Taylor v. Cornelius

60 Pa. 187, 1869 Pa. LEXIS 79

• Court: Supreme Court of Pennsylvania
• Decided: May 11, 1869
• Docket: No. 217
• Status: Published

Opinion

The opinion of the court was delivered, by

Sharswood, J.

— Bernard Douredoure, at a time when he was unquestionably solvent, made a settlement of part of his estate for the separate use of his wife. He afterwards embarked in business and failed. He assigned all his estate for the benefit of his creditors. He then made an arrangement with William Taylor, to which the consent of the assignees and all his creditors was given, by which not only all the assigned but also the settled estates of his wife were to be conveyed to Mr. Taylor, who executed a declaration of trust, dated December 24th 1855, that he held the same upon condition that they were to be sold and the proceeds to be applied to repayment to him of the sum of $20,634, or thereabouts, already advanced and expended by him in purchase of debts and liabilities of said Bernard Douredoure, and of all other sums to be advanced by him for account of said Bernard Douredoure, and upon repayment to him of all sums so due, together with lawful interest, that he would convey all of the property remaining unsold, that is to say, those formerly belonging to Mrs. Douredoure, to her or to her order, and those formerly belonging to Mr. Douredoure, to him or his order. The plaintiffs below subsequently, in T858, obtained a judgment in the District Court against Bernard Douredoure, upon which an attachment of execution was issued and served on William Taylor, June 28th 1858, who pleaded nulla bona, upon the trial of which issue the jury, under the instructions of the court, found a verdict for the plaintiffs. The learned judge charged that the several conveyances to Taylor, and the declaration of trust by him, were fraudulent and void as to the attaching creditors. The ground of this instruction seems to have been that they amounted to an assignment for the benefit of creditors, and not having been recorded within thirty days, were void under the 5th section of the Act of March 24th 1818, Pamph. L. 287. We think that in this there was error. Together they constituted merely a mortgage to Taylor, with a power of sale for the purpose of securing advances already made or thereafter to be made for the use and benefit of Douredoure. For what purposes the advances were to be made, or whether they were to be applied to their objects by the mortgagor or mortgagee, does not appear to be material. It was a security for debts thereafter to be contracted by the advance of money: Griffin v. Rogers, 2 Wright 882. There was no trust for any creditor: the grantee could not be called on to account except by the grantor. Such a mortgage without any power of sale in the mortgagee has often been decided to be valid in Pennsylvania. “It is now settled,” says Mr. Justice Huston, in Stewart v. Stocker, 1 Watts 140, “ that a mortgage or judgment may be given to secure a creditor, not only for a debt due, but for responsibilities, which are contingent, nay, for future advances:” Lisle v. Ducomb, 5 Binn. 585; Garber v. Henry, 6 Watts 57; Parmentier v. Gillespie, 9 Barr 86; Moroney’s Appeal, 12 Harris 372. The power of sale does not vary the case: it creates no trust for creditors: it no more converts a mortgage to secure future advances to be applied in payment of the debts of the mortgagor into an assignment in trust for the benefit of creditors than would such a power in an ordinary mortgage given to secure a loan. The equity of redemption is subject to levy and sale on execution against the mortgagor, and the proceeds of sale, after payment of the advances, to an attachment in the hands of the mortgagee as garnishee. Neither do we regard the provision for commissions or compensation to the mortgagee as impressing the instrument with the character of an assignment within the Act of 1818. Whether such a provision ought to be pronounced usurious and therefore void, or whether a court of chancery, which watches with jealousy all unusual agree-merits between the mortgagor and mortgagee, clogging or embarrassing the equity of redemption, would consider it as oppressive and inequitable, and therefore not to be enforced, it is unnecessary here to determine. It does not render the mortgage void. We are dealing only with the question whether the instruments are within the 5th section of the Act of March 24th 1818. We are of opinion that they are not. This disposes of the first two specifications of error.

