An equity of redemption of a term of years mortgaged by a testator possessed of it;

An equity of redemption of a term of years mortgaged by a testator possessed of it;

Debts by bond and by simple contract equally.(9)

In the first place, the mortgage debt, principal and interest; and then bond and other debts pari passu.(r)

In a case, where a Court of Equity decreed simple contract creditors to stand in the place of a mortgagee, against the mortgage land descended, a great part of the mortgage debt having been by the executor paid out of the testator's personal estate, the Court [ *328 ] paid out of the land the simple contract debts, and a debt by judgment, equally; such judgment having been, by a simple contract creditor of the testator, obtained after his death against his executor.(s)

In Vernon's Reports it is said, but whether by the Court, or by the reporter only, does not clearly appear, that "where creditors are plaintiffs, the usual decree is, that the debts shall be paid in course of administration; but that is to be intended of legal assets, and not of assets in equity, that are not assets at law.' ·." (t) And in Ambler it is said, but perhaps by the reporter only, "The general direction in the decree, to apply the assets in a course of administration, does not confine such application to a legal course; but it is to be taken distributively, and understood of legal or equitable, according to the nature of the assets."(u)

[ *329 ]

*CHAPTER XXVIII.

OF MARSHALLING ASSETS. (a)

SECT. I. Of the General Principles of Marshalling two Funds.
II. Of Marshalling for Creditors.

III. Of Marshalling for Legatees.

IV. Of Marshalling for a Widow, in respect of her Paraphernalia.

*SECTION I.

[ *329 ]

OF THE GENERAL PRINCIPLES OF MARSHALLING TWO FUNDS.

WHEN there exists two funds, and two claimants against them, and at law one of these parties may resort to either fund for satisfaction, but

(9) Case of Creditors of Sir C. Cox, 3 P. W. 341, cited 1 Bro. C. C. 137, 4 Ves. 542, and 1 B. & C. 372. See Barthrop v. West, 2 Ch. Rep. 62.

(r) Hartwell v. Chitters, Ambl. 308, cited 1 B. & C. 372.

(8) Wilson v. Fielding, 10 Mod. 426, 2 Vern. 673. See, also, on judgments obtain

ed after a testator's death, Earl of Kildare v.
Kent, 2 Freem. 253.

(t) Solley v. Gower, 2 Vern. 61.
(u) Hartwell v. Chitters, Ambl. 308.

(a) For instances of marshalling, and which may not be noticed in this Chapter, see Index, at word "Marshal," or "Assets."

the other can come upon one only, the Courts of Equity exercise the power to marshal, as it is termed, the two funds, and by this means to aid the party, whose remedy is at law confined to one of them.(b) A general principle of this interposition is, an equity, which arises from the circumstance, that without such interference, he, who has the double fund to resort to, possesses an unreasonable power to disappoint the right of him, whose remedy lies against the single fund only. (c) The way in which the Court interposes is, sometimes to turn the person, having the double security, upon that fund which is not liable to the other person's demand, and so to leave to this person the other fund open; (d) or, if satisfaction has already been taken out of this fund by him, who has the double security, then to decree the other party to stand in his place, and to draw from the *remaining fund as much as has been [ *330 ] taken from the other. (e) And very commonly the Court suffers him, who can come against either security, to exercise his legal right of election; and then if he resorts to the only fund against which the other party can claim, this person is, as in the last mentioned instance, decreed to receive satisfaction pro tanto out of the other fund.(ƒ)

When there exists two funds of assets, one of which consists of legal personal assets, and the other of equitable assets, and against these funds there are 'two claimants, namely, specialty and simple contract creditors, here, if the specialty creditors, by the exercise of their right to first payment, exhaust the assets which are legal, another description of marshalling takes place; for a Court of Equity, before it permits the specialty creditors to be paid the surplus of their debts out of the equitable assets, decrees the creditors by simple contract to draw from the latter fund, a sum equal to the money taken from the legal assets by the specialty creditors. (g) This kind of marshalling has, it seems, taken place, on the principle, that a testator intended each fund to be equally shared by both kinds of creditors; (h) or that he “intended all his creditors should be equally paid their debts;" (i) and, at other times, on the broad principle, "that by natural justice and conscience, all debts are equal, and the debtor himself is equally bound to satisfy them all."(j)

Lord Hardwicke, speaking of the rule of the Court of Chancery as to marshalling assets, and directing simple contract creditors to stand in the place of specialty creditors pro tanto to receive satisfaction, says that this marshalling "must be as between the real and personal assets of a person deceased; for the Court has no right to marshal the assets of a person alive; it not being subject to such a jurisdiction of equity till the death."(k) It is observable, however, that although technically the term "marshal" is not applied except to assets, yet a [ *331 ] species of marshalling takes place in other cases also, and

(b) Aldrich v. Cooper, 8 Ves. 382, Lord Eldon's judgment throughout.

