Court Opinion

ID: 3645878
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:02:05.592138+00
Date Added: 2024-06-11T12:04:50.180334
License: Public Domain

The following statement of facts was presented by (260) the record transmitted to this Court:
Robert H. Burton, largely indebted, chiefly on responsibilities for other persons who failed, died in September, 1841, having previously made his will, in which he appointed Mrs. Burton and two other persons, executrix and executors, and bequeathed and devised to the same persons all his estate, real and personal, in trust, to sell the same or such part as should be necessary, and as the executors might choose, at private or public sale, for cash or on credit, and out of the proceeds to pay all the testator's debts; but in making those payments the executors are to pay the testator's own debts first, that is, such as he contracted on his own account and not as surety for others, in preference to such as he owed as surety for any other person; and among the testator's own debts, those, for which any person was liable as the surety for the testator, are preferred before those for which no one was surety; and after discharging all the debts of those descriptions to pay the debts for which the testator was liable as surety for any other person or persons. The present bill was filed by several bond creditors of the testator, on behalf of themselves and all the other creditors, against the executors and devises, praying for an account of the real and personal estate and for payment of their debts according to the several rights of the respective creditors, legal and equitable. At September, 1842, the defendants having answered there was the usual decree for the defendants to account and the creditors to prove their debts before the master, and for an injunction against any creditor proceeding further at law. At March, 1844, a report was made by the master, and thereon and on the motion of some of the creditors the Court made the following interlocutory orders, with which some of the party were dissatisfied and by leave appealed.
"It appearing to the Court, by the report of the master, that the judgments existing against the testator at his death, and the absolute judgments rendered against the executors themselves have been fully paid out of the assets of the *Page 203 
testator; and it also appearing that there are judgments         (261)quando to a large amount on specialties, which remain unpaid; and it being suggested that the executors will receive funds before the next term of the court, which, not being sufficient to satisfy all the said judgments quando, the executors are nevertheless desirous to apply under the direction of the Court; and it also appearing that one Henry Fullenwider, was on 21 January, 1841, very largely indebted to many persons, and that the testator was the surety for the said Fullenwider for a considerable number of those debts, and that for the purpose of saving harmless the testator and also securing the payment of all his said debts in the order therein mentioned, the said Fullenwider on the day aforesaid executed to B. Shipp, Esq., a conveyance for a large estate, consisting of a number of slaves and divers valuable tracts of land, and iron factories, in trust to sell the same for cash or on a credit and appropriate the proceeds of sale to the payment in the first place of the said debts (which are scheduled) for which the testator, Burton, was surety or for which any other person was surety; and secondly, to the payment of all other debts which the said Fullenwider owed; and thirdly, to pay the surplus, if any, to the said Fullenwider himself; and it further appearing that Mr. Shipp sold the said estates at public sale, and at that sale the testator, Burton, became a purchaser to the value of $32,000, including a place called the High Shoals Factory at the price of $21,200; that the said Burton paid for all his purchases except the High Shoals, and that for the price thereof he gave his bond to the said Shipp, dated 7 June, 1841, and payable twelve months after date, and that, thereon, by agreement between the said Burton, and Shipp, the said Burton made sundry payments by discharging so much of Fullenwider's debts that were secured by said deed, and that by such payments the sum due on the bond for $21,200, was reduced to $16,946.45, for which a judgment quando was taken against the executors in June, 1843, which is one of the judgments quando before mentioned. And it further appearing that there is a large number of debts outstanding due by bonds of the testator, on which no suits have been brought. And thereupon, further instructions to the master being prayed as to the proper                    (262) appropriation of the personal and real estates, and also a declaration upon which the executors might with safety apply the funds they expected shortly to receive, the Court ordered: First, that the defendants should pay such funds as might come to their hands to the judgments quando in proportion to their respective amounts. Secondly, *Page 204 
that for the said balance due to Mr. Shipp, he had a lien as vendor for the same on the High Shoals, and was entitled to be paid thereout in preference to any other creditor of the testator. Thirdly, that the payments quando on specialties were to be paid before the specialties not sued on; and lastly, that the real estate or its proceeds were legal real assets and not equitable assets." Several persons concerned in interest, being dissatisfied with the decree, by several appeals brought the whole decree before the Supreme Court.
