Case Name: Wood vs. Jones
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1838-01-30
Citations: 1 Meigs 513
Docket Number: 
Parties: Wood vs. Jones.
Judges: 
Reporter: Tennessee Reports
Volume: 19
Pages: 513–518

Head Matter:
Wood vs. Jones.
CHAN CERT. Trust direct — implied—Relation of mortgagor and mortgagee — Equity of Redemption — Statute of Limitations. Even in case of a direct trust, and in a suit between trustee and beneficiary, the statute of limitations may be a bar to the claim of the latter. But the relation of mortgagor and mortgagee is not that of trustee and beneficiary. It stands upon grounds peculiar to itself. The mortgagee has the right of possession, and it is for himself from the first. But the mortgagor’s equity of redemption does not depend upon that possession, and cannot be affected by it, or barred by the continuance of it, under whatever circumstances or pretensions, short of the time when a presumption of right will arise. But if the mortgagee sell the property, the purchaser, though at the time aware of the equity of redemption, will be protected by the statute; for though notice of the equity fixes him with a trust for the mortgagor, it is not direct but implied; and to enforce that species of trust, the beneficiary must sue within the time of limitation. For in such case the purchaser’s possession is for himself, and his duty to the mortgagor does not arise out of the transaction whereby he acquired the possession, but is implied from the notice of his vendor’s duty.
On the 10th of September, 1825, John L. Wood borrowed the sum of four hundred dollars from Benjamin M. Jones; and to secure the payment of the money executed to him a mortgage of a slave named Anderson, conditioned to be absolute if the money, with legal interest thereon, remained unpaid on the 1st of September, 1826. The contingency happened, and Wood very soon afterwards removed to Arkansas and subsequently to Texas.
Jones kept the negro till the 25th of January, 1830, when he sold him to Nathaniel Wooland, to whom he made an absolute bill of sale. Wood returned to the neighborhood of the parties in the year 1830, was informed of the sale to Wooland, but left without disputing his title. On the 15th of June, 1832, Wooland sold the negro to Booker Nevils, who, on the 30th of the same month, sold him to John D. Love, to whom he made an absolute bill of sale. The negro remained in Love’s possession till the 18th of February, 1837, when Wood filed his bill in the chancery court at Columbia against Jones, Wooland and Love to redeem. They answered and depositions were taken on behalf of the defendants to show that Wood was aware of the sale to Wooland and of his adverse claim to the negro as early as 1830, without pretending to dispute his title. No proof was taken on behalf of the complainant; and the case presented the naked question — -Whether, under the circumstances, the equity of redemption was barred?
January 29.
On the hearing before Chancellor Bhamlitt on the 20th of September, 1838, his Honor was of opinion in the affirmative, and decreed accordingly. The complainant appealed in error.
Pillow for the complainant
said,, the main question in this-cause is, whether complainant’s right of redemption' is barred by the act of limitations? In the case of Overton vs. Bige-^ low, 3 Yerg. 613 — see 10 Yer. 580 — I understand this court to have expressly determined that the act of limitations will not bar the mortgagor’s equity of redemption in this court. Viewing this decision as directly in point, it is conclusive against the decree so far as Jones is concerned.
We will now examine the case as it affects the rights of Wooland and Love. The mortgage being registered, was notice to them. I Johnson’s Chancery Reports; 288,, 398; Fonbl. Equity, 4'49, note. Wooland, in his answer, says Jones mid him of the existence of the instrument or mortgage. This notice of complainant’s equity of redemption arrested all further proceedings by the purchaser, and the’ whole purchase was in fraud of the equitable incumbrance. 1 John. Ch. Rep. 301; 3 P. Williams, 306. Notice of the trust makes the purchaser a trustee, notwithstanding the consideration paid. 1 Johns. Ch. Rep. 575; 1 Murphy, 219.
