Goddard v. Prentice

Waite, J. The material facts embraced in the report of the committee, are substantially these. Joseph Goddard, in behalf of the trustees of the property of his wife, entered into a written contract with George Stanley, by which it was agreed, that certain lands, bought by jthe trustee, and in part paid for by him, should be conveyed to Stanley, and that he should give two notes to Henderson, the vendor, in payment of the balance of the purchase money. It was further stipulated, that the lands should be holden by Stanley, solely as security for his liability upon those notes; [552] an^ the balance of the property? after realizing enough therefrom to indemnify him for his advances and expenses, should be exclusively for the benefit of Mrs. Goddard. The husl>ancj agreed to re-pay Stanley all that he should advance ; and the latter agreed, that whenever that payment was made, he would transfer the property to the trustee of Mrs. Goddard. The notes were accordingly given ; the lands conveyed to Stanley ; and Goddard, in right of his wife, entered into the possession. Stanley, before any payment made by him, failed ; and the lands were attached and set off upon execution to Walker Prentice, the husband of the defendant, who was a creditor of Stanley, and afterwards died, having devised them, with other real estate, to his wife, for life. Prentice, at the time of the attachment, had full knowledge of Stanley’s title ; and neither Stanley, in his life-time, nor his representatives since, have ever paid any thing upon his notes, with his property. But one of them was paid with funds provided by the trustee ; and the other has since been purchased, by an agent of his, by whom it is still holden. The defendant is now prosecuting her action of disseisin against Goddard, to recover possession, claiming title under the levy of the execution in favour of her husband. The first enquiry naturally arising upon these facts, is, what would be the rights of these plaintiffs in a court of chancery, as against Stanley, were he still living, the owner of the property, and prosecuting an action to recover the possession. The contract shows, that he had in equity but a mortgage upon the lands, to secure him against his liability upon his notes, given for a part of the purchase money. Whenever those notes were paid or discharged, by the plaintiffs, his beneficial interest in the property would be gone. He has expressly agreed, that when he was repaid his advances and expenses, he would convey the property to the trustee of Mrs. Goddard. The report of the committee shows, that neither he nor his estate, has ever paid any thing on account of these notes; that one has been paid with funds furnished by the trustees, and the other purchased by their agent. The debt, therefore, for which the property was mortgaged, has become satisfied ; and Stanley, were he living, would have only the legal title, [553] without any beneficial interest. He would stand in the same situation as any other mortgagee, holding the legal title, after the debt had been discharged. The object for which the conveyance to him was made, would be accomplished, and a court of chancery would compel him to convey the legal title to the trustee, according to the terms of his contract. The attempt, under such circumstances, to deprive the plaintiffs of the possession, would be inequitable and unjust; and an injunction against further proceedings in the action at law, would be granted. In the next place, what would be the situation of Prentice, the levying creditor, were he living ? He took the property, with full knowledge of the trust. And no rule in equity is better established, than that persons coming into possession of property bound by a trust, with notice of the trust, shall be considered as trustees. 2 Mad. Chan. 103. He could acquire no greater interest from Stanley, than belonged to the latter. He would be liable to the same equity; would stand in the same situation ; and be bound to do all that Stanley could be required to do. Taylor v. Stibbert, 2 Ves. jun. 439. 2 Fonb. Eg. 42. But Stanley, if living, and still the owner of the legal title, might be compelled to convey. So Prentice, having acquired nothing more than Stanley’s interest, if living, with notice of the trust, would be liable to a similar decree. It was said in the argument, that the records showed an absolute title in Stanley, and that credit may have been given to him by Prentice, relying for security upon his ownership of the property; and that it would operate as a fraud upon creditors, to allow Stanley to hold himself out to the world as the unconditional owner of the property, obtain credit thereby, and then defeat the claims of creditors, by showing a secret trust. But no facts are shown, in the present case, authorizing the inference that Goddard, in his arrangement with Stanley, acted with any fraudulent design; or that the latter obtained credit with Prentice, by means of his apparent ownership of the property. Had the defendant relied upon any claim of that sort, it was incumbent upon her to show it. But it is said, the law will presume that credit was given to Stanley, in consequence of his apparent ownership of the prop [554] erty. If it does, it will not give the creditor a specific lien upon it, unless he has acquired it, by some act of his. Had he attached the property, or taken a mortgage of it, without fraud and without knowledge of any trust, his title would prevail in equity, as well as at law. But having omitted to take any lien upon the property, either by attachment or in any other manner, until he was informed of the true condition of Stanleys title, he stands in the same situation as a purchaser with notice at the time of the attachment. Had he attached with knowledge that the property had been conveyed to the plaintiffs, and their deed not recorded, the attachment could not, as against them, prevail. But there is another difficulty in this part of the defence. It is found, that Prentice had knowledge of Stanley’s title, at the time of the attachment; and it does not appear but that he had this knowledge at the time the credit was given. If he had, then no credit was justly given to Stanley in consequence of this apparent ownership. Again, it is said, that Stanley had an interest, when the execution was levied ; for one of his notes was then out-standing and unpaid. But, at that time, he had paid nothing. He held the property merely for his security against his liability. When that liability was removed, the property was no longer needed for his security. The removal of that liability was no fraud upon Stanley, or any one claiming under him ; for the plaintiffs, in doing it, did nothing more than was agreed to be done on their part, when the original arrangement was made. Finally, what is the situation of the present defendant ? It is claimed, that if her husband was chargeable with notice, that does not affect her : for she comes in the character of a purchaser. It is true, a title by devise, is called a title by purchase, as distinguished from a title by descent. But a devisee is not a purchaser for valuable consideration, so as not to be affected by the notice given to the devisor. He stands rather in the situation of an heir at law. Now, it is very clear, that the heirs of Prentice would stand in his situation, as it regards this trust property, and would be affected by notice to him, in precisely the same manner, that he would, if living. And it would be very strange, if he could destroy that effect, by a devise of his property, instead of letting it pass to his heirs, by [555] descent. Indeed, the rule is settled, that a devisee of a trust estate, takes it subject to the trust. 2 Mad. Chan. 364. Again, it is claimed, that if the defendant cannot hold as devisee under the will, she is at least entitled to her dower. But the latter title rests upon no better foundation than the former. If her husband, at the time of his death, had no beneficial interest in the property, she could derive none from him, either as widow or as devisee. If her husband held the property as a mer§ trustee or a mortgagee, in neither case would his widow be entitled to dower in it. Another claim has been made on the part of the defendant, that here are too many plaintiffs. But all of them have an interest in the subject matter of the suit — the trustee, that the property may be conveyed to him, in order that he may execute the trust — and the wife, that it may be conveyed for her benefit. If she is properly a party, it is necessary that her husband should be united with her. The general rule, in cases of this sort, is, that in suits respecting trust-property, brought either by or against trustees, the cestui que trust, and the trustees, are necessary parties: the former having the equitable, and the latter the legal interest. Sto. Eq. Plead, s. 207. Our advice, therefore, is, that the report of the committee be accepted; that the defendant be enjoined against the further prosecution of her action at law for the possession, and be ordered to convey all her interest in the property to the trustee of Mrs. Goddard. In this opinion the other Judges concurred. Decree for plaintiffs.