Griffith v. Frederick County Bank

Stephen, J.

delivered the opinion of the court.

The complainant in this cause seeks the aid of this court in two distinct characters; — as a creditor of Ephraim and John Etchison, and also as a purchaser of a part of the tract or parcel of land called the “ Great Meadows.” In both these capacities, he seeks to affect property, which had been conveyed by his debtors, and which had been decreed to be sold for the purpose of satisfying the objects of such conveyance. His bill is a bill both for discovery and relief. In the first place, we think it clear beyond a shadow of doubt, that the complainant is entitled to no relief against Stewart, Warfield, and Gaither, whom he attempts to charge as executors in their own wrong of Ephraim Etchison. The allegations of his bill, as to any improper intermeddling by them with the personal estate of said Etchison, being wholly unsustained by proof. Gaither was a creditor of Etchison by judgment, regularly and legally obtained in Montgomery county court; to satisfy that judgment, he issued an execution, and placed it in the hands of the sheriff of the county, by whom the property of the defendant was sold to satisfy the debt due upon it. In the whole of this proceeding, there is not a scintilla of proof of any improper or illegal interference, by either Warfield, Stewart, or Gaither. The complainant in his bill then prays, “ that in case the said Mahlon Chandler, and Joshua Pearce, and Hannah his wife, have good title to the aforesaid land called “ Great Meadows,” a specific execution of said agreement, and payment of the balance of the purchase money may be decreed to them; and in case of a failure of title, then that the aforesaid agreement may be rescinded, and the said Chandler, Pearce and wife, may be decreed to bring into court the moneys received by them, to be applied to the payment of the debts due from said John, and Ephraim, deceased.” We think the court below were also correct, in refusing the relief so prayed, because the complainant, under the circumstances of the case, and according to the clearest principles of equity and justice, was not entitled to it. On the sixteenth day of June, 1829, John and Ephraim Etchison being about to obtain a loan of four thousand dollars from the Frederick County Bank, solicited Joshua Stewart and Charles D. Warfield to become their endorsers, to enable them to effect said loan. To induce them to do so, they executed to them on that day a deed of indemnity, by which the tract of land called the “ Great Meadows,” together with other property, was conveyed with a power of sale in case the note endorsed by them and discounted by said bank should not be paid, when payment thereof should be demanded. This deed vested in Stewart and Warfield all the interest, estate and title of Ephraim and John Etchison, to the property thereby conveyed, until it had performed its office of indemnifying them against loss, in consequence of the responsibility incurred by them by reason of their said endorsement. It was a deed founded upon a good consideration, and could not be impeached, invalidated or set aside at the instance of a creditor, whose pretensions could only be considered equally meritorious. That such a deed is founded upon a good and valid consideration, see 2 Johns. 306, where Chancellor Kent says— “ indemnity is a good consideration within the statute of frauds. ” See, also, to the same effect, 3 Cranch, 73, where the chief justice says, — “The deed is made to save Hooe harmless, on account of his having become the security of Fitzgerald to the United States, and on account of notes to be endorsed by Hooe for the accommodation of Fitzgerald in the Bank of Alexandria.” These are purposes for which it is supposed this deed of trust could not lawfully have been executed; and the deed has been pronounced fraudulent under the statute of I3i/i of Elizabeth. That statute contains a proviso, that it shall not extend to conveyances made upon good consideration and bona fide. The goodness of the consideration in the case at bar has been admitted. “ This deed of indemnity being then founded upon a good and valuable consideration, it would have been repugnant to every principle of justice and equity, to lake from tbo grantees the security thereby afforded to them; and it is quite clear, that in no other way and upon no other terms, could the contract have been rescinded as prayed for by the complainant in his bill.” In such cases the parties must be restored to their former rights, and placed In the same situation in which they stood anterior to the contract. Whenever a court of Equity is prevailed upon to set aside an agreement, it will be on refunding what has been bona fide paid, and making allowances for improvements. 