Hawley v. Mancius

7 Johns. Ch. 174

• Court: New York Court of Chancery
• Decided: July 1, 1823
• Status: Published

Opinion

The Chancellor,

The question on the validity of the deed, in trust, for the benefit of the wife and children of ‘John C Cuyler, has been brought incidentally into discussion, though it does not seem properly to arise in the case. The only real point is, whether Mancius' and Cuyler, as surviving owners at law of the judgment of the 22d oí May, 1817, and Mancius, as assignee of Quilbo fs judgment, are entitled, under the facts in the case, to enforce these judgments, or either of them, against the lands purchased by the plaintiff.

With respect to the trust deed in favour Of Mrs. Cuyler, it is sufficient to refer to the judgment of the Supreme Court upon the question which was raised and discussed, touching the validity of that deed. So long as that judgment remains in force, it is conclusive against the deed. A judgment of a Court of competent jurisdiction, cannot be questioned or impeached, collaterally, in another Court, in an action between the same parties, and upon a point once put directly in issue and decided. This Court cannot examine into the intrinsic merits of a judgment at law, without the aid of new and distinct matter, showing fraud in procuring it, or that it is used or retained against conscience. This is a plain and well settled principle; and the deed in favour of the wife and children having been solemnly adjudged at law to be fraudulent and void, as against creditors, it must be taken and held to be equally so in this Court. I shall, therefore, place this deed entirely out of view, in the consideration of this case.

Mancius and Jacob C. Cuyler having accepted the trust created by the assignment of the 25th of June, 1817, it became their duty to convert the real and personal estate into money, and to pay Cuyler’s debts, according to the priorities created by law and by the deed. The real estate was assigned subject to the judgments, and they were entitled to priority of payment out of the proceeds of the real estate. It was the intention of all the parties to the deed of assignment, that the judgment creditors, as well as the other creditors, should be paid out of the property assigned. None of them thought of paying any of the judgments out of the land purchased by the plaintiff 5 for, until October, 1819, that land was considered by Cuyler, and by his assignees, to belong to them, in trust, for his wife and children. The assignment was intended as a provision for all the debts, to the extent of the funds; and, as the real as well as personal estate was directed to be sold and converted into cash, it was intended, undoubtedly, that the first proceeds should be applied, as they were bound in law to be applied, to discharge the judgments, and then that the joint fund, arising from the real and personal estate, should be applied to the debts in schedule No. 3. remaining unsatisfied. If this intention had been strictly executed, both the judgments now directed against the lands of the plaintiff would have been satisfied j and it is apparent, from the answers, that the proceeds of the real and personal estate, received by the assignees, were amply sufficient for the satisfaction of the judgments. The assignees acted according to the declared intention of the ássignment, and actually discharged a great part of the judgment which they themselves held; and if they have not actually discharged the whole of it, it has been owing to their own voluntary act or neglect.

The schedule No. 3., annexed to the assignment, contained a list of debts to be first paid, and nearly all the debts and responsibilities covered by the judgment of Mancius and others, were included in that list. The remaining demands covered by the judgment, and not included among the specified debts in that schedule, are stated in the answer of Mancius and Schuyler, to amount to 2194 dollars. But whether these demands were in the schedule or not, is immaterial; they were to be first paid, as part of the judgment, out of the proceeds of the real estate, and the residue of the judgment, (if any,) unsatisfied out of the real estate, was to be first paid, as part of the schedule No. 3. If any part of the judgment was entitled to he first and preferably paid, out of the proceeds of the real estate, it was these very demands, or portion of the judgment not included in the schedule No. 3.; and upon this principle, that if there ttv0 funds specifically bound for one debt, and only one funds specifically bound for another debt, that other debt shall have a preference upon the only fund to which . . „ . it is equally entitled to resort.

If two funds bound fía-C;one ofbtthe”funds only bound for another debt, that other debt ence on the only fu.ncl t0 titled to resort.

