Case Name: Brown vs. Vanlier et als.
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1846-12
Citations: 7 Hum. 239
Docket Number: 
Parties: Brown vs. Vanlier et als.
Judges: 
Reporter: Tennessee Reports
Volume: 26
Pages: 239–249

Head Matter:
Brown vs. Vanlier et als.
A vendor of land, when the purchase money has not been paid, can enforce his lien against a trustee and cestui que trust, to whom it has been conveyed to secure pre-exist-ing debts without notice of such lien.
This bill was filed by Thomas Brown in the Chancery Court at Franklin against Wallace Dixon, Sam. Vanlier, Lanier, Doyle and others.
The bill charges, that on the 22d of May, 1839, complainant sold and conveyed to Samuel Vanlier sundry small tracts of land in Perry county, amounting in all to 540 acres: That he took two notes for part of the consideration money, both dated the 22nd of May, 1839, one for $2070, due 1st and 4th of April, 1840, and the other for $1000, due 1st and 4th of April, 1841, the latter bearing interest from the date. That both notes remain unpaid, and constitute a lien in equity upon the land in controversy. That on the 5th of March, 1840, Samuel Van-lier, under pretence of being indebted to various persons, conveyed by deed of trust to Wallace Dixon, said tracts of land, and various articles of personal property, in trust to secure the payment of said debts, but in truth and in fact to defraud his creditors.
This deed conveyed the property enumerated to secure certain creditors, and the debt of complainant, giving a preference to the other creditors over said complainant.
Wallace Dixon, the trustee, answers, that he has no personal knowledge of the contract mentioned in complainant’s bill, but from information he is now in possession of, he believes it to be as stated in the bill and admitted in the answer of Samuel Vanlier. He further says: “As to the allegation in complainant’s bill, that respondent was present at the making of the contract for the sale of said tract of land, and that he consequently knew at the time of his acceptance of the trust, that a portion of said purchase money was due and unpaid,” “respondent answers and says: that said allegation is wholly false and without foundation. Respondent does not recollect ever seeing complainant and Vanlier in the company of each other, nor had he at the time of the execution of said deed of trust any knowledge of the existence of the notes mentioned in com™ plainant’s bill.”
He also denies that the deed of trust was executed to defraud creditors.
The answer of Lanier and wife is equally explicit. After answering as to the justice of their demand, they say that said deed of trust was executed for the consideration and purposes therein expressed, in good faith, and without notice of complainant’s claim upon said land, if he had any.
Michael Doyle also denies any knowledge of the existence of complainant’s equity, and says he is a creditor, &c.
There was no proof of fraud in the execution of the deed of trust, or of notice of the supposed lien.
The case was heard before chancellor Cahal, on bill, answer, replication and proof, ’and a decree was entered sustaining the validity of the deed, and the property was ordered to be sold for the benefit of the creditors therein preferred. •
From this decree the complainant Brown appealed.
Cooper, for the complainant.
The court is called upon in this case, for the first time, to set- , tie the precedence between a vendor setting up a lien for unpaid purchase money, and creditors of the vendee claiming under a voluntary conveyance made by the vendee to secure pre-existing debts, where vendor has taken the first step to enforce his equity.
In this State the lien of the vendor, for unpaid purchase money was early recognized — and it still continues to be considered a subsisting equity — scarcely a volume of the reports of the decisions of this court which does not contain one or more opinion affirming its existence. Pillow’s heirs vs. Shannon’s heirs, 3 Yerg. 508. Slieraiz vs. Nicodemus, 7 Yerg. 1. High vs. Battle, 10 Yerg. 186. Taylor vs. Hunter, 5 Hum. 569 and reports passim. But our registration laws and the policy of this State in subjecting lands as well as personal'property to the payment of debts by execution sale, have modified the extent of the vendor’s lien as it stood at common law. By the registration laws, the vendor’s lien, as every other unregistered lien, is post poned to the rights of judgment creditors and bona fide purchasers without notice. By the policy of subjecting lands to the payment of debts by execution sale, the priority of the vendor over other creditors of the vendee has been lost — that is to say, other creditors of the vendee may acquire rights to the land,"and enforce them, if they are diligent, without noticing the vendor’s lien. In every other respect the lien must be considered, as still subsisting — and subject to these modifications it will be enforced as at common law.
