Court Opinion

ID: 4913939
Source: CourtListenerOpinion
Date Created: 2021-09-22 00:06:06.694187+00
Date Added: 2024-06-11T08:13:07.476599
License: Public Domain

Mr. Justice Raney
concurring:
Upon the last errors (the 6th, 7th and 8th,) assigned and discussed my views are as follows:
I. The question whether a defendant can assert his own fraudulent attempts or acts against his creditors in defence of an action brought by his fraudulent grantee is one upon which there is much doubt. It has been held in Virginia, Thomas vs. Soper, 5 Munf., 28, where the action was detinue for slaves which the grantor retained possession of, and in Maryland, Dorsey vs. Smithson, 6th H. & J., 61, (see also 5 Md., 44,) where likewise the part of the property sought to be recovered in the action of replevin brought against the vendor’s executor, had not been in the plaintiff’s possession, and in Texas, Hœser vs. Kræka, 29 Texas, 450, where the vendor remained in possession of the chattels, that the defence could not he made. In Springer vs. Drosch, 32 Ind., 486, sustaining Findley vs. Cooley, 1 Blf., 262, and overruling Welby vs. Armstrong, 21 Ind., 489, it was decided that a contract for the sale or conveyance of property to hinder or delay creditors is illegal as to creditors only, and as between the parties and as to all *169others than creditors, it is legal and valid, and can he enforced in all its terms as any other contract. In Clemens vs. Clemens, 28 Wis., 637, it is held that a conveyance of land or sale of personal property, or an executory agreement in relation thereto, made for the purpose of hindering or delaying creditors, though void as to creditors, is valid as between the parties; and the maxim “ex turpe causa non oritur actio ;” and “ in pari delicto potier est conditio defendentis” do not apply to controversies at law or in equity growing out of such conveyance, sale or agreement. In Smith vs. Hubbs, 10 Me., (1 Fairfield,) 71, A. furnished goods to B. at request of C., to hold and sell in the name of C., under a fraudulent arrangement between the three to protect the goods from attachment of B.’s creditors. In a suit brought by A. against C. to recover the price of the goods, it was held that it was competent for C. to allege and prove the fraud in defence of the action, yet in Ellis vs. Higgins, 32 Me., 34, Ellis brought a writ of entry against Higgins and read a deed of warranty from H., who offered to prove that the deed was made and recorded fraudulently to secure the land from his creditors, but the offer 'was rejected. “Between parties to fraud,” says the opinion, “the law renders no aid to either. The title, though by a fraudulent deed, passed from the tenant to the demandant. The statute does not declare it to be void. If it had been a contract to convey, it could not have been enforced. It "was an actual conveyance. It passed the title without any aid from the courts.” In Andrews vs. Marshall, 43 Me., 272, 48 Id., 26, it is held that if a fraudulent vendor or grantor parts with all his interest in the property conveyed to his vendee or grantee, the law affords him no aid and equity, no relief in reclaiming it. The grantee here was a mortgagee, and his right of action againt a trespasser was sustained. In Pennsylvania, in Murphy vs. Hubert, 16 *170Penn. St., 50, ejectment was brought by the grantee on a deed made to defraud creditors, and it was held he could recover. “ It is not the plaintiff that asks the aid of the court, but the defendant. The plaintiffs title is good. At law the defendant has no defence whatever. "Were the case in equity on bill for injunction * * the chancellor would refuse relief when it appeared that defendant, who asked the aid of the court, had been guilty of a fraud in attempting to screen his property from the just claims of creditors. * * He would leave the party to his remedy at law, where the plaintiff would be entitled to recover on the well settled principle that although the deed was void as to creditors, yet the title is valid as between the parties.” * * “ The defendant claims that being in possession differs this from the cases ruled, but this is not so, as is shown in the 'cases cited and on principle. If it were, it would nullify the rule.” The same doctrine is practically held as to personal property in Buehler vs. Gloninger, 2 Watts, 226.
