Latham v. Skinner, 62 N.C. 292, 1 Phil. Eq. 292 (1868)

Jan. 1868 · Supreme Court of North Carolina

62 N.C. 292, 1 Phil. Eq. 292

CHARLES LATHAM and others v. THOMAS E. SKINNER and others.

A vendor of lands having delivered a deed in fee to certain purchasers who were partners upon their executing personal. notes for the purchase money, a sealed instrument was delivered some weeks afterwards by the Xmrchasers to the vendor, which expressed no valuable consideration, but referred to the sale, and stated a wish to secure to the vendor the payment of the bonds, and thereupon provided that in case of failure by the purchasers to make payment as their notes fell due, the vendor “should have such a lien [in and to such tract] -and to that extent as wiE save him harmless”:

Held that, there being no valuable consideration, the paper could not, in any event,.be set up either as giving a lien, or as a contract to give a lien.

Also, the partnership having been subsequently dissolved, that the outgoing partner who had taken a bond from his copartners to indemnify him against the firm debts, had thereafter no equity to subject the partnership funds to the payment of the debt to the vendor; and therefore that the vendor had none through him.

The relief administered in equity must be limited to that sought by the frame of the bill.

Whether there may be an express “vendor’s lien” in this State, Quaere?

(Smith v. Smith, 1 Jon., 135; Potts v. Blcwlaeell, 8 Jon. Eq., 449, s. c. 4 il>., 58 ; Miller v. Miller, ante 85 ; cited and approved.)

Bill to declare and enforce a lien, filed to Fall Terra 1867 of the Court of Equity of TVakiils’gton, and at that Term set for hearing upon bill, answers and replication, — the defendants admitting* the due execution of certain exhibits filed with the bill. The cause was thereupon transmitted to this court.

Tlie bill was filed by Charles Latham, S. Ii. McRae and A. M. Lewis, and stated that a sale of certain land therein ■described had been made by McRae to Lewis, Thomas E. .'Skinner and Charles W. Skinner Jr., on the 4th of May, 1859, and that a deed in fee was accordingly executed, and the purchasers gave their notes for the price; that upon the 14th oí June 1859 the purchasers, to secure the payment of their notes, executed to McRae a trust deed or mortgage, or deed in the nature thereof, conveying- and intending to convey to him a lien upon the land sold, which trust deed was upon the 25th of November 1859 duly recorded in the Register’s office of Washington county.

A copy of that trust deed was appended, and was as follows:

Whereas on the 4th day of May A. D. 1859 a bargain and sale were entered into and agreed upon by and between Sherwood H. McRae of the one part and Thomas E. Skinner Charles W. Skinner and A. M. Lewis of the other part, in regard to a tract of land in the county of Washington, N. C., con. taining 6049 acres, more or less, as per boundary &c., in a deed executed by the said S. H. McRae to the said Skinners and Lewis, bearing date 4th of May 1859 for the consideration therein set forth. And whereas the said Thomas E. Skinner, Charles W. Skinner and A. M. Lewis have executed to the said S. Ii. McRae their notes in three instalments or payments, with the amount of eight thousand sixty-two dollars and sixty-two and two-third cents each, the first being due the 1st day of January 1861, the second on the 1st day of January 1862, and the third and last on the 1st day of January 1863, and whereas it is desirable by the said Skinners and Lewis to secure to the said S. H. McRae the payment of these several recited notes as 'demanded thereby'; therefore witnesseth that the said Thomas E. Skinner, Charles W. Skinner and A. M. Lewis doth for themselves, their heirs, executors, administrators, &c.,alien and indemnity in and to the said tract of land to that extent, and for the purpose of securing and making effectual the payment of the purchase money, with legal interest, as per contract and notes, and in case of failure of the said Skinners and Lewis and their representatives to make the said payments as per said notes at or within a reasonable time according as they fall due, then and in that case the said McRae shall have such a lien and to that extent as will save him harmless in securing the said purchase money and no more. In which case this obligation to be void. Given under our hands and seals this 14th day of June A. D. 1859.

A. M. LEWIS, [seal.]

TPIOS. E. SKINNER [seal]

C. W. SKINNER, [seal.]

The bill then proceeded to state that on the same day that McRae’s deed to them was' dated, the Skinners and Lewis entered into articles of partnership which recited the purchase ánd constituted the land a part of the partnership fund; and that this partnership continued until the 26th day of April 1860, when it was dissolved as to Lewis, anda bond was executed between the former partners which amongst other things recited the existence of firm debts and expenses, and engaged the Skinners to indemnify Lewis against them, (except as to $500 of expenses, which he agreed to lose) and particularly, against the purchase money due to McRae, and bound Lewis, when ever such debts should be discharged, to convey his one third part in the land to the Skinners. The bill also set forth that two of the notes for the purchase money of the land were still unpaid, and that Lewis was still liable for them.

