Case ID: rob_7/html/0001-01.html
Source: Caselaw Access Project
Author: {"author": "Martin, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Robert Layson v. Thomas Rowan and another.
    In the State of Mississippi, in which the common law prevails, a debtor, though insolvent, may, by a deed of trust, grant a preference to a part of his creditors; and, having a right to determine which of them shall be paid, he may dictate the terms of payment.
    In the case of a mortgage or deed of trust, the possession of the property by the mortgagor or debtor, until the sale, is not inconsistent with the deed, and raises no presumption of fraud.
    The fact that one of the parties for whose benefit a deed of trust was executed by an insolvent, in another State, is a son of the debtor, does not authorize the conclusion, in the absence of other proof, that the debt is fraudulent.
    A debt, to secure which a deed of trust has been executed, may be described by the name of the debtor, and its amount be left to be ascertained. Id cQrtum est, quod certum reddi potest.
    
    It is no objection to the validity of a deed of trust under the common law, that the cestui que trust is not a 'party to the deed, nor that the trustee is not a creditor of the debtor who executed it.
    Appeal from the District Court of the First District, Bu
      
      chanan, J. This was an action for the balance due on a promissory note by the defendants, residents of the State of Mississippi. An attachment was levied on certain cotton and money, as the property of the defendants. The latter excepted to the jurisdiction of the court, on the ground, that no property of theirs had been attached, alleging, that the cotton seized belonged to one Woods ; and they prayed, that the suit might be dismissed. The answer, subsequently filed, pleaded a general denial. Woods, representing himself to be a citizen of Mississippi, intervened, claiming the property attached. He alleges, that the cotton attached, the proceeds of which were seized, was shipped to New Orleans from the State of Mississippi; and that, before it left that State, he had acquired a perfect title thereto, by virtue of a deed of trust executed by the defendants, dated 1st October, 1S42; that all the parties to the deed were residents of that State; that by the laws of that State, the deed of trust gave him a perfect title to the cotton, which he had reduced into possession; and that the proceeds of the portion of the cotton which had been sold, had been credited, by the factors who sold it, to him before notice of the attachment. The intervenor concludes by praying, that the cotton and the money attached may be adjudged to be his property, and for damages. The plaintiff answered the petition of intervention, by averring, that the claim of Woods was simulated and without consideration, and designed to hinder, deay, or defraud the creditors of the defendants. The latter after-wards pleaded payment and usury.
    The evidence establishes the allegations of the intervenor ; and the case turned upon the validity of the deed of.trust to him, under the laws of the State of Mississippi. The deed to Woods is in the following words;
    “ This indenture, made the 1st day of October, 1842, between Thomas Rowan and James S. Rowan, of the first part, and Wiley M. Woods, of the second part, witnesses: That the said party of the first part, for and in consideration of the debts hereinafter named and secured, and of one dollar to them in hand paid, have this day bargained, sold, and delivered, and by these presents do bargain, sell, and deliver unto the said Woods, all the crops of corn, fodder, and cotton now growing and being gathered on-the following plantations, to wit: on the said Thomas Rowan’s plantations in Wilkinson county and in Franklin county, and the plantation in Adams county, occupied and cultivated by James J. Rowan, to be delivered to him, the said Woods, or his agent, when gathered and prepared for market: In trust, however, that said Woods will sell the same at private sale, in the usual markets, for the customary prices, and with the proceeds thereof, pay: first, a judgment in favor of M. F. Degraffenreid against S. G. Rowan and others, on which the said Woods is bound as surety on a forthcoming bond, amounting to about $3430 ; to Henderson & Franklin, an account due them by said Rowans of $681 44 ; to Buckner, Stanton & Co., or their assigns, a balance due them by said Rowans of $2352 42; to Herring, for his wages as overseer for the present year, $500 ; the same to J. W. Rice, for same services ; to J. M’Adams, his wages for teaching school this year, $600 ; to William W. Rowan, a balance due him as overseer and manager for said Thomas Rowan, for several years past, about $3000 ; and the residue thereof to pay to Thomas Henderson, to be by him applied to the purposes of a trust conferred on him by the deed of said Thomas Rowan, James J. Rowan, and Mary Rowan. In witness whereof, the said parties have hereunto set their hands and seals the day and year above written.
    T. Rowan, [Seal]
    Jas. S. Rowan, [Seal.]
    W. M. Woods.” [Seal.]
    The deed above referred to recites, that it is made between “ Thomas Rowan, James S. Rowan, and Mary Rowan, of the first part; Thomas Henderson, of the second part; and the several and joint creditors of all, or any one, or more of the above named Rowans who shall accept their assignment, of the third part; ” that the Rowans have thereby conveyed, in trust, to one Thomas Henderson, certain tracts of land, and all the cattle, horses, hogs, mules, sheep, fanning utensils, tools, and implements of husbandry, household and kitchen furniture; and all the slaves thereon, and their increase, and the profits or proceeds of said plantation and slaves, with the corn, fodder, hay, &c.; together with a certain house and lot in the city of Natchez. After enumerating various debts due by the Rowans, the deed stipulates, that they shall retain possession of all the property conveyed to Henderson, until the same is sold; that they shall be entitled to sell the growing crop, and, out of the proceeds, pay any small debts due by them, not provided for in the deed, the current expenses of the plantation and of their families, paying over the surplus to Henderson; that, after the year 1S42, the whole net income of said personal and real estate, after defraying the expenses of their plantations and families, shall, in like manner, be paid over to Henderson, or. that he may, at his option, take possession of all the cotton raised on said plantations as soon as it shall be ready for market, and sell the same at private sale, and with the proceeds pay, first, the current expenses of the plantations and of their families, as before mentioned; that Henderson shall, as funds may come into his hands, pay to each of the enumerated creditors, except one, a proportion of the funds, according to the amounts of their respective debts. The deed further provides, if the fund to be so annually distributed shall not pay twenty per cent on the whole amount of the debts, that Henderson may, at the request of a majority in amount of the said creditors, sell a part or the whole of said property for cash, the proceeds to be distributed.as before mentioned, but the excepted creditor to be paid only after all the other creditors are satisfied ; that if any surplus remain, it shall be paid to the Rowans; that if the funds received by the trustee, from the annual income of the property, suffice to pay twenty per cent annually on the whole amount of the enumerated debts, with the interest then due, no sale shall be made, nor any execution be issued under any judgment included in the list of debts, &c. There was a judgment of nonsuit below, and the plaintiff appealed.
    
