Ragan v. Gray

Mr. Justice Handy

delivered the opinion of the court.

The appellant filed his bill in the superior court of chancery, to set aside a sale made under a deed in trust in which he was interested; and the decree being against him, he has brought the case here for revision. The merits of the case will appear from the following statement of the material facts in it.

In November, 1836, Nicholas Gray purchased of John A. Gibson, a plantation and slaves in Hinds county, for the sum of $122,000, of which he paid $20,000 on the 1st of January, 1837, when possession of the property was delivered, and for the residue, executed five promissory notes, each for the sum of $20,400, payable respectively on the 1st of January, 1838,1839, 1840,1841, and 1842, and to secure these four last notes, gave a deed in trust on the property to John I. Guión and Nathan Bryant, trustees, empowering them or either of them, in default of payment of - any one of the notes, to sell to the highest bidder at public action for cash, upon thirty days’ notice, the property, or so much of it as would be necessary to satisfy the amount due. Gibson indorsed the notes due in January, 1839, 1840, and 1841, to Bryant for value, who afterwards indorsed them to the defendant Barrow, and Gibson also transferred the note due in 1842 to Herring, the complainant’s intestate. Gray failed to pay the note due in January, 1839, and on the 8th of January, 1839, the trustees advertised the property for sale for its payment, to take place on the 9th of February following, and on that day the sale was made of the whole property by Bryant, the other trustee not being present, and Barrow became the purchaser, for the sum of $20,400, the amount then due him, and received a deed from the trustee. This was done under-an arrangement made on the day of sale by Barrow and Gray, with the consent and advice of Gibson and Bryant, that the two other notes of Gray due 1st of January, 1840, and 1841, .should be delivered up to him and satisfied, which was accordingly done.

The bill charges, that this arrangement was fraudulent and .the sale void as to the complainant; that the agreement was, that Gray should permit Barrow to purchase the property below its value, and to that end that the biddings were to be suppressed, and that this agreement was carried out, and by the .suppression of the biddings many persons, who were present at the sale and desirous of purchasing the property, or parts of it, were induced not to bid; in consequence of which the property was sold greatly below its market value. The object of the bill is to have the sale set aside ■ and a resale made, and the proceeds thereof applied to the complainant’s claim; also, an account of the rents, hire, and profits of the property to the complainant’s benefit.

The answers of Gray and Barrow admit the arrangement in regard to the sale as above stated, but. deny that there was any agreement that the biddings were to be suppressed. They state that the reason for making this arrangement was, that Gray was about to take legal steps to enjoin the trustee’s sale on the ground of defective title to the property in Gibson and fraud practised by Gibson in the sale. Barrow states that, being the holder of the three notes entitled to priority of payment, amounting to greatly more than what the property would sell for, and Gray, Gibson, and Bryant, being insolvent, and being his only resource for the payment of his debt besides the trust property, he entered into the arrangement and agreed to give up all three of his notes, fearing that if Gray enjoined the sale, the contract might be rescinded and his entire debt lost. Barrow states that Gibson was a party to the arrangement and active in effecting it and was present at the sale, and that he had no knowledge that Gibson had transferred the note to Herring. He denies that the complainant has any title to it, and avers that Gibson was the owner of it after the trustee’s sale. He denies all fraud on his part, and also relies upon his possession as barring the complainant’s suit under the statute of limitations.

The testimony in the record is voluminous, and we will advert only to so much of it as is material to the decision of the case.

It is apparent that efforts were made at the sale to induce persons not to bid; that they consequently did not bid, and that the property was sold considerably below its market value at the time. It was understood among the persons attending the sale and desiring to bid, that a compromise or settlement had been made between the parties ; that Barrow was to become the purchaser, and that the sale was made in furtherance of that arrangement, and the bystanders, therefore, either declined bidding at all, or ceased to bid when informed of it. It does not clearly appear by whom this information was given, or who induced persons not to bid, but it is probable that all the parties, Gibson, Gray, Bryant, and Barrow, and especially the three first named, who were acquainted with the persons assembled, contributed to it. The highest valuation put upon the property is about $45,000, and it is shown that such property declined in market value from that time for several years, including the year 1842, when the complainant’s note became due. Gray’s deposition shows that he was about to institute legal proceedings to enjoin the sale, and would have done so but for the compromise with Barrow. Gibson’s deposition shows that he proposed the arrangement under which the property was sold ; that he had then transferred the last note to Herring, but was anxious to promote the arrangement, as he was thereby discharged as indorser of the notes held by Barrow. Pie further states that afterwards, and in the year 1841, he sold property to the complainant in discharge of the note previously transferred by him to Herring and of other indebtedness., and took up that note thereby, the object being to reinvest Gibson, or his son who conducted the settlement for his benefit, with the full title to said note, and that Gibson retransferred the note to the complainant shortly before the commencement of this suit in May, 1848.

