Mayo v. Staton

Connor, J., after stating tbe facts. It is conceded by' counsel in their well considered briefs that tbe case agreed presents for decision tbe question whether, at tbe time of sale by tbe sheriff and purchase by tbe plaintiff, tbe interest of tbe judgment debtor in tbe locus in quo was subject to sale under execution. His Honor in bis carefully prepared opinion and judgment makes an able and exhaustive review of tbe cases decided by this Court and answers tbe question in tbe affirmative, rendering judgment for the plaintiff. Tbe case was ably and exhaustively argued and counsel have furnished us full briefs of tbe authorities. Tbe Act of 1812 may be found in Tbe Code, section 450, subsections 3-4 and section 452. It has been frequently construed by this Court. It must be conceded that tbe decisions are not in harmony and that — 674 — there is much dicta to be found which it is difficult to reconcile. The question being of much practical importance, especially since deeds in trust have so largely superseded the use of mortgages for the security of debts, we have deemed it well to endeavor to “run the line” and “mark the boundaries,” removing, if possible, such confusion as may exist in our decided cases. We are not unmindful of the difficulty of the undertaking. As we shall see, several of the ablest and most learned of the judges who have sat upon this bench have given the subject careful consideration. It may be that some of them have failed to carefully examine the decisions made by those who have preceded them. However this may be, our investigation brings us to a conclusion different from that reached by the learned Judge of the Superior Court, and it is proper that we set forth the reasons by which we have been controlled in our conclusion. In Harrison v. Battle, 16 N. C., 537, one Hunt conveyed to Mr. Battle valuable real and personal estate in trust to sell and apply the proceeds to the payment of certain debts, scheduled in the deed, with a resulting trust to the grantor. Judgment was recovered on a debt not secured in the deed and execution levied upon Hunt’s interest in the property. Before the sale of any part of the property, Hunt assigned to several persons his interest in the residue after the payment of the debts, notice of which was served on the trustee. The debts secured in the deed were paid from the proceeds of the personal property assigned to the trustee. The plaintiff being the owner of the judgment against Hunt, filed his bill in equity against the trustee and all others interested in the property and its proceeds. The Court decreed a sale by the trustee, with direction to hold the proceeds subject to the direction of the Court. Henderson, C. J., delivering the opinion after an advisarisays that prior to the Act of 1812 the levy of the execution did not create a lien on the interest of — 675 — Hunt, because it was not liable to sale. He said: “Nor is tbe trust in favor of Hunt one of tbat description authorized to be taken in execution under tbe first section of tbe Act of 1812. Tbe use or trust there spoken of is a pure and unmixed one; for tbe doing execution under that section, to use its own terms, divests tbe estates both of tbe trustee and cestui que trust and transfers them to tbe purchaser.” We note this case now only so far as it affects tbe construction of tbe first section of tbe act. It does not appear from the statement of facts whether tbe debts were paid by the sale of tbe personalty prior or subsequent to tbe levy or teste of tbe fieri facias. Tbe next case in order of time is Pool v. Glover, 24 N. C., 129. Josiah Jordan conveyed to a trustee real estate in trust to secure and pay certain debts, etc., and upon further trust tbat if said debts should be paid without a sale of tbe lands, to convey to said Josiah, etc. A judgment having been recovered against Jordan, a writ of fieri facias was issued and tbe sheriff sold “tbe equity or interest of Jordan of and in the premises.” Defendant purchased and refused to pay his bid for tbat Jordan bad no interest subject to sale under an execution. Ruffin, C. J., referring to Harrison v. Battle, supra, says: “Tbat case determines tbe precise point tbat a conveyance of land of this nature by a debtor to a third person in trust by a sale to pay the bargainor’s debts, with a resulting trust to tbe bargainor, leaves an interest in tbe bargainor which is not a trust within tbe first section of tbe act.” We quote tbe remaining part of this sentence later on. In Davis v. Petway, 27 N. C., 576, Ruffin, C. J., after