Miller v. Stetson & Co.

RICE, C. J. The complainants are judgment creditors of Thomas Miller. Executions have issued under their judgments, and been returned “no property found.” The demands on which their judgments are founded, existed before the said Miller executed the deed, a copy of which is made an exhibit to their bill; but were not reduced to judgment until after it was executed. The deed was executed since the Code went into effect. The question for our decision is, whether, upon-the foregoing facts, taken in connection with the contents of the deed, the chancellor was authorized to pronounce it void as to the complainants; in other words, whether the deed shows anything on its face, which, in judgment of law, renders it void as against such creditors of the grantor as the foregoing facts prove the complainants to be. The deed on its face appears to a deed of trust, intended as a security for the payment of the debts specified in it. It does not require of any creditor provided for by it any release, or the performance of any other act impairing his existing rights. It does not purport to convey all the property of the grantor, nor to provide for all his creditors. It vests the property mentioned in it, to-wit, certain city lots and goods, in the trustee for the benefit of certain designated creditors, not including the complainants; and directs him to convert the same into money, and apply it absolutely and without reserve to the payment of the specified debts, equally and without any pi-eference or priority of any one of them over another; and it then directs the trustee to pay to the grantor, “or his oi'der,” the surplus, if. any, which may remain in his hands, after payment of the debts, costs and charges, expressly provided for, and legally payable by the terms of the deed. The direction to pay the surplus to the grantor, “or his order,” is, in legal effect, the same as a direction to pay it to him. ITnder our law, his right to the surplus, under such a deed, is as transferable by him, when the direction of the deed is that the trustee shall pay it to him, as when the direction is to pay it to him “ or his order.” In either case, his transferree might sue in his own name for it. — Code, §§ 2129, 1680. [169] Section 1550 of tbe Code provides, that “ all deeds of gift, all conveyances, transfers, and assignments, verbal or written, of goods, chattels, or things in action, made in trust for the use of the person making the same, are void against creditors, existing or subsequent, of such person.” Under that section, and the New York exposition of a statutory provision of that State just like it, made before our Code was adopted, the chancellor pronounced the deed herein above mentioned to be void as to the complainants, because he supposed that the provision it contains as to the surplus is an express trust for the use of the grantor, within the meaning of the section of the Code above copied. He cites and relies on Goodrich v. Downs, 6 Hill’s (N. Y.) Rep. 438. The common-law right of a debtor, to give a preference to certain creditors over all others, has been restricted, but not destroyed, by the Code. Whatever may be the extent of his embarrassments, he may, even under the Code, devote a part of his property to the equal, absolute and unconditional payment of certain creditors, in preference of all others, by a deed of trust executed for the sole purpose of securing and paying the honest debts of those creditors. To that extent, at least, he has the power of preference. Regarding the deed now under consideration as an exercise of that power by the grantor’, there is'nothing on its face which carries the power beyond mere preference, or shows that it was made, in whole or in part, “in trust for tbe use of” the grantor. The insertion of the express provision, that the surplus remaining after payment of the debts, costs, and charges, expressly provided for and legally payable by the terms of the deed, should result to the grantor, was a mere work of supererogation. If that provision had been omitted, the same surplus would-have resulted to him, from the other provisions of the deed, by mere operation, of law. The deed means the same-thing, whether it have or have not that provision; and cannot be rendered invalid as to any creditors by its insertion, unless there be some law in this State which, in effect, declares that the power of a debtor to prefer certain creditors over all others cannot be exer [170] cised by any deed of trust which does not, on its face, direct that the surplus which may remain, after the discharge of the debts of the preferred creditors, shall be applied to the payment of some debt or demand for which the grantor is liable to some other person, and shall not result to the grantor until every debt or demand for which he is liable to others shall have been discharged!! I It is certain there is not in this State any law which makes any such direction essential to the validity of the exercise of the power of preference, when that power is exercised, as in the present case, by a deed of trust which makes a simple and unconditional appropriation of a part of the debtor’s property to the equal payment of the honest claims of the preferred creditors designated by the deed. When that power is exercised by such a deed, a reservation to the grantor of the surplus remaining after the payment of the debts, costs, and charges, provided for and legally payable by its terms, whether expressed on its face or implied by law, is not “ a trust for the use of the” grantor, within