Gaylord v. Couch , 5 Day 223 ( 1811 )

Sjirm, J.

This is a writ of error, brought to reverse a decree of the Superior Court, sitting as a court of chancery, passed upon a petition in which Thomas Couch was petition- or, and liada I Gaylord, and others, administrators of the estate of David Tibballs, deceased, were respondents. A committee was appointed, by the court below, to report the facts in the case; whose finding must have been the basis of the decrée, passed by the court, and will be the foun-datiun of my opinion. It will be unnecessary for me, to notice all the facts, found by the committee, which they, how-e\er, reported at great length. I will only state such, as appear to me, important to the result, which my own deliberations and judgment have led me to form.

The committee find, that on the 30th day of June, 1798, Couch was indebted to Tibballs, to a certain amount; whereupon, he conveyed to him, by deed, a tract of land, and took a bond for reconveyance, when the debt should be paid; which deed he held, until sometime in the year 1802; when ¡t was, by Couch, put into the hands of Tibballs, to enable him to assist Couch, in a settlement with one of Ms creditors, and to prevent that creditor from taking the land. And, at ' the same time, it was, by a parol agreement entered into between the parties, stipulated, that the bond should be returned, uneancelled, and in full force, when a settlement with such creditor, should be effected; or, the lands recorded* agreeably to the provisions of the bond.

They also find, that the creditor was settled with ; but that the bond was not redelivered, nor the land recorded. They then proceed to state, that a great number of notes of hand, which Tibialis held against Couch, at the time of his death, and which came into the possession of his administra tors, were unpaid, and justly due. These notes are not mentioned in the petition; nor is there any allusion to, or prayer regarding them; and they appear to he altogether distinct from, and no way connected with any fads stated in the petition. Nor, does it appear, by the finding of the committee, or otherwise, that the estate of Tibialis was insolvent; or, that any difficulty or embarrassment, whatever, existed in obtaining the damages, to which Couch might be entitled.

The court, then, proceeded to decree, that the administrators should deliver up, and cancel, of such notes, to the amount of 500 dollars.

This decree is, in my judgment, erroneous, on several grounds.

1. The bond was delivered up by Couch to Tibialis, upon, an agreement to defraud creditors, within the meaning of oui statute against fraudulent conveyances; which renders the transfer, as between the parties, absolute, and nullifies any agreement tf> return the bond.

It was argued, at the bar, that no fraud was found by the committee ; aud that the court cannot infer fraud. I admit, that the words “ fraud,” or “ fraudulent,” are not used by the committee. I admit, also, that a fraudulent intent cannot be inferred, by the court, from any other facts, whatever. The question, then, is, whether such intent is found by the committee, in language clearly intelligible to the court ? If so, it becomes very important what that language is. The committee find, that the bond was put into the hands of Tibialis, to prevent a creditor from obtaining the land Here is the ..iyocl of ¡he parties, and their intent, clearly expressed in language which cannot he mistaken. What other is this, than a fraudulent transaction ? if ¡o put property into the liands of another, to prevent creditors from taking it, be not fraudulent, language has not the power of expressing fraud. This transfer had no other object, than to create a secret trust, for the future benefit of Couch. Tibballs had no power, by the agreement, to transfer the bond, or the land, or to do any thins:, except to hold it, until the happening of a certain contingency, and then deliver it up to Couch.

When the object of a whole contract, is found to be the creation of a trust, for the future benefit of the grantor, to the injury of creditors, there can be no doubt as to the intent.

It was argued further, that the bond was put into the hands of Tibballs, for the purpose of enabling him to assist Couch, in settling with a creditor; and that this could not be to defraud him. Here it becomes necessary to enquire, how, and in what sense, the delivery of this bond, was to enable Tib-balls to assist Couch, in settling with a creditor? Was it to enable Tibballs, by a sale of the property, to pay the debt ? If so, the transaction would be perfectly free from any imputation of fraud. But this, as I have already stated, was not the case ; there was no power of transfer, given by the agreement ; and the property was to be delivered back, at all events, when the creditor should be settled with.

