Case ID: dc_10/html/0379-01.html
Source: Caselaw Access Project
Author: {"author": "Cartter, Ch. J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHN GEORGE KILLIAN, ADMINISTRATOR DE BONIS NON OF WILLIAM SCHLORB, DECEASED, MARY MARGARET SCHLORB, EMMA SCHLORB, WEBELMINA SCHLORB, KATE SCHLORB, GEORGE L. SCHLORB, AND JOHN SCHLORB, v. WILLIAM E. CLARK.
    Equity. —
    No. 5322.
    I. Where a person conveys real estate in trust for the use of his wife, at a time when he is engaged in a prosperous business and is perfectly solvent, the law will not presume that he intended to hinder and delay a creditor whose debt was created several years after the conveyances were made. Fraud in such case is to be established by proof, and not by presumption.
    II. If, however, a voluntary settlement is made at or about the time the debt is contracted, a court of equity will set it aside at the instance of the creditors.
    III. A bill of review may be filed under a general rule of court announced in connection with this case, at any time within two years from the date of the decree sought to be reviewed.
    STATEMENT OE THE CASE.
    This is a bill of review to reverse two decrees in the original cause on the ground of error apparent on the face of the record.
    The bill of review sets out fully the pleadings and proceedings in the original cause, together with the decrees and the alleged errors therein. From the record the material facts appear to be as follows:
    On the 18th of August, 1858, 'William Sehlorb executed a deed conveying lots 6 and 9 in square 654, together with the goods and chattels in the building standing on said lots, to John Killian, since deceased, in trust for the use of his wife, the said Mary Margaret Sehlorb, and in case of his surviving her, the said trustee was to hold said property for- the benefit of said William Sehlorb. On the 23d of October, 1858, the said William Sehlorb purchased lots 5 and 8 in the same square from one John B. Kibby, and directed the same to be conveyed to said Killian, upon a similar trust, for the benefit of his said wife. On the 5th day of October, 1865, the said William Sehlorb purchased of one Henry J. Baker lot 2 in said square, and had the same conveyed to his infant son, George L. Sehlorb; and on the 21st day of December he purchased lot 3 in said square from Thomas B. Brown, and on the 3d day of May, 1866, he purchased from one Amos P. Beedle the north half of lot 7 in said square. The two last-mentioned lots were conveyed to Killian upon the same trust as those already mentioned. On December 23,1868, he conveyed lot 1 in said square, with certain goods and chattels described in a schedule thereto annexed, to said Killian, also on a similar trust, for the benefit of his said wife. The complainants in the original bill allege that the consideration for all these conveyances, extending from 1858 to 1868, was paid by the said William Sehlorb, and the deeds taken to the said Killian and his son for the purpose of hindering and delaying creditors.
    In the latter part of November, 1865, the said William Sehlorb commenced dealing with William E. Clark, and on the 26th of June, 1873, a judgment was rendered in favor of said Clark for $3,819.02 against John Killian, administrator of said William Sehlorb, who had previously died, upon which an execution had been issued and returned nulla bona.
    
    The said Clark thereupon filed his creditor’s bill against the parties now complainants in the bill of review, and asked that the several deeds already mentioned be declared null and void, so far as his interests were concerned, and that a trustee be appointed to sell, &c.
    The answer of Mrs. Schlorb in said original equity suit denied all fraud, and, on the contrary, charged the fact to be that the greater portion of the property was transferred eight years before any dealings took place between the said William Schlorb and the said Clark, and at a time when the said Schlorb was free from debt and engaged in a prosperous business, and the only lot conveyed in trust for the benefit of his wife, after the dealings commenced, was the one transferred in 1868, and that no balance at that time was due said Clark; that the indebtedness arose subsequent to said transfer and shortly before the death of said Schlorb. In regard to lot 2, it is alleged that the transaction occurred a year before the said dealings commenced, and that Clark could not, therefore, have trusted the said William Schlorb on account of said lot, as his name was not on the land records; that in regard to all the property which had been transferred to a trustee for the use of Mrs. Schlorb, no credit could have been given to said Schlorb, as the transaction took place many years before any dealings between said Clark and Schlorb, and could, therefore, in no way have contributed to the indebtedness set up in the bill of complaint. The allegations of fraud are repeatedly denied, and it is averred that Clark is the only person to whom the said Schlorb was indebted. Guardians ad litem were appointed for the minors, and the usual answer was put in for them.
    John Killian, the trustee, is dead, and. the complainant John George Killian is administrator de bonis non.
    
