Case Name: Mitchell and Wife vs. Beal, et al.
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1835-05
Citations: 8 Yer. 134
Docket Number: 
Parties: Mitchell and Wife vs. Beal, et al.
Judges: 
Reporter: Tennessee Reports
Volume: 16
Pages: 134–142

Head Matter:
Mitchell and Wife vs. Beal, et al.
A confessed a judgment in favor ofB. for six thousand five hundred anti eleven dollars, part of which was secured by cotton belonging to A, anti shipped by B. A, before the sale of the cotton was heard from, executed a deed of trust to B„, by which he conveyed much more property than was necessary to secure the balance duo upon the judgment. It was stipulated in [the deed of trust, , that A was to retain possession of the property for three years, before it should be sold to pay the debt: It was held by the court, that the deed of trust was fraudulent and void as to other creditors of A.
A debtor, in failing circumstances, may prefer one creditor, or secure his debt in preference to others; but he cannot cover a much larger amount of property than will satisfy the debt, and postpone, for an unreasonable length of time, its appropriation. In such case, it hinders and delays other creditors from having the surplus applied to the payment of their debts.
This bill was filed by the complainants, who are creditors of Wilson and Harman, for the purpose of setting aside a deed of trust, executed by them to secure certain debts due to Win. M. Beal.
The defendants, Wilson and Harman, were in failing circumstances, and had many-debts outstanding against them, when they confessed judgment in favor of Beal for $6,511. About $4,100 of this amount was only due at the time when the deed of trust was executed, if the probable proceeds of one hundred and fourteen hales of cotton, the property of Wilson and Harman, which had been shipped by Beal, and had not been heard of, were credited on his account; but if the proceeds of the cotton were not allowed as an item of credit, then there was really more due to Beal, than the amount confessed as due by the judgment.
Wilson and Harman executed a deed of trust to secure this debt, by which they conveyed nineteen negroes and eighteen hundred acres of land; and possession of said property was to be retained by them for three years. About eleven hundred acres of the land was afterwards sold to satisfy judgments, which had been obtained and formed a lien upon the land, prior to the date of the deed of trust: but the property which remained undisposed of, was of more value than the amount of the debt due to Beal, and secured by said deed.
A. Huntsman, for complainants.
Harman and Wilson were indebted to Beal in large sums of money. They confessed judgment in Henderson county court, at the February sessions 1833, for $1400 more than was due, as appears by the bill and answer, proof, &c., and left Beal at liberty to insert more hi the judgment, upon certain contingencies. Suit was also pending against Wilson and Harman, at the time, in favor of complainants, Mitchell and wife, Rockhill, and others; upon which judgments were obtained at the next county court, in May following. Previous to the rendition of these last judgments, Beal took a deed of trust upon all the property, personal and real, of Wilson and Harman, which was very considerable, in lands and negroes, as the deed of trust will show, and entirely to one creditor. In it, it was stipulated, that they were to remain in possession of the property for three years, receiving the rents, issues, and profits thereof; at the end of which time, it was to be sold for the satisfaction of Beal’s debt, if not previously paid. During all which time, the property was covered from executions. The complainants issued their executions immediately after judgment, which was returned by the sheriff, that no property was to be found, save that liolden by Beal’s deed of trust.
This bill is filed to set aside or postpone the deed of trust to Beal, and to be permitted to satisfy their debt out of the property so conveyed.
The complainants insist, that whether the consideration given by Beal is bona fide or not, that the deed of trust is fraudulent and void as to them.
1. It is made entirely to one creditor, and the debtors still retain the rents, issues, and profits, by way of favor to them. 1 Ten. 587; 1 Hay. 427, 428; 5 Johnson 258; Twyne’s case in 3 Coke’s Rep.
2. It gives an extension of credit for three years longer after judgment, leaving all the property in the hands of the debtor, which is precisely contrary to the letter and meaning of the statute of Elizabeth, which uses the expressions, to “hinder or delay creditors.” See the Stat. Eliz., and the 4th resolve in Twyne’s case; 4 Hay. 427, 8. Pre. ch. 285; 9 Johnson 337; 5 Johnson 25S.
3. It cannot differ in principle from cases, where a creditor, by giving an extension of credit to his debtor, does it at his own responsibility, and thereby releases his security, even after judgment. See 2 Vesey, Jr, 540, and many cases there collected on this point. 2 John. Rep. 554; Read vs. Young and Whitcomb, 3 Yerger’s Reports.
4. All the authorities go upon the principle, that although the debtor may fairly prefer one creditor to another; yet if the arrangement is made to benefit the debtor, by giving him longet time, and letting him have the rents, profits, or use of the property, it is fraudulent as to other creditors, because the property should be disposed of, and the balance, if any, subjected to their claims.
