Justice v. Scott, 39 N.C. 108, 4 Ired. Eq. 108 (1845)

Dec. 1845 · Supreme Court of North Carolina

39 N.C. 108, 4 Ired. Eq. 108

JOHN R. JUSTICE vs. JOSHUA SCOTT & AL.

The probate of a deed of settlement upon a man’s family, before the Clerk of the County Court, as if it were an ordinary deed of trust, and its subsequent registration upon that probate, are void as against creditors and subsequent purchasers.

Where an action is brought at law for the recovery of negroes, conveyed by a deed in trust, which it is alleged was fraudulent in its inception, the defendant at law may avail himself of that objection in the suit at law, and cannot transfer the jurisdiction to a Court of Equity. He can only apply to the Court of Equity for a discovery of the facts, to be used in the suit at law.

But where a trustee, in a deed made nine years before, institutes an action at law, against a purchaser under execution against the maker of the deed, and the purchaser alleges that all the debts were paid and the whole trust resulted to the debtor; while the debtor, who united in himself the character of creditor, by administering upon the estate of one of the creditors secured in the deed, says, that a certain debt is not paid, and the trustee says he does not know whether it is or is not paid, a Court of Equity will entertain a bill by tho purchaser, as the most convenient and comprehensive mode of determining the rights of all the parties.

Where a bill is for relief upon the footing, that, as a trust, the subject is one of equitable cognizance, the injunction ought not to stay the trial at law, but only the suing out of an execution, should the plaintiff at law get a judgment.

The cases of Smith v. Castrix, 5 Ired. 518, and Henderson v. Hoke, 1 Dev. and Bat. 119, cited and approved.

Appeal from an -interlocutory order of the Court of Equity of Craven County, at the Fall Term, 1845, his Honor Judge Battle presiding, which order directed the dissolution of the injunction, theretofore obtained in the cause.

The case, as presented by the pleadings, was this :

On the 8th of April, 1834, the defendant, Bryan Jones, conveyed to the other defendant, Scott, sundry pieces of land, a stock of merchandize, and several slaves, including two, named llenry and John ; in trust to sell, and out of the proceeds of sale, pay a debt for $910, due from the grantor to his mother, Sarah Jones, and then to pay all the other debts of the grantor. It is admitted by all the parties, that every debt secured in the deed, except that to Sarah Jones, was paid soon after the execution of the deed. Sarah Jones died intestate in 1838 : and Bryan Jones, her son, administered on her estate. In 1843, the two slaves, 'Henry and John, were sold by the Sheriff upon writs of fieri facias on judgments then recently obtained against Bryan Jones, and the present plaintiff became the purchaser, having, as he says, no notice of the deed to Scott, and believing the title, as well as the possession, to be in Bryan Jones. Soon afterwards, an action at law was brought by Scott and Jones, in the name of the former, against Justice, for the negroes, which the latter defended, and the same is now pending. After-wards, Justice filed the present bill. It charges, first. that the deed of trust was in its inception fraudulent, having been made to secure debts that were not owing : and secondly, that, if the debts really existed at that time, they had been paid many years ago, and that Jones had used and enjoyed the property as his own — had sold some • of it, and particularly, that, in 1838, lie settled that part of it, which he had not before sold, on his wife and children, by conveying the same to a trustee for their use, including the two negroes before mentioned; and that the settlement was void, because it was voluntary, and made when the settler was insolvent. The bill further charges, that, on the 9th of January, 1843, being the day of the' sale at which the plaintiff purchased, Jones, at the instance of Scott, executed to the latter a declaration and release, under his hand and seal, in which he, in his own right, and as administrator of Sarah Jones, acknowledged that the debt to Sarah Jones, and all the others mentioned in the deed, were satisfied, and released and discharged Scott from all claims and actions in respect of the said trust and trust property. The prayer of the bill is, tliat the deed of trust may be declared to have been fraudulent and void, as against the execution creditors, and for an injunction against prosecuting the suit at law, and for general relief.

