Mr. Justice Wylie
delivered the opinion of the Court:
This is an appeal from a decree of the special term affirming an auditor’s report.
The facts of the case are as follows:
The defendant, being the owner of real estate, made-several deeds of trust to secure indebtedness, and subsequently contracted other debts which the creditors put in judgments. A bill was filed by one of these creditors on behalf of himself and others who might come in praying a sale of the property. A trustee was appointed to make it,, but the sum brought was insufficient, after satisfying the trusts, to pay in full all the judgment creditors who proved their claims.
The auditor reported the judgments were to be paid according to their respective priorities, thus entirely excluding many1 junior ones; exceptions were filed and overruled.
The correctness of this ruling is the subject for decision.
[12] At common law execution for money was leviable only -on the goods and chattels of the defendant. The feudal privileges of the lord were inconsistent with a power in the tenant of the land to- alien or incumber it.
But by statute of Westminster 2d, 13 Edw. I, Cb. 18, the plaintiff was given the right either to issue a fi. fa. as formerly, or a new writ called elegit. Under this latter he ■could sell neither goods nor lands; but he might levy upon all the defendant’s goods, except his oxen and beasts of the plow, and one-half of his lands, at a - fair and reasonable ■extent, or valuation for their use, until the judgment should be satisfiedand this extent was to be ascertained by a jury •of twelve men summoned by the sheriff.
In this way judgments first became liens on land ; not that they were made so directly by Act of Parliament, but only because land might be taken in execution under the elegit.
This was the law in Maryland until it was superseded, in practice, by the Act of 5 George II, Chap. 7, which subjected lands to be sold under fieri facias, in like manner as goods and chattels; but no lands could be thus seized and sold under execution except those in which the defendant had a legal estate.
Nor was any trust estate in land liable to the elegit given by the statute of Westminster 2d, until after the passage of the Statute of Frauds and Perjuries, by the 10th section of which lands which were held simply in direct trust for the ■defendant, were made liable to be extended under that writ; .and that section of the law is now in force in this District.
The trust which, existed on the land of the defendant, in the present case, was not such a trust as this, but was a trust for the payment of the debt thereby secured.
During the. existence of that trust, therefore, the land in ■question could not have been taken in execution and sold under a fieri facias issued by any of the judgment creditors; but in order to obtain a sale of the land, it was necessary to [13] apply to the chancery jurisdiction of the court, by bill, praying for a sale of the property for the satisfaction of the judgments, and of the prior deed of trust, and make the trustee who held the legal title a party defendant. That has been done, and the court decreed an absolute sale of the property, including both the legal and equitable title thereto, and the holder of the legal title, under the trust deed, was thus divested of his title, and the proceeds of the sale applied in the first place to the payment of the debt secured by the deed of trust. After the satisfaction of that debt, out of the proceeds there remains a surplus, but it is not sufficient to pay all the judgments.
The older of these judgment creditors claim to be first satisfied according to the priority of their respective judgments. This would leave nothing to be applied to the younger judgments; and these younger creditors now claim that the fund should be apportioned pro rata, equally, amongst all the judgments, on the ground that, as none of the judgments -were a lien on the property at the time of the sale, the proceeds should be distributed like equitable assets, on the principle that equality is equity.
We think, however, that the doctrine of the distribution of equitable assets is one which has no application to the present case.
That doctrine applies only to the payment of debts due by a deceased person, and not to a fund arising from the sale under decree of court of the estate of a living person in the condition of the property which was so sold in the present instance. The word a,ssets signifies goods enough to discharge that burden which is cast upon the executor or heir in satisfying the debts and legacies of the testator or ancestor. Tomlin’s Diet.
