Opinion
(June Term, 1844.)
1. An execution binds equitable interests and rights of redemption of mortgages, only from the time of issuing of the execution, and not from its teste.
2. As against a judgment creditor, a purchaser of a legal estate must take notice that the debt has been reduced to judgment at the time of his purchase, and that the execution will overreach his purchase.
APPEAL from an interlocutory order made by his Honor, Judge Battle, at the Spring Term, 1843, of MONTGOMERY Court of Equity, dissolving the injunction which had been granted in the case.
Strange Mendenhall for the plaintiff.
Winston for the defendants.
The following facts are stated in the pleadings:
E. L. Morgan, being seized of the land in controversy in this cause, and being desirous of borrowing the sum of $500, on 9 October, 1839, made a note payable to A. H. Saunders and G. Coggin for that sum, negotiable at the Bank of Cape Fear, at Fayetteville, which Saunders and Coggin endorsed for his accommodation, and redelivered to Morgan, that he might have it discounted. He offered it for discount but the bank declined taking it, and he then prevailed on an individual to discount it in part, that is, to advance him $150 on it. On 9 October, 1839, Morgan also executed to T. L. Cotton a deed for the land in controversy, in trust to sell the same and pay the debt mentioned in the note, or repay to Saunders and Coggin whatever sums they might be compelled to pay on the note.
In the early part of 1840, the plaintiff and Morgan were upon a treaty for the purchase of the land at the price $725, the plaintiff being informed by Morgan of the deed to Cotton, and it being agreed, if the contract was made, that out of the purchase-money that debt should be discharged. On 10 March, 1840, the parties, Hall, E. L. Morgan, Saunders and Cotton, met to adjust finally the contract, (290) and the payments thereon. The defendant, Nelson Harris, was also present, and assisted in making the computations for the settlement; and then the plaintiff, by assuming debts for E. L. Morgan, or by cash, paid the whole price of $725, except the sum of $152; for which he executed his note, which he afterwards paid. Among the debts paid or assumed by Hall for E. L. Morgan, were some to Nelson Harris. Out of the money paid him on 16 March, Saunders and Cotton then received the sum due on the debt secured by the deed of trust, but they did not reconvey to Morgan, nor convey to Hall, as all parties thought the deed became inoperative by the payment of the debt. After the settlement was closed, Hardy Morgan, the father of E. L. Morgan, delivered to the plaintiff a deed from E. L. Morgan to the plaintiff, purporting to be a bargain and sale in fee for the land, and bearing date 2 March, 1840. At the same time, Hardy Morgan took the note given by plaintiff for $152; and it was agreed between the parties that out of the money due thereon, when paid by the plaintiff, H. Morgan should pay a debt which E. L. Morgan owed to one Delamothe, and for which Nelson Harris was bound as surety. For the debt to Delamothe a judgment was taken in the Superior Court of Montgomery, which began on 5th Monday, which was 2 March, 1840; and afterwards, but it does not appear on what day, a fieri facias issued thereon, tested as of the first Monday of March, 1840, under which this land was sold by the sheriff in July, 1840, and purchased by N. Harris at the price of $50, and he took the sheriff's deed. He then instituted an action of ejectment against Hall, who had gone into possession, and recovered against him. Thereupon Hall filed this bill against Harris, E. L. Morgan, Saunders, Coggin and Cotton, and therein charges that the contract was concluded between E. L. Morgan and himself on 2 March, 1840, and that at that time the deed to him was drawn and executed by E. L. Morgan and left with H. Morgan, to be delivered when the plaintiff should have paid the purchase-money, or secured it satisfactorily; and that 16 March ensuing was then fixed on as the time of meeting, when the creditors of E. L. Morgan (291) could assemble, and Hall would be prepared to pay their demands. The bill also states, that although N. Harris and other persons informed the plaintiff on 10 March, that a debt was due to Delamothe, yet he was not informed that it had been reduced to judgment, otherwise he would have insisted on its being discharged out of the cash payment he then made. The bill then states that the plaintiff had offered to pay to N. Harris the sum he had given at the sheriff's sale, and requested from him a conveyance or release, which he refused to make, and was about suing out a writ of possession and turning the plaintiff out. The bill then insists that N. Harris, after being privy to the contract and settlement between the plaintiff and E. L. Morgan, and getting payment of Morgan's debts to him through the plaintiff, ought not to be allowed to disturb the plaintiff, even if Harris has the legal title under his purchase; and that, at all events, N. Harris ought not to be permitted to use his judgment at law, unless and only as the means of obtaining an indemnity for the sum paid by him, or not without paying to the plaintiff the sum paid out of the plaintiff's purchase-money in discharge of the debt secured by the deed of trust. Wherefore the bill prays a conveyance of the legal title from Cotton, the trustee, and also a release from Harris, upon such terms as the Court may deem just, and, in the meanwhile, for an injunction against the judgment in the action of ejectment.