The defendants answered separately. They both state, that the debt to Sarah Jones was justly due at the date of the deed, and that the other debts had been paid by sales of parts of the property conveyed; and they aver, (hat the deed was not intended to defraud creditors, hut was executed to secure debts truly owing. The defendant, Scott, says, that he does not know whether the debt to Sarah Jones was ever paid or not, and he admits that Bryan Jones, after the death of his mother and of his wife, told him, Scott, that the debt was not due. He also admits, that Jones executed the release to him, as stated in the bill, and says that lie took it, “ because he thought he was entitled to it, and for his own protection.” He states that he, afterwards, allowed the action at law to be brought in his name, for the benefit of the children ol' Bryan Jones, who claim the beneficial property in the slaves, under the settlement made by their father in 1838, and that at that time, Bryan Jones, he believes, was clear of debt; and he denies that the suit is prosecuted for the 1 benefit of Bryan Jones himself. The defendant, Jones, further answers, that the debt to his mother was for money borrowed from her, and that it was raised by the sale of a tract of land by her, as executrix of her husband, John Jones, deceased; and that, by the will, the same belonged to the mother for her life, and then to such child or children as this defendant should leave. With the answer is exhibited a copy of the will of John Jones, audit appears thereby, that the testator appointed his wife executrix, and gave lier all his estate during her life ; and, at her death, he gave certain parts of his real and personal estates to John S. Morris, including therein a certain plantation in Craven County, in trust to permit the defendant, Bryan Jones, to enjoy and use the property, real and personal, and receive the rents and profits thereof during his life, and then in trust for such child or children of the said Bryan, as might be living at his death.. By a subsequent clause, the testator authorized his wife, if she deemed it expedient, to sell the plantation mentioned, and, with the proceeds, purchase other real or personal property, and, after the death of his wife, he gave the property so purchased to the said Morris, to be held upon the same trusts as the plantation was held on.

He further states, that after the death of his mother, to-wit, on the 20th of August, 1838, this defendant, at a time when he owed nothing, conveyed to John S. Morris the negroes Henry and John, and six others, in trust for the separate use of the defendant’s ■wife during the coverture,. and if she should survive, to be conveyed to the wife, upon the death of the defendant, with a power of appointment by deed or will to the wife, and in default of appointment to the child or children she might leave. The answer then states that, the wife did appoint by will to her children, and died, and that her will .was duly proved. With the answer is exhibited a copy of the settlement, made by the defendant to Morris; and it appears thereon to have been proved before the Clerk of the Craven County Court, September 3d, 1838, and to have been proved before a Judge of the Superior Court, June’20th, 1843.

This defendant further says, that the debt to his Mother was never in fact paid; but, considering that he had conveyed to a trustee all his estate for the benefit of his wife and children, and that to the latter belonged the money secured by his bond to his Mother, he destroyed his bond, without paying any part of the principal or interest due thereon. The answer thereupon insists, that the negroes and other property conveyed in the deed to Scott are properly applicable to the payment of that debt. The defendant says that his reason, for giving to Scott the release of January 9th, 1843, was merely to quiet his apprehensions of liability in consequence of the sale of the slaves that day to the present plaintiff; and that it was not meant as an abandonment of Scott’s right to the slaves, as trustee; and that, so far from it, both Scott and Jones gave notice of the title of the former openly, and forbad the sale by the Sheriff. The defendant denies that he has any interest in the property, and says that he has been discharged as a bankrupt.

Upon the filing of the bill, an injunction was granted as prayed for ; and upon the coming in of the answers, the defendant moved for its dissolution, and it was ordered pro forma accordingly, and the plaintiff appealed.

J. W. Bryan and J. H. Bryan, for the plaintiff.

Badger, for the defendants.

Ruffin, C. J.

The Court is of opinion, that the injunction ought not to have been dissolved, that is, not absolutely. The claim set up for the children of Jones under his settlement may be put out of the way at once. To say nothing of the prima facie fraud in it, as being a voluntary settlement upon his family by one, who, as he now says, was then indebted to his Mother’s estate, and so soon became indebted to others, and insolvent; and, as he says, bankrupt; yet the deed is void for want of due proof and registration. Smith v. Castrix, 5 Ired. 519. We collect from the answer of Scott, that it was in reference to this claim of the children he regarded himself as trustee for them ; considering that their father had assigned to them, or to Morris for them, his resulting trust, which was for the whole property after the debts were paid. If, then, the settlement by Jones be not effectual, the resulting trust is still in him, and that amounted to the whole beneficial property, as this defendant supposed, from the rep-' resentations of Jones, and from his formal release, that the debt to the mother was paid as well as all the others. It was consequently wrong- for Scott to set up his legal title, in opposition to the right of the plaintiff, derived by 3)is purchase, under execution against the sole cestui que trust of the property; for the plaintiff, by his purchase, stood, in this Court, in the place of Jones in his relation to Scott, and the latter is therefore endeavoring to recover the possession or the value of the negroes, from his own cestui que trust.

