Case ID: va_67/html/0302-01.html
Source: Caselaw Access Project
Author: {"author": "Staples’J;", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Henderson v. Hunton & als.
    November Term, 1875,
    Richmond.
    Fraudulent Conveyances.—M and H, with others, were sureties of J as sheriff, who, in I860, was dead and insolvent. In January 1866 B recovered a judgment against H as surety for J, and in April 1866 B recovered a like judgment against M. M was an old man, not able to provide for himself, and there were several small judgments against him. In March 1866 he conveyed to his nephew T all his real estate, worth about $2,100, in consideration of $50 he owed T, and that T would provide for him during his life; T not knowing of the judgment against H, or that M was a surety of J. T paid off the judgments against M, to the amount of $687.60, and he paid for the support of M after the deed, and before March 1869 about $1,300. In March 1869 H flies his bill against M and T, to set aside the deed on the ground of fraud; and T answers and denies fraud in himself, and any knowledge of a fraudulent intent on the part of M. Held:
    1. Same—Equitable Relief.—Equity would vacate the deed and hold the land liable to the creditors of M if they interposed in due time in asserting their claim.
    2. Same—Laches—Part Performance by Grantee.— But the creditors of M.haying failed to assert their demands against the property'until Thad made considerable advances for the support of M, in performance of his contract, the deed is a valid security to the extent of these advances.
    3. Same—Consideration—Adequacy.—A conveyance on such a consideration is not to be regarded in law as merely voluntary; and the courts will not pronounce the consideration inadequate, unless it is manifest that the services to be rendered and the expense to be incurred are grossly disproportioned to the value of the property.
    4. Same—Same—Bona Fide Grantee.—Such agreements are treated as founded on valuable consideration; and consequently, they are only fraudulent, so far as the grantee is concerned when mala fieles is justly attributable to *him: he must be cognizant of the fraudulent intent of the grantor, if there was such intent.
    