The facts are so imperfectly stated, that we fear we shall be able to render much less assistance to the parties, towards ascertaining their rights, than they expected from their appeals. The report of the master is not before us, except as certain facts of it appear in substance in the decree, nor does it appear whether Mr. Shipp had conveyed the High Shoals to the testator or not, nor whether "the funds" which the executors suggested they expected shortly to receive and wished to pay out without delay, were the proceeds of the personal or real property, nor does it appear whether the judgmentsquando were rendered at the same or different periods, or whether the suits, in which they were rendered, were brought at the same or different periods. It is therefore impossible for the Court to say distinctly whether there is or is not error in the several parts of the decree. We can only say, as to the first declaration made in the decree, upon the equality of the right of payment of the creditors by judgments quando, that it is certainly correct in respect to the proceeds of the real (263) estate, as we hold that to be equitable assets; and may be correct and probably is correct in respect to the personal estate, because no fact is stated upon which one of those judgment creditors can be entitled to a preference over another. But as the Court can not, for the last reason, see whether that part of the decree is correct, as between the parties in this cause, the Court can neither affirm nor reverse it, but must remand the case. Then the decree can be reheard on petition, and then the facts may be more distinctly set forth, or by consent, the question may be sent up again, if the parties should still wish the opinion of this Court on it.
We are of opinion, upon the second point; that Mr. Shipp is not entitled to a preference of payment out of the High Shoals property; that is to say, upon the supposition that he conveyed *Page 205 
it to Burton in his lifetime. The question of a vendor's equitable lien for the purchase-money of land conveyed by him, we consider settled by the decision at this term of Womble v. Battle, ante, 182. We know of but one way, if any, in which that fund could be reached, so as to give Mr. Shipp the benefit of it, upon the ground of the purchase-money having a preferable right of satisfaction before Burton's general creditors.  That is by considering the conveyance by Mr. Shipp to Mr. Burton — if one was made — before the payment of the purchase-money and without any personal security for it, except the purchaser's own bond, as an act of such gross negligence or inexcusable want of caution, as to amount to a breach of trust in Mr. Shipp, and, of course, in Burton, who concurred in it by taking the conveyance. Therefore, probably, the creditors of Fullenwider, who are secured in the deed, or Fullenwider himself (who has an interest that his debts should be paid as well as in the clear surplus), might, upon their bill against Shipp and Burton, or by coming in before the Master, be allowed to follow the property; and if so, that would relieve Shipp to the amount of what they might get out of the property. That, however, is the province of those persons, and Mr. Shipp can not claim it. Looking at Shipp merely as the vendor of land belonging to him, we think he has no lien, after a conveyance. It is probable he did convey; else, he would not      (264) apply in the way he has. But as the fact is not stated, we can not assume it, and must, therefore, send the cause back undecided upon this point also.
Upon the third point, the Court is of opinion that the decree is correct, as far as it affects the personal estate; but incorrect as far as respects the fund arising from the real estate, as the latter is assets in equity only, and is, therefore, applicable to all debts alike, or, in this case, to the debts in the order directed in the testator's will. In the course of legal administration, and in that way the personal estate here is to be applied, a judgment of assets in futuro does not alter the priority between debts so as to give one of inferior dignity, on which such a judgment has been taken, a prefence before a debt of higher dignity, not sued on. This was held in Roundtree v. Sawyer, 15 N.C. 44. An executor may, of course, pay such a judgment on a simple contract before notice of a bond debt, as he might do, if the simple contract debt had not been reduced to judgment. But the judgment quando does not fix the executor with assets, but assumes that he had fully administered up to the time of judgment; and, therefore, when called on to account upon a scire facias for assets thereafter come to hand, the *Page 206 
executor may show that there were none applicable to that debt, because debts of higher dignity existed. But between debts of the same dignity, here being, originally, all specialties, we think the law is, that the diligent creditor shall be preferred. It seems to have been so considered by Lord Hardwick, in Ashby v.Pocock, 3 Atk., 308. Although the judgment is not absolute, yet the suit gives notice of the debt and the judgment ascertains it, and the executor would not be at liberty after suit to make a voluntary payment to a creditor in equal degree, who had not sued. Hence the bond outstanding could not protect the executor in a scire facias on the judgment; while to a suit on the bond he might plead the prior suit on bond and judgment therefor. Such seems to be the understanding of the text-writers upon this question. Wms. Exrs., 659; Ram. on Assets, (265) 290, and the authorities cited by him.
