Wright v. Douglass

3 Barb. 554

• Court: New York Supreme Court
• Decided: July 4, 1848
• Status: Published

Opinion

By the Court,

Gridley, J.

It is indispensable to the plaintiff’s right to recover that he should establish in himself a legal title to the premises in question at the time when this suit was commenced. The title under which he claims is derived under a sheriff’s deed, executed upon a sale under a judgment, obtained in a suit commenced against the Towanda Bank, as a foreign corporation, wherein the attachment was served by a levy on the premises, on the 26th day of June, 1843. If then, the Towanda Bank held the legal title to the premises on that day, the plaintiff’s right to recover is probably made out. (6 Hill, 362.)

To establish this fact, the plaintiff proved a judgment in favor of the bank, against one Eben J. Dennis, the common and admitted source of title of both parties, and a sale under the judgment, with a sheriff’s certificate, executed to the bank as the purchaser, bearing date June 6th, 1838. In addition to this, the plaintiff gave in evidence a sheriff’s deed, reciting the sale to the bank, and dated on the 16th of December, 1845. If this deed is an available instrument for the plaintiff, conveying the title of Dennis to the bank, then, notwithstanding its recent date, it would probably be good by relation: and for all the purposes of this suit, would prove the legal title to have been in the bank, when the premises were levied on by the plaintiff’s attachment. But the validity of this deed, as an operative instrument, is disputed by the defendant on two grounds.

1st. It is said that there is no proof of a delivery of it to the bank, or to any person having authority to accept it on behalf of the bank. The deed bears date since the commencement of this suit, and is produced by the plaintiff, a creditor who is seeking to collect a debt against the bank by a hostile proceeding. la addition to this, it would seem that the bank itself had elected to abandon the inchoate title it had acquired by the sheriff’s certificate; and had sought, by a different method, to obtain a beneficial interest in the premises, and to convey that interest, together with an outstanding trust estate, to another creditor in satisfaction of a just debt. When we consider these facts in connexion with the circumstance that the bank itself became utterly insolvent, and ceased from all business operations some years before the date of the instrument, it is impossible to uphold this deed as having been delivered, either to the grantee, or to any agent whose authority to accept it, on behalf of the grantee, can be fairly presumed. It was doubtless procured by and delivered to the plaintiff without any knowledge or consent of the bank, or of the defendant to whom the rights and interests of the bank in the premises had been transferred. What relief might be granted in a court of equity in a case where the rights of third parties were not concerned, and where a judgment debtor fraudulently-refused to receive a deed from a sheriff, under circumstances like the present, is a very different question. We are here in a court of law, and not in a court of equity. The rights of third persons are concerned, and were acquired prior in time to the service of the plaintiff’s attachment. And we are not prepared to say, from any evidence before us, that those rights and interests which are now represented by the defendant, are not equally worthy of the protection of a court of equity as those of the plaintiff. It was certainly competent for the Bank of Towanda and Dennis to agree to abandon the sheriff’s certificate; and to adopt a direct mode of acquiring a title to the premises by a conveyance, and for the bank to transmit that title to any creditor in payment of a just debt. No one can question the legality of such a proceeding, except a creditor who stands in a situation to challenge the transaction as a fraud upon his rights. But it is not pretended that the demand of the Bank of Ithaca was not a just debt; and the right to pay one creditor in preference of another cannot be disputed. We do not think, for these reasons, that the plaintiff had any power to accept this deed for the bank, so as tq vest the title in the bank by relation at the time when the attachment was served. The deed therefore not. having been legally delivered, has no validity or operative effect whatever. But, 2dly. There is another objection to the validity of any title derived under this deed. And this arises upon the legal effect of the deed executed by Bben J. Dennis to Amasa S. Dana, the attorney and trustee of the bank, on the 4th day of December, 1830. I think that we are bound to conclude from the evidence, that this deed was so executed by the consent and procurement of the bank, and that the bank furnished the consideration, which was the debt due from Dennis to the bank. This was a new arrangement which, as between Dennis and the bank, subverted the title, (such as it was,) which was derived under the certificate of the sheriff. It was utterly inconsistent with that title, and must be held to be evidence that it was abandoned by a mutual agreement of the parties. If this be so, then the bank, after the 4th of December, 1839, possessed no right or interest or estate in the premises, by virtue of the certificate of the sheriff; and by necessary consequence, it was impossible for the plaintiff to acquire any legal or other title based on such certificate of sale.

