| N.C. | Jun 5, 1838
On 20 February, 1834, Hoskins, by a deed of trust executed by himself and the defendant Mr. Jones, and not by any of the creditors thereby provided for, conveyed certain estates to Mr. Jones, and also assigned "all the debts due to him (Hoskins) now in the hands of Mr. Morrison for collection," upon trust to raise money therefrom to pay certain debts therein specified. At the time of executing this deed Hoskins delivered to Mr. Jones the receipt given by Morrison, and informed the trustee and creditors of the instructions he had given for the prior payment of the other debts, namely, $7,069.45 thereout, in the first place; and about that time Hoskins also wrote to Mr. Morrison, from Guilford County, *77 of the assignment he had made, and advised him that, after discharging the said debts to which the funds had been previously specially appropriated, it would be his duty to pay the surplus to Mr. Jones as trustee for the benefit of the other creditors. Soon after Hoskins (87) died insolvent. Lindsay administered on his estate and demanded the evidences of debt from Morrison, who refused to deliver them up, on the ground that he held them as a security for the creditors mentioned in the instructions of Hoskins to him, who looked to him for payment thereout, and also as an indemnity to himself against loss from his promise to those creditors to use diligence to collect the debts and pay them thereout as collected. Lindsay then forbade Morrison the use of his name to institute suits, but it was afterwards agreed between them that Morrison should proceed in the collection in the name of the administrator, and that the rights of the respective parties and creditors should be submitted to judicial determination. A considerable sum was accordingly collected, but not enough to discharge the debts of which Hoskins directed the payment by Morrison; and it was not expected that more would be collected, as the other debtors were supposed to be insolvent.
Mr. Jones sold the specific property conveyed to him, and accounted with the creditors mentioned in the deed, and paid over the whole proceeds in part of their demands.
The bill was filed by the creditors mentioned in the deed of 20 February, 1834, and by the administrator of Hoskins against Mr. Jones and the executors of Mr. Morrison for an account of the moneys collected by the latter, and prayed to have it declared that those moneys ought to be applied, in the first place, to the satisfaction of the creditors who are plaintiffs, and the surplus paid to Lindsay, the administrator of Hoskins. The plaintiffs are entitled certainly to a reference for the purpose of ascertaining the state of the funds in Morrison's hands, and of the debts to which they are applicable; and they must have it, if they choose to run the risk of the expense of it, should the inquiry turn out against them. With the view of ascertaining the utility of proceeding to take an account, the hearing was brought on upon the single question, Which set of the (88) creditors, those whom Mr. Morrison was to pay or those for whose benefit the assignment was made to Mr. Jones, are entitled to be first satisfied out of the funds in the hands of the former? This course was adopted, as it was understood by the court, because if that question be *78 decided in favor of the former class, all the fund that is available will be exhausted without satisfying them, and the plaintiffs would deem it useless to proceed further in the cause.
Upon the particular point discussed, the Court is clearly of opinion against the plaintiffs. Neither class of creditors nor their trustee have a legal assignment of the debts from Hoskins. Accounts cannot be so assigned, and bonds and notes can only be by endorsement. They both, then, claim by equitable assignments. Each of them is valid against the representative of Hoskins; and as between each other, the rule is that which is prior is preferable. It may, though, be at once remarked that as far as Mr. Morrison satisfied the specified debts by applying the funds to their payment, or by discharging Hoskins by taking up his notes and giving his own, before the execution of the deed to Mr. Jones and notice of it, the transaction stands upon sufficient grounds to support it, without reference to the doctrine of an equitable assignment to the creditors. It was an actual appropriation and payment of Hoskins money, by his direction and to his use. This includes the debt to Mr. Morrison himself, to Carson, and to any others in the like situation. With respect to the creditors who were not paid, the question is whether what passed between Hoskins, Morrison, and those creditors gives them a lien on this fund anterior to the assignment of 20 February, 1834. We think it undoubtedly does. The evidences of debt were deposited with the intention that they should be a security for those debts. If that were not sufficient until rejection by the creditors, yet when this deposit and the purpose of it were, upon the request of Hoskins, communicated to the creditors, and their acceptance of it was a security solicited, and they did accept it, we must hold it to amount to an assignment in this Court. All parties so intended and understood. The creditors (89) took no other means of collecting or securing their debts, but urged diligence on Mr. Morrison, and a speedy payment by him. Hoskins had every reason to be satisfied that it should be so regarded by them as well as himself. That he considered the fund thus far specially appropriated is clear from his communication to his other creditors at the time he made the deed of trust. If he could have countermanded his instructions to Morrison, viewing him simply as his own attorney and agent, it is certain that he did not intend to countermand them, and that he did not then look upon Morrison as his agent only, but as a person authorized to act on behalf of the creditors who had accepted, and to hold the fund for their benefit. The deed is expressed in the comprehensive terms, "all the debts in the hands of Morrison," because if they proved good, there would still be a considerable surplus, nearly $4,000. But he told them that he had given orders for the payment thereout of the other debts, and that they could only get the residue after the satisfaction of those debts; and to that effect he gave information to Mr. Morrison within a few days. It is not stated precisely when the several creditors acceded to the arrangement, but it must be presumed they had all done it prior to 20 February, because it appears they were written to early in January and returned answers, and in due course of mail all the answers could have been received before the expiration of January. Their assent, however, is to be assumed until the contrary is shown, which is not pretended. The deed of trust was, therefore, taken with express notice that it was the intention of Hoskins that the class of debts mentioned in the instructions to Morrison should be first paid; and if there were nothing else in the case but the instructions and this notice, it would postpone those claiming under the deed of February. It makes it an assignment of the balance after the payment of the other class of debts.
It must, therefore, be declared that the plaintiffs are not entitled to any part of the funds placed in the hands of Morrison until all the debts mentioned in the instructions to him shall have been first duly paid. If the plaintiffs do not proceed to draw up an order of reference within a reasonable time, say on or before 1 February next, the bill must then stand.
(90)
PER CURIAM. Dismissed, with costs.
Cited: Perry v. Bank,