraining the defendants, Stowe and Alston, from selling or offering for sale the premises advertised to be sold by the foreclosure notices published by Stowe, and that on the final hearing such injunction be made perpetual; that a receiver be appointed of the mortgaged property; that the defendant Stowe be required to appear and disclose under oath all the property of the defendant Worland upon which he has or claims any lien for the payment.of the indebtedness due him from said Worland; that the assets and property of said Worland may be marshaled and the priorities of the respective liens claimed by the parties be found, adjudged and decreed; that plaintiff may have judgment for the amount found due him, and a decree foreclosing the mortgages given to him by the Wof-■land Hotel Company and Charles H. Worland; that the defendant Stowe may be required to first exhaust the property -of the defendant Worland on which the plaintiff has no lien or claim before proceeding with the sale of the premises covered by plaintiff’s mortgages; that all of said property may be sold by decree of the court and the proceeds thereof applied according to the respective rights and liens'of the parties; and that plaintiff may have such other, further or different relief to which in equity he may be entitled. ■ .

Upon the petition, which was positively verified, a temporary injunction was granted enjoining the defendants Stowe and Alston from selling or offering for sale the premises described in the petition on which the plaintiff claims a lien, the injunction to take effect upon the execution of a bond for the payment to said defendants of all damages sustained by them if it be finally decided that the injunction ought not to have been granted. The order was subsequently modified so as not to forbid a postponement or postponements of the sale or advertising the same according to the statute in such case made and provided. The defendants Stowe and Alston filed a motion to dissolve the injunction on the ground that the petition is insufficient on its face to show cause fpr the injunction, and for the reasons stated in affidavits filed in support of the motion. The affidavits set out the mortgages and quit claim deed aforesaid executed to Stowe, and state in substance as follows : That in August or early in September, 1909, the attorneys for the plaintiff, acting for him, examined all the securities held by Stowe from said Worland, and were given for examination all the water contracts pertaining to the land described in the quit claim deed, and that the de-, fendant Stowe offered to turn over .to the plaintiff all the securities so held by him if the plaintiff would pay the debt from Worland to Stowe, which offer was declined. That the title to none of the real estate described in the quit claim deed is in Worland; but that part of the same is in the United States, and the title to the remainder is in the State of Wyoming, the latter being segregated land lying under the Big Horn County canal, to which the state has obtained title under the Carey Act. That unless and until title shall be' obtained by Worland the defendant Stowe will have received no interest in land by virtue .of the deed, and even should Worland acquire title tlie effect of ‘ the deed is problematical, and would involve the defendant Stowe in litigation, should be seek to enforce the deed as security. That Worland is the' owner of certain contracts for water for the lands covered by the deed, which provide for payment on the installment plan, and the bulk of the payments are yet to fall due; that the water rights, to one having no title to the lands, are of uncertain, if any, value; and that a proceeding to foreclose would involve doubtful questions of law. That defendant Stowe will be seriously delayed in realizing on his securities and put to additional expense, if he is not allowed to proceed to sell the lands covered by his two mortgages; and if he is forced to proceed to satisfy his debt out of the property covered by the deed the effect will not unlikely be to destroy the value, if any, which it possesses, and thus prejudice the interest of plaintiff as well as of Stowe; that Stowe has urged Worland to perfect his titles to the land covered by the deed, but he had neglected to do so. That none of the lots (the tracts described by metes and bounds) mentioned in Stowe’s first mortgage have been platted.

The equitable remedy of marshaling securities, as said by Pomeroy, in his work on Equity Jurisprudence, “depends upon the principle that a person having two funds to satisfy his demands shall not, by his election, disappoint a party having but one fund. The general rule is, that if one creditor, by virtue of a lien or interest, can resort to two funds, and another to one of them only,— as, for example, where a mortgagee holds a prior mortgage on two parcels of land, and a subsequent mortgage on but one of the parcels is given to another, — the former must seek satisfaction out of that fund which the latter cannot touch.” (4 Pomeroy’s Eq. Jur., Sec. 1414; 6 id, (2 Eq. Rem.) Sec. 865.) The principle is stated in Story’s Equity Jurisprudence as follows: “If one party has a lien on, or interest in, two funds, for a debt, and another party has a lien on, or interest in one only of the funds, for another debt, the latter has a right in equity to compel the former to resort to the other fund, in the first instance, for satisfaction, if that course is necessary for the satisfaction of the claims of both parties, whenever it will not trench upon the right, or operate to the prejudice of the party entitled to the double fund.” (Redfield’s Ed., Sec. 633.) The limitation upon the application of the principle as affecting the right of the party entitled to the double fund is stated as follows: “Relief will not be given if it will delay or inconvenience the paramount encumbrancer in the collection of his debt, or prejudice him in any manner; for it-would be unreasonable that he should suffer because some one else has taken imperfect security.' Thus, relief has been denied where the fund to be resorted to has been dubious, or one which might involve the creditor in litigation.” (6 Pomeroy’s Eq. Jur. (2 Eq. Rem.) Sec. 866.) “The principle of marshaling, inasmuch as it is based upon the necessity of equal rights between the' parties, will not be enforced to the prejudice of the paramount creditor. He must not be unreasonably delayed- in the collection of his debt, or inequitably deprived of any of his legal remedies. He is entitled in any event to full and prompt payment, and equity will not deprive him of his right at the instance of another creditor less fortunately situated. Consequently he will not be restrained from proceeding against either fund unless it appears that the other is amply sufficient for his debt, and he must receive full payment before the junior creditor can demand subrogation. Thus, where the paramount creditor’s right to both funds is not clear and undisputed and the remedies available for reaching and applying the funds are not reasonably prompt and efficient, he will not be hindered in his election of securities; and likewise the paramount creditor will not be compelled to collect his debt from the singly charged fund where such fund is of uncertain value, and long delay will necessarily ensue in converting it into money, or where that fund consists of property in the possession of third persons who claim title thereto, while the doubly charged fund is money in court. Neither will he be confined to a fund of such a character that he is unwilling to accept the hazard of obtaining payment therefrom. And in fine the paramount creditor will not be confined to the singly charged security where its value is dubious or can be realized only by litigation.” (19 Am. & Eng. Ency. Law, 1264, 1265.)

