Smith v. Smith, 40 N.C. 34, 5 Ired. Eq. 34 (1847)

Dec. 1847 · Supreme Court of North Carolina

40 N.C. 34, 5 Ired. Eq. 34

WILLIAM SMITH vs. STEPHEN SMITH & AL.

For any sum, which a surety for the price of land, purchased by ano. ther, has paid or is liable to pay on that account, he has an equity to be ro-imbursed or exonerated by a sale of the land; and to that end, he has a right to file his bill to prevent a conveyance to the purchaser by the vendor, who has kept the title, as a security for the purchase money.

The cases of Green v. Crockett, 2 Dev. & Bat. Eq. 390, and Polk v. Gallant, Id. 395, cited and approved.

Cause removed by consent of parties from the Court of Equity of Rockingham County, at the Spring Term, 1847.

The defendants, Stephen Smith and. David Smith, are the sons of the plaintiff, William Smith, and the former, Stephen, is the son-in-law of the defendant, Andrew Martin, the elder. In October, 1843, Andrew Martin, the younger, who is a son of Andrew Martin, the elder, proposed to sell a tract of land iff Stokes Gounty to the two defendants, Stephen and David, at, the price of $1,000; but they, not feeling themselves able-to pay for it, declined the purchase, unless they could get assistance from the plaintiff, and Andrew Martin, the. elder. On the 33d of October, 1842, the plaintiff and his two sons, and Andrew Martin, jun. met, and it was concluded between them, that the two young men should make the purchase for that sum, on a credit until the first day of January following, and the two elder persons would become their sureties, and would also contribute to the payment of the debt. A bond was accordingly drawn, and executed by the defendants, Stephen and David, and also by the plaintiff, and Andrew Martin, the elder; and the defendants, Stephen and David, took it to Andrew Martin, the younger, with whom they made a parol contract for the land, and delivered him the bond ; and upon the payment of it they were to receive a deed. On the 14th of February, 1843, a payment of $300 was made on the bond, the same being the proceeds of a tract of land, which the plaintiff then conveyed to one Drury Smith, at that price, which he delivered to his son, Stephen, with directions to apply the same to this debt, and which was entered on the bond as a payment by Stephen. On the 1st of May,. 1843, Andrew Martin, the elder, paid on the said bond the sum of $350, and it was credited as a payment by him. Afterwards, Andrew Martin, the younger, instituted a suit at law on the bond against the plaintiff alone, and obtained judgment for the balance due thereon and costs.

The plaintiff then filed this bill against his two gons^ aud both of the Martins ; and thereimstates, that, when the bond was executed, he agreed to pay upon it the sum of $250, as advancement to his sons, and no more, and that the defendant Andrew Martin, (he elder, also agreed to pay on it the like sum of $250, as an advancement to his son-in-law, the said Stephen, and that the two young men were to pay the residue themselves. The plaintiff further states, that when he afterwards sold the land for $300, he was willing to give them the whole of fhat sum, and directed it to be applied io the bond, as a payment by him, in discharge of his part of the debt; but that • the defendant, Stephen, bad it entered as a payment in exoneration of himself. The bill also states, that the , said Stephen had been in the employment of the defendant, the elder Martin, for several years, in superintending the manufacturing and selling of tobacco for him, and that, on that account, the latier was indebted to the former in the sum of $350, which was satisfied b3>- the payment of that sum on the bond aforesaid ; and that the same was, by collusion, entered as a payment by Martin, instead of being by the said Stephen, with the view of throwing the payment of the remaining $350, on the plaintiff.

The bill further states, that the land had not been conveyed, and that the two defendants, Stephen and David, had but little property, and would be unable to reimburse to the plaintiff the same, if he should be compelled to pay the residue of the bond, unless by means of the land itself; and it charges, that, by collusion between all the defendants, the vendor had sued the plaintiff alone for the purpose of coercing the payment from him, and leaving the other parties the power of disposing of the land to other purposes.

The prayer of the bill is, that the land may be declared a security for the residue of the debt, and particularly to the plaintiff, for any further sum he may be compelled to pay in the premises, and that the defendants Stephen and David and Andrew, the elder, or some one or more of them may be decreed to discharge the residue of the bond, and in default thereof, that the land may be sold for that purpose ; and that, in the mean while, an injunction might issue, restraining Andrew Martin the younger, frota raising the money on his judgment, and from conveying the land otherwise, than under the order of the Court. The injunction was granted, as prayed for. The answer of Andrew Martin, the younger, admitted the contract of sale, as charged in the bill, and stated, that he had been unable to make a conveyance, because he purchased the land at a Clerk and Master’s sale, and had not been able to make payment of the purchase money, by reason of being disappointed in receiving the price he was to get. It further stated, that this defendant had now received a conveyance, and with his answer he filed a deed from himself to Stephen Smith and David Smith in fee, to be delivered to them under the direction of the Court, whenever the balance of his debt should be paid to him. This defendant further states, that he was not present at the execution of the bond, and does not know what agreement the other parties made, as to the proportions of the debt, which they were respectively to pay ; but that he brought suit against the plaintiff alone, because he was informed by .the other parties, that the payment of #350 was made by Andrew Martin, the elder, with his own funds, and that of $300 was made by Stephen Smith, and that the .balance of $350 was to be paid by the plaintiff for his son David.

