delivered the opinion of the court:
In Webber v. Clark,
Some of the defendants to the bill are in possession of the twenty acres of land in cоntroversy, but since the principal objects of the bill are to establish a trust in Harms and Klehm and secure conveyances from them, and to obtain a deed from Chambers, the trustee in the trust deed, on the theory that appellant, cestui que trust under said trust deed, is now the owner of the equity of redemption, there can be no doubt of the jurisdiction of a>court of chancery to entertain the bill. Indeed, the legal title to the premises being vested in certain of the defendants, it is manifest that appellant has no remedy at law, by action of ejectment or otherwise.
It is claimed that the laches of appellant has barred her from seeking relief in equity. Whatever may be the rule in other jurisdictions, it has long been the general rule in this State that a defendant, in order to avail himself of the defense of laches, must set up such defense by plea or answer, so as to afford the complainant opportunity to amend the bill by inserting allegations accounting for the delay. (School Trustees v. Wright,
We find no case in which it has been directly held in this State that the defense of laches cannot be availed of by a demurrer when the laches to bar the suit appears in the bill itself. In Beach v. Shaw,
Upon consideration of all the cases in this State, this much is clear: That while the general rule is that the defense of laches must be made by plea or answer, yet suсh rule does not apply when the bill already states the causes of and excuses for delay. In the case at bar, as in Hall v. Fullerton, supra, and in Williams v. Rhodes, supra, the complainant undertakes to account for her delay in bringing suit, and makes in that behalf numerous allegations, and there is, therefore, no occasion for either plea or answer setting up laches. The truth of these matters of excuse is admitted by the demurrer. Why, then, any necessity for the delay, trouble and expense of proving such matters by testimony? Why may not the insufficiency of the excuses for delay be urged on demurrer? Here, the whole issue as to laches turns upon the legal suffiсiency, from the standpoint of a court of equity, of these matters pleaded by way of excuse for delay. It is said in Hall v. Fullerton that the general rule above stated is one not to be extended to a case where the reason for the rule does not apply, and the reason for the rule has no more application in this case than in that.
The doctrine in equity in regard to the statutes of limitation is, that such statutes may be taken advantage of by demurrer where the bar appears on the face of the bill, unless equitable grounds in avoidance of the bar are alleged. (Henry County v. Winnebago Swamp Drainage Co.
At the time appellant loaned her money and took the mortgage security, in March, 1875, the abstract of title was examined by her attorneys, and it showed that Sayles was the owner of the premises. On April 24, 1876, Hancock, the assignee in bankruptcy of Beecher, deeded to Grant, but she did not learn of the bankruptcy of Beecher and the proceedings that resulted in said deed until after October 25, 1880. Said deed was not in the chain of title upon which the trust deed to Chambers, her trustee, was based, Beecher having made a deed to Sayles and Walker on January 12, 1875. When she learned of the bankruptcy proceedings and the deed to Grant, she applied to Grant to have him release to her the part of the premises in which she was interested, and proposed to pay him his expenses and proper charges in the matter, and for some time expected him to accept her proposition, and was prepared to arrange the matter with him accordingly. Grant afterwards advised her that he was under some obligations to other parties, as attorney, trustеe or otherwise. From the time she first had notice of the bankruptcy of Beecher and the deed to Grant, until February 11, 1885, — a little more than a year before the filing of her bill, — she was not the owner of the equitable title that had been vested in Sayles and Walker, but that title belonged to Henry H. Brown, to whom it had been conveyed by Jenkins, assignee in bankruptcy of Sayles. That equitable title and interest, however, were under mortgage to Chambers, as trustee, to secure the 83000 that she had loaned to Sayles. She filed her bill on March 26, 1886, having then recently learned that Grant had, by a quit-claim deed, conveyed the premises to Klehm on January 26,1883.