2 Powell on Con. 143. It is true, the prayer of the bill does not absolutely ask for a rescinding of the contract, but is in the alternative, that in case Chandler, Pearce and wife, have good title to the said land, a specific execution of said agreement, and payment of the balance of the purchase money may be decreed to them. It is necessary to consider what was the capacity in which the complainant stood before the court in order to ascertain his right or title to call upon it to administer to him this relief. He states himself in his bill to be a creditor of the Etchisons, and a purchaser from them of a part of the land conveyed by them to Warfield and Stewart, called the Great Meadows.” As a creditor at large, and before judgment, and before he has a certain claim upon the property of his debtor, has he a right to call for a specific execution of the contract in his behalf? We think he has not. A leading case on this subject, and which is frequently referred to for the principle decided by it, and particularly by Chancellor Kent, in 2 John. C. R. 145, is to be found in 1 Vernon, 399 — the case of Angelí vs. Draper. In that case the bill stated, that the plaintiff had obtained judgment against I. S. for £100, and that the defendant upon pretence of a debt due to himself, and to prevent the plaintiff’s having the benefit of his judgment, had got goods of I. S, of great value into his hands, sufficient to satisfy his debt with a great overplus, and prayed an account and discovery of these goods. The defendant demurred, because the plaintiff had not alleged that he had sued out execution, and had actually taken out fieri facias; for until he had so done the goods were not bound by the judgment, nor the plaintiff entitled to a discovery or account thereof. Per. Cur. Allow the demurrer. The plaintiff ought actually to have sued out execution before he had brought his bill. This case establishes the principle, that the creditor, until he has established a certain claim or lien upon his debtor’s property, has no right to call for an account and discovery of such property, in the hands of a stranger or third person. If he has not, it is conceived that the same principle forbids his interference with the disposition of his debtor’s property, and disables him from calling for a specific execution of the contract in this case, upon the ground merely that he is a creditor, and may ultimately have a claim upon it for the satisfaction of his debt. In 2 Johns. 144, 145, the same doctrine is sanctioned and established by Chancellor Kent, where he delivered the following opinion, which, as it is short, and strongly impressive of his views and sentiments upon the subject, we shall give at length; he says — “ This is a case of a creditor on simple contract, after an action commenced at law and before judgment, seeking to control the disposition of the property of his debtor under judgments and executions upon the ground of fraud. My first impression was in favour of the plaintiffs; but upon examination of the cases I am satisfied, that a creditor at large, and before judgment and execution, cannot be entitled to the interference which has been granted in this case. In Angell vs. Draper, 1 Vern. 399, and Shirely vs. Watts, 3 Atk. 200, it was held that the creditor must have completed his title at law, by judgment and execution, before he can question the disposition of the debtor’s property ; and in Bennet vs. Musgrave, 2 Ves. 51, and in the case before Lord Nottingham, cited in Balch vs. Wastall, 1 P. Wms. 445, the same doctrine was declared, and so it is understood by the elementary writers. Mitford, 115; Cooper’s Eq. Pl. 149. The reason of the rule seems to be, that until the creditor has established his title, he has no right to interfere; and it would lead to an unnecessary, and perhaps a fruitless and oppressive interruption of the exercise of the debtor’s rights. Unless he has a certain claim upon the property of the debtor, he has no concern with his frauds. On the strength of settled authorities, I shall accordingly grant the motion for dissolving the injunction.” The object of the bill in this case was to obtain relief against judgments charged to have been voluntary, and without consideration ; and also fraudulently confessed by the debtors with intent to defraud and injure the plaintiffs. The chancellor thought that a creditor at large was not entitled to the aid of a court of Equity, for the reasons stated in his opinion; and the reasons given for that opinion would seem equally to exclude the right of such a creditor to call for a rescinding or specific execution of a contract of his debtor for the purchase of land, simply upon the ground of the relation of debtor and creditor alone. But the complainant alleges that he contracted to purchase from the Etch-isons a part of the land called the “ Great JWeadows,” and many consider himself entitled to call for a specific execution of the contract upon that ground. In In the first place, it is to be observed that this court, in decreeing a specific execution of agreements, exercises a discretion, not an arbitrary one, but a sound judicial discretion, regulated by fixed and established rules; and therefore says — 2 Powell on Con. 221: “ no rule is better established than that every agreement to merit the interposition of a court of Equity in its favour, must be fair, just, reasonable, bona fide, certain in all its parts, mutual, useful, made upon a good or valuable consideration, not merely voluntary ; consistent with the general policy of a well regulated