Court Opinion

ID: 8121001
Source: CourtListenerOpinion
Date Created: 2022-09-09 14:53:34.382288+00
Date Added: 2024-06-11T16:39:00.286560
License: Public Domain

Mr. Justice Olin
delivered the following dissenting opinion:
On the 4th December, 1867, the complainant obtained a judgment at law against the defendant Welch, for $875 damages exclusive of costs. Upon this judgment he issued an execution and the Marshal of the District levied on cers tain personal property in the possession of the defendant Welch, which property was replevied by one Davis and a judgment recovered in the latter suit by Davis against the marshal.
The plaintiff then files a bill in equity usually known as a creditors bill charging that certain conveyances of his personal and real estate made at or about the time of the recovery of the judgment by the complainant were fraudulent and void, and made to hinder and delay his creditors and especially the complainant. These several conveyances are made exhibits in the case both by bill and answrer of defendant Welch.
The bill seeks fo set aside these conveyances by Welch and subject the property to the payment of the plaintiffs judgment.
Welch in his answer does not deny that these several conveyances were made with intent to hinder and delay Bird-sail and other creditors, but sets up the the defense that the judgment recovered by Davis in the replevin suit is a bar to all Inquiry in a Court of Equity, not only whether the conveyance of such personal property was fraudulent and void but that the real estate conveyed at or about same time by a different instrument could not be questioned or inquired into although the conveyance upon its face showed it to be fraudulent and void as against creditors.
*328This defense was very properly abandoned at the hearing in the Court below, and has not been made a point in the argument of the cause in banc.
There' are several answers to this supposed defense:
1. The plea or answer does not cover the whole case, as it concerned only the personal property.
Judgment of a court of law is no bar to a suit in equity where fraud is charged in the bill. See sec. 784, Story’s Equity Pleading: “ If there is any charge of fraud, or if other circumstances are shown by the bill as a ground of relief, the judgment or sentence cannot be pleaded by a plea in bar of the bill.”
3. There is no plea in the case, and if all forms of pleading were to be disregarded, the facts stated in the answer amount to no defense to the bill if arranged by the most ungenerous bearing of special pleading.
Two questions are presented by the bill and answers in this case:
1. Were these several conveyances by Welch made with intent to hinder, delay or defraud Birdsall in the collection of his demand? and
2. Were these conveyances fraudulent and o void as against the creditors of Welch?
The first is purely a question of fact in this case to be judged of by the statements contained in the bill and answer of Welch.
As I am fully aware that different minds may draw different conclusions from a given state of facts, I can therefore feel no surprise that others do not see under the circumstances of this case a fraudulent intent to hinder or delay creditors. Nevertheless I have come to the conclusion that there was such fraudulent intent, although my brothers who have had the same opportunity to judge of that intent, and are certainly as well, and doubtless better, able to do so than myself, have come to a different conclusion.
I will only state the facts in the case which induce me *329to believe that the disposition of his property made by the defendant, Welch, was made wdth intent to hinder and delay and defraud the plaintiff.
Birdsall was prosecuting Welch for an alleged malicious arrest and false imprisonment. We may, I think, naturally suppose that in such a controversy there was no very kindly feeling subsisting between these parties. Just two days before the verdict is rendered in the case Welch makes such a disposition of his property real and personal as to prevent Birdsall from reaching it on execution, if he should obtain a judgment.
Now, take that fact in connection with the character of the transfer of his property he then made and my mind is forced to the conclusion that the leading object, purpose and intent of those conveyances was to prevent his property being reached by any judgment Birdsall might obtain ; those conveyances while they attempt to put the property of Welch beyond the reach of an execution in favor of Birdsall leaye Welch in possession of a greater portion of the property.
Here is then a contrivance by which a judgment creditor is set at defiance, and the debtor is left in possession and enjoyment of property wdiich according to law belongs to his creditor.
It was said on the argument of this case by one or more members of the Court that a debtor had the right to prefer one creditor over another, even if he made that preference with the intent to hinder and delay another creditor in the collection of his just debt; such conveyance was valid in law.
I by no means assent to that proposition; while I agree that it is a well settled rule of law that a debtor in failing circumstances may dispose of his property in payment of his debts, giving preference to such of his creditors as he chooses, I still think if he make such preference with intent *330to hinder or delay some other creditor in the collection of his debt such conveyance is fraudulent and void.
This is the plain explicit language of the statute; if the conveyance be made with the intent to hinder and delay the creditor, it is void; this question of intent is a fact to be found by Court or jury, but if found, the law pronounces the conveyance void. See Cadogan vs. Kennett, decided by Lord Mansfield, 1 Cowp., 434. In the case of Bozman vs. Draughan, 3 Stewart, 243, the Supreme Court of Alabama “held that a conveyance with intent to hinder and delay creditors in the collection of their debts was void as against such creditors, though on valuable consideration.” The Court of Appeals in Kentucky, in the case of Vernon vs. Morton, 8 Dana, 247, held “If the intention in executing the deed be to hinder and delay creditors it will vitiate the whole deed though it be made upon a good consideration, or for the just and equitable purpose of securing an equal distribution of the effects among all the creditors.”
In the case of Nicholson vs. Leavitt, 4th Sandf., 252, (New York), it is held that an intent to defraud is implied in the intent to hinder and delay creditors, and in answer to the argument that an intent to hinder and delay creditors, there being no intent to defraud them, will not make an assignment illegal, and that a positive intent to defraud must exist, the Court say that a positive intent to defraud always does exist where the inducement to the trust is to hinder and delay creditors, “since the right of a creditor to recover his demand when due is as absolute as the right to recover at all.”
