Court Opinion

ID: 7985368
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:24:54.438349+00
Date Added: 2024-06-11T16:35:11.141423
License: Public Domain

Chalmers, J.,
delivered the opinion of the court.
The trust-deed which is attacked as fraudulent in this case was executed by the grantors to secure pre-existing debts due their kinsfolk and intimate friends, and at a time when a heavy suit was pending against themselves, which was just about to ripen into a judgment. These facts, it is insisted, make it necessarily fraudulent in law, even though no fraud in fact was intended, and though the sole intent of the grantors was to give a preference among creditors. The counsel for the appellee concedes that the law would be otherwise if there had been an absolute transfer of property in extinguishment of a pre-existing debt, or if, upon a new consideration, there had been a mortgage executed to secure a contemporaneously contracted indebtedness, but insists that pre-existing creditors who surrender nothing and make no new advance cannot, in receiving a new security, be regarded as purchasers for value.
The defect in this position is in misconceiving the nature and effect of the doctrine of innocent purchasers. without notice, or rather in failing to note the very words necessary to be used in announcing it. He is a bona fide purchaser in the eyes of the law who has paid value without notice of defects in the title of the thing bought, or of fraud upon the part of the seller. Where one has bought under such circumstances, his purchase will ordinarily cut off all unknown equities, and relieve against all secret frauds. But if there be no *489defects of title to be cured, and no fraud upon tbe part of tbe seller to be relieved from, there is no occasion for the buyer to invoke the doctrine, nor can he be compelled to resort to it until the fraud or the defects have been affirmatively established by him who attacks the transaction. Conceding all that is claimed here, the defendants did only what they had a perfect right to do. Pressed by one creditor, they elected to incumber their property in favor of others, whom they thought more meritorious, or for whom they felt more affection, and in so doing they exercised a right immemorial in the common law, and one which every man practically and daily exercises when he pays one debt, leaving others unpaid. The only way in which other creditors can successfully assail such a conveyance is by showing that the debts pretended to be secured are simulated, or that the security was never intended to be enforced, and was given only as a sham to ward off the attacks of others, or that some benefit has been received by the grantor, as by a stipulation for unusual indulgence, or in some other way.
It is insisted that this view militates against the doctrine announced in Harney v. Pack, 4 S. & M. 229, Pope v. Pope, 40 Miss. 516, Perkins v. Swank, 43 Miss. 349, and other cases, in which it was announced that the reception of security for a pre-existing debt did not constitute the recipient a purchaser for value. Those cases, properly understood, only declare, what we now reiterate, that if the party attacking such a conveyance can show that there was a defect in the title of the thing conveyed, or an outstanding prior and superior equity, or fraud upon the part of the grantor, the grantee or beneficiary cannot claim to be relieved from such defects or frauds by reason of his own ignorance or innocence. Herein consists the difference between him who has paid and him who has not paid a new present consideration. The first cuts off all unknown equities, and is relieved from the effects of all secret frauds upon the part of the grantor, by his own good faith and his payment of value ; the second, having paid no value, is not protected by his ignorance of defects or innocence of frauds, if in fact such frauds or defects existed.
*490The bill in this case asserts that the debts pretended to be secured were fictitious, and that the conveyance given for their protection was never intended to be enforced; but these allegations are explicitly denied by the answer, and the complainant having set the case down for hearing, without proof, must be treated as having admitted the truth of the answers, so far as they were responsive to the bill. That the debts secured were professedly due to relatives and intimate friends, that the conveyance preceded by four days only the recovery of a large judgment by the complainant against the grantors, that haste was made to have it recorded in counties where the grantors owned property before abstracts of the judgments could be enrolled there, might well be considered as suspicious circumstances, and as affording the complainant a basis for attaching the transaction; and yet they are equally consistent with the perfectly legitimate purpose of securing an honest debt.
The sworn answers of the defendants not only deny all fraudulent intent, but they specify with minuteness the several debts to protect which the instrument was made, giving the dates, amount, and consideration of each. The cause having been set down upon bill and answers, these responses must be taken as true. They effectually overthrow the equity of the bill. That the case was not set down within five months after answer filed does not affect the result. The burden o-f making out tire case rested upon the complainant. The averments of the answers, being strictly responsive to the allegations of the bill, must, in the absence of proof, be taken as true.

Decree reversed and bill dismissed.