Case ID: sc-eq_11/html/0245-01.html
Source: Caselaw Access Project
Author: {"author": "Harper, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Wm. H. Gist v. S. P. Pressley, Jas. Allston, Geo. W. Hodges, and Geo. W. Pressley.
    Plaintiff bad a mortgage of two negroes from bis debtor against wbom there were senior executions. Defendants had also a mortgage of real estate junior to the plaintiffs, and in order to save the property mortgaged to them, purchased the oldest execution. The negroes mortgaged to plaintiff, and all the other property except that mortgaged to defendants were sold under the executions, and they were all satisfied: the defendants afterwards foreclosed their mortgage by sale under the order of the Court, the proceeds remaining' in Court. On a bill filed by the plaintiff, it was held that he was entitled to relief out of the proceeds of the property mortgaged to defendants, to the extent of the sales of the negroes mortgaged to him. [*324]
    There is a difference between an absolute sale and a mortgage in respect to She effect of the grantor’s retaining possession : in the first it is in the common course that possession should be changed, and if it is not, it is evidence of fraud ; but this is not the course in the case of a mortgage, and the mere circumstance of the mortgagor retaining possession until condition broken, is not of itself evidence of fraud. [*325]
    Even after condition broken a mortgage is still different from an absolute sale.— It is not the usual course that the mortgaged property should be seized immediately after condition broken — some degree of neglect in this respect will not infer fraud; great neglect may. [*328]
    •Before Chancellor Johnston, at Abbeville, June, 1814.
    The bill alleges that John B. Pressley made a note in these words : — . “ On or before the first day of July next, I promise to pay William H. Gist, or bearer, nine hundred dollars, for value received, with interest from the first day of January last past, this 21st day of May, 1832.
    “(Signed) John B."Pressley.”
    And executed the following mortgage :—
    “ State of South Carolina__Whereas, I, John B. Pressley of the district of Abbeville, and State aforesaid, am indebted to William H. Gist, in the sum of nine hundred dollars by promissory note, dated the twenty-first day of May, due the first day of July next, with interest thereon from the first day of January last. Now, therefore, know all men by these presents, that I, John B. Pressley, in consideration of the premises, and to secare the more certain payment of the above specified sum of money, have granted, bargained and sold, and by these presents do grant, bargain and sell, and in market overt delivery, to the said William H. Gist, two *qicn negro slaves, Godfrey and Betty, the former about twenty-eight years of age,, the latter about thirty-two, to have and to hold the said two negroes, with their future increase, if any, unto the said William H. Gist, his heirs, executors, administrators and assigns for ever. And I do hereby bind myself and my legal representatives, to warrant and for ever defend the title and soundness of the said two negroes, to the said William and his legal representatives, against myself, and all claims derived through, or founded on my title or claim, and against all persons whomsoever, claiming or to claim the same. Given under my hand and seal, this nineteenth day of June, in the year of our Lord, one thousand eight hundred and thirty-two. Now, the condition of the above obligation is such, and it is hereby expressly agreed, that if the above bound John B. Pressley, or his legal representatives, shall well and truly pay the sum of money specified in the said promissory note above referred to, with all interest there may be due thereon according to its tenor and legal effect, then this obligation and every grant hereby made, shall become null and void, otherwise to remain in full force and effect
    Jno. B. Pressley, [Seal.]
    Signed, sealed and delivered in') the presence of \
    
