McEwen v. Bamberger

Cooper, J., delivered the opinion of the court. Miles H. Mayes, being the owner of two storehouses on which there was a vendor’s lien for unpaid purchase money, due by instalments on the 8th of June, 1867, 1868 and 1869, drew up and signed, on the 16th of November, 1865, a deed conveying the store-houses and lots on which they were situated to the complainants, McEwen and Tompkins, in trust, to secure to each of them a specific debt mentioned. The deed provided that if the debts were not paid — 577 — by the time the last instalment of purchase money was satisfied, then the secured creditors might take possession and sell the land to pay their debts, and reserved to the grantor the right to remain in possession until the expiration of the time specified. This deed was registered on the 29th of November, 1865, upon the acknowledgment of the grantor. One of the grantees was a resident of another county in this State than the county in which the grantor resided and the land lay, and the other was a non-resident of the State. Neither of them was ever notified by the grantor of the deed. In 1867 the defendants, Bamberger, Bloom & Co., and others, creditors of Miles H. Mayes, filed their bill to subject the interest of Mayes in said property to the satisfaction of their-debts, and such proceedings were had that a decree was rendered in said suit for the sale of the property, first to satisfy the unpaid purchase money, and then to apply the surplus proceeds of sale to the satisfaction of the demands of the complainants. The land was sold, and after satisfying the debt of the vendor there remained a surplus of about $1,200. At this stage of the proceedings, on the 29th of January,. 1870, McEwen and Tompkins filed this bill to have the benefit of the conveyance of the 16th of November, 1865, and, acquiescing in the sale made, to have the surplus proceeds applied to the satisfaction of their demands. The chancellor rendered a decree in conformity with the prayer of the bill, and the defendants, who áre creditors of Mayes, have appealed. The present complainants say in their bill that they — 578 — bad no notice of- the execution of the deed of Mayes to them, and were not aware of its existence until a few days before the filing of their bill, when it was accidentally seen upon the register’s book by one of their counsel in examining into the title of the property. Under these circumstances the first question which arises is whether the deed was intended in good faith for the purposes expressed on its face, or was a mere fraudulent device resorted to by Mayes to hinder and delay his creditors. If the deed was fraudulent in fact or law on his part, no presumption of acceptance by the nominal grantees can arise. Townsend v. Harwell, 18 Ala., 301; Stewart v. Spencer, 1 Curt., 157; Baldwin v. Peet, 22 Texas, 708. For, says Mr. Justice Curtis, in Stewart v. Spencer, the law cannot deem such a deed beneficial to the creditors, and the presumption on which his assent rests necessarily fails. The peculiar features of this deed are that no trustee, resident in the county, has been selected to execute the trust; that no home creditor is secured; that two creditors at a distance are selected as grantees and beneficiaries without any previous consultation or subsequent notice; that the possession of the property was reserved to the grantor for four years, although the debt secured was comparatively small, if the beneficiaries should discover the deed and accept it; and that the grantor kept his own counsel, saying nothing of the deed - to any one. Although the probate of a deed, and delivery of it to the register for registration for the benefit of the -beneficiaries might, under. some circumstances, be considered a de — 579 — livery to the grantees (Tompkins v. Wheeler, 16 Pet., 106, 115), yet registration alone, nothing more appearing, would not suffice to establish a delivery. Brevard v. Neely, 2 Sneed, 170; McEwen v. Troost, 1 Sneed, 191; Johnson v. Roland, 2 Baxter, 203, 210. There should be some act or declaration of the grantor evidencing an intent that the instrument should take effect as a deed, and that he had done all that he thought necessary for the purpose. In the absence of any, the slightest evidence on the part of the present grantor that he intended more than a form, it is difficult to avoid the