The personal property in the hands of the executor is legal assets. So also is the real estate descended to the heir assets in his hands, as to those contracts of the ancestor by which the heir is bound. If the heir be bound by [14] the bond of his ancestor, the obligee may have his action against the heir, and obtain satisfaction of his judgment' from the land descended to the heir, without going into a court of equity, because the heir is bound specifically by the terms of tho bond. In such case the land is called legal assets, and the bond creditor may obtain payment of his debt in full, although a simple contract creditor would foe cut out altogether. But if the descent to the heir be interrupted, and the testator has devised the land to the executor, or to a third person in trust to pay debts, the remedy at law of the obligee against -the heir is lost, and he must look for payment to the trustee, to whom the estate was devised. He cannot maintain an action at law against the trustee, upon the the testator’s bond, as he might have done against' the heir, had there been no will; but his only remedy.is in equity against the trustee. But if he go into equity for that, purpose, that court will give him no preference over the simple contract creditors, but pay all, both the simple and the bond creditors alike.
Under the old law, as observed by Lord Camden in Silk vs. Prime, 1 Br.o. C. C., 138,. “ no injury was done by the court to specialty creditors; for though real estates were assets at law to pay'such debts, yet they might then bé defeated by the debtor’s will, or the heirs alienation ” (before judgment against the latter). The assets thus reached by the aid of a court of equity, are what are called equitable assets, and are always distributed equally amongst the creditors, because in such case, none of them has a priority by lien or otherwise.
In the distribution of the assets of a deceased person’s estate, the object of the court is to bring all parties interested before, it and to administer upon all the assets and to close it up. In the case of the distribution of a fund derived from the sale of property belonging to a living person, made under decree of court, no estate is to be settled, but only a fund to be distributed, amongst such creditors [15] as have already procured a lien upon the fund, and if there be a surplus it will be handed to the owner of the property sold, notwithstanding he may have numerous creditors, whose claims have not been reduced to liens.
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Mr. Justice Wylie
delivered the opinion of the Court:
This is an appeal from a decree of the special term affirming an auditor’s report.
The facts of the case are as follows:
The defendant, being the owner of real estate, made-several deeds of trust to secure indebtedness, and subsequently contracted other debts which the creditors put in judgments. A bill was filed by one of these creditors on behalf of himself and others who might come in praying a sale of the property. A trustee was appointed to make it,, but the sum brought was insufficient, after satisfying the trusts, to pay in full all the judgment creditors who proved their claims.
The auditor reported the judgments were to be paid according to their respective priorities, thus entirely excluding many1 junior ones; exceptions were filed and overruled.
The correctness of this ruling is the subject for decision.
[12] At common law execution for money was leviable only -on the goods and chattels of the defendant. The feudal privileges of the lord were inconsistent with a power in the tenant of the land to- alien or incumber it.
But by statute of Westminster 2d, 13 Edw. I, Cb. 18, the plaintiff was given the right either to issue a fi. fa. as formerly, or a new writ called elegit. Under this latter he ■could sell neither goods nor lands; but he might levy upon all the defendant’s goods, except his oxen and beasts of the plow, and one-half of his lands, at a - fair and reasonable ■extent, or valuation for their use, until the judgment should be satisfiedand this extent was to be ascertained by a jury •of twelve men summoned by the sheriff.
In this way judgments first became liens on land ; not that they were made so directly by Act of Parliament, but only because land might be taken in execution under the elegit.
This was the law in Maryland until it was superseded, in practice, by the Act of 5 George II, Chap. 7, which subjected lands to be sold under fieri facias, in like manner as goods and chattels; but no lands could be thus seized and sold under execution except those in which the defendant had a legal estate.
Nor was any trust estate in land liable to the elegit given by the statute of Westminster 2d, until after the passage of the Statute of Frauds and Perjuries, by the 10th section of which lands which were held simply in direct trust for the ■defendant, were made liable to be extended under that writ; .and that section of the law is now in force in this District.
The trust which, existed on the land of the defendant, in the present case, was not such a trust as this, but was a trust for the payment of the debt thereby secured.
During the. existence of that trust, therefore, the land in ■question could not have been taken in execution and sold under a fieri facias issued by any of the judgment creditors; but in order to obtain a sale of the land, it was necessary to [13] apply to the chancery jurisdiction of the court, by bill, praying for a sale of the property for the satisfaction of the judgments, and of the prior deed of trust, and make the trustee who held the legal title a party defendant. That has been done, and the court decreed an absolute sale of the property, including both the legal and equitable title thereto, and the holder of the legal title, under the trust deed, was thus divested of his title, and the proceeds of the sale applied in the first place to the payment of the debt secured by the deed of trust. After the satisfaction of that debt, out of the proceeds there remains a surplus, but it is not sufficient to pay all the judgments.
