Court Opinion

ID: 6408255
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:50:38.324092+00
Date Added: 2024-06-11T15:51:17.079348
License: Public Domain

Hubbard, J,
From the facts stated, we have no doubt that the mortgage was fraudulent as to creditors. It appears to have been made with the double purpose of securing, through the defendant, a bond fide debt due from the mortgagor to a Mrs. Pickering, and of preventing creditors from attaching the property. Such a purpose taints the conveyance, (2 Pick. 137, 138,) and if the goods had been in the hands of the defendant at the time of commencing the action, there is no question but what it could have been successfully maintained. As between the parties the transfer was valid, but it might be avoided by creditors. Prior, however, to the present suit, the defendant had converted the goods into money, by a sale to bona fide purchasers, and had paid the amount to Mrs. Pickering, a bond fide creditor; the proceeds not exceeding her demand.
The learned judge who tried the case, after stating the principles of the law respecting conveyances fraudulent as against creditors, further instructed the jury that “ if the mortgage was found by the jury to be void on the ground before stated,” that is, of being fraudulent as to creditors, “ the defendant was not discharged from his liability by payment of the proceeds of the mortgage to Mrs. Pickering, or to Shaw for her benefit, in pursuance and execution of the contriict; but if the parties rescinded the contract, and the defendant thereupon paid the proceeds to Shaw for his own use, before notice of any proceedings by Shaw under the insolvent act, then the defendant was discharged from any liability in this suit.” It is also argued by *523the counsel for the plaintiff, that though the defendant paid Mrs. Pickering out of the proceeds of the mortgaged property, she had no interest or property in the goods, and that it was his own debt he was paying to her; that it was no part of the original agreement, that he should pay her out of this particular fund; and that, as he used the mortgaged property as his own, selling it before the time when the mortgaged note fell due, he is accountable for the proceeds in this action.
But we cannot concur in these conclusions. If Mrs. Pickc ing had been knowing to the fraudulent agreement, and consenting to it, a payment to her would not have purged the fraud, or have discharged the defendant. But she was an innocent party and a bona fide creditor, who might herself, if there had been no assignee of the estate of Shaw, have defeated the conveyance by an attachment of the goods to secure her own debt. A payment to her cannot then be held void as against creditors, she being herself a creditor, and standing in the same situation as a purchaser without notice. It does not, in our judgment, affect the case, that the defendant had given, or agreed to give, his note to Mrs. Pickering; for it is evident from the facts, that it was not received by her, if received at all, in payment of the debt due to her from Shaw, and the sum actually paid to her was the proceeds of the goods, and was in discharge of the debt of Shaw.
We cannot distinguish this case in principle from those of Thomas v. Goodwin, 12 Mass. 140, and Hutchins v. Sprague, 4 N. Hamp. 469. In those cases, the conveyances to the respective trustees of the several defendants were fraudulent as against creditors ; yet the trustees, having paid the proceeds of the goods assigned to them to bona fide creditors of the principal debtor, were discharged, on the ground that there remained nothing in their hands that could be subjected to a judgment In the case of Hutchins v. Sprague, the court say, “ howevei fraudulent the contract, under which the goods went into the hands of the trustee, might have been, if, before the service oí the process, he had repented of the fraudulent purpose and restored the goods to the principal, it is clear he would have *524been entitled to be discharged in this case. And we see no reason why a bond fide payment of debts, due from the principal, to the full value of the goods, or even an actual and bond fide assuming to pay such debts to that value, should not be deemed equivalent, in this case, to a restoration of the goods.” And we are of opinion that the payment of the debt to a bond fide creditor of the mortgagor, without notice, from the proceeds of the mortgaged goods, was equivalent to a rescinding of the contract and a restoration of the goods, or their proceeds, to Shaw for his own use; and that the previous agreement of the defendant with Shaw does not furnish a legal cause for charging him in this action. And with this agrees the decision in the case of Oriental Bank v. Haskins, 3 Met. 332.
It has been attempted by the counsel to distinguish Thomas v. Goodwin and Hutchins v. Sprague from the case at bar, on the ground that they were suits against trustees, and turned on the state of facts as they existed at the time of the service of the writs. It is true that the cases did thus turn; but the same is true in the present case. As the trustees in those actions had no goods or effects of the principal in their hands, at the time of the service on them, so here the defendant had neither goods nor money, the property of the insolvent, in his hands at the commencement of the suit; the payment to a bond fide creditor having discharged him from liability to other creditors. And if, instead of a suit under the insolvent act, no process had issued against the insolvent, and a creditor had sued him, and summoned the defendant as his trustee, and the facts as they now appear had been stated in his answer, he would, under the authority of the cases cited, have been entitled to be discharged The fact, that the plaintiff is an assignee under the insolvent act, and not a creditor of Shaw, does not vary the matter. He has no greater rights in this case than a creditor would have had, if there had been no process under the statute.

Verdict set aside, and a new trial ordered at the bar cf this court.