conclusion that the instrument and its registration were resorted to merely as a fraudulent device for the grantor’s private benefit. If, however, it be conceded that the grantor, as far as he actually went, was influenced by no sinister motive, the question would still remain whether what was done would give the grantees a right to the property superior to that of other creditors of the grantor, who had secured a lien on the property two or three years before the grantees had any notice of the existence of the deed. In England, a deed of trust which is not executed by the creditors is looked upon as a conveyance made by the debtor for his own convenience, which he may control, alter or revoke at his pleasure, and which will not avail against other creditors who may acquire liens. Walwyn v. Coutts, 3 Mer., 707; Garrard v. Lauderdale, 3 Sim., 1; S. C. on Appeal, 2 R. & M., 451; Acton v. Woodgate, 2 M. & K., 492; Simmonds v. Palles, 2 J. & L., 489; Johns v. Johns, 8 — 580 — Ch. Div., 744. Upon the strength of the earlier of these decisions this court has held that if a debtor conveys property in trust for the benefit of creditors-to whom the conveyance is not communicated, and the. creditors are not in any manner privy to the conveyance, the deed will merely operate as a power to the-trustees, and is revocable by the debtor, provided the. revocation be made before the creditors receive information and accept the trust. Galt v. Dibrell, 10 Yer., 147; Robertson v. Sublett, 6 Hum., 313; Brevard v. Neely, 2 Sneed, 165; Mills v. Haines, 3 Head, 332. But these cases concede that the trust becomes irrevocable by the acceptance of the beneficiaries, and that, the presumption is that they have accepted its benefits.. The doubt was whether the presumption of acceptance alone would suffice in a contest as to priority of liens, between the beneficiaries and other creditors. In Mills v. Haines, ut supra, this doubt was resolved against the sufficiency of the presumption, while in Furman v. Fisher, 4 Col., 626, the ruling was the other way.. The weight of American authority, where the assignment is made to a trustee under such circumstances-as to amount to a delivery by the grantor, and is otherwise valid, tends to sustain the sufficiency of the presumption of acceptance as against other creditors. Marbury v. Brooks, 7 Wheat, 555; S. C. 11 Wheat, 78; Halsey v. Whitney, 4 Mason, 206; Nicoll v. Mumford, 4 J. Ch. 529; Scull v. Reeves, 2 Green Ch., 84, 131; Ingram v. Kirkpatrick, 6 Ired. Eq., 462. And our decisions are now in accord with the current. Farquharson v. McDonald, 2 Heis., 404, 419; Wash — 581 — ington v. Ryan, 5 Baxter, 622. It is, however, still • an open question how far the rights of the beneficiaries will be affected by proof of the positive refusal of the trustee to accept the deed, or by the intervention of unsecured creditors, before acceptance by the trustee or the beneficiaries. Delivery and acceptance seem to be as essential to the validity of a deed of assignment for the benefit of creditors as of any other common law deed conveying land. Burrill on Assignments, 305; Perry on Trusts, sec. 593; Brevard v. Neely, 2 Sneed, 172; Johnson v. Roland, 2 Baxter, 203. Neither the delivery nor the acceptance need, however, be formal, the intention of the grantor that what was done should operate as a delivery, and the intent of the grantee to accept the benefit being sufficient, and the intent of either or both may be implied from admissions, conduct or circumstances. McEwen v. Troost, 1 Sneed, 186, 191; Nichol v. Davidson county, 3 Tenn. Ch., 547. As between the grantor and grantee, these principles are universally recognized. And it seems to be equally conceded that, as between the same parties, the refusal of the trustee to accept will not vitiate the trust, and that the beneficiaries would, nevertheless, be entitled to have the trusts executed. Field v. Arrowsmith, 3 Hum., 442; Burrill on Assignments, 307. The doubt is whether unsecured creditors may not acquire a superior lien between the execution of the deed and its acceptance by the trustee or the beneficiaries, or both. And the authorities are neither uniform nor ■clear upon these points. The text books seem to — 582 — consider an acceptance essential, and that other creditors may acquire- rights at any time before actual acceptance. Burrill on Assignments, 305; Perry