Case Name: Doney v. Clark, Admr.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1896-12-01
Citations: 55 Ohio St. 294
Docket Number: 
Parties: Doney v. Clark, Admr.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 55
Pages: 294–306

Head Matter:
Doney v. Clark, Admr.
Insolvent estate — Lands conveyed by decedent in fraud of creditors —Rights ofpur chaser in good faith — Section 6139, Revised Statutes — Rights of administrator. — Sections 5240-2, Revised Statutes.
1. By the provisions of section 6139, Revised Statutes, the administrator of an insolvent estate is a trustee for the creditors of his decedent with respect to lands conveyed by said decedent in fraud of his creditors, and he may maintain a suit to subject them to the payment of the demands of such creditors, unless the rights of a purchaser in good faith from the fraudulent grantee have intervened.
2. Such administrator may maintain an action against the fraudulent grantee to recover the value Of the lands, if the latter has conveyed them to an innocent purchaser.
3. The time within which such action may be brought is not fixed by the general statute for the limitation of actions, but by the special provision of said section, which permits it to be brought within four years from the death of the fraudulent grantor.
4. On the trial of issues of fact joined in an action so brought to recover the value of the lands, either party is entitled to demand a jury.
5. The action to recover the value of the lands so conveyed “involves the validity of a deed,” and the grantee is competent to testify generally under the provisions of sections 5240-2 of the Revised- Statutes.
(Decided December 1, 1896.)
ERROR to the Circuit Court of Franklin county.
Clark, as administrator of William A. Dunnick, tiled his petition in the court of common pleas to recover from Doney the value of real estate described in the petition. He alleged in substance that Dunnick died insolvent, August 11, 1890, that prior to the death of Dunnick while he was so insolvent, Dunnick and' Doney, for the purpose of hindering, delaying and defrauding the creditors of the former, entered into an agreement whereby Doney should, through the forms of legal proceedings, enforce a judgment rendered against Dunnick in foreclosure in favor of one Jaeger, that pursuant to said agreement Doney, with moneys furnished him by Dunnick, procured an assign- “ ment of said judgment, caused the lands to be sold and himself became the purchaser, agreeing to hold the title thereto for the use and benefit of Dunnick who furnished all the money which Doney paid in the transaction. Prior to the death of Dunnick, in May, 1889, Doney, in violation of said agreement and of the rights of Dunnick’s creditors, sold and conveyed said lands to one Lena G. Miles, under circumstances which gave validity to ' the title acquired by her.
A general demurrer to this petition was overruled.
In his answer Doney denied the alleged agreement by which he was to hold the title in trust for Dunnick and that the latter furnished any portion of the funds used by him in the transactions mentioned in the petition, and alleged that he purchased the premises in good faith with his own funds and for his own use.
There was a judgment for the plaintiff for $2,240 and costs. This judgment was af&rméd by the circuit court.
The record in the court of common pleas shows that the case was set for trial in one of the civil jury rooms, and that when it was called for trial the defendant moved that it be tried to the court. This motion was allowed, the court holding that neither party was entitled to a jury.
On the trial of these issues the defendant, Doney, was called as a witness in his own behalf. He was permitted to testify in contradiction of a witness who had testified to admissions made by him. Questions were then put to him concerning his transactions with Dunnick, and to elicit his denials of the alleged contract, and to show that Dunnick had not furnished any of the moneys used in making the purchase. On objection by counsel for the administrator, he was not permitted to testify generally or in answer to such questions.
J. V. Lee and George L. Converse-, for plaintiff in error.
The petition claims in substance, that the real estate belonged- to Dunnick, and that Doney held it in secret trust for Dunnick’s benefit.
The petition undertakes to impeach the deed to Doney as fraudulent and void as to Dunnick’s creditors. The validity of the deed to Doney is impeached by the petition and the question of its validity was the issue made in the case.
The decree finds that Doney had no interest in the real estate, notwithstanding the deed to him, and the effect of that finding was that his deed was invalid and void.
We contend that Doney was a competent witness under the statute as to the transaction between him and Dunnick, which involved the validity of Doney’s deed. Plaintiff offered testimony tending to show that Dunnick furnished the money to purchase the Jaeger judgment, and that judgment was the foundation of Doney’s title, and that was the gist of the whole case.
If the case did involve the validity of the deed to Doney and the validity of his title, it is clear that the trial court erred in ruling out the questions before referred to, and that the circuit court erred in holding that Doney was not a competent witness upon that point.