    Thos. B„ Speerin,
    Gary Davis.”
    That on the 19th of February, 1829, John B. Pressley, with these defendants, his sureties, become bound to David Lesley in the penalty of five thousand dollars, conditioned to pay $2000, with interest from the first of January, 1829, on the first of January, 1832; which bond was assigned on the day of its execution, to Alexander B. Arnold. That bond being unpaid, Jno. B. Pressley, on the 23d of. June, 1832, mortgaged to the defendants as an indemnity for their suretyship, a house and lot in the village of Abbeville, and his mill tract of land. On the 3d of August, 1832, John B. Pressley died, possessed of the negroes, house and lot, mill tract of land, and very little other estate : at his death, there were executions to the amount of twelve or thirteen hundred dollars older than either of the mortgages. That soon after Pressley’s death, James Allston knowing of the plaintiff’s mortgage, and suspecting Pressley’s solvency, on the 6th of August, 1832, took an assignment of the execution of William Harris v. John B. Pressley, which was senior of the others, and on which was due about $910. That Allston assigned one half of that execution to George W. Hodges, 1st of October, 1832. *3201 *Tha.t Allston and Hodges caused this execution to be levied on J Godfrey and Betty, with the view to save the mill tract and house and lot, for their mortgage, and they were sold in October, 1832, by the sheriff, for the inadequate price of $680, which was paid over to Allston and Hodges, under Harris’ execution and that under this and the other executions, all the visible property of John B. Pressley, except the house and lot, and mill tract, was exhausted, and all the executions satisfied.
    That afterwards administration of John B. Pressley’s estate was granted to George W. Pressley, who being sued by this plaintiff, obtained leave to plead plene administravit, declaring there would be no assets to pay simple contracts of the intestate. In November, 1832, the sureties of J. B. Pressley paid the assignee of his said bond about $2600, the amount due ; and in May, 1833, filed their bill for foreclosure of their mortgage, upon which an order was made (June, 1833,) by the Chancellor of foreclosure, to satisfy the mortgage or other lien having preference, and that the money should be held, by the Commissioner subject to the liens of claimants ; and this order was made on the suggestion of this plaintiff’s claims. The house and lot and mill tract were sold for $2400. That plaintiff has before and since frequently urged on defendants, that his mortgage being older than theirs, he had a right in equity to insist that all unincumbered property and that subject to a junior lien, should be exhausted, before that subject to his lien should be disturbed, and that having caused a contrary course to be taken, they were bound to allow him satisfaction of his mortgage out of the avails of theirs : but they refused, and even denied him a ratable proportion thereof. The bill prays that the defendants may answer on oath its allegations: that Allston and Hodges may discover what they paid for the execution of Harris; whether they did not procure the sale of Godfrey and Betty under that execution, and whether they were not, then and before, well informed of the plaintiff’s mortgage ; that from the sale of the Commissioner, the plaintiff may have satisfaction of his demands, or so much as will equal the inadequate prices for which the negroes were sold, with interest from the date of the sale; or that of the price of the' negroes, and interest and the proceeds of real estate, the plaintiff may have a share proportioned to the sum left for the sureties, as the amount of his note is to their demand; and for such other relief as should be proper.
    *The answer of George W. Pressley admits $105 of-assets in ¡-*<>0-1 his hands applicable to debts of his intestate, J. B. Pressley, and *- that the amount of specialty debts greatly exceeds the assets. The answer of James Allston and George W. Hodges denies that they knew anything of the plaintiff’s debt, and say they did not hear of his mortgage until after J. B. Pressley’s death; nor did they hear that it was older than their mortgage until they had purchased the Harris execution, but did hear of it before the sale of Godfrey and Betty. That these defendants were the sureties of J. B. Pressley, and as such, paid the amount stated in the bill; and that the bond on which the payment was made, was for the purchase of the house and lot, afterwards with the mill tract, mortgaged to them as the bill sets out: that J. B. Pressley died about the time and left the property mentioned in the bill, and personal property under no specific lien, which was sold by the sheriff for $656 11.— They suspected the solvency of J. B. Pressley, and did buy the execution of Harris to protect the lot and mill tract, but paid for it its nominal value, and it had assigned as the bill states. That the plaintiff told All-ston his mortgage was not recorded, and theirs was recorded. That neither of them caused or procured a levy or sale of Godfrey and Betty under their, or any other execution, nor was a levy or sale made under theirs. They did not receive the price of Betty, it was paid over to junior executions, and only received the price of Godfrey, ($430,) which the sheriff had applied to theirs as the oldest execution. That the plaintiff knew the negroes had been levied on and would be sold, and did not resist the sale or claim the proceeds at the sheriff’s hands. That the defendants might well haye claimed the proceeds of Godfrey and Betty both ; because, after the mortgage, they remained in the possession of J. B. Pressley until his death, and at his late residence until seized by the sheriff, having never been in the plaintiff’s possession. That the plaintiff never did apply to them to have their execution satisfied out of the unincumbered property, or for payment, as the bill states.
    The Chancellor decreed, that of the moneys in the hands of the Commissioner arising from the sale of the house and lot and mill tract, the plaintiff should be allowed the amount for which Godfrey and Betty were sold by the sheriff, with interest from the time of sale until the money *£>oon was impounded by the order of the *Oourt of Equity. From ° -* which decree the defendants, James Allston, George W. Hodges and Samuel P. Pressley appealed.
    