The debts specified in schedule No. 3. amounted to 43,408 dollars; and it was admitted in the answers, that they had all been paid, except 17,372 dollars. In that sum is included the bond and mortgage of Moses Rogers, upon the mansion house, amounting to 10,000 dollars principal, and 700 dollars interest; which principal was not due and payable until the 22d of July, 1819, or upwards of two years after the date of the assignment, and which debt we may presume to be amply secured by the mprtgage. That mortgage debt cannot be permitted to encroach upon the fund to be applied under the assignment to the discharge of the debts in schedule No. 3., until the other debts contained in that schedule are satisfied, or, at least, until Rogers has resorted to and exhausted his mortgage fund; and this restriction upon the mortgage of Rogers, falls within the influence of the principle, which has just been mentioned. There would remain, then, exclusive of that mortgage debt, only about 6000 dollars of the debts in schedule No. 3. to be satisfied; and the admissions in the answer conclusively show, that the assignees have received funds and property sufficient for the purpose; and if any part of those funds has been diverted to other purposes, instead of being applied to the discharge of the judgments and the other debts in schedule No. 3., the assignees have done it in their own wrong.

I consider it to be a very clear point, that Mancius and Jacob C. Cuyler, by the acceptance of the trust, and carryIngit into execution in a great degree, even with respect to their own demands and those of Schuyler, covered by 1-1 . . , „ . the judgment, have waived their remedy under the judgment, and accepted of the provision in the assignment in lieu of it. It would be impossible to maintain that they could use the judgment in destruction of the trust; and if they could use it at all, it would be to derange the order and efficacy of the trust provisions; they are, therefore, upon every sound principle of justice and equity, restricted to the remedies placed in their hands by the assignment. The lien of the judgment is preserved by the terms of the assignment; but it is only for the sake of priority in payment, and to guard against the intrusion of intervening liens. They must sell, and pay, and distribute, in the character of trustees, and not of judgment creditors; and to take out an execution upon the judgment against property over which they are exercising a discretion and control as trustees, would be incompatible with a due discharge of the trust, and a manifest breach of it. They are bound, therefore, to seek for satisfaction of their judgment in the mode presented by the terms of the trust which they have accepted. They have all along so thought and acted, until after the judgment at law upon the deed of settlement. The answer states, that they assured Schuyler, their co-creditor, that they would be enabled, by sales under the assignment, to raise money to pay his demand, and discharge his responsibilities.

As Mancius and Jacob C. Cuyler, by means of their acceptance of the trust, have disabled themselves from proceeding on the judgment, Schuyler, their partner in that judgment, is equally concluded by their acts, and he could ndt use the judgment to the disturbance or destruction of the trust. He was entitled to look to them for his payment and indemnity, for they had a control over the judgment as parties to it, and could modify, restrict, or discharge it. By the death of Schuyler, they, as survivors, have the exclusive control of the judgment at law; and the remedy of his representatives is here, in this Court, to compel them to account for the due use and proceeds of the judgment. They cannot be permitted to use it inconsistently with the terms of the trust, for the benefit of Schuyler’s representatives, any more than for their own benefit; and if the estate of Schuyler has sustained any injury by the acts of his associates, Mancius and Jacob C. Cuyler, the indemnity is to be sought from them. I am entirely satisfied, that any direct remedy upon the judgment, for any part of the demands intended to be covered by it, is in equity extinguished by the acceptance and operation of the deed of assignment.