It then alleged that 'on the 5th of Sept. 1866 the Skinners conveyed all their interest in the land in trust to secure certain individual debts of their own; and that on the 4th of October 1866 Thomas E. Skinner made a further conveyance of his interest therein, to secure certain individual debts of his own. Also that complainants had applied to the Skinners to pay to Latham (as assignee of McRae,) the notes remaining due, or to release their equity of redemption, &c., and comply with the agreementof 26th April 1860, but without success.

The prayer for relief was that the respective liens upon the lands should be ascertained and declared, — that those lands should be sold in satisfaction of such liens, and for further relief; and process was prayed for against the Skinners and the trustees under the deeds of September and October 1866.

The opinion of the court renders it unnecessary to state the contents of the answers.

W. A. Moore, and Phillips & Battle, for the complainants.

1. The informal paper of June 1859 creates an express lien in favor of the vendor, or at all events, a contract for a lien which in this court is the same as a lien, and here is based upon the debt due to McRae. This debt although not in general a valuable consideration, is in our courts treated as such sometimes. There is no public policy in N C. against an express vendor’s lien. Potts v. Blaclaoell, 3 Jon. Eq., 449 and 4 Jon. Eq., 58; Wornble v. Battle, 3 Ire. Eq. 182.

2. There is also here a partnership lien, to be resorted to through Lewis, although there have been a dissolution. For here there has been no transfer of the property. West v. Ship, 1 Yes. Sr. 242; 6 Yes. 126, 127; 11 Yes. 3; Potts v. Blaclaoell, 3 Jon. Eq., 449.

3. The trustees under the deeds of 1866 are in no better case than the Skinners. They take with notice, as matter of law. Potts v. Blaclaoell, above.

4. Where two or more purchase land jointly and give a joint note for the purchase money, they each have a lien or equity or trust inter se, as quasi partners, to have the joint property applied to the payment of the joint note in preference to the claims of the creditors of the individual obligors. 2 Sug. V. & R, 127. The distinction in England in such cases between equal and. unequal advances of purchase money does not exist here where survivorship is abolished.'

Bragg and Smith, contra.

1. The instrument of June 1859 has no operative words of grant, and conveys nothing. Coote Mort., 4; 2 Bl., 157.

2. Nor is there any consideration; the debt being past. Springs v. Hanks, 5 Ire., 40; Jackson v. Hampton, 8 Ire., 457; Wisioall'v. Potts, 5 Jon. Eq.,189.

3. There is no such thing in this State as a lien upon land created by the parties without the creation of an estate. Wonible v. Battle, 3 Ire. Eq., 182. The registration of this paper, not being required by law, can give no efficacy. BurneÜ v. Thompson, 3 Jon. 113Holcombe v. Bay, lire. 346; Justice v. Scott, 4 Ire. Eq., 108; Be Gourcey v. Bass, Bus. Eq., 181.

4. The trustees under the deeds of 1860 liad no notice of the alleged mortgage. Here, however, actual notice will give McRae no better footing as regards them. Fleming v. Burgin, 2 Ire. Eq., 584; Potts v. Blackwell, 3 Jon. Eq , 449 & 4 ib. 58.

5. The bill is not framed to enforce a contract for a lien. Equity never interferes between creditors one of whom has obtained a specific lien. Knight v. Bunn, 7 Ire. Eq., 77; Smith v. Turreniine, 2 Jon. Eq., 253; Ilufham v. Fry, 5 Jon. Eq., 415; Saunders v. Terrell, 1 Ire., pp. 103-4.

6. The dissolution of the partnership has put an end to any lien through Lewis. Potts v. Blackwell, above; Holmes v. Hawes, 8 Ire. Eq., 21. Especially as Lewis took a bond from the Skinners binding them to pay the firm debts. Bankinv. Jones, 2 Jon. Eq., 169; Holmes v. Hawes, above.

Pearson, C. J.

The general scope of the bill is to subject the land set out in the pleadings to the payment of the notes given to the plaintiff McRae, by the defendants Thomas and Charles Skinner, and the plaintiff Lewis, on the ground that the instrument executed to McRea by Thomas and Charles Skinner and Lewis, dated 14th June 1859, — is a mortgage or “ an instrument in the nature of a mortgage,” and has the legal effect of creating a lien on the land for the payment of the debt secured by the notes. The bill in the second place, alleges the existence of a co-partnership between Thomas and Charles Skinner and Lewis in respect to the land, that the debt was a copartnership debt, and seeks to set up an equity to have it paid by the laud, under and by force of tlio equity of Lewis as one of the partners in reference to the individual debts due by the defendants Thomas and Charles Skinner, to the other defendants. The difficulty in the case grows out of the nondescript character of the instrument dated Juno 14th 1859. It is not a mortgage, or “an instrument in the nature of a mortgage,” that is, as understood in the books, a conveyance to a third person in trust to secure a debt, nor can it in any way have the legal effect to create a lien. The most that it can amount to is, a promise thatJVIcRae shall have a lien on this land to secure his debt. When the legal estate is transferred, the party passing it may create a use by simple declaration, or he may reserve a power to create a use afterwards by declaration, or he may give to a third person a power to declare the uses. But if the legal estate is not transferred a use can only be created by a bargain based on a valuable consideration, which is said to raise the use, or by covenant to stand seized, based on a good consideration, to wit, natural affection. This is familiar learning. See Saunders on “ Uses and Trusts.”