In New York, in the case of Nellis vs. Clark, 20 Wend., 24, and 4 Hill, 424, (A. D. 1838 and 1842,) it was held that recovery could not be had on a promissory note given in part consideration of a fraudulent conveyance of land, upon the principle that when a contract is entered into for fraudulent or illegal purposes, the law will, leave both parties where it finds them, and will not aid in disturbing what has been executed or carried into effect, and as to such parts as remain executory it will not compel the contractor to perform his engagements or pay damages for non-performance. See also Niven vs. Best, 10 Barb., 369. In the case of Moseley vs. Moseley, 15 N. Y., 334, (A. D. 1857) where the defendant was in possession and claimed to have made a parol purchase of the land from Joseph Moseley, and paid the consideration, and it was at*171tempted by him to show that the plaintiff’s deed from Joseph was made to defraud his creditors, it was held that this could not be done. Denio, C. J., delivering the opinion, said: “ It was formerly understood to be the law that contracts and conveyances made with a view to hinder and defraud creditors were nevertheless valid and binding between the parties to such contracts and conveyances. Jackson vs. Garnsey, 16 John., 189 ; Osborn vs. Moss, 7 Id., 161; 1 Blackfd., 262; Fairbanks vs. Blackington, 9 Pick., 93. * * In Nellis vs. Clark, the rule was departed from by a decision which restricted the doctrine to executed conveyances.” * * * “ Enough of the ancient principle is left to determine this case. The deed * is an executed conveyance which the grantor could never be heard to question in a court of justice on the ground that it was executed if fraud of creditors. The defendant is not a creditor; * * if he has any claim to the subject of the suit it is one taken under his father, and he can claim no right which the grantor was estopped from setting up.” Jackson vs. Garnsey was an ejectment brought upon a deed which the court said may have been and probably was executed for the purpose of defrauding a creditor of the grantor and without other consideration than one merely colorable. In Osborne vs. Moss the case of Hawes vs. Leader (Cro. Jac., 270, Yelv., 196,) is referred to as an answer to the defence. In that ease the intestate made a grant of his goods to B. by fraud between him and B. to cheat creditors, and he kept possession of the goods and died. B. sued the administrator for the goods, and the administrator pleaded the covin and fraud and the statute of Elizabeth, declaring such grants, gifts,, &c., void against creditors. On demurrer the plea was held bad on the ground, among others, that the deed, though void against creditors, remained good against the party and his administrator. In Massachusetts, in Fairbanks vs. *172Blackington, 9 Pick., 93, it was held that if a person secures property to his children in fraud of his creditors, the fraud in this transaction is no defence to an action brought by the children against a person who has received and agreed to account to them for the property. The original transaction, though void as against the father’s creditors, is binding on the parties to it and valid as to all persons except the creditors; and in Drinkwater vs. Drinkwater, 4 Mass., 353, it was held that an administrator cannot defend any real action brought against him in that capacity by any one claiming as a purchaser from his intestate, whether the purchase was bona fide or fraudulent as to creditors : and in the Oriental Bank vs. Haskins, 3 Met., 332, it was held that conveyances fraudulent as to creditors and those fraudulent as to subsequent purchasers are both voidable only and not void. See also 7 Met., 520. In South Carolina, in the case of Broughton vs. Broughton, 4 Rich., 491, (A. D. 1851) it was held that a grantor who executes a conveyance to defraud his creditors is bound thereby, and in an action against him by the grantee or his heirs to recover the land will not be allowed to show the fraud of the grantee and himself, the want of real consideration, the intention of the parties that the title should not pass, for the purpose of either invalidating the deed or availing himself of’the maxim in pan delicto, &c. “It is a mistake to suppose, says the court, that the parties being in pari delicto the court will refuse the remedy demanded by the plaintiffs. The deed as between the son and father is perfectly good. The defendant by a stern, but a proper policy of the law, is excluded from proof which would show the fraud. He is in this respect the actor; his fraud silences and estops him from averring against the deed.” The possession had remained in the grantor till his death and had never been changed and the action was by the heirs of the grantee who *173had not been in possession. In Caston vs. Ballard, 1 Hill, S. C., 406, A. D. 1833, the title, (says Goldthwaite, J., in 8 Porter, 358,) was never in any manner conveyed to Caston, but remained in Ballard during the whole time, and B. could have recovered the slaves, if the facts of the case are truly stated. In the case of Roden vs. Murphy et al., 10 Ala., 804, Roden sued Murphy and others for taking from his possession and carrying away two slaves. The defence was in effect that the deed under which Roden claimed was. made by Jacobs, the intestate, to defraud his creditors, and that Jacobs was permitted to retain possession of the slaves for more than two years after the debt pretended by the deed to be secured was due, and up to the time of his death, that Rogers, as executor of Jacobs, proved the will and took the slaves into his possession as the estate of J., and reported the estate insolvent and it was so declared. Eogers. resigned and Murphy was appointed administrator, &c., and as such received the slaves from E., and as such retains them. “ Considering the deed as operative by its delivery, it is the settled law of this court,” says the opinion, “ that the administrator of the grantor, no more than himself, can insist on the question of fraud with the grantee. We held in Martin vs. Martin, 6 Ala., 367, that an administrator could not assert a title against the admission of his intestate with respect to slaves, although the slaves themselves might possibly have been subjected by creditors of the intestate to their demands. The same principle governs the case of Rochelle vs. Harrison, 8 Porter, 352, and it is admitted in 5 Ala., 192, 81, and 4 Ala., 521. In view of these decisions, it is evident the pleas permit no available bar, and that the party, as administrator, is estopped from denying the title his intestate has created.” In 27 Ala., 348, the court say : “ The deed is only void as to creditors, whose *174-debts are delayed, hindered, &c. Neither party to it can say it is void for fraud.” As I understand Rochelle vs. Harrison, if the contract passes the title a recovery can be had by the grantee, but if it is merely executory and dependent on some act to be subsequently performed by either party, and no title passes, possibly such would not be the rule. It is not assumed that possession of the slaves had actually been delivered, but that R. was at least estopped, by acknowledging a hiring, under his hand and seal, from denying it. In Lawton vs. Gordon, 34 Cal., 36, a conveyance of real estate, made and received for the purpose of defrauding the creditors of the grantor, is held to be good between the parties, and as to all the world except the creditors of the grantor, and to be good against subsequent purchasers from the grantor unless they buy without notice and for a valuable consideration. In Flower vs. Cornish, 25 Minnesota, 473, the action was to establish the claim of the plaintiff as owner of the mortgage and notes, to proceeds of property covered by the chattel mortgage. The mortgagor remained in possession of the mortgaged chattels until he made a general assignment of his effects, and then he placed his assignee in possession of the mortgaged property, and the property was sold. The assignee claimed that the mortgage was fraudulent as against the mortgagee’s creditors, and that he was entitled to the proceeds. It was held that neither the mortgagor nor his assignee could raise the question, but only the creditors of the former as such and not by virtue of any provisions of the assignment, but wholly independent of it.
