Sharp v. Fly

68 Tenn. 4

• Court: Tennessee Supreme Court
• Decided: April 15, 1876
• Status: Published

Opinions

Sneed, J.,

delivered the opinion of the court.

The tract of land in controversy "was originally -sold by Lannum to Sharp by deed, with reservation -of a lien for the purchase money unpaid. This deed was not registered. The complainant, Sharp, sold without conveyance to Halé and Clements, and thereupon, by an arrangement between the several parties, Fly became bound to Sharp for balance of Hale and Clem-ents’ purchase, and Sharp, in writing upon his unregistered deed from Lannum, directed Lannum to execute a deed directly to Fly to the land, and surrendered Lannum’s deed to him for cancellation. A deed was thereupon executed by Lannum to Fly, without reservation cf lien, and acknowledging payment of the price. By this arrangement the complainant, Sharp, •came to be the owner of a note for $4,000, executed by Fly, to which Branch signed his name as joint -obligor. The deed by Lannum to Fly was executed and delivered on the 3d of September, 1860, and registered on the 6th of the same month and year. Ho lien was reserved, as already stated, upon the face of said deed, and the price of the land was admitted to be paid. This note of $4,000 fell due in December, 1861, and is for the' balance of the purchase money due to Sharp, the debt of Lannum, on account of the original ‘ purchase by Sharp having been long since (paid. About the 14th of December, 1860, Fly being very largely indebted to E. M. Apperson & Co., conveyed the land in controversy, and a large amount of' other property, to W. S. Jones as trustee, to secure said debts. The ■ deed was signed by Fly, the maker, and by Jones, the trustee, and its benefits accepted by the beneficiaries, E. M. Apperson & Co., who-signed their names thereto, and it was at once registered in Gibson county, where the land lies. The trustee, Jones, upon default of payment, proceeded in time to sell portions of the property and credit the debts secured pro tanto; and he having died in 1864, the defendant, Quigley, was after ward-appointed trustee, and proceeded to close out the trust by a sale of the property. Thus the whole of the property was, from time to time, sold under the provisions of the trust, except the land in controversy. A large amount of' this -property, all, indeed, except the land in controversy, was sold to one Green Williams, who thereupon executed- a deed of trust to A. Delap on the same property to secure the deferred payments, which were two notes of $23,000 each. Upon closing out this, trust of Green Williams, there was still a large balance due to Apperson & Co., much of the personalty having been lost by the war; and in December, 1867,. the trustee, Quigley, proceeded -to sell the land in controversy for its payment, and .the same was purchased by Apperson & Co., and credited upon their debt.. In May, 1867, however, the- complainant, Sharp, with Lannum-as co-complainant, filed his bill, making Fly, Branch and the trustee, Quigley, defendants, to enforce his alleged vendor’s lien upon the land for the-unpaid note of $4,000. This bill was demurred to upon the ground, among others, that the beneficiaries were not made parties. The demurrer was sustained, with leave to complainant to file an amended bill, which was done accordingly. The amended bill charges a fraudulent combination between the parties to the trust to cover up the property of Fly,, and thus defraud his creditors, and relies- upon this ground of relief as well as that of the vendor’s lien, as set up in the original bill, and charges that Apperson & Co. had actual notice of the existence of said lien before-the execution of the trust. In the progress of the-cause the defendant, Branch, put in a cross-bill claiming to be a partner of Fly in the purchase of the land in controversy, and insisting upon his lien as-such upon the land for bis interest in the unsettled partnership. In the progress of the cause also the-defendant, Fly, was permitted to plead and rely upon his discharge in bankruptcy. ■ All the defendants deny the fraud imputed -to them, and assert that the transactions were fair and bona fide, and the defendants, Apperson & Co., very positively deny all knowledge- or suspicion that the complainant or any other person had a lien upon the land so conveyed. But there is-testimony that after the conveyance the trustee, Jones, admitted that he was advised or was of opinion that the complainant’s note was a lien on the land at the time the deed of trust was executed. These are the general features of the case without unnecessary detail, and the statement is perhaps sufficiently full to illustrate the equities of the parties.

It will be seen from these facts that the main question to be determined is, whether the complainant, Sharp, has a vendor’s Hen on the land which can overreach the interest acquired by Apperson & Co. by virtue of the trust. This question must be decisive of the case, as we are unable to see any ground whatever upon which to impute any fraudulent purpose or contrivance to the defendants, Apperson & Co., throughout these complicated transactions, nor can we discover in the case any foundation for the claim of Branch upon this land upon the score of his alleged partnership. The whole case must turn upon the question whether the complainant had an actual subsisting lien at the time the lien of Apperson & Co. attached, and the question whether, in such case, notice to the trustee of the complainant’s claim was notice to the beneficiaries, will be immaterial if it should turn out that the complainant had no lien at all, whatever might be the opinion or information of the trustee to the contrary. 3 Head, 722; 10 Hum., 375.

