Perkins v. Gibbs , 153 F. 952 ( 1907 )

ADAMS, Circuit Judge,

after stating the facts, delivered the opinion of the court.

Counsel for the parties in their argument and brief have extended discussion over a vast field of learning in this case; but, after a careful consideration of the facts and applicatory law, we find that the rights of the parties are solvable upon propositions of law which are indisputable and of fact which rest within a narrow compass. Upon the death of their father, and by virtue of the probate of his last will and testament, Alonzo and Clara Whiteman, his children, succeeded to a vested remainder each in and to an undivided one-half of the real estate in question in Minnesota and in and to a ■ certain paper mill and real estate on which the same was situated and other real estate in New York, subject only t'o a determinable life esfate in their mother, Rebecca Whiteman. Her life estate depended upon a condition subsequent that she should not again marry. In Minnesota, as elsewhere, title to real estate does not vest in the personal representatives of a deceased owner, but does on the death of the .owner descend to and vest in the heirs at law or devisees subject to the possible requirement of its being needed to satisfy the debts of the deceased. The record in this case discloses no reason for consideration of-the rights of creditors of the deceased. Accordingly, in 1890, thl1 land in question was owned as follows: Rebecca had a life estate subject to be defeated by her remarriage, and Alonzo and Clara had each a vested remainder in expectancy in an undivided one-half thereto. Sections 1369, 4371, 4372, 4374, Gen. St. Minn. 1894; Debenture Co. v. Dean, 85 Minn. 473, 477, 89 N. W. 848. Rebecca’s life estate was undoubtedly alienable (sections 4164, 4316), but whether so or not is of no importance because it was terminated before this suit was instituted by her remarriage. Alonzo’s and Clara's estates were vested in interest, if not in possession, and as such were alienable by them. Sections 4372, 4396, Gen. St. Minn.; Debenture Co. v. Dean, supra; Lawrence v. Bayard, 7 Paige (N. Y.) 70; Griffin v. Shepard, 124 N. Y. 70, 26 N. E. 339; O’Donnell v. Smith, 142 Mass. 505, 8 N. E. 350.

Being so owned and lawfully subject to sale and disposition the only question in this case is one of fact, whether the deed duly and properly executed by Alonzo and Rebecca acting as individuals purporting to convey their right, title, and interest in the land in question to Clara on December 4, 1890, and the deed made by the same parties acting as executors in the exercise of powers conferred by the will of the testator conveying the land to Clara on January 23, 3892, were devised and intended by the parties as a scheme to hinder, delay, and defraud the creditors of Alonzo, or were they made pursuant to the provisions of the contract of January 25, 3890, to separate their holdings in common into individual estates.

As the quitclaim deed effectually conveyed all the rights of Alonzo and Rebecca to Clara, little consideration need be given to the subsequent executors’ deed, except to say that it evidences a harmonious and persistent purpose to carry out the provisions of the original contract, even to the extent of making a useless deed as an unnecessary assurance of Clara’s title just because the grantors had agreed to do so. It shows the good faith of the original agreement.

Complainant, the purchaser of the lands under execution issued on the judgment -against Alonzo, contends (3.) that Alonzo, when the deeds in question were executed, was in financial straits, embarrassed, and insolvent; that Clara knew of his condition, and voluntarily became a party to a scheme to cover up his property and protect it from the rightful demands of his creditors; that to that end and for that purpose she took and held title to it in secret trust for her brother, with an understanding that, when he should get a settlement with his creditors or otherwise be released from their claims, she would reconvey it to him on demand; and (2) that Clara gave no consideration for the conveyances.