(c) 8 Ves. 389, 394, 395, 396, 397; 9 Ves. 211; 4 Russ. 338, 340.

(d) 1 Vern. 455; 10 Mod. 462; 2 Atk. 446; 3 Atk. 273; Amb. 615; 5 Ves. 361; 8 Ves. 389, 391, 395; 1 Russ. & M. 187. See also Povye's case, 2 Freem. 51.

(e) 9 Mod. 151; 3 Atk. 369; 7 Ves. 209, 211; Cromwell v. Griffith, 1 Barnard. 207.

(f) Barn. Ch. Rep. 229; 3 Atk. 467; 1 Dick. 383.

(g) 2 P. W. 416, 417, 418; Cas. T. Talb. 220; 2 Vern. 436; Prec. Ch. 193; 2 Atk. 294; 1 Dick. 383, 384; 7 Bro. P. C. ed. Toml. 583.

(h) 2 P. W. 417, 418.
(i) 3 P. W. 323.

(j) Cas. T. Talb. 220.

(k) Lacam v. Mertins, 1 Ves. 312.

may be applied to the property of a person living.(7) And this application seems to have been made in the following case before Lord Cowper: S. having several young children, and being much in debt, conveyed part of his lands, in trust for the payment of his debts; and, by another deed, conveyed other part to trustees for the maintenance of his children. This last conveyance, being voluntary, was declared void as to creditors, and still liable to their demands as before; but it was good against S. himself, and should bind him: and therefore if his creditors. should fall upon those lands for a satisfaction of their debts, and thereby strip the children of their maintenance, the children should have a recompense out of the residue of the estate, which S. had reserved to himself for his own maintenance; and compared it to the case, where creditors, that have a lien upon the land, take their satisfaction out of the personal estate, which was liable to other creditors of an inferior nature, who have no lien upon the land, these creditors in equity shall stand in the place of the other creditors, who had a lien upon the land, and have a satisfaction out of that in their stead. This case is the same, for though the conveyance was voluntary in the father, yet he is bound by nature to provide for his children, and it is a sort of a debt."(m)

SECTION II.

OF MARSHALLING ASSETS FOR CREDITORS.

Of Marshalling-1. For Simple Contract Creditors, where Creditors by Specialty have taken the Personal Assets;-2. For Specialty or Simple Contract Creditors; or, as the Case may be, for both of them.-3. For Creditors, where the Funds to be marshalled consist of Legal and Equitable Assets.

1. In the case of a deceased person, who, at the time of his death, is, within the meaning of the bankrupt laws, a trader, his *real estate is made liable to satisfy his simple contract debts by [ *332 ] the statute 11 Geo. IV. and 1 W. IV., c. 47, s. 9, if the debtor has died since the 16th July, 1830, the time of the passing of it, and by the statute 47 Geo. III., stat 2, c. 74, if he died before that time. But except where these statutes apply, and they relate, it is seen, to certain traders only, the simple contract debts of a person deceased are governd by the common law; under which they are not payable out of his real estate, which either descends from, or is devised by him, and which he has not made by his will, or otherwise, a fund for the payment of his simple contract debts. (n)

On the death of a person, who is, or is not, a trader within the bankrupt laws, his creditors by specialty, in which his heirs are bound, are entitled to payment, by the common law, out of his freehold land descend

(2) Aldrich v. Cooper, 8 Ves. 388, 389,

394.

(m) Sneed v. Lord Culpepper, 7 Vin. Abr. 52, 2 Eq. Cas. Abr. 255, 260.

(n) 4 Ves. 550; 8 Ves. 384, 389, 391, 394; 12 Ves. 154.

ed to his heir at law;(0) and by the statutes 3 & 4 W. & M., c. 14,(p) and 11 Geo. IV. and 1 W. IV. c. 47, s. 2, out of his freehold land of inheritance devised by him; that is, by the latter statute, if the debtor has died since the passing of it, and by the former, if he died before that time. And when the legal assets of the debtor consist of both land and personal estate, such specialty creditors are, by the common law, entitled to payment out of either of these funds: at law they may, at their election, take their remedy against the heir, or against the executor.(g)

