Court Opinion

ID: 9807540
Source: CourtListenerOpinion
Date Created: 2023-08-31 20:08:39.022239+00
Date Added: 2024-06-11T11:41:57.002515
License: Public Domain

Si-iepherd, J.
dissenting; I am unable to concur in that part of the opinion which declares that the defendant W. D. LaRoque is entitled to a homestead exemption. Neither can I agree that the equitable relief sought in this action is based upon the idea that there is a resulting trust in favor of either the debtor or creditor.
The proposition is, that if an insolvent husband purchases land with his own money, and, for the purpose of defrauding his creditors, procures the title to be made to his wife, he is, as against creditors, seeking to subject the fund so fraudulently withdrawn, entitled to a homestead exemption of one thousand dollars.
The authorities cited from Virginia, Tennessee and Thompson on Plomestead, are where the legal title was in the debtor and fraudulently conveyed by him. They stand upon the same principle as Crummen v. Bennett, 68 N. C., 494, which is based upon the ground that the fraud of the debtor has been ineffectual to change his relation to the property, a,nd for that reason he is entitled to a homestead. It is plain that such authority has no application where the debtor never had the legal title, and if it can be used at all in a case like the present, it tends to show that only the personal property exemption can be allowed the debtor since, if the transaction is void for fraud, the investment fails, leav*317ing the money impressed with the usual characteristics and incidents of personal property.
The Kansas case only decides that the debtor is entitled to the homestead as against subsequent creditors, and this, together with the Illinois and Wisconsin cases, is founded upon the peculiar laws governing the homestead in those States. Any one who reads a work on homestead exemptions cannot fail to be struck with the infinite- variety of laws upon the subject, and the consequent conflict of the decisions of the Courts of the various States. Mr. Thompson, in his preface to his work on Homestead Exemptions, well says that “the result is a confused and almost inexplicable system, indicative of different intentions, theories and designs on the part of the law-makers, with regard to the practical application of the law, expressed generally without any very successful attempt at the definition of terms or manifestation of meaning and purpose. The inevitable consequence is a conflict of judicial construction and interpretation, but a pretty general agreement of the Courts and the legal profession in sentiments of disgust for the unsatisfactory and uncertain conditions of this department of jurisprudence.” How, after this candid expression of the eminent author, any weight can be attached to such decisions outside of their own States, I am at a loss to understand. Especially is this true when such decisions are utterly inconsistent with the old and well settled principles applicable to the fraudulent acts of insolvent debtors, the effect of such transactions in reference to their property, and the principles governing the remedies which must be pursued by the creditors.
It is but natural, therefore, that the Court should place but little reliance upon such authorities, and éndeavor to base its ruling upon some rational theory in harmony with the principles of law .and equity as uniformly expounded by the jurists of this State. This it has sought to do by placing *318the decision upon the ground that the debtor has some interest in the land which he has fraudulently procured to be conveyed to the wife. It is upon this theory that Dortch v. Benton was decided, the Court resting its opinion upon the idea that the husband had acquired an equitable estate by a valid contract of purchase. Whatever may be the (acts of that case, it is clear that this is the principle of the decision.
This principle of an equitable estate in the debtor is a safe one, if sustained by the facts, and it is manifest from the concluding part of the opinion in this case that the decision is grounded upon that theory alone. It is too plain for argument that the husband has no such equity by reason of his being a vendee under a contract of sale, for, at the very time he made his first payment, the title was made to the wife, and, previously, he had nothing whatever but the bare parol agreement of the owner, Washington, that he would sell him the land at a certain price. So far from having any estate, he did not have even a mere right in equity. Another reason why this view cannot be sustained is, that he never paid any money under such parol contract, but the money sought to be subjected was all paid at the time of, or subsequent to, the conveyance to the wife. Moreover, it would be absurd to say that the husband can be a vendee under an executory contract, while, at the same time, his wife is holding the land under an executed contract, made, at his instance, by the same vendor. It must follow, therefore, that, if the said defendant has any interest at all in the land, it must be by virtue of a resulting trust. And this seems to be the view of the Court. This resulting trust is finely said to be “based upon the idea that the equitable interest in land is drawn as if by irresistible magnetic attraction to the person who pays the price.” This magnetism, however, is powerless in the present case, and so far from any equitable interest being attracted to the insolvent hus*319band, it is, under the circumstances, absolutely repelled and driven beyond his reach.
There are two reasons for this. One is, because the money paid is presumed to be an advancement to the wife. In such case, there can, in the absence of evidence to the contrary, be no resulting trust. This is too plain to require the citation of authority, and is conceded in the opinion of the Court. The other reason is, that the transaction being fraudulent, “equity will not assist the perpetrator of the fraud, and consequently will decline to enforce the trust, which would otherwise result, were the transaction a bona fide one, for his benefit.” Bispham’s Eq., 124; Page v. Goodman, 8 Ired. Eq., 16; Rhem v. Tull, 13 Ired., 57; Gowing v. Rich, 1 Ired., 553; Dobson v. Erwin, 1 D. & B., 569. It being conclusively settled, then, that there can be no resulting trust for the husband, it is finally insisted that a trust results in favor of the creditors.
