Hancock v. Wooten

• Decision Date: 10 November 1890
• Citation: 12 S.E. 199,107 N.C. 9
• Parties: HANCOCK et al. v. WOOTEN et al.
• Court: North Carolina Supreme Court

12 S.E. 199

107 N.C. 9

HANCOCK et al. v. WOOTEN et al.

Supreme Court of North Carolina

November 10, 1890

Appeal from superior court, Greene county; CONNOR, Judge.

This was a suit by creditors to reduce their debts to judgment and to set aside, as fraudulent, an assignment made by W. J Wooten to W. A. Darden, trustee, both of whom were made defendants. Simeon Wooten and Julia Wooten, the wife of W. J Wooten, were preferred creditors, under the assignment, and were joined as defendants. Julia Wooten died before trial. There was a decree for the plaintiffs, and a receiver of the property was appointed. An appeal was taken by Simeon Wooten and W. A. Darden, the trustee.

Where a transfer of a debtor's property is set aside as fraudulent as to creditors, creditors who have ratified the transfer or claimed under it should not be allowed to participate in the fund arising therefrom.

W. R Allen, for appellants.

F. A Woodard and W. C. Munroe, for appellees.

SHEPHERD J.

1. The first exception is addressed to the ruling of his honor upon the question of parties. The appellants (who are W. A. Darden, the trustee, and Simeon Wooten, a preferred creditor) objected to proceeding to trial because of the death of the defendant, Mrs. Julia Wooten, another preferred creditor. Her heirs at law had no interest in the land conveyed in the assignment because she had joined with her husband, the trustee, in the execution of the deed, and it was binding as to them; and, for the further reason, that, upon her death, her interest, if any, remained in her, vested by survivorship in her husband. Woodford v. Higly, 1 Winst. 237. Neither did she have any interest in the personalty, as whatever interest she may have had therein, passed to her husband, as sole distributee. The only interest then which she could, in any view, have asserted against the plaintiffs was that of a preferred creditor, and her personal representative did not then apply, nor has he ever applied, to be made a party; nor does it appear that he has ever offered, in any way, to enforce the alleged claim of his intestate. The appellants, therefore, were the only persons who prayed that her representatives be made parties to the action. Did they have a right to insist upon this and thus delay the trial? As it does not appear that Simeon Wooten had any interest which conflicted with that of Mrs. Wooten, and as it was not, at that stage of the proceeding that he could have had it determined, (the issue being confined to the validity of the deed alone,) it is plain to us that he had no legal right to insist upon the objection. Such conflicting claims between the cestuis que trustent, had any existed, could have been passed upon subsequent to the trial of the issue, and to that end the court could have brought in the proper parties. Mitf. Ch. Pl. 430, notes.

The question presented, then, is whether the presence of Mrs Wooten was necessary upon the trial of the said issue, and whether the trustee could, as a matter of right, insist upon the joinder of "her representatives." Without discussing the general subject of the joinder of trustees and cestuis que trustent, and leaving untouched the principles declared in the several decisions of this court, as applied to particular cases, we will consider the single question here presented, to-wit: Whether, in an action brought by a creditor to set aside an alleged fraudulent trust or assignment, it is necessary upon the trial of an issue, as to the validity of the trust or assignment, that the cestuis que trustent should be made parties defendant; and whether the trustee, as a matter of right, can in all cases have them made co-defendants. In Barrett v. Brown, 86 N.C. 556, cited by the appellants, there is a general expression favoring the affirmative of the proposition, but it will be noted that the plaintiff in that case was seeking to enforce the trust by having an account taken in order that she might have her "pro rata share of her claim," and the court very properly decided that the trustee had a right to have each cestui que trust present in order that he might contest the claims of the others and thus protect the trustee and have a complete settlement of the whole litigation. Quite different is the case before us. "There is a broad distinction (says Pomeroy on Remedies, § 357, cited with approval by Wait on Fraudulent Conveyances, § 137) between the case of an action brought in opposition to the trust, to set aside the deed or other instrument by which it was created, and to procure it to be declared a nullity, and that of an action brought in furtherance of the trust, to enforce its provisions, to establish it as valid, or to procure it to be wound up and settled. In the first case the suit may be maintained without the presence of the beneficiaries, since the trustees represent them all and defend for them." To the same effect is the opinion of Chancellor WALWORTH in Rogers v. Rogers, 3 Paige, 379. This case seems to be regarded as a leading one, and has been almost universally cited in the reports and text-books. The chancellor says: "But where the complainant claims in opposition to the assignment, or deed of trust, and seeks to set aside the same, on the ground that it is fraudulent and void, he is at liberty to proceed against the fraudulent assignee, or trustee, who is the holder of the legal estate in the property, without joining the cestui que trust. Such has been the uniform practice of this court in relation to cases of this description." Such, also, is the opinion of Lord REDESDALE (Mitf. Ch. Pl. 4th London Ed. 175) and of Justice Story, (Eq. Pl. §§ 215, 216.) See, also, Burrill, Assignm. 599; Russell v. Lasher, 4 Barb. 232; Wheeler v. Wheedon, 9 How. Pr. 293; Tucker v. Zimmerman, 61 Ga. 599. The overwhelming weight of authority is in favor of the rule, as above stated: "The true explanation of this doctrine [says Story, supra, § 141] is that in cases of this sort courts of equity proceed upon the analogy of the common law, which treats the personal representative of the deceased debtor, or testator, as the regular representative of all persons interested in the personal assets, and bound, by his bona fide acts, so far as third persons are concerned." This view is also strongly sustained in Cheatham v. Rowland, 92 N.C. 340, in which the court refused to join the cestuis que trustent, at the instance of the trustees, where a claim was asserted against the trust property. "The trustees [says the court] are the proper persons, as legal owners in charge, to manage and take care of the common property, not only in its preservation, but in its defense against unjust and unreasonable demands, from whatever source they may come. *** When the trust is abused and they neglect or misappropriate the property, those interested may interpose to prevent the injury and enforce the execution of the trust, or even have the estate taken away and put into other hands." Many reasons founded upon expediency, as well as justice, are assigned for the rule as stated, prominent among which is the avoidance of the delay resulting from the death of cestuis que trustent, and the time elapsing before their representatives can be made parties. Again, in the case of a general assignment, (as this appears to be,) great difficulty will be met in the service of process upon a large number of cestuis que trustent, especially where some of them are non-residents, or whose residence is unknown. Adhering, as we do, to the principle as laid down, that the cestuis que trustent are not necessary parties in actions to set aside deeds of trust, or assignments for the benefit of creditors, we think that we are authorized, under the liberal provisions of the Code, to say that a creditor may join the cestuis que trustent in such an action, and that the cestuis que trustent may themselves apply to be made parties defendant. But, while they may thus be made parties, we do not think that the death of any or all of them, pending the suit, should be a cause of delaying the trial of the issue touching the validity of the deed, unless it appears that the trustee is not defending in good faith, or that the ends of justice will be better subserved by having the representatives present. This is addressed to the wise discretion of the court to be exercised in view of the particular circumstances attending each case. ...