When the objection is that the witness- is incompetent to testify, and the objection is sustained, it is not necessary for the party to set out in his bill of exceptions the matters he. expected to prove by the witness. Hollister v. Reznos, 9 Ohio St., 1-7; Wolf v. Powner, 30 Ohio St., 472.
We contend that the petition is insufficient, and that the trial court erred in overruling the demurrer to it.
1. The action was brought by Dun nick’s administrator to recover the' value of lands claimed to have been fraudulently conveyed by Dunnick, or through his procurement, to Doney and for the purpose of paying the' debts of the decedent. The transaction between Dunnick and Doney, if fraudulent, cannot be impeached by Dunnick’s administrator, unless the property so transferred by Dunnick is actually required for the payment of his debts. (McCall, Administrator, v. Pixley, 48 Ohio St., 379.)
This action, if it can be maintained at all, is analogous to. an action brought by the administrator to sell real estate of his decedent for the purpose of paying debts of the estate.
In this case the action is to recover the value of the real estate, the defendant having sold and transferred it to a third party.
We suppose that it logically results from this view of the court, that the administrator cannot recover the value of the real estate from a fraudulent grantee unless authorized by statute so to do, because in order to a recovery it is necessary to impeach the fraudulent ■ conveyance of his intestate.
2. The petition is defective because it does not state when the debts existing at the death of Dunnick accrued. For anything that the petition shows to the contrary, all of the existing debts may have accrued long after the fraudulent transfer. If the transfer was not with intent to defraud future creditors, there could be no recovery by the administrator, for the purpose of paying debts that accrued after the transfer. Creed v. Lancaster Bank, 1 Ohio St., 1; Evans v. Lewis, 30 Ohio St., 11.
Subsequent creditors must, generally speaking, elicit facts showing contemplation of future indebtedness. * * A specific intent to defraud subsequent creditors will, of course, avoid the transfer as to them. In the absence of proof of such an intent the transaction will stand.
(Waite on Fraudulent Conveyance, etc., section 96, 1st Ed.). A voluntary conveyance made to defraud creditors is void only as to prior and existing creditors, and to those designed to be defrauded by the conveyance. Voorhis v. Michaelis, 45 Kan., 255; Edgerly v. First Nat. Bank, 30 Ill.; App., 425.
Can the administrator maintain this action ? Section 6139. There is no provision for recovering the value of the land, where it has passed out of the the hands of fraudulent grantee. It is not alleged in the petition that Lena G. Miles, Doney’s grantee, purchased the property for a valuable consideration, in good faith, and without knowledge of fraud. We think that such averments should have been made. There are averments in the petition from which the fair inference is that Lena G. Miles was not an innocent purchaser. If such was the case, the administrator should have pursued the property, and the court has no authority to render a personal judgment against Doney, for its value.
We contend that the petition does not, for the reasons above stated, make out a case of a personal judgment against Doney.
A fraudulent transfer is good against the grantor, his heirs, executors, administrators, etc. Bump Fraudulent Conveyances, p. 444; Crawford v. Lehr, 20 Kansas, 509.
M. B. Patterson, for defendant in error.
The right of a creditor of a fraudulent grantor to recover the value of real estate from a fraudulent grantee who has sold the same to an innocent purchaser is now too firmly established to admit of doubt. Waite’on Fraudulent Conveyances, section 177; Beach Mod. Eq. Jur. 922; Solinsky v. Lincoln Sav. Bank, 85 Tenn., 372; Murtha v. Curley, 90 N. Y., 372; Decker v. Decker, 108 N. Y., 128; Feary v. Cummings, 41 Mich., 376; Coale v. Moline Plow Co., 134 Ill., 35; Chamberlain v. Jones, 114 Ind., 458; Phelps v. Smith, 116 Ind., 378; Ringold v. Suitar, 35 W. Va., 186; Ferguson v. Hillman, 55 Wis., 190; Mason, Adrn'r., v. Pierson, 69 Wis., 585; Post v. Stiger, 29 N. J. Eq., 554; Heath v. Page, 63 Pa. St., 125; Logan s. Wallace, 76 N. C., 416; Fullerton v. Viall, 42 How. Pr., 294; Heuston v. Plato, 3 Cols., 402; Hulley v. Chedict, (Nev.) 36, p. 738. And in Ohio, it seems, it is not indispensible to the pursuit of value, that the fraudulent vendee should have disposed.of the property. Bradford v. Byer, 17 Ohio St., 394; Railroad Co. v. O'Donnell, 49 Ohio St., 489.
The proposition that an administrator may maintain an action for a personal recovery in behalf of creditors of the estate, based on the frauds of the administrator’s intestate, was at one time denied in Ohio. Benjamin v. Baron, 15 Ohio, 518.
