Nason v. Smalley

The opinion of the court was delivered hy Phelps, J. This bill appears to have* been drawn with a twofold .purpose;, its object being, first to set aside or enjoin' perpetually the judgment at law upon the executors bond, and * in this aspect, is a controversy between the orators and the defendants Smalley and Hickock, who represent the devisees of Daniel Ryan ; and secondly, in case it fails in this object, to sub’ect the es — 122 — tate"0f William Nason, which passed by devise to John Nason,. and from him to' the defendant Clark, to the payment of the debt or claim of the other defendant; and, in this- respect, the controversy arises between the orators and the defendant Clark. The question with Clark depends altogether upon the decision of the question between the other parties to the suit; for, if it should be found, that the other defendants can not sustain their judgment, it becomes unnecessary to enquire, whether the estate can be followed, in the hands of Clark, and subjected to payment of the testators debts. On the other hand if the judgment can equitably he enforced, the question would then arise, whether the orator Evarts is entitled to charge the estate in the hands of the purchaser, in order to exonerate himself. - The question whether the defendants are entitled to retain their judgment resolves itself into two distinct enquiries y the first growing out of the manner in which the judgment was obtained, and the second having reference to the intrinsic merits of their claim. Although the judgment may have been obtained in sucha manner, that it ought not,in itself considered, to bind Everts, yet it would be idle to interfere, if the debt, thus in fact established, be just and equitable, or if the party must be left at liberty to prosecute anew, and a court of law would be compelled hereafter to render a like, judgment. There can be no doubt, that the judgment was entered in pursuance of the written agreement between Nason and Van Duzee. The defendant Smalley, although he repudiates the agreement, and denies all knowledge of it at the time, admits that the judgment was entered by agreement of counsel, and upon a proposition emanating from the counsel of Nason. No enquiry appears to have been made, as to the amount of the supposed divestavit, or the extent of the claimant’s interest in it, but the judgment was for the penalty of the bond. This proceeding was wholly unaccountable, except upon the supposition of an agreement between the parties, and in the absence of all proof or even allegation of any other and different agreement, we must assume it to have been donó in pursuance of the written agreement produced. The question then turns upon the effect of this agreement, and the operation and effect of the judgment obtained in pursuance of it, viewing the transaction with the eye of a court of equity, and in reference to the power of that court to control the use which may be made of it. The agreement in question may be viewed, either as a valid — 123 — and unexceptionable agreement, which may be conscientiously enforced, or as fraudulent in its conception and purpose, and void, to a certain extent at least, both at law and in equity. Upon the first supposition, we must treat the transaction as binding in all its parts, , , ° 1 , 5 at least upon the immediate parties to it, and we must treat ,the judgment as qualified, so far as concerns the use to be made¿’of it, by the co-temporaneous agreement of the parties. It requires no argument to prove that Van Duzee can be permitted to enforce the judgment in no way inconsistent with his contract. A question however is raised, whether the defendants are bound by that agreement; and on this point, it may be well to notice the relation of these parties. Smalley as administrator of the estate of W. N. Ryan must be regarded in this court as a mere trustee, and as recovering in this case for the benefit of the creditors of W. N. Ryan, if any, in the first instance, and for the heir in the next, which heir Van Duzee represents — Smalley is therefore the trustee, and Van Duzee represents one of the cestui qui trust, perhaps the only one. There is therefore a privity between them, the one representing the legal estate or interest, and the other the equitable, and ultimately beneficial interest. Hickock may be considered either as having no interest in the recovery, in which event he may be laid out of the case, or as having an equitable interest in the subject matter of the controversy, and standing in the same relation to Smalley as Van Duzee. In this view of the subject, Hickock and Van Duzee have a joint or common interest, as representing the two residuary legatees of Daniel Ryan, and are to be equally ben-efitted by the recovery at law. The creditors of William N. Ryan, if any, sustain a similar relation to Smalley as their trustee and a similar relation to Van Duzee as being interested in, the same trust. In these persons whom I have enumerated, rests the whole legal and equitable interest in the recovery, and they are the ¡¡only persons whose rights