Stephen Smith and David Smith answered together. They state that after consultation between the plaintiff', Andrew Martin the elder, and themselves, it was ultimately agreed between them, that these defendants should make the purchase of the land, and give their bond for the purchase money, and that the two elder persons should execute it as sureties. They deny, however, that the agreement, as to the mode of payment, was, as it is stated in the bill, namely, that each of the four was to pay $350 ; and they say, the agreement was, that they, the defendants Stephen and David, should pay the sum of $300 in part of the bond, that the defendant, the elder Martin, should pay $350 thereon, as an advancement to Stephen Smith, his son-in-law; and that the remaining $350, should be paid by the plaintiff, as an advancement to the defendant David. They farther state, that their father had, before that time, given to them, by parol, a tract of land lying in Virginia, which they could sell, and which their father told them they might sell, to one Drury Smith) for $300, in order thereby to raise that part of the bond, which these defendants were to pay. The defendant, Stephen, states, “that Andrew Martin, the elder, had engaged him to conduct his business, in manufacturing tobacco, carrying it off, and selling it: that no definite settlement had taken place between them, and the said Andrew had advanced only about $150, in cash, and some manufactured tobacco : and that it was agreed between them, that the said Andrew, the elder, should pay towards the said bond, for the said Stephen, the sum of $350, which was to close their private accounts: that there was not due to the defendant, Stephen, that amount upon strict settlement, but as it was a family arrangement between father-in-law and son-in-law, it was to be considered as an advancement.” The answer further states, that the land, which their father had given them, was sold by them to Drury Smith, and conveyed by their father, and the price, viz : $300, was received from the purchaser by the defendant Stephen, with the assent of their father, and applied to the bond, on the joint account of both the defendants Stephen and David ; and they insist the plaintiff cannot retract the gift of that sum, nor claim to be re-imbursed out of the land the further sum recovered from him, in as-much, as he agreed to pay that sum on the bond as an advancement for the defendant David, who was to have one half of land, and the plaintiff was well able to make such advancement.

The other defendant, Andrew Martin, the elder, put in a separate answer, in which he. states the transaction much in the same manner as in the last answer. It states that during the consultation, about the purchase, “ the two young men said they could not pay for the land, without considerable aid ; and ultimately it was agreed that this defendant and the plaintiff would help them. Stephen Smith had done considerable work for this defendant, in hauling and selling tobacco, for which he had received $150 in cash, and a load of manufactured tobacco : no definite settlement however, had ever taken place. This defendant then stated, that if Stephen and David went into the trade, he would pay $350, towards the price ; and the plaintiff said he was willing to help his sons by paying an equal sum towards the price ; and he distinctly stated, that he had previously given them a piece of land, and that, although he had not made a deed for it, they might sell it for $300, and therewith pay the residue of the purchase money for the land they were to buy; so that one half of the land should belong to each of the sons. The answer further states, that the price to be got for the land, previously given, was not to be in part of the payment to be made by the plaintiff; but that he was to pay $350, in addition thereto, as an advancement to his son David, against that sum advanced by this defendant, for his son-in law Stephen Smith, so as to entitle each of them to an equal share of the land, and the defendant avers, that, in good faith, he paid the sum of $350, according to his engagement, as an advancement to Stephen Smith, and he insists that the plaintiff is bound, in good faith to this defendant, and also to his sons, to advance a sum sufficient to discharge what may be due, on the bond.

Upon the coming in of the answers, the injunction was dissolved with costs ; but it was made apart of the order, that the deed filed by Andrew Martin, the younger, and made to the defendants, Stephen arid David, should be retained in the Master’s office, until the further order of the Court. It further appears in the record, that the plaintiff paid upon executions the debt, interest and costs, in equity and at law ; and that he then dimissed his bill as to Andrew Martin, the younger, and continued it as an original bill against the other defendants, and replied to their answers.