stating tbe distinction between those cases in which tbe cestui que trust could, at once, call for tbe conveyance of tbe legal title, and those wherein it was necessary tbat tbe trustee should retain tbe legal title to protect tbe interest, either of immediate or ulterior trusts, says: “Now the Act of. 1812 did not mean to change tbe nature of trusts, tbe relation of trustee — 676 — and cestui que trust, or the rights of the latter against the former. The sole purpose of it was to render the interest of the cestui que trust liable, at law, as it was in equity, for the debts of the cestui que trust in certain cases by transferring by a sale or execution against the cestui que trust the legal estate of the trustee as well as the trust estate of the debtor. It is the necessary construction of such a provision that it was not intended to embrace any such cases as those adverted to, in which the trustee could not voluntarily convey to the debtor without incurring a breach of trust to other persons with whose interest he is also charged. He concludes: “As the Court would not decree a conveyance at the suit of the cestui que trust, it follows that we must hold that the trustee’s estate would not be divested by a sheriff’s sale under execution against the cestui que trust” The next case in which the question is discussed is Anderson v. Holloman, 46 N. C., 169. The point decided there is that “The purchaser at a sheriff’s sale of an interest resulting to a debtor under a deed of trust does not acquire a legal estate.” That was an action of trespass Q. 0. E. It was held that as the plaintiff did not show actual possession he did not have legal title which drew the possession to it, and could not therefore maintain the action. The debts secured by the trust deed had not been paid and it was held that, until paid the legal title remained in the trustee. No case is cited upon this point. In Thompson v. Ford, 29 N. C., 418, a slave had been conveyed in trust for the payment of debts. He was sold under execution against the party executing the deed in trust. Ruffin, C. J., said that no title passed under the second section of the Act of 1812 because it was confined to mortgages of lands, tenements and hereditaments. Nor could the slave be sold under the first section, because when he was sold there Avas a balance duie on the debts secured by the deed. These cases being the only ones in Avhich the question is raised prior to 1870, would — 677 — seem to settle the proposition that a resulting trust such as Staton owned could not be sold under execution against the cestui que trust under the first section of-the Act of 1812. It would seem to be equally well settled by these decisions that such interest could be sold under the second section of the act, treating it as an equity of redemption. Returning to the case of Harrison v. Battle, supra, Henderson, C. J.,says: “But we believe that, so far as regards the land, Hunt’s interest may be sold under the second section of the act, for we can not distinguish his right to have the land again, after the payment of the debt, for which it stood as a security, from an equity of redemption. It has all the essentials of that right, although it wants some of its formal parts; it is conveyed to secure the payment of a debt; upon the payment of the debt Hunt has a right to call for a reconveyance. * * * * We cannot therefore distinguish this interest from an equity of redemption; and its exemption from sale under a fieri facias is equally an evil with the exemption of equities of redemption. The mischief is precisely the same, and we therefore think it is within the spirit of the second section of the Act of 1812.” The learned Justice proceeds to say that although the creditor has a remedy at law, “it is not an effectual one.” He decides that the jurisdiction of the Court of Equity is not ousted because a remedy is given at law “unless it be a plain one,” concluding: “The remedy here is more effectual because this Court ascertains all the claims upon the thing and sells the corpus itself. The purchaser gets what he purchased, no more and no less. He does not make his gain by another’s loss.” It would be difficult to state the reasons for confining the operation of the Act of 1812 to its terms more strongly or clearly. How far the Court was controlled in its decision by the fact that the debts secured by the trust deed had been paid, it is impossible to say. — 678 — Returning to the case of Pool v. Glover, supra, we find Ruffin, C. J., concurring in tbe decision