This is the law in New York, Minnesota, Wisconsin, Kansas, Indiana, Kentucky and perhaps other States; but this is only by reason of statutes expressly providing that such a trust shall result for the benefit of the creditors. Pom. Eq., 1042; Tiedman Real Property, 500, notes.
In some States it is even held that the interest of the fraudulent debtor in such a case may be sold under execution. That no such trust results to a creditor, and that equity does not assist him upon any such principle, is so well settled by the decisions of this Court, as well as.the textbooks, that it is a matter of surprise to me that there can be the least doubt upon the subject. In the leading and instructive case of Dobson v. Erwin, supra, RufeiN, C. J., says: “The debtor himself, then, could not claim a recon-veyance upon the foot of such a trust. It is not deemed a valid trust fit to be executed in a Court of Equity. For the same reason, one claiming as a creditor of the debtor, could not insist on it, by way of.affirming the alleged agreement *320and asking the execution of the trust. The Court does not recognize any such trust for the purpose of enforcing it, as such, in favor of any person, because, if it existed,' it is covinous and avoids the deed itself. A creditor cannot, therefore, he relieved upon a bill which supposes the existence and validity of such a trust * * * So, on the other hand, as we think clear, there can be no such trust, and relief in equity would be founded, not on it, but on a ground entirely different, namely, the fraudulent intent to withdraw the debtor’s estate from his creditors.”
The remedy, says the same distinguished jurist, in Gowing v. Rich, supra, is founded on “the right in equity to follow the funds of the debtor.” To the same effect is Rhem v. Tull, supra, in which Pearson, J., says: “In fact it could not, asa trust, be recognized in favor of any person; a Court of Equity could not recognize and enforce it as a trust, even in favor of a creditor.” So in Wall v. Fairley, 77 N. C., 105-107, RoduaN, J., says that the words “real property” cannot be construed to cover land in which the defendant never had any estate or right, and as to which his creditors have only a right in equity to follow a personal fund which has been converted into the land as a. gift to his children, and in fraud of them.” This language is quoted with approval by Dillard, J., in Dixon v. Dixon, 81 N. C., 323-324, who then proceeds as follows: “But in the case of a suit to reach the funds of a debtor not capable of being applied under an execution, as in this action, to reach the money of the judgment debtor vested in the land conveyed to the wrife, there is no lien by the judgment or execution, and the jurisdiction arises because there is no lien and the action, wrhen instituted, at most, is looked on as one to follow the funds of the debtor.”
The consensus of judicial opinion, therefore, is that in a case like ours there can be no resulting trust, either in favor of the debtor or the creditor, and that the purchase-money *321paid by the husband can be followed into the land as a personal fund only.
These principles being so abundantly established, I am at a loss to conceive by what judicial magic this personal fund, which has been, and can only be, followed as such, is, at the moment it comes within the reach of the creditor impressed with the character of realty and protected by the homestead exemption. There is nothing in the Constitution which authorizes such a doctrine On the contrary, the distinction between real and personal property in respect to exemptions is there expressly recognized in the different amounts allowed the debtor in each species of property, and I can find nothing in that instrument which in the slightest degree alters the well-settled principles by which real and personal estate is to be distinguished.
The debtor, then, having no equitable estate by reason of his mere verbal agreement to purchase, and there being no' resulting trust either in his favor or in that of his creditor, it must follow that he has no equitable interest whatever in the land, as such, which can be asserted by or through him. The purchase-money, therefore, is treated as a personal fund fraudulently withdrawn from his creditors. Being followed only as such personal fund, it must necessarily be treated as such to the end. This being so, the debtor would be entitled only to the personal property exemption.
In conclusion, I will add that, even if there were no creditors, and the conveyance had been made to a stranger, there could only be a resulting trust to the extent of the forty dollars paid at the time of the conveyance. Here, all of the money, except this small amount, was paid sometime after the conveyance was executed. In order to constitute a resulting trust, “ the consideration must be paid by the person claiming the resulting trust at the time of the transaction of sale or conveyance. Any subsequent payment of the *322consideration by such person, even thoügh he has been compelled to do so as surety of the grantee, will not raise a trust.” Tiedmari on Real Prop., 500; Adams’ Equity, 7 ed., 33, note.
Believing, as I do, that the ruling of the Court is based upon reasoning wholly inconsistent with the clear and well-defined distinction and principles so thoughtfully elaborated and interwoven into our jurisprudence by the great judicial minds of the past, and that a departure from them can only result in confusion and incongruities, I have been constrained to enter my dissent, and to state some of the reasons upon which it is founded.