Merwin v. Richardson

Carpenter, J.

Philip Hugo was a merchant in New Haven. On the 25th of June, 1881, being pecuniarily embarrassed, he conveyed certain real estate, valued at about $10,000, to James D. Dewell and John A. Richardson by a quit claim deed in the ordinary form. No consideration moved from the grantees, but so far as they were concerned the deed was a voluntary one. The object however was not to place the property bejmnd the reach of creditors, but to set it apart as a guarantee that certain arrangements which he proposed to make with his creditors for an extension of the time of payment should be performed on his part. He caused the deed to be recorded, and notified Dewell and Richardson, also his creditors, of the deed and its object. From most of his creditors he obtained an extension of time and continued his business. He remained in possession of the real estate so conveyed, taking to himself the rents and profits. Some of the indebtedness existing when the deed was given was paid and other debts contracted with the same creditors in lieu thereof. This was done in the ordinary course of business, making payments on account, or notes, and purchasing on credit other goods.

*232 On the 14th of January, 1882, Hugo made an assignment, under the insolvent laws of this state, of all his property for the benefit of his creditors, naming Dewell in his deed of assignment as his trustee. Dewell was duly confirmed as trustee and is proceeding in the settlement of the estate. Of the indebtedness existing June 25th, 1881, when the deed was given, a large portion is still outstanding. In addition to the new indebtedness arising in the usual course of business, as above stated, there is a considerable amount of indebtedness created primarily since June 25th, 1881. Dewell as trustee caused the real estate thus conveyed to be inventoried, and claims that all the creditors are entitled to the benefit of it; while Richardson claims to hold it for the exclusive benefit of certain New York creditors. The trustee declined, after request made upon him by Merwin & Son, to institute any proceeding to subject the real estate to the payment of all the debts of Hugo, and therefore this action was brought for the benefit of all the creditors.

Dewell caused all the creditors to be cited in as parties. A portion of the creditors filed a cross-complaint, praying, in substance, that the prayer of the complaint might be granted. After the hearing, and before judgment, Dewell and Hugo filed separate applications to be admitted co-plaintiffs, and they were so admitted.

The court rendered judgment for the plaintiffs, vesting the title to the real estate in question in the trustee for the benefit of all the creditors, and required Richardson and Dewell to convey their interest therein to Dewell as trustee. Certain creditors and Richardson appealed. •

The reasons of appeal are sixteen in number. They really however embrace but five points. It is to be regretted that counsel find it necessary to state the errors of which they complain in so many different ways. A point once stated in clear and concise terms is not strengthened by repeating it in different forms of expression.

The first error assigned is that the plaintiffs cannot maintain this suit.

The first section of the Practice Act provides that “ if *233 the defendant desires to plead to the jurisdiction, or in abatement, or both, he shall take such exception in one plea substantially in the following form. * * * All defenses other than those to the jurisdiction or in abatement shall be made by an answer or demurrer.”

There was no plea to the jurisdiction or in abatement. Neither was there a demurrer. There is an answer, but it does not question the ability of the plaintiffs to sue, so that the pleadings raise no such question as this. As we understand the spirit and policy of the Practice Act, it requires that all such questions shall be raised by the pleadings. Trowbridge v. True, ante, p. 190. We think that the defendants by their answer, and by going to trial on the merits, waived any question as to the capacity or right of the plaintiffs to sue.

Again. The fourteenth section of the Practice Act pro vides that an executor, administrator, or trustee of an express trust, may sue or be sued without joining the persons represented by him and beneficially interested in the suit. This the trustee declined to do. Thereupon S. E. Merwin & Son brought the suit alone against Dewell and Richardson. Under the thirteenth section of the Practice Act perhaps the court might have authorized the plaintiffs to prosecute in behalf of themselves and the other creditors. But that course was not taken. All the creditors were made parties, some of whom united with the plaintiffs, asking for the same judgment which they claimed, and others opposed it. After the hearing and before judgment Dewell the trustee became a co-plaintiff, and he claimed the same judgment. So that when the judgment was rendered the party who by the fourteenth section of the Practice Act might have brought the suit alone, was in fact a plaintiff demanding a judgment in his favor for the purposes of the trust. Now we must regard this objection as an objection to the parties as they stood at the time judgment was rendered. It was in effect then a claim that Dewell as trustee could not maintain this action and could not have a judgment in his favor. We think he could. Under the Practice *234 Act he was a plaintiff; and neither the manner of his becoming such, nor the fact that others were joined with him, will defeat his right to recover.