    Implications were filed to the answers in said equity suit, but no witnesses were examined. Two decrees were pronounced by the court, one dated February 17, 1875, setting aside the conveyances of lots 1 and 3 and the north part of lot 7 to John Killian, in trust as aforesaid. The proceeds of the sale of these lots being insufficient to pay the judgment of the said Clark, the court decreed on June 13, 1875, that all the conveyances of the other lots to Killian for the use of Mrs. Schlorb, and the conveyance to George L. Schlorb, be set aside and the premises sold, and the proceeds thereof applied to the satisfaction of said judgment.
    The bill of review assigns various errors in connection with the first of these decrees, to wit, that of February 17, 1875; that at the time of the conveyances of said lots 2 and 3 and the north part of lot 7, no balance could have been found against Schlorb in favor of Clark; that Clark could not have based his transactions with Schlorb on the ground that he was the owner of said lots, because Schlorb was engaged at that time in a prosperous and remunerative business, and such conveyances were made as a reasonable provision for his wife and children; that it is shown by the record of the action at law, which is made an exhibit to the original bill, that during a period of two yeái’s and eleven months just previous to the death of said Schlorb, the business transactions between him and the said Clark amounted to $99,502.83, which had all been paid, over and above the amount of said judgment.
    The third and fourth assignments of error in regard to the second decree, dated June 13, 1875, read as follows:
    “ 3d. It is shown by the auswers that said conveyances of said lots were not made with any fraudulent intent whatever.
    “4th. It is shown by the said bill of complaint of said defendant, William E. Clark, that said lots 2, 5, 6, 8, and 9 were conveyed to said John Killian, as trustee, for the benefit of said co-complainants, Mary Margaret Schlorb and said George L. Schlorb, previous to any transactions between said William Schlorb and said William E. Clark; and that said lots 5, 6, 8, and 9 were conveyed' to said John Killian, as trustee, in the year A. D. 1858, and that the business transactions between said defendant Clark and said William Schlorb did not commence until the 22d day of November, 1865, there being a period of nearly eight (8) years between the date of said conveyance of said lots and the recording of the same in the land records of the District of Columbia, before the date of any business transactions betwéen said William E. Clark and said William Schlorb.”
    There are several other alleged errors assigned upon said decrees which are not material to the decision pronounced in the case, unless, perhaps, that one shown by the answers in said equity cause, that Schlorb had no creditors at the time of the conveyances for the benefit of his wife.
    The bill of review alleges that the trustee appointed by the court to sell said property has conveyed all of said lots except one to said Clark, aud the prayer of the bill is that all the conveyances to the said Clark may be declared null and void, and the said decrees reversed and set aside. The cause was heard below upon a demurrer to the bill of review, and a decree entered April 12, 1877, sustaining said demurrer and dismissing the bill. Hence this appeal.
    
