Bailey, J.
According to the case made by the bill, Hick-ling, being the holder of a deed of trust upon certain premises of which the complainant owned the equity of redemption and which he occupied as a residence, entered into a written agreement with him, by which Hickling agreed to have the premises sold under the deed of trust and to become the purchaser, and to allow the complainant to retain possession by paying interest on the incumbrance, with the right, at any time within three years, to redeem the premises by paying the incumbrance and costs of sale; or, if during that time he could find a purchaser, to retain the surplus of the purchase money, after paying said incumbrance and costs. Hickling having obtained title in the manner proposed, the complainant continued in possession for two years, paying interest as agreed, and at the end of that period succeeded in negotiating a sale of the property for a sum sufficient to extinguish Hickling’s claim and have a surplus of $983. This sale being satisfactory to Hickling, was agreed to by him, and the first installment of the purchase money being afterward paid, the premises were conveyed by Hickling to the purchaser, and a deed of trust taken, securing the residue of the purchase money. Of the notes secured by said deed of trust, was one for $1,000, maturing May 1, 1882.
At the time of making the sale Hickling and the complainant executed a second contract, by which Hickling agreed to pay the complainant said sum of $983 out of the principal and interest of the installment of purchase money, payable May 1, 1882, and out of that installment only; and it was also provided that, in case of the failure or refusal of the purchaser to consummate the purchase or to pay that installment, Hick-ling should be released from the payment of said sum to the complainant.
If we consider first, the relations of the parties as they existed prior to the execution of the last mentioned contract, it can not be doubted that Hickling, in becoming the purchaser of the premises at the trustee’s sale under the arrangement alleged in the bill, assumed a trust relation to the complainant. He acquired and held the title in trust, first, as security for his debt, and secondly, to render to the complainant any surplus remaining after such indebtedness should be paid. If the complainant had paid the indebtedness in the manner provided in the first agreement, equity would unquestionably have compelled a conveyance of the premises to him. But having procured a purchaser instead, to whom Hickling sold the premises for a sum sufficient to pay the indebtedness and leave a surplus, Hickling held the surplus in trust for the complainant. Trusts of this character are enforcible in equity.
The case, so far as this question is concerned, is very similar to that of Coates v. Woodworth, 13 Ill. 654. There Wood-worth, being indebted to Tarbox in the sum of 8100, deeded to him certain lands as security for such debt. To pay said indebtedness, Woodworth afterward obtained a loan from Coates and had Tarbox convey the lands to him as security therefor. This loan not being paid at maturity, Coates sold the land for $400 and refused to pay over to Woodworth the surplus after satisfying the loan. Woodworth proceeded in equity against Coates to recover said surplus, and it was held that he was at liberty to pursue his remedy in that forum. On this point the court say: “ It is objected that a court of chancery has no jurisdiction, for the reason that the complainant could have recovered the amount due him in an action at law, for money had and received. Admitting that he might have maintained snch action in this case, that would not deprive this court of its jurisdiction. Chancery always has jurisdiction to enforce a trust, and that is the object of this bill.” We had occasion to examine this question somewhat elaborately in Hubbard v. U. S. Mortgage Co., 14 Bradwell, 40, where a very similar state of facts was presented, and we there reached the same conclusion as to the jurisdiction of equity above announced.
The present case presents stronger grounds for equitable interference than either of the cases above cited. In each of those cases the trustee had reduced the subject of his trust to money, and nothing remained but the payment of the same over to his eestui que trust, and it was not clear in either case that the party had not an adequate remedy at law, by an action for money had and received. But in the present cnse, with the exception of a small amount of interest, no money appears to have come into the hands of the trustee, but the subject of the trust is a security not yet collected. It is manifest, then, that here an action for money had and received would not afford the complainant an adequate remedy.
We are unable to see that the relations of the parties were changed, so as to materially affect this question by the second agreement. That agreement was entered into immediately after the consummation of the contract of sale, and an accounting between the parties to ascertain the amount of the surplus coming to the complainant. It was not an abrogation of the trust relation between the parties, but rather an admission and affirmation of that relation, and it seems to have been entered into principally for the purpose of limiting the trust to a specific installment of the purchase money and of declaring that the trust should be extinguished if that particular installment should fail.
There are very respectable authorities which would justify us in holding that the last mentioned agreement of itself, without reference to the previous relations between the parties, operated as an equitable assignment fro tanto, of the installment of purchase money maturing Hay 1,1889. Thus in Rodick v. Gandell, 1 DeG., M. & G. 736, it is held that an agreement between a debtor and creditor that the debt owin'? should be paid out of a specific fund coming to the debtor, would operate as an equitable assignment of such fund, or as an equitable charge thereon. The same rule is followed in Riccard v. Prichard, 1 Kay & John. 277. Whether this rule is applicable to all cases need not he determined here, but where, as in this case, the agreement not only provides for the payment of the debt out of a specific fund coming to the debtor, but limits the creditor to such fund, and provides that if that fund fails the debt shall be extinguished, it would seem scarcely open to question that the agreement should be held to operate as an equitable assignment, pro tanto, of the fund.