      A. Burt, for the appellants,
    now moved to reverse or modify the decree, on the following grounds :—
    1. Because the decree allows to the plaintiff the price of Godfrey and Betty, of the avails of the land, assuming that his mortgage is older than defendants’, although, if older, its lien was waived by permitting them to be sold, and their proceeds appropriated to Harris’ and other executions; and although the Harris execution was never levied, or otherwise used to the plaintiff’s detriment.
    2. Because the Harris and other executions older than the mortgage, could not be thrown upon the land; for they were satisfied before the filing of this bill.
    3. Because the decree requires the defendants to account for the price of Betty, although she was not sold under the Hands execution, nor the proceeds of her sale applied to it.
    4. Because the mortgage of the defendants being taken without the knowledge of the plaintiff and being a lien on different property, gives the plaintiff no claim to subject the laud to executions older than either mortgage,
    5. Because the possession by J. B. Pressley of Godfrey and Betty, after breach of the condition of the mortgage, was fraud per se; or at least such a badge of it as impaired any claim that the plaintiff might have had to the relief decreed to him.
    6. Because at all events the decree should have allowed the Harris execution, as the oldest, the avails of the .whole unincumbered estate of J, B. Pressley, and charged the land with the residue only of the defendants’ receipts under the Harris execution.
    On these grounds, it was argued that the plaintiff had no equitable ground of relief against the defendants, at least to the extent afforded by the decree. The fifth ground was however principally relied on, under which it was insisted that the plaintiff’s mortgage was fraudulent and void as to creditors and purchasers because it was not recorded, and its existence was not known. to the defendants — that the mortgagor, after condition broken, continued in possession of the negroes, and exercised all acts of ownership over them until his death, and his representatives aLerwards up to the levy; and permitting the property to remain in possession *of the mortgagor, was evidence of some secret trust for r^qoo his benefit; and that the circumstances of themselves constituted L such a case as rendered the mortgage absolutely void; or at least furnished such high evidence of fraud, as should prevent the Court from interfering in behalf of the plaintiff against creditors and purchasers without notice. And in support pf this ground, the following authorities were cited and commented on :■ — Smith v. Henry, 1 Hill’s Rep. 16 ; Cowp. 434; 1 Cranch, 316; 2 Kent’s Com. 405; Hudnal v. Teasdalo, 4 M’C. 294; 3 Co. 87 ; Prec. in Ch. 285; 1 Atk. 165 ; 1 Bur. 467 ; Kidd v. Rawlinson, 1 Bos. & Pul. 59 ; Arundel v. Phipps, 10 Yes. 145 ; 2 Kent’s Com. 412; Reeves u Harris, 1 Bail. 563; Edwards n. Harben, 2 T. R. 587; Montgomery u. Kerr, 1 Hill, 291; Bobo v. M’Beth, 2 Bail. 489-91; Walwyn v. Lee, 9 Yes. 24; Erost v. Beekman, 1 John, Ch. Rep. 300.
    