In those jurisdictions in which the proposition that the administrator represents the creditors has been denied, the remedy has been withheld. In those jurisdictions in which the proposition is affirmed the remedy has been granted.
The Supreme Court of Ohio, while not having expressly decided the question stated by Judge Boynton in Lockwood v. Krum, 34 Ohio St., 10, and presented by the record in this case, has affirmed the proposition that an administrator in this state is trustee for creditors. Lewis v. Eustler, 4 Ohio St., (Opin.), 361; Gill v. Pinney, Adm’r., 12 Ohio St. (Opin.), 47; Davis v. Corwine, 25 Ohio St., 668; Kilbourne v. Fay, 29 Ohio St., (Opin.), 279; McDonald v. Aten, 1 Ohio St., 293.
The petition seeks a personal recovery, but if the remedy will depend upon the administrator’s power over real estate fraudulently conveyed, the power to subject it to the payment of debts is expressly conferred. Sections 6139 and 6140 R. S. Ohio. These sections were not necessary to confer the remedy. The remedy exists by virtue of section 4196,- by virtue of the statutes which makes a decedent’s real estate stand for payment of his debts, and by virtue of the administrator’s representative capacity. Woerner, sec. 296; Schouler, sec. 297; Williams, p. 305, editor’s notes. Ford v. Ins. Co., 50 Cal., 299; Freeman v. Burnham, 36 Conn., 469; Bassett v. McKenna, 52 Conn., 437; Welsh v. Welsh, 105 Mass., 229; Cross v. Broton, 51 N. H., 488; Pringle v. Pringle, 59 Pa. St., 281; Bonslaugh v. Bonslaugh, 68 Pa. St., 495; Sullice v. Graderigo, 15 La., 582; Coaly v. Whitmore, 71 Me., 65; Clark v. Claugh, 65 N. H., 43.
The petition substantially conforms to the requirements of section 6141' for the sale of real estate. This action is not one for the sale of real estate, and it is only essential that the petition should show that the estate is insolvent.
The petition shows an active fraud participated in by both the decedent and defendant. Acts done pursuant to such a fraudulent scheme as is set forth in the petition are absolutely void, both as to. existing and subsequent creditors. Section 4196, R. S. Ohio; Evans v. Lewis, 30 Ohio St., 11; Webb v. Roff, 9 Ohio St., 430; Greed v. Bank, 1 Ohio St., 1.
It is therefore not important when the indebtedness accrued. ,
The plaintiff below being an administrator, the defendant below was, by section 5242, R. S. Ohio., rendered incompetent to testify as to the matters-about which he was inquired, unless the action fell within the operation of the last exception of the section in question. The exception referred to provides that the section in question shall not apply to “actions or proceedings involving the validity of the deed.”
Whether this exception saves to the fraudulent grantee, whose title is attacked by an administrator of the fraudulent grantor in behalf of creditors, the right to testify, in any case, we. think very doubtful. Abbott’s Select Cases, Evidence p. 137. Roberts v. Briscoe, 44 Ohio St., p. 602.
First — This action is not one directly involving the validity of a deed; and
Second — The deed in question is not the deed of the deceased grantor, but a master commissioner’s deed.
The exception in question relates to cases where the “title to the thing granted is directly attacked, ’ ’ and applies only to a case for setting aside a deed of a deceased person. Section 5242, R. S., 1st paragraph; Mosher v. Butler, 31 Ohio St., 188; Sternberger v. Hanna, 42 Ohio St., 305; McNichol v. Johnson, 29 Ohio St., 85.

Opinion:
Shauck, J.
It is conceded by counsel for the plaintiff in error that if the legal title to the lands, which, according to the allegations of the petition, were the subject of the conveyance, had remained in the fraudulent grantee, the administrator of the grantor might have maintained an action to set aside the conveyance and subject the lands to sale for the payment of the grantor's debts under the provisions of section 6139 of the Rev. Stats. That section relates to the duties and powers of executors and administrators with respect to the sale of lands of decedents for the payment of their debts, and provides: "The real estate liable to be sold as aforesaid, shall include all that the deceased may have conveyed with intent to defraud his creditors, and all other rights and interests in lands, tenements and hereditaments; provided, that lands so fraudulently conveyed, shall not be taken from anyone who purchased them for a valuable consideration, in good faith, and without knowledge of the fraud; and no claim to lands so fraudulently conveyed shall be made unless within four years next after the decease of the grantor. "
Nor can it be doubted that the powers of executors and adminstrators are such only as may be conferred upon them by statute. This, however, does not forbid the application to remedial statutes conferring such power of the familiar rule that, to the extent which their language will permit, statutes of that character are to receive such construction as will accomplish the apparent object of the legislature.
