Opinion
(August Term, 1849.)
1. Where a recovery in ejectment has been effected by a combination between the purchaser at a sheriff's sale and trustees who have the legal title, by which the latter are induced to commit a breach of trust: Held, that the cestuis que trustent are entitled to an injunction, to be continued to the hearing, to prevent the plaintiff in ejectment from taking possession of the land.
2. A court of equity will under no circumstances permit a trustee to secure a debt of his own, not secured by the trust, by forming a combination with one claiming adversely to those whose interest he has undertaken to protect.
3. It is the policy of the law to favor purchasers at sheriffs' sales as against debtors in the executions whose debts have been paid by the purchasers, but not as against third persons.
APPEAL from an interlocutory order, made at Fall Term, 1847, of MECKLENBURG Court of Equity, Pearson, J.
Osborne, J.H. Wilson, Bynum, and Iredell for plaintiffs.
Boyden for defendants.
This bill was filed by Joseph H. Wilson, James P. Henderson, John Irwin, and William W. Elms against Henry Heathern, James Magnus, George W. Langstaff, John Penman, John B.S. Harris, Henry Blundell, Henry W. Olcott, Daniel Alexander, William H. Harris, and John W. Morrison. The bill set forth that in 1835 an association called the Anglo-American Gold Mining Association was formed by certain persons, most of whom resided out of this State, together with the defendant Penman, a citizen of this State, the object of which was to purchase and work gold mines in North Carolina; that of this association the defendants Heathern, Blundell, and Langstaff were members, besides other persons to the plaintiffs unknown; that the said Penman, in 1835, (216) acting for the said association, purchased, among other property, a tract of land lying in Union County known as the Washington Mine, and a smaller tract adjacent to it; that the said Penman, by deed of bargain and sale dated in March, 1836, conveyed the said lands to the defendants John B.S. Harris, Olcott, and Alexander in trust for the said association, empowering and directing the said trustees to convey to such person or persons as any three of the directors of the said association should designate. The bill further states that the association commenced it operations in 1835 or 1836, worked their mines extensively, and contracted large debts on the faith of the property, of which they were in the possession; that in 1837 they were largely indebted, and, among others, to the plaintiffs Irwin and Elms in the amount of $14,000 or $15,000; that for the purpose of securing the payment of this indebtedness a deed of bargain and sale for the land above mentioned was regularly executed by the defendants Magnus, Heathern, and Blundell, three of the directors of the said association, to the plaintiffs Wilson and Henderson, as trustees, for the purpose of selling the same and discharging the debts enumerated in the deed, and authorizing and requiring the defendants J.B.S. Harris, Olcott, and Alexander, trustees as aforesaid, to convey the said estate to the plaintiffs Wilson and Henderson, trustees as aforesaid, according to the provisions of the deed made by Penman to the first trustees; that the said plaintiffs Wilson and Henderson took possession of the said Washington Mine and sold the same to the plaintiffs Irwin and Elms, and executed to them a deed therefor. The bill further sets forth that the defendants Alexander, Olcott, and J.B.S. Harris, trustees in the deed from Penman, instead of discharging their trust by making title to the said land to the plaintiffs Wilson and Henderson, have refused to do so, although they had notice of the claim of the said plaintiffs, and were often (217) requested to make the conveyance; but that, on the contrary, the defendant J.B.S. Harris, designing to defeat the just claims of the said plaintiffs to the land aforesaid, cooperated with the defendants Morrison and Harris, authorizing them to make use of his name in an action of ejectment to recover the possession of the said land. The bill further states that the plaintiffs Wilson and Alexander delivered the possession of the said land to the plaintiffs Irwin and Elms, after their purchase, and it has been held by them ever since. The bill further states that, in pursuance of the combination above mentioned, the said J.B.S. Harris, with the defendants Morrison and W.A. Harris, instituted in 1840, in the Superior Court of Mecklenburg County, an action of ejectment against the defendant John Irwin, in which they claimed title under two counts, one on the demise of W.A. Harris and Morrison, and one in the name of Olcott, J.B.S. Harris, and Daniel Alexander, the trustees above named; that at Fall Term, 1846, of Mecklenburg Superior Court the said W.A. Harris and Morrison obtained a verdict and judgment, and on appeal the judgment was affirmed in the Supreme Court, and that the said W.A. Harris and Morrison now threaten to sue out a writ of possession on the said judgment; that the claim of title set up by W.A. Harris and Morrison is through Penman, and subsequent to his conveyance to Olcott, Alexander, and B.S. Harris, and also to the conveyance to the plaintiffs Irwin and Elms by Wilson and Henderson. And the bill then prays for an injunction to restrain the issuing of a writ of possession on the said judgment in ejectment, for a conveyance of a legal title, and for general relief.
