Court Opinion

ID: 4928233
Source: CourtListenerOpinion
Date Created: 2021-09-24 00:59:47.887627+00
Date Added: 2024-06-11T08:13:40.913251
License: Public Domain

The opinion of the Court was drawn up by
Siiepley J.
This is an action on the case. The material facts stated in several counts, in the declaration are, that Burton being insolvent, entered into partnership with Rice, and that Burton and Rice, on November 13, 1843, made a conveyance in mortgage of certain personal property named, to Adams *432and Hardy. That property, of the value of $25,000, was conveyed to secure a debt of $3500, alleged to be due to them. That the property was greatly undervalued. That it was to be forfeited to the mortgagees on failure of payment of the $3,500, on the fifteenth of December following. That it was agreed, that payment should not be made to redeem it, and that the property should become forfeited. That the mortgagees should not take advantage of the forfeiture, but should allow the mortgagors to have the control and benefit of the property. That the plaintiff, being a creditor of Burton, on May, 22, 1844, commenced a suit against him, and caused Adams and Hardy to be summoned as his trustees. That Hardy made a disclosure in that suit for himself and partner and claimed the property as forfeited to them. That they were upon such disclosure discharged. That the plaintiff recovered judgment against Burton, sued out an execution thereon, placed it in the hands of an officer for collection, and that he returned it in no part satisfied. It is alleged that all these acts were done by the defendants to place the property out of the reach of Burton’s creditors, and with the intention to delay and defeat the plaintiff in any attempt made to collect his debt.
The presiding Judge being of opinion that the plaintiff upon proof of these facts, could not maintain his action, directed a nonsuit, and the case is presented by a bill of exceptions.
Stripped of the allegations describing the manner, in which the alleged fraud was perpetrated, the declaration presents the common case of a fraudulent conveyance of property, made for the purpose and with the intent to defraud creditors.
Creditors may consider such conveyances to be unlawful and void, and may cause the property to be applied to the payment of their debts by the use of any of the different legal and equitable processes applicable to their case and afforded by the law for that purpose. Some one of those processes has been found to be well suited to such a purpose, and by a proper selection and use of it, a creditor upon satisfactory proof *433may obtain payment from property so conveyed, or from its. proceeds in the bands of a fraudulent bolder.
Omitting the selection of any of the long established remedies and the usual course of procedure, it is now proposed by an action on the case to seek, not the property fraudulently-conveyed or its proceeds, but a judgment against those who-were partios to the fraud, for the amount of damages, which the plaintiff can prove, that he has suffered by reason of such fraudulent conveyance. If such an action can be maintained in this, it may in every other case, where a fraudulent conveyance has been made of real or personal property with an intention to defraud creditors. If such an action upon such proof can be maintained by any one, it may be also by each creditor. There is nothing to give one a right superior to that, of another. It is one of the essential elements of a special' action on the case, that the plaintiff is entitled to recover damages for the injury which he has suffered, irrespective of the rights of other persons to recover in like manner damages for injuries suffered by them from the same act or cause. All are-entitled to compensation for the injuries suffered from the-same cause, and each may recover it for himself. The first suit commenced can have no effect upon subsequent suits: commenced by others. The damages in such actions are not measured by proof or consideration of the benefit, which the wrongdoer may have derived from his wrongful or unlawful act. They are limited and measured only by the injury, which his-conduct has occasioned. If therefore the principles which regulate this form of action are to be regarded and preserved,, all creditors, who have been injured by a fraudulent conveyance of their debtor’s property, must have an equal right tore cover damages to the extent, to which each has thereby been a loser. And the effect upon a party receiving such a conveyance must be to subject him to damages in no degree regulated by the amount of property received, and limited only by the injury occasioned, it may bo, to very numerous creditors similarly situated and injured. To place him in such a position the whole law regulating the rights and liabilities arising out of *434proof, that one has received a conveyance of a debtor’s property with an intention to defraud his creditors, must be changed. That law, as it has been administered in civil actions does not punish a person for becoming a party to such a fraud. Does not punish the debtor and vendor, who has thus conveyed his property. It only deprives the purchaser of all benefit to be derived from it, by declaring his title thus obtained to be void, when it may injuriously affect the rights of creditors. It leaves the moral turpitude and other injurious effect upon creditors and upon society to be punished, as the sovereign power may provide. To allow each creditor to maintain an action on the case against a fraudulent purchaser to recover damages, supposing them to be capable of legal estimation, would be to make use of a civil action for the. recovery of sums, in the nature of a penalty, to the full amount of all, which could be recovered. For the fraudulent purchaser would acquire no legal title to hold that property against the rights of any such creditor by proof, that he had been compelled to pay many times its value. It would do this too, when there is a statute in this State authorising a recovery in the nature of a penalty, and yet limiting the liability of one, aiding a debtor in the fraudulent concealment or transfer of his property to prevent its attachment or seizure, to double the amount in value of the property concealed or transferred. If such an action as this may be maintained against a fraudulent vendee, it may, upon like principles, against the fraudulent vendor or against any particeps fraudis. And in such case the amount to be recovered must be wholly in its nature penal, more so than in a case of recovery by virtue of the provisions of the statute c. 148, <§> 49. This action has accordingly been, as appropriately commenced against vendors as vendees. The debt of the creditor will not be. satisfied pro tanto by a recovery and collection of damages from a vendee or a particeps fraudis. A debt due from one person cannot be satisfied by the recovery of damages from another person, unconnected with and a stranger to it, without some statute provision. The creditor would recover damages in satisfaction for an in*435jury suffered, not on account of a debt due and in satisfaction of it.
