North American Land Co.'s Estate

Mr. Justice Sharswood

delivered the opinion of the court, May 7th 1877.

The question presented on these appeals is one of distribution. The fund to be distributed arises from the proceeds of 6119 shares of stock of the North American Land Company. This fund it is net disputed has been raised under the trusts of a certain deed of September 30th 1796, James Greenleaf to George Simpson, recorded at Philadelphia in Deed Book No. 55, p. 381, and therefore called the “ 381 trust,” to distinguish it from another trust under a deed of the same date between the same parties recorded in the same book at page 391. The first mentioned, or “ 381 deed,” recites several conveyances by Robert Morris and John Nicholson to George Simpson, to secure the payment of orders drawn by them and endorsed by James Greenleaf in several classes, and recites also that James Greenleaf was desirous “that all persons holding or interested in said orders, notes or engagements should have the full benefit of the securities mentioned.” The trust is, “ that any of the said orders, notes or engagements, being due and unsatisfied,” the trustee., on the request of thje holder or James Greenleaf, should make sale of the property conveyed, and that as soon as all the said notes, orders and engagements shall be paid and satisfied, then to reconvey to James Greenleaf. It is clear that the holders of said notes and engagements are the eestuis que trustent to whom the fund is to be distributed.

The appellees, to whom the fund was awarded in the court beiow, are the successors of Henry Pratt et al., to whom James Greenleaf, Edward Pox, Robert Morris and John Nicholson, by deed dated June 26th 1797, conveyed certain property to form an Aggregate Fund, in trust (after certain provisions not now material), to pay all the notes, endorsements, and other engagements made by Edward Pox for or on account of James Greenleaf, amounting with interest to about $900,000, for which Robert Morris and John Nicholson were to give their obligations, and also to pay the trustees for certain notes and acceptances which they had purchased for the use of the trusts of the “ 391 deed,” $4725. George Simpson, the grantee in the “ 391 deed,” on the 23d of March 1797, conveyed to the same persons, the trustees of the Aggregate Fund, all the real estate, notes and acceptances, held by him under that deed, in trust, to secure Edward Fox. Attached to the Aggregate Fund Deed is a schedule containing a list of notes and acceptances of Robert Morris and John Nicholson, amounting to $831,500. Morris and Nicholson were to give their obligations for the payment of these notes and acceptances, payable one-half on the 26th of December 1798, and the other half on the 26th of December 1799. Then follows a covenant in these words: “ The said Robert Morris and John Nicholson, and each of them, agree to and with the said Henry Pratt, Thomas W. Francis, John Miller, Jr., John Ashley and Jacob Raker, and to and with the survivors and survivor of them, and to and with the heirs and assigns of them, and of the survivors and survivor of them, that the several notes and acceptances, hereinbefore mentioned, endorsed by James Greenleaf, and now held as aforesaid by them or any other persons for their use, amounting to $831,500, a particular list of all which notes and acceptances is hereunto annexed, shall be considered as real, bond, fide debts of them, the said Robert Morris and John Nicholson, jointly and severally, without any plea of defalcation or set-off either in law or equity, and that all securities of every kind heretofore given by them or either of them for the securing the payment of the said notes and acceptances or any of them are hereby confirmed and made good and valid to all intents and purposes, so far as the same relates to the said notes and acceptances and no further.”

The appellees, claiming as the trustees under the Aggregate Fund Deed, produced before the auditor notes to the amount of $676,500, identical with those described in 'the .schedule attached to the deed. The question — and it is really the only question— presented on these appeals, is whether they have entitled themselves as boná fide holders under the trusts of the “ 38T deed.” The holders of these notes are certainly within the terms of that trust, and unless something has been shown to impeach the primá facie title arising from mere possession, are entitled to the benefit of it. It was earnestly contended that the appellees could not' have rightful possession of them under that deed as trustees, as it contained no words conveying anything but the lands and real estate described in it. This is undoubtedly true. Indeed, that deed expressly recognises the fact that these notes were all then in the possession of these trustees, or of other persons for their use. It is clear that the shares of North American Land Company stock, the proceeds of which constitute the fund in court, did not pass by that deed. They were already vested in the trustee under the “ 381 deed.” The trustee under that deed was no party to the Aggregate Fund Deed, and to preclude all question, it expressly declares that the “ 881 deed” and “property therein mentioned is not included herein, nor influenced in any degree, nor forms any part of this indenture.” It will be observed that all the property which was conveyed by Greenleaf to Simpson by the “ 381 deed” was property of Morris and Nicholson, pledged by them to Greenleaf for the security of his acceptances, as specified in the several schedules attached to that deed. On the other hand, the property conveyed by the “ 391 deed” to Simpson was exclusively property of Greenleaf. Morris and Nicholson were no parties to that deed. All that property, as we have seen, had been conveyed by Simpson to the same gentlemen, who were made trustees under the Aggregate Fund Deed, and as that deed rvas a conveyance of a large amount of property belonging to Morris and Nicholson, this, with the 'property of Greenleaf, already transferred to them, constituted w£at was properly called an “Aggregate Fund,” intended more especially for the security of Edward Fox. Hence the Aggregate Fund Deed provides that “ the whole property hereby conveyed by the said Robert Morris and John Nicholson, either jointly or severally, together with all the real estates and the legal and equitable interests and titles thereto heretofore conveyed and assigned to the said Henry Pratt et al. by any or all of the hereinbefore mentioned indentures, shall form and be considered as one aggregate fund.”