It was urged that there was no such refusal by the trustee as to justify this suit. The views we have already expressed are a sufficient answer to this objection. When the judgment was rendered, if not before, the proper'person who might sue and whose duty it was to- sue, was before the court as a plaintiff, asking for the proper judgment.

At the January term of the court in 1884, Coburn & Co. and five other parties appeared in court as defendants, and, claiming to be creditors, filed a cross-complaint, in which they prayed that Richardson and Dewell might be required to convey the premises, with the rents and profits derived therefrom, to the trustee of Hugo, or that they sell the property and deliver the proceeds, together with the rents and profits, to the trustee. This cross-complaint was signed and filed by Julius Twiss, Esq., as counsel for said creditors. He was also counsel for the plaintiffs. On that ground and for that reason alone Richardson and some of the creditors filed a motion to erase the cross-complaint. The court declined to do so, and this is given as one of the reasons of appeal.

We agree that the same counsel at the same time and in the same case cannot represent different parties whose claims are antagonistic; but where, as in this case, there are several parties asking for the same judgment, their interests do not conflict, and we see no objection to the same counsel acting for all such parties, notwithstanding the accidental circumstance that some of them are classed as plaintiffs and others as defendants.

The objection which the appellants now make, and apparently for the first time, that the cross-complaint should be erased because the parties filing it were not legally summoned into court, cannot prevail, for two reasons:—1st, the appellants limited the objection in their written motion to the reason above considered, and we think they should now be confined to that; and 2d, the appellants cannot *235 take exception to any irregularity in the process by which others are brought into court.

Another error assigned is that the court improperly allowed Dewell and Hugo to become plaintiffs. The Practice Act is liberal in respect to parties. By the eleventh section all persons having an interest in the subject of the action, and in obtaining the judgment demanded, may be joined as plaintiffs. The sixteenth section provides that' no action shall be defeated by the non-joinder or misjoinder of parties. New parties may be added and summoned in, and parties misjoined may be dropped, by order of the court, at any stage of the cause, as it may deem the interests of justice to require. The seventeenth section provides that when any action has been commenced in the name of the wrong person as plaintiff, the court may, if satisfied that it has been so commenced through mistake, and that it is necessary for the determination of the real matter in dispute so to do, allow any other person to be substituted or added as plaintiff. These provisions are broad enough to justify the action of the court. The relief as prayed for by the original plaintiffs and by De well and Hugo, is substantially identical. The interests of the last two are in no sense adverse to Merwin & Son. There is no fact or circumstance in the ease which indicates that the appellants were legally prejudiced by the admission of these persons as plaintiffs.

Another question is made concerning the nature and effect of the conveyance to Dewell and Richardson. The appellants, assuming that it was designed to secure their respective claims alone, and was not intended as security for all the creditors, insist that the deed was not fraudulent in fact, and that it was not avoided by the insolvency proceedings because such proceedings were not instituted within sixty days after the deed was given; and therefore that the deed cannot be set aside.

But the appellants are wrong in their conception of the real question involved in the case, and they are wrong in their assumption. The question is not whether a frauda *236 lent convejmnce shall be set aside, but whether a conveyance made in- good faith shall operate as the parties intended it should. It is expressly found that “ Hugo executed the deed and placed it on record for the purpose of satisfying the entire body of his creditors that said property would be thereby secured to the payment of his debts then and thereafter existing.” If it is to have the effect contended for by the appellants it defeats the intention of the grantor, and, if it does not operate as a fraud, it operates to give certain creditors a preference, which is contrary to the policy of our insolvent laws; while the view contended for' by the plaintiffs, and which was adopted by the court below, gives effect to the intention of the grantor, and results in an equal distribution among creditors. Equality is equity.