I am aware of this court having determined that all implied trusts are subject to the operation of the act of limitations; but where there is an express trust created by contract, and the trustee, in fraud of the rights of the cestui que trust, has attempted to denude himself of the trust by selling to a person fixed with the fraud by constructive notice and notice in fact, I am not of opinion that that decision could properly be applied to such a case. Notice being fixed upon the purchaser from a trustee by express contract, the law constitutes him a trustee in the room and stead of the first trustee, holds him subject to the same duties and responsibilities, and same law, and upon the ground that his purchase is in fraud' of the equitable incumbrance, of which he had notice. If trusts of this kind are classed with implied trusts generally, and are liable to the bar created by the act of limitations, the trustee by express contract, can sell the trust property to persons having full notice of the trust (and thereby affected with fraud) and from the moment of sale, the statute will commence its bar, and thus by bad faith and fraud an estate clothed with an express trust be wholly swept from under the cestui ■que trust. Surely such cannot be the law. There ought to be, there must be a distinction between the rules of law applicable to estates clothed with express trusts, and by fraud attempted to be barred, and trusts created by implication of law merely, where lapse of time in the absence of fraud is relied upon as constituting a bar. An executor, guardian or express trustee can, if there be no such distinction in law, by selling the trust property, discharge the property of the trust altogether, and fix the trust upon himself personally, and thus completely change the nature of the estate, so as to convert a trust security fund into personal security, and this too by an aet of fraud. Such wifi be the inevitable consequence of adopting the rule of law which bars such trusts as are created by implication of law, and applying it to cases of express trust created by contract, and attempted by a fraudulent sale to be defeated.
Such a rule of law would be no less revolting to equity and justice than ruinous to the community and policy of the law. In this case there was an express trust between Wood and Jones, created by contract. The character and nature of the trust cannot be changed by any act of Jones. It cannot by his act from an express trust be converted into an implied trust. That such is and must be the law so far as Jones is concerned, there can be no question. Can the transfer to Wooland and Love, (who were affected with fraud) affect the character of the trust. The law, by the contract of the par-lies, saddles the property with the trust. The express trust is affixed to the property, and when the property changes hands the trust follows the property and attaches in the hands of the second holder, who is by law converted at once into a trustee. It is nota case of trust by implication of law. The law does not raise the trust. The trust is clearly express, but the purchaser with notice is converted into a trustee with an express trust property, and is estopped by fraud from taking advantage of his own wrong, &c.
January 30.
Cook for the defendant
took the same positions, and relied upon the same authorities as he had done in his argument in Yarborough vs. JVeioeZ, reported in 10 Yérger, 376.

Opinion:
Green, J.,
delivered the opinion of the court.
This bill is brought to redeem a negro man slave, mortgaged by the complainant to the defendant, Jones, the 10th of October, 1825, to secure the payment of the sum of four hundred dollars.
Jones sold the negro to Wooland in January, 1830, who in 1832 sold him to Neville, by whom he was, in June, 1832, sold to the defendant, Love. All the defendants, who have successively purchased and had possession of the negro, have claimed an absolute right to him, and have held possession for themselves respectively and adversely to all other persons.
More than three years having elapsed from the time Jones sold the negrp to Wooland in 1830, before the bill was filed in 1837, the statute of limitations is a bar to the relief the bill seeks against Wooland and Love, and confers upon Love, who is now in possession of the negro, a perfect title. These persons, although they may have known of the complainant's equity, and thereby may have been by operation of law, trustees for him, may nevertheless avail themselves of the benefit of the statute of limitations; for nothing is better settled than that the statute runs in favor of a party, who is created a trustee by implication of law.
There is no contract between Wooland and Love and the complainant, and it is because the Jaw will not permit them to acquire a title to the negro by purchase from Jones, with a knowledge of the complainant's equity of redemption, that it holds them liable as trustees. Although, therefore, they could not set up their title, acquired by purchase from the mortgagee, in bar of the equity of redemption, because it would be a fraud upon the complainant to permit them to do so, yet as they in fact have held possession adversely and for themselves, and not in subordination to, or consistently with the complain ant's right, the statute of limitations has operated in their favor and perfected their title.
