Harrington v. Taylor
169 P. 690 · California Supreme Court · 1917
Facts
Four brothers created trust deeds for properties in Los Angeles and San Francisco to pay various creditors, specifying lien priorities and that the Los Angeles property be sold first. Trustees sold the Los Angeles property, paying senior liens in full from its proceeds, then sold the San Francisco property. A junior creditor, Sarah Harrington, whose lien on the Los Angeles property was not satisfied, sued, arguing for a marshaling of assets and ratable distribution from both sales.
Issue
Can the equitable doctrine of marshaling assets be applied to compel trustees to prorate proceeds from two separate property sales when the trust deeds specify the order of sale and lien priorities, and such marshaling would injure other lien claimants?
Holding
The court reversed the trial court's judgment, holding that the trustees correctly applied the proceeds according to the trust deeds. The equitable doctrine of marshaling assets could not be applied because it would injure other lien claimants and contradict the express terms of the trust.
Rule
The equitable doctrine of marshaling assets is an equity that cannot be invoked when its operation would cause inequity to other lien claimants or violate the express terms of a governing instrument. This right is inchoate and subject to defeat if not enforced before sales and disbursements, or if it harms others.
Read the full opinion on CourtListener
Case brief last reviewed . Prepared by CaseReader from the published opinion.