41 N.C. 463 | N.C. | 1849
The defendant became bound as surety for Edward Pittman for several debts to different persons; as also did one Alexander for some of them jointly with the defendant; and the plaintiff became also his surety in a note for about $400. Becoming insolvent, Pittman, on 15 November, 1842, conveyed to the defendant, by deed of bargain and sale, expressed to be in consideration of $10 paid, certain land, slaves, and other chattels — being all his property. The deed recites the several debts, and *325 that Alexander, the plaintiff, and the defendant were respectively sureties as above mentioned, and that Pittman was "desirous of securing the above named Kirkpatrick and the other sureties by conveying his property aforesaid to the said Kirkpatrick as trustee upon the following trusts," namely, that on Pittman's failure to pay the whole specified debts by 1 January, 1843, Kirkpatrick should sell the land and other property or such part as should be necessary for that purpose, and out of the proceeds "satisfy the above debts, or whatever may remain unpaid, and return the balance to the said Pittman or his (464) assigns." The defendant accepted the deed, and the next year sold all the property and applied the proceeds to the debts for which he and Alexander were, or he alone was, bound. Afterwards the plaintiff was obliged by execution to pay the debt for which he was the surety; and then he filed this bill, praying an account of the trust property and that he may be paid in full or pro rata.
The answer of Kirkpatrick states that he prepared the deed and that Pittman executed it at his instance and in his presence; that when he was drawing it and had enumerated the debts for which he was liable alone or with Alexander, Pittman mentioned the debt for which the plaintiff was bound for him, and proposed to insert it in the deed also, saying that he was desirous to indemnify all his sureties in preference to paying debts to other persons. That the defendant objected to the proposal, but that Pittman assured him the property was sufficient to pay all those debts, and said that his object in including the plaintiff was that, after the other specified debts should be satisfied, the surplus should go to the indemnity or satisfaction of the plaintiff; and that upon that representation and understanding the defendant consented that the plaintiff should be included, and the deed was executed in its present form without the knowledge of the plaintiff. The answer then admits the sale of all the property, and sets forth an account of the proceeds and of the debts, from which a balance of nearly $1,000 appears to be due on the debts for which the defendant was bound, after applying the whole proceeds to them and excluding the debt to the plaintiff.
The defendant examined Pittman, and he stated that he intended to indemnify the defendant fully, and that he thought he was doing so by giving the deed of trust, as he believed the property was sufficient to pay all the debts mentioned in the deed, and it would have been (465) had not several of the negroes been sold on executions upon judgments which at the time he did not suppose to have been rendered. He stated also that he did not wish or intend any preference between his sureties; but that he and the defendant both thought that the latter, having the funds in his own hands, might apply it so as to save himself, and that the deed was executed under that belief or understanding. *326
It is not deemed material to notice any difference between the statements of the defendant and the witness. There is but little doubt that both of the parties to the deed have been disappointed in the result. But as the deed expressly puts the plaintiff and the defendant on the same footing, it is clear that if it be binding as a contract it cannot be varied upon evidence in the manner urged by the defendant. It is said, however, that conveyances of this kind are of a peculiar nature, and that the grantor can direct a different appropriation of the effects from that prescribed in the instrument; and, indeed, as the plaintiff did not execute the deed nor was privy thereto, that he cannot claim (466) the benefit of it. In Wallwyn v. Coutts, 3 Mer., 707, there is a very short note of a decision of Lord Eldon, on the authority of which other judges have proceeded to lay down a doctrine to the extent stated, which is a very remarkable instance of important legal principles being deduced from a very inadequate source. As the case is there reported, two noblemen conveyed land to trustees upon a trust for the payment of specified debts, without an agreement of any creditor, and without any consideration moving from any one of them. Upon a bill by a creditor for relief under the deed, Lord Eldon refused a motion for an injunction against a misapplication of the fund, saying only, as reported, "that the trust being voluntary, the court could not enforce it against the duke and marquis, who might vary it as they pleased." The report is very unsatisfactory, not stating the provisions of the deed particularly, and the reason assigned is so clearly erroneous that there can be little doubt that it does not correctly state that which did influence Lord Eldon, whatever it might be; for, there being an executed conveyance, which passed the legal estate to the trustees, it was altogether immaterial whether the trusts were voluntary or not. The trustees would be bound to perform the trusts, though voluntary, because they took the estate on those express trusts, and, therefore, could neither keep the estate nor convey it to another exonerated of the trust. It was so held by Lord Thurlow in Coleman v. Sorrell, 1 Ves., Jr., 50, and expressly laid down by Lord Eldon himself, a few years before, in Ellison v. Ellison, 6 Ves., 656. In distinguishing between the rights of different volunteers to call for the execution of trusts, he said, if one needs the assistance of the court of equity to constitute him a cestui que trust, he cannot have it if the instrument be voluntary, as upon covenant to convey; but if there be a legal conveyance effectually made, though it be voluntary, the equitable interest, will be enforced; for, he adds, (467) where an actual transfer is made, that constitutes the relation of trustee *327
