Case ID: sc-eq_11/html/0027-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Harper, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Union Bank vs. A. V. Toomer.
    General rules for determining whether conveyances be fraudulent, and the cases on that subject considered. [*31]
    When a consideration is paid in order to avoid the conveyance, the Court must be satisfied of an actual fraudulent intention, and the preponderance of authority seems to be, that the purchaser must be a party to the fraud. [*32]
    ‘ S. II., being infirm and unable to manage her business, conveyed her land and most of her slaves to the defendant, he paying certain debts, (which, after inquiry, were believed to be all she owed,) and an annuity for her life equal to the appraised value of the property deducting the debts: after the death of S. H. judgment was obtained against her executors on a bond executed by her as surety, and which existed before the conveyance: on a bill by the judgment creditor to set aside the conveyance on the ground of inadequacy of price and charging that it was fraudulent as to creditors; there being no evidence that the defendant knew of this debt, or that fraud was intended, it was held that the conveyance was valid. [*38]
    Charleston, May Term, 1833. — Before Chancellor De Saussure, who pronounced the following decree :
    The object of the bill in this case is to have the benefit of a judgment at law, on a bond of the late Mrs. Sebina Hall, and for that purpose to set aside certain sales and conveyances of lands and negroes, made and executed by said Mrs. Hall to Dr. Toomer, the defendant, prior to said judgment, on the ground of fraud and inadequacy of price. There were two distinct questions made at the argument of the cause, for the consideration of the Court. 1. It was insisted that the bond executed by Mrs. Hall to C. B. Cochran (on which the judgment has been obtained) and by him assigned to the Union Bank, as a security for a bond given by Jacint Laval to C. B. Cochran, and assigned to the Bank, *was p^oo obtained from her by imposition and practices on her weakness and L confidence in Laval, and is not sustainable in a Court of Equity. 2. That if the bond and judgment thereon could be sustained, it would not affect the purchase made by Dr. Toomer, the defendant, from Mrs. Hall, which was bona fide, for valuable consideration, and without notice of the bond of Mrs. Hall.
    
      Evidence to a great extent was given at the hearing of the cause, applicable to both branches of the case. [The Chancellor here went into an examination of the first question, and after remarking on the evidence, concludes, that although the bond is not entirely free from the suspicion of being unfairly obtained, yet as a judgment at law has been obtained on it, and the executors of Mrs. Hall are not parties to this case seeking to set aside the judgment, he was bound to regard it as valid, — and then proceeds :]
    The second question is, whether the Court will set aside the conveyances of real and personal estate, made by Mrs. Hall to Dr. Toomer, the defendant, to let in the plaintiff and subject that property to the payment of the bond of Mrs. Hall. The plaintiff does not pretend that there was any lion on the property conveyed to Toomer; no judgment was obtained on the bond until some time after the sale and conveyance to Toomer. There is no proof that the purchase was made by Toomer to aid Mrs. Hall in protecting the property in question against her liability on this bond in particular; it does not appear that he knew of the existence of this bond. The question then is — Was this such a conveyance by Mrs. Hall to Toomer, as was fraudulent and void as to creditors ? The circumstances of the case were these: Mrs. Hall, a widow lady, advanced in life, of infirm health, not skilled in the management of property, being desirous of paying some debts and having a certain regular income, applied to Dr. Toomer to be the purchaser of her lands, and the greater part of her slaves, (reserving twenty). He was the son of her first husr band by his first wife;.part of the estate was derived from his kindness to her. Dr. T. had behaved so properly, respectfully and usefully to her, that she had great regard for him, and she confided in his kind treatment of the slaves she was about to sell, about which she was solicitous. Undoubtedly, though a transaction in which she wished to get a fair value for the property, there was a feeling of kindness towards Dr. Toomer, mingling itself in the transaction ; but it was considered a busi^9„-| ness transaction, in which fair dealing *was to be observed. Dr. J Toomer hesitated and came into the measure slowly and apparently with reluctance. When he acquiesced, appraisers of the property were named: forty-eight negroes and the land (the latter, it seemed, was thrown in at a nominal price) were appraised about §19,000. On the basis of their estimate a contract was made. Respectable counsel were employed on the part of Mrs. Hall to attend to her interests, and indeed everything was done which caution and a determination that the transaction should be well considered and fairly conducted, required. There is no doubt of the fairness of the transaction, and Mrs. Hall, though infirm and weak, was more competent, with the aid of counsel and good appraisers, to form a sound opinion on a subject proposed by herself without solicitation of Dr. Toomer, and the papers deliberately read to her, in a ease where she was to get a valuable consideration, than she was to bind herself without consideration, as a surety for a large debt, without the advice or presence of any friends, (who were carefully avoided,) and for which her estate has been held to be bound. Having ascertained that the business of the sale to Toomer was conducted fairly and deliberately, and with full knowledge on the part of Mrs. Hall, the only question which remains for consideration is, whether the price was fair and adequate.
    
