Henderson v. Downing

Mr. Justice Yerger

delivered the opinion of the court.

The appellant filed his bill, alleging that on the 16th day of July, 1842, Thomas and James J. Rowan, conveyed by deed of trust, to the appellant, as trustee, a large amount of real and personal property, situated in different counties in-the State of Mississippi; and that, among other tracts of land so conveyed, was one situated in the county of Hinds. The deed of trust is made an exhibit to the bill. The bill also alleges, that the tract of land, situated in Hinds, was designated by numbers, and that the deed of trust did not designate it as situated in Hinds county; and that the trustee was in fact ignorant that it was situated in that county until informed that it had been levied upon to satisfy a judgment and execution against Thomas Rowan and others; and that upon being informed of this fact, he caused an agent to attend at the sheriff’s sale, and give notice of the existence of the deed of trust to persons attending there to bid; but that Reuben N. Downing nevertheless did purchase the tract of land at the execution sale, although he had been previously notified, before his purchase, of the existence of the deed of trust. The bill also states, that the deed of trust, on the day of the sale and before the sale took place, was filed for record in the office of the clerk of the probate court of Hinds county, and duly recorded by him. The bill prays that the deed to Downing, as a cloud and incumbrance on complainant’s title, may be cancelled, &c. The defendants demurred to the bill, and the chancellor sustained the demurrer and ordered the bill to be dismissed, from which an appeal has been prosecuted to this court.

There were two causes relied upon to sustain the demurrer in the court below. First, that the allegation of notice to the purchaser at the execution sale of the existence of the deed of trust was not sufficient to defeat the title obtained by him at the sale, as the deed of trust was not recorded in Hinds county before the rendition of the judgment.

Second, that the deed of trust was fraudulent on its face as to the creditors of the grantors.

In relation to the first point, it may be remarked, that the statute of this State has declared, “that all deeds of trusts or mortgages, whensoever they shall be delivered to the clerk to be recorded, shall take effect and be valid as to all subsequent purchasers for valuable consideration without notice, and as to all creditors from the time when such deed of trust or mortgage shall be acknowledged, proved, or certified and delivered to the clerk of the proper court to be recorded, and from that time only.” Hutch. Code, 606, § 5.

This court, in the case of Dixon & Starkey v. Doe, ex dem. Lacoste, 1 S. & M. 70, held, that creditors equally with subsequent purchasers, were affected by notice of an unregistered deed. Without controverting that decision or making any further comment on it, than to say that it will not be extended any farther than the case there made, we need only remark, that in this case it does not appear, from the proof, that the judgment creditor had any notice of the existence of this deed of trust, either when the debt was contracted or before the judgment was rendered; and such being the fact, in our opinion, the judgment creditor had a right to enforce his judgment by a sale of the land, although notice of the existence of the deed of trust may have been given to him subsequent to the rendition of the judgment. And as he had the right to sell the land under such circumstances, the fact that notice was given to purchasers at the execution sale of the existence of the deed, cannot affect the right of such purchasers, or postpone their rights to the grantee in the deed of trust. When the statute .speaks of “ subsequent purchasers,” it means purchasers from the grantor directly, and not purchasers at execution sale. The last-named class of purchasers occupy a position at least as favorable as that of the judgment creditor; and if the judgment creditor would not be affected by notice given at the sale, but might still go on and séllthe property, his judgment lien being deemed paramount to the unrecorded deed, the same rule must be applied to the rights of a purchaser at execution sale founded on such judgment. See 4 Rand. 208. Martin & Yerger, R. 385; 1 Dev. & Battle, 55.

Any other construction of the statute would lead to the palpable absurdity of declaring to the judgment creditor that he might appropriate the land of the debtor to satisfy his judgment in preference to the grantee of an unrecorded deed, yet at the same time it would enable that grantee to attend the sale; and, by giving notice of the deed, deter purchasers from bidding, and thus destroy the chief benefit that a creditor would derive from the preference given him.

