Hunt v. State Bank, 17 N.C. 60, 2 Dev. Eq. 60 (1831)

June 1831 · Supreme Court of North Carolina

17 N.C. 60, 2 Dev. Eq. 60

Nathaniel Hunt and William Harrison v. The State Bank, Marmaduke N. Jeffreys et al.

A bona fide purchaser from a trustee, holding' upon a personal confidence to sell the trust estate, receive the purchase money, and divide it among the cestuis que trust, is not bound to see to its application.

The bill, which was filed in 1821, alleged, that in, the year 1816, the plaintiffs, together with the defendant Jeffmjs, and several other persons, were sureties for one Buko W. Davis, to the State Bank and the Bank of Newbern, in different notes, amounting in all to the sum of g 10,000. That the plaintiffs and Jeffretjs, to secure themselves from loss on account of their liabilities for Davis, procured him to convey to one William Moore, a valuable tract oí land, in trust to sell the same, and apply the proceeds to the payment of the several debts, for which they were sureties. That Davis becoming insolvent, and making default in the payment of the debts thus secured, the trustee, in obedience to the directions of the plaintiffs and Jeffreys, in the year 1818, advertised the land, assured to him by Deris, for sale, when it was purchased by the defendant Jeffreys — *that no mo - ney was paid by Jeffreys upon this purchase; but that with the consent of the plaintiffs, Moore the trustee conveyed the legal title to him, the sale being merely a means of barring Davis’ equity — -that Jeffreys was to sell the land for the joint benefit of the sureties of Davis. That in the year 1820, Jeffreys being indebted to the State Eank on his own account, sold the land thus held by him in trust, to that bank, and the purchase money was, by agreement, applied to the payment of the last mentioned debts. That the arrangement between Jeffreys and the bank, was made by William Boylan, the president, and that he, Boylan, before the conclusion thereof, had no - tice of the trust, upon which Jeffreys hold the land— that Jeffreys, and the other sureties of Davis, had become insolvent, and that the plaintiffs had been compelled to pay the whole debt, for which they were bound with him for Davis.

The bill prayed a discovery from the president, Mr. Boylan, and specific relief by a sale of the land, and payment to the plaintiffs of the sums they had severally advanced, as sureties of Davis.

The President and Birectors of the State Bank, in their answer, denied the existence of any trust in favor of the plaintiffs, in the land purchased by them of Jef-freys, and insisted that they were purchasers for value, and without notice — they averred, that if Jeffreys held in trust for the plaintiffs, that they, the plaintiffs, had not only authorized him to sell, but had actually ratified, the sale made by him, and that they were not hound to See Pechase money was applied to the extiu-guishment of the claims of the jilaintiffs.

'^r‘ Boyhttb in his answer, stated, that believing several notes held by the State Bank, upon whid’n Jeffreys was an endorser, to be doubtful, he, in March, 1820, made a treaty With Jeffreys, ‘Whereby he purchased for the bank the land mentioned in the bill — that he gave for the land $ 5000, which was at least $ 1000 more than he would have given in cash, or undoubted securities— that when the contract of sale was made, he knew nothing of the title to the land, further than from information then" derived from Jeffreys, viz: that he, Jeffreys, had purchased it under a trust deed to William Moore, and he denied notice of any claim or interest of the plaintiffs in or to the land; or that Jeffreys, in any way, held it in trust for them.

The bill was taken pro confesso as to Jeffreys, and he was examined under an order to that effect. He deposed, that the plaintiffs and himself, together with several other persons, were sureties for Davis, to a large amount —that to secure themselves, -they procured a conveyance of all Davis’ estate, including the land in 'question, to William Moore — that at the sale by Moore, he purchased' that land, upon a verbal understanding and consent of the sureties of Davis, that lie should have the sole power of selling it, subject to an account with the sureties— that in addition to that land, he also sold to the State Bank his manor plantation for $ 6,288 — that upon ■ these two sales, he received sundry notes, including two notes of the plaintiff Hunt for $ 1328 and g 171, and one note of the plaintiff Harrison for g 393. That when he men-turned to Hunt the terms, upon which he had sold the land purchased of Moore, he, Hunt, expressed much satisfaction and delight — that afterwards, the persons interested in the sale met at his house, to settle the proportion of the purchase money, respectively due them, but that an altercation.ensued, and they separated without coming to any conclusion, and that then, for the first time, Hunt expressed his dissatisfaction with: the sale. Upon bis cross examination, lie stated, that while Mr, Boylan was at his bouse, when the treaty of sale, was concluded, he wrote the following letter to,., the plaintiff Hunt ':— “ I have a chance of selling the Davis tract of land at i£ $500.0 taken up.im bank. As there has been something said about it, I wish you to come,up immedi- “ ately. Mr. Boylan is at my house, ané will wait till I have a return*” That, Mr. Boylan did not, as ho, thought, know of the writing of that-, letter, hut was aware of Hunt’s claim on,the land.

