Opinion
(December Term, 1856.)
The statute of limitations will protect a person holding possession under the legal title, if the conveyance take effect to pass the legal title, and make it necessary to convert the party into a trustee against his assent.
Where, therefore, a deed in trust was made to secure bona fide debts, one who purchased and took the trustee's title is protected by the statute of limitations, however fraudulently he may have acted in suppressing competition, and although he bought in the property for the trustor.
CAUSE removed from the Court of Equity of Edgecombe County.
Moore, for plaintiffs.
Bryan, for defendants.
John H. Dawson, being largely indebted to his mother, the defendant Tempe, and to the defendant Jos. J. Williams, a relation, for debts and liabilities taken up and paid by them, and being in failing circumstances, on the 17th of April, 1842, at the instance of the defendant Williams, made a deed of trust to John L. Hyman, conveying a large amount of property, consisting of a tract of land in Halifax County of 900 acres, also thirty-four slaves, twenty-two mules, five hundred and fifty hogs, besides horses, wagons, carts, plantation tools, household and kitchen furniture, twenty-five thousand pounds of pork and bacon, and various articles and commodities incident to the farming business, in trust, to secure to his mother, the said Tempe, and to the said J. J. Williams, debts to the amount of nearly nine thousand dollars, part of which were due to her, and part to J. J. Williams, and part to the two jointly, most of which had been on interest for a short time; also, to secure to Whitmel Kearney $1500 and interest, to Wm. K. A. Williams $896 with interest, and to Samuel Williams $727 with interest, making in all, without interest, nearly $12,000. These debts were bona fide. Besides these creditors, the said Dawson owed the plaintiffs the several debts set out in their bill, and other persons, none of whom were included in this or any other deed of trust. Besides this deed of trust, the said Dawson had executed another to Thomas Jones, dated 6th of April, 1842, containing four slaves and other property, to secure one of the same debts to Mr. Williams, and one to Mr. Jones, which it is not material should be more minutely noticed. These two deeds conveyed all the estate, real and personal, and everything of value which the said J. H. Dawson owned. On the 23rd of May following, the trustee, Hyman, made advertisement and sold all the property mentioned in the deed to him. There were not many persons present at the sale, and not many persons bid upon the property. An agent for the defendant, Mrs. Dawson, bid it all off at low prices, and the trustee afterwards made her a formal and proper title to the same. The amount raised by this sale, together with what was raised by the other trustee, Jones, did not equal the debts provided for in the deed of trust by several thousand dollars. The other creditors secured in the deed of trust agreed with Mrs. Dawson and Mr. Williams that if they would become personally bound for their debts, these creditors would not compete with her at the sale under the trust. The arrangement was made, therefore, that if Mrs. Dawson should get the property, they were to give her time, and she was to take up these debts with her own notes, with Williams as surety; and on these terms they agreed not to bid against her, and did not so bid. The same agreement was made with some others of the persons present, whose debts were not included in the deed of trust. A general impression prevailed amongst the persons present that Mrs. Dawson was purchasing for the case and benefit of her son. One of the terms of the sale proclaimed was that cash should be paid, and that Virginia money would be taken at a discount. All the property, after the sale, remained at the plantation where Mrs. Dawson and J. H. Dawson lived, (where the sale was made,) and was managed and controlled by the latter, until his death, in 1845. He sold such of the property as he wished, bought other property, directed the farming operations, sold the surplus, and collected the proceeds, all, as the agent, and in the name of his mother, Mrs. Tempe Dawson, but of which he rendered no account.
The prayer of the bill is for an account, and for payment of their debts out of the property so conveyed to the defendant Tempe Dawson, or any other property of J. H. Dawson, that may have come to her hands, and that they, and the other creditors of the said John H., have all such other and further relief as their case may require, c.
The defendants answered, denying the allegations, and relying on the statute of limitations. There were replications and proofs; and the cause being set down for hearing, was sent to this Court.
The bill alleges that the debts for which the deed of trust to Hyman was executed were feigned and covinous, and on this ground that deed is impeached as fraudulent and void against creditors. Upon the argument, the plaintiffs' counsel admitted that all the debts secured by the deed of trust were justly due. This relieves it from impeachment, and it stands as a bona fide conveyance, the legal effect of which was to devest the title out of the debtor, John H. Dawson, and transfer it to Hyman. So, the plaintiffs' equity depends solely upon the alleged fraud in the subsequent sale under the deed.
This brings up the second ground upon which the plaintiffs seek to subject the property to the payment of their debts, to wit, that John H. Dawson and his mother, the defendant Tempe Dawson, contrived, by collusion, to get the control of the other debts secured in the deed of trust, and thereby suppressed bidding, so that she was enabled, at her own prices, to purchase every single article of the property — land, negroes, horses, ploughs, hoes, c., that was sold by the trustee, and acquire the title, to the prejudice of the other creditors whose debts could have been made out of the surplus of the property that would have remained unsold after selling enough to pay the debts secured in the deed of trust, had the property not been sold at an under-value by reason of fraud between the mother and son, whereby it was contrived that she was to get the title and become the ostensible owner, so as to keep off the son's creditors, but was to let him enjoy and have the use of it.