We have already said that we hold the real estate to be equitable assets, and that the decree was wrong in declaring them legal. Under the Act of 1789, as we held in Dunn v. Keeling,13 N.C. 283, the land would be undoubtedly legal assets. For that act makes all devises void against creditors, as the first section of the St. 3 and 4. W. and M., ch. 14, had in England done; but it did not take out of the operation of its enactment a devise in trust or charge for the payment of debts, as by the provision in the fourth section of the English Statute had been done. It followed necessarily that all devises were here alike void against creditors, and they might proceed against the devises in actions at law for their debts. It might seem strange to hold that a devise for the very purpose of paying debts should be held to be fraudulent as to the creditors. So it would be, if it were not declared fraudulent and void upon the intent of the testator in making the gift, as a deed by a debtor is by the St., 13 Eliz., when made with the intent to defeat creditors. But the acts of 1789, and of 3 and 4 W.  M. do not make devises void upon the intent, or as a fact to be found by the Court or jury, but upon the fact of the devise, since, at common law, that defeated the creditor, with whatever intent it might have been made. Therefore, under these acts, lands devised to one for his own benefit are clearly liable to the testotor's [testator's] creditors, although, in the same will the testator made, otherwise, an ample provision for the payment of his debts. The question of intent, therefore, was immaterial; and the general enactment made a devise even for payment of debts void. But the English statute, by that proviso, took such a devise out of the operation of the previous clause; and consequently left it, as if the statute had not been passed. Therefore, in England *Page 207 
a creditor could not sue such a devise. If he did, the latter would plead that the devise to him was in trust for payment of debts; which, being a protection by statute, the Court was obliged to take notice of and sustain. There, therefore, the creditor was obliged to go into equity and obtain satisfaction upon the footing of the trust for him created in the will.  By omitting that proviso             (266) in our act, all that was reversed here. For when a creditor sued the devise here, it would be no answer to the action to plead that he was a devisee in trust for others, although those others might be honest creditors. The creditor would reply, there is nothing to help you in the statute, which, for my purpose, has made the gift to you void. We were obliged then to hold lands thus devised to be legal real assets. It would seem that the Legislature could mean nothing less by omitting the proviso of act of W.  M.; which might have been from an intention to prevent debtors from creating preferences by their wills, and to make the land liable to debts according to legal priorities. That was the necessary construction of the act; and the Court could not avoid it, thought not insensible of the great confusion and immense losses that would almost certainly arise out of it. For it might defeat the most reasonable provisions for the testator's family, and for the payment of his debt. For example, an heir or devisee can not, after process sued, alien; so that one obstinate creditor, by bringing suit, might prevent a sale for a fair price, and sacrifice a large estate by a sale for cash on execution for a trifling debt. And, at all events, instead of selling the land by the executor or trustee and applying the whole proceeds to the satisfaction of creditors, in nine cases out of ten, more of it would be sunk in costs of suits at law than came to the hands of the creditors themselves. Then as to the preferences the debtors may create, that raises no objection. It can not be a fraud in a person to devote his property to the payment of just debts, although he may not have enough to pay all his creditors. Upon that ground preferences by deed are upheld. But if preferences be wrong, they are less likely to be made by will than by deed. Men may expect favors from particular creditors for whose benefit they make deeds; but they are past that before their wills can go into effect, and, therefore, will not be much inclined to make unjust preferences by will, or, indeed, to make any. It is almost universal, when lands are devised in trust for creditors, that it is for all creditors; though, sometimes,         (267) certainly, it is otherwise, and perhaps ought to be. It is highly probable that views of this kind, when the subject *Page 208 
was brought to the notice of the Legislature by Dunn v. Keeling,13 N.C. 283, decided in June, 1830, induced that body, in the act of that year, ch. 36, to enact here, in substance, the proviso contained in the St. 3 and 4 W.  M. It is now found in Rev. St., c. 43, s. 15, and provides that "nothing in that act contained shall impair or in any way affect the right of any person to whom land may be devised in trust, or to whom power to sell land shall be given, by any will, for the purpose of paying the debts of the testator, to dispose of the same, in orderto carry into effect the intention of the testator."
The effect of that provision undoubtedly is, to sustain against general creditors that devise for the sake of the purpose of it, namely, the trust for creditors, as far as it may be necessary for that purpose. Beyond that, perhaps, the residue of the land or its proceeds might be liable, as at law. But to the extent that the will raises a trust for creditors, clearly the land is no longer liable in an action at law, under the statute of fraudulent devises, but can be reached only in equity, upon the footing of the trust. Consequently, it is equitable assets; the distinction between them and legal assets being, that the one may be reached, at law, and the other only in equity. It was formerly doubted in England, whether, in some cases of devises or powers to executors to sell for payment of debts, the proceeds were not legal assets. But since the case of Silk v. Prime, 1 Bro. C. C., 138, it has been considered as settled in the English court of chancery, that in every case the assets are equitable. And recently the same doctrine has been held at law in the cases of Clay v. Willis, 1 B. 
C., 364, and Barker v. May, 9 B.  C., 489.
What effect this will have on the rights of the parties to this suit we can not say, as the facts are not stated, so as to enable us to see the application of the rule. Therefore, we can only declare that the lands devised in the testator's will are not legal assets, but (268) equitable assets; as to which the general rule is, that they are to be applied to the payment of the debts, and as in the order the will directs, and that, if there be not a sufficiency to pay all the debts of a particular class, they are to be applied to all the debts of that class pari passu, whether due by bond, simple contract, or otherwise — saving, however, the preferences that may arise from specific liens for any particular debts.
PER CURIAM.                        ORDERED TO BE CERTIFIED ACCORDINGLY.
Cited: Simmons v. Spruill, 56 N.C. 12; McLean v. Leach, 68 N.C. 98;Gaither v. Sain, 91 N.C. 307. *Page 209