the meaning of section 1550 of the Code, and does not render the deed void as to any creditor of the grantor. — Hindman v. Dill, 11 Ala. R. 689, and cases therein cited; Brown v. Lyon, 17 ib. 659; Burgin v. Burgin, 1 Iredell, 453; Hafner v. Irwin, ib. 490; Leitch v. Hollister, 4 Comstock, 211; Hall v. Dennison, 17 Vt. R. 310; Mechanics’ Bank v. Gorman, 8 Watts & Serg. 304; Estwick v. Cailland, 5 T. R. 420. It is the mere legal result of the other provisions, which were inserted in the deed in the exercise of the clear legal right of the debtor to prefer creditors. It does not render the surplus less accessible to unpreferred creditors, when a second time in his hands, than it was before he parted with it; nor does it prevent them, if they have obtained judgment and a return of no property on the execution, from intercepting the surplus before it gets back into his hands, and subjecting it to the satisfaction of their demands, at any time after the execution of the deed. — Dubose v. Dubose, 7 Ala. R. 235; Tarver v. Roffe, ib. 873; Frow v. Smith, 10 ib. 571; Graham v. Lockhart, 8 ib. 9; Hodge v. Wyatt, 10 ib. 271; Floyd v. Morrow, 26 ib. 353. The judgment [171] of the law, pronounced upon the mere face of such a deed, is, that the deed was made, not in trust for the use of the grantor, but for the purpose of preferring the creditors designated in it; and that the reservation as to the surplus contained in it is not one of the purposes for which it was made, but is perfectly consistent with the honest purpose of the deed, (to-wit, the preference of the designated creditors,) and is the mere expression of an incident which legally results from the accomplishment of that purpose by the other provisions of the deed. "We shall not undertake to say, that the decision in Goodrich v. Downs, supra, was one “not fit to be made ” nor followed in New York. Each State is entitled to have a system of its own for the protection of the rights of creditors. The statutory provision of New York, of which it is said section 1550 is a literal or substantial transcript, is but part of the system of that State. It was proper for the courts of that State to put such a construction upon that particular provision as would make it harmonize with other parts of the system to which it belonged. It is but fair to presume, that to produce that harmony, the New York courts found it necessary to make and to adhere to the decision in Goodrich v. Downs. But, however that may bo, there is nothing in our system which would justify our courts in holding, that the insei’tion in suck a deed, as that exhibited in this case, of a mere reservation as to. the surplus, which the law itself would imply, rendered the deed void as to the creditors of the • grantor, as a deed “madein trust for the use of the” grantor, within the meaning of section 1550 of the Code. That section is but part of our system; and, in expounding it, our courts must be controlled by other parts of our system, and the meaning of the phrase, “trust for the use” of the grantor, as settled by decisions of our own courts made before the adoption of the Code. Long before the Code was adopted, it was firmly settled hy our decisions, that the question whether a reservation as to the surplus was “ a trust for the debtor’s use,” depended on the nature and character of the other provisions of the deed in which the reservation was found; that in deeds of trust, [172] entirely different in the nature and character’ of their provisions from the one exhibited in this case, such a reservation was a trust for the debtor’s use, (Grimshaw v. Walker, 12 Ala. R. 101; West, Oliver & Co. v. Snodgrass, 17 Ala. R. 549;) but that in deeds of trust similar in the nature and character of their provisions to the one exhibited in this case, such a reservation was not a trust for the debt- or’s use. — Hindman v. Dill, 11 Ala. R. 691, and the cases therein cited. And in Hindman v. Dill, which was decided several years before the Code was adopted, this court very clearly indicated its unwillingness to sanction Goodrich v. Downs, even as a proper exposition of the statutory provision of New York. The language then employed by this court, in reference to Goodrich v. Downs, was as follows: “We are not prepared to say that, under the circumstances disclosed in that case, wo should have considered the trust as one for the debtor’s use.” Under such circumstances, the courts of this State must understand our legislature to have adopted section 1550 in the sense in which our courts by former decisions had indicated they would understand it, rather than in its New York sense; and this view is greatly strengthened by the other provisions of the Code in relation to the rights of debtors and creditors. We have examined all the'objections urged against the validity of the deed exhibited with the bill; and we are fully convinced, and therefore decide, that there is nothing on its face which renders it void as to the complainants, or authorizes any court to declare it -void as to them. Shackelford v. P. & Bank, 22 Ala. R. 238; Abercrombie v. Bradford, 16 Ala. 560; Tarver v. Roffe, 7 Ala. 873; Dubose v. Dubose, 7 Ala. 235; P. & M. Bank v. Clarke, 7 Ala. 765; Pope v. Wilson, 7 Ala. 690; Evans v. Lamar, 21 Ala. 333; Graham v. Lockhart, 8 Ala. 9; Brown v. Lyon, supra; Burgin v. Burgin, 1 Iredell, 453; Hafner v. Irwin, ib. 490. The chancellor erred in deciding contrary to the law as herein above declared. For that error, his decree is reversed, and the cause remanded. The appellees must pay the costs of the appeal.