      5. Same—Actual Fraud by Both Parties.—When there is actual fraud, both parties participating, a deed is utterly void ab initio, and is not permitted to stand as security for any purpose. The fraud infects the whole transaction.
    6. Same—Constructive Fraud—Bona Fide Grantee.— When the deed is merely constructively fraudulent, or when it appears that the grantee has acted bona fide, and did not participate in the fraud, the deed is permitted to stand as a security for what is justly due to the grantee, or for . advances made by him subsequent to its execution.
    7. Same—Consideration of Future Support—Legal Title—Vacation of Deed.—A bona fide deed, in 'consideration of future support, though voidable at the suit of creditors, is not void. The legal title vests in the grantee by operation of the deed, good against all the world, except creditors; subject to be divested by them if they impeach it in due time. But the title remains in the grantee until the deed is vacated; and when vacated.it is not void ab initio, but only from the time of the decree.
    8. De Minimis.—The amount paid by T, is so nearly the value of the property, that the bill of H should be dismissed.
    In March 1869 Silas B. Hunton instituted a suit in equity in the Circuit court of Fauquier county, againstThomas Henderson, T. I<. Moore and others, to set aside a deed made by Moore to Henderson. In his bill he states, that he and Moore and five others, whom he names, were the sureties of John Q. Marr, late sheriff of Fauquier county, who had died insolvent. That a judgment had been recovered by John S. Byrne against the plaintiff and three others of the sureties of said Marr, in January 1866, for the sum of $1,117, with interest from December 15th 1858, for the failure of Marr as sheriff to pay over the proceeds of fee bills collected by him: this judgment being subject to a credit of $500, as of the 8th December 1859; and that a like judgment had been recovered in April 1866 against Marr’s adm’r and Moore: That on the 10th of April 1866 another judgment had been recovered *by Forbes’ ex’ors against Marr’s adm’or. and all his sureties, for $342.86, with 15 per cent, damages from the 31st of January 1866: and that plaintiff had paid off these judgments.
    The plaintiff further states that on the 31st of March 1866 said T. B. Moore, finding that Marr’s estate was insolvent, for the purpose of avoiding the payment of his share of said Marr’s liabilities, and in fraud of the right of his co-sureties, conveyed all his pronerty, consisting of a lot in Warren-ton with an office on it and forty acres of land near that town, to Thomas Henderson, in consideration of fifty dollars which he owed Henderson, and maintaining, supporting and providing him with necessary clothing, and supplying also the attention of a servant, for and during the rest of the natural life of the said Thomas B. Moore.” He charges that this deed was purely voluntary and fraudulent as to creditors: that Henderson knew that Moore was liable for -the malfeasance in office of Marr, and for many other debts; and plaintiff charges that the conveyance to Henderson was made with the sole view of preventing the creditors of Moore from making their said debts. He states that Henderson had conveyed the forty acres of land to T. C. McBearan, and had taken a house and lot in Warrenton in part payment, and McBearan had sold to •C. Bouckright; and that $333.33 of the purchase money was still due from McBearan. He charges that the deed from Moore to Henderson is fraudulent and void, and that the property thereby conveyed is liable to the plaintiff and the other creditors of Moore. And making Marr’s adm’r, and his co-sureties, and Henderson and McBearan and Bouckright defendants, he calls upon them to answer as fully all the allegations of the bill as if specially interrogated. The prayer of *the bill is that Marr’s adm’r may settle his account; that the solvent sureties may be compelled to pay the plaintiff their proportion of said debts paid by him; that the •deed from Moore to Henderson may be declared fraudulent and void, and the real estate therein conveyed subjected to the payment of the legal liabilities of Moore; or if the sale to McBearan and Bouckright cannot be disturbed, that the house and lot •conveyed by McBearan to Henderson, and the $333.33 and interest, still due from Mc-Bearan, may be subjected to the payment «of Moore’s liabilities; and for general relief.
    Henderson answered the bill. He admits •the execution of the deed from Moore to himself, upon the consideration named in the deed as stated in the bill; but he denies •that the deed was made by Moore for the purpose of avoiding his share of the liabilities of Marr and in fraud of the rights of his sureties. He denies that the deed was purely voluntary and fraudulent as to creditors; and he utterly denies that he “well knew that Moore was liable for the misfeasance in office of Marr, and for many other debts, and that the conveyance was made with the sole view of preventing the creditors of Moore from making their said debts.” He avers that he was not aware of the securityship of Moore for Marr as sheriff until after the execution of the deed.
    The defendant further says, that at the time of the execution of the deed, Moore was an old man; for a long time previous had been utterly helpless, unable to provide for himself, and needing the constant attention of a servant. Respondent was his nephew, and had for years been rendering him assistance in money, clothing, provisions, &c., for the amount of which Moore was indebted to him; and although as a matter *of form, $50 was named in the deed, the real amount was five times as much. The old man was encumbering himself with debt; and various friends who knew of the outlay of the respondent, urged and advised him, from time to time, to assume the support of said Moore, pay off the liens upon his property, and become the owner of the same; and this plan seemed to be satisfactory to Mr. Moore. The liens upon the property, which constituted, as far as respondent knew, his indebtedness, amounted to little less than $1,000, if they did not exceed that sum, and these with the amount he owed respondent, would made over $1,250 or thereabout. The respondent could not have expected to derive any advantage from the transaction, when the highest valuation of the property was $2,000; which would only leave about $750, to meet the expense of Moore’s support during his life. Respondent has paid off nearly the entire known indebtedness of Moore, supported him in Warrenton until the fall of 1868, at an annual expense exceeding $500, and is still paying for his maintenance and support at the Protestant Infirmary in Baltimore. He insists that he has paid valuable consideration for the property; and whatever view may be taken of his coyenant to support Moore after the date of the conveyance, the debt due him and the liens paid by him, formed a valuable consideration sufficient to sustain the deed; and to this consideration should be added the amount expended by him in maintaining Moore, at least until he received notice of plaintiff’s demand; which would constitute a valuable consideration greater than the highest estimates put upon the property.
    The cause came on to be heard in April 1869, when the court, without deciding on the validity of the deed from Moore to Henderson, directed a commissioner to *ascertain and report the value of the real estate mentioned in the deed, &c.; the amount of the debts and liabilities of Moore at the date of the deed; and what part thereof has been paid, and by whom; what amount the sureties of Marr, as sheriff, have paid for -him, and which of them have paid it; and the amount the plaintiff is entitled to recover from Moore on account of money paid as co-surety of Marr.
    The commissioner reported, that the forty acres of land were worth $1,500, the office and lot in Warrenton was worth $600=$2,100. That Henderson had sold the land for $1,500, and had received all the purchase money except $275. He reported debts of Moore paid by Henderson, all of them judgments against Moore before the deed was made, $687.60; the amount paid after the deed for the support of Moore (including Henderson’s own debt at $250, and for putting a new roof on the office in Warrenton, $78.72), $1,529.50; making Henderson’s payments for Moore $2,217.10. The amount of debt paid in 1867 by Hunton’ as surety for Marr, with interest to September 1st 1870, was $1,752.34; of which Hunton was entitled to recover from Moore $876.17.
    The judgment of Byrne against Hunton and others as sureties of Marr, was rendered in January 1866, and was not docketed; the judgment of the same plaintiff against Marr’s adm’r and Moore, was rendered at the April term 1866,: and the judgments of Forbes’ ex’ors against Marr’s adm’r and all the sureties for $342:86, were rendered at the 'Sáme term of the court. Henderson was the only witness examined. He says, Moore owed him about $250; but he does not state the items. He further says, that at the time the deed was executed he did not know of any notices against Moore' as the -surety of Marr; and at that tiihe *had not heard that Moore" was Marr’s surety. Mr. Moore was about seventy-six years old, and he 'lived about three years and a half thereafter."
    The cause came oil to be heard on the 21st of April 1871, when the court held, that the deed from 'Moore to Henderson was fraudulent as'to the creditors of Moore; sustained the sale of the forty- acres-'of land to Menearan, and decreed a sale of the office lot in Warrenton; and that Henderson should account- for the $1,500 the price of th'e forty acres of land he had sold, with interest from the day of sale, in the' following manner: first, to the liens existing and outstanding on said property paid off by Henderson; second, to' any other liens existing at the date of the deed'; third to the $50 due by Moore' to Henderson; and the balance distributed according to law, among the Creditors'of T. B. Moore dec’d. And to this end the report was recommitted, with directions to the -'commissioner to" convene the creditors of Moore, &c. 1 •'
    From this decree Henderson applied' to this court for an appeal; which was allowed.
    Brooke & Scott, for the appellant.
    Bppa Hunton, for the appellee..
    
