Case ID: tenn_36/html/0271-01.html
Source: Caselaw Access Project
Author: {"author": "CakutheRS, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Alice P. Searcy et al vs. Daniel F. Carter et al.
    
    Fraudulent Conveyances. Rights of creditors and purchasers. Voluntary donee. Chancery jurisdiction. Statute of limitations. A Court of Equity, ■while it repels the fraudulent grantee of property from vindicating Ms title to the same, can, in a contest with bona fide purchasers, allow a voluntary donee under him to occupy no better ground. And the operation of the statute of limitations, which in another forum might be held to perfect a title which had its beginning in fraud, would in such case, in the view of a Court of Equity, be nugatory for that purpose, and the party be remitted to litigate his rights at law.
    FROM STJMNER.
    The complainants filed this bill in the Chancery Court at Gallatin, to have their remainder interest in certain slaves under the will of William Bracken, deceased, asserted and secured. They are the children of Reuben Searcy, who was living at the time of the filing of the bill, and to whom the slaves were bequeathed for life by the testator, with remainder to his children. They allege that said slaves were sold by their said father many years since to Daniel E. Carter and others, who are made defendants to the bill. It is alleged in defence that said slaves were the property in fee of said Reuben Searcy; that many years ago he made a collusive and fraudulent conveyance of them to the testator, to hinder and defraud his creditors; that said testator participated in said fraud, and in his will made the bequest of the life-estate to the said Reuben Searcy, with remainder to his children, in prosecution of the original fraudulent purpose; that the several purchasers had given for said slaves a fair consideration, and for many years had held them adversely under their respective purchases. The complainants insist that whatever might have been the character of the original conveyance from their father to the testator, yet the latter, by an adverse possession of more than three years, had perfected his title, and had a good right to bequeath said property as his own. Upon this point of possession the testimony is conflicting. There are other matters of allegation and defence which it is unnecessary to notice here. At the September Term, 1856, Chancellor Ridley gave a decree in favor of the defendants, dismissing the bill. The complainants appealed.
    Head and TuRHER, for the complainants.
    Upon the hypothesis, as is contended by the defendants, that the conveyance made by Reuben Searcy to William Bracken on the 23d of October, 1827, was executed to hinder and delay the creditors of Searcy, and therefore void, we argue,
    1. That the defendants are not creditors of Searcy. The slaves were purchased by them from Searcy himself, who made bills of sale. None of the negroes were sold under execution. But, if insisted that the money paid by Bunton was applied to the payment of the McAuly debt, we contend that Bunton thereby has no right to be subrogated to the rights of the creditor, McAuly. To entitle a party to be subrogated to the rights of another, he must have been previously holden for the debt, or paid it, in order to protect his rights. A mere voluntary payment or advance of money, or purchase of property levied on, "will not entitle the party to he substituted to the rights of the creditor. Sanford vs. McLean, 3 Paige, Ch. R., 117; Gfadsden vs. Brown, Spears’s Ch., 37; Bank of the United States vs. Winston, 2 Brock., 252; 2 Penn., 296; 3 Penn., 200. And if the defendants have no right to he subrogated to the rights of McAuly, they do not stand in an attitude to contest the validity of the conveyance, unless there is something else in the case.
    2. Neither can the defendants attack said conveyance upon the ground that they are subsequent purchasers for a valuable consideration. A conveyance, to he avoided by subsequent purchasers because fraudulent, must he made to defraud purchasers and not creditors. The defence made in the answer is, that the conveyance of the 23d Oct., 1827, was made to defraud creditors. Purchasers therefore cannot take advantage of the question of fraud, if it existed. 5 Watts, 378; 10 Ohio R., 162; 1 Rob. Yir. R., 500-539; 1 Story’s Eq. Jur., sec. 371; Rowland vs. Rowland, 2 Sneed, 545.
    3. A conveyance, although fraudulent, is not void as to subsequent purchasers who have notice of the conveyance at the time of their purchase. The defendants admit in their answer that they knew of the existence of the conveyance of the 23d Oct., 1827, prior to their respective purchases. They do not therefore stand in a position to attack said conveyance upon the ground of fraud. Anderson vs. Roberts, 18 John. R., 530; 5 Peters’s IT. S. R., 280; Shaw and another vs. Levy, 17 Sergeant & Rawle, 99-102; Bakin vs. Smith, 1 Sneed, 312; 8 Iredell, 340; 7 J. Oh. R., 65.
    To hold that a fraudulent vendor may sell to a purchaser, with notice of the previous fraudulent conveyance, would he in conflict with the whole current of judicial decisions in Tennessee as to the effect of such conveyance between the parties, their heirs, distributees, and privies. 1 Meigs’s Dig., 1008; 2 Sneed, 545; 1 Story’s Eq. Ju., sec. 371.
    4. The statute of 87 Eliz., and our act of 1801, in terms only apply to real estate. A conveyance of slaves, even if it is fraudulent, cannot be attacked by subsequent purchasers, because the statute of 1801 does not embrace personalty. See act of 1801; 1 Simmons & Stewart, 315; 7 Harris & John., 257-271; 1 Judge’s Alabama It., 58-61. This case and the one in 2 Murphy are conclusive of the question. Ball vs. Blany, 2 Murphy’s Law and Eq., 174. The adverse possession of slaves for three years, by a fraudulent vendee, vests in him a right to the slaves; and the statute of limitations commences running, as to creditors, from the date of their judgments, and, as to subsequent purchasers, from the date of the adverse holding. In this case there was an adverse holding on the part of Bracken for more than three years; and even upon the assumption that his purchase was fraudulent, his title became perfect. Tubb vs. Williams, 7 Humph., 371; Blanton vs. Whitaker, 11 Humph., 317; Beeves vs. Bougherty, 7 Yerg., 223-235; Jones vs. Bead, 1 Humph., 345, 346.
    5. By a careful analysis of the testimony, the Court will see that the conveyance of the 23d Oct., 1827, was not fraudulent.
    John J. White, for the defendants.
    