In any view of the case, then, it is clear that Hiclding, at the time of his death, held the note maturing May 1, 1881, and the deed of trust securing the same, in trust for the complainant, and said note and deed of trust having come info the hands of defendant Sarah Ann Hickling, it is equally clear that she thereby became charged with the same trust, whether she holds said securities as executrix or devisee of her deceased husband. It became her duty as such trustee, to perform the trust fairly and in good faith. The bill, however, alleges that instead of doing so, she has colluded with the maker of the note to prevent his paying it, and thus deprived the complainant of his equitable rights therein.
It was the duty of Sarah Ann Hickling to use reasonable diligence in making collection of said note, and paying over the proceeds to the complainant to the extent of his interest therein. This she has wholly failed to do.
Free access — add to your briefcase to read the full text and ask questions with AI
Bailey, J.
According to the case made by the bill, Hick-ling, being the holder of a deed of trust upon certain premises of which the complainant owned the equity of redemption and which he occupied as a residence, entered into a written agreement with him, by which Hickling agreed to have the premises sold under the deed of trust and to become the purchaser, and to allow the complainant to retain possession by paying interest on the incumbrance, with the right, at any time within three years, to redeem the premises by paying the incumbrance and costs of sale; or, if during that time he could find a purchaser, to retain the surplus of the purchase money, after paying said incumbrance and costs. Hickling having obtained title in the manner proposed, the complainant continued in possession for two years, paying interest as agreed, and at the end of that period succeeded in negotiating a sale of the property for a sum sufficient to extinguish Hickling’s claim and have a surplus of $983. This sale being satisfactory to Hickling, was agreed to by him, and the first installment of the purchase money being afterward paid, the premises were conveyed by Hickling to the purchaser, and a deed of trust taken, securing the residue of the purchase money. Of the notes secured by said deed of trust, was one for $1,000, maturing May 1, 1882.
At the time of making the sale Hickling and the complainant executed a second contract, by which Hickling agreed to pay the complainant said sum of $983 out of the principal and interest of the installment of purchase money, payable May 1, 1882, and out of that installment only; and it was also provided that, in case of the failure or refusal of the purchaser to consummate the purchase or to pay that installment, Hick-ling should be released from the payment of said sum to the complainant.
If we consider first, the relations of the parties as they existed prior to the execution of the last mentioned contract, it can not be doubted that Hickling, in becoming the purchaser of the premises at the trustee’s sale under the arrangement alleged in the bill, assumed a trust relation to the complainant. He acquired and held the title in trust, first, as security for his debt, and secondly, to render to the complainant any surplus remaining after such indebtedness should be paid. If the complainant had paid the indebtedness in the manner provided in the first agreement, equity would unquestionably have compelled a conveyance of the premises to him. But having procured a purchaser instead, to whom Hickling sold the premises for a sum sufficient to pay the indebtedness and leave a surplus, Hickling held the surplus in trust for the complainant. Trusts of this character are enforcible in equity.
The case, so far as this question is concerned, is very similar to that of Coates v. Woodworth, 13 Ill. 654. There Wood-worth, being indebted to Tarbox in the sum of 8100, deeded to him certain lands as security for such debt. To pay said indebtedness, Woodworth afterward obtained a loan from Coates and had Tarbox convey the lands to him as security therefor. This loan not being paid at maturity, Coates sold the land for $400 and refused to pay over to Woodworth the surplus after satisfying the loan. Woodworth proceeded in equity against Coates to recover said surplus, and it was held that he was at liberty to pursue his remedy in that forum. On this point the court say: “ It is objected that a court of chancery has no jurisdiction, for the reason that the complainant could have recovered the amount due him in an action at law, for money had and received. Admitting that he might have maintained snch action in this case, that would not deprive this court of its jurisdiction. Chancery always has jurisdiction to enforce a trust, and that is the object of this bill.” We had occasion to examine this question somewhat elaborately in Hubbard v. U. S. Mortgage Co., 14 Bradwell, 40, where a very similar state of facts was presented, and we there reached the same conclusion as to the jurisdiction of equity above announced.