      
      Frauduient Conveyances — Bona Fide Grantee.— “Where there is a fraudulent intent on the part qf the grantor in a deed founded upon a valuable consideration, and such intent is unknown to the grantee, the latter is not chargeable with want of good faith, since no rule is better established than JJiat both parties must concur in the fraudulent intent to r&'dfer.the deed absolutely void.” Rixey v. Deitrick, 85 Va. 45; Skipwith v. Cunningham, 8 Leigh 271; Norris v. Jones, 93 Va. 183; Hazlewood v. Forrer, 94 Va. 709; Bishoff v. Hartley, 9 W. Va. 100; Herring v. Wickham, 29 Gratt. 628; Bank v. Belt (Va.), 30 S. E. Rep. 467; Boggess v. Richards, 39 W. Va. 567, 20 S. E. Rep. 599, 45 Am. St. Rep. 938. Au agreement to maintain and support another is a valuable consideration and will support a conveyance of property. See Keener v. Keener, 34 W. Va. 423, 12 S. E. Rep. 730, citing the principal case.
    
    
      
       See citation of principal case in Almond v. Wilson, 75 Va. 627; Livesay v. Beard, 22 W. Va. 592; Alexandria, etc., v. Thomas, 29 Gratt. 491; Claflin v. Foley, 22 W. Va. 441.
    
   Staples’J;

This' is a creditor's" bill to set aside-a'deed on'the ground of fraud. ' The deed in question conveys all' the real estate of the 'grantor, Thomas B- Moo're, in the county of Fauquier, to Thomas1B.' Henderson,-the grantee, in consideration of a debt of fifty dollars due by the fd'riner to the latter, and for the further consideration of a comfortable support to be furnished the-grantor during his life.

As Moore was much embarrassed with debt at the date of this transaction, there is no doubt but that a *court of equity would have vacated this-deed and held the property liable to the demands of creditors if they had interposed in due time in asserting their claims. Although the law does not restrain the-owner in the exercise of a just dominion and control of his estate, it does not permit him to defeat the just claims of creditors, by reservations of benefit to himself inconsistent with those claims.

But the creditors of Moore having failed to assert their demands against the property until Henderson had made considerable advances for the support of Moore, in performance of his contract, the question we are to consider is, whether the deed is a valid security to the extent of these advances.

