Legal Definitions - rule of marshaling remedies

The rule of marshaling remedies is a legal principle that courts may apply to ensure fairness when a party has multiple legal options (remedies) to resolve a dispute or recover what they are owed, while another party has fewer or only one such option against the same defendant or resource.

This rule typically requires the party with more options to pursue a remedy that does not unfairly deplete or eliminate the only option available to the other party. Its purpose is to protect the interests of the party with more limited recourse, preventing a party with broad recovery options from inadvertently or unnecessarily harming another party's more restricted ability to seek justice or compensation.

Here are some examples illustrating the rule of marshaling remedies:

• Secured Creditors and Collateral: Imagine a scenario where a bank (Creditor A) holds a mortgage on both a commercial building and a separate piece of undeveloped land owned by a developer (Debtor). Another lender (Creditor B) only holds a second mortgage on the undeveloped land. If the developer defaults on their loans, Creditor A has the option to foreclose on either the building, the land, or both to satisfy its debt. The rule of marshaling remedies would likely require Creditor A to first pursue foreclosure on the commercial building, if its value is sufficient to cover Creditor A's debt. This action would leave the undeveloped land available for Creditor B to potentially recover their debt, preventing Creditor A from unnecessarily wiping out Creditor B's only collateral and thus their only remedy.

• Contract Breach and Damages: Consider a situation where a software development firm (Plaintiff A) sues a client (Defendant) for breach of contract, seeking either specific performance (forcing the client to complete the contract as agreed) or monetary damages. Separately, a freelance designer (Plaintiff B) also sues the same client for unpaid invoices for work on a different project, seeking only monetary damages. If the client has limited financial resources, and specific performance would tie up a significant portion of those resources, a court applying the rule of marshaling remedies might encourage or require Plaintiff A to pursue monetary damages instead. This ensures that the client's remaining funds are available to satisfy Plaintiff B's claim, which has no alternative remedy like specific performance.

• Trust Mismanagement and Beneficiary Claims: Suppose a trustee (Defendant) mismanages a trust, causing financial losses to its beneficiaries. One beneficiary (Beneficiary A) has a claim against the trustee personally for breach of fiduciary duty and also has a right to recover from a specific, separate fund that the trustee had previously set aside for a different purpose. Another beneficiary (Beneficiary B) only has a claim against the trustee personally for their losses. If the trustee's personal assets are limited, a court might apply the rule of marshaling remedies, directing Beneficiary A to first seek recovery from the separate fund. This action would preserve the trustee's personal assets, making them available to satisfy Beneficiary B's claim, which has no other source of recovery.