Out of legal personal assets, specialty creditors enjoy, at law, the right to be paid before creditors by simple contract. (r) And when an executor has made this payment, he is in equity indemnified in making it, although there is not enough left to satisfy the simple contract creditors.(s) It is plain, therefore, where the assets consist of freehold land of inheritance, descended or devised, and personal assets, creditors by specialty, in which the debtor's heirs are bound, may, by the exercise of the right mentioned, if there is a deficiency of the personal assets, [ *333 ] either exhaust them entirely, or so much that they may not leave sufficient to pay the simple contract creditors in full. To relieve, therefore, these creditors, the Courts of Equity marshal the real and personal assets; and they may, it seems, do this, by directing the specialty creditors, who have at law both kinds of assets to resort to, to take satisfaction out of that fund, upon which the simple contract creditors have at law no claim;() in other words, by making the real estate pay as much of the specialty debts, as will be necessary to obtain a fund from the personal estate for payment of the simple contract creditors. (u) It has, however, been said," Where there is a debt by judgment or statute, which chargeth the real estate, there a Court of Equity cannot hinder the creditor's coming upon the personal estate, because he hath right so to do by law; and it is not in the testator's power to take that right away; but there the other creditors have an equity to charge the real estate, for so much as is taken out of the personal estate, and may prefer a bill for that purpose."(v) But considerable doubt seems to be thrown on the former part of this doctrine, by a case, where" there being a debt owing to the king, it was ordered that the king's debt should be satisfied out of the real estate, that the other creditors might be let in to have satisfaction of their debts out of the personal assets."(w) And the same doctrine appears to be directly contradicted by the opinion expressed by Lord Macclesfield, that the Court may decree "a judgment creditor who has his election at law, to resort for his satisfaction to either real or personal estate, to make such an election, as simple contract creditors may not be defrauded."(x) Still it appears that, generally speaking, a Court of Equity does not break in upon the legal privilege of specialty creditors to come first against the personal estate, and, on the contrary, allows them to do this; and merely empowers the simple contract creditors to

*take, from the real estate, a sum equal to the money, which the specialty creditors have drawn from the personalty.(y)

[ *334 ]

A court of Equity has marshalled assets, and decreed creditors by simple contract to stand in the place of specialty creditors, paid or to be paid out of personal estate, and to receive a satisfaction pro tanto out of real estate, in the instances, amongst others,(z) where the Court has decreed simple contract creditors of a testator to receive satisfaction,-out of freehold property devised:(a) out of real estate specifically devised, and not by the will charged with the testator's debts:(b) out of real estate devised to the testator's eldest son and heir at law:(c) out of money arising from the sales, directed by the Court, of an advowson in gross descended, and of freehold estates in fee, and leasehold estates pur auter vie, devised:(d) out of freehold estates purchased by the testator after the making of his will, and descended to his heir at law.(e)

When simple contract creditors are so decreed to stand in the place of a specialty creditor of a person deceased, the special contract binds the heirs of this person, and consequently such specialty creditor has two funds to resort to. But when in a special contract, as in a bond, the heirs are not so bound, this contract will not, at law, affect the real assets, and the specialty creditor can resort to one fund only, namely, the personal estate. In a case of this kind there is no marshalling; "as there are not two funds, and therefore no one is disappointed by the option of another."(f) The Court cannot, Lord Hardwicke says, "extend this relief to creditors further than the nature of the contract will [ *335 ] *support it; therefore it must be a specialty creditor of the person whose assets are in question; such as might have remedy against both real and personal, or either, of the debtor deceased; it not being every specialty creditor, in whose place the simple contract creditors can come to affect the real assets, viz. where the specialty creditor himself cannot affect the assets, as where the heirs are not bound."(g)

In Neave v. Alderton, a person died intestate, indebted in 1007. by bond, in which his heirs were bound, and to the plaintiff in 457., by simple contract, and did not leave personal assets sufficient to pay his debts. The defendant was his son and heir, and had real assets, by descent, of the value of 100%., and he took out administration to his father. And he having paid the debt by bond out of the real assets, the simple contract debt was decreed to be paid out of the personal assets. (h) In Wilson v. Fielding, an executrix, who had confessed judgment to a mortgagee, on his mortgage bond, applied part of the personal assets in paying off the mortgage. The plaintiff, W., who was a creditor by simple contract, brought an action against the executrix, who pleaded plene administra

(y) 9 Mod. 151; Barn. Ch. Rep. 229, 304; 2 Atk. 436; 3 Atk. 467; 1 Ves. 312; 1 Dick. 253.

(z) Charles v. Andrews, 9 Mod. 151; Vernon v. Vawdrey, Barn. Ch. Rep. 280, 304, 2 Atk. 119. Kinaston, or Kynaston, v. Clark, 2 Atk. 204, 206, and stated from MS. 2 Cruise Dig. 2nd ed. 447; Lacam v. Mertins, 1 Ves. 312; Cox v. Bateman, 2 Ves. 19; Gibbs v. Ougier, 12 Ves. 413; Bridgen v. Lander, 3 Russ. 346, n. See also Sanderson v. Wharton, 8 Price, 680.

(a) Snelson v. Corbet, 3 Atk. 369. (b) Powell v. Robins, 7 Ves. 209. (c) Scott v. Scott, 1 Eden, 458, Ambl. ed. Blunt, 383, and n. (2.)

(d) Westfaling v. Westfaling, 3 Atk. 460. 467.

Wride v. Clarke, 1 Dick. 382. 8 Ves. 389; 2 Bro. C. C. 107. (g) Lacam v. Mertins, 1 Ves, 312. (h) 1 Eq. Cas. Abr. 144,