and cestui que trust, though without a good or meritorious consideration, and voluntary. The distinction seems to be perfectly sound. Indeed, it only applies a principle which was before familiar at law in respect to the creation of uses with and without a consideration: it being held, as explained by Mr. Hargrave, that in conveyances under the statute of uses a consideration is necessary, because they are in truth bargains or covenants, which will not raise a use, if voluntary, to which the statute can transfer the legal estate; but that, in those at common law, as a fine or feoffment, a consideration is not necessary, because they operate by transmutation of possession to pass the land itself from the grantor without interposition of equity, and the grantee, thus receiving it coupled with a use, must hold it to that use, whether voluntary or not; and then the statute would transfer the possession to the use. It would be against conscience for the feoffee to keep the estate for himself, and there could be no use resulting to the grantor, because the deed disposed of it to another. Therefore the use must belong to him, whoever he may be, for whom it was declared. The principle is that uses and trusts annexed to a perfect conveyance of the legal estate will be sustained, but that a trust will not be raised against the owner of the legal estate upon an agreement with him, unless there be a valuable or good consideration. Now, in Wallwyn v. Coutts, supra, it is assumed that the deed was effectual at law. Whether as a feoffment or as a bargain and sale, expressing a consideration as passing from the trustee, or as a lease and release, is not material. The legal title was vested in the trustees, and it followed from the rule of the common law as to uses, and from the consequent doctrine of equity as to trusts, that any trusts coupled with the estate in the conveyance, or declared by the trustees, ought to be executed, though gratuitous; and it is not seen how trusts for (468) creditors, supposing creditors who are not parties to the deed to be but volunteers, can be distinguished from trusts for children or others not founded on a valuable consideration. It is most questionable, therefore, whether the report correctly attributes that as a reason of LordEldon's judgment. That it is erroneous in that respect is the more probable, since subsequent judges, who approved of the decision, have undertaken to assign for it other and very different reasons. It has been said that the true ground of the decision was not that a cestui que trust, under a voluntary conveyance, had not the right against the grantor, but that, in the view of the Court, the relation of trustee and cestui quetrust never existed between the trustee and creditors, but that the grantor was himself the only cestui que trust; and that what is said in the deed about paying debts is not for the benefit of the creditors, but the grantor's own convenience, and hence he had a right subsequently to direct the application of it, as his own trust fund. Garrard v. Louderdale, 3 Sim., 1, *328
and upon appeal, 2 Russ. and Mylne, 451; Bill v. Cureton, 2 Mylne and Keene, 511. In the opinion given by Sir Launcelot Chadwell in the former case, he states the provisions of the deeds in Wallwyn v.Coutts, and, as the report of it in Merivale is so defective, 3 Sim., 14, sets forth the bill and the several deeds particularly, and the order made by Lord Eldon. It appears thereby that the estates conveyed belonged to the Duke of Marlboro, and that, after reciting that the duke's son, the Marquis of Blanford, had granted certain annuities, and that the duke was desirous of relieving him from the payment of them and also to make provision for his son, he, the duke, in consideration of natural love and effection for his son, etc., conveyed to the trustees in fee certain lands upon trust to raise money sufficient to repurchase the annuities granted by the son, and then in trust, if (469) the trustees should think proper, to raise any further sum which they might decree expedient, to pay debts then due from the marquis, that the trustees should consider advisable to be paid; and for the purpose of raising such sums it was declared that the trustees should, at such times as to them should seem proper, sell the lands; and that they should in the meantime mortgage any part of them, and stand possessed of the money raised thereby upon trusts to pay off the annuities, and then upon trust, if the trustees should think proper, but not otherwise, and at the request of the marquis, to pay such of his debts as they should consider advisable to be paid; and upon the further trust to pay to the duke any surplus money raised in his lifetime, and to pay any surplus raised after his death to the marquis; and, subject thereto, the trustees were to stand seized in trust for the duke for his life, and then for the marquis in fee. By subsequent deeds between the same parties and reciting the first and certain acts done under it, other trusts were declared. One of the annuitants filed a bill, on behalf of himself and others, praying that the fund should not be applied to the purposes of the substituted trusts until the annuitants specified in the first deed were satisfied; and Lord Eldon refused and injunction. But the one case came before that great chancellor which called for his opinion on this point, and therefore it cannot be said positively whether he meant to confine what he did to the particular terms of that deed and circumstances of that case, or proceeded on the general principle which has been since laid down on the authority of the decision. But it would seem from the incongruity of such a principle with his judgment in Ellison v. Ellison, 6 Ves., 656, that he must have gone on the peculiar facts of that case. It is apparent that the position rests upon a supposed intention of the grantor to make a conveyance for his own convenience or pleasure, because not executed at the instance or with the concurrence of a (470) creditor; and it was then considered that, the thing being done *329