The course of decisions in this state shows a rigid adherence to the rule" that a grantor who creates a trust for his own benefit to hinder or delay his creditors cannot maintain any form of action to enforce the trust. The rule results from the turpitude of the transaction. The same rule logically should, and under our authorities does, apply to the administrator of a solvent decedent who, in his lifetime, executed a deed for such fraudulent purpose. The estate being solvent, such suit would, in its substantial aspect, inure to the benefit of the heirs at law of the fraudulent grantor whose rights are not superior to his. McCall, Admr., v. Pixley et al., 48 Ohio St., 379.
But no logical or ethical consideration would justify the extension of that rule to the defrauded creditors of the grantor or to any one standing in their rights. .They are in no sense participes oriminis. Accordingly we have express provisions of statutes authorizing suits to subject property so conveyed to the payment of the grantor's debts. Such suit may be brought by the creditor, or by the assignee of the grantor for the benefit of . creditors, or by the administrator under the section quoted. In none of these statutes is there express authority for an action against the fraudulent grantee for the value of the lands when the rights of a bona ficle purchaser intervene. But that such action may be maintained by the proper party seems clear on both reason and authority. Although the trust which the parties attempt to establish by their contract is void, the property in the hands of the fraudulent grantee is, by the terms of the statute, impressed with a valid trust in favor of the grantor's creditors. It may be that the fraudulent grantee is required only to surrender the land so held, but when by his own act he has made that impossible there attaches the usual incident of a personal liability for the value of the subject of the trust. Wait on Fraudulent Conveyances, section 177; Solinsky v. The Bank, 85 Tenn., 368; Chamberlin v. Jones et al., 114 Ind., 458; Mason, Admr., v. Pierron, 69 Wis., 585; Post v. Stiger, 29 N. J. Eq., 554.
. It is true that upon the subject of the right of the administrator to maintain anaction for the recovery of property fraudulently transferred by his decedent the decisions in other states are not uniform. The decisions have been much influenced by statutory provi sions. Where the administrator is regarded as succeeding only to the rights of his decedent a recovery has, of course, been denied. Where he is regarded as standing in the rights of creditors also, it has been allowed. Here in veiw of the insolvency of the estate, and the provisions of the statute, the administrator asserts the rights of creditors. This sufficiently distinguishes the case under consideration from Benjamin v. Le Baron's admr, 15 Ohio, 518, which related to personal property and was not influenced by such statutory provisions.
In answer to the observations of counsel as to the statute of limitations, it is sufficient to say that the special limitation prescribed in the section under consideration is exclusive. It limits the action to four years after the decease of grantor. The present action was brought within less than two years.
The common pleas court did not err in overruling the demurrer to the petition.
This was an action for the recovery of money only. In view of the fact that the fraudulent grantee had conveyed a valid title to the subject of the trust no decree in equity was needed or sought. Although the principles upon which a recovery was sought may be of equitable cognizance, either party is entitled, in an action for the recovery of money only, to have the issues determined by a jury. The erroneous ruling of the trial court to the contrary is, however, not aground of reversal since it was made at the instance of the party who complains of the final judgment there rendered.
The question yet to be considered relates to the ruling of the trial court that the defendant is not, in a case of this character, competent to testify generally. The general rule prescribed by section 5242 of the Rev. Stat., would sustain that ruling because the plaintiff is an administrator. But the last paragraph of the section contains the following: 'Nothing in this section contained shall apply to actions or proceedings involving the validity of a deed. "
The foundation of this action is the invalidity of the deed to Doney. If the apparent title had remained in him the appropriate remedy would have been a decree to subject the lands conveyed. In a suit for that purpose, it is conceded, the grantee would have been competent to testify generally. The difference in the form of the action and the remedy results from the voluntary act of the fraudulent grantee in divesting himself of such title. No reason is suggested why the defendant should be competent in one form of action and not in the other, nor do the terms of the ex- eeption restrict it to suits to set aside deeds or to subject lands fraudulently conveyed by the testator. Neither action could be sustained if the deed were valid to convey an absolute title according' to its purport. The action, therefore, involves the validity of a deed, and it is within both the letter and the reason of the exception. It follows that in actions of this character the defendant is within the general rule of competency prescribed by section 5240 of the Rev. Stat.
For error in excluding the testimony of the plaintiff in error the judgments of the circuit court and the court of common pleas are reversed.