Summary
In Harrison v. Battle, 16 N.C. 537, one Hunt conveyed to Mr. Battle valuable real and personal estate in trust to sell and apply the proceeds to the payment of certain debts scheduled in the deed, with a resulting trust to the grantor.
Summary of this case from Mayo v. StatonOpinion
(December Term, 1830.)
1. Under the first section of the act of 1812 (Rev., ch. 830), subjecting trust estates to execution, only such estates as are held in trust for the defendant in the execution solely are within the operation of the act. As the sheriff's deed transfers the estate of both trustee and cestui que trust, those cases where it is necessary for the purposes of the trust that the trustee should retain the legal estate are not within its operation. As in case of a conveyance to sell and pay debts, and then in trust for the bargainor, the estate of the trustee is not destroyed by an execution sale of the interest of the cestui que trust.
2. But the interest of the bargainor, after payment of the debts, being in no respect distinguishable from an equity of redemption, may be sold under the second section of the act.
3. That section subjects equities of redemption in land only, to execution sales. The same interest in chattels is left as at common law, and can be subjected to the satisfaction of an execution only in a court of equity.
4. Before the passage of the act of 1812 a court of equity lent its aid to an execution creditor to subject an equity of redemption, subsisting in favor of the defendant, to the satisfaction of the execution. It will do so still, especially as the remedy is not so perfect at law, as it can be made in this Court, by ascertaining, before a sale, the amount of the debts charged upon the land.
5. A creditor must establish his debt at law to entitle himself to the aid of a court of equity. But a return of nulla bona is unnecessary where it appears that all the debtor's property has been placed beyond the reach of final process.
6. Where lands and slaves were conveyed in trust to pay debts, with a resulting trust in favor of the bargainor, and after its execution the bargainor made further assignments of the resulting trust to secure debts, and judgments were also recovered against him: Held, that executions bound the resulting trust in the land from the teste; and, if they overreached the assignments, had a priority; and that as to the resulting trust in the slaves, it was bound in equity in favor of the creditor who first filed his bill, without reference to the teste of his execution, and that assignments made before the filing of the bill had a preference.
7. Creditors secured by the deed upon both land and slaves are, in favor of the execution creditors having a lien upon the resulting trust in the land, marshaled, so as to have their debts satisfied pro tanto by a sale of the slaves.
From FRANKLIN. The plaintiff alleged that he was the surety (538) of the defendant Hunt in a note for about $2,600, discounted at the Bank of New Bern; that Hunt being in failing circumstances, the plaintiff had procured an action to be brought by the bank, in which judgment was recovered by the plaintiffs at law, at September Term, 1828, of the County Court of Franklin; that pending the action, viz., on 6 September, 1828, the defendant Hunt had conveyed to the defendant Battle all his property which could be seized under an execution, in trust to pay certain debts due by him, Hunt, which were mentioned in the deed, with a trust as to the residue, after paying those debts, to Hunt; that the property thus conveyed was much more in value than the debts secured by the deed; that execution upon the judgment obtained by the Bank of New Bern issued, which the plaintiff procured to be levied upon the property thus conveyed, subject to the claim of the defendant Battle, and that if the defendant Battle sold only so much of the property conveyed as was necessary to pay all the debts secured by the deed to him, that there would be a large surplus, amply sufficient to satisfy the (539) execution in favor of the bank; but that the defendant Hunt had given sundry orders upon the defendant Battle for the surplus, over and above the sum due on the debts thus secured, and threatened to exhaust the same by similar orders, and that if the defendant Battle should sell, in consequence of these orders, and pay over accordingly the whole of the proceeds in his hands, there would be nothing from which the plaintiff could be indemnified against his liability as the surety of the defendant Hunt, who was insolvent.
Seawell, Gaston, and Badger for plaintiff. (541)
The Attorney-General for the assignees of the residuum.
W. H. Haywood for the assignees.
The plaintiff then averred that he had made the Bank of New Bern secure in the ultimate satisfaction of their judgment, and had taken an assignment thereof.
The prayer was for an injunction restraining the defendant Battle from selling more of the property conveyed to him than was necessary to satisfy the debts secured by the deed of trust, and that the residue in his hands might be subjected to the satisfaction of the execution in favor of the president and directors of the Bank of New Bern, who were also made defendants.