Aloiizo was complainant’s only witness to the making of the alleged fraudulent compact between him and his sister, and Clara was defendants’ only witness on that subject. Alonzo affirmed its .existence, and testified that the deeds were executed pursuant thereto. She broadly denied both those propositions. He admitted that the agreement of January 25. 1890, was made for the purpose of dividing the father’s estate between himself and his sister, but said nothing was ever done under it. She testified that such was its purpose, and that the conveyances in question to her were made in part performance of that agreement. The testimony of both these witnesses was given about 35 years after the events occurred concerning which they testified. Alonzo was then or soon after, in the New York penitentiary serving a sentence for some crime committed by him, and Clara, while emphatically denying the fraudulent purpose imputed to her, appears to have been quite oblivious to most of the details of the transactions about which she testified. About all she seems to know with any certainty is that she intrusted her matters to competent counsel and followed their directions. From these unreliable sources we confidently turn to' those instruments of writing and unimpeachable records which abound in this case for the truth. Both sides concede that the agreement of January 25, 1890, was executed for the purpose of making a friendly partition of the then joint interests of the children in their patrimony. That instrument, so far as we can discover, had no sinister purpose whatsoever. It was a rational and reasonable one to make. It was recorded soon after its execution in the office of the register of deeds where the land in question was situate, as notice to all persons of the incipient rights of the parties. The two deeds now assailed were in apparent partial execution of that agreement. The quitclaim deed recites on ■ its face that it was made “in consideration and in pursuance of a certain agreement made between the parties hereto and bearing date the 25th day of January, 1890.” The practically cotemporaneous agreement of January 2, 1891, made between Alonzo and Clara, recites that Alonzo, and Rebecca “have executed and are about to deliver to” Clara a conveyance of a portion of the lands in Minnesota and Wisconsin as required by the agreement of January 25, 1890. The executors’ deed, as already stated, affords corroboratory proof of the good faith and intentional observance of the requirements of the original agreement obliging the executors on certain conditions therein specified to make, execute, and deliver to Clara “a sufficient executor’s deed or deeds for conveying and assuring to her the fee simple title of said lands and premises free from all incumbrances.” That deed recites that it was made by the executors “in consideration of the sum of one dollar and other valuable' considerations to them duly paid [by Clara] the receipt whereof is hereby acknowledged.” In view of such indisputable proof found on the face of the deeds and their allied writing, we have no doubt that the conveyances in question were honestly made for the purpose originally intended by the parties. The testimony of Alonzo that he and his sister deliberately entered into’ a scheme to cover up and conceal his property from his creditors is out of harmony with the original intention of the parties, and in the light of the 'fact that Alonzo owed the estate $45,000, had devoted much of the personal estate to unlawful uses, had appropriated and converted to his own use the proceeds of the fire insurance policies on the mill property, and was then hopelessly insolvent, we cannot believe that Clara would have abandoned the original purpose which alone gave her any assurance of- securing an equivalent for all or a part of her imperiled interest in the personal estate of her father merely for the purpose of creating a secret trust for the benefit of her brother and to enable him to swindle his creditors. The irrationality and unreasonableness of the story condemn it.

But it is said the conveyances in question were without consideration, and for that reason void as to creditors. The facts do- not warrant any such conclusion. When the deeds in question were delivered to Clara, Alonzo had" not only then actually received the full agreed consideration, but, according to his own admission, was hopelessly insolvent. By the original agreement of January 25, 1890, he was to get the paper mill in Dansville and the land employed in connection with it, worth according to the brief of complainant’s counsel about $150,000. He was also to secure a release and discharge from a personal obligation against him in favor of the estate for about $65,000 occasioned by his appropriating as executor that much of the personal estate for the construction', alteration, and completion of the paper mill. He was also to get a release and discharge from liability for his personal indebtedness to the estate amounting to about $45,-000. What did he actually get? The executors of the estate deeded to him the mill property, conveying to him the full legal title, which with the insurance money which he appropriated, amounting to about $75,000, constituted all there was of the mill property. He has never béen made to respond to the estate for the amount of $65,-000 which he took out of its funds and misapplied in the improvement of his mill. Neither has he ever been made to pay his debt of $45,000 which was admittedly due from him. Such are the facts, and, by whatsoever method, instrument, or conveyance the result was brought about, he is now and for 15 years last past has been in the undisputed and undisturbed enjoyment of all his promised rights and immunities under that agreement. The answer made to this showing is that in 1895 Alonzo, in complying with the order of the Surrogate Court to make a final settlement of his accounts preparatory to turning over his estate to the administratrix c. t. a., charged himself with all the items of money just referred to, and thereby recognized an obligation to the estate for them. That fact for the purposes of this case is of no consequence. As between him and Clara, the items all belonged to him, and he had appropriated them to his own use; but, as between him and the estate, the orderly course of procedure required him to make a full statement of his accounts. It is no uncommon practice in administering the estates of deceased persons for an executor to make partial distribution before final settlement; but that does not excuse a full final statement of accounts with debits against him of the full value of the estate. The fact of a preliminary distribution can afterwards be shown as an exoneration of the executor to that extent. It is also said that Clara never executed a quitclaim deed to Alonzo for the mill property as agreed; but the executors executed that deed with her assent as shown by the proof. It thus appears that the contract of January 25, 1890, has been substantially executed on both sides. Each has received substantially what he or she was entitled to get. Whether it was executed in the exact way specified in the agreement or whether formal instruments were exchanged as thereby contemplated is for the purposes of this case immaterial. We are now dealing with the substance of things, the equities between the parties, and not with technical terms or technical requirements.

