Kellum et al. v. Smith

• Decision Date: 01 January 1859
• Citation: 33 Pa. 158
• Parties: Kellum et al. versus Smith.
• Court: Pennsylvania Supreme Court

33 Pa. 158

Kellum et al. versus Smith.

Supreme Court of Pennsylvania.

ERROR to the Common Pleas of Bradford county.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Adams, Elwell, and Mercur, for the plaintiffs in error.

Watkins, for the defendant in error.

The opinion of the court was delivered by STRONG, J.

The case presented is this. In 1848, Israel Smith was the legal owner of the "Amos Ackla claim" (part of the Benjamin Ackla farm), and the equitable owner of the "mill lot," and of another tract of land called the "Sarah Morrison tract." In the summer of that year, he caused the mill lot and the Morrison tract to be conveyed to Bell & Co., under an arrangement that they should hold the property as security for his indebtedness to them, and also for future advances which they agreed to make, to enable him to improve the mill lot. At the time of these conveyances, Smith was considerably indebted to Bell & Co., and largely to other creditors residing in Baltimore and elsewhere — indebted, perhaps, in an amount greater than the value of the property which he then held. Bell & Co. had knowledge of the indebtedness when they entered into this arrangement; and it may fairly be assumed, that this knowledge was the moving cause of the conveyances. However that may be, the purpose was security to the grantees. They took the lands as security for what they had already advanced, and for what they were still to advance, to enable Smith, the equitable owner, to make improvements upon the mill property. They agreed to reconvey whenever their advances should be repaid. This arrangement made Bell & Co., at most, but mortgagees of the property, and left an equity of redemption remaining in Smith. After the deeds were made, Bell & Co. continued to make advances, and Smith remained in possession of the property, making large improvements upon it, paying the taxes, and treating it ostensibly as his own.

On the 13th of December 1848, Saunders and Crook obtained a judgment against Smith, which was a lien upon his equity of redemption. This judgment was revived on the 29th of June 1855, against the debtor, but not against terre tenants. By virtue of executions founded upon it, the property in controversy was levied upon, condemned, and sold to Alanson B. Smith, the plaintiff in this ejectment. He received the sheriff's deed on the 20th of December 1855. Previous to this sale, however, the whole Benjamin Ackla farm, including the "mill lot," had been levied upon as the property of Israel Smith, under an execution issued at the suit of John Ackla and others. The levy was made under a fi. fa. issued to September Term 1849; the property was condemned, and on the 6th of May 1850, was sold to Bell & Co. The sheriff's deed to them was acknowledged on the 9th of the same month. Unless this sale was fraudulent, or unless, in some way, it raised a trust for the debtor, it, of course, destroyed the equity of redemption, and divested all the interest of Israel Smith — leaving nothing to pass under the subsequent sheriff's sale to Alanson B. Smith. The contest in this case is between the claimants under these two sales. It may be added, that both were effected under judgments for debts existing when the original arrangement was made between Israel Smith and Bell & Co.

The case does not require us to consider, whether a mortgage to secure an existing debt, and future advances for the purpose of improving the mortgaged property, can be regarded as fraudulent against other creditors, even though the mortgagee had knowledge of the existence of other creditors, and intended to obtain priority over them, when he took the mortgage. It is possible, that on another trial, that question may be distinctly presented. The material question now is, whether, after the sheriff's sale to Bell & Co., in May 1850, there was any trust in them for Israel Smith, the debtor. As already seen, that sale was made under an execution to which they were strangers. According to the testimony offered by the plaintiff in the court below, when the property was advertised to be sold, Israel Smith called upon them, and "agreed with them to bid off the property for him, and to hold it on the same terms as they held the rest of his property." Those terms were, that they should convey to him when they were repaid their advances. In reference to this part of the case, the defendants in the court below prayed the court to instruct the jury, "that the alleged agreement between Wm. H. Bell, George W. Hollenback, and Jacob Hand (Bell & Co.), that they should, at the sheriff's sale, on the execution to William Gibson's use (John Ackla and others) v. Israel Smith, bid off the property, and hold it to secure the indebtedness of Israel Smith to them, was void by the statute of frauds and perjuries — and they as the purchasers at that sale had a right to sell the property to whomsoever they pleased — and the plaintiffs claiming by virtue of a lien and sheriff's sale, since they thus acquired the title, cannot recover." The learned judge refused to affirm this proposition, and charged the jury that "if they believed the evidence of Israel Smith, the agreement of Bell & Co. to purchase for him, and to hold under the arrangement stated, created a resulting trust, even though there had been no design to hinder, delay, and defraud creditors." To this we cannot assent. A resulting trust cannot be created in such a way. Such a trust can arise only from the payment of the purchase-money, or from fraud in the purchase; fraud perpetrated by the grantee. Here the purchase-money of the sheriff's sale was paid by Bell & Co., and consequently the beneficial interest, as well as the legal estate, went to them. Had there been fraud in that purchase, they might have been held trustees ex maleficio. But the fraud which will convert the purchaser at a sheriff's sale into a trustee, ex maleficio, of the debtor, must have been fraud at the time of the sale. Subsequent covin will not answer, any more than subsequent payment of the purchase-money will convert an absolute purchase into a naked trust. When the purchaser at a sheriff's sale promises to hold for the debtor, and afterwards refuses to comply with his engagement, the fraud, if any, is not at the sale, not in the promise, but in its subsequent breach. That is too late. It is abundantly settled, that equity will not decree such a purchaser to be a trustee, unless there is something more in the transaction than the mere violation of a parol agreement. This was asserted in Robertson v. Robertson, 9 Watts 32; in Haines v. O'Conner, 10 Watts 313; in Fox v. Heffner, 1 W. & S. 372; in Jackman v. Ringland, 4 W. & S. 149, and in Barnet v. Dougherty, 8 Casey 371. What more was there in this case than the violation of a parol agreement to hold the property for the benefit of the debtor? The purchasers practised no artifice. They did not proclaim at the sale that they were buying for Smith (as was done in the case of Brown v. Dysinger, 1 Rawle 408), and thus obtain the property at a reduced price. They were not even present. They caused nothing to be done there, except notice to be given of the title which they then held. Of this, Smith had no reason to complain. Whatever representations were made at the sale, were made by him alone, and at his own instance. The case of Brown v. Dysinger has been greatly misunderstood. What it was not intended to rule, was clearly stated by Judge ROGERS, in Haines v. O'Conner. Nor is the ruling in Morey v. Herrick, 6 Harris 123, necessarily in conflict with the doctrine of Jackman v. Ringland and its kindred cases. There the trust was created by a participation in the purchase, and by payment of part of the purchase-money. The case did not call for the observations of the judge who delivered the opinion of the court, respecting the...