The injunction prayed for was granted. At the return term some of the defendants answered.
W.A. Harris and J.M. Morrison answered that they admit (218) the action of ejectment instituted by them for the recovery for the land, and that the declared on two counts, one on the demise of themselves and one on the demise of J.B.S. Harris, Olcott, and Alexander. They say that the plaintiff Irwin caused himself to be made defendant in the place of the tenant in possession; that on the trial no evidence was offered of any title in the said J.B.S. Harris, Olcott, and Alexander, and the recovery was effected on their own demise. They state that at February Term, 1838, of Mecklenburg Superior Court of Law they recovered a judgment against the said Penman for about $500; that on this judgment they issued a fi. fa., which was levied on the land above mentioned, and at the sale by the sheriff these defendants became the purchasers and received a deed from the sheriff. They admit the suing out of the writ of possession on their judgment in ejectment. These defendants then say that, inasmuch as they are purchasers at a sheriff's sale, they have a right to be placed in possession under their said recovery, whatever may be the claim of title on the part of the complainants. These defendants further state that no copy of the exhibits mentioned in the plaintiff's bill was annenxed [annexed] to the copy of the bill served on them, and they do not admit the allegations of the bill as to them to be true.
The defendant J.B.S. Harris filed a separate answer. He admits that his name was used by his express consent, in the action of ejectment before mentioned, as one of the lessors of the plaintiff. He states that the deed of trust executed by the said Penman to this defendant, Olcott, and Alexander was made at the instance of the defendant Olcott and others, at a time that the association before referred to was largely indebted to this defendant, and, he believes, also to Alexander and Olcott, and this defendant believes that one great object of the said trust was to prevent Penman from squandering the said property, and thereby to enable said trustees to secure the debts due by the said association. This defendant further avers that the said association is (219) still indebted to him, as executor of his father and in his own right, to the amount of $40,000 or $50,000, and is also indebted to Alexander and Olcott in an amount not known to this defendant; and that it was for the purpose of securing the large debt due to him from the association that he permitted his name to be used in the action of ejectment above referred to; and he insists that if a recovery had been effected on the demise of himself and his cotrustees, they would have been entitled, both in law and equity, to have taken possession of the said land and to have held the same as a fund for the satisfaction of their debts; and he insists that if the legal title to the said land is still in him and his cotrustees, then they will, in equity, be entitled to hold said land as a fund applicable to the payment of their debts. The defendant avers that no copy of the exhibits referred to in the plaintiff's bill was attached to the copy of the bill served on him, and does not admit such exhibits. He insists that, even if a request had been made to him to part with his legal title, which he denies, he had a right to require the payment of his debt before he parted with such title.
Judgment pro confesso by due course of the court was taken against the other defendants.
Upon the coming in of the answers a motion was made to dissolve the injunction, which was refused, and, by leave of the court, the defendants appealed.
The injunction ought to have been continued until the hearing.
The land in dispute was conveyed to one Penman in 1835. Penman in 1836 conveyed to J.B.S. Harris, Olcott and Alexander, three of the defendants, in trust for the Anglo-American Gold Mining (220) Association and such persons as the said association should appoint. In 1837 Henry Blundell, Henry Heathern, and James Magnus, three of the directors of the said association, conveyed to Wilson and Henderson, two of the plaintiffs, in trust to sell for the payment of debts, and, in pursuance of the deed, directed the said trustees to hold in trust for the said Wilson and Henderson. Afterwards the said Wilson and Henderson conveyed to Irwin and Elms, two of the plaintiffs, who took possession by their tenants.
In 1838 Morrison and William A. Harris, two of the defendants, caused the land to be sold by the sheriff under an execution in their favor against Penman, became the purchasers, and took a deed from the sheriff.