It seems to be settled that where there are several successive alienations of land, and the final conveyance is made by the first vendor to the last ven-dee, the last vendor, all intermediate liens being discharged, is substituted to the rights of the first vendor, and may enforce his lien for unpaid purchase money as against his vendee. Hamilton v. Gilbert, 2 Heis., 682; Burrow v. Carter, MS., Jackson, 1871; 1 Hilliard on Mort., 678. The question of the vendor’s lien depends not upon who executes the title, but who sold the land to the defendant against whom the lien is sought to be enforced. It is contended on the part of the complainant that the execution of the deed of trust by Williams to Jones upon most of the property conveyed by Ely to Jones was, in legal effect, a merger or novation of the debts due to Apperson & Co., and operates as an extinguishment of Apperson & Co.’s interest in the assignment by Fly to Jones. There are several reasons why the doctrine of novation can have no application in this case. In the first place, no such case is made in the pleadings. Secondly, it does not appear affirmatively that the property conveyed by Williams to Delap to secure the deferred notes of $2,300, each was of value sufficient to extinguish all of the debts of Apperson & Co. Thirdly, no such intention to release the lien on the land conveyed to Jones and not sold to Williams, is made to appear, and this intention is never to be presumed. But the fact stands to rebut such an intention, that much of the property conveyed by Williams to Delap was lost during the war, that Apperson & Co. did not release or quitclaim their rights in the land in controversy, and that there is still a large portion of Apperson & Co.’s debt still due after the foreclosure of Williams’s trust. It is a familiar principle that a mortgage being given as a security for a debt, the general rule is that no mere change in the mode and time of payment, nothing short of the actual payment of the debt, or an express release, will operate as a discharge of the mortgage. The lien lasts as long as the debt. 2 ; 13 Gray, 170; 13 Sm. & M., 393; 1 Hilliard on Mort., 482. So it is held that a sale of mortgaged property,'Under a power given in the mortgage, and the taking of the purchaser’s twelve months’' bond for the purchase m'oney,, does not, by the laws of Louisiana, operate as an exlinguishment of the mortgage debt. Union Bank v. Stafford, 12 How. U. S., 327. The doctrine of novation in the civil law is but 'the doctrine of merger in the common law— “the substitution of a new obligation for an old one,, which is thereby extinguished.” It was a principle-in the civil law that there must be an express intention to novate the animus novandi. A novation is. never presumed. A case of- novation at common law is put in Tatlock v. Harris, 3 Tenn., 180: “If A owes B £100, and B owes C £100, and the three meet and it is agreed between them that A shall pay'C the £100, B’s debt is extinguished, and C may recover that sum from A.” But • it must appear in every case that the taking of other securities or liens, or any change in the time or manner of payment was intended by the parties as a shifting of the ■ liability from one debtor to another. Thus it is held that, the delegation by -which the debtor gives to the creditor another -debtor, who obliges himself toward such creditor, does not operate, a novation unless the creditor has expressly declared his- intention to discharge the debtor who made, the delegation. 13 La. Am., 238. Now it cannot be pretended that the defendants, E. M. Apperson & Co., have in any manner whatever intimated a purpose to relinquish the security-they held for the balance of their large debt by the transaction between Jonés and Williams. Even if' they had become parties "to said trust by signing - the same, no presumption could bé raised that they intended to relinquish their lien upon the land in controversy, in the absence of any such express intention,, or of any circumstance whatever to indicate such a purpose. On the contrary, the very fact -that they retained their • original lien on the land in controversy,, under the circumstances, must be accepted as a circumstance to show a contrary intention or a sagacious foresight that much of the property conveyed by Williams to Jones was not the best indemnity for debt in the aspect of public affairs then existing. The case is simply that of a creditor, having just debts secured by mortgage on all his debtor’s property, sells off a part of it and takes a trust upon it from the purchasers, and it turns out that this is not enough to pay his debt, upon what principle of equity can he be precluded from looking to the balance of his original security to save the unpaid balance? Unless he has manifestly intended to give up his original indemnity, we cannot presume it. Such, as we have seen, is the concurrent doctrine of both the civil and the common law upon this- subject.

