Den on Dem. of Gowing v. Rich, 23 N.C. 553, 1 Ired. 553 (1841)

June 1841 · Supreme Court of North Carolina

23 N.C. 553, 1 Ired. 553

DEN ON DEM. OF RICHARD GOWING vs. JOSEPH RICH.

Where land was purchased by A. but the deed of conveyance was made to her daughter B., who became personally liable for a part of the consideration money, a creditor of A. cannot sell this land under an execution at law to satisfy ajudgment obtained by him against A. although the land was so conveyed expressly to protect it from the debts of A.

It cannot be so sold by virtue of the Statute of Frauds, Rev. St. c. 50, s. 1, because that only avoids conveyances made by the debtor himself.

Nor can it be sold under the Act of 1812, Rev. St. c. 45, s. 4, subjecting trust estates to execution, for that only applies to a case, in which the debtor, the cestui quetrusl, could immediately and unconditionally claim a conveyance of the legal estate from the trustee — not to one where the trustee needs the legal title to subserve the rights of himself or of third persons.

In the present case B., the grantee and trustee, before she could be compelled to part with the legal title, had a right to be compensated for the money she had paid or to be indemnified for the liability she had incurred in relation to the consideration of the purchase.

The remedy of the creditor was in equity, but on a different principle, and that is, the right in equity to follow the funds of the debtor.

The cases of Brown v. Graves, 4 Hawks 342; Gillis v. McKay, 4 Dev. 172; and Dobson v. Erwin, 1 Dev. & Bat. 569, cited and approved.

This was an action of ejectment, tried at Davie Superior Court of Law at Fall Term, 1840, before his Honor Judge Pearson.

Both parties claimed under one Sheeks. The defendant admitted himself in possession. The plaintiff offered in evide«ce a judgment in favor of one Alexander against one Chloe Oaks and others, an execution thereon and a sheriff’s Heed to himself, conveying all the interest of the said Chloe Oaks. The plaintiff then offered evidence to prove, that the said Chloe Oaks in the year 1836, while the suit of Alexander, which was for a debtot about $2500 was pending, had sold a negro and had sold her home place for $700, and had contracted verbally to buy the land in question of Sheeks for $1250; that, on the day agreed upon to execute the writings, Sheeks went to the house of Mrs. Oaks, when he was informed by Mrs. Hoskins, who was the daughter of Mrs. Oaks and the widow of one Hoskins, who had died a few years before insolvent, leaving his widow destitute and dependant upon her mother for support, that she was to buy the land and would pay for it and take the deed in her own name. Sheeks expressed himself willing to make the deed to whoever paid him the money, and, accordingly, with the knowledge and consent of Mrs. Oaks, he made the deed to Mrs. Hoskins and received from her g700 in cash, of which $600 was in one hundred dollar bills, and took Mrs. Hoskin’s note under seal for the balance, $550¶ Sheeks stated that he took Mrs. Hoskin’s note without security, because he was told and believed that the land was bound to him for the purchase money. The plaintiff then offered evidence to prove, that Mrs. Oaks had bought and paid for the land; that the $700 paid was her money, which she had handed to Mrs. Hoskins, with ' the understanding that the deed was to be taken in the name of Mrs, Hoskins to keep off the creditors of Mrs. Oaks; and that Mrs. Hoskins was to execute the note for the balance of the purchase money, but Mrs. Oaks was to pay it. The defendant offered evidence to shew that the $700 was the money of Mrs. Hoskins — that a few months after the deed was executed and after Mrs. Oaks and Mrs. Hoskins had taken possession of their new home, the land in question, he' had married Mrs. Hoskins, without notice of any implied trust in Mrs. Oaks, and had been compelled to pay the note of $550 executed by his wife. The plaintiff’s counsel insist* ed, that, if in fact Mrg. Oaks had bought the land and paid $700 of the price and agreed to pay the balance, and made use of Mrs. Hoskin’s name in the deed and in the note, as a cover to keep off creditors, then Mrs. Oaks had a trust estate^ which was subject to execution sale under the act of 1812. The defendant’s counsél insisted, 1st, that supposing the facts to be as contended for by the plaintiff’s counsel and ‘that Mrs. Oaks had an implied trust, the purchaser of of this trust under the act of 1812, did not acquire the legal title, but his remedy was in equity. 2dly, That the act of 1812 did not take within its operation an implied trust. 3dly, That the defendant, as husband, was a purchaser for valuable consideration, and, if he married without notice, he was not bound by the trust. 4thly, That, taking the facts to be as contended for by the plaintiff, yet if the jury were .satisfied that the defendant had married without notice of the understanding that Mrs. Oaks was to pay the $550 note, and had been compelled to pay the amount himself, then although Mrs. Oaks had a trust to the amount of $700, yet he also had a trust to the amount paid by him, and the case would not come within the operation of the act of 1812. 5thly, The defendant’s counsel insisted, as a matter of fact to the jury, that the land was bought and paid for by Mrs. Hoskins for her own use and out of her own money; and insisted that it made no difference how she obtained the money, whether by loan from Mrs. Oaks or from her other relations, or by secreting it out of her husband’s effects, provided it was not, at the time she paid it, the money of Mrs. Oaks.