IIow are the damages, which a creditor may thus recover, to be proved and estimated ? The plaintiff had obtained no lien on the property conveyed by attachment., judgment or in any other manner. Had no special property in or claim to it. The only proof of loss or injury, which he could make, would be, that his debtor had fraudulently conveyed his property without having received any value for it, and with the intent to avoid the payment of his debt. And that he had no other means of obtaining payment. All other creditors could make the same proof. Upon such proof he could not be entitled to recover the amount of his debt; for that is still subsisting, and it may yet be collected. Nor could he be entitled to recover the value of the property conveyed; for to that he had no better claim than other creditors. He has not therefore lost it. If it had not been fraudulently conveyed, it was as probable, that it might have been applied to the payment of other debts, as to his own. The debtor might have disposed of it fairly and for a valuable consideration ; or have lost it by accident or misfortune. The only loss or injury shown by the proof would be, that he had been deprived of a chance or possibility of obtaining payment from that property. This would be stating his loss or injury too strongly, for ho would still have the chance of attaching or securing it, or its proceeds, in the hands of the fraudulent holder. A jury would be authorized then to estimate the value only of his chance to secure it and have it applied to the payment of his debt while in the hands of his debtor; for this only has he lost. There would be no data, tables, or other means afforded, by which such a chance could be estimated. The loss or injury would be too uncertain and remote for legal estimation. An action like the present can be maintained only by proof of a direct, certain and material injury. Benton v. Pratt, 2 Wend. 385; Lamb v. Stone, 11 Pick. 527. In the case of Pasley v. Freeman, 3 T. R. 51, it was said, that the action would bo maintained by proof of fraud and damage. While it was justly *436stated in Lamb v. Stone, that there might be legal torts, in which the damage to individuals might be great, and yet so remote or contingent as to furnish no ground of action. The injury should be so definite and certain, that it may be particularly described in the declaration. And it should be proved as described. Reynolds v. Kennedy, 1 Wilson, 232. Pangburn v. Bull, 1 Wend. 345.
A still further objection to the maintenance of this action is, that the plaintiff does not appear to have suffered any damages, not common to all the creditors of Burton. Com. Dig. Action upon the Case, B. 2. One might as well maintain such an action, against another for causing the air to become noxious from a nuisance equally affecting a whole neighborhood.
Most of the cases cited and relied upon for the maintenance of this action were examined and distinguished from a case like this in the opinion delivered by Mr. Justice Morton in Lamb v. Stone, in which there was an unsuccessful attempt made to maintain a similar action. It would be unnecessary to notice any of them again if the case of Adams v. Paige, 7 Pick. 550, had not been still relied upon as authority for the maintenance of this action. The essential difference between them consists in the fact, that the plaintiffs in that case had caused the goods of their debtor to be attached for the security of their debt, and had thereby acquired a right to have them by proper proceedings applied to the payment of their debt in preference to all other creditors, who had not previously caused them to be attached. Of this right, which proved to be a valuable one, they were deprived by the fraudulent conduct of the defendants. That constituted a good cause of action capable of proof, and of certain estimation, and one not common to all other creditors. In this case the plaintiff had no such lien or .right.
In the case of Moore v. Tracy, 7 Wend. 229, the plaintiff was induced, by the fraudulent conduct of the defendants, to sell certain goods on credit to one known to the defendants to be insolvent, by which he lost their value.
The case of Penrod v. Mitchell, 8 S. & R. 522, and 2 *437Penn. 126, has been much relied upon, as an authority for the maintenance of the action. In neither of the opinions, delivered by eminent judges in that case, were the objections, which were stated in the case of Lamb v. Stone, or which have been here noticed, considered and obviated; and they are of a character too important to be yielded to mere authorty not binding upon this Court.
Under general leave to amend, the counsel for the plaintiff have presented with their arguments in writing a new count, drawn recently and since a nonsuit was entered. Not having been presented to the Court and allowed, it is not a part of the case presented by the exceptions taken at the trial. Yet if the action might thereby be sustained, the court might be induced to remove the nonsuit and to allow the amendment proposed to be made. There is an additional averment in it which, it is contended, may be material. It is that the defendants “ corruptly did combine and conspire together,” to defraud the plaintiff by the acts before stated. Whenever a premeditated fraudulent conveyance of property has been made, such an allegation might perhaps be made and proved. The law which defines and regulates the liabilities of the parties to a fraudulent conveyance, has not arisen and existed without a knowledge, that it might be so; and it cannot be varied by the insertion or omission of such an averment. It cannot in this case be essential, for the denial of the plaintiff's right to maintain the action has not arisen out of any defective or insufficient averments, but out of the insufficiency of the facts stated, to enable him to maintain it. The additional facts stated in the proposed count, are in substance that the plaintiff’s debt was contracted before the conveyance was made in fraud of it, and that an attachment of the goods conveyed was prevented by the fraudulent representations of the defendants. It will be perceived, that the conclusion could not be different in accordance with the principles already stated, if such additional facts had been presented by the declaration.

Exceptions overruled, and nonsuit confirmed.