T'o say that mere delay, as where foreclosure may be necessary, unaccompanied by any other injury, requires a denial of the relief places too strict a limitation, we think, upon the application of the general principle. In a Wisconsin case, where this question was considered, the court say: “It is true that delay to the prior creditor has been sometimes spoken of as a bar to the relief here asked, blit we are not ready to subscribe to the doctrine that mere delay is sufficient to compel the court to deny the relief where'no other injury is_ involved. Some delay is a neces-sáry consequence of the enforcement of all rights, and, if a possible delay would defeat the right of a junior creditor to have the assets of his debtor marshaled, such marshaling would rarely, if ever,- take place. The true rule, we think; is well expressed in Evertson v. Booth, 19 Johns. 486, where it is said that the relief will not be given if it will endanger thereby the prior creditor, or in the least impair his prior right to raise his debt out of both funds; and it is further said that there is ‘no principle in equity which can take from him any part of his security until he is completely satisfied’.” (Gotzian v. Shakman, 89 Wis. 52.)

The case is not here upon a judgment ultimately determining the rights of the parties, nor are we informed by the record before us whether anything more has occurred in’the case than the granting of the temporary injunction, 'and the denial of the motion for its dissolution. Whether a temporary injunction shall be granted, or having been granted, whether it shall be dissolvéd, are matters resting in the sound discretion of the' court; and an appellate tribunal will not- interfere with or control the action of the court below therein, unless it appears that there has been a clear abuse of discretion. (Collins v. Stanley, 15 Wyo. 282, 88 Pac. 620, 123 Am. St. Rep. 1022; Anderson v. Englehart (Wyo.), 108 Pac. 977.) In Collins v. Stanley, 'this court said: “This discretion should be exercised so as to prevent injury, having in mind the situation of the parties. The rights of the defendants are protected by - the bond, while there is no such protection afforded plaintiff if the injunction, is dissolved, and it should turn out that his action is well founded.” Although the petition prays that the injunction may be made perpetual on final hearing, that is not the principal relief sought in the case. It was clearly applied for and granted for the purpose of-maintaining the securities in the same condition as at the commencement of the suit until the respective rights of the parties as to marshaling might be determined, and the injury to the parties enjoined incidental to the delay caused by the injunction is supposed to be provided against by the statutory bond. The question as to the right to the relief sought in relation to the securities held 'by the defendant Stowe is now here, therefore, only so far as it bears upon 'the propriety of granting and continuing the temporary injunction.

