#### *Bullock v. Gordon and Wyatt, Administrators of Irvine.

(Argued Wednesday, October 18th, 1815.)

1. Fraudulent Conveyances — Sale of Land by Debtor Charged in Execution.* — A sale of a tract of land, by a debtor charged in execution, is not necessarily fraudulent and void as to the creditors at whose suit he is in custody, but may be supported, if made to a bona fide creditor, for a reasonable consideration, and without any secret agreement, or understanding between the parties, that the land is to be holden for the use and benefit of such debtor.

2. Chancery Practice — Fraud—Testimony Conflicting —Issue.†—Where a charge of fraud is made in the bill, but denied in the answer, and the testimony is such as to leave it doubtful, the court of equity ought to direct an issue to ascertain it.

See Marshall v. Thompson, 2 Munf. 212, to the same effect.

3. Fraudulent Conveyance — Conveyance by Debtor Charged In Execution — Secret Agreement — Right of Creditor. — If a debtor, charged in execution, convey a tract of his land, without a reasonable consideration, or with a secret agreement, or understanding, that the person, to whom such conveyance is made, shall hold the land for his use; and he afterwards take the oath of insolvency; a creditor, at whose suit he was notin custody, may file a bill in equity to have the conveyance set aside as fraudulent; and, upon its appearing that such was the case, such creditor ought to have liberty to make the sheriff a party to the suit, and obtain satisfaction of his claim as may appear right.

Samuel Irvine filed his bill, in the Superior Court Of Chancery for the Staunton District, against Hannah Bullock, William S. Bailey, and James Bailey; stating that he had brought suits and obtained judgments on two several bonds of the said James Bailey, amounting to about 721. besides interest; that, during the pendency of said suits, the said James Bailey, in order to defraud his creditors, and to cover his property from the just demand of the plaintiff, had transferred his interest in a certain tract of ladd in Rockbridge County to the said Hannah Bullock, without receiving from her a full and adequate consideration therefor, and having no:visible personal estate, expected by this subterfuge to evade the plaintiff’s just claim ; that the tract of land in question had originally been purchased by James Bailey and William S. Bailey in partnership, each being bound to pay half the purchase money ; that William, being security for James for his part, in order to secure himself, took a title for the whole tract from the seller, covenanted to convey to James one half, on his paying half the purchase money ; that James had actually paid almost the whole of his part of the purchase money, but, in order to secure this land from his creditors, had procured the said Hannah Bullock, who was a near connexion of his, to become bound to William for the residue of the purchase money, (being but a small sum,) and had also procured William to execute his obligation to convey the said land to her on the payment of said sum ; so that the said *William S. Bailey yet had the title in himself ; that the land was valuable ; that the half so covenanted to be conveyed to the said Hannah was abundantly sufficient to discharge, as well the residue of the purchase money, as the other debts of said James ; that the said William S. Bailey and Hannah Bullock, in equity, stood as trustees for the benefit of the bona fide creditors of the said James ; and that the half of said plantation was, in their hands, subject to be sold for payment of the plaintiff’s claims ; the said James Bailey having taken the oath of an insolvent debtor. The prayer of the bill therefore was, that the defendants be compelled, on oath, full and perfect answer and discovery to make of and concerning the premises ; that a partition of said land, if necessary, be directed : and that half thereof be sold to satisfy the claim of the plaintiff.

By the defendants, in their answers, it was, in substance, stated, that the defendant James Bailey, was in possession of the land, which was purchased by William S. Bailey, who acted as his agent; that, being justly indebted to Hannah Bullock in a very considerable sum, (the amount of which was not accurately stated,) for the purchase of some negroes, horses, grain, &c. and for money paid by her in discharge of some of his debts, and being desirous of securing her in the payment of her demands, the said James Bailey made over to Mrs. Bullock all his right, title and interest in the said land, as a consideration therefor, which the defendants James and Hannah alleged to be an adequate price of the same ; that a conveyance of the land having been made to William S. Bailey, he gave his bond, for a title, to James Bailey, who assigned that bond to Mrs. Bullock, to whom, in consequence of that assignment, a deed was made by William.

From the exhibits and depositions it appeared, that the assignment of the title bond was made, from James Bailey to Mrs. Bullock, at a time when the former was in confinement under sundry executions-against his body, in behalf of creditors, of whom Irvine the present plaintiff was not one ; that various purchases of property had been made by him of her, 'and some advances of money by her on his account and that, *after the said assignment, she paid William S. Bailey forty pounds, before she could obtain a conveyance.

Chancellor Brown was of opinion, “that the sale by the defendant James Bailey to' the defendant Bullock, at whose suit the said James Bailey was not in execution at the time of said sale, at a time when the said Bailey was confined in jail under the executions of several creditors, was, under our acts of assembly concerning executions- and frauds, fraudulent and void as to creditors ; though the defendant Hannah had, nevertheless, an equitable lien thereon for the amount of the balance of the purchase money which she paid to the defendant William S. Bailey.” He therefore decreed a sale of the land by commissioners to satisfy the judgments in favour of the plaintiff; unless the defendants, or *221some one of them, should pay them off by a given day; directing the commissioners, however, to sell the said land, “subject to the prior lien, which the defendant Bullock had thereon, for the balance of the purchase money which she paid to the defendant William S. Bailey.”

From this decree an appeal was granted, by the chancellor, on the motion of the defendant, Bullock, in August 1811; which appeal being afterwards abated by Irvine’s death, was revived against his administrators.

Wickham for the appellant.

The assignment of the title bond, by James Bailey to Mrs. Bullock, passed his legal and equitable rights to the land ; so that she alone was entitled to sue, in equity, for a conveyance, or at law for damages.