in that way, and to that intent, creditors cannot claim benefit under it or interfere with the grantor's arrangements. Now, it may be said upon that deed, though with some scruples, that it owed its existence to an intention of that sort. The estate belonged to the father, while the debts were those of the son, and the father reserved to himself a life estate, subject only to the discretion of his trustees to raise a fund by sale or mortgage for the payment of the debts when and if they thought it proper and advisable. It is manifest, then, that there was no consideration to support the deed against purchasers from the father, or his creditors, because it was thought voluntary in every sense of the term. There was then color for regarding the transaction as an appointment by noblemen of persons to act in the name of trustees, stewards in fact and attorneys in the management and sale of large estates, under their control, indeed, but without troubling the owners about them until they should choose to recall the appointment or make other dispositions of the estates, and in the course of such management to pay such debts as the grantors, or the trustees, might prefer. It is to be observed that there is nothing on the face of the deed or in the case to raise a suspicion that the debts were not perfectly secure to the creditors, independent of the deed. The father does not say he was desirous of securing the payment of his own debts, nor even those of his son, with any reference to the interest of the creditors; but, on the contrary, the motive for the deed was the father's desire to relieve his son from paying his debts, to promote the son's convenience and happiness merely, apart from the claims of his creditors. Viewed in that light and with an understanding, founded on experience and observation, of the probable purposes of persons of such fortune and rank as the parties to that deed, much more perfect than can be formed here, it is very possible that (471)Lord Eldon was correct in not considering the deed to have been intended to vest rights in the son's creditors, independent of the continuing pleasure of the father and son — if, indeed, such was the reason that actuated him. But it seems impossible to infer such an intention, when an insolvent person, or one greatly embarrassed, assigns his estate expressly as an immediate security for particular debts or for his debts generally, and this is the means, through sales by the trustees positively prescribed, of paying the debts as far as the effects will suffice; for the inference is directly against the express declaration of the deed. Such a grantor plainly makes the deed, not to promote his own convenience, merely or chiefly, but to discharge a duty of conscience by making a positive provision for the payment of his debts in convenient time, a far as he is able; and it cannot be presumed that he did not, from the beginning, intend a benefit to the creditors. To what end shall a debtor retain a subsequent control over the property? To allow him to have *330
it by virtue of a doctrine of equity is substantially to insert in the deed a general power of revocation and appointment, the effect of which would be to render it void against other creditors. Farback v. Masbury, 2 Vern., 510; Cannon v. Peebles,
In Langton v. Tracy, 2 Ch., 30, the trust was for payment of debts generally, naming no creditor, and the deed made voluntarily. It was argued that for those reasons it was revocable by the grantor; but Lord KeeperBridgman, assisted by the judges, held clearly that the debts were a just and honest consideration, and the creditors might, as cestuis que trustent, compel the execution.
In Leach v. Leach, Chan. Cases, 249, it was held again, first, that a trust created by deed is supported by that consideration, and, secondly, that a trust for payment of debts generally is good against the heir, though no creditor be a party to the deed. This last consideration, that is, the operation of such a deed after the death of the maker, is very material in determining its proper construction from the beginning; for it can hardly be supposed that the grantor intended that his heir might frustrate his settlement; and yet, if the power of revocation be impliedly in the ancestor, it must extend to the heir.
There is also the still later case of Small v. Ondley, 2 P. Wms., 427, when an assignment by an insolvent to a creditor to secure his debt was held good against assignees in bankruptcy, although the deed was *331 made without the privity of the creditor. There are, moreover, (473) many instances in which assignments for payments of debts have been sustained against purchasers and other creditors, as founded on a valuable consideration, and, therefore, not fraudulent, though the secured creditors were not privy to the deed. Stephenson v. Haywood, Finch, 310;Marbury v. Brooks, 7 Wheat., 556. Now, that cannot be if the creditors cannot enforce the trust, but is with the debtor to allow or forbid its execution; for it would be strange, indeed, if a creditor could not bring an estate to sale under his execution which the defendant in the execution could control through his trustee, especially since the statutes authorizing executions to be done on trusts. It may be a circumstance on which a judgment creditor may the more readily impeach an assignment as fraudulent, when it is made of the debtor's own accord and without the knowledge of the creditors whom it purports to secure. But that does not concern the question between those creditors and the grantor and trustee. As between them, the terms of the deed being plain, its purpose as a security for a true debt being perfectly just, and the efficacy of the deed as a security for the debt being indispensable to its honesty and validity to any purpose, the equity and necessity of holding the trust for the creditors obligatory seem to be almost above question; and one is led almost irresistibly to think that Lord Eldon meant to confine himself, inWallwyn v. Coutts, 3 Mer., 707, to the particular circumstances of that case, and not to lay down a general proposition, that unless the creditors are privy to a conveyance upon trust to pay debts, they are but volunteers, and for that reason they cannot as cestuis que trustent enforce the trust. It must be admitted, however, that whether he intended to be so understood or not, there have been so many other cases professing to go on his authority, in which the judges have laid that down as a general principle, that probably it is to be considered now the settled rule in England.
