Carrigan v. Drake

The opinion of the court was delivered by Mr. Justice Pope. The complaint exhibited in the Court of Common Pleas for Chesterfield County by the plaintiffs against the defendants, alleges that on the 9th day of October, 1883, the defendant, James F. Drake, as trustee for his wife and children (who are also defendants here), executed to the plaintiffs a bond in the penalty of $1,600, conditioned to pay $800, twelve months after its date, with interest from its date, at the rate of ten per cent, per annum, and that to secure such bond said defendant, as such trustee, at the same time executed a mortgage upon a house and lot in the town of Cheraw, in this State; that only $32.14 has been paid on said bond; that the bond and mortgage before recited were executed in pursuance of an order in an action, to which all the defendants were parties, whose object was to empower such trustee to raise $800 for the benefit of his ces-tui que trust, and to secure such amount by a mortgage of such trust property ; that the condition of said bond and mortgage has been broken. Plaintiffs pray that the mortgage be foreclosed, the premises sold, the proceeds of sale applied to the payment of the bond, and that execution issue against the trustee for any balance thereafter found due. The answ'ers contain, amongst others, the following allegations : That James F. Drake, the trustee, on the 9th October, 1883, borrowed only $650, instead of $800, to be used by him in business in Wadesboro, North Carolina, and that plaintiffs knew full well such purpose of the trustee at the time of their transactions with the trustee; that the defendant, Mrs. Drake, was at that time a married woman, and that such loan of money by the plaintiffs was not for the benefit of her separate estate; that the order referred to in the complaint, as authorizing the borrowing of the money and mortgaging her estate to secure the same, is null and void; that at the date of such order her children were all minors, except Mrs. Mary E. Hearn ; that no guardian ad litem was legally appointed to represent them, because not made parties as required by law. All the issues of law and fact were referred to Edward Mclver, Esq., as special referee. Testimony was taken for both sides. By the report of such referee it was determined: 1. That on the [362] 9th October, 1883, the defendants, Mrs. Drake and Mrs. Hearn, were adults; the remaining defendants were minors at that time, the last two being under 11 years of age. 2. That a copy of the petition asking that the trustee be given the right to borrow money and mortgage trust property to secure the same was not served on the infants, though a subpcena ad respondendum was probably served, and that no papers were served on the father, mother, or guardian of the infants in their behalf. 3. That the order of Judge Pressley, dated 4 October, 1883, was signed without the County of Chesterfield. 4. That the amount advanced under the mortgage was six hundred and fifty dollars. 5. That the payments were made out of the proceeds of the hotel business conducted by Mr. and Mrs. Drake jointly. 6. That the amount of four hundred and twenty-five dollars and thirty-one cents has been paid at the times and in the amounts stated by the witness, W. A. Carrigan, in his testimony. 7. That if was the understanding between Drake and the plaintiffs that the payments should go as a credit on the mortgage debt. 8. That the amount of $422.51 is due on the mortgage debt on the 15th November, 1889. As conclusions of law the referee found: 1. That the statute has not executed the use under the terms of the deed of 27th February, 1878, but that the legal title remains in the trustee, James F. Drake, in trust for A. E. Drake during her natural life, and at her death in trust for her children. 2. That while a married woman has no authority to charge or encumber her separate estate held in trust, except in pursuance of the power given her in the instrument creating it, yet a Court of Equity has jurisdiction to authorize the trustee to encumber the estate, when it is for the interest of the estate so to do, even though the deed contains no such authority. 3. That the infant defendants, James F., jr., Henry, Lemuel, and Francis, were not properly before the court when the order of Judge Pressley, dated 4 October, 1883, was signed. 4. That the judge did not have jurisdiction to hear and determine this matter in any other than the county where the land is situated, it being a determination of the rights or interests in real estate. 5. That the complaint must be dismissed as to all the defendants. 6. That the pay [363] ments made, amounting to $425.31, must be credited on the bond debt (being six hundred and fifty dollars) at the .times and in the amounts made. 7. That the amount of $422.57 is due on the bond on the 15th November, 1889. The plaintiffs duly excepted to this report. The whole cause came on to be heard before Judge Witherspoon, who by his decree sustained all the findings of fact by the special referee, but reversed the 1st, 4th, and 5th conclusions of law of the special referee. From this decree the plaintiffs do not appeal, but the defendants appeal upon eight grounds: I. His honor, the presiding judge, erred in holding that Judge Pressley had the right to hear and determine the petition of James F. Drake, trustee, at Bennettsville or Marion, “as same was not the determination of any right to or interest in land.” II. His honor erred in holding that the trustee, being authorized in his discretion to sell and reinvest the proceeds for the benefit of Mrs. Drake and her children, the court could not control the exercise of such discretion, and