Forbes v. Bowman ( 1911 )

The trust deed executed by W.A. Bowman and the Sumter Banking and Mercantile Company to R.I. Manning and others as trustees for creditors could hardly have been made more complex and difficult to understand. Careful consideration leads me to the conclusion that no moral fraud or wrongdoing was contemplated, but I concur in the conclusions reached by Mr. Justice Gary (1) that the debtors were insolvent when the deed was executed, (2) that the intention was to convey the entire property of W.A. Bowman as well as that of the Sumter Banking and Mercantile Company, (3) that the deed contemplated the payment of the creditors mentioned in the deed to the exclusion of other creditors, and (4) that it provided for the return of the surplus of the property to the debtors instead of its application to the claims of other creditors not mentioned in the deed. Under this state of facts it inevitably follows as a conclusion of law that the deed was voidable at the instance of creditors not provided for because obnoxious both to the assignment act and to the statute of Elizabeth. Jacot v.Corbett, Cheves' Equity 71; Stuart v. Kerrison, 3 S.C. 266;Claflin v. Iseman, 23 S.C. 416.

In reaching this conclusion notice should be taken of the following provision appearing in the deed as the twenty-fourth clause: "That the trustees shall apply the proceeds of sale and collections from the individual property of W. A. Bowman, only, to the payment of the individual debts and obligations of the said W.A. Bowman, including his endorsements and guaranties." If this stood alone it could well be construed as providing for a ratable distribution to all the creditors of W.A. Bowman, but this construction would be inconsistent with and entirely defeat the thirteenth clause which provides that after the creditors specially mentioned in the deed have been paid, the surplus shall be paid over to the debtors. If the two clauses are to be construed together and both given effect then "the individual debts and obligations of the said W.A. Bowman" mentioned in the latter clause must be held to refer only to those debts and obligations mentioned in the thirteenth clause. If the two clauses are to be regarded absolutely irreconcilable then that which appears first in the deed and provides that the debtors and not the creditors shall receive the surplus in the hands of the trustees must be given effect in preference to that which is afterwards written. It is, however, but just to the parties interested to say that they made an offer to the plaintiff that he should come in and have the benefit of the terms of the deed as if the twenty-fourth clause of the deed stood alone, unlimited by the thirteenth clause; and the Circuit Judge held that he could yet come in and receive all the benefits of the deed of trust. There was no exception to this finding.

Notwithstanding the conclusion that the deed was voidable under the statute of Elizabeth and the assignment statute, it seems to me clear that the plaintiff is estopped from attacking the transaction. The suit is at the instance of the plaintiff alone and for his benefit alone. He does not sue for himself and other creditors, and if there be other creditors of W.A. Bowman, the record does not disclose that any of them have complained or sought to set aside the deed. Therefore if the plaintiff has taken action which makes it inequitable that he should be heard to attack the deed the case is at an end.

On the subject of estoppel the Circuit Judge said in his decree: "I have not considered the circumstance that the plaintiff, as president of a corporation, signed the deed of trust for his corporation as one of the principal creditors. I do not think it necessary to decide upon the legal effect of such an act; but its moral force is of consequence when a chancellor comes to ask himself in the consideration of a cause whether a wrong has been done." This language, it is true, does not indicate very clearly the extent to which estoppel entered into the conclusion of the Court, but it does indicate very clearly that it was taken into consideration. This being so, when respondents' counsel relied on estoppel in this Court they were not introducing into the case a new ground not relied on by the Circuit Judge. It was not necessary, therefore, for respondents' counsel to give the notice required by rule five that they would rely upon estoppel as an additional ground in support of the Circuit decree. At the least, the applicability of the rule is extremely doubtful; and when that is so, it should not be applied so as to exclude an issue of vital importance to a just decision on the merits of the case.

The execution of the trust agreement and conveyance on the part of the Richmond Guano Company was by the hand of the plaintiff as its vice president. An officer of a corporation is not estopped as an individual by signing a deed for the corporation under the direction of the board of directors or superior officers of the corporation. The just rule, however, and that which is supported by the current of later judicial expression is that estoppel arises against one as an individual when he, as an officer of a corporation or in any representative capacity, voluntarily participates in the making of a deed or other transaction on behalf of the corporation, and the other parties to the transaction incur expense or are put at a disadvantage by acting under the agreement in reliance upon his approval and participation. This is the principle on which the following cases were decided. In Hancock v.Caskey, 8 S.C. 282, it was held that when lands were sold under a decree for partition, without reservation of the growing crops, a guardian ad litem of the infant defendants was estopped from claiming such crops as his property. InMortgage Co. v. Walker (Ga.), 46 S.E. 426, the act of the plaintiff in signing a deed as agent was held to estop him from asserting title in himself. The Court said: "The deed may have been the act of Mrs. Walker, but the recitals of fact and the representations bound the conscience of the agent, and estopped him from using any right or title outstanding in himself." In Bank v. Bank (N.C.),50 S.E. 848, one C. was the president of a corporation which had conveyed the property in dispute. The Court said: "True, this was a conveyance by the corporation, and therefore is not an estoppel against C. as an individual. But he signed the deed for the company as its president, and this covenant that the property is free from incumbrances amounts to a representation by him that this is true."

In Wells v. Steckelberg (Neb.), 66 Am. State Rep. 529, it was held that if one assumes in a representative capacity to sell and convey to another the entire estate in land, he is estopped from setting up an estate therein in his own right against the purchaser. In Schnable v. McNeill (Texas), 110 S.W. 558, an administrator conveying under order of the Court property in which he as an individual owned a life interest was held to pass his own interest by estoppel. In Tomlinson v. Drought (Tex.), 127 S.W. 262, it was held that where executors conveyed property under a trust deed as belonging to the estate, they were estopped from claiming that any part of it belonged to them personally. In Brock v. Rogers (Mass.), 69 N.E. 334, one who by leave of Court had sold as guardian land standing in the name of his ward was not allowed to set up an adverse title in the land in himself. See also 11 A. E. Ency. 397 and 16 Cyc. 712.

There is a presumption that an officer who signs a deed on behalf of a corporation participated in the negotiations which led up to it, and approved its execution. If the plaintiff was compelled by his superiors to sign the deed or if he, as an individual, intended to attack it, good faith required him to speak before he participated in it, and before the defendants had acted under it and incurred the expenses necessarily incident to the execution of the trust. The record affords no explanation of the plaintiff's course in participating in the trust agreement on behalf of a corporation in which he was interested, and afterwards attacking the agreement as illegal and fraudulent when the defendants had incurred expense in carrying it out. Under the facts here appearing it seems to me that the plaintiff is estopped from alleging against the validity of the trust deed and agreement.

The judgment of the Circuit Court stands affirmed by reason of an equal division of this Court.

MR. JUSTICE HYDRICK concurs.

February 1, 1911.