This brings us to the consideration of the question whether, under the facts, the complainant had a lien npon the land in controversy. The conveyance-under which he claims it is upon the records of the county, reserving no lien and acknowledging upon its-face that there is no purchase money due. The defendants, being just creditors in a large amount of money, take a deed of trust upon this and other property, and they accept the trust and become parties thereto by signing the same. They have actually gone forward through their trustee in closing out said trust to the extent of selling all the property included therein except the land in question; and the bill charges and the answer of the trustee admits, that they were proceeding to sell this land in controversy to discharge the unpaid balance of the debt before the bill was filed to enjoin it. It seems to us that these facts vindicate the defendants’ right, even within the doctrine of the case of Brown v. Vanlier, 7 Hum., 249. In that case the deed of trust was made to Wallace Dixon to secure certain creditors, but no steps whatever had been taken to close the trust, nor had the beneficiaries in any way signified their acceptance of the same by signing it or otherwise. The whole argument of that case rests upon the idea that the vendor’s bill was filed before any steps were taken to close the trust conveyance. Thus it is said, in that case, that the vendor’s equity is such an equity as will be enforced against creditors claiming under such conveyance where the vendor files his bill before any steps have been taken to close the trust conveyance. Id. 241. It should be distinctly noted, says the argument, that I am willing to admit that if the conveyance is closed before the vendor endeavors to enforce his equity, or even if the first step be taken in a legal forum by the creditors, such creditors might obtain a priority; although notified of the existence of the vendor’s lien. Id. 244. This, we think, states the true doctrine, except that the same effect must necessarily result, whether resort be had to a legal forum or not, in cases where the legal title is vested in a trustee with full power to close the trust without resort to a legal forum, and where he is proceeding accordingly, before the vendor’s bill is filed, as in this case. This doctrine has been followed in many cases reported and unreported by this court. Green v. Demoss, 10 Hum., -; Ellis v. Temple, 4 Col., 315; Fain v. Inman, 6 Heis., 10. It may be well to note that Chancellor Cooper, in his edition of Yerger’s Reports, in a note to the case of Eskridge v. McClure, 2 Yer., 88, refers to the case of Brown v. Vanlier, 7 Hum., —, and the other cases on the subject, and states his opinion to be that the late eases contain the sounder doctrine, and more consistent with our registration laws.

The confusion which has arisen in professional opinion upon this subject has sprung from the varied interpretations given to the word “executed” in the opinion of Turley, J., in Brown v. Vanlier. The opinion, as will be seen, adopts the argument, and the argument maintains the doctrine above stated. But the court, in stating the result, uses the word executed,” so that it has been mistaken to mean foreclosed, while giving such a sense to the word is manifestly at war with the doctrine maintained in the argument which is adopted by the court. A trust of this nature is simply inchoate as long as it is a mere private matter between the bargainor and the trustee. In that chrysalis state it may be revoked by the bar-gainor. It must be i accepted by the beneficiaries, or benefit must be taken under it by them before it is a trust. It is, then, an executed trust, and in this sense,. in the opinion of the writer, Judge Turley used the word, and not in the sense of foreclosure, which would put the court in direct antagonism to the argument they had adopted. Thus it is said a trust is executed where the legal or equitable estate passed to the trustee its creation. ■ 1 Prest. Est., 190. So it is said if a debtor voluntarily convey property to trustees for the benefit, of creditors, and the transaction is not communicated to them, and. they do not execute the deed, and are not in any manner privy to it, the deed operates only as a power to the trustees, and is revocable at any time by the debtor. Hill on Trustees, .130. . These and many cases referred to show that the word “executed” is used in the sense of acceding to or accepting the deed. Id. 131. So. Judge McKinney’s explanation of the term is consistent with both the English and American authorities, that an executed trust is one that has become a complete trust by the vestiture of the rights it purports to create. Before the creditors have elected to take under the deed, the assignee is rather the trustee for the debtor than for them; when they have accepted the assignment by claiming or taking a benefit under it, the assignee becomes their trustee, and they assume by virtue of the assignment the character of lien creditors. Or if they have, by filing a bill, or in any other manner made themselves parties to the assignment, by claiming or receiving a benefit from it before the vendor’s bill is filed, they müst prevail' over the tardy claim of the vendor. 1 White & Tudor’s Equity Cases, 250. This equity of the vendor after he has parted with his title without reservation,' is not a lien until established by the decree of the' court, and must always yield to any intervening lien which has attached before the filing of the bill. Thus it is held that it cannot prevail against creditors claiming under a deed of trust made for their benefit, or under a mortgage, for they have more than an equity •or lien — they have the legal title. Dunlap v. Barnett, 5 Sm. & M., 702.

We need not discuss this subject at length, but refer, for the argument, to several cases decided' by this court ubi supra. In one of those cases we have recently said, “It is clear that creditors who have acquired a valid, specific lien upon the estate, are not to be assimilated to volunteers and purchasers under the vendee in the sense of the law, and if this floating equity, misnamed in judicial parlance ‘the vendor’s lien,’ be not quite a myth, but a mere capacity to acquire a lien if he chooses, then this same capacity belongs to others who are creditors, and have rights just as meritorious as his. And we hold that the simple knowledge on the part of the creditors that the vendor, sleeping on his rights from year to year, may, if he chooses, acquire a lien as the creditor himself is about to do, cannot, in a forum of conscience, impair the value or affect the validity of the lien so acquired by the creditor. In such case there is no mala fides, no fraud, no improper advantage taken by the one of the other, but the race of diligence as just creditors being open to both alike, the one has lost and the other won.” Fain v. Inman, 6 Heis., 12. The result is, that the decree must be reversed and the bill dismissed.