are involved on the part of the defendants, or whose rights are entitled to consideration. It is said that neither Smalley, nor the other cestui qui trust, are bound by this contract. So far as Smalley is a trustee for Van Duzee, he doubtless would 'be bound; for if Van Duzee is himself bound by the agreement, Smalley would not be permitted to pursue the judgment in violation of that agreement, for his, Van Duzee’s, benefit. But with ,this exception, and so far as Smalley represented other equitable interests, it mnst be conceded that neither he, nor his cestui qui trust, would be bound. Granting how-«yer to these persons, the right to repudiate the contract, a serious — 124 — •question arises, whether they must not repudiate it in toto, and with all its consequences. Can they avail themselves of it¿ and of what is done under it, as being beneficially interested, without adopting it in toto ? Can they derive an incidental, perhaps an inequitable advantage from it, and still reject those stipulations, upon the faith of which the judgment was submitted to ? We think not. In our judgment the common principle of election applies, that if they adopt or reject, they must adopt or reject in toto. The judgment is a part of the fruits and consequences of the contract. It was tendered upon certain terms and conditions — to be enforced only in a particular manner, and, if accepted, must be accepted upon those terms. In equity, it is not to be regarded as the act of the court, but as the act of the parties. Van Duzee acted in behalf of all interested, and they must adopt his acts as they are, or not at all. They are not indeed to be prejudiced by his acts, but unless they choose to adopt them, they must stand upon the original merits of their claim. If they seek an adventitious advantage from the judgment, they must take it with all restrictions. This agreement applies as well to those jointly interested with Van Duzee, as to Smalley, who, in equity, is their instrument, and has no right but theirs. In short the trustee is bound in equity ¡by the act of the cestui qui trust, and those interested with him., if they adopt his acts, and if not, they can claim no benefit from them. .'But this case deserves consideration in another aspect. There 5s a strong presumption, arising upon the case that the whole transaction was a fraudulent contrivance, to enable Nason to defeat the title of his own grantee, and to reclaim the land mortgaged to the defendant Clark, to the exclusion of that mortgage. At least, it is apparent that this w.as one object, and that the judgment was entered for a much larger sum than was due to the prosecutor, for this purpose. What then is the .effect of this fraudulent contrivance ? A contract designedly in fraud of third persons, is as a general rule, good as between the parties to it. Still equity will not enforce such a contract while executory, nor, .on the other hand, will it relieve the fraudulent party against his own .contract. On this ground, if Na-son alone had saught relief it would probably have' been denied him, as equity would not relieve him from the consequences of his own fraudulent acts. But it is one of the great purposes of equity jurisdiction, to relieve the party who is the object of .the fraud. — 125 — Although the immediate object, in this transacsion, may have been to defraud the grantees of Nason, still the entering up of a judgment against Everts, to be in any event enforced against him, was as gross a fraud upon him as can well be conceived. On the face of the proceeding, it is apparent that a great share of that judgment was not due to the prosecutor, but was intended for the exclusive benefit of Nason. To permit the judgment to be enforced as against Everts, under such circumstances, would be to permit the principal to recover the debt out of his own surety ; for Nason being the acting executor, and guilty of the devastavit, if one was committed, must be regarded as principal, and Everts his associate stands on the footing of a surety. Indeed it is worse, for as the supposed debt must be taken to be fictitious, it is no less than submitting to a fictitious judgment to be enforced against Ev-erts for the benefit of Nason. Such is the transaction on the face of it. And it does not vary the case, if we suppose that the design in the outset was not to enforce the judgment against Everts, but simply to create a title to the land alluded to in the agreement. If the enforcing the judgment against Everts was an after thought, it is equally fraudulent in its nature and effect. Everts therefore is entitled to relief as the party aggrieved, unless he be so far implicated in the fraudulent purpose, as to subject him to the vindictive rule of law, which denies relief to the fraudulent party. It does not however appear, that he had any notice of the proceeding, until long after it took place.