Court Opinion

ID: 5474385
Source: CourtListenerOpinion
Date Created: 2022-01-09 20:45:49.050334+00
Date Added: 2024-06-11T08:33:25.817410
License: Public Domain

Platt, J.
(After stating the evidence.) From this evidence it appears, that Benjamin S. Anderson has a regular title under the judgment of Clason against Sarah Johnson; the deeds to her being prior to the judgment of Taylor against Griffith, under which the respondents claim. But it is insisted, on the part of the respondents, that the conveyances from Griffith to Mrs. Johnson, were made to defraud the creditors of Griffith, and are, therefore, void as against the respondents. The evidence is abundantly sufficient to prove, that the two deeds from Griffith to Sarah Johnson, were made to defraud his creditors; and that she conspired with him for that purpose. And I think the proof so clear and irresistible on that point, that it is immaterial whether the affidavits of Sarah Johnson and Thomas Allen, be admitted or not. My opinion, however, is, that those affidavits were properly excluded, for the reasons assigned by the Chancellor.
It is, then, contended, on the part of the appellants, that even admitting the deeds to Sarah Johnson were fraudulent, yet, that Benjamin S. Anderson became a bona fide purchaser of her title, at sheriff’s sale, for a valuable eon-sideration, without notice of any such fraud ; and that the title under her was purged of the fraud, by means of such subsequent bona fide purchase. By the first section of the statute “ for the prevention of frauds,” it is enacted, that all grants, bargains, and conveyances of land, made to delay, hinder, or defraud creditors, shall, as against such creditors, be deemed “ clearly and utterly void, frustrate, and of none effect.” And the Glh section of the statute contains a proviso, that this act “ shall not extend, or be construed to impeach, defeat, make void, or frustrate, any conveyance or grant of lands, for good consideration, and bona fide, to any person not having, at the time, any manner of notice or knowledge of such fraud.” The original fraud being *537proved, it is incumbent on the appellants, according to every construction of the statute, to Dring their case strictly ■Within the proviso. In my judgment, they have not done so. Benjamin S. Anderson bid 150 dollars, at the sheriff’s sale, on the execution against Sarah J ohnson ; and the premises (worth 1,500 dollars) were struck off to him. He received the sheriff’s deed, in usual form, for all the right and title of Sarah Johnson in the premises, without any specification of the nature or quantity of her estate. The terms of such sales always imply the caution of caveat emptor, so far as to impose on the purchaser the duty of strict inquiry, and afford little ground for him to complain of being deceived. If Sarah Johnson had been in the actual possession under such deed; or, perhaps, if the possession had been vacant, a bona fide purchaser at a sheriff’s sale, might be deemed within the proviso of the statute. But, in this casp, Sarah Johnson had neither the actual, nor the constructive possession of the premises. The proof js clear and uncon-tradicted, that soon after the pretended conveyance from Griffith to her, Griffith, in his own right, executed to Alexander Denniston a lease of the premises, for five years, at an annual rent of 110 dollars. Denniston took possession, and held distinctly, as the tenant of Griffith, under that lease, at the time of the purchase by Anderson. It is proved, that Sarah J ohnson, at no time, ever had the possession in person, or by her tenant; nor did she ever receive rent, or any other acknowledgment of her title. On the contrary, it appears, by the testimony of Denniston, that he refused to acknowledge her title, or to pay rent to her; and that, in fact, he held adversely to her claim. It is very clear, that if her title had been good, she could not have made a valid conveyance to any person, except the tenant in possession, or to Griffith, on account of the adverse possession. Now, when we take into consideration, that the premises were advertised by the sheriff; that the lands so advertised were then in the actual possession of a tenant holding in opposition to, and in defiance of, Sarah Johnson, and who so held at the date of Clason’s judgment against her, and down to the time of the sheriff’s sale, and when it is considered, that the sale was at Newburgh, within *538a few rods of the house and lot in question, such adverse pos* session must be deemed constructive notice to Anderson, the purchaser, that her title was defective. It was enough to put him on inquiry, and that is equivalent to notice. I his principle has been settled under the construction of the statutes for the recording and registry of deeds and mortgages, and in other analogous cases. Anderson does not, therefore, appear in the character of a confiding and deceived purchaser, who paid his money for an ostensible equivalent ; but he stands in the light of a speculating adventurer, for a nominal consideration, and has no just claim to any thing more than Sarah Johnson herself colild have legally claimed in the premises. I think he is not, in the language and sense of the proviso, u a purchaser for good consideration, bonafide, without any manner of notice,” &tc.
