A creditor who, by the terms of a trust deed executed in good
faith by the debtor to secure payment of the debt, has the power to
order the land to be sold either by public auction or private sale
and to direct the trustee to convey to the purchaser, and the
amount of whose debt is thrice the value of the land, may accept
the land in satisfaction of the debt and cause it to be conveyed by
the trustee to the debtor's children as a gift to them from the
creditor without affording to other creditors of the debtor any
just cause of complain.
The case is stated in the opinion of the court.
MR. JUSTICE GRAY delivered the opinion of the Court.
This is a bill in equity by a judgment creditor of William E.
Spalding against Spalding, his children, William W. Rapley, William
H. Thomas, trustee, and George W. Bonnell, to set aside conveyances
of land in Washington and to have it sold and applied to the
payment of Spalding's judgment debts. The material facts of the
case, as appearing by the pleadings and proofs upon which it was
heard in the court below, are as follows:
Page 117 U. S. 371
The plaintiff's judgment was recovered on February 6, 1868. On
December 20, 1867, Spalding being indebted to Rapley in the sum of
$10,000, for which he had given him a promissory note, payable in
ninety days, and Rapley having endorsed other notes of Spalding to
the amount of $20,000, Spalding, by a deed in which his wife
joined, conveyed all his real estate in Washington to Thomas, in
trust to secure the payment of the note for $10.000 and to secure
Rapley from loss by reason of his endorsements. The trusts declared
in that deed were that in case of Spalding's failure to pay any of
the notes at maturity or interest thereon, the trustee should, upon
the written order of Rapley, sell the land by public auction; that
Rapley might at any time during the continuance of the trust direct
the trustee to sell the land or any part thereof at private sale to
such persons and upon such terms and conditions as Rapley should
deem most advantageous to all parties concerned, and make
conveyances accordingly; that the proceeds of all sales under the
trust should be applied first to pay the expenses of executing the
trust, then to pay, all the notes, and lastly to pay any balance
remaining to Spalding and wife, their executors and administrators,
and that the trustee should stand seized of any land remaining
unsold after satisfying the liens aforesaid, to the sole use and
benefit of Spalding's wife and children, and sell or mortgage it as
she should in writing appoint, and pay over the proceeds to her, or
invest them as she should direct.
Mrs. Spalding died without having attempted to exercise this
power, and all the land, except two lots, was sold by the trustee,
according to the deed of trust, for the sum of $22,046, and applied
to the payment of the notes endorsed by Rapley, and interest
accrued thereon.
On March 27, 1876, Spalding and Rapley made a final settlement
of all business between them, including the affairs of a
partnership which had existed between them in other lands from
before any of the transactions above stated, and Spalding at
Rapley's request, signed the following agreement:
"It is agreed this 27th day of March, A.D. 1876, between William
W. Rapley and William E. Spalding, of the City of Washington, in
the District of Columbia, in full and final settlement
Page 117 U. S. 372
of all their partnership affairs, and of all business heretofore
existing between them, that the said Rapley does release and convey
to George W. Bonnell (for such purposes as the said Spalding may
direct) all the right, title, and interest of him, the said Rapley,
in and to [six lots of land, designated by squares and numbers,
being the two lots aforesaid, and four others owned by Rapley] in
the City of Washington in the District of Columbia, and in
consideration of such release and conveyance the said Spalding does
hereby release and acquit the said Rapley from any and all demand
and claim whatever on account of their business aforesaid."
On the same day, Spalding, Rapley, and Thomas, as trustee,
executed a deed of the two lots to Bonnell, expressed to be in
consideration of the payment of the sum of $2,500. The value of
these lots was admitted to be $3,297. The record before us contains
no copy of the deed, nor any further statement of its contents.
But the oral testimony proves beyond controversy that no money
was actually paid for this conveyance; that at that time, Spalding
had no claim against Rapley; that no part of Spalding's note to
Rapley for $10,000 had then or has since been paid; that Rapley
decided to take the two lots in satisfaction of that debt to
himself, and authorized and directed this conveyance to be made
without a sale by auction in order to save expense, and with the
sole object of having the land held by Bonnell in trust for
Spalding's children as a gift to them from Rapley, and that Thomas
and Spalding joined with Rapley in the deed to Bonnell in order to
perfect the legal title.
The facts of the case being understood, the law applicable to
them is clear. There is no proof whatever that the trust deed from
Spalding to Thomas was made with any intent to defraud Spalding's
creditors. Under that deed, Rapley had the whole equitable title in
the two lots, and the right to direct Thomas to sell them by
private sale, for an adequate consideration, to pay the debt due
him from Spalding. He in effect paid a greater consideration by
accepting the lots in satisfaction of a debt for thrice their
value. He might cause them to be conveyed
Page 117 U. S. 373
to himself, to Spalding's children, or to any other person,
without exceeding the powers conferred upon him by the trust deed,
or affording to Spalding's creditors any just ground of
complaint.
Decree affirmed.