But whatever the courts in that country may think themselves (474) bound to hold on this point, it is certain, as was said in Walker v.Crowder,
In Nicholl v. Mumford, 4 Johns. C. C., 522, Chancellor Kent laid it down that if an assignment be to trustees for the payment of debts and the legal estate vests in the trustees, chancery will compel the execution of the trusts for the benefit of the creditors, though they be not parties, nor at the time assenting to the conveyance. He had before held to the same purpose in Shepherd v. McEvers, 4 Johns. C. C., 136, and Moses v.Murgatroyd, 1 Johns. C. C., 129.
In the case of Halsey v. Whitney, 4 Mason, 206, Mr. Justice Story stated the doctrine thus: As to trusts created for the benefit of creditors, and to which they are not, technically speaking, parties, they are unquestionably valid if the deed be made bona fide and pass (475) the legal estate to the trustees; for it can be no question whether it is for a valuable consideration or not, because the debts due to the creditors constitute a valuable consideration in the highest sense, and the obligation of the trustee to perform the trust according to the provisions of the deed is a sufficient consideration as far as he is concerned.
Similar views were taken of this matter, as supporting, against an attachment, an assignment voluntarily made by a debtor to a trustee of his own selection, in trust for creditors without their privity, by ChiefJustice Marshall in Marbury v. Brooks, 7 Wheat., 556, and yet more fully in the same case, when it came before the Supreme Court a second time, 11 Wheat., 78. He said that deeds of trust are often made for the benefit of persons who are absent, and even for those not in being. Whether they be for the payment of money or for any other purpose, no expression of the assent of the persons for whose benefit they were made has ever been required as a preliminary to the vesting of the legal estate; and such trusts have always been executed on the idea that the deed was complete when executed by the parties to it. He then proceeds to consider how the creditors not being privy to the execution may be evidence of fraud, and how that presumption may be repelled. But, if bona fide, the deed is obligatory throughout.
In each of the cases at law it is evidently assumed that the creditor could, as cestui que trust, enforce the trust according to the terms of the deed; and neither of those distinguished judges conceived it competent to the debtor and trustee to defeat the trust to any extent. In truth, they plainly hold the contrary, since they put the validity of the deed, in point of bona or mala fides and of the sufficiency of the consideration, upon the ground that by its execution the deed became complete and *333 secured a benefit to the creditors. In the cases in New York the trusts were actually enforced in chancery at the suit of the creditors. There are other most respectable adjudications in equity to the (476) same purpose.
In Ward v. Lewis, 4 Pick., 518, an insolvent debtor made an assignment to trustees to pay debts in a certain order, which the trustees accepted. Afterwards the debtor and some of the creditors compounded upon other terms, and the trustees applied the effects according to the new agreement. Yet it was held that a creditor secured in the first deed, though not privy to its execution, had a right to affirm the trusts; and he had a decree for his debt against the trustees who had received and misapplied the fund. Two years afterwards, under circumstances not at all favorable to the creditor, and although Wallwyn v. Coutts was cited, the Court gave a second decision to the same effect, in a suit upon the same instrument. Bank v. Lewis, 8 Pick., 113.
In this State no question has been made on the point before the present case, as far as recollected; and there have been but few occasions on which an observation has been made concerning it.
In Walker v. Crowder, supra, the remark was made which has been already quoted; and in Moore v. Collins,
Upon the whole, therefore, the Court holds, upon the intrinsic soundness of the principle, the prevalent impression in the profession, and the course of the adjudications in the United States, that the relation of trustee and cestui que trust is constituted by the execution of such a deed in favor of a creditor assenting at the time, or in a reasonable time afterwards, and, indeed, that such assent is to be presumed unless the contrary be shown. Consequently, the trustee cannot, with or without the direction of the grantor, apply the fund to any other purpose until the trusts of the deed are satisfied; and therefore the plaintiff is entitled to the account and to have his proportion of the fund, if (477) there be not enough to pay him in full.
PER CURIAM. Decree accordingly.
Cited: Smith v. Turrentine,