In Arkansas, in Payne vs. Bruton, 5 Eng., 53, it was held upon the presumption that the law will not aid to enforce an executory contract made to defraud creditors, that one who held an absolute bill of sale of property from another, made for the purpose of defrauding the latter’s *175creditors, but without consideration, could not maintain replevin for the property ; nor trover, in Georgia, in Goodwyn vs. Goodwyn, (20 Ga., 600), where there was no delivery made and no consideration paid. In New Jersey, the doctrine that a note given for property transferred to defraud creditors cannot be enforced in the hands of the payee against the maker, is maintained. Church vs. Menir, 33 N. J. L., 318. In Kentucky the same doctrine is advanced in Norris vs. Norris’ Adm’r, 9 Dana, 318, and admitted and asserted in Tennessee, in 10 Yerg., 228, and held in New Hampshire, in Cross vs. Brown, 51 N. H., 486, where it was shown that the avails of the note transferred were needed to pay the deceased transferrer’s debt. See Abbott vs. Tenney, 18 N. H., 109.
The theory of the New Jersey court, and other courts agreeing with it, is that as long as anything remains to be done to put the grantee in enjoyment of what his bill of sale or contract calls for, the law will not aid him ; and this upon the principle that the courts should not in any manner aid a fraud, either to put a grantee in possession or to recover it for a grantor. They contend that these transactions were fraudulent as between the parties at the common law, and that the statute of Elizabeth was merely declaratory of part of the common law, so far as it related to creditors. On the other hand it is the contention of the Wisconsin, and other courts, taking a contrary view, that as between the parties the transactions were always good at common law and assailable only by the creditors attempted to be defrauded ; either that the familiar axioms quoted above did not apply, or that the grantor and his personal representatives were estopped to suggest the fraud ; some courts holding this even as to purely executory contracts, and others only as to those where the instrument passed the legal title, though the possession was withheld. *176The class holding that the defence of fraud upon creditors cannot be raised, argue that not only is it against the common law to permit it, but that the grantor should not be permitted to say the deed is good as against his creditors, when they assail it or seek to reach his property, and yet in the next breath to allege as against his grantee, and for his own protection, that it was intended as a fraud upon his creditors, and is, therefore, not good as to the grantee. There are strong reasons in favor of both rules. It cannot, however, be denied that the doctrine of the New Jersey class of cases is a departure. A careful review of the authorities shows this, and the weight of authority is against them. Nor am I satisfied that it is not the more wholesome rule that the grantor should be estopped to say that his deed or absolute bill of sale, the case apparently before us, is a fraud on creditors. This will operate as a protection against such a claim being made against a valid deed, and it is not going far to say that he who will make a fraudulent deed to defeat his creditors will not hesitate long, if good opportunity offers, before corruptly attempting to defeat his meritorious grantee by making it appear that his really valid and honest deed was an attempted fraud upon his creditors. Let the legal title stand where he places it, so far as he and his heirs are concerned. This I believe is the best rule. Creditors have their own remedies.
II. In so far as the question of admitting evidence of the insolvency of the estate is concerned, I do not think the Circuit Judge erred in refusing to admit it. Independent of statutory regulation permitting it, the general and best established rule is that such insolvency does not authorize an administrator, as such, to question the transfers and acts of his intestate made or done in fraud of creditors. In some States it is allowed, but according to Mr. Bump, only by virtue of statutes conferring the authority, which is cer*177tainly the case as to some of the States he mentions, if not all of them. Bump on Fraud. Conveyances, 438, note 2. In the following cases it is held that the administrator cannot question such transfers: Marler vs. Marler, 6 Ala., 367; Roden vs. Murphy, 10 Ala., 804 ; 24 Ala., 513 ; Winn vs. Barnett, 31 Miss., 653 ; Crosby vs. DeGraffenreid, 19 Ga., 290 ; Coltraine vs. Causey, 3 Ir. Eq., 246 ; Osborne vs. Moss, 7 John., 161 ; Brown vs. Einley, 18 Mo., 375 ; George vs. Williamson, 26 Mo., 190 ; Jordan vs. Fenno, 13 Ark., 593; Ellis vs. McBride, 27 Miss., 155. In Shears vs. Rogers, 3 B. & C., 96, the defendant executor was also the fraudulent assignee of the lease, and he was held to hold it as assets. Of course creditors of the intestate may question the transaction by proper proceedings.