In order to sustain the complainant’s claim in this case, then, it is only necessary for us to show: 1st, That creditors claiming under a voluntary conveyance, made to assignees by a failing debtor to secure pre-existing debts, are not creditors and purchasers within the meaning of the registration acts — and, 2ndly, That the vendor’s equity is such an equity, as will be enforced against creditors claiming under such conveyance as aforesaid, where the vendor files his bill before any steps have been taken to close the' trust conveyance — in other words, that creditors claiming nnder a trust conveyance, take the property conveyed, subject to every equity which might have been enforced against it while in the hands of the assignor.
I need not consume the time of the court in showing that judgment creditors alone are embraced within the policy of the registration laws. The point has been too often decided to require even the citation of authorities. Nor need I argue that creditors claiming under a voluntary conveyance made by a failing debtor to secure pre-existing debts, are not bonafide purchasers without notice, within the meaning of the registration laws. This point may be considered as even more authoritatively settled than the other. It should be noticed, however, that the authorities which I shall advance in support of the second proposition above laid down, eqnally sustain the first. I shall therefore proceed to show, that creditors claiming under a trust conveyance made to assignees to secure pre-existing-debts, are mere volunteers, and take the property subject to every equity which might have been enforced against it while in the hands of the debtor — and, that as the vendor’s equity can be enforced against the vendee, so it is good against the creditors of the vendee claiming under a trust conveyance— provided the vendor files his bill before any steps have been taken by the creditors to enforce their equity.
The general rule upon this subject is thus laid down by chancellor Kent, (2 Com. 542 — note:) “The assignee of a voluntary assignment for the benefit of creditors, stands in no better situation than the assignor. Neither he, nor the creditors whom he represents, are purchasers for a valuable consideration without notice as against prior equitable liens.” Haggerty vs. Palmer, ‘,6 John. Ch., 437. Knowles vs. Lord, 4 Wh. 500, So in the case of personal property, and even negotiable paper, it is universally held: “That the trustee in an assignment for the benefit of creditors, or the creditor himself where the property is assigned to secure a pre-existing debt, stands in the shoes of the assignee, and can take no other title than that of such assignee.” (See Bay vs. Coddington 20 Johns. Rep. 637, the leading case in this country, which has been followed by this court in Wormley vs. Lowrie, 1 Hum. 46S, and in Ingham vs. Vaden, 3 Hum.) The same principle is carried out in all its modifications: “One who takes an assignment of property, says the Supreme Court of North Carolina, to secure a debt, and neither advances money, nor releases his debt, is not a purchaser within the rule of equity which protects purchasers without notice.” (Harris vs. Horner, 1 Dev. and Bat. Eq. 455.) In Dickinson vs. Tillinghast, 4 Paige’s Ch. Rep. 215, a mortgagee who had failed to register his mortgage, was preferred to a creditor who had taken an absolute conveyance from the mortgagor in payment of a pre-existing debt without notice of the prior mortgage; but who had not released his debt or given up any evidences of debt. It was insisted on behalf of the creditor in that case, that he was a bona fide purchaser without notice within the meaning of the recording act of the State of New York, which, like the registration laws of this State, made all unregistered mortgages null and Void as against subsequent bona fide purchasers without notice. “To constitute a bonafide purchase, says the Chancellor, for a valuable consideration within the meaning of the act, the purchaser must, before he had notice of the prior equity of the holder of an unrecorded mortgage, have advanced a néw consideration for the estate conveyed, or have relinquished some security for a pre-exist-ing debt due him.” In Donaldson vs. The Banlc of Cape Fear, 1 Dev. Eq. 103, the Bank claimed under a trust conveyance from a member of a firm who was indebted to the Bank in his individual capacity, and the bill was filed by a creditor of the firm, alleging that the land at the time of the trust conveyance was held by the individual member in trust for the firm. The Bank claimed to be a bona fide purchaser for value. “From the case as it appears at present,” says the judge who delivered the opinion of the court, “I am inclined to think, that the defendant is not a purchaser for value, but a mere encumbrancer. For what value did the Bank pay for the trust? Nothing: it was to secure a debt contracted before the trust was contemplated. The Bank stood after, as it did before the deed. Had the Bank purchased with an antecedent debt, the extinguishment of the debt would have been value sufficient. Here the debt remains as before the conveyance.”