- The most that can be made out is, that his counsel in the suit at law had knowledge of the agreement, and it is insisted that this constructive notice is sufficient to preclude his claim for relief. But the counsel in the suit probably followed the directions of Nason, and under the circumstances, there is no very strong presumption that they consulted Everts on the subject, At all events, we think the presumption not sufficient tp establish notice in fact, and mere constructive notice is not sufficient, so to implicate the party in the fraudulent and culpable design as to preclude him on that ground from ordinary equitable relief. We are therefore of opinion,.that the defendants can claim no advantage by reason of their judgment at law, but if that judgment be retained at all, it must be upon the original merit of their claim, and as a security for what may be equitably due. With a view to this branch of the case, the bill has been referred to the master to take the account, and ascertain how far there .are assets of Wjlliam Nason in the hands of the orators. His re* — 126 — Port s^lows nothing in their hands, and if they have no assets, then there can be no equitable reason for keeping the judgment on foot. It is insisted however that there are two grounds upon which the judgment may be left in force, viz : 1. That the real estate, devised by William Nason to John Nason, may be treated as asset in the hands of the executors. 2. That they have been guilty of a devastavit, in relation to the lease hold estate, forfeited for non payment of rent. As to the first, we think it unnecessary to enquire, whether the creditors may pursue the estate in the hands of a bona fide purchaser, or how far a lien upon it may exist. The question here is, whether the lands are now to be treated as assets in the hands of these executors, and whether Everts is responsible for the value of those lands, under the circumstances of the case. Originally, without doubt, those lands were assets for the payment of debts, and were subject to the disposal of the executors for that purpose. They were devised to the orator John Nason, who was one of the executors, subject however to the contingency of being required •for the payment of debts, and the question is, how long they are to be considered as held in trust by the executors, and when Na-son alone would become seized in his right as devisee. This question is important, as whenever the period should arrive, when Na-son might assert his right as devisee to aliene the land absolutely, the power of the executors as such must necessarily cease, and their trust, with its corresponding liability, must be determined. At common law, no question of this kind would arise. The real estate, not being assets in the hands of the executor, but the heir being liable by reason of the inheritance, he of course was liable in the outset, to the extent of the inheritance, and the only question which] could arise was, as to the right of the creditor to follow the inheritance, in the hands of strangers, Under our system, land being assets in the hands of the executor, and the principle of inheritance and the power of devising being recognized, various questions have arisen, as to the appropriate remedy, in given cases. In the first instance, there is a remedy against the heir or devisee, and lastly a supposed remedy, by way of lien on the estate in the hands of the purchaser. The probate act of 1797, by which this case was governed, was defective, in not designating precisely at what period the liability of the executor or administrator should cease, and that of the heir or devisee should accrue ; a defect which is supplied by the act of 1821, which requires a decree of the probate court to divest the — 127 — right of the executor, or administrator, and to vest the estate in the heir or devisee ; and at this period, the corresponding liability to creditors is transferred. In this omission in the old act, the difficulty of this case originates. On the one hand, it seems improper that the right of the heir or devisee should be suspended, so long as there is a possibility that claims against the estate should arise, and, on the other-hand, there is no good reason for holding the executor or administrator responsible for the supervenient claims,, after the estate has gone to the heir or devisee, and been by him aliened. With respect to claims susceptable of liquidation at the time of the testators decease, there is no hardship in holding the executor responsible for their payment, especially as he may compel the holders to present them within a limited period, or submit to be barred. But with respect to claims, like the one in question, which may originate at an indefinite period afterwards, it is difficult to lay down a general rule sufficiently satisfactory and explicit. We know of no better rule on this point, than this, whenever all debts due from the testator, at the time of his decease, with charges of administration, &c. and all specific legacies shall have been paid then the estate is to be considerad as vesting absolutely, by force of. the devise, and the power of the executor as such ceases. Unless, indeed, he have notice, in the mean time, of claims subsequently accruing, which renders it his duty to retain