The question, then, recurs, how was the delivery of this bond to be the means of facilitating a settlement with a creditor ? The finding of the committee, furnishes a direct answer. It was, by preventing that creditor from obtaining the land; or, in other words, by withdrawing from the creditor, all ostensible means of satisfying his debt; the value of it is io be diminished, and thereby an advantageous settlement, effected. The object, then, of these parties, was clearly to defraud a creditor ; and whether it was to defraud him out of his whole debt, or a part only, can make no difference.

It has been argued, also, that this bond was a mere chose in action, not subject to be taken by attachment, or execution, and therefore, the transfer could do a creditor no harm. I have no doubt, that the transfer of a chose in action, to defraud creditors, is as much within the statute, as a transfer of property in possession. If ch'osesin action cannot be taken, by a common attachment or execution, they are, frequently, not beyond the reach of process, by foreign attachment; and the possession of them may prevent the possessor, from taking the' oath provided for poor imprisoned debtors,— Should a debtor, in failing circumstances, convey all his notes of hand, to a trustee, for the purpose of being enabled to hold himself out as a man destitute of property, and in that way, by a settlement, defraud his creditors out of a part of their demands, I should not hesitate to pronounce a contract, so foul and corrupt, to be a fraudulent conveyance, within the statute.

I n the present case, however, the transfer was really a trams fer of an interest in land. The bond, taken at the time whets a clear deed was given, created an equity in the grantor, which might be w ell taken by his creditors ; and the delivery of the bond, was really a transfer of that equity. So that, the argument fails, in every point of light in which it can be viewed.

Again, it was argued, that this agreement, to redeliver the bond, is good between the parties, and void, by statute, only as to creditors. But the statute, by declaring the agreement of the bond to be good, as between the parties, virtually declares the agreemeut creating a trust to be void. The law leaves the parties where it finds them. A contract which has been executed, cannot be defeated, while that which is executory merely, cannot be enforced. The argument totally subverts the meaning of the statute, which goes upon the ground of enforcing the secret trust, as to creditors, by giving them the (id! benefit of it; but, as between the parties, the law considers the conveyance, as good and valid ; and renders void any agreement, which is inconsistent with what such transfer appears to be, upon the face of it.

It has also been said, that a man may convey away a part of his estate, to keep it out of the reach of creditors; provided, he has enough left to satisfy their demands. If such a posi f soil be correct, in point of Jaw, there could he no application of it to the present case, uutil it first be shewn, tlial the petitioner had other estate, sufficient to pay his debts ; which does not appear. Rut the position is not a correct one. There have been cases of conveyances to children, I admit, where the grantor was indebted at the time, but had sufficient estate left to pay all his debts, in which, it has been held, that the conveyance was not within the statute. These decisions liave been governed by the principle, that all presumption vif fraudulent intent, is removed by the consideration of the fact, that other and sufficient estate was left in the possession of the grantor. But no case can be found of a conveyance to a stranger, and a fraudulent intent found, as in the present case, where it has been held, not to come within the statute, merely because there is other estate left in the possession of the grantor.

The statute authorising the levy of executions on lands, has wisely put the power of choice in the creditor, so that in case his debtor fails to pay his just debt, he may levy on any part of his lands, to satisfy his demand, at his election. But if the argument I oppose, is well founded, then the debtor may convey a large portion of his estate to a friend, for the avowed purpose of defeating this right of election, and in this way, make the election himself, and compel his creditor to take such land as he pleases.

2. But if this agreement liad been free from fraud, the claim is barred by the statute of limitations ; which provides, that no suit in law or equity shall be brought- or maintained, upon any contract or agreement that shall be made, and not reduced to writing, but within three years next after entering into, or making the same. In this case, more than three years had intervened between entering into this parol agreement, and the institution of the present suit. And here was no sufficient acknowledgment found by the committee, to take the case out of the statute.