In my view of this case, it does not become necessary to decide the important question, whether a bona fide purchaser, for good consideration, without notice, &c. can acquire a valid title, as against creditors, by a corlveyance from a fraudulent grantee of the defrauding debtor ? That question is, however, fairly before us; the Chancellor has pronounced a deliberate opinion on it 3 and as the point is highly important to the community, I think the occasion requires, that the construction of the statute should now be settled, by the solemn decision of this Court. With profound respect, I have read the case of Preston v. Crofut, in the Supreme Court of Errors of Connecticut, (1 Day’s Rep. N. 1S. 527. note,) where the subject has been concisely exhausted by the counsel and the Court. But, after the best consideration of which I am capable, my mind has been led to the conclusion, that His Honour the Chancellor ha's not given the true exposition of the statute 5 and that such a bona fide purchaser, under a fraudulent grantee, without notice, either actual or constructive, acquires a valid title, purged of the original fraud, as against creditors. The enacting clause, and the proviso, taken in connexion, certainly do not, ex vi terminorum, necessarily require a construction which would defeat such bona fide purchase. Oh the contrary, the words of the proviso seem large ^nough to save the rights of such á purchaser, according to théir graqi-*539matical sense and ordinary acceptation. In the eye of the legislature, and in the view of sound policy, it seems to have been an object-of as much solicitude to protect honest purchasers, as honest creditors. A purchaser who pays a fair price, for an ostensibly fair title, without notice, or ground for suspicion of any latent fraud in any previous link of the title, has, in my judgment, higher equity than an adventurous •creditor, who trusts, without any lien on the debtor’s land. He who trusts most, should risk most. The creditor may protect himself by exacting security, but the purchaser cannot guard against the future claims of unknown dormant creditors. It is better that such sleeping creditors should sometimes lose their money, than that titles to lands should be rendered precarious and insecure. I think it better accords with the letter and spirit of the statute, to say, ¿hat a general creditor must assert his claim before the fraudulent grantee of his debtor has deceived an honest purchaser, or that such creditor shall lose his right. A contrary doctrine would often .enable a creditor to “ convert his shield into a sword.”
Our statute comprises the statutes of 13 Eliz. ch. 5. and 27 Eliz« ch. 4. without any essential variation; and this question arises upon the construction of the 1st section of our act, and the proviso in the 6th section, which, together, comprise the statute of 13 Eliz. ch. 5.
It was remarked by Lord Mansfield, in Cadogan v. Kennett, (Cowp. 434.) “ that the principles and rules of the common law, as now universally known and understood, are so strong against fraud in every shape, that the common law would have attained every end proposed by the statutes of 13 Eliz. ch. 5. and 27 Eliz. ch. 4. The former of these statutes relates to creditors only; the latter to purchasers. These statutes cannot receive too liberal a construction, or be too much extended, in suppression of fraud. The statute of 13 Eliz. ch. 5. directs, 4 that no act whatever, done to defraud a creditor, shall be of any effect against such creditor.’ But, then, such a construction is not to be made in support of creditors, as will make third persons sufferers. Therefore, the statute does not militate against *540any transaction honaf.de, and where there is no imagina* tion of fraud. And so is the common iaw;”
If the statute is a mere declaration or development of the principles of the common law, my construction is perfeCt]y reconcilable with the decision of the Court of Errors 0f Connecticut, in Preston v. Crofut. The common law, the statute of 13 Eliz. ch. 5. and our statute for the prevention of frauds, all agree in the rule (according to my apprehension) that a conveyance, in which the grantor and grantee conspire to defraud creditors, is void as against creditors ; provided, however, that this rule shall not extend to defeat the title of any bona fide purchaser, for good consideration, without notice of the fraud. Now, the statute of Connecticut, on which that decision was founded, contains no such proviso; and by such omission, the legislature of that state have chosen to alter and modify the rule of the common law, so as to make no saving or exception in favour of subsequent bona fide purchasers. I understand all the Judges, in Preston v. Crofut, to agree, that under their statute, without such proviso, the first grantee, as well as the grantor,must participate in the fraud, in order to render the deed void a3 to creditors. Notv, if that be the true exposition of the statute, I ask, of what use or .effect is the proviso, unless it be construed to extend to subsequent purchasers ? If it was unnecessary, in order to protect the first bona fide grantee, under a fraudulent debtor, •and is not to be extended to a subsequent purchaser $ then it follows, that the proviso in our statute is to be rejected as ■surplusage. In my judgment, the 6th section of our act, containing the proviso of 13 Eliz. ch. 5. was designed not merely to explain, but to limit and qualify the first section ; and I do not feel authorized to reject it as inoperative.
The universal silence in Westminster Hall, upon the precise point now under discussion, affords to my mind strong ground to infer, that the construction contended for by the respondents, was never sanctioned by the Courts in England. If such had been the doctrine in that country, the cases demanding an application of it, must have been of very frequent occurrence; and yet, we find no case, where *541a creditor in England ever attempted to impeach a conveyance on the ground of fraud, except where the purchaser^ whose title was sought to be defeated, was either a party to, or was presumed conusant of such fraud.
