Furlong v. Edwards

Mason, J., delivered the following opinion, being, in part, the opinion of the court. The bill in this cause, which was filed on the 26th day of June 1852, charges the recovery, by the appellee Edwards, of certain judgments against Furlong one of the appellants, before a justice of the peace, the issuing of writs of fieri facias on said judgments, and the levying on certain goods and chattels alleged to be in the possession of Furlong, which had been conveyed by said Furlong to John Miller another of the appellants. The bill then charges the execution of the deed by said Furlong, conveying all his property, (which is the same levied upon by said writs) to said Miller, to secure a sum of money due him, and to secure the payment of certain other debts owing by the said Furlong to various persons, for the payment of which said Miller had become security. To said deed there was a condition annexed, that if Furlong paid to Miller and the other creditors the amounts severally due them, at or before certain stated periods, then the deed was to be void. The bill further alleges that the property conveyed by said deed or mortgage, was more than sufficient to pay the mortgage debts, but not more than sufficient to pay them, together with the claim of the complainant. The bill then proceeds to charge, that the complainant was in danger of losing his claim by a misapplication of the said property, that Furlong was in possession of the same, and — 111 — rapidly disposing of it at public auction, that complainant was ignorant of the application which Furlong was making of the proceeds of sales, but that he believed they were improperly applied to his own use, that Furlong was insolvent, and that said property could not be sold under the aforesaid executions, and therefore the remedy of the complainant was in a court of chancery. Upon this bill, and before answer, the court appointed a receiver and granted an injunction in accordance with the prayer of the bill. Subsequently the appellants, Miller and Furlong,, answered the complainant’s hill. They admit the execution of the deed, the issuing and levying of the writs of fieri facias, and that the deed embraced all Furlong’s property, and that it was more than sufficient to pay the mortgaged or preferred debts, and the claim of the complainant.. The defendants, however, explicitly deny that Furlong is in possession of the property, or that he is selling or disposing of the same as his own property, or for his own purposes, but that he was acting as the authorised agent of Miller, and as such was selling the property, collecting the moneys on the notes and other assets conveyed by said deed, and was applying the proceeds arising from said sales and collections, in discharge of the objects contemplated by the said deed or mortgage ; and they further deny that any part of the money has been improperly applied. Upon application for that purpose, after the defendants had filed their answers and without proof on either side, the court below refused to dissolve the injunction previously granted, or to discharge the receiver. This refusal forms the basis of the present appeal, and we are called upon to decide whether the proceedings of the circuit court, either in passing the first order appointing a receiver and granting an injunction, or afterwards, in refusing to revoke the same, were regular and proper. We will not now pause to consider whether the averments of this bill were sufficient to warrant, in the first instance, the — 112 — appointment of a receiver, and the granting of an injunction. We will barely remark upon this point, that this power is a most delicate one', and should be exercised by the court with extreme caution, and only under special and peculiar circumstances requiring summary relief.- Conceding that the averments of the bill were sufficient to warrant the interposition of the court and the passing of the first order, it is clear to our minds that the defendants have explicitly denied every material fact stated in the bill, and completely sworn away every equity upon which the complainant could rest his case. The only allegations in the bill that could have authorised the interference of a court of chancery in the mode prayed for, were those which averred that the defendant Furlong ivas in possession of the property, was selling and, converting the same to his own use, that he was insolvent, and that the complainant was thereby in danger of losing his debt. These charges are unequivocally and explicitly denied, and thus the complainant has every pretended ground taken from him, upon which to rest an application for an injunction and receiver. Upon other grounds we do not think the present case is one which calls for the interposition of .a court of chancery, to protect by injunction and the appointment of a receiver, the interests of the complainant. The appellant Miller is the legal owner. The court always reluctantly interferes against the legal title, and only in cases of fraud clearly proved, and of imminent danger. Lloyd vs. Passingham, 16 Ves., 59. Williamson vs. Wilson, 1 Bland, 422. Speights vs. Peters, 9 Gill, 472. So far from fraud or improper conduct, constituting the ground of this proceeding against the legal owner, the judge who passed the order, expressly excludes any such idea, and even passes a high encomium upon what he terms the elevated and enviable character of Mr. Miller, thereby taking from the court all ground or claim to deal with his property in the harsh mode which was adopted. This court does not wish to be understood as calling in question the authority of the case of Harris vs. Alcock, 10 — 113 — Gill and Johns., 226. We can see nothing in that case to warrant the present proceeding. The only purpose for which that case could be invoked, would be to authorise the court to enforce the equitable lien of the complainant, acquired against the mortgaged property by virtue of his levy. The position assumed by the learned judge who delivered the opinion below, as. respects the time when the creditor acquires his lien, is in our judgment erroneous. The following is his language upon this point :• “The right to file his bill takes place, so soon as the officer having