These authorities conclusively show that the assignees in a voluntary assignment for the benefit of creditors, stand in the shoes of the assignor; and that any equity which might have been enforced against him, Will be enforced against them, with or without notice — that every prior lien, registered or unregistered, has precedence to the equity of the creditors in such trust conveyance. ■ An unregistered mortgage, as in the case of Dickinson vs. Tillinghast, 4 Paige’s Ch. Rep., a creditor’s mere right Qver partnership property, as in Donaldson vs. Banlc of Cape Fear, a contract for a mortgage as in Burn vs. Burn, secret equities between parties to negotiable paper, as in Bay vs. Coddington and Wormley vs. Lowrie, are all preferred to the equity of creditors claiming under an assignment made by a failing debtor to secure pre-existing debts. It is impossible to see any distinction in principle between these cases and the one now before this court.* Here is a general assignment made by a failing debtor for the benefit of creditors, and here is the prior equitable lien of the vendor for unpaid purchase money. Is there any thing in the vendor’s equity which places it out of the rule so clearly laid down?
But we are not left solely to analogy as to the vendor’s lien. We have the positive and weighty authority of Mr. justice Story, in favor of the lien in such case. “The iien of a vendor, he says, 2 Eq. Jur. Set. 1228, will prevail against assignees by a general assignment under the bankrupt and insolvent laws; and against assignees claiming under a general assignment, made by a failing debtor for the benefit of his creditors; for, in such cases, the assignees are deemed to possess the same equities only as the debtor himself would possess.” Equally clear and explicit is the language of Chancellor Walworth, in the matter of Howe and wife. I Paige’s Ch. Rep. 128. “It is a well settled rule of equity, he says, that the general assignees of a bankrupt take his estate subject to every equitable claim which exists against it by third persons; and that they cannot avail themselves of the legal estate thus acquired, to defeat a prior equity, of which they had no notice at the time of the assignment. They differ in this from bona fide purchasers of the legal estate, and from mortgagors who have advanced their money on the credit of the land, and who are considered quasi Iona fide purchasers. I can see no good reason, he continues, why a different rule should be applied to general assignees, for the benefit of all the creditors," created by the voluntary act of the debtor, from that which prevails in respect to those created by operation of law. Sir Simon Stuart’s case, referred to by the counsel and by the Lord Chancellor in Burn vs. Burn, 3 Ves. Jr. 576, was an actual conveyance to trustees for the benefit of creditors; and yet it was held that a prior contract for a mortgage was entitled toa preference. The case might be different, where creditors had released their debts in consideration of the assignment.”
It should be distinctly noted, that I am willing to admit, that if the conveyance for the benefit of creditors is closed before the vendor endeavors to enforce his equity — or even if the first step in a legal forum is taken by the creditors, such creditors might obtain a priority although notified of the existence of the vendor’s lien. No case has as yet gone that far, where the opinion of the court is taken in connection of the facts. On the contrary, at least three courts of the union, where the ven dor’s lien is enforced, have decided directly the reverse — to wit: Virginia, Maryland and Kentucky. See Duvall vs. Bibb, 4 Hen. and Munf. 113. Tompkins vs. Mitchell, 2 Rand. 428. Eubanlc vs. Poston, 5 Mon. Rep. 285; and 3 Gill & Johns.
But the broad principle laid down by this court in Robáis vs. Rose, 2 Hum., may be construed to give such creditors a right to obtain priority by due diligence without noticing the vendor’s lien. It seems clear, however, that if the vendor, or any other person having an equity, registered or unregistered, secret or known, takes the first step to enforce such equity, he must prevail.