The first ground taken in behalf of the appellant is, that the sale was fraudulent in fact, to the injury of the appellant. It is insisted that the sale was made under the trust deed merely to carry out in form what had already been done, in substance by private arrangement, a sale of the property; that biddings were prevented in order to bring the sale within the limit of the first note, the only one under which the trust sale could then take place, and give it the semblance of fairness and propriety, and that the property was thereby sacrificed and sold for the suspicious sum of exactly the amount of the first note. These circumstances, considered alone, would certainly show collusion and fraud in the transaction. But there are other circumstances indicating that there was no actually fraudulent and dishonest intent on the part of Barrow.' He held a debt for upwards of $61,000, which he had no hope of realizing except by means of this deed in trust. The party bound by that deed was about to take steps to enjoin the sale which had been advertised, and to rescind the contract under which it was given, which, if successful, he would lose his whole debt, or if not successful, he would in all probability be greatly delayed and embarrassed in the collection of it. His debt amounted to greatly more than the property would sell for in the market. Believing, then, that his debt would ultimately absorb all the property, and in order to prevent the litigation about to take place in regard to it, he determined to give up his entire debt and to take the property for it; and in ■order to make the arrangement formal, and secure the property to himself, he chose that the sale should be made under the deed in trust. To this arrangement Gibson was a party, and there is nothing to show that Barrow had any notice at the time, but that he was the holder of the other note, as the deed in trust showed that it was payable to him. The arrangement, then, might well have been carried out without any intention to prejudice that note, and even without any reference to it, and such is the distinct statement of Barrow in his answer. But it is asked, if no reference was had to the last note, why was not a simple deed taken from Gray, and if Gibson was the holder of the last note, why was not the deed in trust simply entered satisfied, as all parties in interest were content with the arrangement? It appears that Gray was insolvent, and there, might have been judgments against him which would have attached upon the property upon the satisfaction and discharge of the deed in trust, and a purchaser might well object' to taking the title of a party so situated. Indeed, there could be no good objection, in point of rectitude of purpose, in Barrow’s preferring that his title should be perfected through the deed in trust, when it could really work to the injury of no one, as his claims would, in all human probability, absorb the entire property, and were entitled to priority of payment, as he and the other parties to the transaction were fully aware.

2. It is objected that the sale was fraudulent in law or invalid, ■and should be set aside, 1st, because Bryant, the trustee, was a party to the agreement between Barrow and Gray, and interested in having it carried out, as he thereby would be discharged of his liability as indorser upon the notes held by Barrow; 2d, this sale, as claimed by the defendant Barrow, is justified on the ground that it was substantially a sale to secure the money on all the notes, whereas the trustee had no right to consider but the note then due, and no power to make the sale with reference to the notes not then due; 3d, that Bryant, after the execution of the deed in trust and notes, had become the holder of the notes and had transferred them by indorsement, and thereby became disqualified to act as trustee by reason of his interest in the matter. There is certainly much force in the first two points of objection. Unless there are circumstances of justification, it would be - illegal for a trustee clothed with the power to sell' property for a particular purpose, at public auction to the highest bidder, to participate in an arrangement by which a particular individual should become 'the purchaser, and carry out that arrangement by the form-of a sale ostensibly public and to the highest bidder. Yet such a sale may be valid by the consent of the parties interested, which -is frequently the case, or by the party attacking it not occupying a position which will enable him to do so successfully. And for the same reason, a sale made for a larger sum than the trustee is authorized by the deed to sell for, may become valid by the consent of the parties interested, or by the incapacity of the party complaining to object to it. The objection as to the disqualification of the trustee seems not to be insisted upon, and we therefore do not decide the point, as the view we take of all these objections would obviate that objection, and render the decision of it unnecessary.

Giving to the objections to the sale all the force for which the appellant’s counsel contend, still it is insisted in behalf of the appellee that the appellant cannot avail himself of them, because it is shown that Gibson was a party to the arrangement as to the sale, and whether he was the holder of the last •note at the date of the sale or not, he subsequently became the owner or beneficiary of it in 1841, whereby all -the equity arising from his participation in the sale attached to it in his hands, and his subsequent transfer of it to the complainant in 1848, passed it subject to that equity. It is unquestionably true that the assignee of a note, under our law, takes it subject to all the equities existing against it in the hands of the assignor'. But here a question is made as to whether Gibson became the owner of the note after it was taken up by settlement with Herring’s administrator. And this point is clearly settled by the evidence. It is shown by Gibson’s deposition, that at the time he transferred the note to Herring, he was indebted to him about $36,500, and that after his death, he had a settlement with his administrator, by which he conveyed to him land and negroes in discharge of his entire indebtedness to the estate, and “ took up ” this note, which he had indorsed to Herring, his object being to “ reinvest himself with the full title to the note.” It was a settlement of an indebtedness and liability on the part of Gibson to Herring’s estate by giving property in discharge of it which was accepted by the administrator, and not a purchase of a note belonging to the estate by means of property sold to the administrator, as has been suggested. The property given in discharge of the indebtedness does not appear to have been conveyed or delivered back to Gibson, when the note was retransferred by him'to the complainant; and although Gibson seems to have' come to the conclusion, after he had held the note from 1841 to 1848, that he was not legally entitled to hold it, yet the facts stated by him show that he had fairly settled it with the administrator, and taken it up, and his erroneous opinion of his legal right to the note cannot affect the right. The administrator had the power to settle the debt due his intestate, and, for ought that appears in this record, he exercised that right properly and for the benefit of the estate.

The equity in favor of the appellee against the note as against Gibson attached, therefore, when the note was retransferred to him, and followed it in the hands of the complainant, to whom he afterwards transferred it. This view of the case renders it unnecessary to consider the defences to the bill under the statute of limitations.

The decree is affirmed.

The counsel for appellant filed a petition for a reargument in this case, but the court refused to grant a reargument.