Opinion
(December Term, 1859.)
1. One creditor secured in a deed of trust cannot maintain a bill for an account of the fund without making all creditors who are preferred, and all in the same class with him, parties either plaintiffs or defendants.
2. Where a surety seeks to have his debt paid to the creditor out of some specified fund, or by some other party than himself, such creditor is a necessary party to the bill.
3. Aliter, where he has paid the debt and is seeking to be reimbursed by the principal or cosurety.
4. Where a bill alleged a fraudulent combination between the maker of a deed of trust and one of the trustees therein named, and it was sought to set aside a preference given to such trustee, it was Held that the trustor, as well as the trustee, should have been made a party.
CAUSE removed from the Court of Equity of CUMBERLAND.
W. McL. McKay for plaintiff.
Neill McKay and Fowle for defendants.
The bill alleges that in 1854 one Matthew Sirmans executed to the defendants Jackson and Warren a deed of trust of certain property therein mentioned, consisting of a stock of goods, household furniture, a wagon, and certain debts and accounts due the said Matthew, in trust: First, to discharge a debt of about $90 due the estate (12) of Henry Dawson, whereon Randall Jackson and the defendant Warren were sureties. Then a debt of owing by Sirmans to the said defendant Richard Warren. Then to discharge two notes of $500 each, due to N. K. McDuffie. Then to pay a certain note of $700, due by Sirmans to Blaney Williams, or so much as would save the plaintiff harmless, he being one of the sureties thereon.
The bill further alleges that the two notes of $500 were originally due to a copartnership consisting of said McDuffie and one Upchurch, and that on a settlement between them the notes in question fell to the share of McDuffie, and that he endorsed them to the plaintiff, and that Sirmans paid all of one of these notes but $176, and that there is about $676 due plaintiff on the two.
The bill further alleges that the debt provided for in the second instance in said deed of trust had no existence in fact, but was feigned and covinous.
The bill further charges that after the trustees took possession of the goods conveyed, they permitted Sirmans to use and appropriate as much of them as he desired.
The bill further charges that the provision in the said deed to secure him against loss on the debt due Blaney Williams has not been complied with, but that plaintiff has been sued on the same and a judgment obtained, and that the plaintiff will have at least half of the debt to pay, there being one other surety.
The prayer is that "a decree be made in favor of the plaintiff for $676.04, with interest and costs and charges, and for so much as will save him harmless where he is surety for said Sirmans."
The defendants, in their answer, state that the $500 secured to Warren in the deed of trust is not fraudulent; that the latter had become the surety for Sirmans in sundry instances to the amount of that sum, and that it becoming manifest he should have to pay these debts, it was agreed that he should be considered as a creditor to that (13) amount and be indemnified in this provision.
Nothing is said in the answer as to the two notes of $500 due to N. K. McDuffie, or the endorsement to the plaintiff, except that, having paid the preferred debts, there was nothing in their hands to pay them, or any part of them.
The defendants further say that the plaintiff, previously to the filing of this bill and previously to the judgment on Blaney Williams' note, became insolvent and left the State; that he paid nothing on that debt, but that it was satisfied by the sale of the property of one Dougald McPhail, who was cosurety with him.
The defendants insist that all the creditors who are preferred in the assignment made by Sirmans, as also those sought to be postponed by this bill, to wit, N. K. McDuffie, Randall Jackson, and one James Harven, ought to have been made parties, and they ask the same advantage as if they had demurred. They deny all combination, etc.
The cause was set down to be heard on the bill and answer.
The bill is badly drawn, and the cause being set for hearing on "bill and answer," the case fails, as well in regard to the probata as the allegata. It is defective in form and substance. In short, the plaintiff cannot have the relief asked for without departing from so many of the established modes of proceeding in courts of equity and violating so many clear principles that we feel at a loss which ground to select as the basis of the decree dismissing the bill.
The plaintiff seeks for an account of a fund which the defendants either have or ought to have received as trustees, under a deed executed by one Sirmans, and alleges that he is entitled to have one of the debts therein enumerated paid to him, and to be exonerated in respect to another, and also charges that the deed was made by Sirmans (14) with an intent to defraud creditors, for that a supposed debt of $500 secured to the defendant Warren, who is one of the trustees, is feigned and covinous.
1. The allegation that two notes of $500 each, set out in the deed as payable to N. K. McDuffie, became the individual property of the said McDuffie in the settlement of the copartnership of McDuffie and one N. S. Upchurch, and were endorsed by McDuffie to the plaintiff, is not admitted in the answer, and there is no proof in respect to it; so this part of the bill fails, and not only so, but the failure causes a fatal defect for the want of parties, for these two debts are to be paid before the debt in which the plaintiff is concerned as a surety, and consequently McDuffie and Upchurch were necessary parties. It is well settled that one creditor secured in a deed of trust cannot maintain a bill for an account of the fund without making all creditors, who are preferred, and all who are in the same class with him parties, either as plaintiffs or defendants. Patton v. Bencini, 41 N.C. 204; Fisher v. Worth, 45 N.C. 63. It is necessary to enforce this rule to prevent a multiplicity of suits, for otherwise the trustee might be subjected to as many suits as there are creditors; and to protect the trustee for an account taken in the suit of one would not be evidence in the suit of another creditor, and so the trustee could never know when he was safe.
2. Where a surety has paid the debt of his principal he may proceed against him, or may subject a fund which he has provided without making the creditor a party; but where the debt is unpaid and the surety seeks for exoneration, there, as a matter of course, the creditor must be a party, for the relief is not to have the amount paid to the surety, but to have it paid to the creditor, who is decreed to accept it in discharge of the liability. Our case furnishes an apt illustration of the principle. Sirmans is indebted to one Blaney Williams, with the plaintiff and one McPhail as his sureties. A fund is provided by Sirmans for the payment of the debt, or a sufficient amount thereof to save the plaintiff harmless; the plaintiff is insolvent and has left the country. Now, is the fund to be paid to him or to Williams? (15) Indeed, he hardly has the face to ask for the money, but prays for something like it, in the shape of a decree, for so much as will save him harmless in respect to his suretyship, when he does not allege that he has paid, or ever expects to pay, one cent! It is averred in the answer that the whole debt has been paid by a sale of the property of McPhail. If so, he is entitled to be subrogated to the rights of the creditor, and ought to have been a party on account of the interest which he has in the fund.
How far a creditor is at liberty to ask to have a deed of trust carried into execution which he alleges was made with an intent to defraud creditors, whether he can claim under, and also against it, is a question into which we will not now enter, for, as a fraudulent combination is charged between the debtor and one of the trustees, it would seem both parties to the alleged fraud should be before the court. But Sirmans is a necessary party on another ground — he is charged with having retained a large party of the trust fund, and it is admitted in the bill that he made a payment of several hundred dollars on one of the notes secured in the trust, to wit, the note payable to McDuffie after the creation of the trust. So he is a necessary party in taking the account, both in regard to items of charge and discharge.
PER CURIAM. Bill dismissed with costs.
Cited: Wiswall v. Potts, post, 189.
(16)