The older of these judgment creditors claim to be first satisfied according to the priority of their respective judgments. This would leave nothing to be applied to the younger judgments; and these younger creditors now claim that the fund should be apportioned pro rata, equally, amongst all the judgments, on the ground that, as none of the judgments -were a lien on the property at the time of the sale, the proceeds should be distributed like equitable assets, on the principle that equality is equity.
We think, however, that the doctrine of the distribution of equitable assets is one which has no application to the present case.
That doctrine applies only to the payment of debts due by a deceased person, and not to a fund arising from the sale under decree of court of the estate of a living person in the condition of the property which was so sold in the present instance. The word a,ssets signifies goods enough to discharge that burden which is cast upon the executor or heir in satisfying the debts and legacies of the testator or ancestor. Tomlin’s Diet.
The personal property in the hands of the executor is legal assets. So also is the real estate descended to the heir assets in his hands, as to those contracts of the ancestor by which the heir is bound. If the heir be bound by [14] the bond of his ancestor, the obligee may have his action against the heir, and obtain satisfaction of his judgment' from the land descended to the heir, without going into a court of equity, because the heir is bound specifically by the terms of tho bond. In such case the land is called legal assets, and the bond creditor may obtain payment of his debt in full, although a simple contract creditor would foe cut out altogether. But if the descent to the heir be interrupted, and the testator has devised the land to the executor, or to a third person in trust to pay debts, the remedy at law of the obligee against -the heir is lost, and he must look for payment to the trustee, to whom the estate was devised. He cannot maintain an action at law against the trustee, upon the the testator’s bond, as he might have done against' the heir, had there been no will; but his only remedy.is in equity against the trustee. But if he go into equity for that, purpose, that court will give him no preference over the simple contract creditors, but pay all, both the simple and the bond creditors alike.
Under the old law, as observed by Lord Camden in Silk vs. Prime, 1 Br.o. C. C., 138,. “ no injury was done by the court to specialty creditors; for though real estates were assets at law to pay'such debts, yet they might then bé defeated by the debtor’s will, or the heirs alienation ” (before judgment against the latter). The assets thus reached by the aid of a court of equity, are what are called equitable assets, and are always distributed equally amongst the creditors, because in such case, none of them has a priority by lien or otherwise.
In the distribution of the assets of a deceased person’s estate, the object of the court is to bring all parties interested before, it and to administer upon all the assets and to close it up. In the case of the distribution of a fund derived from the sale of property belonging to a living person, made under decree of court, no estate is to be settled, but only a fund to be distributed, amongst such creditors [15] as have already procured a lien upon the fund, and if there be a surplus it will be handed to the owner of the property sold, notwithstanding he may have numerous creditors, whose claims have not been reduced to liens.
If we were, in the present case, to be lead by the doctrine of equitable assets, we should be bound to go much further than is asked by the complainants, and direct a reference to the auditor, with instructions to publish a notice requiring all parties interested as creditors of the defendant whether by judgment or otherwise to come before him and prove their claims in the same manner as though he were deceased ; and make a pro rata distribution amongst them all.
But in our view the judgments in the present instance are liens on the fund in controversy, according to their priority, by well settled principles, and on authority.
The fund is the result of a sale under decree of court, in a case where the holder of the legal title was a party as well also as was the holder of the equitable title. The sale gave a perfect legal and equitable title to the purchaser. The trust deed is' satisfied and extinguished, and is to be put out of consideration in this case. The residue of the fund which is alone the subject of this suit, must therefore, be regarded as the proceeds of a sale of the whole, absolute and perfect title in law and equity, according to the doctrine of equitable conversion. The object of the grantor in the deed of trust was not to part with his whole interest in the property, but only of so much as would suffice to pay the debt, in case a sale should become necessary. By the sale the incumbrance was removed, and1 the residue is his without that incumbrance. It is, therefore, a legal estate in the property now represented by its proceeds; and these proceeds should be distributed as the proceeds of a clear, perfect estate in the property.