A conveyance of property in consideration of an agreement to support the grantor is-not regarded in law 'as merely voluntary. As it is impossible to foretell how long the-grantor may live, or 'what exx^ense the g-rantee may necessarily incur in maintaining him, the courts will not undertake to-pronounce the consideration inadequate; unless indeed it is manifest that the services to be rendered and the expense to b’e-incurred are grossly disproportionate to-the value of the property. Such agreements are therefore treated as founded upon a -valuable consideration. And consequently they are only fraudulent so far as the grantee is concerned, when mala fides is justly attributable to him. Ho rule is better1 settled than that both parties must concur in the fraudulent intent. The fraudulent design of the grantor, if unknown to the grantee, will not infect the latter with a 'want of'good faith. 2 Bomax 420, margin 324. ' ' ,

When there is' actual fraud, both parties participating, the deed is utterly void ab initio, and is not permitted to stand as a security for any purpose. The “'fraud infects the whole transaction. So-far has this doctrine been carried, that in a case before this court, it was held, that a deed cotil'd not operate as security for a valid debt, ■although the other provisions were forced upon 'the creditor as a condition of securing what was actually due him. In ño instance will the courts afford any indemnity to á |iárticeps criminis in case of actual fraud. Bump 'on' Fraudulent Conveyances 572.

When, however," the de'ed is merely constructively fraudulent, or when it appears that the grántee' has acted bona fide, and did not participate in the fraud,' the deed is permitted to stand'as a security fór whát is'justly due 'the grantee, or for advances made'by him subsequent to its execution. This doctrine is not only just and reasonable in itself, but ' is supported by abundant authority. As, however) it is strongly controverted by the learned counsel for the appellee, it may not be improper to mention some of the eases which sustain the proposition.

In Albee v. Webster, 16 New Hamp. R. 362, the court say: A sale may be actually fraudulent as to creditors for want of sufficient consideration, and yet be made good if full consideration be subsequently paid before creditors interfere. So a sale may be fraudulent as to creditors on account of a secret trust accompanying it; but if by a subsequent agreement, before creditors interfere, this secret trust is discharged and the sale is otherwise made valid, the fact that the trust once existed will not operate to vitiate the sale, the fraud being purged.

In Thomas v. Goodwin & als., 12 Mass. R. 140, it was held, that where one summoned as trustee, had received goods of the principal debtor under circumstances indicative of fraud, and which would have “'fixed him as trustee, but before service of process upon him had paid debts of the principal to the amount of the goods received, he was discharged. The case of Lynde et al. v. McGregor, 13 Allen R. 181, is to the same effect ; the court regarding the distinction between deeds actually fraudulent and deeds constructively so; and that the latter may be made effectual by subsequent advancements.

In Gardner Bank v. Wheaton, 8 Greenl. R. 373, the transaction was held to be fraudulent and void as against creditors; but there being no moral turpitude on the part of the grantee, he might charge upon the estate all his payments and expenses actually made and incurred under the agreement before the conveyance was impeached.

In Bean v. Smith & als., 2 Mason’s R. 252, 296, the language of Mr. Justice Story is very applicable to the case before us. After discussing the facts, he proceeds to say: The next question that arises is, whether the conveyances are to stand as securities for the sums which have been really advanced or paid by them for their father since the execution of these instruments. I agree to the doctrine laid down by Chancellor Kent in Boyd & al. v. Dunlap, 1 John. Ch. R. 478, and Sands v. Codwise, 4 John. R. 536-549, that a deed fraudulent in fact is absolutely void, and is not permitted to stand as a security for any purpose of reimbursement or indemnity; but it is otherwise with a deed obtained under suspicious circumstances, or which is only constructively fraudulent. * * * Again, cases are not unfrequent in equity, where the court upon setting aside a conveyance, has left some benefit to the grantee. But that is done only where there are circumstances which do not immediately affect the party against whom the decree is sought with original *and meditated fraud; or if he holds a derivative title, where that title was attained without knowledge of the fraud. There are numerous other cases sustaining this view, which I shall content myself merely with citing. Oriental Bank v. Haskins, 3 Metc. R. 332; Hutchins v. Sprague, 4 New Hamp. R. 469; Hopper, adm’r v. Sisk, 1 Carter’s R. 175. See also Bump on Fraudulent Conveyances 574, and the numerous authorities referred to in note. And see Janney v. Barnes et als., 11 Leigh 100.

