Opinion
(December Term, 1843.)
1. A contracted with B for a tract of land and gave two bonds for the price, one for $1,000 and one for $500, B giving a bond to convey the title to A when the price was paid. B afterwards surrendered the bond for $500 to A and died, the other bond being unpaid and no title conveyed, and transferred the bond for $1,000 to his infant grandchildren, to whom A was appointed guardian, giving the usual guardian bond. A afterwards conveyed this land to a trustee for the purpose of paying certain debts, and died insolvent: Held, that the infants were still entitled to hold this land as a security for the bond of $1,000, in preference to the creditors secured by A's deed of trust, and that it was just and proper they should do so, before resorting to the securities in the guardian bond.
2. Until an actual conveyance, under a contract for the sale of land, the estate is a security for the purchase-money, analogous to a mortgage.
3. An infant's action at law on a bond due to him by his guardian is not even suspended by such guardianship, and the infant may sue on it by his next friend; but, even if suspended, the suspension would not work an extinguishment of the debt, but would cease with the guardianship, as in the case of a debtor administering on his creditor's estate.
4. Certainly in a Court of Equity such an extinguishment would not be permitted, but every security necessary for the satisfaction of the debt would be kept on foot, against any act of the debtor himself.
5. Though a person, claiming land under a contract of sale and not having paid the purchase-money, obtain a decree of a Court of Equity against the heirs of the vendor, who is dead, requiring them to convey the legal title, yet such decree of itself will not convey the legal title.
6. The purchaser of an equitable title takes it subject to prior equities. It is only the purchaser of the legal title, without notice of a prior equity, who can hold against such equity.
This cause was removed by consent from the Court of Equity of GUILFORD to the Supreme Court, at Fall Term, 1843.
Graham for the plaintiff.
Morehead for the defendant.
The bill set forth, substantially, the following facts: In April, 1836, William Hanner purchased from his father-in-law, Nathan Armfield, a tract of land, which is described, at the (118) price of $1,500; and gave therefor one bond for $1,000, payable 25 December, 1836, and another bond for $500, payable 25 December, 1837. And Armfield gave to Hanner a bond in the penalty of $3,000, with condition to convey the land in fee, upon the payment of the money mentioned in those bonds. In January, 1839, and while very sick, Armfield surrendered to Hanner, as a gift, the bond for $500, to be canceled; and it was done. At the same time, by way of donation and advancement, Armfield gave the bond for $1,000 to his three grandchildren, Alexander, Alfred and John Hanner (who were infant children of the said William Hanner) and endorsed the same to them. In a few days thereafter Armfield died intestate; and William Hanner administered on his estate, and was also appointed the guardian of his three children, and got possession of the bond for $1,000. In 1840, William Hanner filed his bill in the Court of Equity against the heirs-at-law of Nathan Armfield, one of whom was his own wife, who was a daughter of Armfield; and therein he set forth the facts as above stated, and thereupon insisted, that in contemplation of law the whole debt for the purchase-money of the land was paid or extinguished by his having been appointed administrator of Armfield, and the guardian of his own children, who were the assignees of the bond for $1,000, and prayed that the heirs-at-law might be compelled to perform the contract specifically, and convey the land to him, W. Hanner, forthwith. The heirs entered no appearance, and the bill was taken pro confesso and the cause heard ex parte in October, 1842, and a decree entered, which, without declaring the payment of any part of the purchase-money, decreed that the defendants therein should execute a conveyance for the land in fee to W. Hanner, and be perpetually enjoined from disturbing his possession. Nothing has ever been done under the decree. In February, 1843, William Hanner died intestate and insolvent. But, five days before his death, he executed to Ralph Gorrell, one of the defendants (who had been his solicitor in the above mentioned (119) suit), a deed of assignment of all his property, as a security for certain debts mentioned therein, and upon trust to sell or dispose of the estates conveyed, and, out of the proceeds, satisfy those debts, or such part thereof as such proceeds would satisfy. In that assignment the land in question is included, and is described therein as follows: "One tract of land, containing 400 acres, more or less, it being the land on which Nathan Armfield formerly lived, and which the said Hanner claims under a title bond executed by the said Armfield to him, and under a decree of the Court of Equity for Guilford County."
The present bill was filed in June, 1843, by Alexander, Alfred and John Hanner, and by Walter A. Winborn, who was the surety of William Hanner for his guardianship of his three sons, against Ralph Gorrell, the trustee, and the creditors provided for in the deed of trust, and, by amendment, also against the heirs-at-law of Nathan Armfield and of William Hanner; and, after setting forth the facts as above stated, it charges that William Hanner never, in fact, paid any part of the debt of $1,000, nor accounted for the same by charging himself therewith in his guardian accounts, nor put out any sum at interest for the wards; and thereupon it prays that the land may be declared to be a security for that debt and interest, and that it may be paid by the trustee, or raised by a sale of the land under the directions of the court, and that all proper parties may be decreed to join therein.
Answers were put in by Mr. Gorrell and the creditors secured by the deed; but they do not materially vary the case as before stated, as to the matters of fact. They insist, that the infant plaintiffs have an adequate security for their demand in the responsibility of the other plaintiff, Winborn, as surety for the guardianship; that the debts provided for in the deed are just, and will be lost, or a part of them, if the plaintiff should obtain a decree; and that the creditors had no knowledge of the debt now claimed by the plaintiffs, and believed from the decree obtained by William Hanner, that he had thereby become the owner of the land, and could convey (120) it. It is admitted, however, by Mr. Gorrell, that he knew the debt was not, in fact, paid; and he says that he would not have acted as trustee had he been present when the deed was executed, but he was induced afterwards to accept the deed, lest all its provisions might fall through. It is also admitted by Mr. J. Sloan, one of the creditors, that he was the only creditor who was present at the execution of the deed, or was active in its preparation, and that William Hanner then mentioned the debt of $1,000 as still existing.