In Moses et al vs. Murgatroyd et al., 1 Johns Ch. B,., 119, it was held that the administrator of a mortgagor is not entitled to the ’surplus moneys arising from the sale of the [16] mortgaged premises; but that such surplus must be considered as part of the real, estaté, and descend to the heirs.
And it was only carrying out this doctrine to its logical result, when the Lord Chancellor decided in Sharp vs. The Earl of Scarborough, 4 Ves., 538, that an equity of redemption of a mortgage in fee is not equitable assets, as against judgment creditors, because the judgment creditor has a right to redeem the mortgage. And in Lee et al. vs. Stone et al., 5 Gill & J., 1, it was decided by the Supreme Court of Maryland that in equity the equitable estate of a deceased debtor is bound to the same extent as a legal estate of like quality and duration would be bound at law.
The very point in dispute, also, has been decided at least twice by the Court of Appeals of Virginia.
In Haleys vs. Williams, 1 Leigh, 142, that Court says: “It is a settled rule in respect to the satisfaction of judgments . and other liens upon an equitable fund, where neither has the legal title, that all are to be paid according to their priority in point of time, upon the maxim, in equali jure, qui prior est in tempore, potior est in jure.” Symmes v. Symonds, 4 Bro. P. C., 328; Brace vs. Duchess of Marlborough, 2 P. Wins., 495. And in this case the fund is equitable so far as the judgment creditors are concerned, the legal title being in the trustees for the security of the debt due to F. James & Co., which has a priority over the judgments.
Coutts vs. Walker, 2 Leigh, is the other case.
Green, J., delivering the opinion of the Court says:
“But although the equity of P. Coutts could not be taken in execution at law, it was upon the general principles of a court of equity, bound in equity, as it would have been bound at law if it had been a legal title; and the judgment creditor has a right to insist upon the execution of the trust for the satisfaction of his judgments, precisely as the debtor would have a right to have it executed for his own benefit, if there had been no judgment. Thus a judg [17] ment creditor 1ms a right to redeem a mortgage, or any other encumbrance. And amongst encumbrances, where all have nothing but equities, their equities being equal, they are entitled to satisfaction according to the priority of their encumbrances in point of time, upon the maxim, qui prior est in tempore potior est in jure.” Churchill vs. Grove, Nels. Ch. R., 89; 1 Ch. Ca., 85; 2 Ch. R., 180; Mackreath vs. Symonds, 15 Ves., 353; Haleys vs. Williams, 1 Leigh, 140.
This was an interesting case, and the facts were these: Real estate "was conveyed to a trustee by deed of marriage settlement, in trust out of the rents and profits to pay the wife an annuity, and, subject to the annuity in her favor, in trust for a son of the grantor. Whilst the wife is yet living, a creditor of the son recovers a judgment against him, and then files his bill in chancery to subject the son’s equitable interest in the estate to the payment of the judgment.
It was held: 1. That the equitable interest of the son could not be taken in execution at law; 2. That it was, nevertheless, bound in equity by the judgment, and equity would apply it to the payment of the judgment; 3. But, inasmuch as the annuitant was yet living, and not compellable to accept a gross sum in satisfaction of her annuity, and as the trustee was to hold the property and pay the annuity out of the profits, a court of chancery ought not to direct an out-and-out sale of the debtor’s equitable interest, subject to the annuity, but ought only to direct the application towards the judgment of the surplus profits, as they accrued, after paying the annuity to the wife.
The decree made at the special term is, therefore, affirmed.
Note — The following is the very learned and able report of Mr. Chsistopiieu Ingle, the special auditor in the foregoing case. His thorough and careful consideration of the question discussed before the court renders no apology necessary for including it in these pages notwithstanding its considerable length:
[18] Special Auditor’s Report.