There is no reason arising, on this case, which appears to be sufficient to deprive the plaintiff of the protection and assistance of this Court, against the undue application and use of the judgment of Mancius. The plaintiff represents judgment creditors, who have acquired a priority and advantage fairly in a course of legal diligence; and if the amount of their judgments was an inadequate price for the lands purchased by their trustee, they were not responsible for the fall of the market price of the land. It was the act of these trustees, M. and C., that depreciated this property. They had very essentially contributed to render the title to it shaded, doubtful, and litigious, by their acceptance and assertion of the deed of settlement. It may well be assumed, that those creditors, under all the circumstances, gave a reasonable price for the land, when they took it to secure their judgments, amounting to near 4600 dollars. The facts in the case evidently show, that it is the only satisfaction they are to receive; and when they purchased, the title was no doubt deemed extremely hazardous. There is nothing, then, in the case, to impair the pretension of the plaintiff to the ordinary aid and protection of the Court. He does not come here to ask for any particular favour or preference. His preference and his title have been already duly acquired at law. Nor does he come here to interfere with the distribution of the fund under the deed of assignment, or to impair the rights of the general creditors upon that fund. He comes simply to be protected against the inequitable use of their judgment, by M. and £7., contrary to the deed of assignment, and to their duties as trustees under it. That assignment was made on purpose to give preferences, and to disturb all equality of distribution of the funds of Cuyler. The scheduled debts were to be first paid, and that too in such order of preference and priority, as the trustees should deem proper, by which means they had the complete disposition of the whole fund, and the power to apply it, in the first place, exclusively to the satisfaction of their entire demands. The assignment, with all its provisions, was in hostility to the equitable doctrine of an equal or rateable distribution of assets; and the case affords a, melancholy assurance, that the postpbned creditors, whose debts are not in schedule No. 3., and which exceed 37,000 dollars, will not receive a single cent. If a surplus should remain for those general creditors who do not belong to the privileged class, (and the plaintiff’s cestui que trusts-were of that description,) the trustees have the same discretion given to them, especially by the deed, of giving preferences and priorities.

If the defendants were permitted to go on and collect 5000 dollars, under their judgment, out of the lands purchased by the plaintiff, how would this promote the marshalling of assets, or equality of distribution ? Not at all. It would probably cut off the judgment creditors whom the plaintiff represents, from their debts, as it is hardly to be presumed that they would be willing to redeem the land from such an incumbrance, in addition to the other judgment of Quilhot. It might enlarge the chance of a surplus of funds after the scheduled debts were satisfied-; but who can tell that there would be any equality of dfstribution of that surplus ? or that those cestúi que trusts would be allowed to touch a cent of it ? for the trustees have the same power given to them that Cuyler had, to prefer one creditor to another. The interference of the Court in this case will not, therefore, in any degree impair the operation of its favourite doctrine of equality in the distribution of trust funds ; and it strikes me, that the Court is called upon, by very obvious principles of justice and equity, to restrain the defendants, M. and C., from renouncing the duties of their trust, by resorting, not as trustees, but as judgment creditors, to their judgment, to collect a portion of their debt, especially, when that act will deprive the plaintiff of a title fairly and justly acquired by law.

Upon the first consideration of this case, I thought a distinction might be taken between Quilkofs judgment and the other; but upon more reflection, I think there is no just ground for it. Mancius purchased that judgment while in the execution^ of his trust; and if he did not buy it in for the benefit of the estate, (as we must presume he did, since it was his duty, as trustee, to have paid it in preference to any other debt, as it was the oldest lien,) he bought it upon some speculation of his own, at a reduced price; and any such advantage he could not be permitted to retain, as it would be incompatible with the duties of his trust. He has, therefore, ill his answer, very properly renounced all claim to any demand under it, beyond a reimbursement of the purchase money, with interest. This very renunciation is an admission of the purchase in the character of trustee, and not on his own account, and he was entitled to reimburse himself out of the earliest fund in hand. The judgment, to the extent of the purchase money paid, had the preference to any demand, and why did he not reimburse himself instantly ? If he did not, it was his own negligence, for he was entitled to do it, and had the means for that purpose. Can he now, under the circumstances in which he purchased this judgment, and impliedly admits that he holds it, be permitted to depart from bis character of trustee, and act as a stranger to the trust, and as Quilhot himself might have acted, and collect the judgment at law upon any lands chargeable with it ? Certainly not. He purchased in the judgment, while he was acting as trustee, and it must be satisfied to the extent of the purchase money paid, out of the trust funds, and not otherwise.

I shall accordingly decree, that the injunction heretofore issued be continued, and made perpetual, in respect to the judgment confessed in favour of Mancius and others, and in respect to the judgment of Quilhot, and in respect to any proceedings under them, or either of them, by execution, scire facias, action of debt, or otherwise, so far, at least, as concerns the lands purchased and claimed by the plaintiff, and that no costs be charged by either party against the other.

Decree accordingly.