The defendants took no testimony. On the part of the plaintiff, two witnesses were examined. One is Drury Smith, who, as stated in the pleadings, purchased the land in Virginia. He says, that in January or February 1S43, Andrew Martin, senior, proposed to sell to him a tract of land, lying in Henry County, and belonging to William Smith, the plaintiff; and that he then informed the witness, that Stephen and David Smith had agreed to take a tract of land in Stokes County, in North Carolina, from his son Andrew, at #1,000, and that the plaintiff had given his land in Henry to the boys, to sell for the best price they could get, to help to pay for it: that the witness then said to him, that when Stephen Smith, who was then at the South, should come home, ho might tell him to come over, and that he. the defendant, would give a fair price for the land: that in a short time, Stephen Smith came to the house of the witness, and they agreed for the land at #300, provided the plaintiff would enter into writing to close the contract; and that, on an appointed day, the plaintiff and his son Stephen went to the witness, and the contract was reduced to writing between the plaintiff and the witness : and the witness then paid to the plaintiff the price of #300, and he immediately handed the whole sum to his son Stephen, and told him to go and pay it towards his land before, he slept, to stop the interest. The witness further states, that at the time of the trade, Stephen Smith wished to borrow money from him, to make a further payment for the land purchased from Andrew Martin, junior, and that he said, “if he could get #300 from the deponent, that sum with the price deponent was to pay for the land, and what Andrew Martin, senior, owed him, would enable him and David (who was in partnership in the purchase) to pay for it.”

Another witness states, that he was present in February-1843, when Drury Smith paid-$300, for land, to the plaintiff, who immediately handed the money to his son Stephen, and told him to go and see his mother, and, if she would make a right to the land, to go.on and pay the money before he slept, to stop interest; but, if his mother would not' make the right, to return the money to, him, to which Stephen replied, that he would.

Iredell, for the plaintiff.

Morehead, for the defendants.

Ruffin, C. J.

For any sum which the plaintiff might have paid, or might be liable to pay, as a surety for his sons on the bond for the purchase money of the land, he had an equity to be re-imbursed or exonerated by a sale of the land ; and to that end,- he had a right to file his bill to prevent a conveyance to the purchasers by the vendor, who had kept the title, as a security for the purchase money Green v. Crockett, 2 Dev. & Bat. Eq. 390. Polk v Gallant, Id. 395. The title is still under the control of the Court: and, therefore, the enquiry is, how far the plaintiff is to be regarded as the surety of his sons. It is agreed on all hands, that the sons made the purchase, and that the fathers-in law executed the bond in the character of sureties to some extent. The plaintiff, however, admits, that he undertook to pay $250, of the purchase money, as an advancement for his sons; and he says, that upon selling the piece of land for $300, from which he expected to raise the $250, he agreed to give the whole price as an advancement, to be applied as a payment from him on the bond. For that sum, the plaintiff seeks, and could have, no redress. Undoubtedly he could have no recourse on his sons for a sum thus voluntarily assumed, and voluntarily advanced as a gift. We are not prepared to say, that, after agreeing with his sons and the father-in-law of one of them, to advance a certain proportion of the purchase money, and thereby inducing the sons to make the purchase, and the father-in-law to agree also to advance a sum, towards paying for it, the plaintiff could, before the payment, retract his undertaking, but would not be compellable to make it good. However, it is not necessary to consider that point, nor how far the plaintiff might be discharged from his obligation by a fraud on the agreement on the other side, in making, with the funds of the son Stephen, the pay. ment which his father-in-law was to make out of his own funds as an advancement to Stephen. For, as the pleadings stand, and upon the. proof, it must be found, in point of fact, we think, that the $300, received for the land from Drury Smith, was a payment made on the bond by the plaintiff, and that he did not undertake to make any further payment on it, by way of advancement to either of his sons, or was bound therefor, except asa surety. Several considerations concur to produce that conclusion. In the first place, the bill admits no further responsibility to have been assumed by the plaintiff; and it affirms, that the land, from the sitie of which, the money was raised, belonged to the plaintiff, and was sold by him, to enable him to meet his engagement on the bond. In both respects the burden of proving to the contrary is on the defendants; and they havo entirely failed to give any such proof. The burden is on them, because, as the purchasers of the land, they are prima facie the principal debtors for the price. The furthest the law has gone, in presuming a gift from the father to the child, is, when the father paid’, or secured the price, anc! took a conveyance in the name of the child. In that case it is inferred, that the advancement of the child was intended, and no trust results to the father on account of the purchase money being his.

