Court Opinion

ID: 8257347
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:33:10.327713+00
Date Added: 2024-06-11T16:43:02.598240
License: Public Domain

Fisher, J.,
delivered the opinion of the court.
This was a bill filed by the complainants, as judgment creditors of the late firm of Taylor & Richardson, in the Chancery Court of Rankin county, to have a deed executed by the defendant, Taylor, declared void, on the ground of fraud, and to subject the property thereby attempted to be conveyed, to the payment of said judgments.
The defendants below demurred to the bill, and the court sustained the demurrer, from which decree the complainants have prosecuted-this appeal.
The main ground of demurrer is, that it appears by the bill that the complainants did not become creditors of the firm of Taylor & Richardson until a year or more after the execution of the deed,, and that, although it may have been voluntary, still the complainants have no right to assail it. The law now appears to be well settled that a man may, for the sole purpose of protecting his family against the casualties and accidents of trade, settle his property for their benefit, and that such settlement will be upheld against his subsequent creditors, unless it shall appear that the property was so situated that the community could have been-easily misled as to the title of the true owner. The deed being its-own exponent in this case, the object of Taylor was manifestly to-settle his property on his family ; and if this was the whole casey we should feel no hesitation in holding that the court below committed no error in sustaining the demurrer to the bill. The very object of such settlement by a man engaged in commerce, is to prefer his family to those who may thereafter become his creditors, and it may be safely admitted that the design was to protect the *738property conveyed against the debts thus to be contracted; for otherwise the conveyance would be simply an idle ceremony. The right to make the settlement carries with it the right to the beneficiaries to hold and enjoy the property against the claims of the donor, or against those who may assert a title through him. The conveyance when executed according to the forms and ceremonies of the law, and made a matter of record, is notice to the world not to trust the donor longer upon the faith of the property conveyed; and while it may have the effect of impairing his credit, it cannot be regarded as a fraud upon those who have ample opportunity to learn his true condition.
■ But as already remarked, we must go further and ascertain whether this is the case made by the bill. It is in the first place alleged that Richardson was at the date of the copartnership and at the date of the deed, insolvent; that Taylor was then known to be worth about the sum of ten thousand dollars, consisting of the property conveyed by the deed ; that the firm had recently purchased a stock of goods, and contracted debts to the amount of about f>13,000, and that about $9500 of this sum remained unpaid at the time Taylor executed the deed. It however appears that the lai’ger portion of the goods purchased were in the possession of the firm at this time. The bill then proceeds to charge that the object of the deed was to defraud the creditors of said firm, and also to defraud those who might thereafter become creditors. In order that the true questions may be presented, we will, at the risk of being tedious, quote the allegations of the bill relating to this branch of the case. It alleges “that on the 12th of February, 1852, the defendant Taylor secretly, and with the intent to defraud his then creditors, and also with the view and intent of contracting other debts with complainants and others for large amounts, and to defraud them, and without the knowledge of the defendant Richardson, his partner in business, and without any consideration whatever, made a deed in trust and gift of all his then remaining property and slaves to the defendant Reber, for the use and benefit of himself and wife, the defendant Sarah A. Taylor.” A copy of the deed being made an exhibit to the bill, the title of the slaves appears to have been conveyed to Reber for the use of Taylor’s wife and children, and he does not appear as a party interested therein. The *739bill then proceeds as follows: “ That neither the deed, or slaves, or either of them, was ever delivered to the trustee, Reber, but that the said Taylor remained in the quiet possession, use, and control of the same. That immediately after the said partnership was formed, and before the deed was made or recorded, so far as the complainants know or believe, and while complainants had been led by said Taylor & Richardson to believe that all the property of said Taylor was subject to the firm debts of Taylor & Richardson, they, the said Taylor & Richardson, made a commercial arrangement with Wright, Williams & Co., of New Orleans, to assume and pay the existing liabilities, then recently contracted, and to advance to them all amounts' of money, or the greater part thereof, necessary to carry on the business, and to give them credit by mercantile recommendation and letters of credit to buy goods of complainants and elsewhere, and said Wright, Williams & Co. were informed and believed at the time of said arrangement, that said Taylor was the owner of said slaves in said deed mentioned, and was the sole responsible party.” The bill then proceeds to state that Wright, Williams & Co. paid off the debts existing against the firm at the date of the deed, that they from time to time advanced large sums of money to the firm, that the complainant’s debts were in part contracted on the faith of letters given by Wright, Williams & Co., and upon the faith of said slaves. It appears that the debts due to Wright, Williams & Co. have been paid.
These several allegations will be noticed in the order in which they are made by the bill.
It is said that the deed was secretly executed. The bill alleges that it was duly acknowledged and recorded. That which is placed upon the public records of the country, can never be regarded as an act done in secret. The bill therefore simply contradicts itself in this respect.
Again, it is said that Richardson, the other partner, was kept'in ignorance of the deed. He is alleged to have been at the time insolvent, and having no individual property liable to the copartnership debts, he could not complain that Taylor had placed himself in the same situation; and creditors could not complain of an injury to Richardson, when he himself could not complain.
Next it is said that Taylor remained in possession of the property. *740Supposing the beneficial interest to have passed to Ms wife and children, and that the deed was properly recorded, Taylor’s possession in such case would be regarded as the possession of those having the right, and who under the laws and customs of society constituted his family.
It is again said that the object of the deed was to defraud the existing creditors of the firm, and that it is therefore void as to the subsequent creditors.