      R. H. Chinn, for the appellant.
    
      Finney, for the defendants.
    The deed to the intervenor, Woods, is alleged to be void under a statute of Mississippi, intended to secure creditors and subsequent purchasers, without notice, against fraudulent loans and conveyances. Howard & Hutchinson’s Dig. 370. The deed is alleged to be one calculated to “ hinder, delay, and defraud creditors.” But the proviso at the end of the act, expressly protects all conveyances made in good faith on the part of the grantee, and for a valuable consideration. The deed to Woods was for a valuable consideration, and in good faith on the part of the grantee. Indeed, no fraudulent intent is proved against any one. A statute similar to the one quoted, is believed to exist in all the common law States. That in Virginia is in the same words. They are all borrowed from the English statutes of the 13 and 27 Elizabeth. It has been repeatedly decided, both in England and the United States, that a debtor, though insolvent, may assign or'convey his property to secure favorite creditors, to. the exclusion of others, although such an arrangement would necessarily delay and hinder such other creditors, by diminishing or consuming the fund to which they would have to look for payment. 2 Johns. Ch. R. 283. 1 Binney, 513. But here it is not shown that the defendants were insolvent. A trustee, under a deed of trust to secure an honest debt, is a purchaser for valuable consideration, and, as such, protected by the statute. 2 Johns. Ch. R. 189. So also, indemnity is a valuable consideration under the statute. 1 Burr. 474. The grantee in these eases is always protected, unless it is shown that he had notice of the fraudulent intent of the debtor to “ delay, hinder, &c.” He has a right to take a security, provided he be not privy to a fraudulent intent on the part of the grantor. And it makes no difference how black may be the fraud of the latter, unless notice be traced to the former. 4 Randolph, 302. 4 East, 1. 1 Binney, 513. It is objected, that there was no delivery of possession. This is idle. Delivery" of possession to the trustee, never occurs on the execution of a deed of trust. It remains with the debtor, until the time to sell. 1 Tuck. Comm. Laws of Va.-338, 340, and cases there cited. 5 Rand. 252. The rule is, that the possession should be consistent with the deed.
    Huston, on the same side.
    Maybin, for the intervenor.
   Martin, J.