Replication was taken to the answers and the cause set for hearing, when it was removed to the Supreme Court.
If the bill were against William Hanner alone, even these defendants would not, at least they do not, question the proposition that the land would be a security for the debt due on the bond given to his children by their grandfather. By the express terms of the sale, the purchase-money was to be paid before Hanner was to have a deed. He did not even pretend in his bill that Armfield meant to discharge him from that provision of the contract, when he gave one of the bonds to him and assigned the other to his children. If there had been such an understanding or intention on the part of Armfield, why did he not convey the land at the same time? The only answer must be, that it was well understood that the legal title was still withheld, as a security for the provision the grandfather was making in his last illness for his grandsons. So Hanner's own bill treated the transaction; for it admits that he was bound to pay the whole purchase-money before he could call for a conveyance, and puts his right to call for it in that suit upon the position that he had paid it — not in fact, but upon a legal principle, by way of extinguishment by means of his being the guardian of the infant proprietors of the bond, and thus being the hand to pay and receive. Therefore, unless that principle were applicable to the case, it stood upon the common doctrine of the court of equity, that until an (121) actual conveyance, the estate is a security for the purchase-money, analogous to a mortgage. Oliver v. Dix, 21 N.C. 605; Green v. Crockett, 22 N.C. 390. Now, it was an entire mistake to suppose that the principle of law relied on had anything to do with the case. The action at law on the bond was not even suspended; for, although the debtor was the guardian, yet the action on his bond would not be in his name, but in that of the infants themselves, the assignees of the bond, by a next friend. But even if it were suspended, it would only be during the guardianship; and that being the act of the guardian himself and the law, and not of the infant creditor, the suspension would not work an extinguishment, but be only temporary and cease with the guardianship, as in the case of the debtor administering on the creditor's estate. Needham's Case, 8 Rep., 136. But certainly, however it might be at law, a court of equity would never enforce against any person, and much less against infants, any such principle of extinguishment, but would relieve against it, and keep on foot every security necessary to the satisfaction of the debt, against any act of the debtor himself.
It may be true, that the wards might charge their father on his bond for the purchase-money, and also might charge him and his surety on the guardian bond; but that does not preclude them from insisting also on their real security. Indeed it is just and proper, they should have recourse to that in the first instance, as the property of the debtor himself, in exoneration of his surety. Bunting v. Ricks, 22 N.C. 130. There was then no satisfaction of the debt in question, as is obvious in Hanner's own bill: and, consequently, he had no right to a conveyance, and upon the bill of his children against him the land would be declared a security for the debt, and disposed of accordingly.
The decree in that cause made no difference. The present plaintiffs were, none of them, parties in that suit, and, therefore, not bound by the decree Proprio vigore. If a conveyance had been actually made under it, the plaintiffs would still have been entitled to relief against (122) Hanner himself, because obtained in bad faith towards those creditors, and with the view to defeat them of a security to which they were entitled. But there has been nothing done under the decree, and, therefore, the legal title is still outstanding in the heirs of Armfield, and the plaintiffs may insist upon it as security for their debt, actually subsisting. The decree of a court of equity is not a legal title. It professes only to require the person to convey the title by executing a deed. Ferebee v. Procter, 19 N.C. 439. And this brings up for consideration the defense set up by the trustee and creditors claiming under Hanner's assignment, as peculiar to themselves, and founded on merits independent of those of Hanner and himself. They claim to be just creditors, who have honestly obtained a security for their debts without a knowledge of the plaintiff's equity; and, therefore, entitled to hold it. But they were mistaken in supposing that they had obtained a conveyance of this land as a security. They say, they relied on the decree as determining the rights of the parties and constituting a title. But we have seen, that is not so. The deed is only an assignment of an equitable title, and then, were these persons purchasers instead of creditors, the estate itself must answer all claims to which it would have been subject in the hands of the assignor. It is only the purchaser of the legal title without notice of a prior equity, who can hold against such equity. Polk v. Gallant, 22 N.C. 395. In the case before us, there is not only not a conveyance of the legal title, but there is a plain reference on the face of the deed to the decree and covenant as constituting the only title of Hanner, and those documents would have enabled all these persons to have discovered the true state of the case, not to speak of the actual knowledge of the trustee and the active creditor in getting the deed. But it is useless to consider the particular circumstances, as the defendants are but the assignees of an equity, and get only what the assignor had, which was the right to have this land, when he had paid to his three children the debt which he owed them for the residue of the purchase-money. The Court takes nothing from the defendants, which they or Hanner ever had; but (123) only say, the defendants can not take from the plaintiffs a security which they honestly had before the defendants got theirs and which they have done nothing to impair. Therefore, the land must be declared to be a security for the sum due on the bond for $1,000, and it must be referred to inquire what that sum is; and, as both sides wish the land sold, when the debt shall be ascertained, a sale will be decreed, and, after paying the plaintiff's debt and interest, and costs, the balance will go to the trustee to be applied under his assignment.
PER CURIAM. DECREED ACCORDINGLY.
Cited: Smith v. Brittain, post, 355; Long v. Barnett, post, 637; Harris v. Harrison, 78 N.C. 213-215; Todd v. Outlaw, 79 N.C. 237; Ruffin v. Harrison, 81 N.C. 220; Mast v. Raper, 81 N.C. 334; Wharton v. Moore, 84 N.C. 481; Durant v. Crowell, 97 N.C. 373; Barnes v. McCullers, 108 N.C. 52.