In 1840 an action of ejectment was instituted against the tenant of Irwin and Elms. The declaration contained one count on the demise of Morrison and W.A. Harris, and a second count on the demise of J.B.S. Harris, Olcott, and Alexander, and a recovery was made upon the first count.
The prayer is for the conveyance of the legal title by the defendants J.B.S. Harris, Olcott, and Alexander, and that the defendants W.A. Harris and Morrison be enjoined from suing out a writ of possession.
The equity of the bill, so far as it relates to the injunction, is that the recovery in the action of ejectment upon the demise of W.A. Harris and Morrison was effected by a combination between J.B.S. Harris, Olcott, and Alexander, who are trustees for the plaintiffs, and W.A. Harris and Morrison, who claim adversely to them under the sheriff's deed, by which combination an undue advantage was gained; for although the defendant in that action could have defeated a recovery upon the demise of W.A. Harris and Morrison, who claimed under a (221) sheriff's sale in 1838, by showing that he had conveyed to the trustees in 1835, yet as there were two demises, this would necessarily have enabled the plaintiff to recover on the second demise, and thus the present plaintiffs were, in that action, exposed to a cross-fire. This is a plain equity, confessed by the defendants.
J.B.S. Harris, the only one of the trustees who has answered, admits that he and Alexander consented that their names should be used as lessors in the action of ejectment, which was also to contain a count in the name of W.A. Harris and Morrison, and says his reason for doing so was for the purpose of securing a large debt which the association owed him when he consented to accept the deed of trust, and which is still unpaid; and he insists that, had a recovery been effected on the demise in his name and that of his cotrustees, he would have been entitled, in law and equity, to hold the land to secure the debt. He does not allege that the debt was mentioned in or secured by the deed of trust, but admits that the legal title was received by him and his cosureties in trust to hold for the association and for such persons as the directors of the said association might direct or appoint. It is a strange idea of equity for a trustee, because the legal title has been confided to him, to assert a trust in favor of himself. Equity will under no circumstances permit a trustee to attempt to secure a debt of his own, not secured by the trust, by forming a combination with one claiming adversely to those whose interest he has undertaken to protect, because it is a palpable breach of trust and a direct violation of the confidence reposed in him.
The other two defendants, William A. Harris and Morrison, admit that they united with the trustees in bringing the action of ejectment, but they insist that as the recovery was effected upon the title which they set up as purchasers at a sheriff's sale, and not upon the demise of the trustees, they ought to be allowed to take possession, especially (222) as it is the policy of courts, both of law and equity, to favor purchasers at sheriff's sales.
It is the policy of the law to favor purchasers at sheriff's sales as against debtors in the executions whose debts have been paid by the purchasers, but not as against third persons, particularly where these have the equitable estate and the purchasers have effected a recovery at law by an iniquitous combination with the trustees, whose duty required them to give protection, instead of taking sides with their adversaries.
If these defendants had impeached the deed made by Penman to the trustees, upon the ground of an intent to defraud his creditors, it might probably have avoided the, at least upon the hearing, as the recovery would then have been effected upon the strength of their own title as purchasers, and not by force of the combination; but there is no allegation of the kind, and the bill avers that Penman purchased as the agent and with the funds of the association, the cestuis que trustent. That they were the equitable owners before the conveyance by Penman to the trustees is not denied or called in question.
The objection that copies of the exhibits referred to in the bill were not annexed to the copies served is not available on the motion now before us. It would have been a good reason for refusing to answer, but the exhibits are sent up with the transcript. The deeds are duly proven and registered, and the motion was heard in the court below upon the bill, answers, and exhibits filed.
The third position taken by the defendants W. A. Harris and Morrison, that they should be allowed to take possession because there is no allegation that the mine will be endangered, or that they are not fully able to pay the rents and profits of the land and all the gold they may take from the mine, is also untenable. These allegations are not necessary against parties who have no title (for, in 1838. Penman had no interest in the land, either legal or equitable), and who effected (223) their recovery at a law by inducing trustees to commit a breach of trust and to form a combination against their cestuis que trustent. The interlocutory decree was right.
PER CURIAM. Affirmed.