But the statute of limitations does not run in favor of the mortgagee, as this court has often decided. Overton vs. Bigelow, 3 Yer. Rep. 513; Hammond vs. Hopkins, 3 Yer. Rep. 525; Yarborough vs. Newel, 10 Yer. Rep. 276.
In the last case the court decided, that the mere possession of the mortgaged property by the mortgagee, for any length of time, short of that which affords a presumption of right, will not authorize him to plead the statute of limitations; but as all the members of the court were not satisfied that possession of the mortgaged property by the mortgagee, accompanied with an open declaration, known to the mortgagor, that the right of redemption was resisted, would not operate a bar to that right, within the time fixed by the statute of limitations, that question was left undetermined. But now, upon a reconsideration of the question, we are all of opinion, that even in this latter case, the equity of redemption would not be barred.
The relation of mortgagor and mortgagee stands upon grounds peculiar to itself. It is not the case of an ordinary express trust, nor to be governed by the same rules. The mortgagee has a right to the possession of the property. He holds it for himself from the first, and not for the mortgagor. The mortgagor's right to redeem, does not depend upon the mortgagee's possession. He may file his bill to redeem, as well if he have possession of the property himself, as if the mortgagee possess it. If therefore the mortgagee's denial of the right of redemption, he being in possession, would enable him to plead the statute of limitations, if a bill were not filed in three year's afterward, the same consequence would follow, if, while the mortgagor should retain possession, the mortgagee, were to declare he should not redeem. But for such an absurdity, no one would contend; and yet, we think the doctrine insisted on would lead to this result.
Again, if the mortgagee's possession of the mortgaged slave for three years would bar the equity of redemption, he might sue the mortgagor at law and recover the money he had advanced upon the mortgage; and thus, by virtue of the contract, he would undoubtedly have a right to the money, and by virtue of the statute of limitations, a right to the negro. Nor would the mortgagor have any better ground to enjoin a recovery of the money, by alledging, that his negro had become the property of the mortgagee by the statute of limitation, than a party who may be sued upon a bond, would have to enjoin it, by alledging, that he had an account against the plaintiff, which though just had been barred by the statute.
Note. As to the general doctrine of the limitation of equitable demands, seethe opinion of Sir William Grant in Cholmondcley vs. Clinton, the 3d point, 2 Merivale, 357 ; and the opinions of Sir Thomas Plumer, in the same case, 2 Jac. &Walk. 141,157. On the latter page, he says — "Whenever a bar has been Jixed by the statute to the legal remedy in a court of law, the remedy in a court of equity has, in the analogous cases, been confined to the same 'period" In Bond vs. Hopkins, 1 Sch. & Lef. 412, Ld. Redesdale says, p. 429, — "If the equitable title be not sued upon within the lime within which a legal title of the same nature ought to be sued upon to prevent the bar created by the statute, the court, acting by analogy to the statute will not relieve. If the party be guilty of such laches m prosecuting his equitable title as would bar him if his title were solely at law he shall be bound in equity; but that is all the operation this statute has or ought to have on proceedings in equity.,J Lewin on Trusts and ^Trustees, c. 28.
2. As to the limitation of direct trusts, see Angelí on limitations, 136 and cases referred to; Lewin on Trusts and Trustees, c. 28, and authorities cited.
3. As to the application of the statute of limitatations to equities of redemption as between the mortgagor and a purchaser from the mortgagee with notice, see Piatt vs. Vat tier, 9 Peter, 405. The facts are clearly and briefly stated by Judge Story, p. 413.
4. Asto,the effect of lapse of time on equities of redemption, see 2 Merivale, 35*7, et seq.
We therefore think, that no length of possession, short of that which affords a presumption of right, will bar the equity of redemption.
The decree must be reversed, and a decree rendered for the complainant against Jones. The negro will be delivered up in two months, or in default thereof, the complainant will be entitled to his value, estimating it at the time the decree is pronounced, together with a reasonable allowance for hire, deducting the $400 and interest.