In addition to the notes and acceptances included in the “391 deed, ’ ’ it is recited that the trustees, Henry Pratt et al., “are possessed of other notes and acceptances of them, the said Robert Morris and John Nicholson, and of each of them separately, which are made payable to and endorsed by the said James Greenleaf, which they hold in trust for certain creditors of James Greenleaf, and are also possessed of other notes or acceptances of them separately, which are made payable to and endorsed by the said James Greenleaf, ■which they- purchased for the use of the trusts in them reposed by the said indenture from George Simpson.” The deed sebsequently proceeds to provide that the trustees shall be reimbursed $4725, money paid by them for these last-mentioned acceptances and notes. Yet these very notes seem included in the general words of the covenant before referred to, “the several notes and acceptances hereinbefore mentioned, endorsed by James Greenleaf, and now held as aforesaid by them or any other persons for their use.” No list of the notes thus purchased was in evidence, and the counsel on both sides say that they are not aware of the existence of any such list, nor of evidence from which such a list could be made out. I conjectured at one time that the $145,000 found by mere accident among the papers of Edward Tilghman, the original counsel of the trustees of the Aggregate Fund, might have been these notes, but the conclusive answer to this or the suggestion that having been cancelled (as it would certainly seem that they ought to have been), they were the $129,500 not produced, is that all these notes are in the schedule and recognised as existing debts of Morris and Nicholson.

We return then to the covenant.- Had it been a mere recognition of the existence and bona fides of these notes in the possession . of the trustees, there would be very great force in the contention that they were recognised merely as claims on the Aggregate Fund, which the trustees of that fund were thereby authorized to apply to their payment. With such a construction of the covenant it would be entirely congruous to hold, that the notes were paid and extinguished as claims against Morris and Nicholson, their bonds and the Aggregate Fund being appropriated to their payment, and the trustees, as holders, and those who surrendered to them and took certificates agreeing to look only to the bonds and the fund. A creditor may undoubtedly accept a collateral wdthout giving up his original claim, but if he surrenders the evidence of that claim and takes a new security, the presumption is the other way. It is impossible, however, to give such a restricted construction to the covenant in question. Its language is too broad and comprehensive, and there is no reason why full effect should not be given to it as against Morris and Nicholson or those claiming under them. “All securities of every kind heretofore given by them, or either of them, for the securing the payment of the said notes and acceptances, or any of them, are hereby confirmed and made good and valid to all intents and purposes,' so far as the same relates to the said notes and acceptances and no further.” This certainly was not the language of men whose intention was to limit the security of the notes to the bonds and the Aggregate Fund. That there were other securities then existing, particularly the shares of North American Land Company stock, which had been pledged by Morris and Nicholson for the payment of these and other liabilities, and which were then held under the “ 381 trust” for that purpose, is a position beyond all controversy. Why then shall not these notes, thus recognised distinctly as secured, be entitled to the proceeds of these land shares ? It is maintained with great zeal and earnestness by the able counsel of the appellants, that they are precluded by that clause of the Aggregate Fund Deed before adverted to, which declares that the “ 381 deed” and property therein mentioned is not included therein, nor influenced in any degree, nor forms any part of that indenture. These words seem to have been inserted ex majori cautela. The property vested in the “ 381 trust” could not, if they- had wished to do so, been made a part of the Aggregate Fund. The trusts of the “ 381 deed” were for all holders of notes and acceptances of Morris and Nicholson which had been endorsed by Greenleaf, as well those upon which Fox had become liable as others. George Simpson, the grantee of that deed, or any assignee from him, was no party to the Aggregate Fund Deed. Undoubtedly the holders of the $617,500 notes, not scheduled in that deed, would be entitled to come in pro rata with the $532,500 on the 4970 shares which the auditor finds to appertain to schedule G. — the $1,150,000 for which the interest of Greenleaf was purchased by Morris and Nicholson- — and to secure the payment of which the legal title remained in him by the agreement of May 28th 1796, and which he transferred to George Simp: son by the “ 381 deed.” Morris and Nicholson would not have been estopped by their covenant from contesting the validity of those $617,500 notes, or the bona fides of the holders, as they are as to the scheduled notes. But surely there is nothing in all this to shut out the $532,500 notes from their right to claim. Nor can it be pretended that the non-production of the $617,500 gives the representatives of Morris and Nicholson any right in law or equity to stand in the shoes of the holders, much less to insist upon the exclusion of the scheduled notes as to which they had expressly covenanted that all securities of every kind theretofore given should be good and valid.

The great aim of Morris and Nicholson evidently was, as honest and honorable men, to appropriate their property for the payment of their notes and acceptances in the hands of bond fide holders. Whatever may have been their defence as .against Greenleaf, they surrendered it as far'as the scheduled notes were concerned as to the trustees, whom they recognised to be bond, fide holders. It is evident that at this late day we cannot understand all the circumstances of the case so as to feel sure of doing entire justice between the parties. It is not improbable that many of these notes were bought in the market for merely nominal sums. Three cents on the dollar is reported by the auditor to have been about their market price in 1797. It is better for us to rest on the conclusion that the parties understood their case much better than we can now do, and to give effect to their agreement according to its plain language.

Decree affirmed; the costs of this appeal, including the printing of the paper-books of all parties, and a fee of one hundred dollars to each of the counsel of the appellants, to be paid from the fund.