Harrison v. Battle, 16 N.C. 537, 1 Dev. Eq. 537 (1830)

Dec. 1830 · Supreme Court of North Carolina

16 N.C. 537, 1 Dev. Eq. 537

William Harrison v. William H. Battle and Nathaniel Hunt et al.

From Franklin.

under the first section of the act of 1812 f Rev. s. SSO) subjecting trust estates to execution, only such estates as are held in tras for the Defendant in the execution solely, are within the operation of the act. As the Sheriff’s deed transfers the estate of both tilt trustee and cestui que trust, those cases where it is necessary for the purposes of the trust, tlut the trustee should retain the legal estate, are not within its operation. As in case of a conveyance to sell and pay debts, and then in trust for the bmgamu:, the os, tatt? of the trustee is not destroyed by an «.section sale of the interest of the cestui que trust.

But the interest of the bargainor, aficr payment of the debit, being in no respect distinguishable from an equity of redemption, m/.y bo , sold under the second section of the act.

That section subjects equities of redemption in land only, to ex-ecu tion sales. The name interest in chattels is lefi a« at common I n;., and can be subjected to the saíisí&etkm of an execution, only hi u Court of Equity.

before the passage of the act of 1812, a Court of Equity lent its aid to an execution creditor, to subject an equity of redemption subsisting in f-vor of the Defendant, to the satisfaction of the execution It will do so still, especially as the remedy is not so neT'cct at Law, us it can be made in this Court, by rscortahihig, before s> the amount of the debts charged upm* the land.

A creditor must establish his debt at Law, to entitle himself to the aid of a Court of Equity. But a return of nulla bona is unnecessary, where it appears that all the debtor’s property has been placed beyond the reach of final process.

Where lands and slaves were conveyed, in trust to pay debts, with a resulting trust in favor of the bargainor, and after its execution, the bargainor made further assignments of the resulting trust, to secure debts, and judgments were also recovered against him — held. that executions bound the resulting trust in the land from the. leste ; and if they overreached the assignments, had a priority ; and tliat as to the resulting trust in the slaves, it was bound in Equity in favor of the creditor who first filed his bill, without reference to the teste of his execution ; and that assignments made before the filing of the bill had a preference.

Creditors secured by the deed upon both land and slaves, are, in favor of the execution creditors, having a lien upon the resulting trust in the land, marshalled, so as to have their debts satisfied pro tanto by a sale of the slaves.

The Plaintiff alleged, that he was the surety of the ^Defendant Hunt, in a note for about g2,600, discounted aljthe Bank of Newbern $ that Hunt being in failing circumstances, the Plaintiff had procured an action to be brought by the bank, in which judgment was recovered by the Plaintiffs at Law, at September Term, 1828, of the County Court of Franklin. That pending the action, viz : on the 6th of September, 1828, the Defendant Hunt had conveyed to the Defendant Battle, all his property, which could be seized under an execution, in trust to pay certain debts due by him, Hunt, which were mentioned in.the deed — with a trust as to the residue, after paying those debts, to Hunt — that the property thus conveyed, was much more in value than the debts secured by the deed — that execution upon the judgment obtained by the Bank of Newbern, issued, which the Plaintiff procured to be levied upon the property thus conveyed, sub. ject to the claim of the Defendant, Battle, — and that if the Defendant, Battle, sold only so much of the property conveyed as was necessary to pay all the debts secured by the deed to him, that there would be a large surplus, amply sufficient to satisfy the execution in fa vox1 üí tbe bank ; but that the Defendant, Hunt, had given sundry orders upon the Defendant, Battle, for the surplus, over and above the sum due on the debts thus secured, and threatened to exhaust the same by similar orders, and that if the Defendant, Battle, should sell, in consequence of these orders, and pay over accordingly the wnole of the proceeds in his hands, there would be nothing from which the Plaintiff could be indemnified, against his liability as the surety of the Defendant, Hunt, who was insolvent.

The Plaintiff then averred, that lie had made the Bank of Newbcrn secure, in the ultímate satisfaction of their judgment, and had taken an assignment thereof-

The prayer was for an injunction, restraining the De® Cendant, Battle, from selling more of the property conveyed to him, than was necessary to satisfy the debts secured by the deed of trust, and that the residue in his hands might be subjected to the satisfaction of the execution in favor of the President and Directors of the Bank of Newborn, who were also made Defendants.

