Newlin, Fernley & Co. v. McAfee , 64 Ala. 357 ( 1879 )

BRICKELL, C. J.

The bill is not, as was supposed by the chancellor, an original bill in the nature of a bill of review, impeaching for fraud the decree rendered in favor of Mrs. McAfee against her husband. Such a bill would properly be filed only by a party or privy to that decree, and the present complainants certainly sustain no such relation to it. The right and title of the complainants is founded wholly on the agreement into which they entered with Green T. Mc-Afee, on the 6th day of October, 1865, which is, in effect, averred to be an equitable mortgage of the lands therein mentioned, for the security of the debts due the complainants. A foreclosure of the mortgage, and a subjection of the lands to sale for the payment of the debts, is the relief prayed. The decree in favor of Mrs. McAfee is averred as the source of the title adverse to the equity of the complainants, which is set up by the defendants, and it is assailed as fraudulent. A decree may have been obtained by fraud and imposition practiced on the parties; and if they would obtain relief against it, relief may properly be sought by an original bill in the nature of a bill of review. — Story’s Eq. PI. § 409-426. But strangers to it, who are intended to be defrauded by it, may attack it collaterally, either at law, or in equity — Bump on Fraud. Con. 509.

2. The first question arising in the case is, whether the complainants have an equitable lien, or right, or claim, on the lands described in the agreement made by them with Mc-Afee, which a court of equity will enforce. Upon that question, we cannot entertain a doubt, when the agreement is read in the light of the circumstances surrounding the parties at the time it was made. The form of the agreement is not material : operative words of conveyance are not essential to the creation of a charge, or trust, which a court of equity will enforce as a mortgage. It is the intention of the parties to charge particular property, rights of property, or 'credits, with the payment of debts, which the court will regard. When that intention is deducible from their agreement, the court will give effect to it, and the equity created will prevail against all others than innocent purchasers for value. — M. & C. P. R. R. Co. v. Talman, 15 Ala. 473; Coster v. Bank of Georgia, 24 Ala. 37; Donald v. Hewitt, 33 Ala. 534.

3. The relation of debtor and creditor subsisted between the parties when the agreement was executed. The debts having matured during the war, while intercourse between the parties was impossible, interest had accumulated. The results of the war rendered it difficult for McAfee to realize from his property the means of immediate payment. A schedule of his real estate is furnished to the complainants, with a statement of the prices paid for it, and the times of its purchase. The creditors agree to relinquish all interest on their debts which accrued prior to October 1st, 1865, and to grant an indulgence of two years for the payment of their debts. It is agreed that the real estate shall be held by Mc-Afee, “in trust for the creditors signing this agreement”; and whenever it was sold, the proceeds of sale were to be appropriated to the payment of the debts. Each party was stipulating for benefits and advantages; McAfee for the relinquishment of the interest accruing during the war, and an extension of the time of payment; and the complainants, for security. An express stipulation of the agreement is, that the real estate shall be held in trust for the creditors. A trust for the creditors is expressly created, and it has every characteristic of an equitable mortgage. The cases are numerous, and many of them are referred to in Donald v. Hewitt, supra, in which agreements, less strong and explicit in terms, have been declared and enforced as equitable mortgages. “The maxim,” said Lord Loughborough, in Legard v. Hodges (1 Yesey, jr. 478), “I take to be universal, that, whenever persons agree concerning a particular subject, that, in any court of equity, as against the party himself, and any claiming under him voluntarily, or with notice, raises a trust.” So that the complainants stand as equitable mortgagees.

4. The subsequent bankruptcy of the mortgagor did not affect the validity or operation of the mortgage. The bankrupt act contains a saving of all liens, or mortgages, on the property, real or personal, of the bankrupt; and equitable liens or mortgages are as much within its influence, as are legal rights. — Parker v. Muggridge, 2 Story, 334; Fletcher v. Morey, Ib. 555.

5. Under the statutes of exemption existing when the mortgage was made, there was no limitation on the power of the owner of land to alienate it, though it was his homestead, and there was no. homestead right, which he or his wife could set up in opposition to a mortgage or alienation made by him. Whatever may have been the effect of the assignment of a homestead to the mortgagor, in the court of bankruptcy, it cannot displace or divest the lien created in favor of complainants. — Thompson on Homesteads, § 323.