On the assumption which we have shown is reasonable, that the deeds ill question were made to Clara in partial execution of Alonzo’s obligation under the contract of January 25, 1890, a court of equity, if necessary, would undoubtedly have compelled Clara to perform her obligations thereunder. Accordingly, for the purposes of this case, we do not concede that it was necessary to show that Clara has fully performed. The equitable obligation existed, and it was sufficient consideration for the performance by Alonzo of" his part of the contract, namely, the execution of the deeds in question. But. as this case involves an issue of fraud and determination of a mental attitude, we have, as we should have done, taken a comprehensive view of all the facts and circumstances surrounding the parties in any way related to the subject under consideration, and in doing so we have found that Alonzo actually received all the money and property to which he was entitled as consideration for the deeds in question, and has never returned and never could lawfully be made to return any portion of it to Clara. Erom these facts we unhesitatingly conclude that the deeds in question are supported by an ample and meritorious consideration. We reach this conclusion in full recognition of the fact largely relied on by complainant’s counsel that Alonzo on February 12, 1895, deeded to Clara his interest in some real-estate in Livingston and Steuben counties, N. Y., in full settlement of her claims against him as executor as shown by' his final settlement. That deed must be taken in connection ‘with all the other facts of the case. It does not appear how much there was in the estate properly belonging to Clara after allowing to Alonzo all that as between him and Clara belonged to him under the agreement of January 25, 1890. That uncertain element might afford full consideration for the last mentioned deed. Neither does it appear how much the real estate last referred to was worth. The conveyance taken seriously and literally may) therefore, be in no wise inconsistent with the conclusion which we have reached. But, when it is considered that by reason of Alonzo’s insolvency a technical accounting and settlement as between him and Clara was of no practical importance, we may properly attribute the deed of February 12, 1895, to a disposition to close up in some conclusive way an open account between the parties at a time when enforcement of legal rights would be unproductive of any good.

Counsel for complainant argue that the quitclaim deed was never in fact delivered to Clara, but w^s held by Alonzo for his own convenience, and placed on record, not by Clara, but by him, to serve his own unlawful purpose of cheating and defrauding his creditors. There is no satisfactory evidence of that character; but, on the other hand, complainant’s contention is effectively denied by his own pleadings. In his complaint he avers that the deed was executed and delivered to Clara, “and that said defendant Clara J. Gibbs caused said deed to be recorded in the register of deeds office in and for said St. Louis county, Minnesota, on the 12th day of May, 1891.” For the purposes of this case, therefore, we must find and hold as a fact that the deed was drily delivered to Clara before May 12, 1891, and by her for her own purposes caused to be recorded. The judgment under which complainant purchased the lands in question was not rendered until May, 1892, so that it never attached to the land in question as a lien until after Clara’s deed, was executed and recorded, and her rights established thereunder. Several other facts are argued by counsel as important and significant in the determination of this case. To all of them, in connection with the facts already discussed, we have given diligent consideration which results in a firm conviction that the deeds in question were executed for the honest purpose of making a friendly partition of the real estate of the ancestor, and constituted neither a secret trust in favor of the grantor nor conveyances without consideration. The conclusion reached by us on these questions of fact render unnecessary the consideration of defendants’ contention that, even if the deeds were void as to creditors, complainant is barred from relief in equity by his laches in failing to institute this suit for 12 years or more after the alleged fraud was committed.

The court below reached the same conclusion we have reached on the issue of fact here involved, and its decree might properly have been a simple dismissal of the bill; but, as its finding that complainant did not have any right, title, or interest in the land in question and its injunctive order restraining him from asserting any such right, title, or interest adverse to the defendants accomplish the purpose and are not complained of for irregularity, the decree as rendered is affirmed.