It should also be remembered, that there is a clear distinction between creditors who claim under a conveyance made to assignees by a failing debtor, and creditors to whom a conveyance has been directly made to secure contemporaneous advances, or in satisfaction of pre-existing debts. These are the cases referred toby Judge Story in his Eq. Jur. sec. 1229, the section immediately following the one already quoted — and upon this ground was decided the case of Woods vs. Banlc of Kentucky, 5 Mon. 194, and perhaps Baily vs. Greenleuf, 7 Wheat. 49. ^
The defendants in the case now before the court, claim under a general assignment to trustees of all his property, made by a failing debtor for the benefit of all his creditors. They come within the very language of Judge Story and Chancellor Wal-worth as above quoted, and fall within the principle of the numerous authorities cited. They are not within any of the exceptions — the deed is not made directly to them; they advanced no new consideration; they released no debts or evidences of debt; they received no property in satisfaction of their claims. It is a clear case of a contest between a prior, unregistered but acknowledged equity, and the equity of creditors under a general assignment made to some pre-existing debts — and where the vendor has taken the first step to enforce his equity.
No decision, we think, can be found in conflict with these views, nor even a dictum, unless in the case of Baily vs. Green-leaf. In Roberts vs. Rose, 2 Hum., the contest was between the vendor and a purchaser at execution sale, at the instance of a judgment creditor of the vendee — a case clearly within the policy of the registration laws. In Gann vs. Chester, 5 Yerg., the controversy was between the vendor and a purchaser at a decretal sale foreclosing a mortgage conveyance. No notice of the vendor’s lien is brought home to any of the parties — and it seems to be a clear case of a Iona fide purchase for valuable consideration without notice. The court refers to Washington vs. Trousdale, Mart. & Yen, 385, where a judgment creditor who had fixed his lien by levy, was preferred to a prior unregistered mortgage, and expressly base their decision upon the policy of the registration laws of our State. But would that court have held, or is this court prepared to hold, that a prior unregistered mortgage would be postponed to the claims of creditor, not judgment creditors, claiming under a trust conveyance to secure pre-existing debts? And, is there any distinction between the vendor’s lien and the equity of a mortgagee who has failed to register?
The case of Bailey vs. Greenleaf bears a strong resemblance to the case of Gann vs. Chester. The vendor filed his bill twenty years after the original conveyance — and in the meantime the property had been mortgaged to secure advancements and sold under decree of foreclosure. The bill seems not to have charged the defendants with notice of the vendor’s lien. The defendants claimed as bona fide purchasers without notice. But it is said, that the court go further in their opinion, and in effect give the preference to creditors claiming under a voluntary conveyance. It must be admitted that the language of the court in that case is very-broad, and has been generally supposed to go to the length contended. It should be remembered, however, that this was the first case in which the question seems to have been considered in this country, and, like all first cases, ought to be construed in connection with facts, and cannot be safely relied as settling all the varying relations and rights between vendor and creditor. The opinion, moreover, to the extent to which it is supposed to have gone, has never been adopted by any other court. It is decidedly condemned in 3 Wheaton’s Reports, 493; is restricted in the case of J&ubanJc vs. Poston, 5 Mon. Rep. 293; is dissented from'in Shirley vs. Sugar Refinery, 2 Edw. V. C. Rep. 511, and virtually overruled in the matter of Howe and wife, 1 Paige’s Ch. Rep. 125. It should also be noted, that Chancellor Kent, in commenting on the case, (4 Kent, Com. 154,) seems to think the decision has been misunderstood in the cases just quoted, and confines it within legitimate limits. “The court, he says, took a distinction between an assignment by a bankrupt under an insolvent act, ancf an absolute conveyance by the vendee to bona fAe creditors as purchasers.” And in this connection I would also refer to the language of Judge Story, already quoted, Eq. Jur. sec. 1228-1229, where he repeatedly refers to this case. The extent to which this court has adopted the decision of Bailey vs. Greenleaf, may be admitted to be just and reasonable; beyond that, this court cannot go without destroying the vendee’s lien, and running counter to its own repeated decisions. The distinction taken, seems to reconcile all the cases, and to give a safe rule for future adjudication. It is easy to see that the vendor’s lien, when it interferes with the settled statutory policy of the country, must give way. But it is impossible, it seems to us, to give a satisfactory reason, why the mere voluntary act of the debtor should confer a superior equity on pre-existing creditors, as against a vendor-creditor, having a prior acknowledged equitable lien on the property conveyed, or why a lien, which could have been enforced against the assignor, should not be equally available against assignees, who are universally held to stand in the shoes of their assignor. The vendor’s equity is certainly not inferior to other equities which this court would enforce without hesitation against creditors claiming under a voluntary assignment, though without notice; such, for example, as a secret equity between the maker and payee of a negotiable or other instrument, the wife’s equity in her distributive portion or choses in'action, the equity oí a mortgagee for value, who had failed to register. The truth is, such creditors and the assignees under whom they claim, are mere volunteers, and the property conveyed, is subject to every equity which might have been enforced against it in the hand of the assignor.
