Case ID: scl_19/html/0016-01.html
Source: Caselaw Access Project
Author: {"author": "Harper J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Jane Smith v. Wm. D. Henry.
    The law allows a preference5™ one creditor over wm'not anaavantagrío jtors, as the price cnee.
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      Tried at York — Spring Term 1832, before Mr. Justice Earle, who made the following report of the case.
    
    This was an action of Trover for a negro girl, named Viney. The plaintiff claimed her by purchase and of sale from Henry Mtachcm. The bill of sale was dated 15 March 1823, included four negroes, a and her children, of whom Viney was one. The consideration expressed was either seven or eleven hundred dollars (the word being written thus “ a leven”) and three notes of hand amounting to $210. Mieachem was indebted to the plaintiff at the time of the sale about $400; she gave him an order on the ex-exutor or her fathers estate for the portion due her, which she estimated at $400, and he at $300, and those sums with the notes formed the consideration paid by plaintiff* for the negroes, being $910 or $1010. on a settlement with the executor had the sum of $400 allowed him on the order, so that the true consideration was $1010.
    The plaintiff is the sister of Meachenfs wife, and k’s family as a member of it since December 1820, until the present time. When she removed there she had a negro girl whom she hired out from 1° year both before and after her removal. She aiso bought another girl or woman who had children, and she was also hired out; sometimes Meachem him-gave her part of the crop for the latter. After the sale of the negro Phillis and her children, Viney and the others mentioned in the bill of sale, they remained at Meachem’s as before; they sometimes worked in the field and were then under his control, somc-times in the house under the plaintiff. He paid no hire for them nor was there any agreement about their work or that he should feed or clothe them for their She clothed them; it was thought by the witnesses that their labour was not worth more than their victuals and clothes.
    The girl Viney was taken in execution as the prop- ■ erty of Meachem, by tbe defendant as sheriff, and sold. The levy was in September, 1823, and the sale in January, 1824; and the question on which the case turned was, whether the sale to the plaintiff was fraudulent. Meachem was largely indebted, not only embarrassed, but obviously about to become insolvent. He had purchased the same negroes from Alfred M. Hunt in October 1820, at the price of $1199, a large proportion of which was yet due, for which he was then sued; the writ was served on him Feb. 25,1823.
    Other suits were pending against him for amounts, and judgments were actually obtained March Term, 1823, to the amount of more than $2500. Under one of the executions thus obtained at March Term, the girl Viney was sold, they were mdla bona for the balance, and no part of them has since been paid; Meachem himself having sworn out of jail.
    Meachem, besides these debts, had given bond with security as the guardian of his wife’s brother John C. Smith. At the time of the sale to the plaintiff he had not received from the executor, the share of his ward, at least only a small sum. Bartlett Meachem, who had purchased a tract of land of the estate, had paid ■$1200 on his first note for the purchase money. Of this sum Meachem received $600 on account of his own share in right of his wife, and borrowed $600 from the executor for which he gave his note. This note is yet in the hands of the executor unpaid: and there has been no settlement between Meachem and the executor concerning the share of his ward, though both swore that it had been paid to Meachem. It was thus explained by the latter: With the view of settling with his ward who was about to come of age, he contracted to buy of Bartlett Meachem, a tract of land for his ward, 110 acres at $10 per acre. Bartlett Meaehem’s note to the executor for the balance of the price of the land was put in suit in February 1823. When Henry Meachem made the sale to the plaintiff, he procured a credit to be entered on Bart-Lett’s note for $800, composed of $400 on the plaintiff’s order, and $400 on account of John C. Smith the ward.
    He also transferred to Bartlett the three notes he received from the plaintiff for $210, making the sum of $1010 paid for the land which was conveyed to the ward, and has obtained his entire release from all claims on account of the guardianship. But it could not escape notice, that since the sale, there has been no settlement between the plaintiff and Meachem, although he received $400 on her order, which in the bill of sale was estimated at $300; nor any settlement between the executor and Meachem concerning the share of John, C. Stnitk and this note of $600, yet both swore that the whole, or nearly the whole, had -been paid to Meachem; but neither could tell how, or when, or how much : and although Meachem had the release of the ward, he could shew no settlement by which the amount due was ascertained. In fact he had given him the land for an acquittance.
    In relation to the fairness of the sale to the plaintiff, and the objects, Meachem was the principal witness. He swore that his object was to prefer some of his creditors to others. He expected judgments would be obtained against him at the ensuing March Term, and he made the sale before they could bind his property, in order to avoid the effect of them. His motive was to pay the plaintiff what he owed her, and to raise funds to enable him to settle with his ward, and thus save his securities on his guardianship bond. ,He did not communicate to the plaintiff his views in making the sale, but she knew that he was largely indebted; he told her that he should be obliged to sell his property; she knew that these were the same negroes he had purchased from Hunt, and that he had. not paid for them ; she knew that Smith Colburn had brought suit for his debt (the negro was sold under his execution) but he told her she would be safe in the purchase. After Viney was sold, the plaintiff sent off the others or sold them to prevent them from being taken under Hunt’s judgment.
    