In the case before us there is not a scintilla of evidence to show that Henderson, at the time of the execution of the deed, had any notice of this claim, or of any indebtedness on the part of Moore, besides the judgments which were after-wards paid by him. At what time he acquired such notice does not appear. Moore’s liability, as one of the sureties of Marr, was, of course, purely contingent. When the deed was made no judgment had been rendered against Moore, nor had the extent of his liability been fully ascertained: that, of course, would depend upon circumstances. If the principal was solvent, it would amount to nothing; if insolvent, but the sureties were all responsible, the measure of his liability would be very small. Now what is there to show that Henderson had any information whatever upon these subjects? Absolutely nothing. The conduct of the appellee was well calculated to delude him into a feeling of security. The judgment against Moore was recovered Upon notice and motion on the 20th April 1866, but a few weeks after the date of the deed: and yet no execution was issued upon it, and no effort made to enforce it. It does not appear that it was even docketed. The payments of complainant were made in 1867; but no proceedings were instituted to annul the deed until *the filing of this bill in March 1869. In the meantime no claim was asserted against Henderson; no notice given him to withhold any advances to Moore, although the deed under which he claimed was duly recorded, and must have been known in the community. During all this time, from March 1866 to March 1869 he is permitted to incur heavy expense in the support of Moore, who was his uncle, without a word of warning or objection from those most interested in looking after this property. In the language of the Supreme court of Pennsylvania, in Pearsoll v. Chapin, 44 Penn. St. R. 1, 14, “while a creditor does not confirm by doing nothing, and the contract must be a nullity as against his rights, by its performance it may be very far from being a nullity: or if he be not prompt in asserting his rights it may dispose of all the property so that he can never reach it. ’ ’

The evidence shows that Henderson paid valid judgments constituting liens on the land to the amount of $687.60; and that he expended about $1,200 in supplying Moore with board and clothing and other things essential to his comfort. There is every reason to believe that Henderson has not derived the slightest advantage from the transaction. He may be guilty of fraud as charged in the bill; but the record does not show it. And I had always supposed the rule well established, that as a charge of fraud is against the presumption of honesty, is an imputation of the gravest character, the courts require to sustain it by proof of the clearest and most satisfactory nature.

It is said, however, that the deed being void at the time of its execution, it is a mere nullity, and cannot be made good by any matter ex post facto. It has been already seen that this rule applies only to conveyances tainted with actual fraud concurred in by both parties. *It has no application to cases like the present, in which an innocent purchaser contracts to pay the value of the property in the support of the grantor. Such conveyances may be voidable at the suit of creditors; but they are not utterly void. The legal title rests in the grantee by operation of the deed, good against all the world except the creditors; subject tobe divested by them if they see fit to impeach the conveyance in due time.

But the title remains in the grantee until the deed is vacated; and when it is vacated, it is not rendered void ab initio; but only from the time of the decree so declaring. Fupp v. Talbird, 1 Hill Ch. R. 99; Backhouse’s adm’r v. Jett’s adm’r, 1 Brock. R. 500; Pearsoll v. Chapin, 44 Penn. St. R. 1, 15.

It is very true that judgment was obtained against Moore before the advances were made by Henderson; but the title was not thereby divested. A judgment lien constituted no interest in the land itself; nor does it confer any right of property therein. The lien operates as a charge upon whatever the debtor possesses at the time; but it. cannot operate beyond that. Until the deed is vacated the title remains in the grantee; and there is nothing .upon which the judgment can operate. The grantee having purchased the property in consideration of a support furnished the grantor, every advance by him is a payment of purchase money pro tanto. It is not materially different from a payment in money to the grantor himself, and its expenditure by him in the purchase of the means of subsistence. If the payment is bona fide made, it will not be affected by the existence of a judgment lien obtained after the execution of the deed of conveyance. It is competent for the creditor at any time to interfere, and by proper proceedings, to require the *appropriation of the purchase money, or the estate itself, to the satisfaction of his claim. If he fails to do so until the purchase money is paid, or until the value of the estate is expended in the support of his debtor, it is his folly or his misfortune. The loss cannot be visited upon an innocent purchaser.

It appears from the report of the commissioner, that the real estate embraced in the deed was worth about twenty-one hundred dollars. The amount of Henderson’s account for judgments paid and expenses incurred is about two thousand dollars. This does not include a claim of $250 asserted by him against Moore upon a previous indebtedness, as he maintains. The debt secured by the deed is put down at fifty dollars; and Henderson does not satisfactorily explain the discrepancy. This item of $250 must therefore be rejected from the account. But if it be excluded, the amount actually paid and not controverted in the court below, falls but little short of the value of the property. If we regard Henderson as a bona fide purchaser he is of course entitled to all the rights appertaining to that position. A small excess of the value of the property over the amount of the purchase money will not justify the interference of the courts. The gravamen of the bill is 'fraud in the debtor, with the knowledge of the purchaser. It is positively denied in the answer, and is not established by the proofs. The only alternative is the dismissal of the bill. The decree of the Circuit court must therefore be reversed, and a decree entered dismissing the bill.

The other judges concurred in the opinion of Staples J.

Decree reversed.