It must be admitted that when a deed is shown to be fraudulent as to existing creditors, very high authority can be produced to show that it is likewise void as to subsequent creditors. If, however, we keep in view the principle which lies at the foundation of the authorities holding this doctrine, it is believed that no difficulty will be experienced in arriving at a correct conclusion. It is a familiar rule of the common law, that fraud vitiates every transaction into which it enters, and courts acting with reference to this rule, have frequently declared that conveyances intended in their inception to defraud creditors, and therefore void to all intents and purposes, should be treated as void not only as to existing creditors, but likewise as to subsequent creditors. The transaction being void, neither party, upon the establishment of the fraud, could enforce the contract, but each was left by the court where he had elected to place himself, — beyond the protection of the law. In subjecting the property to the payment of the debts of subsequent creditors, the courts, following this rule, acted upon the principle that as the conveyance was void, the title never in fact passed to the fraudulent vendee, and as the investigation of the fraud in such case also involved the question of ownership of the property, the court, on ascertaining the existence of the fraud, declared what was but a natural consequence of the rule, that the title was still in the fraudulent vendor, and that such title should be made subservient to the claims of creditors. But the true question here is, how far this rule has been modified by the statute on this subject. It declares that such conveyance shall “ only” be void as against those who are delayed, hindered, or defrauded in the collection of their debts, &c. Hutch. Code, 638. This statute has already been construed to apply only to existing creditors, but if it were now an open question, the language would seem to be too clear to admit of construe*741tion. The conveyance is void as to all who are at the time' of its execution in a situation to be injured by it, but valid as to all others. It operates to transfer the title to the property, but transfers it with the incumbrance of the grantor’s debts then existing.
It must result from the dominion which every man has over his property, that he may dispose of it in such manner as best accords with his own will and judgment, except in those cases where the law, from considerations of policy, has thought proper to impose limitations upon this right.
And the same may be said with respect to the right to acquire property. The right of disposition by the grantor, and of acquisition by the grantee, both existing without restriction at the same time, it is difficult to conceive upon what principle persons who were not in a situation to be injured by the transaction, can complain of it. Of course, if fraud has intervened, this constitutes an exception to the rule, and this brings us to the material point in this case. It is said that one object of the conveyance was to defraud the complainants, and others, who might become the creditors of the firm after the execution of this deed. The facts from which such fraud may be fairly inferred, are alleged, and their truth being-admitted by the demurrer, the complainants, under this state of the case, are of course entitled to relief. It is expressly alleged, that neither the property nor the deed was ever delivered to the trustee, Reber. Whether viewed as a gift, or as a bargain and sale, the title to the property still remained in the debtor, and it is therefore liable to the complainants’ judgments. The act of making, acknowledging, and having the deed recorded, would not be sufficient to transfer the title, for the reason that a contract can only be consummated by the act of two persons, or, in technical language, by the assent of two minds, one agreeing to part with, and the other to accept the title. Until the deed was delivered, it was at most but a proposition to convey, which could have been withdrawn at any time before it was accepted by the other party. It is no answer to this position to say, that when a deed has been properly acknowledged and recorded, a delivery will be presumed; for this presumption, like all presumptions, which exist only for the sake of convenience, must yield to facts, when established. The bill alleges that the deed was not delivered, and this allegation *742being admitted, it is no longer a question as to what facts will be presumed, but wbat facts exist to overthrow the presumption. If the rule were once firmly established, that the registry of a deed should be taken as conclusive evidence of a delivery, a man desiring to defraud his creditors would have nothing to do but to describe some fictitious person as a grantee for a valuable consideration, in a deed, acknowledge it, and have it made a matter of record; and this is really the proposition attempted to be established by this allegation of the bill.
Again, it is alleged, that prior to the execution of the deed, an arrangement was made with Wright, Williams & Co., for them to make certain advances to the firm of Taylor & Richardson, and to recommend them -to others for credit; and that, upon the faith of the recommendations thus given by Wright, Williams & Co., the complainants gave credit to said firm. Credit given under this state of case, would relate back to the agreement with Wright, Williams & Co., and the complainants’ claims would therefore overreach the deed executed by Taylor. Wright, Williams & Co., in giving credit, or in recommending the firm of Taylor & Richardson for credit, were governed by this agreement, and they, Wright, Williams & Co., must be presumed to have investigated the condition of the firm, and of its individual members, before entering into the agreement, and being then satisfied of their condition, they were not bound, while this arrangement regulated the conduct of all the parties, to make other investigations at the time each item of credit was given, or recommended to the firm.
Taylor & Richardson, then, making known their intention or wish to contract debts in future, and actually making their arrangements to do so, must be supposed to have made known their ability to meet such obligations; and using their property as the means of obtaining the agreement from Wright, Williams & Co., and using the agreement as the means of obtaining credit, it would, in substance, be the same as obtaining credit directly upon the faith of the property. Under this view of the case, it falls clearly within the operation of the rule which declares that if the debts were contracted upon the faith of the property, under circumstances clearly showing, as in this case, that the debtor was at the time the true owner, the *743conveyance- will be regarded as fraudulent and void at the instance of creditors.
Another ground of demurrer which has been argued is, that the bill shows that the judgments sought to be enforced were recovered in the United States Court at Jackson, and that being foreign judgments, as is alleged, the bill cannot be maintained. While a judgment of the United States Court may, in some respects, be regarded as a foreign judgment, it is not so, in the full sense of the term. Such judgments may be enforced by execution against the property of the debtor, like State judgments, and indeed they are in the main regulated by State laws. ' It is only necessary to maintain the bill, to make the same allegations in regard to these judgments, which would be made in regard to judgments of the State courts, that, in consequence of the fraud, the remedy had become ineffectual by execution at law. We, therefore, do not think this ground of demurrer can prevail.
Decree reversed, demurrer overruled, and cause remanded for answer in sixty days.