The question is whether this assignment was void as to creditors. Mr. Irvine was only a bond creditor when the assignment was made ; for, according to his own statement, his suits were pending at the time. He had, therefore, no lien on the land. If the court should decide that the assignment was not intended as a sale of the land, but that Mrs. Bullock thereby obtained a lien only ; even on this supposition, the decree is manifestly wrong. An account should have been directed, and her claim satisfied before that of Irvine.

A person contemplating insolvency, may prefer one set of *bona fide creditors to another set; provided he does not defeat any lien that has attached, (a) In England, it is true, that a general assignment by a trader is considered a fraud upon the bankrupt laws, and itself an act of bankruptcy.

Another point is worthy of attention. Bailey took the benefit of the oath of insolvency. If that gave the creditors, at whose suit he was in execution, a lien, they had it in preference to Irvine, as well as Mrs. Bullock.

But the court, at all events, ought to have had the amount of Mrs. Bullock’s lien ascertained ; for the sale of the land would be affected by an uncertain incumbrance ; and such a decree as this drives her to the necessity of becoming a plaintiff, before she can obtain satisfaction.

Heigh contra.

The chancellor has decided the assignment by James Bailey to be fraudulent against all creditors. It clearly was so as to those creditors at whose suit he was in custody ; for they certainly had a prior lien. The judgments themselves gave a lien upon his lands ; and, what was more, those judgments were enforced against his body.

The transaction in this case was evidently fraudulent. The haste with which the assignment was executed is a badge of fraud. When it took place, they had not the bond. The assignment was written on a separate •piece of paper at first, and afterwards put on the back of the bond. He assigned it over, on purpose that he might swear that no person had the property in trust for him. Mrs. Bullock was conusant of the fraud, and therefore acquired no title by the assignment; even though she did pay a valuable considération ; the transaction not being bona fide.(b) Where, then, is the priority of her lien over Irvine’s ?

The question here is not between Irvine and the other creditors, but between Irvine and Mrs. Bullock. If she be a creditor, she is trustee for all the creditors who have liens prior to her’s ; and I contend that Irvine is one.

Wickham in reply.

There cannot be a question that Mrs. Bullock is a fair creditor. I deny that it is fraudulent for a '^debtor to prefer one fair creditor to another. Suppose he had had a sum of money in his pocket: could he not have paid it to Mrs. Bullock ? The lien of the judgments attached on the land, only by virtue of the right to take out an elegit. The capias ad satisfaciendum took away the elegit, and therefore the lien. All that was conveyed by the assignment was his own right, subject to the lien of the creditors, at whose suit he was in custody, if they had any. This was no fraud. It does not appear that the bond was assigned on a separate piece of paper. The words are the “within” bond.

The position in Cadogan v. Kennett, is, that a conveyance to a favourite creditor may be void as to all other creditors ; that is, where false colours are hung out, possession of the property being retained. But was there ever a doubt, that a conveyance to a just creditor, accompanied with delivery of possession, would be good at any time ?

Tuesday, October 24th, 1815.

*

Fraudulent Conveyances — Sale of Land by Debtor Charged in Execution. — See monographic *note*on “Fraudulent and Voluntary Conveyances” appended to Cochran v. Paris, 11 Gratt. 348.

A debtor charged in execution, can, while in custody, dispose as he pleases, provided it is done *Iona Me,*of all his property, real and personal which the creditor cannot in any way reach or subject to his demand. Jackson v. Heiskell, 1 Leigh 276, citing principal case.

†

Chancery Practice — issue—Testimony Conflicting.— When an important fact is left doubtful by the testimony, the court ought to direct an issue. Wise v. Lamb, 9 Gratt. 303, 305, citing principal case. See further, monographic *note*on Issue Out of Chancery” appended to Lavell v. Gold. 25 Gratt. 473.

(a)

 Wood v. Owings, 1 Cranch., 239

(b)

 Cadogan v. Kennet. Cowp. 434.

The president pronounced the following opinion of this court.

The court is of opinion, that, instead of the decree rendered by the chancellor in this case, he ought to have directed an issue to have tried what was the amount of the consideration which passed from the said Hannah Bullock to James Bailey, for the land in question ; and whether there was any secret agreement, or understanding, between the said parties, that the said land was to be holden by the former for the use or benefit of the latter. The court is farther of opinion, that, if it shall turn out, upon the issue aforesaid, that a reasonable consideration did pass, as aforesaid, and that there was no such secret agreement, or understanding, that then, and in that case, the bill of the appellees should be dismissed ; the transaction, in that view, being only a preference of one bona fide creditor over another. But, if it shall appear, on the issue aforesaid, on the first enquiry, that there was no such reasonable consideration, or that there was such secret agreement or understanding, that then the said sale should be considered as having been *made in.*fraud of the other creditors of the said James Bailey, and in derogation of *the rights accruing to the sheriff, for the benefit of the other creditors, under the act concerning insolvent debtors ; the benefit whereof, it would seem to the court, under that aspect, the said James B ailey intended to avail himself of, at the time of the sale aforesaid, and, at the same time, fraudulently to withdraw from its operation the land now in question.

The court is farther of opinion, that, in the *222event of a finding correspondent with that last mentioned, the deed conveying the land aforesaid should he held void, and the land thereby conveyed, be deemed vested in the sheriff, under the provisions of the act relating to this subject; and that the appellees should have liberty, in that case, to make the sheriff a party to this suit, and obtain from him, under a decree of the Court of Chancery, such rights as, under that view of the subject, may he found to belong to them ; saving to the appellants, in the first instance, the amount of the purchase money, with interest, which the said Hannah Bullock may have paid, or may have secured to be paid therefor, to William S. Bailey.

Decree reversed, and cause remanded to the Court of Chancery, to be proceeded in according to the principles now stated.