Upon what principle, upon what semblance of reason, can it be said that the vendor alone, of all persons having equities, shall lose his equity as against such creditors? Shall every other secret equity be allowed, and yet a lien, said to be founded in natural equity, derived from the civil and the common law, and so repeatedly enforced by this court, be allowed? Any objections which may be urged against the vendor’s equity, as that a false credit is given to the vendee by an absolute conveyance by which third persons may be misled, &c., will equally apply to other equities, which áre enforced without hesitation against creditors under a voluntary conveyance. There is no reason why this equity should be placed on different ground from other equities; in truth if there is any preference it should be made in favor of this old and established lien. We conclude therefore:
1st. That the vendor’s lien is in this state an acknowledged, subsisting equity, and will be enforced as at common law, subject to the modifications introduced by the policy of our statutory enactments.
2d. That the policy of our laws only protects judgment creditors and bona fide purchasers without notice against all unregistered liens or equities, and give to other creditors of the vendee the right to acquire liens, and to enforce them without noticing the vendor’s equity.
3d. That creditors claiming under a voluntary assignment to trustees, made by a failing debtor to secure pre-existing debts, are not within the policy of the registration laws, being neither judgment creditors, nor bona fide purchasers without notice'. And that the property in such voluntary conveyance is subject to every equity, whether secret or known, registered or unregistered, which might have been enforced against it while in the hands of the assignor. And
4th. That there can be no distinction between the vendor’s equity and other equities which are enforced without hesitation against the creditors claiming under such voluntary assignment; and consequently, that the vendee in this case, having filed his bill to enforce his lien before any steps were taken under the trust conveyance, by his diligence acquired that priority, which at common law would have been given to his lien, and it is therefore entitled to be first satisfied out of the proceeds of the land.
James Campbell and A. Ewing, for defendant.
Nicholson, for the complainant.

Opinion:
TuRLEy, J.
delivered the opinion of the court.
The only question we deem it necessary to notice in this case, is, whether a vendor of land, when the purchase money has not been paid, can enforce his lien therefor against a trustee, and cestui que trust, when the land has been conveyed to secure debts; when the bill is filed for that purpose before the trust is executed.
We have no doubt that he may. This question is virtually decided in the case of Pettigrew vs. Turner, 6 Hum. R. 440, where it was held that the right of wards to property purchased with their money might be sustained against a conveyance in trust, to secure bona fide debtors, notwithstanding such trustee and cestui que trust were ignorant of their existing equity at the time of the conveyance.
But I do not deem it necessary to enter into an investigation of the proposition, because the subject has been exhausted in. the very able and elaborate argument of Mr. Cooper, which accompanies this opinion, to which I feel that I can add nothing, and to which I refer for the argument.
Decree reversed, and decreed that the complainant be paid his purchase money, with interest, out of the proceeds of the land.