Tbe Defendant, Battle, in his answer, admitted the execution of the deed of trust to him, by the Defendant, Hunt — -that before the sale of any property under the deed, ami on the 23d of October, 1828, he received notice of an assignment of the residue in his bands, made by the Defendant., Hunt, on the 16th of that month, t© Thomas T„ Ilmscll and George W. Freeman, to secare them, as the sureties of Hunt, in two notes for $!00& and gSOO, held by the Bank of the United States ; That on the 1st of January, 1829, a similar assignment of the residue, after satisfying ilussdl and Freeman, was made by the Defendant, Hunt, to .secure Peter Arrington, in the sum of §1400, and on that day notice thereof was given to him, the Defendant Battle s And that also, oh the 12i.h of February, 3829. a similar assignment of 'he surplus, after satisfying Russell, Freeman and Arrington, was mad a by Hunt, in favor of James Hilliard, to severe the sum of 8424, notice of which was also given hint. That he, the D.fendant, not Relieving he bad power to sell under the deed of trust, made by Hunt to him had, (¡Dne ri0 whereby he in anyway sanctioned those assignments, and had jmerely acknowledged notice of them : That the personal effects of the Defendant, Hunt, had been sold, to the amount of g10,456, with which all the debts, secured by the deed of trust, had been paid, and that a valuable real estate, and several slaves, and other minor articles of personal estate, were yet unsold, the legal title of which was still in him. The Defendant disclaimed to hold any thing beneficially, and submitted to any decree which would indemnify him.

The Defendant, Hunt’s answer corresponded, in every respect, with that of the Defendant Battle.

The assignment of the judgment and execution, by the President and Directors of the Bank of Newbern, to the Plaintiff, was admitted by them, and not denied by the other Defendants. Mussell, Freeman, Arrington and Hil - liard were made Defendants, and by their answers, only set up the several assignments made to them, as stated in the answer of the Defendant, Battle.

By an order made in the cause, Battle was directed to sell all the property of the Defendant, Hunt, remaining unsold, aud hold the proceeds subject to the decision of the Court.

By another order, all the execution creditors of the Defendant, Hunt, were allowed to make themselves parties j and a number of them availing themselves of this liberty, a reference to the M ister was made, to ascertain the amount of their-judgments, and the time when executions issued upon them, together with the return thereof.

The cause was heard upon these facts, and the reports of the Master on the above reference, and of the commissioner Battle, as to the sale of the residue in his hands, after paying the debts secured by the deed of trust.

The cause was argued at December term, 1829, by Seawell, Gaston & Badger, for the Plaintiff j and by the Attorney General, for the assignees of the residuum: and at the last term, by the same gentlemen for the Plaintiffs, and by W. II. Haywood, for the assignees.

Cur. víjxt. An v.

Henderson, Chief-Justice.

— The, fieri facias of’ the Newbern Bank, to whose rights Harrison is substituted formed no lien, independent of our act of 1812, (Reo. c. 830) on Hunt’s interest in the property conveyed in trust to Battle, neither this property itself, nor the trust resulting to Hunt being the land, tenements, goods or chattels of Hunt, As therefore if could not be levied on, or sold by the common law', to satisfy the execution, no lien arose by its issuing, or what the Sheriff calls its levy,, For as the lien arises, or is created, as a mean to the end, it would be in vain for the law to raise it, when the end could not be attained. Nor is the trust in favor of Hunt one of that description, authorized to be taken in execution, under the first section of the act of 1812. The use or trust, there spoken of, is apure ami unmixed one,” for the doing execution under that section, to use its own terms, divests the estates both of the trustee and cestui que trust, and transfers them to the purchaser. In the present case therefore, if it operated, it would give both Hunt’s and Battle’s estates to the purchaser, under the fieri facias, and entirely disable Battle from performing the other trusts. In other words, Battle is not seised or possessed to the use of, or in trust for Hunt, but to the use of Hunt and others, whose interests are no ways united with Hunt’s, but are entirely of a different nature. This has been the construction, heretofore put upon the act, and it is believed to be the correct one.