      This is in the nature of a hill for the specific execution of a contract, where the thing is demanded in specie, which is always addressed to the discretion of a Court of Chancery; and the Court will never interpose if there are any circumstances of fraud or even of suspicion in the case. See 9 Yerg., 298; 3 Hayw., 202; 2 Storvis Eq., secs. 750, 769, 770, 775. And in any case where a complainant’s claim originates in fraud, he is repelled from a Court of Chancery. See 5 Humph., 331.
    .This case at first view presents the remarkable feature of a testator, with but a moderate estate, having a wife and four children, the owner apparently of twenty slaves, devising seven of them to a brother-in-law, no relationship by blood existing between the testator and Searcy and wife, Bracken’s wife being Searcy’s sister. That is to say, the brother-in-law gets about three times as many of his slaves as his wife or any of his children; and which were 'worth at the time, according to the proof, more than one-third of the whole balance of the estate, the testator being always greatly attached • to his children, and never having previously, given them any portion of his property. These facts of themselves show conclusively upon their face that William Bracken was not the real owner of the slaves; that his claim was a fiction; and therefore, when making his will, knowing that they did not belong to his estate, he restores them to his brother-in-law. This, taken in connection with the manner in which Bracken originally acquired title to the negroes under the bill of sale of the 23d of October, 1827, shows clearly that the original transaction between Searcy and Bracken was fraudulent; that Bracken’s possession of the negroes was merely color-able — never really for himself, and as his own property, but merely to save appearances, and subordinate to the claim of Searcy, and holding for him.
    The record shows that on the 27th of April, 1827, suit was brought in the Sumner County Court by McAuly against Searcy upon a note executed by him and Spear-man for a large amount, which continued pending in the Court ■ until February, 1828, when final judgment was recorded against him; upon which, an execution was issued, and was returned, “Eo property found.”
    It was under these circumstances that this bill of sale of the 28d October, 1827, from Searcy to Bracken, was made of eight negroes — all the property he had subject to execution — made by a man greatly in debt, having been sold out by execution about 1827, to his brother-in-law, and for the alleged consideration of $2000. The slaves mentioned in the bill of sale are the same included in the devise to Searcy, with the exception of Moses, sold by Searcy to Bunton after the bill of sale was made, and Betsy, willed by Bracken to his wife — the devise to Searcy likewise including a child born after the execution of the bill of sale.
    But, further, the subscribing witness, whose character is vainly attempted to be assailed, proves distinctly the fraudulent object of the bill of sale — avowed by the parties at the time; the colorable character of the possession of Bracken, and his statements subsequently that he was holding the negroes for Searcy, except Betsy; that he said he had bought and paid for, and that she belonged to him.
    There is a mass of testimony furnished by witnesses of the highest character, perfectly irresistible, to show the original fraudulent character of the transaction between Searcy and Bracken; that the sale of the slaves on the 23d of October, 1827, was altogether colorable and fictitious; made palpably and sometimes avowedly by Searcy to defeat his creditors, particularly McAuly; no continued, open, adverse possession on the part of Bracken, claiming title for himself against the world, but a broken, interrupted, occasional possession, and all the time a holding for Searcy and his benefit.
    Look at the possession of Bracken in its various stages as proved by the witnesses. They establish these facts, that, so far as. Clement is concerned, one of the negroes mentioned in the bill of sale, Bracken never had possession of him except for about fifteen or twenty days, when he. took Clement and placed him under Foster, his overseer, and sent one of his own negroes to Searcy in his place; that all the balance of the time, to Bracken’s death in November, 1833, Searcy had him in his possession, making his crops, or hiring him out and receiving the hire, sometimes running him off to Missouri and getting the hire from there, once brought home by Colclough, who paid off the debt for which he was levied on, and then afterwards given up to Searcy, but Bracken at no period controlling him or getting Jiis hire; that after Bracken’s death, his executors disclaimed any title to him or the other negroes as part of Bracken’s estate, and Searcy still having the benefit of him; and, upon the sale to Bunton, uniting in the sale, which was one of general warranty; that Moses was in Bracken’s possession two or three weeks after the sale; then sent back to Searcy’s, where he remained till the sale to Bunton by Searcy in 1828, from which time he has always been in Bunton’s and his son-in-law’s possession as their own absolute property; that .Grace and her children were taken to Bracken’s, but sent back to Searcy’s soon afterwards; that they were sometimes at Searcy’s and sometimes at Bracken’s; but