in therefore sustaining the mortgage to plaintiffs. III. He erred in holding that under the trust deed to James F. Drake, the trust was executed under the statute. IV. He erred in holding that there being no duty imposed on the trustee by said trust deed which the court could enforce, that the statute executed the use, and that title vested in Mrs. Drake. V. He erred in holding that under the rule in Shelley’s Case, the title in fee simple vested in Mrs. Drake, and that her children have no interest in the trust property. VI. Having held that title to lands described in the complaint was in Mrs. Drake, she being a married woman, his honor erred in holding that said mortgage was binding upon her separate estate, there being no evidence that it was for its benefit, but it appearing, on the contrary, that it was for the benefit of said James F. Drake. VII. He erred in holding that Mrs. Drake and Mrs. ITearn are estopped from denying the validity of said mortgage. VIII. He erred in sustaining plaintiffs’ seventh, ninth, and tenth exceptions to referee’s report, in overruling the referee’s first and fourth conclusions of law, and in not dismissing the plaintiffs’ complaint. The respondents present the following grounds of support to the decree of the Circuit Judge: I. Because the money obtained [364] on the mortgage in question was for the benefit of the oestui que trust, and therefore the trust estate is liable for its payment, and equity will subject said estate to such purpose. II. Because Mrs. A. B. Drake, the life tenant, had such an interest in the trust property for her natural life, under and by virtue of the trust deed, that a Court of Equity will subject such life estate to payment of debts contracted for the benefit of the trust estate and cestui que trust. III. Because a Court of Equity considers that done which ought to have been done, and will now subject the property to the payment of this debt which was expended for the benefit of the cestuis que trust. IV. Because the mortgage being given by the trustee and life tenant and an adult remainderman, will bind the life estate and the absolute estate in fee and remainder of Mary E. Hearn, they being estopped by their conduct from denying their estate therein, or repondents’ right to their interest for the payment of this debt. V. Because the power to sell gives power to mortgage. 1 I. So far as the first ground of appeal relates to the infants, who, it is alleged in the complaint, were parties to the action heard by Judge Pressley in Marlboro or Marion Counties on the 4th October, 1883, we must express the view that the court was without jurisdiction. This court has repeatedly held that in order to make infants parties defendant to a cause, the requirements of the law in such cases must be complied with. It is not certain that any summons was served .upon them in the cause that came on to be heard by Judge Pressley on 4th October, 1883. It is certain that the law was not complied with in the matter of the appointment of a guardian ad litem to represent them. No petition or other application for the appointment of such guardian ad litem was signed by those beyond fourteen years of age, nor does it appear that either the father or mother or guardian applied for such appointment for those under fourteen years of age. When the record on its face shows such irregularities, this court cannot hesitate as to.its duty. Tederall v. Bouknight, 25 S. C., 275. “Jurisdiction of the person of an infant can only be acquired by pursuing the mode prescribed by statute.” Riker v. Vaughan, 23 S. C., 187. [364] But by far the more serious- question is presented as to the [365] adults who were parties to that action heard in October, 1883. If we were to admit that the court was without jurisdiction because held in a county different from that in which the land was situated, there would be the serious question that such adults had procured the loan of the money to be made by the plaintiffs here, by reason of their participation in such action. They should not be allowed afterwards to gainsay such action as to these plaintiffs. So, therefore, holding these views we will not consider the question as to the want of jurisdiction by Judge Pressley in passing the order in question. These adults are not entitled to raise it; they are estopped from denial thereof. 3 II. We will consider the second, third, and fourth grounds of appeal together. The language of the deed here referred to is : ' “To have and to hold all and singular the said premises before mentioned (the house and lot) unto the said James F. Drake, his heirs and assigns, in trust and confidence nevertheless for the use and benefit of his wife, the said Ann Eliza Drake, during her natural life, and at her death in trust for the heirs of her body, and at any time should the said James E. Drake, as trustee, deem it best for the interest of his said wife and children to sell said property and reinvest the proceeds, he is hereby empowered so to do.” Now, does this use become executed under the statute ? It has been repeatedly recognized by this court that the statute executes the use in all cases -when nothing remains for the trustee to do. Or, as it is well stated by the special referee, Mr. Edward Mclver, in his report: “A mere naked trust, when the trustee is only required to hold the legal title, is executed by the statute of uses; but whenever the trustee is charged with any duty to the estate which he cannot do unless the legal title remains in him, the statute does not apply. Bristow v. McCall, 16 S. C., 548; Farr v. Gilreath, 23 S. C., 512, and numerous cases there cited. Chancellor Harper, in Posey v. Cooler 1 Hill, 413, states the rule as follows : ‘Perhaps the rule might be more accurately expressed to say that where the intention is that the estate shall not be executed in the cestui que use, and any object is to be effected by its remaining in the trustee, then it shall not be executed.’ In this case, the trustee is authorized, when he deems best, to sell and reinvest; this he [366] manifestly could not do, unless the legal title remained in him.” We are entirely satisfied with the statement of the law as made by the special referee. We do not agree with the Circuit Judge in so much of his decree as combats these views of the referee. We will therefore sustain the second and third grounds of appeal here. 4 Ill: As to the fifth ground of appeal, which involves the application to this deed of the rule in Shelley’s Case. By reading the decree of the Circuit Judge, it will be seen that he is led to recognize! the legal effect of the words “heirs of her body” in the deed by these considerations: 1. Having already held that the statute had executed the use. 2. That the use of the word “children” in the same paragraph of the deed should have no influence in construing the particular clause of the deed here in question. There can be no doubt that the rule of property, so long and familiarly known as the rule in Shelley’s Case, is still recognized in this State. McIntyre v. McIntyre, 16 S. C., 293. The underlying question in all controversies, when it is contended that the rule in Shelley’s Case applies, is, are the words “heirs,” “heirs of the body,” or “issue,” to be construed as words of limitation or words of purchase ? If the former, the rule of Shelley’s Case applies, denying any estate to the “issue,” “heirs of the body,” but enlarging the estate of the life tenant to a fee simple or fee conditional, as the case may be. Such rule does not apply to cases of unexecuted trusts, nor to cases where the word “children” occur. In the case at bar, we have just held that the use was not executed by the statute, and therefore the rule in Shelley’s Case cannot apply here. But if it were necessary to do so, we would hold that the use of the word “children,” in the same clause of the deed where the words “heirs of her body” occur, would sufficiently indicate the purpose of the grant- or in this deed to create a new stock of inheritance, and that therefore the rule tvould not apply. This view of the Circuit Judge must be overruled. 5 IY. The appellants’ sixth ground of appeal presents a troublesome question, for it involves the consideration anew of the status of the separate estate of a married woman, as affected by her conduct in relation thereto. This court has [367] not failed to recognize the decision of Aultman & Taylor Co. v. Gibert, 28 S. C., 303; but, on the other hand, it has resolutely set its seal to those of its decisions that held a married woman bound by her representations to others who have no knowledge to the contrary, that her dealings are made with reference to her sepa-raté estate, and with an intention on her part to bind such estate. There is no question but that the plaintiffs have advanced to her trustee the sum of $650 in cash, upon the faith of the pledge by such trustee of her interest in the house and lot belonging to her for life. No court should be expected or should suffer its judgments to impinge upon the requirements of honesty, fair dealing, and justice as between man and man, unless some rule of civil polity commands it. In the latter class of cases, the responsibility is not that of the court, but upon those who framed the organic and statutory law. In the case at bar, it was known to these plaintiffs what use the trustee would make of the money borrowed — that it would be employed in the venture of, not the purchase of a hotel, but the purchase of some hotel furniture and provisions. And, as might have been expected, the trust estate has been destroyed, as far as such use of it could do so. Novr, who shall suffer — this patient wife, who, under our policy as well as our law, is submissive to the control-of the husband, who at the same time is her trustee, or shall the partners, who are the plaintiffs here, and who knew what they were doing when they loaned the money they are now trying to recover? There must be a loss by some one of the opposing parties. Reluctantly, in this case, we sustain the exception of appellant. 5 Y. As to the seventh ground of appeal, we regard it as disposed of by the decision by us of the preceding ground of appeal, so far as the liability of Mrs. Drake is concerned; but inasmuch as Mrs. Hearn, being under no disability at the time, not only acquiesced in the giving of the mortgage, but actually joined in the application for that purpose, we think she is estopped from disputing that her interest in the trust property is liable for the debt intended to be secured by the mortgage. [367] VI. As to the eighth ground of appeal. We cannot concur in the view of the appellants that the plaintiffs’ complaint should be dismissed as to all the defendants, for we hold that the [368] plaintiffs are entitled to a judgment against the defendant,-James F. Drake, as an individual, for the amount' ascertained in the referee’s report as still due and unpaid to the plaintiff's herein. And then, also, Mrs. Mary E. Hearn, so far as her share in the trust estate can do so, should be held liable to pay plaintiffs’ claim, but her liability therefor should be limited to her share in such trust estate. It is the judgment of this court, that the judgment of the Circuit Court be modified in accordance with the principles herein announced, and for that purpose the cause be remanded to the Circuit Court.