      On this question the decided cases have made or sustained certain clear principles. The absolute right of an owner of property is such, that he may give it away, without any valuable consideration, if he choose to do so, without prejudice to the rights of creditors, and so he may choose to sell it for a price short of its real value, and no person, has authority to question his acts and dispositions. The adequacy or inadequacy of price is a question for his own decision, and he may at his pleasure permit considerations of favor and kindness to mingle in the transaction. In a sale, this power of an owner is so complete that inadequacy of price alone is not considered sufficient to set aside a sale, unless the inadequacy be so enormous as to shock the common sense and the common feeling of right among men, when it then raises the presumption of fraud : or unless the transaction itself be accompanied by such circumstances as show great imbecility or ignorance on the one side, and contrivance and fraud on the other. In.the case before us, there are no such circumstances to lead the mind even to suspect fraud or imposition.' As to the price, it seems to be fair. The *payment of considerable debts, by a schedule furnished by Mrs. Hall, after diligent inquiry >- by herself and her friends, to the amount of upwards of $4000, and the stipulation to pay her an annuity of $1060 during her life, actually placed her in a more eligible situation than she was before, and made her more easy and comfortable.
    The annuity was paid during her life, which lasted six years, and made an amount which, with the debts of Mrs. H. assumed and payed by Dr. T., made it a fair price and reasonable bargain. It was true, as was urged on the argument, that Mrs. H. might have died within a' year, or a shorter time after the contract, when little or nothing had been paid on the annuity, and then the price of the estate sold would have been very low. But it is equally true, that Mrs. H. might have lived twenty years, and then the price paid would have been very high. Both parties ran this risk, and it formed part of their contract. There is, then, no ground to impeach the fairness of the sale to Toomer, and as his purchase was made and completed before any lien had been obtained by C. B. Cochran or the Union Bank, by judgment on her bond, it is not subject to the subsequent judgment. It is therefore ordered and decreed, that the bill of the plaintiff be dismissed with costs of suit.
    An appeal was taken from this decree, on the grounds:
    1. That the conveyance of the property by Mrs. Hall to Dr. Toomer, for a life annuity, wms not a sale for, a valuable consideration, as against a bond creditor existing at the time of the conveyance.
    2. That such a deed is void by the Stat. 13 Eliz., made for the relief and protection of creditors.
    3. That Mrs. Hall, taking back an annuity to the annual value of the estate, with security on the property itself for its payment annually, was tantamount to a continuance in possession, a circumstance which entitle creditors to relief in Chancery.
    
      DunJcin, for the appellant.
    
      Petigru, contra.
   Harper, J.

We do not think it necessary to investigate the first general question made in the Chancellor’s decree respecting the validity of the bond executed by the deceased Mrs. Hall to Cochran for the -1-0-11 security of Laval’s debt, on which the plaintiffs *have obtained J judgment. Admitting it to be valid, we do not think that the conveyance by Mrs. Hall to the defendant-can be impeached.