But where no conveyance is executed, and the child makes the contract of purchase, and all the father does, is to join in the bond for the purchase money, there can be no presumption that the father was to pay the price, as a gift to the child ; else, every responsibility, incurred by a parent, for and with a child, is to be held as making the former the principal, and the latter only the surety; which is against the common experience of the course of business. So, in regard to the ownership of the land sold to Drury Smith, and of the money got for it, it must be deemed to have been, in fact and truth, in the plaintiff, as it was legally his, unless there be evidence on the other side to establish, that he had previously given the land to his sons, and that his concurrence in the sale to to D. Smith was merely formal, in order to pass the legal title. The answers state the last to be the truth ; but they cannot divest the plaintiff of his estate, without proof aliunde ; and no such proof appears. On the contrary, the defendant, Andrew Martin, senior, is represented by the witness. Smith, as making the first proposition to sell to him the land in Henry, and as then stating, not that it had been given by the plaintiff to his sons, before they made their purchase, but that he “ had given it to them” (in consequence of their purchase) “ to sell for the best price they could, to help to pay for it,” that is, for the land they bought. The same inference results from the dealings of the defendant, Stephen, and his father, with Drury Smith, as deposed by that witness. Throughout, the father acted, and was treated by the other two, as the real owner and vendor of the land, who was entitled to, and received the purchase money, and disposed of it. And it is clear from the declarations of the son in that negotiation, that no further contribution was intended by, or expected from the plaintiff, besides the sum obtained for that land $ for he said, the defendant Martin owed him enough to enable him, with the $300, paid by the witness, to pay for the land within $300, and he applied to the witness to lend him and his brother that sum, for that purpose.

The payment of the SS300 on the bond, then, was not made with funds belonging legally or equitabty to the sons, as far as appears, but with the money of the plaintiff ; and, therefore, he fully complied with the whole of the undertaking on his part, as far as any is established. Another consideration strongly corroborates this view of the subject. It is plain upon the answers themselves, that by the agreement between the parties, the advancement, which the plaintiff was to make, was to be compensated by one to an equal amount in favour of Stephen Smith, by his father-in-law, and by means of those two advancements, and the sum of $300, to be paid by the two sons, expected to be raised from the sale of the land, previously given to them by the plaintiff, the answers say, the debt was to be paid. Now, it has been already shewn, that the sum got for that land did not belong to the two sons ; and, therefore, it must have been understood, that the payment, to be made by them, was to come from a different quarter. What the quarter was, cannot be doubted The debt of the defendant Martin to Stephen was known, not, perhaps, in its exact amount, to all parties, and was, unquestionably the source relied on for the payment, which was to be made by the sons with their own means, leaving the brothers afterwards to settle between themselves for the difference in their advances. This must have been so, since no other resource is suggested, and because the defendant, Stephen, expressly declared as much to Drury Smith. But those defendants say, that the sum of $350, which Martin paid on the bond in May 1843, was his, Martin’s, money, and was paid by him as an advancement to his son-m-law, and that no part of it belonged to the son-in-law, although it extinguished the debt from his father-in-law to him, or, in the language of the answer, “ closed their private accounts ” The Court cannot be so blind, as not to see, that the transaction, in that respect, was not a fair one, and that the account given of it in the answers is imperfect, uncandid, and unsatisfactory ; intended to give a false coloring to the payment. We are obliged to perceive, that the payment in the name of the father-in-law was illusory, and that, in realify, it'was with the funds belonging, perhaps, wholly, and at all events, nearly so, to the son-in-law. Taking, then, that payment to be made by the defendant, Stephen, and not by Martin, it follows necessarily, that the payment, which Martin agreed to make as an advancement, is yet to be made; and if made, there would be nothing left to be paid by the plaintiff, even had an agreement been established against him to pay more than the proceeds of the land in Henry.

Upon the whole, therefore, the Court holds, that the plaintiff was entitled to be relieved from any further payment on this debt, by compelling the defendants, or some of them to discharge the balance due on it. From what has been said, it will-have been perceived, that in our judgment, the defendant, Andrew Martin, the elder, ought in justice to pay it; and we should be obliged to examine his liability for it, in this Court, if the other two defendants had insisted on it. But, as they have chosen , to consider the payment of the $350, as a payment by him, in satisfaction of the advancement promised by him, and to discharge him from all further liability, and thereby to take that much of the debt on themselves, we suppose it must be so, and that the law cannot force those persons, against their will, to look 'to him for this money. With that question, the plaintiff has no concern at present; nor will he have any, unless he should be unable to get back the money, he has paid, out of the land, or from his sons, the principal debtors. If that should so turn out, the plaintiff would, at all events, have a claim for contribution on Martin, as his co-surety; and, perhaps, for a full indemnity upon the ground, above mentioned, of his agreement with the plaintiff to make an advancement to his son in-law, equal to that made by the plaintiff for his sons. Reserving those points, however, it is only necessary at present to declare, that the defendants, Stephen and David, are bound to repay to the plaintiff, the debt, interest, and costs at law and in equity, which he paid on the dissolution of the_ injunction in this cause, and, in case they should fail to do, in a reasonable time, that the plaintiff will be entitled to have the same raised by the sale of the land, purchased from Andrew Martin the younger. There must be a reference to enquire what sum is due to the plaintiff on those accounts; and in the mean while, the defendants must pay the plaintiff his costs incurred in this cause, up to this time. '

Pee Curiam.

Decree accordingly.