after the settlement with McAuly on the 5th of December, 1833, the negroes remained for some time at Searcy’s: the children were.too young to hire or to be of much advantage; but Grace the greater part of the. time being in Searcy’s actual possession, he hiring her out.when not engaged about his own business, and controlling her and children just like other owners of negroes; Grace being engaged in washing and various other home work, but being there with her children, all of them at various times, except Betsy, till Bracken’s death; and Grace herself, the mother, finally sold to Col. Meador, -living within one-fourth of a mile of Bracken’s since February, 1828, as the absolute property of Searcy, and always claimed by Meador as such; and the Heed made by Searcy; and no question ever made with him till her death a few years ago. The same state of things continued after Bracken’s death, the negroes passing backwards and forwards; and, as to any possession of Bracken, such as it was, the uniform tenor of his declarations and acts was, that it was a holding for Searcy and for his benefit, and not for himself; and if Bracken paid any money for Searcy, that was refunded to him by his keeping Betsy. And the very fact of Bracken bequeathing Betsy, one of the negroes he got from Searcy by the bill of sale of 23d October, 1827, and giving up the balance of the negroes, is of itself proof conclusive of the original fraudulent character of the whole transaction, and that Bracken was merely holding them for Searcy.
    The fact which is proved of the purchase of Moses by Bunton of • Searcy in 1828, is entitled to great weight in the cause. It is a perfect estoppel against Bracken and everybody else from saying this was a bona fide transaction in regard to the whole of them, for they all stand in the same category, and shows it was a mere holding for Searcy.
    I might refer, here to a similar fraudulent arrangement which Searcy attempted to make with his father-in-law in regard to his negroes before this with Bracken; also to the one made with another brother-in-law in 1827, in regard to his land and other property; and to the fraudulent conveyance of his negroes in 1827 to Benjamin Col-clough, previous to the sale to Bracken. These are circumstances that may well be considered in connection with this subsequent arrangement with Bracken.
    How, then, is the law upon this state of facts ? It is an entire instrument. If fraudulent in part, it is void as to the whole, even if a full price was paid for the property, which there was none at all. See 4 Yerg., 164, 556; 6 Humph., 509; 8 Ibid., 509. Any possession of Bracken was altogether colorable, and for Searcy’s benefit — a holding for him. It was never continued, public, notorious, adverse, or, in the language of Judge Spencer, (9 John., 180,) “exclusive of any other rights,” so as to give Bracken a title to the property by virtue of the statute of limitations. See, too, 7 Humph., 367; 8 Ibid, 663, where the principle is laid down that, to create a bar under the statute of limitations, there must be an actual and exclusive possession, accompanied by such circumstances as clearly indicate that the possessor is holding and claiming for himself, and in opposition to the rights of all others. Consequently, the negroes were always the property of Searcy: the devise of Bracken by his will could not operate upon them, and it was void.
    Under these circumstances, McAuly recovers his decree against Searcy. . The negroes are levied on, and then, to keep them together, and prevent them from being sacrificed, a private sale is made, and the money applied to the satisfaction of the execution. If the sheriff had sold the negroes, there could not be a doubt about the validity of the sale. Well, the negroes had been levied on; they were in the custody of the law, and liable to the satisfaction of the execution. . It is satisfied by the sale of the negroes: whether by the sheriff himself, or by the debtor with the sheriff’s consent, and the money applied to the execution, can make no difference in the judgment of a Court of Equity that only regards the substance of things.
    An equity of substitution, to be sure, cannot grow out of a wrong, (4 Humph., 309;) but there was no wrong here inflicted by Bunton upon the creditors or anybody else: it was for the benefit of all parties. Here was substantially an agreement of all parties to a substitution, to give Bunton the lien of the execution, but let the sale be private instead of public — Searcy, the executors of Bracken, the sheriff, and McAuly, the creditor — and no wrong or injury inflicted upon anybody.
    We see many cases in our reports of the creditor’s right to sureties’ indemnity, and of the surety’s right to creditors’ collateral securities, (see 2 Meigs’s Dig., p. 992;) and without any agreement at all; and it has been often decided that a creditor may transfer the benefit of his execution to a third person who pays the money. Here the benefit of the execution might have been transferred to Bunton upon his payment of the money; and he might have sold the negroes under it, and become the purchaser. It then clearly follows that, upon the agreement of all parties, Bunton might purchase the negroes, and pay off the execution with the proceeds. See 1 Story’s Eq., sec. 493, note, et seq.; sec. 499, note; secs. 1227, 1228, 1229; 2 Humph., 524.
   CakutheRS, J.,