      William J. Miller, for complainant in bill of review.
    It is shown by the bill that Clark commenced to deal with William Schlorb on 22d November, 1865; that Schlorb being indebted to Clark, he, on 26th June, 1873, obtained judgment for $3,819.25; that during the period of two years aud eleven months there were dealings between said Clark and Schlorb of $99,502.83, and that Schlorb paid Clark $95,683.58.
    It is shown that lots 5, 6, 8, and 9 were conveyed to Killian, &c., in trusfi for Mrs. Schlorb and her children, with certain powers of selling, mortgaging, &c.; were made and recorded in August and October, 1858, at least seven years prior to any transactions between Clark and William Schlorb.
    It appears that lot number 2 was never in William Schlorb, and it was conveyed on 5th October, 1865, to George L. Schlorb, son of William, by Henry J. Baker, at least eight weeks before any transaction between Schlorb and Clark. Hence Clark could not have credited Schlorb on the faith of this property. The same may be said as to lots 1, 3, and part of 7.
    It does not appear in Clark’s bill that Clark, or any other person, was creditor of William Schlorb between the years 1858 and 1868. Nor is it alleged in Clark’s bill that William Schlorb was indebted to any one at the time of the date and recording of the conveyances to Killian and his heirs and assigns in trust.
    Nor does Clark allege or attempt to prove that William Schlorb was indebted to him (Clark) at the date of the conveyances; but, on the contrary, Clark shows that lots 5, 6, 8, and 9 were conveyed to Killian at least seven years before even he commenced to deal with Schlorb, and lot 2 at least eight weeks before any dealings between them, and that none of the lots mentioned in Clark’s bill were ever in Schlorb’s name from 1858.
    True, Clark makes a general allegation in his bill that the several transfers of property were done with the purpose and design to hinder, delay, and defraud creditors, and that said transfers were fraudulent and void as to him and other creditors of said Schlorb.
    Mrs. Schlorb denies in her answer the allegations of fraud, and says her deceased husband, William- Schlorb, transferred a greater portion of the property in 1858, about eight years before any dealings with Clark, and that at the time of such transfers her husband was free from debt, in comfortable circumstances, and in a prosperous business.
    It is a well-settled rule-, that when a subsequent creditor depends upon the existence of prior debts to vacate deeds on the ground of fraud, he must allege and prove such debts. (Lust v. Wilkinson, 5 Vesey, 387; Holloway v. Millard, 1 Madd., 229; Kidney v. Coussmaker, 12 Vesey, 155.)
    There is no allegation of that kind, and no proof of any indebtedness at the time of conveyance. Subsequent indebtedness is not sufficient to make a transfer fraudulent. (Lyman v. Cessford, 14 Ia., 229; Snyder v. Christ., 39 Pa., 499.)
    The mere fact of indebtedness to a small amount, the grantor being in prosperous circumstances, and the gift reasonable provision for a child, will not render the deed fraudulent. (Hine's Lessees v. Longworth, 11 Wheat., 199; Sexton v. Wheaton, 8 Wheat., 229.)
    
      There must be, at the time of such conveyance, a fraudulent intent, and it must be clearly shown, or that an indebtedness existed at the time. (Worthington v. Shiply, 5 Gill., 449; Atkinson v. Phillips, 1 Md. Ch., 507; Hamilton v. Greenwood, 1 Bay., 173; Sexton v. Wheaton, 8 Wheat., 229.)
    It is claimed that a transfer of all the property a man has is a badge of fraud. This will not apply where there are several distinct transfers not so closely connected as to constitute one transaction. (Preston v. Gaffin, 1 Conn., 393; Scott v. Winship, 20 Geo., 429.)
    Again, registration of the deeds was notice to Clark; he could not have been deceived. (4 Stat. at Large, p. 520; Seaton v. Wheaton, 8 Wheat., 229; Bump on Fraud. Con., 161; Sinler v. Turner, 10 Iowa, 517; Stewart v. Thomas, 35 Mo., 202; Bar v. Hatch, 3 Ohio, 527; Smith v. Lowell, 6 N. H., 67.)
    