charge of the execution makes his return. Nothing in the nature of a lien or preference is acquired until the bill is filed. From that period he has priority over all other creditors at large.” The case of McDermutt vs. Strong, 4 Johns. Ch. Rep., 687, is cited to support this proposition. We will not discuss the effect of that decision, or whether it sustains the view taken by the court below. The case of Harris vs. Alcock, in our own court expressly decides, that the issuing and levying of a fieri facias, secures for the creditor a priority or lien-upon the debtor’s equitable interest in personal property covered by a mortgage, which lien dates from the time the execution was placed in the officer’s hands. Thus the foundation for the interposition of a court of equity to enforce the lien, has been laid, which may or may not be resorted to, as the circumstances of the case may afterwards require. If the mortgagee proceeds to dispose of, and settle the estate as his duty requires him, by first paying off the incumbrance, and then the creditor’s execution, there would be no need of incurring the expense and delay of a chancery proceeding, but if on the contrary he does not, a court of chancery upon a proper application, would require him to do so. In the present case the answer of the defendant shows that he, as mortgagee, is pursuing strictly the course which the law marks out. He alleges in his answer that he is selling the property, collecting the moneys on the notes, and applying the proceeds to the payment of the mortgage debt. Why then ask a court of equity to require a party to do that which he does not de~ — 114 — ny he is bound to do, and which in fact he is doing aS reguIarly and as expeditiously as he is able? This court will never encourage unnecessary litigation, nor will it treat an individual as in default of any legal duty, unless upon a case clearly made out showing such default. Whether this be a proceeding under the authority of the case of Harris vs. Alcock, or not, is not a question directly presented by the present appeal, and if it were, it would be' comparatively an unimportant one, when contrasted with the real question involved in this controversy, which- is the propriety of granting the injunction and the appointment of a receiver. The point of the decision of the court below- directly xmder review and from which this appeal was taken, was-the refusal to dismiss the receiver and dissolve the injunction. The judge who delivers this opinion takes another view of this case, which in his judgment embraces and disposes of every question which arises out of it, as well as all other cases similarly situated. The sole object of the appointment of a receiver, is to take care of the subject or property about which the parties are contending, and to prevent it from being wasted or lost. 1 Bland, 213. If the court- can see that the party asking for relief, can have redress and protection in any-other way, the extraordinary power of the court will not be exercised in the appointment of a receiver. In the present case I think that not only the complainant, but all other parties interested in the estate of Furlong could find ample protection under the act of 1845, ch. 166. I am of the opinion that the present case is embraced within the manifest spirit of that act, and that the defendant Miller should be required to give bond for the faithful disposition of the property entrusted to him.- It is true that under that act trustees, eo nomine, are required to give bond, but I cannot imagine a reason why, in construing this statute, its application should be restricted to those only who are styled, in the conveyance, trustees, and not extended to those who- are equally so though under a different name. The inquiry then to which we are to address ourselves is, — 115 — does Miller stand in this court in the character of a trustee, acting for the benefit of others or not? The conveyance under which he claims the property in controversy, first provides for his own protection as a creditor directly of the mortgagor; secondly, as surety or endorser to other creditors of Furlong, and therefore is to that extent a deed for the benefit of those creditors; and thirdly, it provides for a restoration of the property to the grantor after those debts are paid, or by legal implication, a disposal of it with a due regard to the equitable rights of others, (like those of the complainant for example,) which may have been subsequently acquired, Under this deed the grantee took possession of the property, or which is enough for the purposes of this case, as I regard it, he claims in his answer to have done so. These several facts and provisions, I think, constitute the present conveyance a deed of trust, and Miller the grantee, a trustee, within the meaning of the act of Assembly. In Willis on Trustees, page 38, it is stated, that “trustees whether for public or private purposes, become so either expressly, or by that implication which arises when it would be inequitable to sustain any other character.” And in 4 Kent 305, the same principle is recognised in these words : “No particular form of words is necessary to create a trust if the intention be clear.” In the same volume of Kent, page 321, the principle is still further extended and made I think, in terms, to embrace the present case. “Collateral securities given by a debtor to his surety, are considered as trusts for the better security of the creditor’s debt, and chancery will see that their intention be fulfilled.” Another description of a trust estate is given in Willis 34. “In the creation of a trust, it is not only necessary that there should be a person seized to the use of, or in trust for some other person, but that there should also be some one capable of enjoying the use or trust itself; that is, there must be a cestui que trust, as well as a trustee.” The present deed comes under the operation of all these principles. In the first place, it is clear that the incidents and — 116 — peculiarities of a trust estate, arise out of this deed, however inappropriate the language employed may have been to effectuate such a purpose. The relation of cestui que trust and trustee, exists as manifestly as if express