      Shortly before the sale to the plaintiff, Henry Meachem sold to his brother Samuel, another negro, woman for $400; this is also yet in his possession, and has been ever since; but he has promised to pay hire under a contract from year to year. About the same time he also sold his land to Capt. Person, to whom he was indebted in a considerable sum, for $1050, which was a fair price, and Person paid him the balance after discharging his own debt. He has continued to live on the land at an annual rent for which he gives his notes. It was Indian land (Catawba) and Person has taken out a new lease for it and pays the Indian assessment. Meachem since swearing out, has owned no property ; claims nothing on his plantation, but his style of living is as usual, and the plaintiff lives with him.
    There was contradictory testimony on the subject of the sum expressed in the bill of sale, whether it was seven or eleven. On the evidence the jury might well have found it “ seven,” and I think such was their conclusion. If it was so, then the plaintiff had paid the stipulated price.
    It was clear too that the sum of $400 was actually due to her, and if Meachem was to be believed, the balance had been actually applied to the discharge of a subsisting obligation. He had not actually received the funds of the ward, but he owed the estate ; and by settling with the ward, he might well conclude he would pro tanto discharge the debt to the estate which was in arrears to the ward.
    I ought to add that there was no attempt to discredit Meachem by impeaching his veracity or attacking his character; and on the contrary there was an offer to sustain it.
    The case was submitted to the jury under a charge in conformity to the opinion of the Court in setting aside the former verdict. I considered the main question arose out of the possession of Meachem after an absolute sale and conveyance. Had I felt at ■liberty to deviate from decided cases, I should have held that there was conclusive evidence of fraud, both in the vendor and vendee. On principle and authority 1 conceive that the true doctrine : it is so in England* and with deference, I think it should be so here. I left it to the jury to say whether the explanation was so clear as to leave no room for doubt as. to the fairness of the sale. The only circumstance proved on this point, now, in addition to the evidence on the former trial, is that the negroes were not worth hire, that their labour was not worth more than their victuals and clothes. But still there was no agreement even on that subject.
    The jury found for the plaintiff $350. The value was proved at $275 to $300 and hire at $15 or 20 per" annum for the girl alone. She might be worth hire, although the family, a woman and children, might not.
    B. J. EARLE.
    The defendant appeals on the grounds; First, that according to the evidence, the sale was fraudulent and void as to creditors.
    Second, that the verdict was for an amount greater than the value of the negro as proved on the trial, and it was also proved that the negroes were not worth hire.
    Williams, for the motion.
    Cited this case, 2 Bailey, 118. Ib. 205. 1 Eq. Rep. 345. 2 T. R. 587,
    Herndon & Hill, contra.
    Cited, 3 T. R. 618, 620, and note (a.) Twynes case, 3 Coke, 80. 10 Com. Law Rep. 452. 10 Vesey, 139. 5 Taunton, 823. 4 Barn & Cress, 652. 1 Maulé & Selwyn, 251. 1 Brod & Bing, 169. 3 Cowen, 161. 2 Con. Rep. 125. 1 Nott & M’Cord, 334. 1 M’Cord, 228. 2 M’Cord, 362. 4 M’Cord, 294.
   Harper J.

The presiding judge remarks that he considered the main question to arise out of the possession of Meachem, and that if he had felt at liberty to deviate from decided cases, he should have held that, conclusive evidence of fraud both in the vendor and the vendee, considering that on principle the true doctrine. I agree with the presiding judge, with such qualifications as I shall proceed to express.

This is distinct from the class of cases we have lately had frequent occasion to consider, where a voluntary conveyance is made by a person who afterward proves to be insolvent. In this case there was a valuable consideration, and from the finding of the jury we suppose an adequate one. It steers clear, also, I think, of another class of cases ; such as that of Cadogan v. Kennet, Cowp. 432, and that of Foley v. Burnell, there reported in a note, Jarman v. Woolloten, 3 T. R. 618, and Haselenton v. Gill, ib. or Arundel v. Phipps, 10, Ves. 140. where the retaining of possession by a person who had made a conveyance of goods, was held not to be fraudulent because the possession was in pursuance of the trusts of the deed. Most of the cases mentioned, were those oí a husband’s retaining possession of property which he had conveyed on valuable consideration to the separate use of his wife. But this was not like that case, tho’ the plaintiff and Meachem lived in the same house, her right to control her own property was not in any degree subject to him. The possession was exclusively in the individual who had the use and servicés of the slaves, and as distinct as if they had lived apart. Meachem had the entire possession.