The conclusion to which I have cqme on this branch of the case renders it necessary to inquire whether the plaintiff has acquired the title that was conveyed by Dennis to Dana by the deed of December 4th, 1839 ; and whether the title so acquired (if he in fact acquired any,) was a legal estate. In conducting this inquiry, the first question which arises, is what estate was conveyed to Dana under the deed of Dennis ? The counsel of the plaintiff has argued that by virtue of the 47th and 49th section of the act entitled “ of uses and trusts,” (1 R. S. 728,) the bank took the whole estate, as though the conveyance had been made directly to the bank, and therefore that the service of the attachment created a lien on the legal estate in the premises, which was consummated in the plaintiff when he finally received his deed from the sheriff founded upon a sale of the premises under a judgment obtained in the attachment suit, and bearing date August 30, 1845. Those sections however, are, by the very terms of the 50th section of the act, declared not “ to extend to trusts arising or resulting by implication of law." We have already said that we regarded the deed in question as creating a resulting trust, the bank having furnished the funds which constituted the consideration, of the conveyance. That déed itself is not in evidence; and the recital contained in the deed of the 15th of August, 1843, does not necessarily show that the trtísts therein mentioned were expressed on the face of the conveyance. If the conveyance of the 4th Of December, 1839, created a resulting trust, it conveyed the entire estate in the land to Dana, by Virtue of the 51st séction, subject only to the provisions of the 52d section of the act. And it seems to me reasonable to hold; that, if the plaintiff had intended to insist that the trust arising bn the deed in question was not a resulting trust, and that the dfeed was so framed as to bring it within the provisions of the 47th and 48th sections of the act, thus conveying the legal title, as well as the beneficial interest in the preniises, to the bank, hé should have put that deed in evidence. As already intimated, the recital in the tripartite deed of August, 1843, may well be construed to express the trust which the parties récognizéd as being raised by the deed; rather than the actual provisidns of the instrument. In a case where the words actually employed by the parties to the deed are so important, nothing shbuld be left to an implication arising from an uncertain recital contained in another conveyance. And, especially would it be wrong to hold it proved by the recital that the absent deed conveyed a legal estate to the bank, when the recital itself declares that the legal title was convejred to the nominal grantee Dana, and when the deed in which the recital is found is entirely irreconcilable with the idea that the bank held the legal estate in the premises. That absent deed, if produced, might be found to express either no trust at all upon its face, or if it created express trusts, the same might be valid under the provisions of the fifty-fifth séction of the act. I shall therefore assume for the present that the deed executed by Dennis to Dana created a resulting trust, and that by virtue of the 51st section of the act before cited, Mr. Dana took the whole interest in the premises, subject to the provisions of the 52d section.

I. It will follow, therefore, that to entitle the plaintiff to recover, he must bring himself within the provisions of that section, which reads as follows : “ Every such conveyance shall be presumed fraudulent as against creditors, at that time, of the person paying the .consideration; and where a fraudulent intent is not disproved, a trust shall result in favor of such creditors to the extent that may be necessary to satisfy their just demandsIt is apparent that the plaintiff, in the attempt to bring the case within this section, is met by several grave difficulties. (1.) There is no satisfactory proof that the plaintiff Was a creditor of the bank on the 4th of December, 1839. The only evidence of that fact is that his claim was founded on bank notes of all denominations bearing various dates from 1835 to 1841. Now it nowhere appears, when the plaintiff received any one of these notes ; nor when they were put forth by the bank. Their dates furnish no satisfactory evidence of this fact; for, judging by the well known practice of banking institutions, it is quite as probable as otherwise, that all the bills bearing date before the execution of the deed, had been, after their first issue, returned to the bank and re-issued to customers, in the ordinary Course of banking business, after the 4th of December, 1839. If, therefore, it be assumed that the rights of the numerous former holders of these bank notes, as creditors, under the section in question, have been transmitted to the plaintiff, the case is still Without adequate proof that any one of these notes was actually issued and outstanding on the 4th of December, 1839. (2.) Again, if this difficulty were obviated, we have no evidence to show how large a portion of the indebtedness which constituted the plaintiff’s judgment arose upon notes bearing 'date before the execution of the deed. It is a part of the case that some bore date in the years 1840 and 1841. Now, confessedly, as to that part of the judgment founded on notes of this description, the statute gives the plaintiff no lien upon, nor rights against, the land conveyed to Dana. It is therefore entirely uncertain whether the trust which results to the plaintiff attaches to the premises in question to the extent of one dollar or one thousand. (3.) The presumption of a fraudulent intent maybe disproved by the very terms of the act. (See § 52, and 10 Paige, 570.) And it may well be argued, that the presumption of fraud is “ disproved” .by the circumstances under which the deed was given, the trustee being the attorney of the bank, and the bank a foreign corporation; and the absence of any proof of embarrassment existing at the time which would render a fraudulent intention to place its property in the name of other parties fairly presumable against the bank. (4) It can hardly be admitted that under the provisions of the 52d section of the act, the title of Dana could be divested by an execution sale for the satisfaction of the whole judgment, when it is manifest that the land is liable for only a part of it. By the very terms of the statute, “ a trust results in favor of all the creditors” of the person paying the consideration. It does not make the conveyance void in toto, as the statute of frauds does; but only pro tanto, to the extent that may be necessary to satisfy the just demands of such creditors. It is not therefore a case where one creditor can get a judgment at law for an indebtedness, a part of which arose after the conveyance — and by a sale for the satisfaction of the whole judgment, transfer the title of the whole of the premises embraced in the conveyance. On the contrary, the creditors must seek their remedies in equity, where alone the rights of all parties can be properly adjusted. And so I understand the chancellor to bold, though for another reason, which will be mentioned hereafter, in the 10th Paige, 567 to 571.