These statements of fact made in the bill do not show a strong case for appellant in explanation and excuse for not sooner bringing suit. We think, however, that when they are considered in the light of the complications in and by which her interest in and lien upon the premises were involved, and also in the light of the facts alleged in regard to notice to appellees of the Walker and Sayles equity, which are hereinafter separately considered, the conclusion should not be, upon this demurrer to the bill, that she has delayed asserting her claim for so unreasonable a length of time, and under such circumstances, as should preclude her from obtaining relief, — ■ and especially so, as it does not appear that the defense of laches was either pointed out in the demurrer or relied upon in the argument thereof in the court below. If there are equities in appellees requiring a court of equity to contract the limits prescribed by statute for barring the complainant, they do not appear in this record A court of equity applies the doctrine of laches in denial of relief only where, from all the circumstances, to grant the relief to which the complainant would otherwise be entitled will, presumptively, be inequitable and unjust, because of the delay. (Stiger v. Bent,
In order to entitle appellant to relief she must show notice of the parol trust or equity to each of the parties through whom the title passed, from Beecher down. It is urged that the statements of notice found in the bill are insufficient.
It appears from the bill that Beecher always recognized the title of Sayles and Walker to the property, and that neither the schedule in bankruptcy of said Beecher nor the schedule of Chatfield and Beecher made any mention whatever of any interest in the premises. Hancock, the assignee in bankruptcy of Beecher, took the estate of the bankrupt as a volunteer, and subject to all the liens, encumbrances and equities existing against it in the hands of the bankrupt.
The bill contains specific allegations showing the manner in which Beecher acquired title and held the same in trust for Sayles and Walker, who furnished and paid the purchase money for the land. The bill then states: “That the said William C. Grant, before and at the time of his said pretended purchase from said Bradford Hancock, as assignee, had notice that said Thaddeus B. Beecher had not, at the institution of said bankruptcy proceedings against him, any actual interest in the aforesaid property of your oratrix, save as trustee as aforesaid.” The bill further charges “that the said Grant, in making said purchase, was acting as the agent of said Charles Harms, and that the said conveyance to said Klehm was made, and the pretended title so acquired by him was held, in trust for said Charles Harms; that said Grant was the solicitor ■ for said Harms, * * * and as agent and attorney for said Harms was instrumental in procuring the sale by said assignee.” And also charges that “said Klehm, in receiving said deed from said Grant, hаd notice that said Grant was not a bona fide purchaser,” and that he, “in taking said deed, was chargeable with notice of the rights and equities of Sayles and Walker, and of the rights and equities of your oratrix.”
Notice to an agent touching the subject matter of his agency is notice to his principal, and notice to an attorney is notice to his client. Klehm was a mere naked trustee, and his cestui que trust had notice; and, moreover, it appears that when he took the deed from Grant he had notice of the defect in the title, and that said Grant was not a bona fide purchaser, and that the title conveyed was chargeable with notice of the rights and equities here in question. The conveyance of Klehm to Antonia Harms was subsequent to the commencement of suit and the service of process, and a Us pendens is notice to all the world of the equities of the complainant in the subject matter of the suit. We think that notice of the equities of appellant sufficiently appears upon the face of the bill.
It is claimed that the title acquired under Hancock, assignee of Beecher, was adverse to the equitable title claimed by Sayles and the mortgage interest claimed by appellant thereunder, and that therefore said equitable title and said mortgage interest are barred by the two years’ limitation contained in the Federal Bankrupt law. Section 5057 of the Revised Statutes of the United States (2d ed. p. 975) reads as follows: “No suit, either at law or in equity, shall be maintainable in any court between an assignee in bankruptcy and a person claiming an adverse interest touching any property or rights of property transferable to or vested in such assignee, unless brought within two years from the time when the cause of action accrued for or against such assignee.” In order to bring the case within the statute the suit must involve “property or rights of property transferable to or vested in such assignee,” and the interest claimed must be “adverse” as between the assignee and other person or persons.