Martin and M’Clanahan, for defendants.
The bill alleges fraud on the ptfrt of defendants, upon the ground,
1. That Wilson and Harman confessed judgment for more than was due to defendant Beal.
2. That more property was covered by the deed of trust, than sufficient to pay Beal’s debt.
3. That Wilson and Harman were permitted to keep the property in possession three years, under the deed, before it coul’d be subjected to the payment of other debts-
4- That the deed reserving to defendant Beal, the power of issuing his execution at any time, under the discretion and control of the trustee, is a strong badge of fraud.
Defendant Beal answers, that defendants Harman and Wilson had dealt with him from July, 1830, to July, 1832, to the amount of twenty-three thousand dollars and upwards; that among other payments, they had consigned to him in the fall of 1831, some three or four hundred bales of cotton, which he shipped to Liverpool for them, and for which he received a return, early, perhaps, in 1832. But there were 114 bales which were supposed to be lost; notwithstanding this, defendant Beal, out of friendly feelings towards Wilson and Harman, allowed them the average price for which the other cotton bad been sold, and agreed to run the hazard of losing the 114 bales altogether, and gave their account credit accordingly, and then Wilson and Harman confessed the judgment charged to be fraudulent, in February, 1832. But by the month of July thereafter, Beal received a return for the 114 bales of cotton, which had sold for such an advance as to malee nearly two thousand dollars more than the average price of the' rest; and defendant Beal, instead of putting it in his pocket, as he might justly have done, while he was in this country, in the summer of 1832, in his own hand writing released the judgment against defendants Wilson and Har-man for the amount, and this is the way in which the judgment was confessed for too much.
2. The above, accounts for the fact of too much property being covered by the trust, if that were indeed the fact, which defendant Beal denies, for the land . and negroes, at the time, would not have brought the debt, if sold under execution or otherwise, and eleven hundred and fifty acres of the land were subject to, and sold under previous judgments.
3. The holding the property by Wilson and Harman, under the deed, is in accordance with the universal practice on subject. The time we admit was too long;; but that time was not given to hinder or defraud other creditors, hut from a conviction, that the failure of crops, and the consequent want of money, rendered it impossible for defendant Beal to make his debt out of the property of defendants Wilson and Iiarman, if he attempted to expose it to sale under execution.
But it is alleged, that because all the property was covered, that, therefore, the deed was fraudulent. This is denied by defendants Wilson and Harman; but that the most valuable part was embraced in the deed, is admitted.
But we rely on the fact, that no fraud was used, or intended to be used, by Beal; and no matter whether the other defendants intended fraud or not, you cannot punish him for it, unless he participated in it. His voluntarily yielding up the advanced price on the-114 bales of cotton supposed to be lost, after assuming the hazard of their entire loss, is a feeble evidence of fraud; and the property which was then worth six or seven thousand dollars, is now worth ten or twelve thousand dollars, so that the creditors have been benefited by the delay. 4 Yer. Rep. 541.
J. M’Kernon, in reply.
This deed of trust is void, by the common law and by statute, as against the creditors of Wilson and Harman, as it tends to hinder, delay, and defraud their creditors of their just debts and judgments.
It gives to the grantors, the use, possession, and enjoyment of valuable plantations and improvements, twenty-two slaves, horses, mules, cattle, a wagon, and for the space of three years, with power to use and consume the produce, the hire of the slaves, the use of cattle, use and-wear of horses, wagon, and this, too, when- they were largely indebted to others.
The deed of trust is void, because as against the creditors, it allows the vendors to remain in possession and use, and consume die produce of a large estate for the space of three years. See 3 Yerger 502, Darwin vs. Handly; 4 Yerger 541, Crutcher and Summerville vs. Horton; 9 Johnson 337 to 344, the case of Sturdewart vs. Keep and Ballard; Kent’s Comr 523, 535; 1 Tennessee Reports 91, the case of Ragan vs. Kennedy. See Twine’s case, 3 Co. Rep.; 2 Starkie 618, 619, Sands and others vs. Codwise and others, 4 Johnson 536; 1 Johnson’s C. R. 484; 1 Johnson’s Rep. 571, Murray vs. Caleb aiid others.
2. This conveyance having been made during the pen-dency of complainant’s writ, is void, in this case evidence of fraud. See Twine’s case, 3 Co. 80; 2 Star-kie 618, 619; 1 Tennessee Rep. 100, opinion of Judge White.
The deed in this case admitting the possession of the property to remain with the bargainors, cannot alter the case, as the bargainors had, as against the other creditors, no right to do so. See 1 Tennessee Rep. 99; 9 Johnson 339. In this case it was a part of die fraudulent intent. 2 Starkie 621. This deed being void'by the common law and by the statute, it cannot be. allowed to stand as security for the debts it purports to protect or secure. See 4 Johnson 536.
