Latham v. . Skinner , 62 N.C. 292 ( 1868 )

The bill was filed by Charles Latham, S. H. McRae and A. M. Lewis, and stated that a sale of certain land therein described had been made by McRae to Lewis, Thomas E. Skinner and Charles W. Skinner, Jr., on 4 May, 1859, and that a deed in fee was accordingly executed (293) and the purchasers gave their notes for the price; that upon 14 June, 1859, the purchasers, to secure the payment of their notes, executed to McRae a trust deed or mortgage, or deed in the nature thereof, conveying and intending to convey to him a lien upon the land sold, which trust deed was upon 25 November, 1859, duly recorded in the Register's office of Washington County.

A copy of that trust deed was appended, and was as follows:

Whereas, on the 4th day of May, A.D. 1859, a bargain and sale were entered into and agreed upon by and between Sherwood H. McRae, of the one part, and Thomas E. Skinner, Charles W. Skinner and A. M. Lewis, of the other part, in regard to a tract of land in the county of Washington, N.C. containing 6,049 acres, more or less, as per boundary, etc., in a deed executed by the said S. H. McRae to the said Skinners and Lewis bearing date of 4 May, 1859, for the consideration therein set forth. And whereas, the said Thomas E. Skinner, Charles W. Skinner and A. M. Lewis have executed to the said S. H. McRae their notes in three installments or payments, with the amount of eight thousand sixty-two dollars and sixty-two and two thirds cents each, the first being due 1 January, 1861, the second on 1 January, 1862, and the third and last on 1 January, 1863; and whereas, it is desirable by the said Skinners and Lewis to secure to the said S. H. McRae the payment of these several recited notes as demanded thereby; therefore witnesseth, that the said Thomas E. Skinner, Charles W. Skinner and A. M. Lewis doth for themselves, their heirs, executors, administrators, etc., a lien and indemnity in and to the said tract of land to that extent, and for the purpose of securing and making effectual the payment of the purchase money, with legal interest, as per contract and notes; and in case of failure of the said Skinners and Lewis and their (294) representatives, to make the said payments as per said notes at or within a reasonable time according as they fall due, then and in that case the said McRae shall have such a lien and to that extent as will save him harmless in securing the said purchase money and no more. In which case this obligation be void. Given under our hands and seals, this 14 June, A.D. 1859. A. M. LEWIS. [Seal.] THOS.E. SKINNER [Seal.] C. W. SKINNER. [Seal.]

The bill then proceeded to state that on the same day that McRae's deed to them was dated, the Skinners and Lewis entered into articles of partnership which recited the purchase and constituted the land a part of the partnership fund; and that this partnership continued until 26 April, 1860, when it was dissolved as to Lewis, and a bond was executed between the former partners which, amongst other things, recited the existence of firm debts and expenses, and engaged the Skinners to indemnify Lewis against them (except as to $500 of expenses, which he agreed to lose), and particularly against the purchase money due to McRae, and bound Lewis, whenever such debts should be discharged, to convey his one-third part in the land to the Skinners. The bill also set forth that two of the notes for the purchase money of the land were still unpaid, and that Lewis was still liable for them.

It then alleged that on 5 September, 1866, the Skinners conveyed all their interest in the land in trust to secure certain individual debts of their own; and that on 4 October, 1866, Thomas E. Skinner made a further conveyance of his interest therein to secure certain individual debts of his own. Also that complainants had applied to the Skinners to pay to Latham (as assignee of McRae), the notes remaining due, or to release their equity of redemption, etc., and comply (295) with the agreement of 26 April, 1860, but without success.

The prayer for relief was that the respective liens upon the lands should be ascertained and declared; that those lands should be sold in satisfaction of such liens, and for further relief; and process was prayed for against the Skinners and the trustees under the deeds of September and October, 1866.

The opinion of the court renders it unnecessary to state the contents of the answer. The general scope of the bill is to subject the land set out in the pleadings to the payment of the notes given to the plaintiff McRae by the defendants Thomas and Charles Skinner, (297) and the plaintiff Lewis, on the ground that the instrument executed to McRae by Thomas and Charles Skinner and Lewis, dated 14 June, 1859, is a mortgage or "an instrument in the nature of a mortgage," and has the legal effect of creating a lien on the land for the payment of the debt secured by the notes. The bill, in the second place, alleges the existence of a copartnership between Thomas and Charles Skinner and Lewis in respect to the land, that the debt was a copartnership debt, and seeks to set up an equity to have it paid by the land, under and by force of the equity of Lewis as one of the partners in reference to the individual debts due by the defendants Thomas and Charles Skinner to the other defendants. The difficulty in the case grows out of the nondescript character of the instrument, dated 14 June, 1859. It is not a mortgage, or "an instrument in the nature of a mortgage," that is, as understood in the books, a conveyance to a third person in trust to secure a debt, nor can it in any way have the legal effect to create a lien. The most that it can amount to is a promise that McRae shall have a lien on this land to secure his debt. When the legal estate is transferred, the party passing it may create a use by simple declaration, or he may reserve a power to create a use afterwards by a declaration, or he may give to a third person a power to declare the uses. But if the legal estate is not transferred a use can only be created by a bargain based on a valuable consideration, which is said to raise the use, or by covenant to stand seized, based on a good consideration, to wit, natural affection. This is familiar learning. See Sanders on "Uses and Trusts."