The answers of all the defendants, except Harris, substantially admit the bill and submit to such a decree as to the Court may seem right. The answer of Harris states that he had no agency in making the contract between E. L. Morgan and the plaintiff. He admits that at their request he made an account of the payments by the plaintiff and ascertained the balance of the purchase-money; but says that he did so merely as scribe at the request of the parties. He likewise admits that E. L. Morgan agreed that certain sums which he owed Harris should be discharged out of the price of the land, and that they (292) were discharged either in money or the bond of the plaintiff. The answer then denies that the deed to the plaintiff was executed on 2 March, 1840, or that the contract or purchase was completed on that day or at any time before the deed was delivered on 10 March; because the defendant states, that on the trial at law it was proved by several witnesses, that about the middle of the week of Montgomery Court, the plaintiff said that he had not purchased the land, and that he did not think he should conclude a bargain for it, as he doubted the title Morgan could make him. Therefore the answer insists that the contract was not finally made until 16 March; at which time the plaintiff made his payments and accepted the deed. The defendant further states that he then distinctly informed the plaintiff that judgment had been obtained in the Superior Court the preceding week for the debt to Delamothe, and that he had consulted counsel and been advised that the land was bound from the rendering of the judgment on 2 March, and, therefore, that the plaintiff must see to the payment of the debt.
The answer further insists that the deed of trust was not good against the creditors of Morgan, because the note was not discounted by the bank, as was contemplated by the parties when it was made, and, moreover, if that should be otherwise, because, upon the plaintiff's purchase, it was not agreed or understood that the legal title of the trustee should be kept on foot for the benefit of the plaintiff, or to be conveyed to him or any other person; but it was considered by all the persons present, that as the debt was paid, the legal title conveyed by the deed of trust was worth nothing, and extinguished.
The defendant admits that he refused to accept from the plaintiff the sum he had given for the land at the sheriff's sale, and insists that he obtained by that sale a good title, both at law and in equity under a judgment and execution creating a lien on the land, prior or preferable to the title derived by the plaintiff under his purchase from E. L. Morgan himself on 10 March, 1840.
Upon the coming in of the answers, the defendant (293) H. moved upon his, to dissolve the injunction obtained against his judgment at law, and his Honor, thinking that whatever equity the bill contained had been fully answered, allowed the motion; but he also allowed the plaintiff to appeal therefrom.
