Green v. Crockett, 22 N.C. 390, 2 Dev. & Bat. Eq. 390 (1839)

Dec. 1839 · Supreme Court of North Carolina

22 N.C. 390, 2 Dev. & Bat. Eq. 390

THOMAS C. GREEN et al. vs. JOHN H. CROCKETT et al.

The sureties for the payment of the purchase money of land sold by the Clerk and Master, under a decree cf the Court of Equity, where the title is retained until the p urchase money shall be paid, have a right upon the insolvency of their principal, before the payment of the debt, to file their bill to restrain the conveyance of the land, and to have it applied to their relief, even though the principal has assigned his interest in it to another person without notice, for the purpose of discharging a debt bonafide due to him. '

The bill which was filed in November, 1837, charged that at the November Term, 1836, of the Court of Equity for the county of Caswell, it was decreed on the petition of the heirs at law of one Littleton Sledge, that a lot of land in the town of Milton, in said county, should be sold by the Clerk and Master of said Court, upon the terms therein stated, which was accordingly done, in December following, when the defendant, John H. Crockett, became the purchaser, at the price of $151, and therefor gave his bond, at six months, to the said Clerk and Master, with the plaintiffs as his sureties; that at-the time of executing said bond, the said Crockett agreed, upon the condition of the plaintiff’s becoming bound for him that if he failed to pay and discharge the bond, and the plaintiffs were compelled to pay it, the title to the said land, which was reserved until payment of the purchase money, should be made to them; that the said bond become due in June, 1837, and the said Crockett having failed in business, and not having paid it, a suit was brought thereon against all the obligors, and a judgment obtained, which must necessarily be paid by the plaintiffs, as the defendant Crockett was insolvent, and had no property on which an execution could be levied. The bill then charged that the said Crockett, upon his insolvency, made an assignment of his interest in the said lot of land to the defendant, George Farley, as trustee, to secure a debt due from him to the defendants George W. Johnson & Co.; and that the said Farley and G. W. Johnson, well knew, at the time of such assignment, that Crockett had never paid for said lot of land. The plaintiffs insisted in their bill, that, as they were sureties, they had a right, upon their paying the purchase money under the judgment aforesaid, to be substituted to the condition of the petitioners, who originally owned the lot of land aforesaid; and to have the title of the said land made to them, or that the land should be again sold to reimburse them.

The defendants Farley and G. W. Johnson, filed their answer in April, 1838, and therein admitted the sale of the lot of the land, the purchase thereof by Crockett, the surety-ship therefor of the plaintiff, and the insolvency of Crockett, as stated in the bill. They stated that they had understood that said purchase money had been paid by the plaintiffs — . admitted that upon the execution of the bond, for the purchase money, the title was retained until it should be paid, but denied that it was so done, upon any agreement between Crockett and the plaintiffs, as a condition of their becoming his sureties; and if it were so, they insisted that it was a matter between the said Crockett and his said sureties, which could in no way affect the defendants Farley and Johnson, who had no notice of it. The defendants, Farley and Johnson, farther denied any notice of the non-payment of the purchase money, for the said lot of land, previous to the execution of the deed in trust, made by the said Crockett to Farly, for the benefit of Johnson & Co.; and they insisted that the said deed was made to secure a debt really and bona fide owing from the said Crockett to the said Johnson & Co.; and that therefore the assignment of the said Crockett’s interest in the said lot to the said Farley, in trust, to secure the payment of the said debt, ought to be protected against the claim of the plaintiffs.

A replication was filed to the answer, and the parties proceeded to take testimony, which it is unnecessary to state, as it did not vary, materially, the facts admitted in the pleadings.

Upon the hearing of the cause, at Caswell, on the last circuit, his Honor Judge Bailey, pronounced a decree, which, after declaring the facts and the rights of the parties, proceeded as follows: “ Whereupon, it is ordered, adjudged and decreed by the court, that unless the defendants, Farley and Johnson, shall, on or before the 1st day of December next, pay to the plaintiffs the full amount of the purchase money, that the Clerk and Master of this court, shall convey the said land to the plaintiffs; but if they shall, within ^iat ^me> ma^e SLlc^ payment to the plaintiffs, together with all costs incurred by them, in that behalf, then, that the atl<^ Master shall convey the title of said land to the defendant Farley. The court doth further order, that the costs of this cause, to be taxed by the Clerk and Master of this court, shall be paid by the defendants — and that execution shall issue therefor.” From this decree, the defendants appealed.

W. A. Graham for the plaintiff.

Badger for the defendant.