delivered the opinion of the Court.

This bill is filed by the complainants to assert and protect their title in remainder to twenty-five or thirty slaves, under the will of their uncle, William Bracken, made in 1833, which is in these words:

“I lend to my brother-in-law and' friend Reuben Searcy and his wife Polly, my negro woman Grace, and my negro man Clement, and Grace’s children, to wit, Pat-sey, Honor, Jane, John, and Harriet, during their natural lives; , and at their decease to be equally divided among the children of him, the said Reuben Searcy.”

Bracken left a wife and four children, and an estate of between eight and nine thousand dollars, exclusive of these slaves, then eight in number, and worth about $3000, and including fourteen other slaves.' The said slaves have now increased to twenty-five or thirty, and are held by the various defendants under sales and titles made by Reuben Searcy after his bill of sale to William Bracken in 1827, which the defendants insist was fraudulent. At the time of this conveyance to Bracken by Searcy in October, 1827, the latter was largely in debt, and one of his largest creditors, Daniel MeAuly, had a suit then pending against him, in which judgment was recovered the next year, in February, for $1390. The bill of sale to Bracken purports to be on the consideration of $2000. The proof is very conflicting as to the possession after this date up to the death of Bracken. It seems to have been of a shifting character, and in neither uniformly and continuously; but the preponderance of the evidence is, perhaps, that the negroes were mostly with Searcy and under his control. It is proved that after this conveyance Searcy was regarded as insolvent.