society, and free from fraud, circumvention, or surprise; or at least such an agreement must, in its effect, unlimately tend to produce a just end.” If any of these ingredients are wanting, or that object be not in view, courts of Equity will not decree a specific performance. A written agreement to be valid within the statute of frauds and perjuries, must contain the terms of the contract, and particularly the price to be paid. 1 Powell on Con. 290, 291. Otherwise, says Powell, all the dangers of perjury which the statute was meant to provide against would be let in to ascertain the agreement; — so in 1 John. 279, Chancellor Kent says : “ The memorandum appears to be utterly defective. It ought to have stated the terms of the contract, with reasonable certainty, so that the substance of it could be made to appear, and be understood from the writing itself, without having recourse to parol proof. This is the meaning of the statute, and without which, the beneficial ends of it would be entirely defeated.” So Ib. 280. He says : “ the omission to mention the price in a letter acknowledging the contract to sell, was held by Ld. Plardwicke in Clerk vs. Wright, 1 Atk. 12, to be a fatal omission, rendering the written evidence of the contract too defective to take it out of the statute.” In the contract of the complainant, the price to be paid for the property purchased is not mentioned. As to that part of the contract, the parties stipulate in the following terms : “ and in case we cannot agree on the price for the same, we do agree to leave the same to two disinterested men to fix between us.” This contract was ,inade in 1818. By the terms of the contract the price was to be paid in the year following. No price for the property has ever yet been fixed, either by the parties themselves, or by arbitrators appointed for that purpose; so that if. lapse of time would not prevent a decree for specific performance, the complainant does not present a case which would enable a court of Chancery to decree a performance in specie. The parties have reserved to themselves the right of fixing the price in the first instance ; there is nothing to shew that any effort or attempt has been made to ascertain it; how then could a court of Equity decree a performance in specie in such a case, if applied to for such a purpose ? It could only be done by assuming the power of fixing the price, a privilege which they have reserved to themselves by the express terms of their agreement. Whether such a contract, leaving the price to future adjustment, would be good within the statute of frauds, we do not mean to determine. We are aware that where the price by the writien agreement has been referred to arbitrators who have failed or refused to act, the court of Chancery has, under certain circumstances of hardship, assumed to itself the power of fixing the price which should be paid; but no adjudication has been found where the court has gone the length of administering relief, in the form of a specific performance, in a case in all respects analagous to the present. In Jer. on Eq. Jur. 442, we find the following principle stated,— "where upon a contract for the sale of property the price is not fixed, but is left to be determined by certain competent persons, this court will not force them to a decision, and will not undertake to perform the duty entrusted to them; so that if they do not fix thereon, the price being an essential part of the contract, the agreement must fail, unless under certain circumstances there has, notwithstanding the defect, been an acquiescence under it, or such a part performance that it would be inequitable not to enforce its execution. In such a ease then, this court will ascertain what is the fair value.” if then the price to be paid by the complainant for the land which he agreed to purchase, has not been ascertained, either by the parties or by arbitrators, and no steps have been taken by the complainant to perfect the agreement in that particular, or reduce it to certainty, he is clearly, at present, not in a situation to call for the specific execution of that agreement, and consequently, had not a right to ask the assistance of the court to cause the agreement between Chandler, Pearce and wife, and the Elchisons, to be specifically performed, because he was a purchaser under them, if his contract is a good and valid one, his interest under it cannot be bound or affected by the decree in favour of Stewart and Warfield, because he was no party to such decree; and he may hereafter resort to Chancery for relief, if the nature and circumstances of his case should require it, and he can prove himself, in ail other respeets, entitled to ask it; care should be taken to make proper and necessary parties to the suit, because “ the court many times, upon hearing, will not, for want of them, proceed to a decree; or if it does, the decree may be reversed ; or if it be not reversed, yet none but the parties to the suit and those claiming under them, are bound by it.” Wyatt's Chan. 299. To the same effect is 1 Sch. and Lef. Rep. 386, where it is said, “ a decree obtained without making parties, those whose rights are affected