Appellant insists that this litigation does not relate to property or rights of property transferable to or vested in the assignee, and relies on section 5053 of the Revised Statutes of the United States, which provided that “no property held by the bankrupt in trust shall pass by the assignment.” It is urged that the bill shows an express trust, as well as a resulting trust. The only suggestion of an express trust that we find in the bill is contained in these statements: “That the said Beecher, as your
oratrix is informed and believes, had, in fact, by some writing in due form, recognized and confirmed the right of said Say les and Walker in and to said premisеs before the petition in bankruptcy was filed by or against said Beecher; that for some cause to your oratrix unknown such writing or document seems not to have been placed on record.” It here appears that the facts to constitute an express trust are not within the knowledge of the appellant, and she, therefore, is not within the general rule that requires a complainant to state them positively. (Campbell v. Paris and Decatur Railroad Co.
It is further insisted that whether the trust was an express trust or a trust arising from implication of law, there was, in either event, a trust estate, and it was within the operation of the statute and did not pass by the assignment, and that therefore no title or interest passed by the assignee’s deed to Grant upon which the limitation law of two years could operate. No authority is cited to show that a constructive trust is within the Federal statute which provides that no property held by the bankrupt in trust shall pass by the assignment made to the assignee in bankruptcy proceedings. It would seem that the rule is, that express trusts only, and not those created by mere opеration of law, are within that statute. Hosmer v. Jewett, 6 Benedict, 208.
But, be it as it may with respect to this section 5053 of the statute, the question arises, did the equity upon which the claim of appellant is based ever become adverse as between the holder of that equity and the assignee of Beecher? As we have already seen, Beecher always recognized and admitted the equitable title of Sayles and Walker to the property, and it was not scheduled as a part of the bankrupt’s property, and the assignee took it, if at all, as a volunteer, and subject to all the liens, incumbrances and equities existing against or in the same in the hands of the bankrupt. (Webber v. Clark,
The contentiоn of appellees is, that when, in 1875, Hancock, the assignee, filed his petition for the sale of the three hundred and ten acres of land, he thereupon assumed an absolute adverse attitude with respect to the premises here in question, and the title then being in him, as assignee, the limitation statute commenced to run, and continued to run when he conveyed the same title to Grant. There would be much force in this contention if the proceeding in the bankrupt court, and the subsequent sale and conveyance by the assignee, had been for the purpose of realizing on an asset of the estate. It ■would have been a disclaimer of the trust. But these averments are made upon the face of the bill and are admitted by the demurrer: “And the said Hancock, in applying to the court, in bankruptcy for leave to make the sale, stated that neither the schedule of the said Beecher nor the schedule of the said Chatfield and Beecher made any mention whatever of any interest in the aforesaid premises, but the said Hancock, in his petition in connection with said application, further stated that he was informed and believed that the said deed was a cloud upon the title of a large number of individual owners of different portions of the three hundred and ten acres aforesaid, and that said owners were farmers in possession of portions of the premises, and had applied to said Hancock to advertise and sell the interest of said Beecher in said premises, and offered to' pay therefor such a sum as would pay for all the expenses attending the sale.” The bill further shows that the tract of three hundred and ten acres was sold by the assignee to Grant for $160, —about fifty cents an acre, — and that the deed made by the assignee only purported to convey the right, title and interest of Beecher and all right of the assignee, but “subject to all unpaid taxes and to all liens and encumbrances, and also subject to аll the terms and conditions of said sale.”