      Francis Miller, for defendant.
    The right of a man to make provision for his wife proportioned to his means is not here contested, but it is denied that a conveyance to her or to her use of all he ever owned is a proper provision, and if such conveyance is not fraudulent in fact it will be conclusively presumed to be fraudulent in law.
    It is submitted that such conveyances are fraudulent as to a subsequent creditor, and in support of this view we refer to the following authorities: Fitzer v. Fitzer, 2 Atk., 513*; Beard v. Beard, 3 Id., 72*; Stilman v. Ashdown, 2 Id., 481*; Glenn v. Randall, 2 Md. Ch., 222; Brinton v. Hook, 3 Id., 480 ; Kerr on Fraud, 199, 208, 385; 1 Story Eq. Jur., secs. 350, 352-7, 361, 363, 364, 369; Hinde’s Lessee v. Longworth, 11 Wheat., 199; 1 Fonblanque’s Eq., bk. 1, ch. 4, secs. 12, 8, note a, cited in 1 Story Eq. Jur., sec. 362, note 1; Solomon v. Bennett, 1 Conn., 525, cited in Willard’s Eq. Jur., 236; Sexton v. Wheaton, 8 Wheat., 246-7; Cathcart v. Robinson, 5 Pet., 280; 2 Story Eq. Jur., sec. 1374; Planck v. Schermerhorn, 3 Barb. Ch., 644; Case v. Phelps, 39 N. Y., 164; Savage v. Murphy, 34 N. Y., 588.
    All the circumstances connected with these conveyances give proof of their fraudulent character. In the conveyance of lots 6 and 9 in squai’e 654, and all his personal property in 1858, it is provided that if the said William Schlorb survived his wife, “ the trustee is to hold the said trust property to and for the use and benefit of said William during the time of his natural life.”
    “Lot number 1 is to be free from all liability for the debts of said William, and free from his control or that of any of his creditors.”
    
    And in all the deeds careful provision is made to protect all of the property, personal and real, from the demaáds of Schlorb’s creditors. The reservation of a reversionary interest in the deed of lots 6 and 9 would of itself be so plain a badge of fraud, that any creditor woyld have had a right to set that aside if necessary to the payment of his debt.
   Cartter, Ch. J.,

delivered the opinion of the court orally, to the following effect:

This is a bill of review seeking to reverse the decree in equity suit number 3877 for errors apparent on the face of the record. The object of the bill in that cause was to set aside certain conveyances of real estate alleged to have been made in fraud of creditors. The conveyances were chiefly made by William Schlorb to a trustee for the use and beuefit •of his wife. Whether there was error in the decrees depends upon the validity of these settlements. We are convinced from the record in said equity suit that the gift of the real •estate, in 1858, was made during marriage, and that Mr. Schlorb was then engaged in a prosperous business; that he was in good credit and perfectly solvent, and that he was not indebted in any sum or sums to any one. It is furthermore apparent that the first of these conveyances for the use of his wife was made at least eight years, and the second six years, and the third thirty days or two months before he had any business .transactions with Clark, or any debts were created between them. After the lapse of all that time the dealings between these parties commenced, and in the space of two years they amounted, in the aggregate, to nearly §>100,000. This had all been settled and paid for with the exception of' the indebtedness for which the judgment was recovered; and we cannot doubt that that amount would have been paid had Mr. Schlorb not died. There is not a suspicion of fraud to be derived from these circumstances, and, indeed, they repel ■ any such inference. With regard to the antecedent conveyances, Clark was a subsequent creditor, and the law will not presume them to have been made for the purpose of defrauding him. Fraud is a fa/ct in such a ease to be established by proof, and not by presumption. Any intention of the kind is denied in the answers filed in and responsive to the bill in the • equity cause, and we will not presume what the record fails to establish it. It is, however, possible that the business credit Mr. Schlorb received from Clark might have been inspired by the apparent ownership of the property acquired during the period or about the time during which these dealings were conducted. We have, therefore, come to the conclusion to affirm the first decree of February 17,1875, ordering the sale of lots 1 aud 3 and half of lot 7, and to review and reverse the decree of June 18,1875, which decrees the sale of the property which had been acquired by said Schlorb previously to any dealings with Clark. The decree is, therefore, reversed, the demurrer overruled, and the proceedings hereafter will be controlled by these views.

It was objected to this bill that it was filed after the period for relief had expired. It was contended that a bill of review ought to be filed within the time for taking an appeal from the special to the general term. Our practice has allowed a longer period than that prescribed for taking an appeal. For the purpose, however, of settling the practice on this subject, we have entered a general rule that a bill of review rnay be filed at any time within two years from the date of the decree sought to be reviewed. The practice will, therefore, be regulated hereafter by an established rule of court.