The general rules of law on the subject cannot be questioned. Dnder the Stat. 13 Eliz. C. 5, as well as at common law, a conveyance made by a person indebted, with intent to defraud Ms creditors, is void. With respect to the circumstances, however, which shall be sufficient evidence of the fraudulent intention, there is a diversity. If a conveyance merely voluntary be made by a person indebted, ■ this has generally been held sufficient of itself, to establish the fraudulent character of the conveyance. But, if it be upon consideration, and even upon full and adequate consideration, as in Lowry v. Pinson, 2 Bail, 324, still, if it appear that it was with the actual fraudulent intention to defeat creditors, it will still be void. If it was upon very inadequate consideration, this will be one of the circumstances from which the actual fraudulent intention may be inferred. But, however inadequate the consideration, if the transaction be bona fide, it cannot be impeached. This seems to be the sum of the authorities on the subject.

This would appear from the proviso in the Stat. 13 Eliz., that nothing therein contained shall extend to any conveyance made “ upon good consideration and bona fide,” to any persons “not having at the time of such conveyance or assurance to them made, any manner of notice or knowledge of such covin fraud or collusion, as is aforesaid.” In the case of Basset v. Nosworthy, Finch. Ch. R. 182, which was determined on the plea of bona fide purchaser for valuable consideration without notice, it appeared that the purchase was made at a very inadequate price. Lord Nottingham said, the question is not whether the consideration be adequate, but whether it is valuable. This is not inconsistent with Russell v. Hammond, 1 Atk. 15. Three deeds 'were executed in one day. For one of them a consideration of two hundred pounds was shown ; for the second, a consideration of one hundred pounds; for the last, no consideration appeared. Lord Hardwicke thought the last voluntary, though it was urged that all formed one transaction, and that it was inartificial to split them. He thought, however, the fact that the donor had reserved an annuity equal to the probable income for his own life, palpable evidence of fraud. This showed the transaction to be merely colorable, the donor being much indebted at the time. In Doe v. Routledge, Cowper, 105, a *321 Pei’son *not indebted, had made a voluntary conveyance. Desiring -J afterwards to defeat this, he made a nominal sale of the same premises at about one-tenth of the value. It appeared that the last grantee' knew of the former conveyance. Lord Mansfield held the first conveyance §bod, and of the last, said that it should be a bona fide transaction, and a fair purchase in the understanding of mankind; but it was manifestly a mere contrivance, and therefore void. In Stephens v. Olive, 2 Br. C. C. 90, the trustees of the wife having covenanted to indemnify the husband against the wife’s debts, this was held a sufficient consideration for the settlement on her. And so in Nunn v. Wilsmore, 8 T. R. 521, where it is said the Court is not particular as to consideration, if it be bona fide. The whole subject is very fully considered in Copes v. Middleton, 2 Mad. Ch. R. 556, and the cases reviewed. In that case, an uncle, insolvent in' his circumstances, shortly before his death conveyed to his nephew an estate, for a consideration which, according to the testimony, appeared to be about half its value. This was sustained, as from the circumstances it did not appear but that the transaction was bona fide; though the uncle’s kindness to his nephew might be supposed to have had an influence in inducing him to sell at a lower price. It is said a conveyance cannot be invalidated under the Statute 13 Eliz., if the defendant be a bona fide purchaser. Was it known to vendor-and vendee, that the estate was worth more than it was sold for ? It did not appear that the nephew knew the uncle to be indebted. In Sands v. Hildeith, 14 Johns. 493, the opinion of Chief Justice Spencer was expressed, that where there is a consideration, though the intention of the vendor may have been fraudulent, yet, under the statute of Elizabeth, the- conveyance is not void unless the purchaser were a party to-the fraud ; contrary to an intimation of opinion in the same case given by Chancellor Kent, who afterwards (3 Johns. C. C. 318) assented to the suggestion of Justice Spencer.