6. The remaining inquiry is, whether the trustee and children of Mrs. McAfee have any right or equity, which can prevail over that of the complainants. The decree, under which they claim, is not evidence against the complainants, except to prove its existence. It has not, as is supposed by the counsel for the appellees, any of the properties, nor can it have the operation, of a decree in rem. — Br. Bank of Montgomery v. Hodges, 12 Ala. 118. It is strictly a decree in personam, binding on parties and privies, and evidence against them only of the facts on which it is “founded, or which are involved in its rendition. As to the complainants, pre-existing creditors, having an equitable lien, the decree is not entitled to any greater operation, or any more weight or influence as evidence, than a conveyance executed by McAfee subsequent to the creation of the lien. There are many facts and circumstances, attending its rendition and its use, which indicate collusion, and an actual intent to defraud the complainants and other creditors of the husband. These can be neu2tralized only by clear evidence that there was a valid trust in favor of Mrs. McAfee, and a just debt due to her from the husband. The burden of proving the trust and the debt rests on the parties claiming under the decree. — Simerson v. Br. Bank Decatur, 12 Ala. 205.

_ 7. The proof is full, that she owned slaves in her own right, the hires or profits of which were taken by her husband, through a period of more than twenty years. It is well settled, that when a wife, having an equitable separate estate, and living with her husband, permits him to receive and use in his own business the rents and profits of such estate, the presumption of a gift to him arises. — Hill on Trustees, Oil; 1 Bish. Mar. Women, § 820 ; Roper v. Roper, 29 Ala. 217; Methodist Church v. Jacques, 3 John. Ch. 77. This presumption prevails, as between husband and wife, and as between their personal representatives. The reason, or, rather, the necessity of it, is very forcibly expressed by Tilg-hman, O. J.: “It is a general principle, that where the wife permits the husband to receive the profits of her separate estate, and particularly where they live together, and the expenses of housekeeping are paid by him, the presumption is, that it was the intention of the wife to make a gift of the profits to the husband. And there is great reason for this presumption; because the husband, being in the receipt of this money, may be induced to live at a greater expense than he would otherwise have done, whereby the comforts of his wife, as well as his own, are increased. To call him to account, therefore, after the lapse of a n’umber of years, might be ruinous, and would certainly be unjust.” — McGlinsey’s appeal, 14 S. & R. 64. The ruinous consequences, and the injustice which would result, this case illustrates. The hires of four slaves, for a period of twenty-four years, with accumulating interest, exceed twenty thousand dollars; for which a decree was rendered. The wife was maintained, the children reared and educated by the husband ; for which, of course, no compensation is, or could legally be, allowed him. A small separate estate of the wife could soon, in this way, consume a large estate of the husband’s, reducing him to insolvency.

The wdfe is entitled to the rents and profits of her equitable estate, and may prevent her husband from receiving them. By her express dissent, or by express agreement with him, she may render him liable to account for them. But, if she does not dissent, nor require an express promise from him to account, the presumption of a gift must prevail. "When a controversy arises between the wife and the creditors of the husband, especially after the lapse of many years, while the husband is engaged in mercantile pursuits, in the course of which credit may have been extended him on the faith of the presumption, the proof to repel it should be clear and convincing. There is no evidence that Mrs. McAfee ever dissented to the hiring of the slaves by her husband, or to his reception of the hires. The evidence is that she assented to it; and while the husband says she sometimes requested him to render her an account of the hires, it is not said that he had previously promised her to account for them. "We cannot declare that Mrs McAfee had any valid claim against her husband for the hire of these slaves.

The legacy of five hundred dollars was the separate property of Mrs. McAfee ; .and for the principal of it the husband was bound to account. What rights Mrs. McAfee, or her trustee, could acquire as judgment creditors, as to this sum, it is not necessary to consider. Notice of the mortgage to the complainants is not denied; and a want of notice would be indispensable to give them any right, which could be preferred to the older equity of the complainants.

The decree of the chancellor must be reversed, and the cause remanded, with directions that a decree be rendered declaring the complainants have a lien on the real estate described. in the bill, and ordering a sale thereof for the payment of the debts mentioned in the agreement of October 6th, 1865. The costs of this appeal, and the costs of the Court of Chancery, must be paid by the respondents who have appeared and answered.