U.S. Supreme Court
Nichols v. Levy, 72 U.S. 5 Wall. 433 433 (1866)
Nichols v. Levy
72 U.S. (5 Wall.) 433
1. Where a state court, interpreting a statute of its own state which gave such court jurisdiction to subject legal and equitable interests in real estate to the claim of creditors, decided that the statute embraced trusts like one in question (which judgment creditors were seeking to set aside), and that it exempted the property embraced by the trust from liability to such creditors, this Court followed that construction of the statute and sustained the trust, though they remarked that if the question had been to be treated by them on general principles of jurisprudence, and independently of the state decision on the statute, the judgment would necessarily have been the other way.
2. An estate in vested remainder is liable to debts the same as one in possession. Hence, where creditors seek to subject, by bill in equity, to their claims an estate in such vested remainder, and it is decided that they cannot do it, the matter will be considered as res adjudicata if they afterwards try to levy, by execution, on the same property when, by the death of the tenant for life, it has become an estate in possession.
In the above court, James Beal Nichol and John Nichol, Jr. chanroblesvirtualawlibrary
filed a bill for an injunction to restrain Levy and thirty-six others, different mercantile houses, from selling, under executions at law which these houses had obtained against them, certain lands in which they, the said J. B. and J. Nichol, were interested, the ground of the bill being that the said lands were not liable to be sold to satisfy the judgments in question. The court refused to grant the injunction, and this appeal was taken.
The questions made in the case were:
1st. Whether the matter of the liability of said lands was not res adjudicata in favor of the Nichols in a certain other proceeding hereinafter mentioned in which they were defendants? and
2d. Whether, as an original question, they had any such estate in the lands as was liable to execution at law?
The case was thus:
The appellants were grandsons of one Beal Basley, and having been engaged in mercantile business, and failing in it, had become heavily, if not hopelessly, indebted. Their grandfather, desiring to provide for his grandsons, these young men, but unwilling that his bounty should go simply to pay their debts, executed, in 1849, a deed, conveying certain lands (including one tract of 308 3/8 acres) to one John Nichol, Sr., upon trusts that the trustees should permit the said Beal Basley to occupy and enjoy the lands &c., during his life:
"And after his death that the said John Nichol, Sr., will permit the said J. B. Nichol and John Nichol, Jr., jointly or in severalty, according to any division into two equal parts that may hereafter be made between them, to have, possess, use, occupy, and enjoy the said property, and receive the rents, issues, and profits thereof, so that neither the said property nor the rents, issues, and profits thereof shall ever be liable for any of the present now existing debts, whether due or not due, or now existing contracts of the said J. B. Nichol or John Nichol, Jr., or either of them, or to any encumbrance, liability, or lien that they or either of them or their property are now subject to for said debts or contracts, or by any acts, defaults, or transactions of their own, whereby they
may attempt to make the same liable for said debts or contracts, and after the present debts and liabilities of the said J. B. Nichol and John Nichol, Jr., shall have been extinguished and they entirely discharged therefrom, then the said John Nichol, Sr., shall hold said property, and every part thereof, in trust, to convey the same to the said J. B. Nichol and John Nichol, Jr., in fee and absolutely, either as tenants in common or in severalty, and in such manner as may be agreed on by and between the said J. B. Nichol and John Nichol, Jr."
John Nichol, Sr., the trustee, died, and the legal estate in the lands descended to his nine children, two of whom were James Beal Nichol and John Nichol, Jr.
Subsequently, and during the lifetime of the grandfather, in August, 1854, certain creditors (in number thirty) of the two grandsons having obtained judgments upon debts existing after the conveyance was made, filed bills in chancery against them and the heirs of the deceased trustee, in Tennessee, praying a sale of their interest in the lands so conveyed. These suits were consolidated and tried together. The bills having set forth the deed, judgments, and the case of the creditors on them, concluded:
"From the foregoing statement of facts your honor will readily perceive that said James B. and John Nichol, Jr., are invested with at least a remainder interest in fee in said tract of 308 3/8 acres allotted to them as aforesaid; that the legal title to said tract being in John Nichol, Sr., or his heirs, the same is not subject to execution at law."
The prayer was that the premises being considered, and as the complainants had no remedy at law, the "interest" of the two grandsons Nichol in the property should be sold, and the proceeds applied to the payment of the judgments.
The chancellor decreed that the property could not be thus applied, either under the general jurisdiction of the court, or under an act of the Legislature of Tennessee by which it was sought to render it liable, notwithstanding the terms of the deed. And the Supreme Court of Tennessee affirmed this decree. chanroblesvirtualawlibrary
The statute of Tennessee referred to, authorized certain proceedings to subject equitable interests to the payment of judgments obtained against the defendant, at law. It declared:
"Section 1. That a bill might be filed"
"to compel the discovery of any bank stock, or other kind of stock, or any property, or thing in action, held in trust for him, and to prevent the transfer of any such stock, property, money, thing in action, or the payment or delivery thereof to the defendant, except where such trust has been created by, or the fund has proceeded from, some person other than the defendant himself, and is declared by will duly recorded, or by deed duly proved and registered."
"Section 2. That the court might decree payment of the judgment out of 'any property, stock, money, or things in action, belonging to the defendant or held in trust for him, with the exception above stated, which shall be discovered by the proceedings in chancery.'"
"Section 4. That when service could not be made at law, and a judgment obtained, and also where the demand was of a purely equitable nature, a court of equity should have jurisdiction to subject legal and equitable interests in every species of stock and other property, with the exception hereinbefore stated, and also in real estate."
In March, 1861, the two grandsons made partition of the land by deed, and in April, 1860, sold portions of it.
In May, 1860, the grandfather, Beal Basley, died, and immediately thereafter the same thirty judgment creditors above-mentioned, and seven others, who had not joined in the former proceedings, caused executions to be levied upon the entire tract of land in question, and it was according who had not joined in the former proceedings, caused executions to be levied upon the entire tract of land in question, and it was according who had not joined in the former proceedings, caused executions to be levied upon the entire tract of land in question, and it was accordingly advertised for sale. Whereupon in August, 1860, James Beal Nichol, and John Nichol, Jr., the grandsons provided for as above mentioned, filed a bill in the circuit court of the United States, for an injunction to prevent the sale, setting forth the proceedings hereinbefore mentioned by which they contended the creditors were estopped, and also relying upon the exemption of the property, according to the terms and conditions of the trust under which they held. chanroblesvirtualawlibrary