thereby, is fraudulent and void as to those parties.” The bill, for the purpose of vacating the decree, charges actual fraud in the obtaining of it; but we have perceived no proof to support that allegation. It appears, indeed, that John Etchison, the defendant, was a man of intemperate habits, but there is no evidence that advantage was taken of his indiscretion, or that he was improperly practised upon in obtaining the decree. The bill prays that a decree may be passed for the payment of the complainant’s claim. This could only be done by subjecting to the payment of it the property included and embraced in the deed of trust from the Etchisons to Stewart and Warfield; or by making liable therefor any other property which they might have, exclusive of that so conveyed. Had the complainant a right to call upon the court to decree a sale of the property embraced in the deed of trust for that purpose? We think that under the circumstances of the case he had not. The complainant in this ease, if a creditor at all, (and whether he will ultimately be such, depends upon a contingency) was a creditor at large; he had, at the time of filing his bill, instituted no suit at law to recover his claim ; he had issued no legal process for that purpose; but he has chosen to resort to Chancery in the first instance. Had he a right to do so ? — we think he had not. The property embraced in the deed to Stewart and Warfield was conveyed to them for their indemnity. The deed executed for that purpose was founded upon a valuable consideration. The debtors of the complainants had no interest in the property, except an equitable interest, or resulting trust, at the time the bill was filed. The complainant had no right to subject that property to the payment of his debt, until the purposes of the deed of trust were fulfilled; and if he wished to make it responsible for the satisfaction of his claim, he should have filed his bill to redeem ; which, as a creditor, he would have been entitled to do, after having previously taken the necessary legal steps to clothe himself with that power. To entitle himself to redeem the real and personal property conveyed by the deed, he should have obtained his judgment and issued his execution at law. In 4 Johns. C. R. 692, Chancellor Kent says, — It may be laid down as a rule of equity, that an execution creditor at law lias a right to come here and redeem an incumbrance upon a chattel interest, in like manner as a judgment creditor at ¡aw is entitled to redeem an incumbrance upon the real estate; and the party so redeeming, will be entitled in either ease, to a preference, according to his legal priority.” So in 1 Pow. on Mort. 261, 262, it is said, — “ The ground for redemption seems to be the having an interest in, or lien upon tbe land. He that has such interest or lien may redeem ; he that has none cannot.” “ But an equitable lien will entitle the encumbrancer to a redemption.” So Id. 281, it is said to entitle a creditor to redeem, his debt must be such as creates a lien on the land.” In 4 John. Ch. R. 622, it is said, that “ a creditor, to entitle himself to the aid of this court in the recovery of his debt, must show that he has prosecuted his debtor at law, to judgment and execution, so as to have gained a legal lien and preference, at the time of filing the bill, or at least before issue joined in this court.” To obtain relief in equity, the principle seems to be well settled, that the creditor must first proceed at law to the extent necessary to give him a lien upon the particular fund sought to be aifected. In 4 Johns. Ch. R. 677, Chancellor Kent says, — “ That the rule has been long and uniformly established, that ‘ to procure relief in equity by a hill brought to assist the execution of a judgment at law. the creditor must show that he has proceeded at law to the extent necessary to give him a complete title.’ ” If he seeks aid as to real estate, he must show a judgment creating a lien upon such estate; if he seeks aid in respect to personal estate, he must show an execution giving him a legal preference or lien upon the chattels. In referring to those decisions, and the principles therein contained, we wish it to be distinctly understood that they are relied on solely for the purpose of shewing that the complainant in this case had not such an interest in, or claim upon his debtor’s property, as to entitle him either to redeem that which had been conveyed by them as an indemnity, or to call for a specific execution of the contract of purchase made by them. We do not intend in the slightest degree to impugn or interfere with the principles contained in the case of Birely vs. Staley, 5 Gill and Johns, 432. If the complainant is not in a situation to ask the aid of the court in relation to the property embraced in the deed of trust, is he entitled to a decree for the sale of any real estate which might have descended to the heirs at law of Ephraim Etchison, and which was not embraced in said deed ? The complainant, in his bill, “ charges that the said Ephraim Etchison, in his life-time, and at the time of his death, was seized and possessed of, and entitled to real and personal estate in