But we believe, that so far as regards the land, Hunt’s interest may be sold under the second section of the act; for we cannot distinguish his right to have the lands again, after the payment of the debt, for which this stood as a security, from an equity of redemption. It has all the essentials of that right, although it wants some of its formal parts; it is conveyed to secure the payment of a debt; upon the payment of the debt, Hunt has a right to call for a reconveyance. Whilst in his possession, by the creditor’s consent, he is not accountable for the profits. This trust, to be sure, can be closed by a sale, without the intervention of a Court of Equity. The aid of this Court to foreclose an equity of redemption, is required only because the law will not trust the creditor to be both his own agent, and that of the debtor, whose rights it may be his interest to sacrifice. This trust is free from that objection, because the parties have agreed on their trustee. We cannot therefore distinguish this interest from an equity of redemption ; and its exemption from sale, under ajfieri facias, is equally an evil with the exemption of equities of redemption. The mischief is precisely the same, and we therefore think it within the spirit of the second section of the act of 18X2.

But that act affects equities of redemption in real estate only : “ lands, tenements, rents and hereditaments,” are its words. It extends not to trusts, arising out of personal estate. As to that, therefore, the execution formed no lien. We also think, that the execution creditor has the right of coming into this Court, to make the lien effectual as to the land. For although lie has a remedy at Taw under his execution, it is not an effectual one. If lie sells at Law, he must sell Hunt’s right of redemption only. Its value is unknown. It depends on how much of the debts are paid. This might be known to some, and unknown to others. Bidders, therefore, would stand on unequal grounds; and after a sale, a purchaser would have to come into this Court, to compel the trustee to settle the trust debts, and to receive them from him ; or to make a sale to raise them, and to pay him the overplus. A sale of property so situated would encourage speculation, that bane of steady and persevering industry and sound morality.

These are some of the reasons which induce the Court to lend its aid. I admit they impugn the policy of the second section of the act of 1812. But the jurisdiction of this Court is not ousted, because a remedy is given at Law, unless it be a plain one. The remedy here is more effectual, because this Court ascertains all the claims upon the thing, and sells the corpus itself. The purchaser gets what he purchased, no more and no less. He does not make his gain by another’s loss.

As to the trusts upon the personal estate, there is no remedy but in this Court; and that there is here, we en tertain no doubt. For do we not mean to consider tins a debt due from Battle to Hunt, even after sale, but as Hunt's property in his hands, which cannot be reached at Law. As to the property before the sale, there is no doubt; for it is an estate or interest in Equity, and so it is after sale. For Battle is not his debtor, but his trus tee. He holds the money as he held the property. When the question of a pure debt arises, it will be time enough to consider, whether it cannot now be readied to satisfy debts. As to the want of the return of nulla bona, to give a right to call in the aid of Court, it is deemed to he unnecessary. In this case clearly it is not required, as to those executions which attach on the real fund — , and we think that the want of it is supplied, as to all the judgments ; for the deed in question conveys the whole of 'Hunt’s property, which an execution could reach. But still the mere creditor must establish his demand by a judgment. As to the orders and assignments, they have a clear priority over ail executions on the personal fund, before such creditor by execution became a party to this bill; that is, orders and assignments have priority to mere judgment creditors, before they became parties Plaintiffs. But the teste of an execution, which over^reaches these assignments or orders? will hate priority over them, as regards the real estate. As to the other judgments competing with each other, they all stand on equal grounds, regardless of the time of their being ob-£ajned, or execution issued thereon. An alias or pluries execution regularly kept up, will as to trust estate in the land, relate back to the teste of the original.

The Master will make an additional report to the next Court, in which he will ascertain the net sum in the hands of the trustee, and will charge him with interest, if he has made interest, and may interrogate him on oath as to that point. He will allow him a commission of two and a half per cent, besides actual expenditures in relation to the trust, and in his attendance in this suit. He will distinguish between the proceeds of the real and personal estate ; the amount of debts paid under the trust deed, and charge them in the first instance to the personal fund. He will present a scheme for distribution, according to the principles of the foregoing opinion. Judgmentss which are partly satisfied out of the real estate, will come in for balances with other judgment creditors. To give thé directions in a few words, they are these : As to the real fund, executions bind from their teste — orders and assignments from their date on both funds— they are of equal dignity; priority of right of satisfaction being gained only by priority of date. Becoming a Plaintiff precludes voluntary transfers as to him. All judgments affecting the personal fund stand in equal degree. The costs are to be paid out of the fund. The funds are directed to be marshalled, in favor of those execution creditors, who had obtained a lien at Law upon the real fund, because the creditors under the trust deed have two funds at Law 5 they but one»