On the points distinctly made in the bill, and upon which the case seems to have been considered on the circuit, and, indeed, was argued before us, the opinion of this Court would be the same his Honor gave. It seems to have been taken for granted by all parties, that the judgment of Delamothe attached on this land, either as the legal estate of the debtor E. L. Morgan, or as being held in trust for him, and therefore, that the purchase under that judgment would have the preferable title in a court of law, as against one purchasing from E. L. Morgan himself, subsequently to the rendering the judgment, and the teste of the fieri facias issued on it. Upon this idea, the plaintiff, after failing at law, filed this bill for the purpose of being relieved against Harris' title, upon several equitable grounds. As far as the grounds of that kind extend, as mentioned in the bill, we think the plaintiff must fail. For, if Delamothe's judgment constituted a lien on the land, or rather, if the execution issued on it, created a lien, by relation, from its teste, we do not see anything in the conduct of Harris, which would prevent him from claiming all the advantages and rights that any other purchaser could. The right to a preference belonged to the judgment creditor, and every person becoming the purchaser under the execution, would entitle himself to the creditor's priority. That Harris had been paid debts, by Morgan, out of the purchase-money, makes no difference, for if he had not bid for the land, some one else would, and the plaintiff would have lost it at all events. He would, however, in each case, lose it by his own fault in buying land subject to a prior encumbrance of a (294) judgment and execution, and being so negligent as not to pay it off, but allow the land to be sold under it. If Harris had drawn the plaintiff into the contract, with a view of being paid his debts, while he deceived the plaintiff as to the title he was getting, it might be different, and Harris might, perhaps, be held to be a trustee of the legal title subsequently got by him at the sheriff's sale. But Harris seems to have had nothing whatever to do with the treaty between Hall and Morgan at any time; all he did in the business, being to act as accountant in stating the debts of Morgan payable out of the price, and striking the balance. He received some of the money, but not as a person interested in the sale, and only as being paid to him by Morgan after he had received it, or became entitled to it, as the price of the land sold by him. Moreover, as against a judgment creditor, a purchaser of a legal estate must take notice that the debt has been reduced to judgment at the time of his purchase, and that the execution will overreach his purchase, or else, the rule of law upon that subject would, in effect, be abrogated. But in this case, the answer removes every pretense of hardship on the plaintiff in that respect, by the positive statement, responsive to the bill, that this defendant gave the plaintiff express notice of the judgment, and of the opinion of counsel, that the land would be bound, if the plaintiff should buy. Upon each of these grounds, we think the plaintiff would have no equity on that part of the case.
We are likewise of opinion that the plaintiff has not an equity to be subrogated to the rights of the creditors secured by the deed of trust, as upon the supposition that the plaintiff paid those creditors, and, therefore, ought to stand in their places. It appears, both by the bill and the answer, that it was not the intention to keep those debts on foot, nor, of course, the deed of trust, as far as it was a security for them. The intent was to pay them, and the belief was, that by so doing, the deed itself became inoperative; which, to be sure was a mistake as far as the legal title of the trustee goes, and (295) as far as a trust resulted thereon, in favor of E. L. Morgan or his assignee. But the debts to the sureties were both in law and fact paid; but, like those to Harris, were paid by Morgan out of his money, which he received for the sale of his resulting trust to the plaintiff, and not by the plaintiff out of his own money. That deed can not, therefore, be set up now as a surety for debts, which the parties intended should be paid, and were paid and extinguished.
But the Court is of opinion, that upon another ground, as far as the case now appears, the plaintiff may be entitled to relief, and therefore, that the injunction ought to have been ordered to stand until the hearing. That ground is, that the answer does not state a case, in which the land was certainly liable to be sold under the judgment and execution, so as to defeat the admitted and honest purchase of the plaintiff. Morgan had not the legal title when the judgment was taken, nor at any time after; and, therefore, at common law, the land was not subject to be sold on execution, but became so, if at all, by the Act of 1812. It is obvious, from the statements of the answer, that on the trial at law, the question was treated, either as if Morgan had the legal title, or as if his resulting trust would be bound by the judgment and execution, in the same manner as his legal title would have been. The relation of a fieri facias at common law is to the teste; and it is settled, that if the teste of the execution and the alienation by the debtor be of the same day, the former is preferred, and a purchaser under the execution