The same principle applies to trusts, to wit, uses not coming within the operation of the Stat. 27, Hen. VIII. For this reason it is held, that a power of appointment, or a power of sale, cannot be created by a deed of bargain and sale, or a covenant to stand seized. These powers are in effect a mere delegation to a third person of the right to raise a use or trust by declaration, and the party cannot himself create a use or trust by mere declaration, unless he transfers the legal estate. This doctrine is discussed and explained in Smith v. Smith, 1 Jon. 135.

The instrument under discussion does not transfer the legal title. A lien is a trust, consequently a lien cannot be created by a mere declaration, unless the legal estate be transferred. So this instrument cannot have the effect of creating a lien or trust, although it would seem to have been the intention of the parties to do so. It is a nalel declaration of a trust, and the bill, so far as it seeks to enforce a subsisting lion, must fail — for under the most benignant application of the rule, u utres niagis valeat quam pereat,’ the instrument cannot be allowed to have the effect of creating a trust, without a violation of the settled principles of equity jurisdiction.

The point taken on the argument, that although the vendor’s lien for the purchase money has not been adopted by our courts, yet that has reference to an implied lien, and does not exclude an express lien — is not presented by the facts; for the deed of McRae is an absolute one, and does not contain a declaration of any trust in favor of the grant- or to secure the purchase money, which we suppose might have been done, and might have amounted to an express lien. But it is useless to speculate on the matter, as there is no such trust declared, and no express reservation of a lien.

But it is said, suppose the instrument does not create a lien, it may, under the doctrine of specific performance, be carried into effect as an agreement to give a lien. There are two objections to this position; in the first place the bill is not framed with that view. It does not allege the instrument to be an agreement to give a lien, and the court must confine itself to the allegations in the pleadings — otherwise we are “at sea.” But, suppose this difficulty out of the way, a court of equity never interferes to compel the specific performance of an agreement unless it be supported by a valuable consideration. Here there is no consideration; it is nudum pactum, for McRae had executed title to the land and accepted the notes of the purchasers. The debt therefore was a matter personal, and although it originated as the price of the land, it was no longer connected with it, and stood on the same footing with any other debt. Miller v. Miller ante 85. In other words the consideration wae past. There is no new consideration alleged, no abatement of the debt, no extension of the time of payment. And the instrument seems to have been executed simply because, to use the language of the parties, “whereas it is desirable by the said Skinner and Lewis to secure to the said McRae, the payment of the several notes,” &c.

On the footing of the copartnership entered into by Thomas and Charles Skinner and Lewis in respect to the purchase of this land, whereby the debt became a copartnership debt, the plaintiff McRae might have worked out an equity, through the plaintiff Lewis, to have this debt satisfied by the land as a partnership fund, in preference to the individual creditors of the parties, but for the fact that by the deed of the 26th of April 1860 the copartnership dissolved and Lewis withdrew from the firm, assigned all the partnership fund over to Charles Skinner and Thomas Skinner, and agreed to submit to a loss of $500 in consideration of their covenant to indemnify him against the debts and liabilities of the firm, and to secure the performance of this covenant reserved to himself his “individual share of one-third of the tract of land." With this security he was content, and is at liberty to make the most of it. Potts v. Blackwell, 3 Jon. Eq., 449; 4 ib., 58. By a bill properly framed he may enforce the specific performance of this covenant for indemnity, and may obtain a decree that Thomas and Charles Skinner pay off and satisfy the debts of the firm, and that his individual one-third of the land shall be applied to that purpose; but beyond this one-third the decree will be merely personal against Thomas and Charles Skinner, and cannot be made to attach to the other Uvo~ thirds; for he has given over these two-thirds to Thomas and Charles Skinner, relying on their personal obligations, and on his individual one-third of the land as a security; of course therefore thejr were left at liberty to dispose of the two-thirds, and could dispose of them either to pay off the liabilities of the late firm, or to pay their individual debts as they should see proper. In other words Lewis retained no right to control the disposition of these two-thirds, and the consideration moving him to this arrangement was the personal understanding of Charles and Thomas Skinner to save him harmless from the debts of the firm.

The bill will be dismissed with costs.

Per Curiam

Bill dismissed.