on, Trusts, sec. 593. The weight of authority is that whenever the title to the property has vested in the trustee, the rights of the beneficiaries become fixed, unless they actually dissent. Burrill, 306, citing Brevard v. Neely, 2 Sneed, 171; Brooks v. Marbury, 1 Wheat, 78; Stewart v. Speneer, 1 Curtis, 166; Seal v. Duffy, 4 Barr, 274. An acceptance by the beneficiaries seems to be equally efficacious, although the • trastee dissent. Burrill, 307, citing Seal v. Duffy, 4 Barr, 274; Webb v. Dean, 21 Penn., 29; Reynolds v. Bank of Virginia, 6 Gratt, 174; Dawson v. Dawson, Rice Ch., 243; Field v. Arrowsmith, 4 Hum., 442; Brevard v. Neely, 2 Sneed, 164; Harris v. Rucker, 13 B. Mon., 564; King v. Donnelly, 5 Paige, 46. The difficulty in this branch of the subject is in-determining the status of the property before acceptance. Chancellor Walworth was of opinion that where land is devised to trustees, and all the devisees decline-the trust, the legal estate must of necessity vest in. the devisees for the benefit of the cestui que trust, for the reason that they cannot defeat the intention of the testator by their refusal. King v. Donnelly, 5 Paige, 46. In a similar case, this court was of opinion that the legal estate would vest in the heir of the devisor, subject to the trust. Goss v. Singleton, 2 Head, 67. Under a deed of assignment for the benefit of creditors, the Supreme Court of Pennsylvania seem to hold that until acceptance the title re — 583 — mains in the assignor, or, upon the refusal of the as-signee to accept, revests in him as by way of remit-ter, but not so as to affect the rights of beneficiaries accepting the trust; and if the court appoint other trustees, at the instance of the beneficiaries, that the title will pass to such trustees. Read v. Robinson, 6 W. & S., 329; Seal v. Duffy, 4 Barr, 274; Webb v. Dean, 21 Penn., 29. The Supreme Court of South Carolina have applied the principle enunciated by Chancellor Walworth to the case of a deed of assignment, and held that a delivery to a third person would be good as to the beneficiaries, and the trustee would not be allowed to dissent to their injury. Dawson v. Dawson, Rice Ch., 245. Our cases are in accord in the conclusion, but leave the principle of the decision undetermined. 2 Sneed, 171; 3 Hum., 442. In principle, I think the true rule is that the acceptance of the trustee passes the title, and the beneficiaries may always come in under the deed unless they dissent; and that where the grantor has done all that is necessary to constitute a delivery, there is such a declaration of trust, whether the title passes or not by reason of the refusal of the trustee to accept, as will make the assignment effectual and irrevocable, as against third persons, upon the acceptance of the-beneficiaries within a reasonable time. What is a. reasonable time must depend upon the circumstances of the particular ease. A failure to aver acceptance-in a contest with unsecured creditors after the lapse-of two years from the execution of the assignment, has been held sufficient to let in the unsecured cred — 584 — itors who had acquii’ed, in the interim, liens by attachment. Dews v. Olwill, 3 Baxter, 432. The delay and want of knowledge in the present case have been for a period of more than four years. Another difficulty exists in this case. There is no trustee, and the deed of assignment is made directly to the nominal beneficiaries. Their assent is necessary both to pass the title and validate the trust. Nicoll v. Mumford, 4 Johns Ch., 572; Tompkins v. Wheeler, 16 Pet., 106; Perry on Trusts, sec. 593. Their assent may,- it is true, be presumed, but the presumption is rebutted by the express declaration in the bill that they were not aware of the existence of the deed, and, of course, did not assent to it until a few days before the bill was filed. In the meantime, and two years previously, other creditors had acquired liens by attachment. There is neither adjudicated case nor principle upon which the acceptance, after such a lapse of time and under such circumstances, can be held to override the liens thus acquired. I am of opinion, therefore, that the complainants are not entitled to the relief sought, and that the chancellor’s decree should be reversed and the bill dismissed. But under the circumstances the entire costs oirght to be paid out of the fund in controversy.