The present case presents stronger grounds for equitable interference than either of the cases above cited. In each of those cases the trustee had reduced the subject of his trust to money, and nothing remained but the payment of the same over to his eestui que trust, and it was not clear in either case that the party had not an adequate remedy at law, by an action for money had and received. But in the present cnse, with the exception of a small amount of interest, no money appears to have come into the hands of the trustee, but the subject of the trust is a security not yet collected. It is manifest, then, that here an action for money had and received would not afford the complainant an adequate remedy.
We are unable to see that the relations of the parties were changed, so as to materially affect this question by the second agreement. That agreement was entered into immediately after the consummation of the contract of sale, and an accounting between the parties to ascertain the amount of the surplus coming to the complainant. It was not an abrogation of the trust relation between the parties, but rather an admission and affirmation of that relation, and it seems to have been entered into principally for the purpose of limiting the trust to a specific installment of the purchase money and of declaring that the trust should be extinguished if that particular installment should fail.
There are very respectable authorities which would justify us in holding that the last mentioned agreement of itself, without reference to the previous relations between the parties, operated as an equitable assignment fro tanto, of the installment of purchase money maturing Hay 1,1889. Thus in Rodick v. Gandell, 1 DeG., M. & G. 736, it is held that an agreement between a debtor and creditor that the debt owin'? should be paid out of a specific fund coming to the debtor, would operate as an equitable assignment of such fund, or as an equitable charge thereon. The same rule is followed in Riccard v. Prichard, 1 Kay & John. 277. Whether this rule is applicable to all cases need not he determined here, but where, as in this case, the agreement not only provides for the payment of the debt out of a specific fund coming to the debtor, but limits the creditor to such fund, and provides that if that fund fails the debt shall be extinguished, it would seem scarcely open to question that the agreement should be held to operate as an equitable assignment, pro tanto, of the fund.
In any view of the case, then, it is clear that Hiclding, at the time of his death, held the note maturing May 1, 1881, and the deed of trust securing the same, in trust for the complainant, and said note and deed of trust having come info the hands of defendant Sarah Ann Hickling, it is equally clear that she thereby became charged with the same trust, whether she holds said securities as executrix or devisee of her deceased husband. It became her duty as such trustee, to perform the trust fairly and in good faith. The bill, however, alleges that instead of doing so, she has colluded with the maker of the note to prevent his paying it, and thus deprived the complainant of his equitable rights therein.
It was the duty of Sarah Ann Hickling to use reasonable diligence in making collection of said note, and paying over the proceeds to the complainant to the extent of his interest therein. This she has wholly failed to do. A court of equity will not permit a trust to fail by reason of the non-feasance or misfeasance of the trustee, but on proper application will take the execution of the .trust into its own hands, and affords relief to the cestui que trust according to the equities of his case. The present bill is framed with a view to such equitable interposition, and there is no reason apparent to us why the case thereby made is not sufficient to warrant the court in taking jurisdiction and administering its relief according to the rights of the parties.
It is claimed that a court of equity should not take jurisdiction because the complainant is entitled to bring his action on the case against the trustee to recover damages for her negligence in not performing the duties of the trust, and thus obtain relief. Without pausing to consider whether such an action would lie, or whether it wou'd furnish the complainant the relief to which he is entitled, it is sufficient to sav that it is not'the law that courts of equity are powerless to enforce and execute trusts which the trustee neglects or refuses to perform, because the trustee may be amenable to an action at law for his negligence. On the other hand, the negligence of the trustee is the very ground upon which courts of equity 'assume jurisdiction to interpose and execute the trust.
Again, it is urged that the bill seeks to enforce a claim against the estate of William Hickling, deceased, and that such claim has never been presented or proved against his estate in the probate court, and is now barred from being allowed by that court by the Statute of Limitations. This point is sufficiently answered, by saying that the bill does not seek to enforce a claim against said estate, and is not within the rules applicable to the presentation and allowance of claims against the estates of deceased persons in the probate court. The bill merely seeks to enforce certain equitable rights, which the complainant claims in a specific security which was held by the decedent in his lifetime, and which is now in the hands of his executrix and devisee.
It is further objected that Sarah Ann Hickling ought not to have been made defendant both as executrix and in her own right; and also that McCurdy and wife, the makers of the note and deed of trust, were improperly-made defendants. The general rule is, that in suits in chancery all persons whose interests may be affected by the decree should be made parties. It is clear that a decree sustaining the complainant’s equitable rights to the note and deed of trust to the extent claimed, would affect the rights of Sarah Ann Hickling both as executrix and devisee; and it is also clear that the makers of a deed of trust are necessary parties to any proceeding in chancery to enforce such security. All of said parties are necessary parties to the bill.
We are of the opinion that the court erred in sustaining the demurrer to the bill, and the decree will therefore be reversed and the cause remanded to the court below, with directions to overrule the demurrer and for further proceedings.
Decree reversed.