words had been used to create it. Miller is the trustee, because he holds property for the benefit of others, while the grantor himself and his other creditors are the cestui que trusts, for whose use and benefit the property is held. The illustration given in Kent is this case. The present deed is a “collateral security given by a debtor to his surety,” and as such creates a trust for the benefit of the creditors, The mortgagee is the trustee for the creditors whose claims are provided for in the deed. Those creditors clearly are, therefore, directly and materially interested in the administration of the estate. It must be conceded that a trust need not depend on mere form for its creation. If this be true the omission of formal technical language cannot defeat the trusts designed to be raised in the present deed. To illustrate further this view, let us suppose that the present deed contained, after the name of the grantee, the word trustee, and in the habendum clause, and before the purposes of the deed are defined, the usual words, in trust nevertheless for the following purposes; in such a case could any rational mind doubt that the act of Assembly would apply to the deed ? Yet the addition of these words would not vary in the slightest degree the substance, purpose or effect, of the instrument. In other words, this language is merely matter of form, and could not change materially the nature of this transaction. Without this language all the peculiarities of a trust exist as effectually, as if express terms had been employed for the purpose. The present transaction clearly comes within the reason and spirit, and is therefore within the operation of the act of 1845, ch. 166. That act was designed for the protection of creditors and others interested in a debtor’s estate, by preventing them from making conveyances of their property to irresponsible or corrupt agents of their own selection for the pretended benefit of creditors. Of what avail would the wise provi — 117 — sions of this law be, if they are thus easily to be defeated by a resort to an indirect mode of accomplishing the end which the law designed to prevent? The identical case contemplated by the statute, namely, a conveyance by a debtor of his property for the benefit of creditors, and for other purposes, to a third party, is before us, and because the person thus selected to carry into effect those designs is not styled a trustee, though in fact he is one to all intents and purposes, we are therefore to say the deed is not within the meaning of the law. * In construing acts of Assembly, the intention of the lawmakers should be, if possible, ascertained and carried out, and to ascertain such a purpose the most liberal rules of interpretation should be resorted to, especially where the purpose of the law is the suppression of a mischief. To accomplish this great and leading object, (the fulfilment of the design of the legislature,) an instrument, technically a mortgage, wall be treated as a deed of trust, and vice versa. . In the views herein expressed, I am strengthend by the supplement to this act, of 1846, ch. 153. There, certain cases are enumerated as exceptions to the rule laid down in the previous act, and as this case does not come within the exceptions, there is thereby superadded another reason for supposing that it was designed to be embraced within the previous law. By the act of 1846, the power given to regulate the bond removes all objections to the law on the ground of hardship on that score. The penalty of the bond is now left within the discretion of the court by the latter act. The wisdom of this law, as I understand it, could not be better illustrated than by the present case. How much more summarily and effectually would the ends of justice be accomplished and the interests of the parties be advanced by a proceeding requiring Miller as trustee, under the act of 1845, to give bond, instead of resorting to the harsh, vexatious and protracted proceeding incident upon the appointment of a receiver? The bond, in all such cases, is, at last, the best and only safeguard that can be suggested for the protection of parties in — 118 — terested in the administration of an estate. In the present ■case, if Miller gives a good bond for the faithful performance of his trust, what additional advantage could the complainant derive from a proceeding in chancery, whether it be for the purpose of having a receiver or trustee appointed, or whether it be to enforce his lien in pursuance of the principles of Harris vs. Alcock? I think, none. The bond is to stand good for any neglect or default in duty on the part of the trustee, and, therefore, I cannot conjecture, in the present aspect of the case, what good could result from the further prosecution of this proceeding that would not be worked out by an adherence to the provisions of the act of Assembly. Nor is there any just grounds for a party to complain of the requirements of this act. All trustees appointed by authority of law must give bond, and why should a trustee, voluntarily appointed, be exempted? If he is an honest man, and experienced in business, he could probably easily give the required security; if, on the contrary, he is an unworthy and an inexperienced person, and not able to give the bond, he is not fit to execute the trust. It is by no means my design to extend the operation of the act of 1845, ch. 166, to all cases of simple mortgages, where only the grantor and grantee are interested in, or are parties to the deed. All such cases must depend upon their own peculiar circumstances. Nor do I wish to intimate that another bill or petition in chancery may not be necessary hereafter to protect and effectuate the rights of the present complainant. But I think that that time has not yet arrived, and therefore regard this whole proceeding, for whatever purpose instituted, as premature and irregular. Decree reversed, and cause remanded with costs in hoth courts. Le Grand, Chief Justice, and Eccleston, Justice, concur in the foregoing opinion of Mason, Justice, except so far as the same relates to the act of 1845, ch. 166. Upon that point they think no opinion is necessary, and therefore they wish to be understood as expressing none.