We are satisfied, from the pleadings and proofs, that there was this collusion between the mother and son, and that the defendant Tempe became the purchaser, and took the property, with the understanding that she was to hold in secret trust for him, in fraud of his creditors.
There is proof that the other creditors secured in the deed of trust were assured that their debts would be paid, and so did not bid. Some of the other creditors, not secured in the trust, were also satisfied, and in that way bought off. But the fact that there was no serious competition, so that the defendant Tempe bought every single article that was sold, "speaks for itself," and leaves no doubt as to the collusion. It is true she took the title from the trustee, and ostensibly went into possession, but the son managed the property, and dealt with it as he saw proper. The fact that he did so in her name, and as her agent, is too flimsy a pretext to deceive any one; and the wonder is, that the plaintiffs and other creditors did not take legal steps at once in order to subject the property to the payment of the debts. For some cause or other they neglected to do so for nearly ten years. The trustee's sale was in 1842, the bill was filed in 1851. Are not the plaintiffs within the operation of the maxim, leges vigilantibus non dormientibus factae sunt? Or did they have their own pleasure to proceed at any distance of time? — in other words, is not their equity barred by the statute of limitations?
The plaintiffs' counsel insisted that, as there is an expressed trust by which the defendant Tempe holds the property for the use of the debtor, the scope of the bill is to subject this trust to the payment of debts, and as there was no adverse holding as between the trustee and cestui que trust, the statute of limitations does not apply.
The bill cannot be maintained in this view, for that trust was fraudulent and "not fit to be enforced in any court, either in favor of the party, his creditors, or any one else;" and the equity of the plaintiffs, as creditors, is to follow the property in the hands of the holder, and to convert her into a trustee on the ground of fraud. This principle is so well settled that it is unnecessary to discuss it. Dobson v. Erwin, 1 Dev. and Bat. 569; Gowing v. Rich, 1 Ire. 553; Page v. Goodman, 8 Ire. Eq. 20; Rhem v. Tull, 13 Ire. R. 57. So it is clear that the plaintiffs' equity is to convert the defendant Tempe into a trustee; and the question is, does the statute of limitations apply to a trust of that kind?
All trusts are either by agreement of the parties, as where there is a declaration to that effect, or where a trust is implied or presumed, as a resulting trust, or where one buys land and has the title made to a third person; or against the assent of the party who has the legal title, he being converted into a trustee on the ground of fraud, either express, as in our case, or by construction, as where one takes a title from a trustee with notice, and the very many cases of constructive fraud to be met with in our books. In the former there is no adverse holding, or conflict of claim between the trustee and cestui que trust: the one holds, by agreement, the legal title for the other, who has the estate in equity. In the latter there is an adverse holding, and conflict of claim: the one holds the legal title for himself, or some third person, who has a privity, or is in collusion with him (as in our case) and the other has but a right in equity or chose in action. This distinction is discussed and explained in Thompson v. Thompson, 2 Jones' Rep. 432; Nelson v. Hughes, 2 Jones' Eq. 33, and "needs no further explication."
In Edwards v. The University, 1 Dev. and Bat. Eq. 325, it is settled upon principle, and upon authority of the cases, that the statute of limitations protects one who has the legal title and is sought to be converted into a trustee against his assent. Such is assumed to be settled doctrine in Uzzle v. Wood, 1 Jones' Eq. 227. The Court say, "When a trust is not created by agreement of the parties, but the person having the legal title is converted by a deeree [decree] into a trustee on the ground of fraud, he may insist that his possession was adverse, and protect himself under the statute of limitations." The opinion then shows that the plaintiffs are within the saving in favor of the femes convert. In our case the attempt is to convert the defendant Tempe into a trustee, on the ground of fraud, and why may she not insist that her possession was adverse to the plaintiffs, and protect herself from their right in equity, by the statute of limitations?
The fact that, in our case, the title was transferred from the debtor by a valid conveyance, distinguishes it from Hawkins v. Alston, 4 Ire. Eq. 137, with which, in the argument, it was assumed to be "almost identical," for there the deed of trust was successfully impeached as fraudulent, and is treated by the Court as void against creditors.
This distinction is a complete answer to the argument of the plaintiffs' counsel, and makes Dobson v. Erwin, 4 Dev. and Bat. 201, Foster v. Woodfin, 11 Ire. Rep. 359, Pickett v. Pickett, 3 Dev. Rep. 6, and the other cases cited, inapplicable.