This is a bill of the kind commonly but inaccurately denominated a “ creditor’s bill,” brought by the complainants, who are judgment creditors of the defendant, George Seitz, in behalf of themselves and other creditors, to subject to the payment and satisfaction of their claims certain real estate Which was conveyed by the defendant in trust to secure the payment of certain preferred debts. The bill alleges that all the debts so secured have been paid off and satisfied; but the answers and other proceedings show that some of them have not been paid off in full, but only in part, though overdue before the filing of the bill; small balances being still due on two of them.
A large number of creditors, most of them by judgment, but some by simple contract, have come in by petition.
A decree was passed for the sale of the premises mentioned in the bill. A sale was made April 15,1869 * * * and the report of the trustee appointed to make the sale has been referred to me to state the trustee’s account and the distribution of the fund in his hands.
% #
The fund in the hands of the trustee is not sufficient to pay the.judgments in full; and touching the proper distribution of that fund a question has been raised and argued which has never yet been authoritatively determined in this jurisdiction.
That question is, Shall the judgments be paid according to their respective priorities, or shall the judgments, or the judgment and the simple contract debts, be paid pro rata,without regard to dignity or priority ?
It is to be regretted that the special auditor has not had the assistance of counsel in the labor of investigation.
In the old Circuit Court the decree in Scott vs. Lynch, decided in 1846 (not reported), was always supposed to have settled the question by directing payment of the liens and encumbrances, according to their legal and equitable priori[19] ties. In that case, however, the fund was insufficient to pay the first specific lien, and no opportunity to test the question was afforded.
For a long time the late auditor, Mr. Redin, considering the rule in Scott vs. Lynch to be the law of the court, invariably followed it; and for some time after the organization of this court he continued to do so; always, however, expressing strong doubts of its propriety. No exceptions have ever, in a single instance, been taken; and thus this highly-important question has yet to be passed upon by this court.
Finally, however, in the case of Moore vs. Kirk, No. 1563, Chancery Rules 6, the late auditor, for the purpose of bringing into review a rule which, he says, always appeared to him to be erroneous, reversed his previous rulings, and distributed the fund pro rata among the judgment creditors. This, however, if the views which will be submitted in this report are correct, was not a test case.
No exceptions were taken in Moore vs. Kirk, and the question remained just where it was before.
It may be added that the present auditor of the court has followed the rule of Scott vs. Lynch.
The late auditor seems to have assumed in all the cases, indiscriminately, that the “assets” were equitable; not drawing a distinction which will be stated presently. It is intimated by him that the decree in Scott vs. Lynch was in conflict with the previous case of Law vs. Law, 3 Cranch C. C. R., 324, decided in 1828, and therefore overruled it.
In Law vs. Law the question arose between judgment creditors and creditors by simple contract and specialty; and it was held that the proceeds of the sale of an equitable title to laud are equitable, not legal, assets. But in that case the defendant never had the legal title, and the court merely decided that it was not like the case of a judgment creditor who has a right to redeem a mortgage, and, by so doing, acquires a legal lien, the legal estate being thereby [20] re-invested in the mortgagor without reconveyance. The Act of Assembly of 1794, Ch. 60, Sec. 10, authorizes the chancellor to decree a sale of an equitable interest in land upon bill filed for that purpose. The proceeds of a sale in that case are, therefore, equitable assets iii the stricter sense of that- term about to be indicated.
In Moore vs. Kirk, also, the legal title was outstanding (although that. fact was not discovered until after the property had been sold under the decree, and the owner of the legal title was not made a party; and the auditor passes over the fact without remark, as if deeming it entirely immaterial to his conclusions). Consequently, even if the auditor’s report had been confirmed upon exceptions, that case would not be conclusive of this.
By the construction which the courts of Maryland uniformly gave to the Statute of 5 George II, Cap. 7, making lands in the plantations and colonies - liable for debts, nothing but the legal estate is liable to execution at law. The rule is the same in England. See Plunkett vs. Penson, 2 Atk., 292; Shirley vs. Watts, 3 Id., 200; Burden vs. Kennedy, 3 Id., 379. And the Act of Assembly just cited is founded upon that known and acknowledged rule of law. That this rule was well established is manifested by the 'statute of Maryland of 1810, Chap. 60. (passed since the separation of this District from that State, and consequently never in force here), which, for the first time, subjected equitable estates to legal process.