The assignee solemnly came into court, and in a formal petition addressed to the court stated that he was informed and believed that the very deed upon which his whole title and interest depended was a cloud upon the title of the individual owners of different portions of the three hundred and ten acre tract-. That fact alone affirmatively and sufficiently shows, not only that he did not himself claim to be the owner, but that he fully recognized and admitted the titles of the individual owners of the different portions of the tract, and when he asked, at the instance and npon the application of all or some of the owners, that his title and interest, and that of his assignor in bankruptcy, should be sold to the owners, or their representative, for “such a sum as should pay for all the expenses attending the sale,” — and this upon the ground that the deed npon which his title depended was a cloud upon the title of the real owners, — it is perfectly manifest that he had no intention whatever of claiming adversely to the real owners of the different and respective portions of the tract. It is evident that the sole interest and object that the assignee had in view in procuring the order of the court and in making the sale, that was intended for the benefit of either himself, as assignee, or thе estate of the bankrupt, was, that the sale should be made for a sufficient sum to pay off all the costs and expenses of the sale. This object he accomplished by selling the tract of three hundred and ten acres, in solido, to Grant, when twenty acres of that land was considered ample security for a loan of §3000.
The title and interest that were vested in the assignee were sold and conveyed “subject to all liens and encumbrances.” There was no interest in him other than the legal title, and there was no encumbrance upon the legal title that had passed from Beecher to his assignee, other than the encumbrance of the trust for thе benefit of the beneficial owners. The title was subject to that trust, and the trust was an encumbrance npon the title, and the assignee was bound to take notice of that encumbrance, and Grant had actual notice of it.
When the assignee in bankruptcy conveyed to Grant, the two years limitation statute had not commenced to run against the equitable title and interest of Sayles and Walker and those claiming under them, and by that conveyance the title and the property or right of property were removed beyond the possibility of being affected by the provisions of that statute. After the delivery of the deed to Grant there was no proрerty or right of property in the assignee to which any interest claimed by any other person could be or could become adverse. The interest must necessarily become adverse in the assignee, for by the very terms of the statute the cause of action must accrue “for or against the assignee,” and to hold otherwise, and that the statute could begin its course after the title and interest had passed out of the assignee, would be to give the statute a scope beyond the purview of the power delegated to the Federal Congress to establish uniform laws on the subject of bankruptcies throughout the United States.
In Roby v. Colehour,
A point is made, that under the assignment in bankruptcy of Sayles, his assignee, Jenkins, took the equity of redemption, an estate, and that he took suсh estate, not in Ms individual capacity, but in his capacity as assignee, —an officer of the court in bankruptcy; that the deed made by him to Henry H. Brown, appellant’s grantor, without any order of court, could pass nothing more than the naked legal title, if that, to the equity of redemption, and that therefore appellant is not the real owner of said equity of redemption, but that it is still in the assignee or has reverted to the bankrupt. The conclusion reached is incorrect, and this, even if for no other reason, owing to the incorrectness of the premises assumed. The allegations of the bill are: “That afterwards, to-wit, on the 25th day of October, A. D. 1880, the sаid Robert E. Jenkins, as assignee in bankruptcy of said John E. Sayles, did, by deed, in due form of law, then executed by the said Robert E. Jenkins, as such assignee, convey the said land, for a valuable consideration, to Henry H. Brown.” Since said deed was executed by Jenkins “as assignee in bankruptcy” and “in due form of law,” it follows that it was executed in Ms official capacity, and in conformity with all the prerequisites necessary to pass to the grantee all the title and interest of the assignee.
It is contended by appellees that the claim of appellant to relief, if it is based on the deeds conveying Sayles’ equity of redemption, is barred by the two years limitation stаtute that we have already considered in another connection. We think this contention well grounded. The assignment in bankruptcy to Jenkins was made on June 20, 1879, and before that date the Beecher-Hancock title and interest, under which appellees hold, had, in the hands of Grant, (he having disclaimed the trust assumed by Beecher for the benefit of Sayles and Walker,) become adverse to the Sayles equity of redemption. So the statute began to run in favor of the Grant title, as against said equity of redemption in the hands of Jenkins, as assignee, on said June 20, 1879, and when, on October 25,1880, Jenkins deeded to Brown, it still continued to run, and in June, 1881, it tolled the right to maintain a suit based on the interest that had been vested in the assignee, Jenkins, as against the Grant title and interest.