      D. L. Wardlaw, contra,
    contended that the circumstances made a case for relief, on the established principles of equity that a creditor having a specific lien, may compel other creditors having elder general liens, to exhaust all the rest of the property before resorting to that on which lie has the lien — the defendant’s mortgage being junior to the plaintiff’s, the property therein mortgaged must be first subject to the elder executions. It was mortgaged subject to the plaintiff’s equitable right to have it so made liable before resorting to the negroes mortgaged to Mm ; and the proceeds of the sale of the property in the hands of the Court must be held liable in like manner as the property itself. As to the charge of fraud, he insisted that the possession of the mortgagor was not such as would render the mortgage void ; it was but for a few days after condition broken, and beiug consistent with the purpose of the deed, repelled the presumption of fraud. Cited Clowes v. Dickinson, 5 John Oh. Rep. 235; Gill v. Lyon, 1 John. Ch. Rep. 447 ; Stoney v. Shultz, 1 Hill’s Ch. 500; 2 Bar. & Aid. 134; 1 Bin. 467; Ryan & Moody’s Rep. 305.
   Harper, J.

The three first grounds of the motion may be considered together. The principles of the Chancellor’s decision, are perhaps less distinctly seen, because the defendant’s, Allston and Hodges, sustain the characters both of senior execution creditors and junior mortgage creditors of the deceased, John B. Pressley. If the execution creditors were different persons, and were now seeking* to enforce their execu- r^ooA tions against the slaves now in question, the plaintiff would have a ■- 4 clear equity to restrain them, and to compel them to resort to the property mortgaged to defendants. This is on the principle expressed in the case of Fowler & Addison v. Barksdale, State Rep. Eq. 164, “that when a preferred creditor has a lien on two funds, and another creditor has a junior lien on one of them, the creditor who has the preference shall resort to that which will operate the least injuriously to the other creditor.” And if the executions, being restrained as to the slaves, had been enforced against the property mortgaged to the defendants, the latter would have had no redress or claim of contribution against the plaintiff. The principle is fully explained by Chancellor Kent, in Gill v. Lyon, 1 John. Ch. Rep. 447, and Clowes v. Dickenson, 5 John. Ch. Rep. 235. When the intestate mortgaged (that is, conditionally sold) the slaves to plaintiff, his execution creditors were bound on equitable principles to exhaust the property which remained in his hands, before pursuing that to which plaintiff had acquired a title. Among this property, was the land and mill and house and lot in question. When the intestate afterwards conveyed these to defendants, he could only convey them, subject to the equitable burden to which they were liable in his own hands. In the language of Chancellor Kent, “ they sit in the seat of their grantor.” The burden is, that the property must be liable to the execution creditors in preference to that conveyed to plaintiff.

Then, if plaintiff had neglected to restrain the execution creditors, and had lain by and permitted the property to be sold, and then filed his bill against defendants to be reimbursed out of the property conveyed to them, could that bill be sustained ? I see no reason why it should not; provided no particular injury were occasioned to defendants by the delay. This is part of the matter decided in Clowes v. Dickinson. And this will dispose of the third ground, relative to the proceeds of the slave, Betty There were executions older than the plaintiff’s mortgage, to exhaust the whole personal property. That defendants were the owners of the Harris execution, was merely an accidental circumstance. If they had not been, and the whole of the money had been paid to third persons, their liability would have been the same. In Clowes v. Dickinson, the bill was in like manner filed to be reimbursed after the property first purchased had been sold. In that case, too, it happened that the second purchasers of pro%qok-i perty *had purchased the older execution. In that case, as is -* alleged in this, the property (two lots of land) sold under execution was purchased at a very low price ; and it was contended for the plaintiff, that if he were not entitled to have the lots themselves, he ought to have an inquiry as to their actual value at the time of the sale. But as he had been guilty of great laches, having lain by for several years, and the purchasers had in the mean time made much improvements on the lots, which would have rendered it inequitable that they should be taken from them, the Chancellor would only allow him the amount for which the property actually sold. This is what the Chancellor has done in the present case; though I do not know that laches can be imputed to the plaintiff. What has been said, disposes of the fourth ground, and also of the sixth. With respect to the latter, it is enough to say that defendants have been satisfied their execution. It is immaterial to them whether this has been done by the proceeds of the particular slave, Betty, or other personal property of the intestate. To whatever executions these may have been applied, the property in defendants’ hands is liable to make them good. The third, fourth and sixth grounds are all misconceived.