Again, in Bank vs. Sherman, 2 Douglass, 176, it was held by the Supreme Court of Michigan, “that fraud in fact or an express intent to commit fraud is.not necessary in order to render a conveyance fraudulent as against creditors. It is.sufficient if the effect of the conveyance is to hinder and delay creditors in the collection of their debts.”
In Mitchell vs. Stiles, the Supreme Court of Pennsylvania *3311 Harris, 306, say: “Whatever the private or actual intent of the deed may have been, it wears the marks which for the benefit of creditors as a matter of public policy the law construes into badges of fraud. Its whole scope and effect is to delay, hinder and obstruct creditors, it is therefore void, and it has been well said by an able American writer in summing up the law on this point, that an assignment in trust for creditors which by its provisions tends to hinder or delay creditors is fraudulent and void in law. See 4 Denio, 217; 7 Howard, 277; 1 Harris, 185.
1 hope sufficient has been said to show both from reason and authority that if a transfer of property has been made with the intent to hinder or delay creditors, that transfer is fraudulent and void in law, notwithstanding it be made in payment or satisfaction of an honest and just debt.
I come now to the question whether the conveyances which were made by Welch are upon their face as matter of law, fraudulent and void as against creditors. These several conveyances are a part of the answer; they are called for by the bill and made a part of the answrer by the defendant Welch.
I have observed that in the answer of Welch he does not deny that the conveyances he made were made with the intent to hinder and delay creditors, especially Birdsall the plaintiff, except that at the conclusion of his answer he denies all fraud and combination. This allegation is by no means any answer to the charge in the bill, that the conveyance wras made with the intent, or as the pleader has stated, with a view, to hinder and delay creditors. It wras a very easy thing to say and swrear to, if true, that these conveyances were not made wdth either “ a view or the intent to hinder and delay creditors,” &c., but by his answer he can only afford to swear that in all these matters he acted in good faith and without fraud. He doubtless believed under the advice of counsel that it was fair and honest to prevent Birdsall from realizing anything upon any judgment he *332might obtain and acted in good faith in contriving the means to prevent it.
It is sufficient to say that allegations of this kind “ acted in good faith, bona fide, not guilty of fraud, are as idle as the wind by way of answer to a specific fact. The charge in the bill is that he made these conveyances with intent to hinder and delay the complainant in the collection of his debt, the answer is, not that he did not make them with that view or intent, but that he acted bona fide and without fraud.
I recur again to the question whether these conveyances by Welch are upon their face fraudulent and void in law as against his creditors.
It would seem from the face of these conveyances that on the 2d of December, 1867, and two days before Birdsall recovered judgment, the defendant, Welch, executed two assignments of his property including all his personal and real estate subject to execution. It was admitted on the argument, and the facts of the case show, that he was at the time hopelessly insolvent.
He assigns his personal property to the defendant, Davis, in trust to pay on demand $1,157, and six months after date, what date does not appear, $2,000; “that in case default shall be made in the payment of said sums, default pray by whom? Of course Welch. Then Davis shall proceed and sell, after advertising as prescribed, the property assigned, and “out of the money arising from the sale thereof, to retain and pay the said several sums as above mentioned, or such sums as shall remain unpaid at the time of sale and all charges touching the same and including five per cent, to the said party of the second part (Davis) for his diligence and trouble in executing this trust. And the remainder if any to pay over to the party of the first part or to his heirs or assigns.”
At the same time Welch and his wife executed a deed of his estate to the defendant Talmadge in consideration of $10,000, as expressed in the deed, and at the same time Tal*333madge executes to Davis a deed of trust to secure the purchase price of the real estate. It recites that Talmadgo is indebted to Welch in the sum of $9,000, on four promissory notes payable to Welch in six, twelve, eighteen and twenty-four months after date and conditions that if these notes are not paid at maturity Davis may proceed to sell the property, and out of the proceeds pay the notes to Welch and the balance if any to Talmadge.
I repeat that at the time of these conveyances it was conceded on the argument both below and in this Court that Welch was hopelessly insolvent even if the plaintiff’s judgment be blotted out. What have we then upon the face of these papers?
An insolvent conveys all his personal estate in trust to pay a particular debt and reserves the surplus, if any, to himself. At the same time he transfers all his real estate for the consideration of $10,000, and reserves $9,000 payable to himself in 6, 12, 18, and 24 months.
Never in the history of frauds which have come under my observation was one so stupidly conceived, or so bunglingly executed as this.
These conveyances were made at the same time, doubtless under the advice or superintendence of the defendant Davis; Welch apprehending a judgment might be obtained against him, transfers his personal property to Davis directing him to pay out of its proceeds certain debts, and pay the balance if any to him ; the personal property is thus supposed safe from any execution of Birdsall.
He then transfers his real estate to the defendant Talmadge and takes his notes for $9,000, payable in 6, 12, 18 and 24 months, and thus it was supposed the proceeds of his real estate were not subject to execution.
I suppose it can scarcely be necessary to cite authorities to show that if a debtor in failing circumstances makes an assignment of a part of his property in trust to pay one or more of his creditors and reserves,the balance if any to him*334self instead of appropriating it to the payment of other of his creditors the transfer is fraudulent and void in law.
I will refer for convenience to the case of Goodrich vs. Downs, 6 Hill, 438, because it is so precisely in point with this case. The Court in that case held, that where an assignment was made by a debtor in failing circumstances, of the principal part of his property to pay one or more of his creditors, and provided that the surplus if any should be returned to the assignor, his heirs, &c., such assignment was fraudulent and void upon its face, the provision as to the surplus being a trust for the use of the assignor. This was the precise provision of the deed from Welch to Davis.
The judgment of the Court at Special Term, I still think ought to be affirmed.