Coble v. Nonemaker , 78 Pa. 501 ( 1875 )

Mr. Justice Woodward

delivered the opinion of the court, October 1875.

Undoubtedly, the most obvious remedy of the plaintiff would have been an action of replevin, in which the question of the right of the defendant to hold the stock of the drug store under his purchase from Eves could have been directly tried. The general rule is settled that an attaching creditor can acquire no claim to property in the hands of a garnishee, other than such as the debtor in a suit against the garnishee could himself assert. The judgment in the court below was entered in pursuance of this general rule. The fact was found by the record that the sale by Eves to None-maker was made for a valuable consideration, without any intention to defraud creditors, and Nonemaker was in possession of the goods in controversy when the attachment was issued against him as garnishee of Eves. Of course, as between the parties to the contract of the 20th of December 1868 the transaction was a final one, and all right of Eves in the property was gone. The inquiry presented here is, whether, by a proper application of the legal rule, the effect of the contract was to extinguish the rights of the plaintiff as well as those of Eves. This is the only subject of discussion, for the exceptions of the defendant on the trial, and urged on the argument, are supported by nothing that appears upon the record.

When Nonemaker bought this stock, he had full knowledge of the mortgage upon it, and of the two accompanying notes, which had been executed in May or June 1868. Indeed, he had drawn up the papers himself. The mortgage was a valid contract, as between the parties to it, although, possession under it not having been taken, it was waste paper as against execution creditors and innocent purchasers. But Nonemaker was not an innocent purchaser. It is true he had paid a valuable consideration, but he had t-he amplest notice of the plaintiff’s equities. The whole transaction was one with which he had been connected from the outset. The drug store had originally belonged to the plaintiff, and had been purchased by Eves for Nonemaker’s benefit. When he bought, therefore, he knew he was paying for property for which his vendor had never paid, and that the former owner was to be left for the recovery of his purchase-money to the hazards of litigation against an absent debtor resident in North Carolina. If the title had remained in Eves until the 1st of April 1871, the property would have been subject to the operation of the plaintiff’s mortgage. Possession could have been taken by him at his discretion, the property sold, and the proceeds applied to the payment of the notes. And this Nonemaker perfectly knew. The original purchase-money had been $4000. Of this sum $2000 had been paid, and the consideration paid to Eves, when the stock was bought, in December 1868, was $2100. This, including interest, was something like the amount the plaintiff had received, and yet it is claimed, on the part of the defence, that the payment of this vested the title to the goods so absolutely in Nonemaker as to destroy every right of the plaintiff to proceed against them as the property of Eves. /

A principle of law is never so applied as to promote or protect a fraud. In the mortgage contract there was nothing illegal, immoral or unfair. As against Eves, all its stipulations could have been enforced. Obtaining a personal judgment on the notes, the plaintiff could have levied on the property. And Eves could, by no voluntary act of his own, relieve it from the lien that rested On it, or evade his personal responsibility for the mortgage-debt. Did the joint act of Eves and Nonemaker shift the lien or destroy the responsibility ? The title was taken by Nonemaker with accurate knowledge of the liabilities to which the goods were subject. That title had been held in trust, to the extent of the unpaid purchase-money, for the plaintiff’s use. When he accepted it, therefore, he took with it the burden the parties had imposed upon it. As to the plaintiff, it was not in the power of Eves to divest himself of such ownership as was requisite to meet the exigencies of the mortgage-contract, and no purchaser could acquire such divested ownership who had not bought in utter ignorance of the mortgage-lien. It follows that the property stood, when this suit was brought, subject to all the equities which bound it before the contract of December 1868 was made. It cannot be questioned that the plaintiff could have maintained this foreign attachment if the effort to transfer the title had not been attempted. He could have waived the right to seize and sell the goods which the mortgage conferred. He could have levied on them under a judgment. It would be a travesty of legal principles to hold'two men competent, by a juggling use of legal forms, to wipe out a third man’s legal rights. In this court these principles have never been so applied. It was held in Moser v. Mayberry, 7 Watts 12, that on the trial of an issue on a scire facias against a garnishee in a foreign attachment, the defendant could not avail himself of the fact that' the goods attached came into his hands by means of a fraudulent arrangement between himself and the debtor. And Sinnickson v. Painter, 8 Casey 884, decided that where a legacy or distributive share is attached in the hands of executors or administrators, evidence is admissible to show that a prior assignment of the legacy or distributive share was fraudulent as against creditors. So far as the plaintiff here was concerned, the contract between the defendant and Eves worked no transmutation of the title to the goods. It left them as they stood when the mortgage was executed — the property of Eves, in the defendant’s hands, subject to the operation of the plaintiff’s lien.

Considered in another aspect, the case seems equally plain. While the title remained in Eves, he held it bound by the trust for the benefit of the plaintiff which the mortgage had created. When the title was passed to the defendant, he, having notice of the plaintiff’s equities, became by operation of law, invested with the character of trustee with precisely the same obligations that the contract expressly imposed on Eves. A trust already in existence, and annexed to the present subject-matter, is created de, novo as against a person who takes by a title derivative from the original trustee: Lewin on Trusts 205. If an estate be passed by trustee to a stranger by conveyance, then the grantee, if he be a volunteer, will be bound by the trust, whether he had notice of it or not; for though he had no actual notice of the equity, yet the court will presume it against him where he paid no consideration: Id. 206; Mansell v. Mansell, 2 P. Wms. 678, 681. But if the grantee bo a purchaser of the estate at its full value, then if he take with notice of the trust, he is bound to the same extent and in the same manner as the person of whom he purchased: Dunbar v. Tredennick, 2 B. & B. 319, for knowing another’s right to the property, he throws away his money voluntarily and of his own free will: Mead v. Lord Orrery, 3 Atk. 328, (236). And the rule applies not only to the case of a trust properly so called, but to purchasers with notice of any equitable encumbrance, as of a covenant or agreement affecting the estate (Daniels v. Davison, 16 Vesey 249), or a lien for purchase-money : Mackreth v. Symmons, 15 Vesey 329. The defendant then held these goods subject to the equities of the plaintiff under the mortgage. The process of foreign attachment was one which could legitimately be employed for the enforcement of those equities. Even if the property had been in the plaintiff’s possession, this remedy could have been applied. A person may attach goods in his own hands belonging to a defendant, or money which he himself owes to a defendant. Sergeant on Attachment, 2 ed. 81, citing 1 Com. Dig. 581; 1 Roll’s Abr. 554; Graighle v. Notnagel, 1 Pet. 245; and Grayson v. Veech, 12 Martin 688. Certainly the fact that the stipulations in the mortgage gave the plaintiff the right to take possession of the property and sell it could not have the effect to confine him to an action of replevin, and debar him from another remedy equally appropriate and equally efficient.

Judgment reversed and procedendo awarded.