Henderson v. Adams

15 Utah 30 | Utah | 1897

Zane, C. J.,

after stating the case, delivered the opinion of the court.

On August 31, 1893, the defendant Louis B. Adams owed the Utah National Bank of Ogden $24,602.37, then due. The bank was willing to grant him further time for its payment, if he would give additional security. Adams executed a deed conveying certain real estate, estimated to be worth $60,000, and transferred some personal property, to one George Bra stow in trust for the Adams Nursery Company, a corporation to be organized the next day to carry on the nursery and real-estate business in Weber county, Utah. It was also agreed by Adams and the bank that such real estate and personal property should be paid for by issuing the stock of the nursery company to Adams, and that he should pledge the same to the bank to secure his indebtedness to it. It appears that the stock was so issued to Adams and pledged to the bank, and that the trustee has not conveyed or transferred the property so deeded to him to the nursery company. In view of the fact that the trustee has not conveyed the land described in the trust deed to him to the Adams Nursery Company, counsel for plaintiffs insist that the legal title thereto is still in the trustee, while counsel for the defendants contend that, in view of the nature of the trust, the law passed the title to the Adams Nursery Company as soon as its organization was perfected. To a clear understanding of the question, it is necessary to refer to the statute of uses, and to its effect upon uses and trusts and the mode of transferring the legal title to lands. The most ancient method of conveying land known to the common law is described by the term '-'feoffment,” according to which the language used in making the transfer was attended with corporeal possession. The intention to transfer the title was expressed by appropriate physical acts as well as by appropriate words. Mere words, whether spoken or written, were not sufficient. The acts attending the preparation, signing, acknowledging, and delivery of a deed sufficient since the adoption of the statute of uses were not enough. The ceremony is known as ''livery of seisin,” and is described in the second book of Blackstone’s Commentaries (page 315). During the existence "of that system of conveyance, uses and trust were introduced to evade the statutes of mortmain, and became almost universal. A use may be defined as “the right in one person to take the profits of land of which another has the legal title and possession, with the duty of defending it and making estates thereof as directed by the ‘cestui que use.’ ” Prior to the statutes of uses, the terms “use” and “trust” were used without any accurate distinction between them. The introduction of uses, and the development and application of the rules defining “uses” and “trusts,” abounded in subtile refinements and nice distinctions. And finally the concealed operation of those, and the often unknown existence of such rights to others than the immediate parties, resulted in much uncertainty, deception, and injustice. The statute of 27 Hen. VIII, c. 10, called the “Statute of Uses,” was adopted for the purpose of sweeping the system away, and with the intent of substituting a simple method of transferring title to lands, without such opportunity for evasion and deception, and with the intent of ridding rights to real property' of the secrecy and uncertainty to which they had been subject. That statute enacted that: “When any person shall be seised of lands,” • etc., “to the use, confidence or trust of any other person or body politic, the person or corporation entitled to the use in fee-simple, fee-tail, for life, or years, or otherwise, shall from thenceforth stand and be seised or possessed of the lands,” etc., “of and in the like estates as they have in the use, trust or confidence, and that the estate of the person so seised to use shall be deemed to be in him or them that have the use in such quality, manner, form and condition, as they had before in the use.” 2 Bl. Comm. 332, 333. This author adds: “The statute thus 'executes the use/ as our lawyers term it; that is, it conveys the possession to the use, and transfers the use into possession, thereby making the cestm que use the complete owner of the lands and tenements, as well at law as in equity.” Thus, the right of possession is given to the person having the right to the use. The same author further says: “The various necessities of mankind induced also the judges very soon to depart from the rigor and simplicity of the rules of the common law, and to allow a more minute and complex construction upon conveyances to uses than others. Hence it was adjudged that the use need not always be executed the instant the conveyance is made, but, if it cannot take effect at that time, the operation of the statute may wait till the use shall arise upon some future contingency, to happen within a reasonable period of time.” Following tbe same rule of construction, the courts also held that “no use could be limited on a use;” and they held that in case of such limitation the first would be executed, and the latter would be void. Again, they held that the statute did not extend to terms of years. And lastly the same author says: “(By more modern resolution) where lands are given to one and his heirs in trust to receive and pay over the profits to another, this use is not executed by the statute; for the land must remain in the trustee, to enable him to perform the trust.” These three exceptions appear to be almost all that is left of that complicated and elaborate system of rules based so largely upon nice distinctions and subtile reasoning to evade the forfeitures of real property held by the church, religious or political factions, or vanquished warriors. This rule is laid down in 2 Washb. Real Prop. (5th Ed.) 466, 467, as follows: “In most of the United States the statute of uses is so far recognized as the law of the state, either by express enactment of the statute itself, or of similar statutes, or by the decisions of the courts, that wdiere the use is merely dry or passive, as an. estate granted to A., to the use of B., the legal title will immediately vest in B., the cestui; whereas, if any active duty is imposed upon the grantee to uses, as to collect the rents and profits of the land and pay them to B., the statute of uses will not transfer the legal title to the cestui.’' And at pages 501 and 502, Id., the following language is used: “Although the limitation of the estate to one be such as would be executed in another, as the cestm que trust, if the trust named was to be merely passive, yet, if he have an active duty, to do which requires him to hold the legal estate for a term or time, he will be considered as seised thereof accordingly, so long as it shall be necessary; and it will be then executed in the cestui que trust, upon the principle that trustees only take so much of the legal estate as the purposes of the trust require.” The reason for livery of seisin in conveying the leggl title to lands ceased when the act for recording deeds went into effect in this state, and a bargain and sale deed passes the legal title to land, under the principle of the statute of uses. Though lands may be in the adverse posséssion of another, the owner may, by deed under the statutes of Utah, pass his title to any third person. The statute of uses has been adopted in some states, and in other states statutes having a similar effect have been enacted; and in others, where no such statutes exist, the principle of the statutes of uses has been regarded as a part of the common law, and applied to deeds of conveyance, uses, and trusts. It is true that the statute of uses was not a part of the English common law, and has not been expressly adopted in this state. The common law, like all human institutions, has been subject to change. From time to time some of its rules have been changed or rescinded by statutory enactments, the reasons for others ceased to exist, and the rule ceased with the reason. They were introduced to the new conditions of this country with its settlement, and enterprise and development have changed those conditions since. In the application of the principles of the common law amid such new and varying conditions, experience and observation have brought to light necessities for the application of new rules to be ingrafted upon the old system. And the courts of last resort in some of the states have declared that the common law executes a passive or naked trust, like the one in question, and vests the legal title in the person having the use, — the cestui que trust. We hold that that rule is a part of the common law of this state, and that the title to the land described in the trust deed to Brastow passed to the Adams Nursery Company when its organization was perfected. Bryan v. Bradley, 16 Conn. 474; Jackson v. Root, 18 Johns. 60; Barrett v. French, 1 Conn. 354; Ramsay v. Marsh, 2 McCord 252; Henderson v. Griffin, 5 Pet. 150; 4 Kent, Comm. (13th Ed.), 299; Flint, Trusts, §§ 120, 121.