The case of Edwards v. Harben, 2 T. R. 587, is the leading case, in which it has been held, that if a man sell goods and continue in possession as visible owner, this of itself constitutes fraud, or is conclusive evidence of fraud. The determination is that unless possession accompanies and follows the deed, it is fraudulent and void. It has been supposed that this has been overruled or departed from by subsequent decisions. But upon the examination which I have been able to make of the several cases, I think it not impossible to reconcile them. It appears to me that the true ground on which the determination in Twyne’s case (which is the foundation of our doctrine on this subject) principally rested, has not been (if I may venture to say so much,) fully apprehended in many of the subsequent cases. In Edwards v. Harben, the ground chiefly relied on in argument, is, that by allowing the vendor to retain possession after the sale as apparent owner, the vendee enables him to obtain a false credit; this would only apply to subsequent creditors, who trusted him on the faith of the property, and the creditor in this case was an antecedent one. It would not do to say that this of itself constitutes fraud, for then every one who lends or hires property to another, a merchant who furnishes a shopkeeper with goods on credit, and thus enables him to hold himself out as owner, and obtain credit, would be guilty of the same sort of fraud. Then it was argued with respect to antecedent creditors, that it tends to delay and hinder them, that relying on the appearance of property in the debtor, they are prevented from taking proper means to enforce their demands ; but in that ease as well as in the one before us, the debtor conveyed the whole of his property, and whether immediate possession had been taken by the vendee or not, antecedent creditors would have been equally defeated ; in such case then, it can not be the failure to take possession by the vendee, which operates the fraud on such creditors. The true view seems to me to be this: the law allows a debtor to give a preference to one creditor over another, and this is giving latitude enough ; but it will not allow him to secure an advantage to himself, at the expense of creditors as the price of such preference. If a party indebted to several, goes to one of his creditors, and says, “ my whole property is not more than sufficient to pay you; I will give you the preference, however, and assign it to you, provided you will allow me to have the use of it for a stipulated length of time or until I work out the debt,” and this is assented to by the debtor — this is fraud in both. The debt- or gains what he is not entitled to, at the expense of creditors, and enjoys the property independently of them ; and the favored creditor gains a pre ference by enabling the debtor to commit this in justice to the rest. He gives a bribe for the preference. But if such a stipulation, were made it would be privately done between the parties and incapable Of proof.

When, therefore, a debtor has made an assignment to a creditor who permits him still to retain possession of the property, and use it as his own, the law reasonably infers, and the inference is incapable of being rebutted by proof, that, there was such a stipulation or understanding between them; or if we could be sure that there was no such express understanding, but that the debtor had assigned in a tacit confidence that he to whom the preference was given would shew indulgence and permit the debtor still to enjoy the property — this would be done with a corrupt purpose, to which the creditor would make himself accessory, by allowing the debtor to retain and use the. •property. Such I understand to be the reasoning in Twyne’s case; “for although it is on true and good consideration, yet it is not bona fide, for no gifts shall be deemed bona fide within the said proviso, which is accompanied with any trust; as if a man be-indebted to several persons in the several sums of £20, and hath goods of the value of £20, and makes a gift of all his goods to one of them in satisfaction of his debt, but there is a trust between them that the ■ donee shall deal favorably with him in regard of his poor estate, either to permit the donor or some other for Mm, or for his benefit to use or have possession of them and it is contended he shall pay him his debt when he is able, this shall not be called bona fide within the said proviso.”

And again: “when a man greatly indebted to sundry persons, makes a gift to his son or any of his blood without consideration but only of nature, the law intends a trustbetween them, seil: that the donee would in consideration of such gift being freely and voluntarily made to him, and also in consideration of nature, relieve his father or cousin, and not see him want who had made such a gift to him.”