There is another ground assumed by the appellees, entirely decisive of this case in their favor, even if we should admit that notice of the unrecorded deed to them was equivalent to its registration, according to the statute. In our opinion, the deed of trust from the Rowans to Henderson, is fraudulent and void on its face as 'to the creditors of Rowan. A very large estate in land and slaves is conveyed by the grantors, for the purpose of paying debts owing by him, the most, if not all, of which debts had already ripened into judgment; and, among other provisions contained in the deed of trust, will be found one, which extends the time of payment for five years, upon the payment of an annual instalment of one fifth of the debts secured; and by another provision, the grantors stipulate that out of the proceeds of the growing crop and of the future annual crops that may be raised, “ the current expenses of the plantations, and of the families of the grantors shall be first paid, and only the smplus or remainder, after such payments, was to be paid and delivered to the trustee in extinguishment of the debts secured by the deed of trust.

In the case of the Farmers Bank of Virginia v. Douglass, 11 S & M. 469, this court held, that as a general rule, when a mortgage is executed to secure the renewal of a debt due, no farther indulgence should be granted than the usual time of collecting debts by due course of law. It was suggested, in the same opinion, that “ perhaps there might be circumstances in which it would not be fraudulent to stipulate for greater delay; as where the debts are large, and the property conveyed large, and where also the personal exertions of the debtor are -relied on as one means of payment.”

We fully concur in tfie proposition established by the court in the above case, that a deed conveying property to secure an existing debt, on which an extension of time is given beyond the usual period necessary to collect the same by due course of law, is fraudulent as to existing creditors of the grantor; but we do not believe that good policy, or a fan construction of the statute of frauds, will justify a court in affixing to the general rule, the exception suggested by the court in the same case. The statute of frauds expressly declares all conveyances void, which are made with the intent to hinder, delay, or defraud creditors; and every mortgage or deed of trust, which extends a time of payment to the debtor, in renewal of an existing debt, beyond the period usually requisite to enforce a claim by due course of law, must necessarily have the effect of hindering or delaying creditors not embraced in the deed, in the collection of their debts, for the period of the extension so given; and as such is, and necessarily must be, the effect of such an instrument, the conclusion is irresistible, in our opinion, that such must be held primd facie to have been the intention of the debtor. The stipulation contained in this deed of trust, that the grantors should have five years’ time, within which to pay the debts thereby secured, therefore renders it fraudulent and void as to existing creditors.

But the deed of trust contains another stipulation equally, if not more fatal than the above, to wit: that the family expenses of the grantors shall be paid out of the product of the property conveyed by the deed of trust, before payment of any part of the debts. This court has held, in several cases, and the rule established by it is, in our opinion, sanctioned by every principle of morality and good policy; that any provision in a deed, which materially hinders and delays creditors in the assertion of their rights, especially when coupled with a reservation of any part of the property to the grantor in the deed, makes the whole void. 11 S. & M. 394; 4 Ib. 229. Tested by this rule, it is clear that this deed of trust is not valid as to creditors. A very large estate in land and slaves, and the annual .product thereof is conveyed, to secure debts already due and in judgment. The debtors stipulate by the deed that they shall have five years’ time within which to discharge the debts, and that, in the mean time, the expenses of their families, and this, too, to an indefinite extent, shall be defrayed from the proceeds of the property, before any portion of it shall be applied to extinguish the debts secured by the deed; and all other creditors must, during this long period of time, be hindered and delayed in the collection of their debts. The bare statement of the provisions of this deed, is sufficient to declare its character. If the courts of the country were to sustain its validity, it would be equivalent to a declaration, that by means of conveyances of this kind, debtors could lock up for an indefinite period of time, their entire property from the claims of creditors, and at the same time appropriate the proceeds of it to the maintenance and use of then families.

Let the decree of the chancellor be affirmed.

Case Details

Case Name: Henderson v. Downing

Court Name: Court of Appeals of Mississippi

Date Published: Apr 15, 1852

Citation: 24 Miss. 106

Court Abbreviation: Miss. Ct. App.