that tbe resulting trust could not be sold under tbe first section, a part of bis language we have quoted, referring to tbe trust, concluding witb these words: “But is an equity of redemption witbin tbe second branch of it (tbe Act of 1812) ? As an authority none could be more apposite to tbe case before us. Tbe counsel, indeed, endeavored to distinguish tbe cases upon tbe ground that in Harrison v. Battle the time for tbe sale bad passed and enough of tbe estate conveyed bad been sold to pay all tbe scheduled debts; whereas here tbe time for a sale bas not arrived, and no part of tbe debt has been paid. But that distinction cannot be sustained; for although there might be something in it, if the case stood on the Act of 1812 by itself, yet tbe subsequent Act of 1812 subjects the legal right of redemption to execution in like manner as tbe equity of redemption was liable under the previous act.” He concludes that whatever might have been sold after the day of forfeiture may be sold before that day. Tbe learned Chief Justice discusses tbe'question at some length. As was his custom, he states bis conclusions forcibly and clearly. Theie can be but one construction put upon bis opinion. Tbe case is cited in State v. Pool, 27 N. C., 108; Doak v. Bank, 28 N. C., 332. Since 1872 this Court has, witb equal uniformity, held that a resulting trust remaining in the grantor conveying property to secure the payment of a debt therein recited, is not subject to sale under execution. In Sprinkle v. Martin, 66 N. C., 55, it would seem that the exact question was presented. The action was for the recovery of a tract of land. The title was put in issue. It appeared that tbe plaintiff being the owner of tbe land on March 27, 1855, conveyed it to one Cook to secure tbe payment of a debt due to two other parties. On March 12, 1869, Cook reconveyed tbe land to him. On May 31, 1858, — 679 — tbe interest of tbe plaintiff in tbe land was sold under an execution issued upon a judgment against bim and purchased by tbe defendant. Tbe sole question presented by tbe exception was wbetber tbe defendant acquired any title under tbe sale and deed made pursuant thereto. Pearson, C. J., said: “Tbe defendant acquired no title by bis purchase at tbe sheriff’s sale, for Sprinkle (tbe defendant in execution) bad no estate or interest in tbe land which could be sold by tbe sheriff under execution,” citing Thompson v. Ford and Harrison v. Battle, supra. He says: “After all tbe debts secured by tbe deed of trust are satisfied, tbe resulting trust becomes liable to sale under execution, for the purchaser may then take tbe legal as well as tbe equitable estate without prejudice to third persons. Such was tbe case in Harrison v. Battle.” While it is true tbe opinion is short, and no other authorities cited than those named, we cannot suppose that tbe Chief Justice wrote for a unanimous Court without consideration. Able and learned counsel represented tbe parties in this Court. Tbe question was again before this Court at tbe same term in McKeithan v. Walker, 66 N. C., 95. Tbe plaintiff having a docketed judgment against tbe defendant,made a motion based upon an affidavit pursuant to section 266, C. C. P., section 490 of Tbe Code, setting forth that an execution bad been issued on tbe judgment and returned unsatisfied; that W. J. Brown bad property in bis possession belonging to tbe defendant, etc. Brown, pursuant to notice, appeared and stated that be held a deed of trust executed by defendant to secure certain debts, etc. That if said debts were not paid be was directed to sell tbe land and from tbe proceeds pay them and pay tbe surplus to said Walker. Plaintiff asked tbe Court to direct tbe sale of tbe land, etc. Motion denied and plaintiff appealed. Rodman, J., said: “At the time of the docketing, therefore, the defendant Walker had ,a resulting trust in tbe — 680 — land conveyed after payment of tbe debts secured.” Tbe learned Justice proceeds to declare tbat tbe language of section 254, C. C. P. (Code, sec. 435), is sufficiently comprehensive to include equitable as well as legal estates, and tbat by docketing tbe judgment tbe plaintiff acquired a lien on tbe resulting trust of tbe defendant. He says: “It must be noted, however, tbat this section does not malee liable to sale under execution any equitable estates wbicb were not so by tbe construction of tbe Act of 1812 before tbe C. C. P. In order to sell an equitable estate, not liable to sale under execution at law by tbat act, tbat is to say, one wbicb is neither a pure and simple