Assuming the assignment to be void, the learned judge proceeded to apply to the case the principle settled in Re Wilson, 4 Barr 431, that for payments made under the trust before an adverse claim the assignee by a void assignment is protected, but only for such; and on that assumption his ruling was undoubtedly correct. But if the "conveyances to Taylor were not void, but constituted a valid mortgage to secure past and future advances, then his instructions to the jury as complained of in the 3d and 4th specifications were erroneous. If there was no personal assumption by Taylor of Douredore’s debts — if he was not bound by contract to discharge them, then according to Terhoven v. Kerns, 2 Barr 96, and Bank of Montgomery County’s Appeal, 12 Casey 170, advances made by him after a junior lien would be subject to it. But as mortgagee in possession he would be entitled to a ■credit for all sums paid on prior encumbrances, for taxes, premiums of insurance, repairs and other similar charges. If, on the other hand, Taylor was under obligation by contract to make advances, if he had bound himself personally to pay Douredoure’s debts, he would be entitled to the security of his mortgage for the advances made by him for this purpose though subsequent to the junior lien: Parmentier v. Gillespie, 9 Barr 86; Moroney’s Appeal, 12 Harris 72. The instruction to the jury therefore that Taylor was not entitled to credit for any payments made by him subsequent to the attachment, which were not contracted prior to that time, was erroneous, and the 3d specification of error must be sustained.

The 4th specification refers to a part of the charge not made the subject of exception below, and cannot therefore be noticed here.

The 5th specification is grounded on the 4th exception taken to the charge that Taylor the garnishee was a trustee for the benefit of creditors, and therefore had no right to apply insurance-moneys received by him to the rebuilding of houses owned by Douredoure. Undoubtedly if Taylor was such a trustee this instruction was correct; but as our conclusion is that he was not, but merely a mortgagee, it is equally clear that if before the date of the attachment he had, with the consent of the mortgagor, made contracts for the rebuilding of the property destroyed by fire, he had a right to apply the moneys received on the policies to such purpose.

The 6th specification of error is grounded on the 5th exception to the charge that the decree of the Supreme Court was not conclusive as between Taylor and the attaching creditors as regarded the land of Mr. Douredoure. It appears that in 1862 a bill in equity was filed in the Supreme Court by Mr. and Mrs. Douredoure against Mr. Taylor, setting forth the several conveyances to and the declaration of trust by him, and that on December 1st 1860 an account had been stated by Mr. Taylor, showing a large balance in his favor, and that it was then agreed by him to accept in discharge certain portions of the real estate of Mr. Douredoure remaining unsold freed from the trust, and that he would convey to Mrs. Douredoure the remaining portions thereof, being part of the estate originally settled upon her. The bill prayed for the specific execution of this contract. It alleged also that Taylor, as part of the original arrangement, agreed and undertook to assume and pay the debts of the said Bernard Douredoure. Taylor filed an answer admitting the allegations of the bill, but setting up several attachment executions against Douredoure which had been served upon him, and among others that now before us by Cornelius & Baker. Thereupon a supplemental bill was .filed, making all the attaching creditors parties, and among others, Cornelius & Baker appeared and answered, setting up that the original conveyances to Taylor were fraudulent and void as against them; that their attachments were valid and subsisting, and bound all sums of money in the hands of Taylor received under the alleged trust.