gets the title. That is the case, when the interest of the debtor is a legal one, either in personal or real property. But as relates to equitable interests made subject to execution at law, the statute establishes a different rule. The first section of the Act of 1812, is taken from the statute, 29 Car. II., Ch. 3, sec. 10. They both require every sheriff, to whom a writ shall be directed, etc., to do execution unto the party in that behalf, suing execution of all such lands, etc., as any other person shall be seized of, etc., in trust for him, against whom execution is sued, as he might, if the said party, against whom execution shall (966) be sued, etc., had been seized, etc., of such land, etc., of such estate as they be seized of in trust for him "at the time of the said execution sued." The liability of trusts to execution is not, therefore, as at common law, or under the statute of Westminster, from the judgment or teste of the execution, according to the nature of the property, but from execution sued. This was so held in the first year of George the first, in the case of Hunt v. Coles, reported by Chief Baron Comyns. I Com., 226. The case was, that H. Saursby was seized in fee of lands in trust, and to the intent that P. Chamberlain and his wife Anne should have £ 40 a year out of the profits for life, and the rest of the profits should be paid to Hope Chamberlain and the heirs of his body. Then in Trinity term, 1695, one Boardman recovered judgment against Hope C. for a debt of £ 160. On 26 July, 1699, Anne C. and Hope C. borrowed £ 600 from the defendant Coles, and for surety therefor, H. Saursby, by their direction, mortgaged the premises to Coles for 500 years. In 1714, Boardman sued out an elegit on his judgment against Hope Chamberlain, and upon an inquisition it was found that Hope C. was seized in fee, and the sheriff extended one-half and delivered it to the creditor, on whose demise an action of ejectment was brought against Coles. And it was held, that by force of the words in the statute, "at the time of the execution sued," the plaintiff could not recover, although the trustee was seized in trust for the debtor at the time of the judgment rendered, and long after. As the trustee had conveyed the lands to another person before the execution was sued, though after the judgment, the case was not within the act of Parliament. It appears from the report, that Chief Baron Comyns was himself of counsel for the plaintiff; and he seems to have been entirely satisfied with the judgment, and states it with his approbation in his Digest — Execution, ch. 14. It is mentioned in the case that Sir Edward Northey remarked, after the decision, that, ever since the act, that had been thought the proper construction, though he did not know that it had been judicially decided; and (297) then Mr. Justice Tracey mentioned a case in Queen Anne's reign, in which Chief Justice Trevor had given that opinion in the Common Pleas, without any dissent from the other members of the Court. The case of Hunt v. Coles is subsequently cited by all writers on trusts, and in treating of them and their liability for debts, as establishing the rule, that the relation of trustee and of the defendant in the execution as cestui que trust, must exist at the time of execution sued. 2 Comyn's Dig., 71. If the trustee has conveyed to another, then the case is out of the statute. So, it follows, that if the debtor has assigned his beneficial interest to another, so that the trustee is no longer trustee for the debtor, but, in the contemplation of equity, is trustee to the assignee of the original cestui que trust, the case must be equally out of the statute, the words being, "in trust for him against whom execution is sued, at the time of the said execution sued."
In the present case the purchase by the plaintiff of the resulting trust of Morgan with the knowledge and approbation of Cotton, the trustee, unquestionably, as between those three persons, converted Cotton into a trustee for the plaintiff and authorized him to call for the legal title and have it decreed in this Court. The defendant, Harris, says, however, that, although that may be true as between those persons, if alone concerned, it is not true here, because Delamothe's execution created a probable lien. But he says that, very plainly, upon the supposition that the execution created a lien from its teste, as in ordinary cases, and not from "the time of execution sued." Hence he insists that the plaintiff did not purchase on 2 March, but afterwards, that is to say, on 16 March; and further, that, if the purchase was on either of those days, it was not valid, as the judgment was rendered as of 2 March, also, and the execution binds from that day. But we have seen, that in point of law the position is untrue; and that the execution does not bind but from the time it was sued. Now, that time is not set forth in the answer; and it may have been even after 16 March; at which latter day the answer admits (298) the plaintiff completed his purchase and took the deed. Therefore, the plaintiff's equity, founded upon his purchase of the trust estate is not completely answered; as his purchase can not be defeated by the sale under execution, unless the writ was actually sued before or on 16 March. As the answer does not state the fact, it will be the subject of proof in the case; and until it be proved, the injunction should have been kept up.