The fifth ground is that which seems principally to be relied on. It is supposed to come within the principle of the case of Smith v. Henry, 1 Hill, 16, that where a conveyance is made by an insolvent person in payment of a previously existing debt, and the grantor is allowed to retain possession of the property, this is conclusive evidence of fraud. Or, at all events, that the intestates having been permitted to retain possession after condition broken, was a badge of fraud, which has not been explained, and which must vitiate the conveyance. It is argued that there is no difference in principle between a conveyance by way of mortgage and an absolute conveyance. . The principal English cases relied on are those of Edwards v. Harben, 1 T. R. 587; Ryall v. Rolle, 1 Atk. 165, and Worsely v. De Mattos, 1 Burr. 467. The two latter were cases of express mortgages, and, it is said, decided that possession’s being retained by the mortgagor, whether before or after condition broken, is of itself conclusive of fraud. But these elaborately considered cases were determined with reference to the English statutes of bankruptcy, and particularly the 21 Jac. 1, c. 19, which reciting “ For that it often falls out that many persons, before they become bankrupts, do convey their goods to other *men upon good consideration, yet still do keep the same, r*Q9fi and are reputed the owners thereof, and dispose the same as their L á ” own,” enacts, “ that if at any time hereafter, any person or persons shall become bankrupt, and at such times as they shall so become bankrupt, shall, by consent and permission of the true owner and proprietary, have in their possession, order or disposition, any goods or chattels whereof they shall be reputed owners, or take upon them the sale, alteration or disposition as owners, that in every such case, the said commissioners shall have power to sell and dispose the same, as fully as any other part of the bankrupt’s estate. ” The cases determined that a mortgage is a conditional sale and transfers the property to the mortgagee, who is therefore the true owner and proprietary, and if by his consent it be left in the mortgagor’s possession, it comes within the terms of the act, whether the possession be before or after condition broken. But I acknowledge that the subjects is fully considered with reference to the common law, and the stat. 13 Eliz. and the opinion of the Court expressed, that there is no difference between a mortgage and an absolute conveyance. But it is not, as under the bankrupt law, that the retaining of possession of itself avoids the transaction, or is conclusive evidence of fraud. It is one of the circumstances which is to be taken with all the other circumstances, to make up a judgment on the fraudulent or bona fide character of the transaction. After reviewing the cases on the subject, it is said in Ryall v. Rolle, “From all these cases, it appears, that upon the construction of the stat. 13 Eliz. there is no room to make a distinction between conditional and absolute sales of goods, if made to defraud creditors, but a Court or jury are left to consider of this from the circumstances of the case.” I have before ventured to express the opinion, that the true ground of decision in Twine’s case was lost sight of in succeeding cases, and the distinction overlooked between the cases in which the retaining of possession is conclusive evidence, or only one of the badges of fraud.