The defendant Battle, in his answer, admitted the execution of the deed of trust to him by the defendant Hunt; that before the sale of any property under the deed, and on 23 October, 1828, he received notice of an assignment of the residue in his hands, made by the defendant Hunt on 16 October, to Thomas T. Russell and George W. Freeman, to secure them, as the sureties of Hunt, in two notes for $1,000 and $800, held by the Bank of the United States; that on 1 January, 1829, a similar assignment of the residue, after satisfying Russell and Freeman, was made by the defendant Hunt to secure Peter Arrington in the sum of $1,400, and on that day notice thereof was given to him, the defendant Battle; and that, also, on 12 February, 1829, a similar assignment of the surplus, after satisfying Russell, Freeman, and Arrington, was made by Hunt in favor of James Hilliard, to secure the sum of $424, (540) notice of which was also given him; that he, the defendant, not believing he had power to sell under the deed of trust made by Hunt to him, had done no act whereby he in any way sanctioned those assignments, and had merely acknowledged notice of them; that the personal effects of the defendant Hunt had been sold, to the amount of $10,466, with which all the debts secured by the deed of trust had been paid, and that a valuable real estate and several slaves and other minor articles of personal estate were yet unsold, the legal title of which was still in him. The defendant disclaimed to hold anything beneficially, and submitted to any decree which would indemnify him.
The defendant Hunt's answer corresponded in every respect with that of the defendant Battle.
The assignment of the judgment and execution by the president and directors of the Bank of New Bern to the plaintiff was admitted by them, and not denied by the other defendants. Russell, Freeman, Arrington, and Hilliard were made defendants, and by their answers only set up the several assignments made to them as stated in the answer of the defendant Battle.
By an order made in the cause, Battle was directed to sell all the property of the defendant Hunt remaining unsold, and hold the proceeds subject to the decision of the court. By another order all the execution creditors of the defendant Hunt were allowed to make themselves parties; and a number of them availing themselves of this liberty, a reference to the master was made to ascertain the amount of their judgments, and the time when executions issued upon them, together with the return thereof.
The cause was heard upon these facts and the reports of the master on the above reference and of the commissioner, Battle, as to the sale of the residue in his hands after paying the debts secured by the deed of trust.
The fieri facias of the New Bern Bank, to whose rights Harrison is substituted, formed no lien, independent of our act of 1812 (Rev., ch. 830), on Hunt's interest in the property conveyed in trust to Battle, neither this property itself nor the trust resulting to Hunt being the land, tenements, goods or chattels of Hunt. As, therefore, it could not be levied on or sold by the common law to satisfy the execution, no lien arose by its issuing, or what the sheriff calls its levy; for, as the lien arises, or is created, as a means to the end, it would be in vain for the law to raise it, when the end could not be attained. Nor is the trust in favor of Hunt one of that description authorized to be taken in execution under the first section of the act of 1812. The use of trust, there spoken of, is a pure and unmixed one; for the doing execution under that section, to use its own terms, divests the estates both of the trustee and cestui que trust, and transfers them to the purchaser. In the present case, therefore, if it operated, it would give both Hunt's and Battle's estates to the purchaser, under the fieri facias, and entirely disable Battle from performing the other trusts. In other words, Battle is not seized or possessed to the use of or in trust for Hunt, but to the use of Hunt and others, whose interests are no ways united with Hunt's, but are entirely of a different nature. This has been the construction heretofore put upon the act, and it is believed to be the correct one.
(542) But we believe that so far as regards the land, Hunt's interest may be sold under the second section of the act; for we cannot distinguish his right to have the lands again, after the payment of the debt for which this stood as a security, from an equity of redemption. It has all the essentials of that right, although it wants some of its formal parts. It is conveyed to secure the payment of a debt. Upon the payment of the debt, Hunt has a right to call for a reconveyance. Whilst in his possession, by the creditor's consent, he is not accountable for the profits. This trust, to be sure, can be closed by a sale, without the intervention of a court of equity. The aid of this Court to foreclose an equity of redemption is required only because the law will not trust the creditor to be both his own agent and that of the debtor, whose rights it may be his interest to sacrifice. This trust is free from that objection, because the parties have agreed on their trustee. We cannot, therefore, distinguish this interest from an equity of redemption; and its exemption from sale under a fieri facias is equally an evil with the exemption of equities of redemption. The mischief is precisely the same, and we therefore think it within the spirit of the second section of the act of 1812.