II. Suppose, however, that I am mistaken in regarding the entire estate in the premises, both legal and equitable, vested in Dana under the deed from Dennis, by virtue of the 51st section of the statute before cited. Admitting that the plaintiff is es-topped by the tripartite deed of August, 1843, from denying that the bank held a beneficial interest in the premises — still it was a beneficial interest only. It -was not the legal estate ; for this, the same instrument which is made the foundation of the supposed estoppel, expressly declares. Nor is this at all improbable; for the deed of December, 1839, as has been already suggested, may have created a trust estate, valid under the 55th section of the act, in Dana, while the beneficial estate was in the bank. But there can be but little doubt that the bank furnished the entire purchase price of the premises — and it has been supposed by the counsel of the plain tifiy that such an interest is subject to execution and attachment. It is indeed enacted, (2 R. S. 368, § 26,) that lands, dec. held in trust or for the use of another shall be liable to debts, judgments, executions and attachments against the person to whose use they are holden; but it is nevertheless expressly stated that this liability is to be made effectual by the provisions contained in the first chapter of the second part of the revised statutes, the very provisions we have been considering. So too, formerly, where there was a resulting trust, the cestui que trust haying furnished the consideration money for the land, such interest of the cestui que trust, though an equitable estate, might be sold on execution. But that was done by virtue Of the statute, 29th Charles 2, ch. 3, § 80, adopted in this state in 1 R. L. 1813, p. 74, § 4. No such provision, however, is found in the revised statutes, or has been enacted since. Of course,- such an interest, that is, the beneficial interest of a cestui que trust of lands cannot now be sold on a judgment and execution at law. (See 10 Paige, 567 to 571, before cited; 3 id. 481; 4 id. 578; 17 John. Rep. 352; 18 Wend. 248, 9.)

III. I have thus far regarded the plaintiff as having proceeded under the provisions of the revised statutes in seizing and selling the premises in question as the legal estate of the Bank of Towanda. By the act of 1842, however, (Sess. Laws of 1842, p. 227,) provision was made for seizing trust property, real and personal, in proceedings by attachment against foreign corporations. But it is provided in the 2d section of this act that when a party seeks to attach trust property, he must execute the attachment by “ leaving a true and attested copy of the writ with the trustee.” This mode of service is prescribed by the statute, for the best of reasons. The trustee being within the jurisdiction of the state can be reached by personal service. He is moreover the representative of the beneficial owner of the property, and may be interested as well as the cestui que trust in the defence of the suit. Should he omit to defend the suit, or to give notice of its commencement to the beneficial owner of the property, he would probably incur a liability over to such owner, for all damages suffered by his omission to do so. Such a service is the most effectual mode of notifying the party most deeply interested in the defence of the action. Hence the propriety of requiring a personal service of the process on the trustee. It is the policy of our law that no man shall be divested of his property without a notice of the proceeding by which that object is sought to be accomplished. He is entitled to his day in court to answer his adversary. And when a personal, service is possible, and when the statute has prescribed that mode of service of process as the commencement of any legal proceeding, the directions of the statute must be obeyed, or the court or officer does not acquire jurisdiction over the person of the defendant. (See 15 John. Rep. 141; Cowen and Hill’s Notes, 998; 5 Wend. 156.) If I am right in this conclusion, the service of the attachment was not such as to give the plaintiff any rights under the act of 1842.

But suppose this conclusion to be erroneous, and that the plaintiff did obtain a lien, by the service of his attachment, upon the equitable interests of the bank in the premises ; and that he acquired by purchase, at the sale upon his execution, the precise interest which the bank held when the attachment was served; yet by the very terms of the act (see 2d subdivision of § 4 of the act of 1842,) the sheriff could .convey to him only an equitable interest; the precise interest which the bank itself possessed when the process was served. He, therefore, has not yet acquired the legal estate ; and without that, lje cannot succeed in this action.

We have not examined the questions arising upon the assignment of the mortgage mentioned in the case, believing, that for the reasons already given, the defendant is entitled to judgment.

Judgment for the defendant.