• With great respect, therefore, I am satisfied, that the construction adopted by the Chancellor, is contrary to the policy and spirit of the statute “ for the prevention of frauds.’’ And that construction appears to be much more unsafe and inconvenient in this country, than in England; when we consider, that the transfer of titles to lands, is with us necessarily frequent, beyond all example in other countries. Vast quantities of our surplus lands, without occupants, are daily offered for. sale in the market; and sound policy forbids, that we should recognize or sanction the principle of a latent disease, which reasonable care cannot perceive nor guard against, and which may, at some in-r definite time, taint and destroy these titles.
I feel a decided conviction, that the construction given by His Honour the Chancellor, to the statute of frauds, is contrary to the general opinion, and common understanding in this community. It Would, ^racíicaiiy, introduce a new and important rule of property, with a retrospective effect; and I dread the evils that might flow from the experiment. It would, undoubtedly, in many cases, bar an inlet to fraud, and operate to protect honest creditors; büt, I fear, that in its general application, it would enable “ prowling assignees’’ of creditors, to prey upon unsuspecting honest purchasers, who would be ruined, not for any important benefit to creditors, but to enrich a host of mousing speculators.
The exception to the jurisdiction of the Court of Chancery, is, I think, without foundation; and the authorities cited for the appellants on that point, have been totally misapplied, on the argument. To sift and scrutinize frauds, by a bill of discovery, and to set aside and annul fraudulent conveyances, so that they may not be set up at law after the evidence of the fraud may be lost, is, emphatically, within the appropriate jurisdiction of a Court of equity. A Court of law can neither compel a discovery, nor set aside a fraudulent deed. And even if the fraud could now be *542proved in an action of ejectment, so as to defeat the fraudulent conveyance, a judgment in ejectment would be no bar t0 ano^er suit, in which it might hereafter be impossible to prove the fraud. The future security of the true title, therefore, demands, that the formal evidence of the corrupt t¡tje sjj0U](j be destroyed, or that the party should be restrained from using it; and a perpetual injunction is the. proper means for that purpose.
The decree awards an injunction against suing out a ha-bere facias possessionem in the ejectment suit of Anderson v. H. M'Leod. It is said, that that was a proceeding inter alios acta; and, therefore, not a subject for decree between these parties,. In my judgment, that objection is unfounded. Part of the gravamen of the plaintiffs was, that the Ander-sons, in order to fortify their spurious title, had tortiously procured an attornment to them from M‘Leod, who was, in fact, a tenant under the plaintiffs; (holding under a lease for a year, now expired;) and that by virtue of that at-tornment, which M‘Leod could not question, the Andersons .had recovered judgment against him, whereby the plaintiffs were in danger of losing their possession, or having it changed without their consent. This was against equity, and why not enjoin against their taking possession ? Why, unnecessarily, put the plaintiffs to an ejectment suit against the Andersons, in which their right to recover would be certain and inevitable ?
I am, also, of opinion, that it was not necessary to make Hector M'Leod a party to this suit. The evidence clearly jshows, that he occupied the premises under a written lease from-the respondent, Robert Roberts, for a year; and that while so in possession, as the tenant of Roberts, B. S. Anderson induced him to make a fraudulent attornment to him. That attornment was a void act as regards the respondents, and Hector MLeod has no rights in hostility to them. Although he may, by his own folly, have rendered himself liable to the costs of the ejectment suit of the Andersons against him, the decree does not touch that claim for costs. MHeod^s interest as lessee, whether he be considered the tenant of the appellants, or of the respondents, had expired long before this suit.
*543The answer of the appellants avers, that after Benjamin B. Anderson had purchased the premises at the sheriff’s sale? the appellants, for a valuable consideration, procured an assignment to them of a mortgage which had been executed by Sarah Johnson to one Daniel Stansbury, bearing date the 28th of March, 1808 ; and also, that the appellants, for valuable considerations, obtained releases, or quit claim deeds, from Sarah Johnson, and from William and Nancy King, in March, 1810, for these premises. But these are substantive allegations which were denied by the general replication, and were not proved, nor offered to be proved. I, therefore, take no notice of those allegations in the answer.
Upon the whole case, my conclusion is, that the appellants have failed to prove that Benjamin S. Anderson is a bona fide purchaser, without notice of the fraud; and, on that ground, the decree ought to be affirmed.
The rest of the Court concurred in the opinion delivered by his Honour the Chief Justice; and it was thereupon ordered, adjudged, and decreed, that the decree and orders of his Honour the Chancellor, complained of, in this cause, be reversed ; and that the respondents’ bill be dismissed, and that the injunction thereupon ordered, be dissolved; and that the respondents, Robert Roberts and Samuel Boyd, pay to the appellants their costs to be taxed, and that the record and proceedings be remitted to the Court of Chancery, to the end that this decree may be carried into execution.
Decree of reversal.