But it is said by the other defendant, that his children have another interest in this property. lie states that the money which his mother lent him, was, under their grand-father’s will, theirs after the grand-mother’s death; that in truth it has never been paid by him; and therefore he insists, that it ought now to be raised for their benefit. There are several answers to this claim. This is new matter, brought forward in the answer, in avoidance of the plaintiff’s equity, and not responsively to the bill, and in denial of the equity. Therefore, the injunction should have been kept up to the hearing. In the next place, the children have not the right to the money at present, but only the capital after the death of their father, who is entitled to the profits during life. But in the last placo, and chiefly, the children have no equity as against these negroes, unless it were to appear, that their father has not satisfied them, and is not able to satisfy them. Ho borrowed the money, and he settled on them six other negroes besides these two; and it is no where stated, that, unless they should receive that sum out of these negroes, they will lose it, inasmuch as they cannot get it in some other way from their father or their grand-mother’s estate. Prima facie, the declaration un-' der seal of the defendant, Jones, who-is administrator of his mother, the creditor, that the debt had been paid, discharges therefrom the trustee of the trust property. If the children have a right in the money, and an equitable lien on. this debt therefor, let them file their bill, and put the questions, upon which their title depends, directly in issue. They cannot bo brought forward in a •way, which will not enable the Court to investigate the whole case, upon which the merit of the claim depends.

Those supposed rights of the children being thus disposed of, there remains nothing to shew, that the whole equitable ownership of the property was not in Bryan Jones, and liable to execution under the act of 1812; unless it be, that his right passed to his assignees in bankruptcy. As to that, the answer states nothing^ but the fact, that, before it was put in, the defendant had been discharged as a bankrupt; but when that was, or Avhether these negroes were included, in the assignment, is not stated. So that no right appears in the assignees, even if it were competent for. this party to set up such a right for the assignees, instead of leaving it to them to do it. It is very clear, that the suit at law was not instituted for the benefit of the general creditors; but only to get the negroes for the debtor’s children.

It was, however, objected at the bar, that all the questions, arising upon the facts stated in the bill, were legal questions, properly triable in the suit at law ; and that the plaintiff could not transfer the jurisdiction to this Court, after a suit properly constituted for the trial of them at law. With respect to this point, it is to be observed, that the bill is framed with two sets of allegations, having a view to relief upon different, and, indeed, opposing grounds. There is not, it must be admitted, a clear discrimination made between them in.the bill, but much confusion in mingling together the facts, upon which the two grounds of relief, taken separately, depend. But we collect, that the bill was framed with the intention of trying here the question, whether the deed was or was not originally covinous, as a security for feigned debts, and deceptive to creditors; and also the further question, whether the debts secured by the deed — admitting it to be hsna fide — had not been paid, so as to vest the whole equitable right, as a resulting trust, in Bryan Jones. As to the first point, we think the objection sound. The bill alleges no defect of proof of any fact, on which the question of fraud depends. If it had, it would onl_y be matter for discovery, to be used on the trial at law, and not for relief. In its nature, the controversy, whether a deed by a debtor is fraudulent, as to his creditors, under the stat- ' ute of Elizabeth, is a legal one: though, in particular eases, it may be made the subject of a suit in equity. But here it was in a course of litigation at law ; and it is plain that it ought not to go on there, and one be carried on here at the same time, upon the very same subject. Then, upon what principle has the defendant at law a right to change the iorum, and say that he will have the matter tried by the Judge in the Court of Equity, and not by a Judge and Jury in a Court of Law 1 If, therefore, that were all the bill, the Court would not sustain il.