In looking over the answers of Wilson and Harman, it is clear, from their own showing, they intended a fraud, both to hinder and delay creditors, by the conveyance in this deed. If it is fraudulent on the part of the grantors, it will be set aside, although the grantor be a bona fide purchaser, and ignorant of the fraud. See Beale vs. Guernsey, 8 John. Rep. 446; Wickham vs. Miller, 12 John. Rep. 320; Hildreth vs. Sands, 2 John. C. R. 35.
The deed of trust in this case, reserving to the bargain-ors the right to sell or dispose of the property, avoids the deed as fraudulent. See 2 Yen. Rep. 510; 2 John. C. Rep. 576; Fonblanque’s Equity 219. .

Opinion:
Green, J. '
delivered the opinion of the court.
Upon the facts of this case, the question is, whether this deed of trust can be supported, as fair and legal. We think it cannot. It is true, a debtor may prefer one creditor, and pay and secure his debt, though others may suffer loss; but he cannot cover a much larger amount of property than will satisfy such debt, and postpone, for an unreasonable time, its appropriation. By such act, he would hinder and delay other creditors; and, therefore, the deed by which he would attempt to do so, would be void by the statute. Other creditors have a right to the appropriation to the payment of their debts, of all the property which may be included in such deed, over and above that which may be necessary to satisfy the debt secured by the deed. If in the deed it be stipulated, that the sale of the property shall be postponed for several years, all other creditors are, of necessity, delayed until the expiration of that time, should the deed be permitted to stand. For, if it be good for any purpose, it must be so for every purpose, and the stipulation as to the time which may be given, is obligatory upon all who may be concerned. The slightest reflection will enable every one to perceive, that in such case other creditors would be delayed and hindered, in having any surplus which may remain after the payment of the debt secured by the deed, applied to the satisfaction of their debts.
In the present case, the unusual time of three years is given for the payment of the money, before any sale is to take place. The creditors of Wilson and Harman are to wait all that time, before they can ascertain whether there will be any property to apply to the payment of their debts, after the extinguishment of Beal's. If the statute has any meaning, a deed like this must be within its provisions, and to be considered as fraudulent. Not that it is to be supposed, that Mr. Beal had any bad purpose of heart in reference to other creditors; but we are to look at die effect of this deed upon the rights of other creditors; . . 1 .' ? , , , . , . ' and the law supposes, that parties intend that winch is the legitimate offspring of their acts.
But it is insisted in the argument, that as there were 114 bales of the cotton belonging to Wilson and Harman, which; had been shipped by Beal, and which he had not heard from, he was entitled to have taken judgment 'for the whole amount of his advances to them, without allowing any credit for the 114 bales; in which case, they would have been his debtors for a much larger sum than the six thousand five hundred and eleven dollars; and that he would have had a right to have included in his deed of trust, a sufficient amount of property to have secured the whole sum thus due him. Should this argument be admitted in its full force, still the objection to the postponement of the disposition of the property so included, for three years, remains in its full force. The 114 bales of cotton were in Beal's hands, and it was intended, that its proceeds should be applied to his debt. He knew, therefore, that when he should receive an account of its sale, that his debt would be extinguished by the amount it might produce, and thus leave a large amount of property covered by the deed, to secure a debt greatly under its value. In this there would be nothing wrong, had the time limited for the disposition of the property been short, so as that the surplus above a security for his debt, could have been applied to the claims of other creditors. But when to secure a large debt, a man's whole estate is covered by a deed, although it may not greatly exceed.in value the debt to be secured, yet if three years be given, during which the property is to remain undisposed of, and - to continue in' -the possession of the grantor, other creditors, who may be entitled to the surplus which may be created by partial payments of the debt secured by the deed, are hindered and delayed in the enforcement of their claim to such surplus. It cannot be disguised, but that this must have been die intention of'Wilson and Harman. The unreasonable time cnyen within which to pay the debt, during all which . ° ' , , , . period their other creditors were Kept from seizing their property, gave them an opportunity of appropriating its proceeds, in a way to defeat, as well as hinder and delay, those to whom they were indebted.
The mere fact, that Wilson and Harman retained'possession of the property, is not fraud per se, nor, in a mortgage, is it prima facie evidence of fraud, if the time given for the payment had been reasonable; such, for instance, as would have been equivalent to the probable "law's delay." The possession was consistent with the deed, and as a fact of itself, would not constitute a ground for setting aside the deed. But the delay, so greatly beyond the time it would have required for Beal to have obtained judgment and levied an execution, is a fact, coming so directly, in its efFect, within the words of the statute, that it is impossible to support a deed with such a provision.
The decree of the chancellor will be affirmed, and the clerk and master of this court carry the same into execution.
Decree affirmed.