trust nor an equity of redemption, tbe plaintiff in tbe execution must still resort to bis action as formerly to bis bill in equity, to ascertain tbe rights of tbe parties and "enforce bis lien by tbe docketing of bis judgment instead of by tbe filing of bis bill, or tbe issuing of bis summons to enforce it. Thus tbe law is made more uniform, and tbe unnecessary and useless distinction between legal and equitable estates is destroyed.. And' tbat is probably as far as tbe law can go in tbat direction.” Tbe Court, therefore, twice, at tbe same term, held tbat a resulting trust, such as tbe one before us, could not be sold under execution. Tbe next case in wbicb any reference is made to tbe subject is Hutchison v. Symons, 67 N. C., 156. It must be conceded that tbe question was not presented in that case and that tbe observations of Chief Justice Pearson were not necessary to its decision. Eor tbe first time we find any criticism oí Pool v. Glover, supra, although tbe two cases decided at tbe preceding term cannot be reconciled with it. Tbe Chief Justice says plainly tbat in Pool v. Glover there was “a misapprehension of tbe law” and “a confounding of tbe distinction between a Trust’ and ‘an equity of redemption.’ ” He accounts for this by tbe failure of tbe Court to advert to tbe fact tbat in Harrison v. Battle all of tbe debts secured in tbe — 681 — deed of trust bad been paid, etc. As we bave seen, Ruffin, C. J., expressly notices tbe fact that in tbe first case tbe debts bad been paid, whereas in tbe case before tbe Court no part of tbe debts bad been paid — and says that “tbe distinction cannot be sustained.” It is true that be gives a reason wbicb does not seem responsive to tbe objection made by counsel. He seems to think that tbe question is affected by the Act of 1812, wbicb subjects the legal right of redemption to sale. Tbe reason wbicb evidently the distinguished counsel for tbe defendant gave for tbe distinction was that until tbe debts were paid tbe trust was not a pure, unmixed one, as in Harrison v. Battle. This distinction is clearly recognized and pointed out by Pearson, C. J., in Sprinkle v. Martin, supra. It is difficult to understand why be did not make tbe criticism of Pool v. Glover in Sprinkle v. Martin, wherein bis opinion is in direct conflict with that case. However this may be, there can be no misunderstanding the opinion of tbe Chief Justice. He says that tbe distinction between a trust and an equity of redemption, though plain, is confounded by tbe decision in Pool v. Glover, “Notwithstanding that tbe statute of 1812, by having two distinct sections, takes care to prevent this -conclusion and treats a trust and an equity of redemption as two separate and distinct things.” Tbe effect of tbe Act of 1812 is again discussed in Tally v. Reid, 72 N. C., 336, by Reade, J., and Sprinkle v. Martin approved. Tbe relation of tbe parties there was vendor and vendee, and it was held that tbe interest of tbe vendor was not subject to sale under execution. This line of eases has been uniformly followed. Mannix v. Ihrie, 76 N. C., 299; Hardin v. Ray, 94 N. C., 456; Trimble v. Hunter, 104 N. C., 129; Everett v. Raby, 104 N. C., 479; Gorrell v. Alspaugh, 120 N. C., 362; Johnson v. Case, 131 N. C., 492. In several of these cases tbe exact point was not involved. They are cited for the purpose of showing that since 1872 there has been a uni — 682 — form current of decisions citing and approving Sprinkle v. Martin and McKeithan v. Walker, supra. In but one of them, Hutchison v. Symons, supra, is Pool v. Glover cited, and then, as we have seen, strongly criticised. It is true that in some of the cases Harrison v. Battle is cited, and we concur with his Honor in the opinion that its full scope is not adverted to. While the point actually decided in that case is that the resulting trust in the grantor was likened to an equity of redemption, the fact is that the debts were paid from other sources. It is true, as said by his Honor, that it does not clearly appear whether they were paid before or after the teste of the execution or levy on the land. It is clear that both Ruffin and Pearson, C. J., treated the case upon the theory that they were paid prior to the teste of the execution. It is certainly a subject of regret that a question of so much practical importance to both debtor and creditor has been involved in uncertainty. We cannot concur with his Honor in the opinion that the point is not presented in Sprinkle v. Martin and McKeithan v. Walker. In our opinion those cases conflict