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Page:Harvard Law Review Volume 1.djvu/78

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(worth, respectively, $10,000 and $5,000) mortgage them both to C for $5,000, and then mortgage A to D for $10,000, and then become insolvent, it is said that D may throw the whole of C’s mortgage on B, and thus obtain payment in full of his own mortgage out of A, though the consequence be that unsecured creditors of the insolvent will receive nothing; and the principle upon which this is held is generalized by saying that when one of two creditors has the security of two funds, and the other has the security of only one of those funds, the latter creditor may throw the debt of the former creditor wholly upon the fund which is not common to both (provided, of course, that fund be sufficient to pay it), in order that he may obtain payment of his own debt out of the fund which is common to both. This doctrine had its origin in efforts of courts of equity to prevent the harsh and unjust discriminations which the law formerly made between creditors of persons deceased, whose claims were in equity and justice equal; and it seems that the doctrine, as a general one, cannot be sustained upon any principle. For example, in the case just supposed, the doctrine of marshalling assumes that, in equity and justice, house B ought to exonerate house A from the first mortgage, whereas, in truth, they ought to bear the burden of the first mortgage equally. As between secured and unsecured creditors, equity clearly ought to favor the latter class, if either.

Lastly, still another instance of an equitable obligation created by equity alone, is the equitable hypothecation or lien given to a vendor, upon land which he has sold and conveyed, to secure the payment of the purchase-money.

Reference has been already made to cases in which a contract results in an equitable as well as a legal obligation. Why is this? Because the legal obligation is not sufficient for all the purposes of justice. In what contracts, then, do the purposes of justice require an equitable as well as a legal obligation ? Chieiiy in those which consist in giving (dando) instead of doing (faciendo). What are the defects in the legal obligation annexed to such contracts? Chiefly these: First, although an obligation to give a thing is said to confer on the obligee a right to the thing, a jus ad rem, yet this right can be enforced only against the obligor personally. A consequence of this is, that, if the obligor become insolvent after receiving the price of the thing, but before the thing