The case was submitted without.- argument, by Sea- . well & Badger, for the plaintiffs, and by Hogg &. W. //.,. Haywood, for the defendants.

Halu, Judge,

after stating- the case as- above, pro-, reeded: From every circumstance connected " with this case I am led to believe, that Jeffreys bad authority, to sell the land, but was to apply the purchase money, foi* the benefit of the plaintiffs artd others, .interested .in, the deed of trust to Moore', and as,he was -authorized to sell the land, no distrust of his fidelity in accounting for .that purchase money was manifested at the time of the sale. The substance of the complaint then is, not that he sold ; the land, but that the plaintiffs have been. defrauded o&the purchase money; and the question arises whether the-bank is liable for the misconduct of Jeffreys, the trustee ? If there Avas any ground to believe, that there was any collusion or contrivance between the officers of the bank and the trustee, our decision Avould be different. The defendant, the president of the bank, denies that he had notice of any trust, on behalf of the plaintiffs; but. I cannot rest upon that. Jeffreys in his deposition, proves something very much like notice; . He is asked Avhether Boylan knew, that-the plaintiffs Hunt and Harrison had any interest in the sale of the land in controversy. He answers, that-he had, so far as regarded Hunt, And this corresponds with the note of Jeffreys to Hunt, that(i Boylan was at his house, and would wait till he had a return” to that note. But admitting that Boylan had notice, Avhat Avas it ? That Jeffreys had aw. thoriiy to sell-the land, and that there was a personal confidence reposed in him, that he would properly apply the proceeds of the sale, for the benefit of those interested in the deed of trust, executed by Davis to Moon. There was no trust or equitable lien upon the land in the deed from Moon to Jeffreys. Jeffreys held a clear title to the land. Butitwas admitted by all concerned, that the sureties had an interest in it. And if Boylan knew it also, how impossible it was for him to know of the particular advances made by each surety, and what particular part of the purchase money he was entitled to receive*. . It appears, that some debts were paid by the sale of the land, for which Jeffreys was personally responsible. But it also appears, that he sold for a great price, more than $ 6000, some of his own lands to the.bank; so that, independently of his own debts paid off by the sale of the two tracts of land, he received bonds and money to a considerable amount; perhaps enough to enable him 1;o do justice to the plaintiffs, if he had had no other resources. 'Bül he has not been called upon by process of law, as far as appears, to come to a settlement with the plaintiffs. And if the hank was even ultimately liable to the plaintiffs, for the purchase money, it would be iniquitous that they should be called upon to pay it twice, when Jeffreys, to whom they have once paid it, had not been called upon to account.

Abona fideyarí-dee, who has notice that there is a personal ■ confidence be.tween the'trustee and cestuis que trust, to sell and divide the purchase money, is’ not affected by equities subsisting between the latter.

And especially he,is not bound t'o notice the right of the ces-tuis que trust to portions of the purchase money where their amount is disputed.

I think, upon the whole view of the case, that as Jef-freys was trusted by those interested to sell the land, he was trusted to receive the proceeds of the sale; and that in the absence of collusion and fraud between liim and the bank, the latter is not liable. None has been proved. Full value was given by the bank for the land, and it does not even satisfactorily appear, that Jeffreys has misapplied the consideration, which the bank gave for the land. But I have not’ particularly adverted to that, as it is not now in contestation between the parties in this suit. I am of opinion that the bill be dismissed with costs.

Bek Cukiam. — Deckee accoKBijjrgut.-