I think a material circumstance is adverted tp by-Lord Eldon in the case of Kidd v. Rawlinson, 2 Bos & Pul. 59, which if it be attended to, will serve to reconcile the apparent contradictions in the several cases on this subject. In that case the goods of one A. who kept a public house, were put up at sheriff’s sale, and bid off by the plaintiff, A’s brother-in-law', who out of kindness allowed A. to retain possession, of the goods. This was determined to be no fraud. It was left to the jury whether the plaintiffhad purchased the goods with a view to defeat any execution by any of the creditors of A. Lord Eldon laid great stress on the circumstance that the plaintiff was not a creditor, and did not buy the goods as a means of satisfying any debt of his own. He cites what is said by Buller in his Nisi prius, 258, and what has been supposed inconsistent with the determination in Edwards v. Harben. “ The donor continuing in possession is not in all cases a mark of fraud ; as where the donee lends his money to the donor to buy goods,'and at the same time takes a bill of sale of them for securing the money.” So in Watkins v. Birch, 5 Taunt, 823, the goods were bought at sheriff’s sale, and paid for, and then allowed to remain in the defendant’s possession on rent or hire. This was determined not to be fraudulent; andt in Leonard v. Baker, 1st Maule & Selwyn, 251, where an insolvent person assigned to trustees, and absconded, and the trustees advertised and sold the goods, and the purchaser left a portion of them in the possession of the insolvent family. / I think the English cases and also our own which have been supposed to depart from the decision in Edwards v. Harben, may be reconciled with it on the distinction to which I allude. The conclusion is, that if a person buys the goods of an insolvent, and advances his money at the time, and leaves them in the vendor’s possession, that circumstance is only one among the other circumstances of proof, to be left to the jury in determining on the fair or fraudulent character of the transaction.— It is not so conclusive of fraud as to be incapable of being explained. But if they are given in satisfaction of a previous debt, that is of itself conclusive evidence of fraud: and this is founded on the most obvi-ous reason. If a person pays a full and fair price for goods at the time of the purchase, or lends money to buy goods and takes a bill of sale to secure himself and from humanity or other good motive, leaves them in the vendor’s possession, this is no conclusive evidence of his being actuated by any corrupt or fraudulent purpose. He gains nothing by the transaction, and if we should suppose that the seller had a fraudulent design, still it would be a case in which the bona fide purchaser for valuable consideration should be protected. But if the goods are transferred'in satisfaction of a previous debt, the vendee does gain a most Important advantage. He is secured at the expense of other creditors, and if the vendee is then allowed to retain possession and use the goods, what conclusion so natural, as that this advantage was th e consideration on which preference was given ? This is the conclusion of law, the fact is generally incapable of proof. I have not referred particularly to the cases, and they arc numerous, which support the decision in Edwards v. Harben, nor is it necessary to do so.

It is enough to say that I believe no case comes in conflict with the decision itself, if it be placed on the proper grounds.

It is said in'“Shephard’s Touchstone, 60, “that if a debtor made a bill of sale to one of his creditors and remained in possession, using the goods as his own, this was fraud.”

Nor do X'think it can make a difference, that besides the. pre-existing debts an additional consideration is advanced by the donee at the time of the conveyance. This would open the door to the whole abuse against which the law intends to guard; the creditor might still secure himself and obtain a fraudulent preference and the debtor obtain an unfair advantage at the expense of creditors. The secret trust which the law regards as fraudulent would still be evidenced by the ■debtor’s retaining possession. I agree as a general rule with what was said on thé former hearing of this case before this Court, that the fraud of the vendor is of itself sufficient to avoid a conveyance. It must be taken subject, however, to the important qualification expressed by Lord Mansfield in Cadogan v. Kennet. But then such a construction is not to be made in support of creditors as will make third persons sufferers. If a voluntary conveyance for the purpose of defeating creditors be made to an infant or an idiot rvho is incapable of participation in the fraud, it is still void. A person is not allowed to retain a gratuitous advantage obtained for him by the fraud of another, Huguenin v. Basely, 14, Ves. 289. In such case no injury is done to the donee; he is put in no worse situation than if the fraudulent conveyance had never been executed. But where a person has bona fide paid his money for property, he is not to be made a sufferer because his vendor may have had a fraudulent intention of putting his property out of the reach of creditors, and making away with the money. To avoid such a conveyance would generally have the effect of causing the vendee.to loose the property and his money too; at all events he would be exposed to great hazard and inconvenience. This does not seem to me to apply to the case of a person receiving a conveyance in satisfaction of a previous debt, the donor having had a fraudulent intention to defeat other creditors and expecting an advantage from the indulgence or gratitude of the donee. In such a case it is not difficult to say, that an injury is not done to the donee by avoiding the conveyance, he is in no worse situation than if the fraudulent act had never been committed. If, therefore, Meachem was induced to give a preference to the plaintiff over his other creditors in the expectation that she would permit him to retain and use the property which the law infers, was his object, and she has answered his expectation in this respect, it seems to me to come within the class of cases where the fraud of the vendor alonéis sufficient to vitiate the conveyance, though the vendee may have had no previous accession to it.

And what is the case before us ? Meachem being indebted to an amount far beyond his property, then-. being suits depending against him, on which judgments were about to be recovered, makes a convey-anee of his whole remaining property, to a near con-nexion residing in the same house with him, and after the conveyance, remains in the possession and enjoyment of the property as apparent owner ; living as he himself states, in the style in which he had been accustomed to live, though entirely without property. Hardly any of the circumstances relied on as badges of fraud in Twyne’s case are wanting in this. I think the jury must be instructed, that, from these circumstances, the law draws a conclusion of fraud which is incapable of being rebutted or explained.

The motion is therefore granted.

O’Neall, J. concurred.