But, in the second aspect, the case, we think, is properly a subject of equitable jurisdiction. The case, that a trustee in a deed, made to secure creditors nine years before, instituted an action at law against a purchaser, under an execution against the maker of the deed, and the purchaser alleges, that all the debts were paid and the whole trust resulted to the debtor, while the debtor, who also unites in himself the character of creditor, by administering upon the estate of one of the creditors secured in the deed, says, that a certain debt’ is not paid, and the trustee says he does not know whether it is or is not paid. It is true, if all the debts were paid, that, under the Act of 1812, the sale by the Sheriff transferred to the purchaser both the trust and the estate of the trustee ; and that he might set up that title and defend himself at law. But that does not oust the jurisdiction of the Court of Equity over the trust, which it originally had, according to a well established principle. Resides, the relief in equity is more effectual, becau.se the investigation is more ■ complete, and the decree will conclude more persons than the judgment at law. Trusts often lie in confidence, and the party may not be able to shew' them at law, whereas, in equity, the parties may be made witnesses against themselves. It is plain, too, that a decree in this Court in a suit against the trustee, the debtor and the creditor, declaring the trusts, and such and such debts to have been paid, and the whole equitable ownership to be in the debtor, and oompelling the creditor to execute a release or acknowledge satisfaction, and the trustee and the debtor to execute conveyances of their several .interests and for perpetual injunctions, will obtain for the purchaser muniments of title, more plain and permanent, than a judgment in his favor, in a suit brought at law by the trustee for a detention or conversion of the slaves. After sucli a judgment at law, the purchaser might, perhaps, still be harassed by suits in Equity brought by some of the creditors. But, by raakiug proper parties to his bill, he can, by one suit, settle all controversies touching the equitable claims, as well as the legal title, to the property. Hence, in Henderson v. Hoke, 1 Dev. and Bat. Eq. 119, the Court sustained the bill, where the plaintiff claimed under execution sale against a cestui que trust. And it is remarkable, that there was an ejectment by Hoke against Henderson, 3 Dev. 12, for the same premises. It is true, that Henderson did not, upon the filing of his bill, pray an injunction against the trial at law; for there was, after the first judgment was reversed in this Court, a second trial at law, and an appeal to this Court, which was pending when the decree was made in tho suit in Equity brought by Henderson. But the bill was entertained, notwithstanding the action at law; and when the decree was made, it followed, of course, that the defendant in Equity •was restrained from further proceeding in the ejectment, and the appeal therein was never brought on. The case, therefore, is, in our opinion, a proper one for relief in this point of view.

But as the bill is for relief upon the footing, that, as a trust, the subject is one of equitable cognisance, the injunction ought not to have staid the trial at law, hut only the suing out execution, should the plaintiif at law get a judgment. The plaintiif has no right to delay the trial at law, until his cause shall have been heard here, and, perhaps, his bill dismissed, by which time the other party may not be able to prove his case at law, by the death or removal of witnesses, or the loss of documents. All the plaintiif can justhT ask is, that, as he has an undetermined equity, the plaintiff at law shall not proceed to cxc.cn.tiou. If the plaintiff means to rely altogether on -bis relief in equity, then he ought to let judgment go, inasmuch as his defence is on an equitable, and not on a legal title. But, as in this case, he, no doubt, insists that he has a good defence at law, as well as a good ground for his bill in equity, we do not see that he may not resist the recovery at law, if he can, or that the Court should require him to submit to a judgment. While, however, that is so, it would be an injury to the other side to stay the trial. It ought not to have been done before the answers, because the object of this suit was not to get answers to be used in the defence at law; and,-much more, the injunction to stay the trial ought not to be continued after the answers. If the plaintiff chooses to try at law, he ought to be at liberty to do so, as he will run the double risk of paying the ■costs; first, by having the judgment against him, and, secondly, by having a perpetual injunction against the judgment, If in his favor, should there finally be a decree against him here.

Therefore, the decree should he reversed, and the injunction modified so as to stay execution upon the judgment, if the plaintiff at law should obtain one. 'The Court cannot give costs to either party. The defendants are not entitled to costs, because they took a decree, which has been reversed. And the plaintiff ought not to have them, because his injunction was too extensive at first, and, chiefly, because the bill, instead of presenting simply the case on which the plaintiff’s equity arises, complicates a good and a bad case together. It will be sufficient to let the costs abide the result at the hearing.

Per Curiam.

Ordered to be certified accordingly.