The court charged that to entitle the plaintiff to recover, the jury must be satisfied that Mrs. Oaks had bought the land, and had, for the purpose of avoiding her creditors, resorted to the plan of handing the $700 to Mrs. Hoskins, and getting her to pay it over, and get the deed in her name and execute the note, with the understanding that Mrs. Oaks was to pay the amount of the note when due;, that if these .were the facts, then, although the legal title was vested in Mrs. Hoskins by the deed of Sheeks, still she held the land in trust for Mrs. Oaks, and this was such a trust as was liable to execution; and the plaintiff, as purchaser under the sheriff’s by virtue of the act of 1812, acquired not only the trust estate of Mrs. Oaks, but also the legal estate of Mrs. Hos-kins, and was entitled to recover in this action — that the position taken by the defendant’s counsel, that a husband, marrying without notice, was considered in the light of a purchaser for a valuable consideration, discharged of the trust, was not true; for the husband, taking by operation of law, stood in the place of the wife, and took no greater estate, and was bound by the trust, whether he had notice or not — . that so far as the $550 note was concerned, if it was a part of the understanding that the note was to be given in the name of Mrs. Hoskins, but Mrs. Oaks was to pay it, then, though the defendant, by marrying Mrs. Hoskins, made himself liable for the note, and had in fact been compelled to pay it; still his paying it would not alter the case, but would only place him in the situation of a security, who had paid money for Mrs. Oaks, without thereby acquiring a lien upon the land or any interest in the land. On the other hand, if the jury were not satisfied that the money was the money of Mrs. Oaks, but came to the conclusion that Mrs. Hoskins had procured it either by loan from Mrs. Oaks or in any other way; or, supposing the money was Mrs. Oaks’, if the jury were not satisfied that Mrs. Hoskins gave the note in her name with the understanding that Mrs. Oaks was to pay it, then the defendant would be entitled to a verdict; for if Mrs. Hoskins gave the note expecting to pay it herself, then the trust estate would be divided, and Mrs. Hoskins would hold the land in trust for Mrs. Oaks as to the $700, supposing that to have been her money, and in trust for herself as to the amount of the note, and thus would be presented the case of a mixed trust, which does not come within the operation of the act of 1812.

There was a verdict for the plaintiff; a motion for a new trial for error in the opinion of the court was discharged, and, judgment being thereupon rendered for the plaintiff, the defendant appealed.

Boyden for the plaintiff.

Caldwell and Winston for the defendant.

Ruffin, C. J.

In the instructions to the jury, the intentions of the parties and the true character of the transaction, upon which the deed was made to Hoskins, were fairly submitted to them. It must, therefore, be assumed, upon this verdict, that the contract of purchase was made by Oaks for her own benefit, that the sum paid, $700, was her money, and that she was to pay the residue of the purchase money, $550; and that she did not give her own note as a security therefor, but procured her daughter to give her note, with the understanding that Oaks should pay it; and that this was done with the view to conceal the interest of Oaks from her creditors and prevent them from seeking satisfaction of their debts out of the land. We are then to treat this .as a strong case of bad faith, in which clearly the daughter held upon a secret agreement and in confidence for the mother. In such a case, it would be a reproach to any system of jurisprudence, if it provided no means ot reaching the land or the interest of the mother in it, for the payment of her debts. We doubt not but her interest may be made liable for her debts; but the question is, whether it be so liable as to be the subject of sale under a fieri facias on a judgment at law, and whether the purchaser at such a sale gets the legal title ? Upon that question, after deliberation, we have come to a conclusion differing from the opinion held by his Honor.

