Com Rs Freedman Savings Trust Co v. Earle

• Decision Date: 10 March 1884
• Citation: 28 L.Ed. 301,4 S.Ct. 226,110 U.S. 710
• Parties: COM'RS FREEDMAN'S SAVINGS & TRUST CO. v. EARLE
• Court: U.S. Supreme Court

110 U.S. 710

4 S.Ct. 226

28 L.Ed. 301

COM'RS FREEDMAN'S SAVINGS & TRUST CO. v. EARLE.

March 10, 1884.

The appellee recovered a judgment against Robert P. Dodge in the supreme court of the District of Columbia on January 4, 1878, for $7,700, with interest and costs, which was revived April 2, 1879, and on which a fi. fa. was issued April 9, 1879, and returned nulla bona. On June 1, 1877, Dodge, the judgment debtor, being then seized in fee-simple of certain real estate in the city of Georgetown, in this district, conveyed the same by deed duly recorded to Charles H. Cragin, Jr., in trust, to secure to Nannie B. Blackford payment of the sum of $2,000, with interest, according to certain promissory notes given therefor, and which were indorsed to Charles H. Cragin. On April 10, 1879, the appellee filed his bill in equity, to which Dodge, Charles H. Cragin, Jr., Charles H. Cragin, and Nannie B. Blackford were made defendants, the object and prayer of which were to take an account of the debt secured by the trust deed, and, subject thereto, to have the premises sold and the proceeds of the sale applied to the satisfaction of the appellee's judgment. The defendants having appeared and answered, a decree according to the prayer of the bill was rendered June 11, 1879. On December 27, 1879, leave therefor having been obtained, the appellants filed a petition in the cause, setting forth the recovery of a judgment in their favor against the defendant Dodge, in the sum of $7,386.47, with interest and costs, on February 11, 1879, in the supreme court of the District of Columbia, and that on December 2d a fi. fa. had been issued thereon, and returned nulla bona December 19, 1879; and praying that they may be made parties complainant in the cause; that the equitable interest of Dodge in the real estate described be subjected to the satisfaction of their judgment; that the same be sold, and the proceeds of sale be brought into court and distributed according to law. To this petition Dodge answered, admitting the recovery of the judgment as alleged. On May 25, 1880, the trustee appointed for that purpose under the decree of June 11, 1879, reported a sale of the premises for $5,525, and the same, on June 25, 1880, was confirmed. The cause was then referred to an auditor to state the account of the trustee to sell, whose report showed an appropriation of the proceeds of the sale, after payment of costs, in payment to that extent of the appellee's judgment. On exceptions to this report, a final decree confirming the same was made September 14, 1880, which decree, on appeal to the general term, was affirmed December 10, 1880.'

Enoch Totten, for appellant.

J. D. McPherson and C. Carlisle, for appellee.

From that decree this appeal is prosecuted, and

MATTHEWS, J.

as ground of reversal, it is assigned by the appellant that the proceeds of the sale of the equitable interest of Dodge, the judgment debtor, should have been distributed pro rata between the appellees and the appellants, instead of having been awarded exclusively to the appellee. It is contended on behalf of the appellants that the interest of the judgment debtor in the land being an equity merely, is not subject to execution at law; and as it can be reached by judgment creditors only through the intervention and by the aid of a court of equity, it becomes of the nature of equitable assets, and when sold the proceeds will be applied, according to the maxim that equality is equity, ratably among the creditors. In the case of Morsell v. First Nat. Bank, 91 U. S. 357, it was decided that under the laws of Maryland in force in this district, judgments at law were not liens upon the interest of judgment debtors who had previously conveyed lands to a trustee in trust for the payment of a debt secured thereby. Mr. Justice SWAYNE said, (p. 361:) 'The judgment in nowise affected the trust premises until the bill was filed. That created a lien in favor of the judgment creditors. There was none before.' And it was accordingly held that in the distribution of the proceeds of sale the judgments must be postponed to debts secured by other deeds of trust made before the filing of the bill, but subsequent quent to the rendition of the judgments. But the decision leaves open the question arising here between judgment creditors seeking satisfaction in equity out of the debtor's equitable estate. It becomes necessary, therefore, to determine the nature of the right and the principle of distribution which arises from it.