It may be said that this defense might have been made at law; for if the case was not within the Act of 1812, Harris did not get the legal title under his purchase, and, therefore, ought not to have recovered. It is probable that Harris recovered at law without going into the legal title further than to shew that he and Hall both claimed under Morgan, and, therefore, that Hall was estopped at law to deny the title to have been in Morgan. For so it appeared on the deeds of the parties; neither professiong [profession] to pass the trust, but the one to be a sheriff's deed for the land, and the other, Morgan's deed of bargain and sale. It is not intimated in the bill or answer, that the outstanding title in Cotton was mentioned on the trial, and the present plaintiff, not having the deed, could not shew it. It is true, as we think, that Hall was not estopped to insist upon that outstanding title if he could have shewn the deed. He was only estopped to say that Morgan had no interest, because he claimed to derive an interest under him. But he was at liberty to shew that his true interest was, and that it had been assigned to him in such a manner and at such a time, as prevented it or the land from being liable to be sold by the execution under which Harris bought. But admitting that to have been so, that will not oust the court of equity of its original jurisdiction over this, as a case of trust, and upon that footing its right to relieve the plaintiff, as a person entitled as a cestui que trust. Henderson v. Hoke, 21 N.C. 138. Here upon the shewing of all parties, the plaintiff would have a right to a decree against Cotton for a conveyance of the legal title unless it was divested out of Cotton by the purchase of Harris under the Act of 1812. It does not yet appear to have been so divested, (299) because it does not appear when the execution was sued. If it should turn out that it was before the plaintiff's purchase, then the plaintiff's bill will be dismissed. If, afterwards, there, then, should be a decree that Cotton convey to the plaintiff; and, for his safety, it was proper that Morgan and Harris should be parties to this suit, in order that they should be concluded by the decree, and not at liberty to harass him with another suit after he had conveyed under a decree in this. This being so, it follows that until the plaintiff's right, as equitable owner as set up by him, has been determined against him or appears upon the answer to be unfounded, his possession ought not to be disturbed. For to what end should he be turned out, when he may in this suit compel his trustee to convey to them the legal title, and as soon as he shall, he will in his turn bring an ejectment against Harris, another party to this suit, and evict him? That double litigation at law is avoided, if this Court, having all the parties before it, in respect of one of its peculiar subjects of jurisdiction, namely, a trust for the plaintiff, in which the others allege an interest, shall proceed to determine the rights of all those who thus claim an interest in the subject. Therefore, although it might not have been indispensable that the plaintiff should have made Harris a party to his bill against Morgan and Cotton, seeking a conveyance from the latter, yet it is convenient and useful that he should have done so, as it saves further litigation and expense, and enables the Court to decree as to their rights in the premises. While that question is sub lite, the possession ought not to be changed.
The case has been treated as one of a trust in Cotton purely for Morgan, and, therefore, falling within the first section of the Act of 1812. We suppose it must be so considered after the payment of the debts to Saunders and Coggin; because then there is a resulting trust for the maker of the deed exclusively. But if, upon the principle of Harrison v. Battle, 17 N.C. 537, this was to be considered as an equity of redemption, within the second section of the act, the result would be the same. For the words (300) of that section are, "that the equity of redemption in lands mortgaged shall in like manner be liable to any execution sued out or any judgment against the mortgagor." Neither section carries the liability of the lands held in trust or mortgaged further back than execution actually sued. Until the creditor takes out his process, purchasers may safely deal for the trust in equity of redemption, according to the statute.
For these reasons we think the decree of his Honor was erroneous, and that it should be reversed, and the injunction continued to the hearing.
PER CURIAM. ORDERED TO BE CERTIFIED ACCORDINGLY.
Cited: Edney v. Wilson, 27 N.C. 235; Morisey v. Hill, 31 N.C. 68; Williamson v. James, 32 N.C. 164; Presnel v. Landers, 40 N.C. 254; Hall v. Harris, Ib., 304.
(301)