It is true, as established by these cases, that when a debtor makes a fraudulent deed, it cannot avail the donee as against creditors, either in respect to the statute of limitations, or in any other way; because, as against them, it is void and of no effect. Upon the same principle, a parol gift of a slave cannot be used so as to call the statute of limitations into operation; because the gift is void and of no effect. In all these cases the title remains in the donor; but in our case, the deed of trust, being valid, passed the title from the debtor and brings it within the principle of another class of cases where the title has passed out of the debtor, or has never been in him; and it is held that the statute of Elizabeth and the Act of 1812, have no application, and the creditor is left to his redress in Equity, by following the fund, and converting the holder of the legal estate into a trustee. Gowing v. Rich, 1 Ire. 553; Gentry v. Harper, 2 Jones' Eq. 177; Jimmerson v. Duncan, 3 Jones' Rep. 538; in which last case Dobson v. Erwin, 1 Dev. and Bat. Rep. 569, Morris v. Allen, 10 Ire. Rep. 203, are distinguished, on the ground that the sale by the sheriff being successfully impeached for fraud between the debtor and purchaser, it was void, and the legal title still remained in the debtor.
Upon the same distinction, all that was said on the argument, in reference to a supposed analogy to the doctrine by which, at law, a creditor, under certain circumstances, is enabled to reach property in the hands of a fraudulent donee, by the fiction of his being executor de son tort, has no application; for that doctrine only applies where the conveyance is void, as against the creditor, so as to leave the title in the debtor, and upon his death, the fraudulent donee is assumed to be, as against creditors, an intermeddler with the property of the deceased debtor. But if the property is transferred, so that even, as against creditors, the title is out of the debtor, of course, creditors cannot treat it as still being his, by force of any statute, in his life-time, or under the doctrine of executor de son tort, after his death.
The fallacy of the argument consists in not adverting to the distinction above referred to, and in treating our case as if the title still remained in John H. Dawson as against the plaintiff and his other creditors, notwithstanding the deed of trust to Hyman; whereas, the legal effect of that deed was to devest the title.
The plaintiffs' counsel next assumed the position, that the statute of limitations is only allowed to protect one, who is sought to be converted into a trustee, on the ground of constructive fraud, and not one who has been guilty of wilful, intentional and actual fraud, and he refers to cases where a deed has been procured by fraud or undue influence, and to Logan v. Simmons, 3 Ire. Eq. 487, where a wife had executed a deed of gift, on the eve of her marriage, in fraud of the husband's marital rights, and the fraudulent donee was converted into a trustee, and not allowed the protection of the statute of limitations, although he had been in possession for many years.
This position is opposed to principle and to the authorities. The reason why the statute applies to trusts, against the assent of the party, is, that there is an adverse holding and conflict of claim, and the party in possession being exposed to the suit of the other, the latter is required, by the policy of the statute of limitations, to assert his right within a limited time. This reason applies with as much force, when the fraud is wilful and actual, as when it is raised by construction. In Uzzle v. Wood, supra, the fraud was wilful, actual, and deliberately carried out. In Edwards v. The University, supra, the legal title was obtained by gross fraud, i. e., by perjury, of which the defendant had notice; for notice to the agent, is notice to the principal. In short, no case recognises the distinction upon which this position is taken. The cases referred to, in the argument, do not involve the doctrine of trusts, but the conveyances were void on the ground of fraud, and being void, could have no effect upon the principle above referred to, of a parol gift of slaves, or a gift void as to creditors. So, in Logan v. Simmons, the deed of the wife was void, and of no effect against the husband. Blanchard v. McLaughlin, 2 Car. L. Reps. 402, has no bearing on the question. The statute of limitations is not alluded to. The statement is not made in reference to dates, and the death of the administrator took place pending the action. Foscue v. Foscue, 2 Ire. Eq. 321, is not in point. The limitation over, after the life-estate, was void, and the delivery of the negro by John E. Foscue, the executor, to the guardian of Dorcas Foscue, being without consideration, did not pass the title, but merely amounted to a bailment, and the Court hold that the executor and his fraudulent alienee (bailee) were liable.
Tate v. Conner, 2 Dev. Eq. 224, was a bill for the specific performance of a contract, and to convert the assignee of the vendee into a trustee, on the ground of notice. There had been a delay of thirty-four years, which raised a presumption that the plaintiff's equity was satisfied or abandoned, and on this, the decision is put. The opinion has a dictum to this effect: "The statute of limitations does not protect the defendants. The case does not come within it, the relief going on the vendor's being a trustee, in this Court, for the vendee. But equity, itself, respects time, when the trust is not express, because it is difficult to ascertain the truth of old transactions." This dictum proves too much; for the fraud of the purchaser from the vendee, was only constructive on the ground of notice. After full research, no case is found, where it is held that the statute of limitations does not protect the person, holding possession under the legal title, if the conveyance take effect, so as to pass the legal title, and make it necessary to convert the party into a trustee against his assent.
It will be declared to be the opinion of the Court, that the plaintiffs' right, in Equity, is barred by the statute of limitations, and the adverse possession of the defendant Tempe. Bill dismissed.
PER CURIAM. Decree accordingly.