Before the act of 1812, which made trust property subject to legal execution, such an interest as this certainly could not be reached at law. It was the constant practice, both'in England and this country, for a purchaser to take his conveyance to a trustee; and it was allowed, though such conveyance defeated dower, and prevented the redress of creditors at law, and obliged them to sue in a Court of Equity. The act of 1812 altered and corrected that, in cases, in which a person is seized simply and purely for the debtor, without any beneficial interest in the party having the legal title or in any other person except the debtor in execution. Brown v. Graves, 4 Hawks, 342. Gillis v. McKay, 4 Dev. 172. The reason for thus confining the operation of the act is, that it divests the whole legal estate of the trustee, and, therefore, can only extend to a case, in which the trustee does not; nee¿ that title to subserve the rights of himself or third persous. The act embraces, therefore, onlv the case in r . .1 which the debtor an execution might.call upon the trustee for a conveyance of the legal estate, or, at the least, if there were several equitable joint-tenants for a conveyance of such part of the legal estate, as would be commensurate with his equitable right. The act in no case, gives to the creditor of the cestui que trust an interest or power over the estate, legal or equitable, greater than that to which the cestui que trust may be entitled. The purchaser holds the land exactly as the debtor held the trust. The act does not, therefore, at all proceed on the idea of a fraud in the creation of the trust; or provide that, by reasoii thereof, the trustee shall be dedeprived of any. interest in himself, derived by the same conveyance. But it is founded on the fact that the debtor, being entitled to the trust, is, in equity and in substance, the owner of the land, and therefore, that it ought to be liable to be sold for his debts. The interest of the debtor, as cestui que trust, is the subject of sale and the purchaser can get no more. He therefore is to stand precisely in the shoes of the debtor, except that the debtor would have been obliged to apply to the chancellor to obtain the legal title; whereas the purchaser gets that also by the sheriff’s deed. The question then is, whether, as between the debtor in execution and the person having the legal title, the former could, in the state of the dealings between them, call for an immediate conveyance from the latter? Now we are clearly of opinion, that the daughter would not have been compelled to convey to the mother, without first being discharged from her note, given for a part of the purchase money, or, after the money was paid, without its being repaid. If Oaks had given her note and Hoskins had executed it as her surety, the latter would have been entitled to retain the legal title, as a security in the nature of a mortgage. This is the same case in substance. Hoskins gaye her note for Oaks’ debt, and the latter agreed, as she ought, to pay it. But site did not, and the former paid it; and, being for the purchase money of this very land, the title could not be taken from her, without making her whole. As between these parties, that 'cannot be denied. But it is contended, the bad faith towards the mother’s creditors is an ingredient in the case, which re-* pelsytll claim of the daughter upon the land, as against the creditors, and gives them a higher right than-the mother* Not, we think, under this act of 1812. We have already-endeavored to shew, that the remedy given by it does not stand on the footing of fraud. But another view will render this still clearer. It there was an intention to defraud creditors, then it is asettled principle, that equity will help neither’ party to such a contract; and, consequently, the mother could not have had a decree against the daughter for a conveyance, nor could the creditor of the mother, that is to say, by way of insisting on such a trust and asking its execution,since that would be to affirm and enforce a fraudulent intent* The remedy of the creditor' is founded on a different principle, which is, the right in equity to follow the funds of the' debtor. Dobson v. Erwin, 1 Dev. & Bat. 569. When the estate was once in the debtor and has been conveyed by him in trust for himself, the redress- of the creditor is plain at law upon either of two grounds. He may sell the trust, and that will, under the act of 1812, carry the legal estate; or he may treat the conveyance as fraudulent and null cib initio under the act of 13th Eliz. (Rev. St.c.50, s. 1,) and therefore as leaving the legal title in the debtor. But this last is invoking another statute which isnot applicable to a case like that before us; which is not of a conveyance by a debtor of land before owned by her, but that of a purchase by the debtor and a conveyance to a trustee for her-. That the statute of Eliz. does not apply, to the case of a purchase by the debtor' is clear from the consideration, that it operates entirely by making void the assurances within its purview. In this’ case, that would leave the title in Sheeks, the vendor, which would not serve the plaintiff’s purpose. As has been" already mentioned, however, before the statute 29th Charles 2nd,, from which our act of 1812 is taken, purchases were daily made in England in the name of trustees; and, though equity found means of paying out of the estate the debts of the’ person, who, in the view of that court, was the owner, yet the purchase and conveyance to the trustee were never deemed within the statute of Elizabeth, so as to subiect theland to a legal judgment and execution. That was the cause of passing the acts to operate at law on the trusts, qua trusts. And they have never been construed to give more to the creditor than the debtor could equitably claim, nor to apply to a case in which the debtor could not, immediately and unconditionally claim a conveyance of the legal estate. As Oaks could hot, in this case, have done that, but must have indemnified Hoskins or her husband for the money paid as her surety, in part of thejuirchase money, the case is not within the act of 1812, and the land was not subject tó be sold under execution.

Pee Curiam, Judgment reversed and venire de novo awarded.