said county of great value ; part whereof was held by him in severalty, and other part in common with the said John.” The bill further charges, “ that the said Joshua and Charles have, by their fraudulent artifices, prevented the granting of letters of administration on the estate of the said Ephraim, deceased; at one time they persuaded the said John Etchison to claim the said personal estate as partnership property. And when this pretext failed them, they conspired together with a certain Ephraim Gaither, of Montgomery county, and under colour of a writ of execution, sued out of Montgomery county court, at the instance of the said Ephraim Gaither, seized upon all the aforesaid personal estate of the said Ephraim, deceased, and sold the same to divers persons, at prices very far below its value. Your orator is advised that said proceedings were fraudulent, irregular and void, and that the said Joshua, Charles and Ephraim, as executors in their own wrong, are accountable for the reasonable value of said personal estate to your orator, and the other creditors of said Ephraim deceased.” The act of 1785, ch. 72, provides, —“ That if any person hath died, or shall hereafter die, without leaving personal estate sufficient to discharge the debts by him or her due, and shall leave real estate which descends to a minor, &c.,” the Chancellor shall have full power and authority, upon application of any creditor of such deceased person, to order the whole, or part of the real estate to be sold for the payment of debts. In the construction of this act of assembly, this court have said in 4 Gill and Johns. 302, — “ if personal assets come to the hands of the executor or administrator, sufficient to pay all the debts of the deceased, the creditor must look to that fund for the payment of his debts; and if those assets are wasted, his remedy is on the official bond of the executor or administrator. The real estate of the debtor is protected, unless the personal assets are insufficient; and to authorize the Chancellor to pass a decree to sell the real estate to pay the debts of the deceased, the bill must allege an insufficiency of personal assets for that purpose, and must sustain that allegation by proof, or the admission of the opposite party. We cannot, therefore, sustain this decree under the act of 1785, because the bill does not allege an insufficiency of personal assets to pay the debts; and if alleged, the complainants by their own showing, disprove the allegation.” The bill in this case does not charge that Ephraim Etchison died without leaving personal estate sufficient to discharge his debts; on the contrary, it says that — “ at the time of his death, he was seized and possessed of, and entitled to real and personal estate in said county, of great value, part whereof was held by him in severalty, and other part in common with the said John. The personal estate, therefore, might have been sufficient for that purpose, if the proper steps had been taken. The Chancellor has no jurisdiction under the act of 1785, ch. 72, to deeree a sale of the real estate except upon the condition therein mentioned ; and this court have said, that the exercise of such jurisdiction must be warranted both by the pleadings and the proof, or the decree cannot be sustained. Nor do we think that the claim of the complainant to the aid of the court, can be sustained by the act of Assembly, 1795, ch. 88, because that act provides that the Chancellor shall have power and authority “ to decree the sale of any equitable title or claim to land in any case in which he might on application decree the sale of a legal complete title.” That act, therefore, only gives the Chancellor a right to decree a sale of the equitable estate on the same terms and conditions, as it invests him with power to decree a sale of the legal estate; which, as we have already observed, is only where it is alleged and proved, that the personal estate left by the deceased was insufficient for the payment of his debts. But in this case, according to the complainant’s own showing in his bill, it may ultimately turn out, that he will have no rights as a creditor of the Etchisons ; on the contrary, it may be that he will finally become their debtor; because it appears by the terms of this contract, as stated by himself, that the price of the land, when ascertained, is to be deducted from the debt due to him; and as neither the price nor the quantity of the land have been ascertained, non constat, whether he will ultimately be a creditor to any amount, when the contract in these particulars shall be fully consummated; for it may be that the price of the land purchased, when ascertained, will absorb the whole of his present demand, and thereby deprive him of any standing in court as a creditor. But the Chancellor erred in dismissing the complainant’s bill absolutely, when the dismissal should have been without prejudice, to any future proceeding he may think proper to institute.

The decree, for this reason, must be reversed, but the appellant will be decreed to pay the appellees the costs incurred by them in this court, and in the court of Chancery.

decree reversed accordingly.