The appellants are equally wrong in their assumption that the deed was intended as a mortgage to them exclusively. The deed is in the ordinary form. Nothing on its face indicates the purpose for which it was given. There is no defeasance and no finding by the court that the deed was intended to secure the appellants alone. The letters fail to show any such intention, and they are consistent with the claim of the plaintiffs. While they indicate that the deed was intended as security for creditors, there is nothing in them, or in the deed, to show that they are to be considered in a technical sense as a part of the same transaction. Neither do they show that Hugo intended to secure the creditors to whom they were addressed to the exclusion of other creditors. They were simply business letters asking for an extension of time; and as an inducement he mentions the fact that he has conveyed certain property to Dewell and Richardson as a guarantee of his good faith in the matter. We cannot therefore treat the deed as a mortgage to those creditors. It conveyed the property to the grantees in trust, not however for the exclusive benefit of the appellants, for the court expressly finds that it was for the benefit of all the creditors. That being so, it was not necessary for the court to pass upon the question of *237 fraud, nor to set aside the deed. All that the plaintiffs claimed, and all that the court did, was to give effect to the intention of Hugo when he gave the deed, by placing the property in the trustee to be at his disposal for the benefit of all the creditors.

But if the letters, taken by themselves, would indicate an intention on the part of Hugo to give his then existing creditors the sole benefit of the property conveyed, yet they were only a part of the evidence on the subject, and the court has found expressly, upon all the evidence, that his intention was to give all his creditors “then and thereafter existing ” the benefit of the security, and without all the evidence before us we cannot see that such was not his intention.

If however the claim of these defendants is that, by force of these letters operating as a contract with them on the part of Hugo, they acquired a right to the security above other creditors to whom such letters were not written, and especially above later creditors, then it becomes a decisive consideration against their claim that these letters are not a part of the deed, and so do not appear with it on record, and therefore cannot affect the rights of later creditors, who are represented by the trustee in insolvency.

And indeed it is an answer to the entire claim of the old creditors that the deed of which they claim the benefit does not disclose its object as security, but is an absolute deed, and therefore of no validity against later attaching creditors or against the trustee in insolvency, who represents all the creditors alike. Ives v. Stone, 51 Conn., 446 .

The court allowed to the plaintiffs, and decreed that there should be paid from the avails of the property, the sum of $295, being the expenses incurred in the prosecution of this suit. The appellants objected.

In cases of this character, where one incurs expense in rescuing property belonging to many, a court of equity has power unquestionably to direct that the expenses so incurred shall be paid from the common fund. The justice of such an allowance in this case is manifest. The objec *238 tion comes with, ill grace from these appellants, who, by their attempt to appropriate this property to their own exclusive use, have made it necessary to incur this expense. Had the court gone further and required them to pay the taxable costs, they would have had no reason to complain. This is not a question of costs proper. Hence the statute of 1881, providing for taxable costs, and directing that in difficult and extraordinary cases the court may in its discretion make a further allowance of not exceeding one hundred dollars as an attorney fee, has no application to the case.

The reasons of appeal raise the question whether S. E. Merwin & Son, the original plaintiffs, have any interest in the property in question, for the reason that their debt accrued after the deed was given. This point was incidentally alluded to during the argument, but was not seriously pressed, aside from the other points in the case.

They clearly have an interest in the property. It was not sold for a valuable consideration. The grantees held it, not for themselves, but for creditors; not for existing creditors only, but all who might thereafter become creditors. The property in equity sustained the same relation to creditors that it would if the title had remained in Hugo.

There is no error in the judgment complained of.

In this opinion the other judges concurred.