A further contention is made by appellees which we think is well grounded. It is, that appellant, in her attitude of beneficiary under the trust 'deed that was made by Sayles on his equitable title and interest, to Chambers, in order to secure the $3000 that she loaned to Sayles, is not entitled to a conveyance to herself of the title that was placed in Beecher in trust for Sayles and Walker, and that such relief could be asked only by the absolute owner of the-Sayles-Walker title. If appellant, instead of taking a conveyance of the equity of redemption from Brown, had fоreclosed the trust deed or mortgage by virtue of her equity as holder of the note secured thereby, and, by means of the deed executed in consummation of such foreclosure, had become the owner of the entire equitable title and interest, we think it plain that under the other circumstances disclosed by the bill of complaint she would have been entitled to a conveyance of the Grant-Klehm-Harms title and interest. But she did not do this, and the complications attending the enforcement of her equities are largely owing to her failure so to do.
But appellees, in claiming that appellant stands before the court in two attitudes, and thаt as holder of Sayles’ equity of redemption she is barred by the statute, and as beneficiary in the trust deed is not entitled to the relief sought, because of her failure to obtain title by foreclosure, sale and deed, do not exhaust the whole measure of the rights and equities that are vested in appellant. As shown by her bill, she stands in three attitudes, instead of two, only. Sayles, through the deed from Walker, became the owner of the entire equitable estate, and by the trust deed to Chambers he conveyed to him the legal title to the equitable estate and interest in the twenty acres of land in controversy. Chambers held this title to the equitable estate as trustee, fоr the purposes of the trust created by the trust deed. Appellant, being already possessed of the equity that accrued to her by virtue of her being the holder of the note secured by the trust deed, afterwards became the owner of the equity of redemption of Sayles, the grantor in the trust deed, and this latter result was accomplished by means of the Sayles bankruptcy proceedings and the deeds executed by Jenkins, as assignee, and by Brown.
A conveyance of the trust property by the grantor in a deed of trust to the party whose debt is secured by the same, passes the equity of redemption but not the legal title, and the latter still remains in the trustee, and the grantee, in such case, has the right to require a conveyance of the legal title from the trustee. (Meacham v. Steele,
There can be no claim that the bar of the two years limitation law found in the Federal statute has any application whatever to the legal title to the equitable estate, because that title passed out of Sayles more than three years before he was adjudged a bankrupt, and never was property or a right of property transferable to or vested in Jenkins, his assignee. And for like reason the original equity with which appellant was invested by the trust deed never came within the domain of that statute. And when, afterwards, appellant became vested with all three interests in the equitable estate, the merger that took place was not a merger of the legal title and of the equity as holder of the note in the equity of redemption, but the equity of redemption and the equity as holder of the note secured by the trust deed became merged in the legal title, and this because the legal title is the greater of the three. Talcott v. Draper,
The title to the equitable estate and beneficial interest is vested in appellant, and the equity of redemption and all other equities have fallen into that title and been merged in it. Identically the same thing has been accomplished that would have resulted from foreclosure, sale to appellant by the master, and execution and delivery of deed to her upon expiration of the time allowed by statute for redemption, and neither the appellees, nor any one or more of them, have any such interest as would give the right to redeem. The title of appellant, as we have already seen, is not barred or affected by the limitation statute. She is now, so fаr as this twenty acres of land is concerned, the absolute owner of the entire interest in the equitable and beneficial title, interest and estate that was in its inception vested in Say les and Walker, and she is entitled to a conveyance of the Grant-Klehm-Harms title, provided the material facts alleged in her bill of complaint are proved and no valid defense is established.
The decree of the Superior Court is reversed and the cause is remanded, with directions to overrule the demurrer to the bill, and to allow the bill to be amended, if the complainant therein shall so desire, and to give the defendants leave to answer, if they shall be so advised by counsel.
Reversed and remanded.