The cases show sufficiently, that where a consideration is paid, in order to avoid the conveyance, the Court must be satisfied of an actual fraudulent intention to defeat creditors, and in general the preponderance of authority seems to be that the purchaser must be a party to the fraud, notwithstanding what is said by Lord Northington in Partridge v. Gopp, Amb. 596, that it is the motive of the *giver, and not the knowledge of the acceptor, that is to weigh. Now, it is not even con- L tended in the present case that the defendant was a partaker of any actual fraudulent intention, and indeed hardly urged that Mrs. Hall had any such intent. The Court can see no reason to impute such intention to either

It is urged, however, that this, though in form a sale, made upon consideration, was in fact merely a gift. But this is the very question that has been considered throughout. It was in form a sale; money was paid. Was it such substantially and bona fide, or only a contrivance to provide for the defendant at the expense of creditors ? The transaction was this, forty-eight slaves, appraised at about nineteen thousand dollars, and some land, of the value of which we have no very distinct evidence, (a consideration of five thousand dollars, is stated in the deed,) were conveyed by Mrs. Hall to the defendant. He, in return, gave her his bond, conditioned to day off her debts specified in a schedule to the amount of upwards of four thousand dollars, and the grant of an annuity for life of one thousand and sixty dollars. This annuity is equal to the legal interest on the estimated value of the slaves, deducting the amount of the debts. It is urged that it is merely a gift under color of a sale, as if Mrs. Hall had conveyed the property to him in trust, first to pay off certain of her debts, next to pay the rents and profits to herself during life, with remainder to himself after her death ; or, .as if she had conveyed to him, charged with the payment of part of her debts and an annuity of one thousand and sixty dollars, for her life. But by this method of reasoning, every sale of property at an under value might be construed a gift of- the surplus. There is nothing to forbid a sale for an annuity, any more than for money in hand. The distinction between the cases supposed, and the present, is this, in those cases there is not even a colorable consideration moving from the grantor to the grantee. If the estate should not be sufficient to pay the debts, or, if, after payment of the debts, the income should not produce the annuity, the grantee would incur no personal liability. He would lose nothing in any event. If it should be more than sufficient for these purposes, the surplus would be a mere gratuity to him. But in the case before us, if the estate, by any unexpected casualty had perished, the defendant would have been personally liable for the debts, and must have paid the annuity, though the estate had not produced a cent of income. The payment of the debts and the annuity were ^plainly J regarded as the consideration both for the slaves and the land, and they formed one transaction. No doubt such a transaction might be merely colorable and fraudulent, as in the case of Bnissel v. Hammond, where Lord Hardwicke, upon the defendant’s proof of the consideration of two of the deeds, held the third, executed on the same day, to be ■voluntary, and the reserving of an annuity to the annual value of the estate to be a badge of fraud. But in every case the inquiry is, whether it be actually so. In general, I should say, that if a person greatly indebted and knowing himself to be so, should convey his whole property on a greatly inadequate consideration, perhaps such a one as the present, with no ostensible motive but to provide for his family, to one who might be inferred to have knowledge of the circumstances, this would be re.garded as colorable and void. But what are the circumstances of the present case ? The defendant took the utmost pains to be informed of all the debts of Mrs. Hall and provided for their payment, and he seems to have been unaffectedly reluctant to enter into the transaction at all. But, as I have said, no actual fraud is imputed to him. Then with regard to Mrs. Hall, she had the most urgent and substantial motives to make this arrangement, arising from her infirmity and imbecility to manage her property so as to make it produce her a support, and was prompted and urged to it by her confidential friends. There is great reason to doubt whether, at the time, she knew or recollected the existence of this debt. She retained twenty slaves, which, if estimated at the prices at which the .others were appraised, would have been sufficient to pay the debt; and if they had proved insufficient, her annuity might have been made liable, subjecting her to the most cruel embarrassment. Some of the slaves retained were favorite ones, whom she desired to emancipate, and which, of all her property, it should seem, she would have been most unwilling to render liable to be taken and sold for her debts. She was anxious for the comfort of her slaves, and had confidence in the defendant’s kind treatment of them. Under these circumstances, it seems to me that it would be extravagant to impute her conduct to the fraudulent motive of defeating the payment of this debt. We must regard the defendant as a bona fide purchaser for valuable consideration.

The decree is affirmed.

Johnson, J., concurred.