Ruffin, Chief J ustice.

There is no dispute in the pleadings, as to any fact material to the equity urged on the part of the plaintiffs, and on which the decree is based; and upon the facts admitted and found, the decree is, in our judgment, certainly right in substance.

It is a rule which has ripened into a maxim of equity, that sureties are entitled to the benefit of every security which the creditor gets against the principal. So clear and strong is this title of sureties, that if the creditor gives up a security which if preserved, would have produced payment to the creditor, or indemnity to the surety, it has been held in many cases, that the creditor can no longer look to the surety, but the latter is discharged altogether, or pro tanto, according to the value of the surrendered security. Not to look further back, the recent cases of Cooper & Arrington v. Wilcox, Ante 90, and Nelson v. Williams, Ante 118, before ourselves, are instances of the application of this principle, and illustrate it. If this rule is not to be abrogated, the plaintiffs must be relieved, as asked by -them. This, it was admitted in the argument at the bar, is correct, if the creditor take a mortgage by way of further security. But the present was not deemed a security of that sort; but was likened to that security of a vendor for the purchase money, which has received the distinctive name of the vendor’s equitable lien; which is personal to the vendor, and of which the benefit cannot be imparted to any other person. The Court thinks otherwise entirely. The doctrine of the vendor’s equitable lieu arises only in a case in which the estate has been conveyed by the vendor. If he retain the legal title, or, after' conveying it, if he receive it back by way qf mortgage, he then has not a lien on the estate, but the estate itself; and the title thus withheld by the.vendor, is precisely analogous toa mortgage made to him. In each case, the legal title is in him; and m the view of a Court of Equity, he has it as a security for the sum due to him, which he is required, in good faith, to make to enure to the benefit of a surety for his debt, 7 J 7 as well as for his own benefit. The decree deemed by us right in its principle. is, therefore,

trine of the e‘ lie,9> ,ai'ises only in a case m •whieh ihe estate has the vendor, estate, or, veying it, ¡f jtVaok'by "N of he then has on' the"es-estatJ'jtsein and the title held by the p^eoiseiySa-naingous to made'tiPse

n°* «- sual now to decree the fosr™' is almost al-Eifiehure or other"of j¡,'es premises, foreclosure, when neither party oourMfor a sale<

As the principal debtor had become insolvent, the sureties, in respect of their liability, had a right, before paying the debt, to file their bill to restrain the conveyance of the land, and to have it applied to their relief. Williams v. Helme, 1 Dev. Eq. 151 — Bunting v. Ricks, Ante 130. But, it is admitted in the answer, that subsequently to filing the bill, the plaintiffs paid the debt, so as to entitle them to an immediate decree in the nature of one foreclosing a mortgage: such as was pronounced on the circuit. As has been remarked more than once by the Court, it is not usual now to decree a foreclosure simply; for it is almost always inore beneficial to the one or other of the parties to sell the premises; and, therefore, the Court, upon the application of either, directs an account of the debt, interest and costs, and a sale for their satisfaction. Fleming v. Sitton, 1 Dev. & Bat. Eq. 621. It is not erroneous, however, to decree a foreclosure, when party asks the Court for a sale; and it does not appear r ' . , . such an application was made in this case, ibhould either of the parties now desire it, the Court is quite willing that deeree should be so modified as to direct a re-sale of the premises by the Master, instead of a conveyance by him to the plaintiffs; and in that form it will be substantially an affirm-anee of the decree of his Honor.

This decree was also objected to as giving costs against the defendants, and particularly against Farley, the trustee for the other defendants, In the first place, the Court is not posed to review a decree upon the question of costs But, besides, we think this decree proper in that respect. The question is not respecting costs in a suit between the cestui que trust and his own trustee, acting in good iaith; in 1 r which case the trustee ought to be nothing out of pocket. But these costs are given to one claiming against both the trustee and the cestui que trust, who all deny the plaintiff’s right altogether. It is but the common case 'for costs to the prevailing; and the decree is in effect, that the cestui T-ie trust shall pay the costs, because the trustee will no doubt reimburse himself for those paid by him, by charging them in the accounts of the trust.

This court posed ci-ee, upon the qnes-alone.

Costs may be given a-trustee, as well as his trusts,sue ■when they claim adversely to the plaintiff, and deny his right altogether.

The decree is, therefore, affirmed in all respects, unless one 0f fog parties shall choose to vary it in the manner indicated; and the defendants must pay the costs in this Court also.

Per Curiam. Decree affirmed.