with the reasoning of the Court in Harrison v. Battle. We cannot reconcile them with Pool v. Glover, supra. While, as we have said, the point was not presented in Hutchison v. Symons, we cannot escape the conviction that Chief Justice Pearson, writing for the same Court which had decided Sprinkle v. Martin and McKeithan v. Walker, at January Term, 1872, took occasion at the next succeeding term to express his dissent from Pool v. Glover, and give his reasons therefor. It is important that the question be settled so that counsel may know how to advise clients, and property affected by equitable titles shall not be made the subject of speculation and sacrificed by being exposed to sale under conditions which make the right acquired uncertain. We are, in view of the decisions of this Court, compelled to decide which of the two conflicting lines of judicial — 683 — interpretation we will adopt. As we have endeavored to show, this Court has since 1872 uniformly held that such interest or estate as Eelix Staton had in the land was subject to the lien of a docketed judgment, but that it could be enforced only by a civil action in the nature of a bill in equity. Mr. Freeman, in his work on Executions, 188, says that the English decisions confined the operation of the statute 29 Car. II., ch. 3, to “clear and unmixed trusts.” He further says that in North Carolina and other States which he names “the decisions are in substantial harmony with those made under the statute of 29 Car. II. Lands are not then, subject to execution against the cestui que trust unless the trustee convey him the entire legal title without committing a breach of trust.” The same conclusion is reached by the Supreme Court of South Carolina in Bristow v. McCall, 16 S. C., 548. We concur with the opinion of Judge Pearson that the statute expressly recognizes the distinction between a resulting trust and an equity of redemption. The origin, history, development and attributes of the two are a part of the common learning of students of our jurisprudence. We think that we can discover in the language of the Chief Justice in his opinion in Pool v. Glover that his mind was impressed with the difficulty of extending the section of the statute authorizing the sale of “trusts” to include an equity of redemption. However this may be, in our opinion, the later decisions are controlling as authority. In view of the complications often attending the adjustment of the amount of indebtedness, the rights of creditors, homestead and dower rights of the debtor and his wife, we think it better for all interests involved that, except when the trust is “pure and unmixed” and the right of the cestui que trust to call for the immediate conveyance of the legal title, the lien of the judgment creditor should be enforced by a civil action. All persons having any interest in the land or the — 684 — proceeds of the sale may be brought before the Court, decrees may be so moulded that they may be protected and a clear title sold. This is especially true at this time when homestead rights are involved and to be preserved. This is illustrated in Leak v. Gay, 107 N. C., 468, and many other cases in our reports. The judgment, when docketed, fixes the lien so that the rights of the creditor are protected. The remedy is simple and inexpensive. The creditor sets forth in a verified complaint a concise statement of the facts and the verified answer of the defendant brings before the Court the exact condition of the title, so that a decree may be made promptly. The plaintiff, however, says that, conceding that the interest of Staton Avas not an equity of redemption and not subject to sale under the second section of the act, and conceding further that such interest could not be sold under the first section prior to 1883 — this section Avas so amended by The Code of 1883, section 450 — that it is noAV subject to sale. He calls our attention to the change made at that time. The original act provides that when any person shall be seized, etc., of any lands, etc., in trust for any person against whom any execution or other process shall be issued, such estate may be levied on or sold under such execution or process. “And the purchaser thereof shall hold and enjoy the same freed and discharged from all incumbrances of the person so seized or possessed in trust as aforesaid.” The last clause is stricken from the section in The Code of 1883. The plaintiff’s counsel says that the reason assigned by the Court Avhy mixed trusts could not be sold under execution was that, by virtue