The plaintiffs, as administrators of the estate of the intestate, Reed, are the only creditors complaining of the transaction in question. They insist that the deed to Brastow, the conveyance of the real estate, the transfer of the personal property to the Utah Nursery Company, the subscription by Adams for the stock, the issuance thereof to him, and the pledging of it to the Utah National Bank, operate to hinder and delay them in the collection of the debt to the estate which they represent, and are therefore fraudulent, and they ask that the trust deed may be set aside. The seventeenth finding of fact by the court below is as follows: “That the incorporation of said Adams Nursery Company, and the conveyance to said Brastow, in trust for said Adams Nursery Company, of said real estate and personal property, and the assignment to said Utah National Bank by said Adams of 900 shares of the capital stock of said Adams Nursery Company on September 1, 1893, as a pledge and security for the debt due by said Adams to said bank, and the future pledge of said 900 shares of stock, and of the further number of ninety-four (94) shares of the capital stock of said Adams Nursery Company, as security for the debts due by said Adams to said Wells, Fargo «fe Co. and said John E. Dooly, were all done in good faith, without any intent on the part of any of the parties thereto for hindering, delaying, or defrauding the plaintiffs herein, or any of the creditors of said Louis B. Adams, but for the sole purpose of securing debts justly owing from said Adams.” This is a specific finding npon the issue of fraud, and, so far as fraud in fact is involved, we would not be authorized to disregard it, without finding that it was made against the clear preponderance of the evidence. Undoubtedly, the $24,602.37 was justly due the bank, and the $10,000 was justly due Wells, Fargo & Qo., and a like amount was due Mr. Dooly, and the security for these' several claims was inadequate before the execution of the trust deed. It is true that the property described in the trust deed was estimated to be of the value of $60,000, but its market value was found to be less; how much, is not mentioned. As security, its market value should be considered. Plaintiffs’ suit had been pending about 14 months when the trust deed was given, but a judgment was not obtained until about 10 months after it was given. During its pendency the defendant Adams was authorized to secure other creditors. We may infer that the security given the bank would delay the collection of plaintiffs’ judgment, but that is often the case where a debtor without property enough to secure all of his creditors secures a part of them. Such a result does not render the security given fraudulent. We may presume from the findings that Adams believed his property would bring more if sold in parcels. To accomplish that end, he organized the Adams Nursery Company, and conveyed to it, and assigned his stock to a portion of his creditors, and thereby the control of his property to them. This stock can be reached on execution as readily as the land transferred could have been. If the bank is permitting Mr. Adams to mismanage the property of the corporation, or to appropriate it or the profits or income therefrom to his own use, a receiver should be appointed, upon a proper showing. The bank has no right, through the instrumentality of the nursery company, to allow Adams to manage its property for his own use, regardless of the rights of his creditors. The bank may hold the property, by means of the corporation and its stock, as security for the debt, a reasonable time, but it cannot hold it for the use and benefit of Adams; and, if it is made to appear that the bank is doing so, the property should be taken out of his hands, and placed in the hands of a receiver, and subjected to the payment of his debts. We are disposed to hold that Adams had the right to adopt the method he did to secure one of his creditors, and that the entire transaction was made in good faith, and that it must be upheld. We have been referred by counsel to a number of cases, but, upon an examination of them, none are found to be entirely analogous to the one in hand. The following appear to be more pertinent: Priest v. Brown, 100 Cal. 626; Davis v. Schwartz, 155 U. S. 631.

The judgment of the court below is affirmed, with costs.

Bautch and Miner, JJ., concur.