The same principle applies to trusts, to wit, uses not coming within the operation of the Stat. 27, Hen. VIII. For this reason it is (298) held that a power of appointment, or a power of sale, can not be created by deed of bargain and sale, or a covenant to stand seized. These powers are, in effect, a mere delegation, to a third person of the right to raise a use or trust by declaration, and the party can not himself create a use of trust by mere declaration, unless he transfers the legal estate. This doctrine is discussed and explained in Smith v.Smith, 46 N.C. 135.

The instrument, under discussion does not transfer the legal title. A lien is a trust, consequently a lien can not be created by a mere declaration, unless the legal estate be transferred. So this instrument can not have the effect of creating a lien or trust, although, it would seem to have been the intention of the parties to do so. It is naked declaration of a trust, and the bill, so far as it seeks to enforce a subsisting lien, must fail — for under the most benignant application of the rule, "utres magis valent quam pereat," the instrument can not be allowed to have the effect of creating a trust without a violation of the settled principles of equity jurisdiction.

The point taken on the argument, that although the vendor's lien for the purchase money has not been adopted by our courts, yet that has reference to an implied lien, and does not exclude an express lien — is not presented by the facts; for the deed of McRae is an absolute one, and does not contain a declaration of any trust in favor of the grantor to secure the purchase money, which we suppose might have been done, and might have amounted to an express lien. But it is useless to speculate on the matter, as there is no such trust declared, and no express reservation of a lien.

But it is said, suppose the instrument does not create a lien, it may, under the doctrine of specific performance, be carried into effect as anagreement to give a lien. There are two objections to this position; in the first place the bill is not farmed with that view. It does (299) not allege the instrument to be an agreement to give a lien, and the court must confine itself to the allegation in the pleadings — otherwise we are "at sea." But, suppose this difficulty out of the way, a Court of Equity never interferes to compel the specific performance of an agreement unless it be supported by a valuable consideration. Here there is no consideration; it is nudum pactum, for McRae had executed title to the land and accepted the notes of the purchasers. The debt therefore was a matter personal, and although it originated as the price of the land, it was no longer connected with it, and stood on the same footing with any other debt. Miller v. Miller, ante, 85. In other words, the consideration was past. There is no new consideration alleged, no abatement of the debt, no extension of the time of payment. And the instrument seems to have been executed simply because, to use the language of the parties, "whereas it is desirable by the said Skinner and Lewis to secure to the said McRae the payment of the several notes," etc.

On the footing of the copartnership entered into by Thomas and Charles Skinner and Lewis in respect to the purchase of this land, whereby the debt become a copartnership debt, the plaintiff McRae might have worked out an equity, through the plaintiff Lewis, to have this debt satisfied by the land as a partnership fund, in preference to the individual creditors of the parties, but for the fact that by the deed of 26 April, 1860, the copartnership dissolved and Lewis withdrew from the firm, assigned all the partnership fund over to Charles Skinner and Thomas Skinner, and agreed to submit to a loss of $500 in consideration of their covenant to indemnify him against the debts and liabilities of the firm, and to secure the performance of this covenant reserved to himself his "individual share of one-third of the tractof land." With this security he was content, and it at liberty to (300) make the most of it. Potts v. Blackwell, 56 N.C. 449; S. c.,57 N.C. 58. By a bill properly framed he may enforce the specific performance of this covenant for indemnity, and may obtain a decree that Thomas and Charles Skinner pay off and satisfy the debts of the firm, and that his individual one-third of the land shall be applied to that purpose; but beyond this one-third the decree will be merely personal against Thomas and Charles Skinner, and can not be made to attach to the other two-thirds; for he has given over these two-thirds to Thomas and Charles Skinner, relying on their personal obligations, and on his individual one-third of the land as a security; of course, therefore, they were left at liberty to dispose of the two-thirds, and could dispose of them either to pay of the liabilities of the late firm, or to pay their individual debts, as they should see proper. In other words Lewis retained no right to control the disposition of these two-thirds, and the consideration moving him to this arrangement was the personal understanding of Charles and Thomas Skinner to save him harmless from the debts of the firm.

PER CURIAM. Bill dismissed with costs.

Cited: Blevins v. Barker, 75 N.C. 437.

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