his authority over the assets. At all events, if the devisee alien the estate after this period, without any notice to the executors of such super-venient claims, there is no doubt, that the alienation is valid, so far at least as to sustain the plea of plene administramt. In this case, the testator died in 1810. All claims against his estate, (this only exepted) must be presumed, at this day, to be satisfied. This claim was put forth, for the first time in 1826, sixteen years after the decease of Nason. Can it be required of Everts to maintain his authority over the estate for this period, and shall the right of Nason, as residuary devisee, to dispose of the estate, be thus suspended ? In our opinion, this would extend the liability of the executor too far. When Nason conveyed the estate in 1820, we see not how Everts could resist the alienation ; and if so, we can discover no reason why the land should now be considered assets in his hands, or he as guilty of a devastavit. The defendants must be left to their remedy against Nason, as devisee or hceres facttis, or, if they can establish their right so todo, to pursue their remedy against the land in the hands of the purchaser. — 128 — As to the supposed devastavit iu relation to the leasehold estate, the point is already disposed of. The forfeiture of the estate took place long after the period, when we consider Everts to have been discharged from all responsibility in regard to the land, and the payment or non payment of the rents was a matter which concerned Nason alone. We think therefore that there is, in equity, no liability on the part of Everts to sustain this judgment — that the entering 'up of the judgment was a fraud upon him — in short, that the judgment can not, 'proprio vigore, bind him, nor can it be permitted to stand as a security, there being no liability to be enforced. Whether the judgment ought not to stand as against Nason, is a more serious question. Viewing the question with reference to the immediate parties to it, viz, Náson and Van Duzee, and without reference to the rights of third persons, it would seem that the judgment ought not to be retained except upon the footing of the contract. Still Nason is undoubtedly liable, to some extent, and in some way, as the executor of Ryan; and the judgment might stand against him, as a security for the liability. Were he the only person whose rights are implicated, there would perhaps be no reasonable objection to suffering it to stand for that purpose. But if it remain, it remains a judgment against him as executor of William Nason. What consequences direct and immediate, or remote and contingent, might flow from this judgment, it is impossible at this time fully to anticipate. Whether it might not serve as the basis of a suit against his sureties as executor of William Nason, or a proceeding of some kind against that estate in the hands of other devisees, or bona fide purchasers, are questions which we are not prepared to answer. The judgment was entered at random, and donbtless for a sum far exceeding what was due. Should it be permitted to remain in force, to serve asa basis for further proceedings, it is doubtful whether persons subsequently liable could be permitted at law to contest it, and thus- the grossest injustice might be done. The argument against relieving Nason is, that he seeks relief from his own fraudulent contract. But in this case the judgment is de bonis testatoris, and it is necessary to enjoin the judgment, in order to obviate the fraud, the consequences of which will otherwise fall upon the estate. If execution should issue upon that judgment, and be levied upon the lands in the hands of Clark as mortgagee, the question of lien would then arise, and, should the lien be es — 129 — tablished, the defendant Clark would be without' remedy at' law, and the property would be taken from him, for a debt,- which we are bound to consider as, to a great extent, fictitious. The doubt on this point arises from the circumstance, that Na-son is one of the orators. Had he been made a defendant, there’ can not be a- doubt that the judgment would be enjoined, and we do not see, that his being made co-plaintiff debars the other parties from the relief, to which they are clearly entitled.- Should we dismiss the bill, on this ground, the defendant Clark would doubtless become the orator, and, upon his application, the judgment must unavoidably be enjoined. As to the defendant Clark, there is no ground for a decree against him. He was made defendant, and a temporary injunction granted upon his suit, with a view to a supposed lien upon the-land' in’ case the orator Everts was made liable in the suit at lawbut, as the proceeding at law will be enjoined,, there is no necessity of discussing that lien, or continuing the injunction upon Clark. That injunction is therefore disolved, and Clark dismissed with his costs. And the other defendants are perpetually enjoined from proceeding upon their judgment at law, either against the orators, or against, the estate of, W..Nason,.or persons interested therein,