I have not found any decision of the English Courts or our own, inconsistent with the cases of Ryall v. Rolle and Worsely v. De Mattos, on the point we are considering. And I concur, that there is no distinction in principle between an absolute conveyance and a mortgage or conditional conveyance. There will be a great difference, however, in the application of the principle, according to the circumstances of the different eases. If, according *to the distinction in Smith v. Henry, there were a r^ooir previous debt due and payable at the time, and the mortgage was L executed to secure that, the mortgagor remaining in possession, it would come completely within the reasoning of that case. No other motive could well be imagined for such a transaction, than that a mortgagor’s being permitted to retain possession of the goods, was the price paid by • the creditor for the preference given to him. Such precisely is the case of Edwards v. Harben. Though called a bill of sale, that was in effect a mortgage. It was intended as a security. It was for a debt already due, and it was stipulated that the vendee should not take possession for fourteen days. It was in this case that the retaining of possession was held to be conclusive evidence of fraud. The case of Meggott v. Mills, 1 Lord Raym. 286, which was not referred to in Smith v. Henry, and which is quoted and commented on in Ryall v. Rolle and Worsely v. De Mattos, seems to me to illustrate this. In that case the landlord had advanced money to his tenant to buy furniture, and took a mortgage of the furniture to secure himself, the tenant retaining possession. As observed in both the cases mentioned, this was not decided upon any notion of a distinction between a mortgage and an absolute conveyance, but Lord Holt said that “if these goods of Wilson’s had been assigned to any other creditor, the keeping of the possession of them had made the bill of sale fraudulent as to the other creditors.” This cannot be on any such ground as that a landlord stands on a better footing than any other creditor; but must go on the principle of Smith v. Henry, that he who has advanced his money on the faith of the security of the mortgage, stands on a different footing from a creditor to whom the debtor’s goods are mortgaged to secure a previously existing debt. In the former case no injury is done to creditors. They are deprived of nothing which they would have had if the transaction had never taken place.

But when a conveyance is made to satisfy a debt created at the time, then, in the case of an absolute conveyance, the retaining of possession is not conclusive evidence of fraud, but one of the badges of fraud, susceptible of explanation. So it may be in the case of a mortgage; but there is then a difference in the application of the principle. When there is an absolute conveyance, it is in the natural course of things that the possession should be changed; and when this is not done, we are set upon *3981 l°°king for *some secret motive or understanding which has ° J induced this departure from the ordinary course. But it is not in the common course that possession should be transferred when a mortgage is executed. If there is'a stipulation that possession shall be retained till condition broken, it seems to me that it comes within the principle of Cadogan v. Kennet, Cowp. 432; Arundel v. Phipps, 10 Ves. ] 40, and that class of cases in which possession was held not to be fraudulent, because in pursuance of the terms of the deed. But if there be no such stipulation, still it is very different from the case of an absolute sale. It is the common understanding and practice of the country, that possession shall not be taken till condition broken. It is a conditional sale to provide for satisfying a debt, and in conscience and equity the party is not entitled to his satisfaction until the debt is due I should therefore say, that the mere circumstance of retaining possession until condition broken, is not of itself evidence of fraud. The possession is sufficiently explained.

And even after condition broken, it is still different from the case of an absolute sale. As I have said, in the latter case, it is the common course that possession should be transferred with the title, and the departure from the common course is to be accounted for. But it is not the common course that the mortgaged property should be seized the moment the condition is broken. It may be harsh to do so. It may not be in the party’s power to find the property, or he may not be able to seize it without committing a trespass. Even some degree of neglect does not infer fraud. Still I think a great degree of neglect in leaving the property in the mortgagor’s possession after condition broken, may be a badge of fraud; though not so strong as in the case of an absolute sale. It is one among the circumstances to enable a Court or jury to judge of the character of the transaction.

In this case, there was but a very trifling degree of neglect, which may be further accounted for by the plaintiff’s having been aware that the slaves were liable to the older executions. It was argued that this mortgage was not given for a debt created at the time. The note, which is the evidence of the debt, was given at the same time, We know nothing of the consideration of the *note, but it is not impeached. r*329 The only circumstance relied on to show that it was given for a L previously existing debt, is that it provides for the payment of interest from the previous first of January. But this is too slight to warrant the conclusion. A contract might have been entered into at that time, with a viéw to this security, which was not regarded as executed until the note and mortgage were given. There are many ways in which the circumstance may be accounted for. Whatever consideration was paid, may have gone to the use of creditors.

The motion is therefore dismissed and the decree affirmed.

Johnson, J., and O’Neall, J., concurred. 
      
       From the brief (the only document the reporter had from which to make a report, not having the Chancellor’s decree,) it appears that the note was dated 21st May, 1832, and the mortgage the 19th June following. It.