The case has been argued in this court by the counsel of the defendants, and of the intervening party ; and the conclusion to which we have arrived in regard to the claim of the latter, renders it useless to notice the arguments of the former.

The plaintiff’s counsel contends, that the deed of trust under which the intervening party claimed, is null and void : 1st, because the defendants were embarrassed ; 2d, as the conveyance is of all their property; 3d, because they give a preference among their creditors; 4th, because they dictate terms to them ; 5th, because the defendants retain possession; 6th, on the ground that the deed is for the benefit of the son of one of the defendants; 7th, because the amount of the debts is indefinite ; 8th, because the cestuis que trust are not parties; 9th, on the ground that the trust was destructive of the property which was the object of it; 10th, because the trustee was no creditor; 11th, because the deed was voluntary; and 12th, as it was for the benefit of the grantors.

.1. The embarrassment of a debtor is ordinarily the inducement to the execution of a deed of trust, by which he is enabled, in the countries where the common law of England prevails, to dispose of his property, not only for the benefit of all his creditors, but, at times, for that of particular ones. The counsel have admitted, that the common law prevails in the State of Mississippi; and have consented, that the printed statutes of that State, and any common law works, may be used in this case. From those authorities it appears, that a debtor is not prohibited from discriminating among his creditors and granting a preference to some. 2 John. Ch. R. 283. I Binney, 513.

2. It may be a badge of fraud in a conveyance or sale, not to a creditor, that the grantor or vendor disposes of all his property, for it will be presumed that his object is to leave nothing which his creditors may touch ; but when the conveyance is a trust for the benefit of his creditors, it cannot be objected to him, as an evidence of fraud, that he has retained nothing.

3. This objection has been answered with the first.

4. The debtor having a right, according to the law of Mississippi, to select such of his creditors as he intends to pay, may well propose to all or any of them, the terms on which the payment is to be made.

5. The possession of the vendor, after the sale, may be urged by third parties ; but, in a mortgage or deed of trust, the possession of the property until the sale be made, is not inconsistent with the deed, and raises no presumption of fraud. 1 Tuck. Comm. Laws of Va. 338, 340, and cases there cited. Land v. Jeffries, 5 Rand. 252.

6. The son of one of the defendants is placed among the cestuis que trust, as a creditor for the sum of three thousand dollars, for services as an overseer. He is a young lad ; but that, and his relationship to one of the defendants, do not authorize us to conclude that the debt is not a fair one, there being no evidence of the demand being fraudulent.

7. A debt may be described by the name of the creditor, and its amount left to be ascertained. Id cerium est, quod certum reddi potest.

8. The cestuis que trust are probably never made parties to the deed; for, if they were, its character would be changed. It would become a mortgage or pledge, and the grantee would not be a trustee, for he would hold in his own right.

9. This objection is grounded on a fact from which the counsel draws a violent presumption of fraud, which he contends ought to induce us to set aside the deed of trust in favor of the intervening party. The defendants had originally granted to Henderson, for certain purposes, a deed of trust on several plantations, and the slaves and cattle, horses, &c., thereon, reserving to themselves the possession, and the crops in the meanwhile resulting therefrom. The deed of trust of the intervening party includes these crops, that is to say, the cotton, corn, fodder, hay, &c., which are to be sold by the trustee ; so that, in the opinion of the counsel, the slaves, cattle, horses, mules, and every animal on the plantations must starve, every part of the crop from which their sustenance had been provided for, being disposed of.

In retaining possession of the plantations, slaves, and animals, with the right of raising and disposing of the crops, the defendants certainly undertook the obligation to provide for the sustenance of the slaves and animals.' But this obligation did not last longer than the possession. A violation of it cannot be urged by the second trustee, who had no interest in its performance. It was no fraud as to him, and cannot be urged by a third party as evidence of ill faith, either in the grantor or'grantee ; certainly not in the latter. Fraud will not be presumed; and the record not showing whether any, or what arrangements have been made with Henderson, the first trustee, we must presume that no injury was either intended or done to him; at least, none the knowledge of which is brought home to the intervening party.

10. This objection has been answered with the eighth.

11. it is of the essence of a deed, or contract, that it be voluntarily executed. If the assent be extorted, the deed or contract is null.

