Irwin v. Wilson, 56 N.C. 210, 3 Jones Eq. 210 (1857)

June 1857 · Supreme Court of North Carolina

56 N.C. 210, 3 Jones Eq. 210

JOHN IRWIN and another against JOSEPH H. WILSON, trustee, and others.

A provision in a deed of trust to secure certain person^ in sums due them, and against certain existing liabilities as sureties, also against future liabilities which they may incur as sureties, and future debts that may be justly due them, there being no allegation or proof of fraud, is valid, and will be enforced in a Oonrt of Equity.

PetitioN to rehear a cause, transmitted from the Court of Equity of Mecklenburg County.

On the 11th of January, 1833, William Davidson conveyed to. Washington Morrison, a large amount of real and personal property, in trust to secure tlie payment of certain debts therein mentioned, and in trust to indemnify certain individuals against liabilities as bis sureties. Among other provisions in this deed of trust, is the following: “ And whereas it may become necessary for the said John Irwin, Samuel McComb, Jane Em-merson, D. T. Caldwell and James H. Blake, for the purpo/o of enabling me to meet the instalments due H. M. Miller,; as agent of the bank of Newbern, Baleigh office, or for other purposes, to enter into other and further liabilities for me, it is, therefore, the intent and meaning, (and I do hereby declare it to be such), of this trust, to indemnify the said John Irwin, Samuel McComb, Jane Emmerson, David T. Caldwell and James M. Blake, not only in all matters for which they are now bound as my security, and to secure them the amount I now owe them individually, but to secure them against all future liabilities which they may incur as my surety, and further debts that may be justly due them.”

After the execution of this deed of trust, William Davidson executed another deed of trust, dated 17th of January, 1837, to John J. Blackwood, in trust to secure a debt of $15,000, due to the agency of the bank of the State of North Carolina at Charlotte, which was contracted on the 13th of January, 1837, with William E. Davidson, James II. Blake and David T. Caldwell, as sureties. He also executed another deed of trust to Blackwood, dated 8th of February, 1838, to secure a debt to the same bank of $15,000, created 25th of Oct., 1837, with the same sureties as the one last mentioned. All these deeds of trust conveyed the same property.

On the 21st of April, 1838, William Davidson executed a deed of trust to James W. Osborne, conveying several tracts of land, with all the stock of horses, cattle, &c.; all the grain, hay, fodder, &c.; blacksmith tools, farming tools, wagons, carts; also seventeen slaves in trust, to secure John Irwin two notes, in amount about $1400; Irwin and Elms two notes about $1300, and to indemnify James H. Blake and David T. Caldwell as his sureties to the State Bank for $1100, with several other debts not material to be mentioned. By this deed the two first named debts were entitled to satisfaction in preference to the others. The following clause is contained in this deed of trust, that is to say, “This trust is not intended to diminish, in any way, the validity of a trust executed by and between William Davidson and Washington Morrison, on 17th of January, 1833, the purposes of which trust were partially satisfied by borrowing money on the faith thereof; for that purpose, part of the property was sold, part put into a new trust tc the State Bank, and part of the debts remain unsatisfied. The present trust is to secure some debts not satisfied in the former trusts.”

The property contained in this deed of trust to Osborne, had been previously conveyed in the deeds of trust mentioned. Mr. Wilson, in his report of sales, &c., mentions that the debt due by Davidson to the agency of the State Bank at Charlotte, originated on 30th of Dec., 1835, and that to Irwin on the 1st of January, 183J, and that it was assigned to Irwin when the trust was made to Osborne.

A bill in equity was filed by one John R. Williams and other creditors of William Davidson, alleging that the amount of property in the hands of the trustees, was greatly beyond the debts and liabilities intended to be secured, and praying the Court to compel the trustees to make sale, so that it might be ascertained whether their debts would be reached. Under this proceeding, the said trustee, Blackwood, and Wilson, the executor of Morrison, the other trustee, were directed to sell and pay off the debts mentioned in the several deeds to them. This they did, and reported to August Term, 1842, of Meck-lenburg Court. At that term the nature of the debt to Irwin and Elms, and that due to the agency of the State Bank, being set forth by the trustee Wilson, he reports that he had not paid either of them, whereupon the Court “ ordered also that the said Joseph Ii. Wilson pay and satisfy the debt due the bank of the State of North Carolina, in his report mentioned, amounting to §1,385,64.” This payment, and some others ordered in the same decree, exhausted the fund in the hands of Wilson, so that nothing came to the hands of Osborne.

At the Fall Term, 1855, of the Court of Equity of Meck-lenburg, Irwin and Elms filed a petition to rehear the decree, alleging that there was error in ordering the debt to the bank of the State to be paid in preferénce to their debts; for that the overplus in the hands of Wilson ought to have gone into the hands of Osborne, so that these debts which had the preference by the terms of that deed might have been paid.

The defendants answered, insisting that there was no error in the decree sought to be reheard, for that the deed of trust executed in 1838 was intended to provide a security for the note in question ; that this note was given in lieu and in the way of renewal of some of the liabilities embraced in that deed, and that but for the protection which was provided in that deed, the defendants Blake and Caldwell would not have signed that-note.

They say further that the plaintiff Irwin, after having sanctioned the provisions of that deed by taking benefits under it, ought not to be heard to impugn it. Explication.

The cause being set down for hearing upon the petition, answers, and exhibits, was sent to this Court.

B. F. Moore, for the plaintiffs.

Boy den, for the defendants.