At common law executions upon judgments could not be levied upon estates merely equitable, because courts of law did not recognize any such titles and could not deal with them. They could not be levied upon the estate of the trustee when the judgment was against the cestui que trust for the same reason; and when the judgment was against the trustee, if his legal estate should be levied on, the execution creditor could acquire no beneficial interest, and if the levy tended injuriously to affect the interest of the cestui que trust, the latter would be entitled to relief, by injunction or otherwise, in equity. Lewin, Trusts, 171, 186; 2 Spence, Eq. Jur. 39. But as courts of equity regarded the cestui que trust as the true and beneficial owner of the estate, to whose uses, according to the terms of the trust, the legal title was made subservient, so in its eyes the estate of the cestui que trust came to be invested with the same incidents and qualities which in a court of law belonged to a legal estate, so far as consistent with the preservation and administration of the trust. This was by virtue of a principle of analogy, adopted because courts of equity were unwilling to interfere with the strict course of the law, except so far as was necessary to execute the just intentions of parties, and to prevent the forms of the law from being made the means and instruments of wrong, injustice, and oppression. Thus equitable estates were held to be assignable and could be conveyed or devised; were subject to the rules of descent applicable to legal estates; to the tenancy by the courtesy, though not to dower, by an anomolous exception afterwards corrected by statute, (3 & 4 Wm. IV. c. 105;) and were ordinarily governed by the rules of law which measure the duration of the enjoyment or regulate the devolution or transmission of estates; so that, in general, whatever would be the rule of law, if it were a legal estate, was applied by the court of chancery by analogy to a trust estate. 1 Spence, Eq. Jur. 502.

As judgment creditors, after the statute of Westminister, (13th Ed.) p. 1, c. 18, were entitled, by the writ of elegit, to be put in possession of a moiety of the lands of the debtor, until satisfaction of the judgment; and as it would be contrary to equity to permit a debtor to withdraw his lands from liability to his judgment creditors, this analogy was at an early date extended, so as to give to judgment creditors similar benefits in respect to the equitable estate of their debtors; and as the remedies in favor of judgment creditors by way of execution upon the legal estate of their debtors have been enlarged, they have been imitated by a corresponding analogy as to equitable estates by courts of equity. This is in pursuance of the principle stated in a pregnant sentence by Lord NORTHINGTON, in Burgess v. Wheate, 1 Eden, 224-250, where he said: 'For my own part, I know no instance where this court has permitted the creation of a trust to affect the right of a third person.' It is embodied in the maxim, aequitas sequitur legen.

It was accordingly held by Lord NOTTINGHAM, in the anonymous case cited in Balch v. Wastall, 1 P. Wm. 445, 'that one who had a judgment, and had lodged a fleri facias in the sheriff's hands, to which nulla bona was returned, might afterwards bring a bill against the defendant, or any other, to discover any of the goods or personal estate of the defendant, and by that means to effect the same;' and although Lord Keeper BRIDGMAN, in Pratt v. Colt, Freem. Cas. Ch., by Hovenden, 139, refused to permit a trust estate, which had descended to the heir, to be extended upon an elegit on a judgment against his ancestor, the reporter adds: 'But note that this hath not been taken to be a good demurrer by the old and best practicers, as little according with good reason, for the heir at law is as much chargeable with the ancestor's judgment as the executor with the testator's debts, and so equity ought to follow the law.' Three years subsequently to this decision the statute of frauds, (29 Car. II. c. 3,) was enacted, the tenth section of which made trust estates in fee-simple assets for the payment of debts, and subject to an elegit upon judgment against the cestui que trust. But this statute did not extend to chattels real, to trusts under which the debtor had not the whole interest, to equities of redemption, or to any equitable interest which had been parted with before execution sued out. Forth v. Duke of Norfolk, 4 Madd. 503. The statute of 5 Geo. II. c. 7, which made lands within the English colonies chargeable with debts, and subject to the like process of execution as personal estate, was in force in Maryland; but as it did not interfere with the established distinction between law and equity, it did not permit an equitable interest to be seized under a fieri facias. Lessee of Smith v. McCann, 24 How. 398. But as the effect of these statutes was to enlarge the operation of executions upon legal estates, so the corresponding equitable remedy as to equitable estates was also enlarged, and as to them equitable executions were enforced to the same extent to which executions at law were enforceable upon estates subject to seizure under them. This mere equity, consisting in the right to obtain...