of the statute, the legal as well as the equitable title vested in the purchaser, thereby parenting the trustees from executing the trust. Counsel overlooked the fact that the language stricken out in subsection 4, sec. 450, is incorporated in section 452. Hence so much of the argument as relates to that phase of the — 685 — case becomes irrelevant. If the sale is sustained the legal title passed from Mr. Johnston into the plaintiff. The real test which is applied in all of the cases is whether the trust is pure and unmixed, so that the cestui que trust may, immediately and without affecting or disturbing the relation of the trustee to any other person, call for the legal estate. If so, his estate may be sold under execution; otherwise, it may not be. We think this the true criterion by which to solve the question. To.the end that we may be clearly understood, we deem it not improper to say that our decision is confined to deeds of trust, both in form and substance. It does not in any manner involve mortgages wherein an estate is conveyed, either to the creditor or to some third person, upon condition that if the indebtedness be paid at maturity “the deed and every clause thereof are null and void.” It has become usual to insert a further clause empowering the mortgagee, who may be either the creditor or some third person named in the deed, in the event of a failure to pay the debt by the mortgagor, to sell and from the proceeds pay the debt, and the residue to the mortgagor. The right left in the mortgagor is twofold, first, to pay the debt before maturity and thus perform the condition by which the deed is avoided at law; and, second, after forfeiture and condition broken, to pay the debt and have a reconveyance — under our statute this is accomplished by cancellation of record. This latter right is a well-defined estate, created and recognized, originally, only in equity, but by a process of judicial evolution and legislative enactment, recognized at law. Bispham Eq., 150. This estate was well known to lawyers prior to the statute of 29 Chas. II, and when it was described in the second section of th$ act in contradistinction to trusts, it was clearly, as said by Pearson, C. J., a recognition that it was a separate and distinct' thing from a resulting trust. While it — 686 — is true tbat in one sense tbe Act of 1812 was remedial and should be construed to advance the remedy and remedy the evil, it was also in derogation of the common law and the statutes then in force, which permitted only well-defined estates to be sold under execution. Henderson, C. J., in Harrison v. Battle, supra, concedes that a resulting trust such as Hunt had in the land is not within the words of the second section of the act, but says that it comes within its spirit. Upon a careful review of the question, the adjudged cases and the language of the act, we conclude: 1. That when land is conveyed to a trustee upon a declaration of trust (and there is no clause of defeasance in the deed) to sell for the payment of debt or to discharge any other duty, in which persons other than the judgment debtor have an interest, or when for any other reason the judgment debtor may not call for an immediate transfer of the legal title, the interest, estate or right of' the judgment debtor, althorrgh subject to the lien of a docketed judgment, cannot be sold under execution. The lien can be. enforced only by judgment rendered in a civil action. 2. That an equity of redemption, as we have defined it, whether created by mortgage deed made to the creditor or to a third person with or without power of sale, may be sold under execution as provided by section 450, subsection 3, of The Code, being section 2 of the Act of 1812. We do not think the interlocutory judgment rendered by Judge Brotvn at March Term, 1903, affects the rights of the parties. The recitals by his Honor were made only for the purpose of directing the commissioner how to proceed in that action. It was not a final determination of the rights of ,the parties. The land was not sold by the commissioner. His Honor’s judgment, from which this appeal is taken, does not treat the interlocutory judgment as in any manner affecting the questions decided in this action. — 687 — We concur with his Honor in the opinion that the provisions of section 451 of The Code are not mandatory. Thorpe v. Ricks, 21 N. C., 619. For the reasons pointed out, the judgment of the Oourt below must be reversed with directions to it to render judgment upon the case agreed for the defendant. Reversed.