It is contended by counsel for the defendants Stowe and Alston, the plaintiffs in error here, that the petition is insufficient to show a right to the relief, and therefore insufficient as a basis for the injunction, for the reason that it fails to show that the plaintiff had tendered to Stowe all the money due him from Worland and that Stowe had declined to turn over his securities 'to the plaintiff; and that the fact, as shown by the affidavits filed in support of the motion to dissolve, that plaintiff had refused to pay Stowe’s debt and accept his securities bars the right of pláintiff to any relief as to the order of enforcing "those securities. It is true, that, upon a familiar equitable principle, the plaintiff might pay off the prior debt of Stowe and be thereby subrogated to his rights. And .finder some circumstances it may doubtless be equitable to require, the party holding a junior lien upon only a portion of 'the property covered by the senior lien to' pursue that course.' But We' do not understand it to be the'law that the second e'ncfimbrancef must in all cases offer to pay off the debt of the first and take the latter’s securities to entitle him to demand that the latter resort in the first instance to the singly charged fund or property, or that he is barred of the right to make such demand by declining an offer of the securities upon his payment of the debt. To hold that to be the absolute rule under all circumstances would, in effect, deny any ofher relief than subrogation, at least whenever the prior lienor is willing to turn over his securities to the party having a lien upon only a part of the property, upon being paid the entire amount due him from the common debtor. Such a rule might in many cases work great injustice. The party-lias two remedies, either subrogation or marshaling securities. In the case of First National Bank of Rock Springs v. Roder, 114 Fed. 451, Sanborn, Circuit Judge, says : “The rule on which the claim of the appellee is founded here is nothing but a corollary of the equitable principle of sub-rogation, of the general principle of equity jurisprudence that the holder of an inferior lien may pay off the superior claim and be subrogated to the rights of its holder. One who has a first lien upon two funds or two pieces of property may collect his debt from one or from .both of them. When another procures a second lien upon one of them, the lien of the former is not destroyed or impaired. The primary right of the latter is to redeem the property from the first lien by paying the debt it secures. When he does this he becomes substituted in equity for the holder of the first lien, and acquires the right to enforce that lien against both the funds or properties originally incumbered. In this way the holder of the junior lien may compel the exhaustion of the property covered by the first lien alone to satisfy that claim. Circuity of action is avoided, and the same result is attained, by permitting the holder of the second lien to compel the holder of the first to exhaust the property covered by that'lien only, before he has recourse to that which is doubly incumbered. Thus the rule here invoked sprang up as a corollary to this principle of subrogation. * * * The law provided a sure method by which Mrs. Roder could have availed herself of the lien upon the wool whieh was held by this bank. She could have paid its debt, and have been subrogated to its rights. It provided another way by which she could have secured the benefit of that lien. She might have demanded of' the bank, before it permitted Murray to use the proceeds of this wool, that it should preserve and exhaust its lien upon the wool and apply all its proceeds to the payment of its claim, before it had recourse to the sheep to satisfy it.”

In Story’s Equity Jurisprudence it is said that the doctrine of marshaling securities seems- very probably to have been derived from the subrogation of the civil law, and that “the principal difference between the Roman system and ours is, that our courts of equity arrive directly at the same result, by compelling the first creditor to resort to the fund, over which he has complete control, for satisfaction of the debt; and the Roman system substituted the second creditor to the rights of the first, by a cession thereof upon his payment of the debt.” (Redfield’s Ed., Secs. 635, 636.) .

Conceding that strong grounds would be presented for refusing the relief asked as to the property covered by the quit claim deed, if it should appear when all the facts are before the court that the conclusions stated in the affidavits as to the effect of that deed and the probable result of an attempt to'enforce the same are justified, the district court may have concluded that it was a matter more properly to be considered at the final hearing of the cause, and it is reasonable to suppose that the court acted upon- that theory. We do not think that .would be an abuse of discretion upon the circumstances of this case. In granting temporary relief by interlocutory injunction courts of equity do not generally anticipate the ultimate determination of the questions of right involved. “They merely recognize that a sufficient case has been.made out to warrant the preservation of the property or rights in issue in statu quo until a hearing upon the merits, without expressing, and indeed without having the means of forming a final opinion as to such rights.” (i High on Inj., Sfec. 5.) A defendant ought not to be disturbed in.the exercise of a legal right without a probability that plaintiff may finally maintain his right as against that of the defendant. (Id.) But all the facts even as to the quit claim deed were not before the court on the hearing of the motion to dissolve, and the Stowe mortgages cover property advertised to be sold by the foreclosure notices not included in the mortgages held by Powers, the values of which were not shown upon the hearing of the motion. The dissolution of the injunction might be most harmful to the plaintiff if he should finally establish his right to the relief, while its continuance cannot produce much injury. It delays, of course, the foreclosure sale, but should any loss be suffered by Stowe on that account he would seem to be protected as to that by the statutory bond. In view of the circumstances this court ought not to anticipate the final judgment of the district court by our action on this appeal from the order continuing the injunction, and it is to be understood that we do not intimate what the final judgment of that court should be at the final hearing.

It is contended that the petition is insufficient for failing to allege that the property mortgaged to Powers by the Worland' Hotel Company is not sufficient in value to satisfy the debt due him. The allegation that the premises described in the petition are wholly insufficient in value to satisfy the claims of the plaintiff and the defendant Stowe was doubtless intended to cover this matter. The petition may be objectionable for the reason,- as suggested, that it does not clearly show that the hotel property is not sufficient in itself to satisfy the debt due to Powers. We' do not, however, deem' it necessary to" decide that question.- If the objection is well taken the petition might be amended in that particular if the facts warrant it. The motion to dissolve the injunction does not specifically mention this objection, and it does not appear that when the motion was heard any pleading had been filed by the defendants. As held in Anderson v. Englehart, supra, under such circilm-stances, the injunction ought not to be vacated without allowing the plaintiff an opportunity to amend.

We are unwilling to hold that there was an abuse of discretion or manifest error in the order complained of, and it will, therefore, be affirmed. '

Beard, C. J., concurs. Scott, J., did not sit.