But that act affects equities of redemption in real estate only; "lands, tenements, rents and hereditaments" are its words. It extends not to trusts arising out of personal estate. As to that, therefore, the execution formed no lien. We also think that the execution creditor has the right of coming into this Court to make the lien effectual as to the land; for although he has a remedy at law under his execution, it is not an effectual one. If he sells at law, he must sell Hunt's right of redemption only. Its value is unknown. It depends on how much of the debts are paid. This might be known to some and unknown to others. Bidders, therefore, would stand on unequal grounds; and after a sale, a purchaser would have to come into this Court to compel the trustee to settle (543) the trust debts and to receive them from him; or to make a sale to raise them, and to pay him the overplus. A sale of property so situated would encourage speculation, that bane of steady and persevering industry and sound morality.
These are some of the reasons which induce the Court to lend its aid. I admit they impugn the policy of the second section of the act of 1812. But the jurisdiction of this Court is not ousted because a remedy is given at law, unless it be a plain one. The remedy here is more effectual, because this Court ascertains all the claims upon the thing, and sells the corpus itself. The purchaser gets what he purchased — no more and no less. He does not make his gain by another's loss.
As to the trusts upon the personal estate, there is no remedy but in this Court; and that there is here, we entertain no doubt; for do we not mean to consider this a debt due from Battle to Hunt, even after sale, but as Hunt's property in his hands, which cannot be reached at law. As to the property before the sale, there is no doubt; for it is an estate or interest in equity, and so it is after sale; for Battle is not his debtor, but his trustee. He holds the money as he held the property. When the question of a pure debt arises, it will be time enough to consider whether it cannot now be reached to satisfy debts. As to the want of the return of nulla bona, to give a right to call in the aid of the Court, it is deemed to be unnecessary. In this case clearly it is not required as to those executions which attach on the real fund, and we think that the want of it is supplied as to all the judgments; for the deed in question conveys the whole of Hunt's property which an execution could reach. But still the mere creditor must establish his demand by a judgment. As to the orders and assignments, they have a clear priority over all executions on the personal fund before such creditor by execution became a party to this bill; that is, orders and assignments have priority to mere judgment creditors before they became parties plaintiff. But the (544) teste of an execution which overreaches these assignments or orders will have priority over them, as regards the real estate. As to the other judgments competing with each other, they all stand on equal grounds, regardless of the time of their being obtained or execution issued thereon. An alias or pluries execution regularly kept up will, as to trust estate in the land, relate back to the teste of the original.
The master will make an additional report to the next Court, in which he will ascertain the net sum in the hands of the trustee, and will charge him with interest, if he has made interest, and may interrogate him on oath as to that point. He will allow him a commission of 2 1/2 per cent, besides actual expenditures in relation to the trust and in his attendance in this suit. He will distinguish between the proceeds of the real and personal estate, the amount of debts paid under the trust deed, and charge them in the first instance to the personal fund. He will present a scheme for distribution, according to the principles of the foregoing opinion. Judgments which are partly satisfied out of the real estate will come in for balances with other judgment creditors. To give the directions in a few words, they are these: As to the real fund, execution binds from their teste; orders and assignments from their date on both funds — they are of equal dignity; priority of right of satisfaction being gained only by priority of date. Becoming a plaintiff precludes voluntary transfers as to him. All judgments affecting the personal fund stand in equal degree. The costs are to be paid out of the fund. The funds are directed to be marshaled in favor of those execution creditors who had obtained a lien at law upon the real fund, because the creditors under the trust deed have two funds at law, they but one.
Cited: Gillis v. McKay, 15 N.C. 174; Clark v. Banner, 21 N.C. 609; McKay v. Williams, ibid., 406; Brown v. Long, 22 N.C. 140; Pool v. Glover, 24 N.C. 131; Doak v. Bank, 28 N.C. 331; Hall v. Harris, 38 N.C. 299; Parish v. Sloan, ibid., 612; Frost v. Reynolds, 39 N.C. 499; Kirkpatrick v. Means, 40 N.C. 222; Presnell v. Landers, ibid., 254; Hough v. Cress, 57 N.C. 297; Bryan v. Spruill, ibid., 28; McRay v. Fries, ibid., 237; Bobbitt v. Brownlow, 62 N.C. 255; McKeithan v. Walker, 66 N.C. 97; Sprinkle v. Martin, ibid., 56; Hutchison v. Symons, 67 N.C. 160; Hardin v. Ray, 94 N.C. 460; Mayo v. Staton, 137 N.C. 674-686; Moore v. Bank, 173 N.C. 184; Hardware Co. v. Lewis, ibid., 293.