McAuly’s execution was levied upon these negroes soon after the death of Bracken, as the property of Searcy; and a sale of them was enjoined by Searcy and wife, upon the ground that the title passed from him to Bracken in 1827, and that 'the latter had made a valid disposition of them by his will. This bill was dismissed at the hearing in 1838, and an execution for the amount decreed — then upwards of $2000 — and it was levied upon the same negroes, then in the hands of Searcy. They were sold by Searcy, with the concurrence and approbation of the executors of Bracken, and the proceeds applied to the payment of the MeAuly debt.

A vast volume of proof has been taken on both sides, the most of which only serves to enhance the cost; and the case has been very elaborately argued by counsel. In the view we take of it, there will be no necessity for an extended discussion of the facts or legal questions raised in the argument.

It would seem to us to be impossible for any impartial mind to weigh the evidence without coming to the conclusion that the pretended sale to Bracken in 1827 was fraudulent in every sense of the word. It was most manifestly intended by both parties to protect the property against creditors, and hold and keep it for the benefit of Searcy and his family. This is not only left to inference, which would be plain enough from the circumstances, but the witness to the bill of sale, then the overseer of Bracken, who is not successfully discredited, but entitled to credit, proves that such was the distinct avowal and understanding of the parties at the time. But independent of this, the whole transaction and final result lead the mind irresistibly to the same conclusion. "There is no other way, looking to the motives which almost universally actuate men in Such cases, to account for the fact of Bracken’s giving one-third or fourth of his estate, regarding this as a part of it, to collateral relations, when he had a wife and four children of his own to provide for. It is most palpably absurd to argue, in the face of this single fact, if there were no others pointing unerringly to the same conclusion, that Bracken had paid up the consideration of $2000, and thereby made the property his own. Such an idea cannot for a moment be entertained. There is no sufficient evidence that the consideration was ever paid, or that there was any intention to pay it at any time. He perhaps paid a part of it, and for that reserved the negro girl Betsy out of the bequest.

The question then arises as to the effect of the fraudulent character of this sale upon the titles of the parties before us. It is not controverted that the contract was binding upon the' parties, and passed the title from Searcy to Bracken, as between themselves, but not as to creditors. Here the contest is between the legatees of Bracken on the one side, and purchasers for a full and fair consideration from Searcy on the other. A Court of Equity will not extend its relief where the property has passed from the covinous and voluntary grantee to a bona fide purchaser for a valuable consideration, without notice. Where the question is between a bona fide purchaser from the fraudulent or voluntary grantor on the one side, and from the grantee on the other, the preference will he given to the prior title. 1 Story’s Eq., sec. 434. But the case before us does not fall within this principle, because the complainants do not stand upon the meritorious ground of purchasers, but they are merely "voluntary donees or legatees of the fraudulent grantee Bracken, while the defendants have the merit at least of being purchasers for full consideration from the covinous grantor Searcy. ■ These volunteers, claiming without consideration, can surely occupy no higher ground than the testator. Could he have succes-fully invoked a Court of Equity against these defendants holding under a purchase from Searcy ? Would not the Court repel him at once, because of his participation in a fraud, without further examination of his case? Certainly there is nothing better settled in our jurisprudence. Can voluntary claimants under him stand in any better condi■tion ? But it is said that the title of Bracken was cured of all its infirmities, if any existed, by the statute of limitation, running upon a continuous, adverse possession of three years and more by Bracken before his death, and, after that, the possession of Searcy was a continuation of the same title, thus made perfect under the will, which was consistent with that of complainants, as he had the life-estate. So the argument maintains that even if the fraud existed in the first instance, so as to leave the title exposed to the creditors or purchasers of Searcy, it was no longer so after the statute had done its office upon the possession of its vendee. We have heretofore stated that the proof before us did not make out a case of continuous, uninterrupted, adverse holding on the part of Bracken, to give' application to the act of limitations; hut even if it did, we would hold that neither a fraudulent vendee nor volunteers under him can demand the active interposition of a Court of Equity for the declaration or protection of such a title. Whatever the effect might he at law, under the all-curative power of the statute, a Court of Equity will withhold its hands on account of the original taint of fraud in the transaction. Whatever stain was upon the hands of the testator is communicated with the gift to those of his legatees. They cannot, then, he heard to claim the benefit of the statute, or any other right springing out of such corrupt transactions, as complainants in a Court of Chancery. They were therefore correctly repelled by the Chancellor, and we affirm his decree.