PeabsoN, J.

Under the deed of trust to Osborne, (1838,) the two notes to “ Irwin and Elms,” assigned to Irwin, had priority over the debt due to the State Bank, with Blake and Caldwell as sureties. But no funds came to the hands of Osborne, being anticipated by the decree which directs payment of the debt due the State Bank, to be made by Wilson, the administrator of Morrison, under the deed of trust of 1833, whereby the fund was exhausted. The petition alleges there was error in that decree in this — that the residue of the fund, after paying, certain debts, which it is admitted had priority, and among others, a large debt to the Bank, $15,000, secured by the deed of trust to Blackwood, (1837,) ought to have been allowed to pass into the hands of Osborne, to be applied under the deed to him, and ought not to have been applied under the deed to Morrison.

This assignment of error is based on the position that the deed of trust to Morrison, without any charge of fraud, or want of bona tides, is inoperative in respect to debts contracted after its execution, and consequently that the debt due the State Bank, with Blake and Caldwell as sureties, which was con-traeted after that time, but by reason of the provision made in the deed for all subsequent debts, to which Blake and Caldwell might become sureties, was not secured by the deed of trust to Morrison, and did not attach to the funds in his hands or in the hands of his administrator, and the residue of the fund ought to have passed to Osborne, he being entitled to the resulting trust of Davidson, under the deed of trust to him, to be paid out according to the provisions of the latter deed.

It appears by the report of Wilson, that the debt in controversy, that is, the debt to the State Bank, with Blake and Caldwell as sureties, was contracted prior to the execution of the deed to Osborne. That deed contains this clause : “ This trust is not intended to diminish in any way the validity of a trust executed by, and between, William Davidson and, Washington Morrison, on the 17th of January, 1833, the purposes of which trust were partially satisfied by borrowing money on the faith thereof.” The deed to Morrison contains this clause : “ And whereas it may become necessary for the said John Irwin, Samuel McComb, Jane Emmerson, D. T. Caldwell and James C. Biake, for the purposes of enabling me to meet the instalments due II. M. Miller, as agent of the Bank of Newbern, Raleigh office, or for other purposes, to enter into other and further liabilities for me, it is therefore the intent and meaning (and I do hereby declare it to be such) of this trust to indemnify the said Irwin, McComb, Emmerson, Caldwell and Blake, not only in all matters for which they are now bound as my security, and to secure them the amounts I now owe them individually, but to secure them against all future liabilities which they may incur as my security and future debts that may be justly due them.” The two notes to “ Irwin and Elms” were not an individual debt due to Irwin, and did not become so until the assignment to Irwin, made at the date of the deed to Osborne. So the debt to tlie State Bank, with Blake and Caldwell as sureties, was entitled to priority as a future liability incurred by them as the sureties of Davidson, upon the faith of the provision made in the deed of trust to Morrison, unless that provision was inoperative. The point is, putting, out of the case all question of fraud in regard to this provision, (which is the more proper, because Irwin is expressly entitled to the benefit thereof, as well as the other persons named, and concirrred in this mode of enabling Davidson to sustain his credit,) did this debt to the Bank, with Blake and Caldwell as sureties, attach to the trust fund in the hands of Morrison or his administrator, so as to become a charge thereon at and from" the time of its creation ? In other words, was the provision of the deed valid for the purpose for which it was intended, or was it void and of no efiect ?

We are at a loss to perceive any ground upon which it can be assailed, putting fraud out of the consideration.

It was suggested on the argument that such a provision should be held void, because it evades the policy of registration, the object of which is to enable every one to see on the face of the deed, as well the property conveyed as the amount of the debts secw'ed. This is stating the object for requiring the registration of deeds of trusts and mortgages too broadly. One purpose is to prevent fraud. That is out of our case. Another is to give notoriety to the fact, that certain property is incumbered in such a way as to put purchasers, and others who may be concerned, on enquiry, and it is suificient if the deed furnishes data by which these enquiries may be satisfied. To require precise figures and dates to be made in the face of the deed would be attended with great inconvenience, and in many cases be impossible; e. g. a trust to secure sundry debts — amounts unknown, or a debt of about the sum of-; such trusts have frequently passed without exception ; or to secure a principal against any loss by reason of the acts of his deputy and the like; or, as in our case, to secure Blake and Caldwell against any liability which they may incur by becoming the sureties of the maker of the trust.

It was further suggested, that such a provision should be held void, because there is no way of putting an end to it, and the property would be tied up indefinitely, so that even an act of the Legislature could not set "it free without Impairing the obligation of a contract.

It is certain that the operation of this provision could be stopped by the trustor’s assigning his resulting interest by a deed to secure specific debts, as was done by the deed to Black-wood and the deed to Osborne — such debts thereby having priority, except against debts previously contracted on the faith of the provision ; and it is also certain that it could be stopped by a creditor’s bill, as in this case, to force the trust, that is, to compel the trustee to satisfy the debts secured, and allow the excess of the fund to be applied to the debts not secured.

The idea of impairing the obligation of a contract is a fallacy. There is no contract to be impaired. Irwin, Blake, Caldwell and the others, were not 'bound to become sureties for Davidson. The provision was merely an inducement for the purpose of removing any objection they might have to becoming bound for him. If this inducement was taken away by an assignment of his resulting trust to secure other debts, or by the intervention of the creditors, they were at liberty to decline any further liability.

Per Oueiam, Petition to rehear disallowed with costs.