The cause was set down and heard on bill, answer and proofs, and a decree was made dismissing the bill as to the attaching creditors, but ordering that the contract should be specifically carried into execution; that the plaintiffs should execute and deliver to Taylor a release of certain property of Douredoure from the operation of the trust so that it should become absolutely his, .and that Taylor should convey to Mrs. Douredoure what remained unsold of her original separate estate. The learned judge below appears to have thought that so far as Mrs. Douredoure was concerned, this decree ought to be regarded as conclusive upon all parties; but that as between Mr. Douredoure, Mr. Taylor and Cornelius & Baker, that when the bill was dismissed as to,[the attaching creditors, the court in effect said they would not adjudicate on that question; consequently it remained open for the decision of the jury. In this instruction we think that there was error. ■ The creditors were made parties in order that they might be heard if anything they had to say in opposition to the case made by the bill. If that case was true in fact they had no just claim upon Mr. Taylor as garnishee; if not true, as they were afforded the opportunity of showing, the decree would have declared and established their rights and the bill been dismissed as to Mr. Taylor. Uxxless the release of Mr. and Mrs. Douredoure would give Mr. Taylor a good title, freed from the trust and freed from Douredoure’s debts, there could have been no decree for specific performance against him. If the conveyances and declaration of trust were valid, and were intended not merely to secure advances, which he was at liberty to make or not to make at his pleasure, but on his agreement to assume personally and discharge all the debts and liabilities of Mr. Douredoure existing at the time of the agreement, then Mr. Taylor was clearly entitled to retain all the property in his hands, including that of Mrs. Douredoure, until he was fully indemnified and repaid. Mrs. Douredoure had voluntarily pledged her own separate estate for this pui’pose, and if either the conveyances were void as an uxxrecorded assignment, or it was a mere mortgage to secure advances to be made by Taylor at his pleasure — the court surely would not have decx’eed a conveyance to Mx’s. Douredoure if the attachment was a subsisting lien and a personal claim against Taylor for any part of the fund which he had received and applied to his own advances. The decree was based ofl the merits of the whole case. The bill was dismissed as to the attaching creditors because no relief was asked against them — none was required. They were brought in to show cause against the decree, and if they could say nothing which xvould avail, to be bound by it. The decree that Mr. and Mrs. Douredoure should release Taylor,, and that Taylor should convey to Mrs. Douredoure, notwithstanding the attachment, was an adjudication against them from which they could have appealed. “ Where all the parties are brought before the court that can be brought before it,” says Lord Chancellor Redesdale, “ and the court acts on the property according to the rights that appear, without fraud, its decision must of necessity be final and conclusive:” Gifford v. Hart, 1 Sch. & Lef. 408. And, again: “In Hungerford’s Case the creditors complained that the property had not been applied as it ought: it was objected that they should not come in under the decree and impeach the decree: it was answered that they might; for that if the decree contained in itself a wrong disposition of the property, they coming in as creditors had a right to appeal, because the decree bound their rights. In Osborn v. Usher, 2 Bro. P. C. 314, the same sort of principle was admitted if the right of a remainder-man or a person entitled to the estate in any way is bound by the decree, he must have a right to appeal from it, as well as the person against whom it is made:” Id. 489.

It is abundantly clear that to render a decree conclusive against a party, it need not be against him particularly by name. It is enough that it is adverse to his interest: Johnston v. Churchill, 6 Litt. 177; Ogsburg v. La Farge, 2 Comst. 118; Wiswall v. Sampson, 14 How. (S. C.) 52 ; Hitch v. Davis, 8 Maryland 524. Whatever question was properly involved in the former suit, and might have been there raised and determined, is conclusively settled by the decree : Stockton v. Ford, 18 How. (S. C.) 418. To hold that the decree in this case is conclusive as to Mrs. Douredoure, so that the creditors have lost all claim on the estate conveyed to her, and yet is not conclusive as to Mr. Taylor, is to make the same decree dismissing the bill as to the attaching creditor — in the same breath — conclusive and inconclusive. If the assignment was void, or if it was a mere mortgage to secure future advances, the attaching creditors had a lien on the proceeds both of the estate of Mr. and Mrs. Douredoure, for both had been assigned, and the decree must be conclusive as to both or neither. The very questions now raised in this case were necessarily adjudicated in that — and all these parties were in court, and had a right and opportunity to be heard; and the decree is consequently conclusive upon them.

Judgment reversed, and venire facias de novo awarded.