12. It is urged, that the deed is for the benefit of the grantors. It provides that the trustee, after complying with the terms of the trust, shall pay the balance remaining in his hands to Thomas Henderson, to be by him applied to the purposes of a former deed of trust of the defendants and Mary Rowan. By this former deed the grantors reserved to themselves, the right to pay, out of the crops sold by them, such small debts as they might owe, not provided for by the deed, the current expenses of the plantations and of their families, and the trustee, Henderson, had the option to take charge of the crops and sell them ; but he was; out of the proceeds, to pay the current expenses of the plantations, and those of the families of the grantors. It is urged, that any balance remaining in the hands of Woods, after complying with the charges of the deed of trust to him, was to be paid to Henderson ; and that out of it the grantors had secured to themselves the expenses of their families. It does not appear to us that they did. They might, indeed, retain those expenses out of the proceeds of the crops which they sold ; and Henderson did not become bound to pay those expenses, except out of the crops of which he took charge, and which he sold. No other funds in the hands of Henderson were made liable to those expenses; so, no balance which Woods might pay, could, in his hands, be liable to such expenses. It is clear that the deed to Woods secured nothing to the defendants.

The plaintiff did not attach any property of the defendants. He did not bring them into court, and judgment was correctly given against him.

Judgment affirmed 
      
      
        Chinn, for a re-hearing. The question in this case is, whether the conveyance to Woods was made, in the language of the statute of Mississippi, to “ hinder, delay, or defraud creditors.” It is conceded, that a party may prefer one creditor to another ; but if, by doing so, he attempt to secure any advantage to himself, the deed is void. The embarrassed condition of the grantor, from Twyne’s case, reported by Coke, down to the present day, has been invariably regarded as a badge of fraud. 1 Coke’s Rep. 836. 4 Bibb, 446. 3 Mar. 241. 2 Litt. 221. 3 Monroe, 3. As to the conveyance being of all the grantor’s property, see 4 Bibb, 165 Lord Kaimes, Principles of Equity, 492, 497. 5 Term Rep. 420. 1 Mar. 105.
      The retaining of possession by the vendors, is not merely evidence of fraud, but is a fraud'per se. 2 Kent’s Comm. 412. Where those for whose benefit a deed is made, are not parties to it, the deed is void. See Combs v. M’Kinley, 1 Monroe, 1. The objection that the deed to Woods was voluntary, has been misapprehended by the court, and confounded with the voluntary execution of it. A deed executed without consideration is voluntary, and such a deed is void. Any reservation in a deed of trust, or assignment, for the benefit of the grantors, avoids it. See 2 Kent, 422. The deed to Woods did secure something to the grantors. It provides, that the surplus, after paying the debts therein provided for, shall be paid to Henderson, to be by him applied to the purposes of the deed of trust to him. By the deed to Henderson, the grantors are secured the possession and enjoyment of their property, for the support of themselves and their families, upon paying annually twenty per cent on the amount of the debts enumerated in the deed.
      In the case of Pitts’ Trustees v. Viley, 4 Bibb, 446, four only of the twelve badges of fraud relied on in this case, presented themselves : 1st, Pitts was embarrassed ; 2d, the conveyance was of all his estate, real apd personal, and there was no covenant on the part’of the trustee to fulfil the trust; 3d, Pitts was permitted to retain possession of the property, and to sell a part of it; 4th, the creditors were not consulted, nor were they parties to the deed. These circumstances induced the court to decide, that the conveyance was fraudulent. Boyle, J., in delivering the opinion of the court, remarks, that although separately considered, neither of these circumstances might suifice to defeat the deed, the whole, together, were conclusive evidence of an intent to hinder and delay the creditors of Pitts. But, in the present case, the deed is absolutely void, as the creditors, for whose benefit it was made, were not parties to it. In the case of M’ICinley and Combs, already quoted, Grimes executed a deed of trust of all his property to Judge M’Kinley, for the payment of all his debts. Combs, a creditor not provided for, resisted the conveyance, and the court decided, that inasmuch as M’Kinley was not a creditor, and the cesiuis que trust were not parties, nor assented to it at the time of its execution, it was absolutely void as to Combs, a creditor. See also the eases in 1 J. J. Marshall’s Rep. 213, 226, 342. 4 Monroe, 581.
      The court have concluded, as no property of the defendants was attached, that the defendants were not before the court. But the record shows, that the defendants appeared by their counsel and pleaded.
      
        Tie-bearing refused.