3, But suppose the case delivered from these objections, and that the petitioner is entitled to damages, for a breach of this agreement, still the decree of set-off, is clearly erroneous, on two grounds. In tile first place, the facts stated in the petition, and the rights and duties resulting from these facts, are, and must he, the only basis of the decree ; and any finding of the committee, relating to notes of hand not stated in the petition, must stand for nothing. Hence, it follows, that the decree of the court, founded on the fact that these notes ex* feted, and affecting rights resulting from these facts, must be erroneous. As to such facts and such rights, the respondent had no day in court, nor any opportunity to defend against them. Let it not be said, that it is equally as convenient for the defendant to give up these notes, as to collect them, and pay the money by way of damages. This -would amount to saying, that the court may make a decree without a petition, or even without parties, if they happen to do what is convenient; but the party has a right to be heard before his rights are affected ; and for this reason, he ought to be notified, with all necessary allegations, as well in chancery, as at law. Besides, the notes might have been put in suit, and suits might have been pending, on which large bills of costs had accrued ; which, by-giving up, or cancelling them, in obedience to the decree, the party would not only lose, but subject himself to pay costs to the adverse party ; and these facts might have been shewn, had he been notified, by regular allegations and process, that such claim would he made.

4. If the court could notice the facts found by the committee, not stated in the petition ; yet, there is no principle of equity, which will warrant the setting off distinct and independent claims, against each other ; unless on the ground of insolvency, which does not appear, in the present case, by the finding of the committee.

Swift, Edmond, Brainard, and Imgersoll, Js. concurred in this opinion.

Baldwin, J.

By the errors assigned in this writ, and from the argument of the' case, our enquiries may be directed to two objects:

s. Whether the petitioner is entitled to any relief?

2. Whether the relief ¡riven is proper ?

The principal objection to arty relief seems to be, that the bond was delivered to Tibballs by Couch, with a view to prevent a creditor of Couch from obtaining the bond. This, it is claimed, is, per sc, fraudulent, and, of course, will not be enforced by courts of justice. The charge of fraud ought not to prevent our understanding the facts. These depend on the report of the committee. It is, indeed, expressly found, that the bond was delivered to Tibballs to prevent a creditor from taking the land, and to enable Tibballs to assist Couch in a settlement with that creditor; but it is not found, nor is it admitted, that this was done with design to defraud the creditor, nor does it appear that the creditor was in fact defrauded. It cannot, therefore, be inferred, that such was the design. On the contrary, as such fraudulent design does not appear, we are to presume it did not exist. It is, however, still further contended, that the law will not permit a debtor to secrete any part of his estate, so as to prevent the process of law against it, and thereby, compel the creditor to resort to less acceptable property, and that such an attempt is, in contemplation of law, fraudulent. This principle I cannot admit. No injury, surely, is done to the creditor, if he finds property sufficient to satisfy his demands. Most men have peculiar attachments to some particular species of their property -it may be fancy, or it may be something more solid, that makes it valuable to them, beyond its worth. N ow, to me, it appears unreasonable tq compel the debtor to subject such property to the caprice of creditors, when other property, sufficient to satisfy their claims, is in open view. The object of the law is the satisfaction of the debt, in money. Whatever personal property, therefore, is taken, may be redeemed by money, during twenty days, and if not redeemed, must then be sold, and converted into money. Money will also extricate lands from the grasp of the creditor, at any lime before his title is completed. So long, therefore, as other sufficient estate is left open to the demands of the creditor, I cannot consider it, either as a fraudulent or an illegal act in the debtor'to screen particular property from Use view or process of the creditor. But if the transaction had been found fraudulent, it would have been void only as it respects creditors.

Another Objection is, that the contract set forth in the petition, is by parol, and was made more than three years ago. The answer to both these objections is satisfactory and conclusive, vis. That the contract was executed, on the part of the petitioner, and was, therefore, binding on the other party, notwithstanding the statute of frauds; and that in consideration thereof, the promise on the part of Tibballs, is found to have been repeatedly renewed, and that within six weeks of his death.

It appears to me, therefore, that the petitioner is entitled to relief of some sort. The enquiry then is, whether the relief granted is proper.

The prayer is not only specific, but general. From the facts disclosed, it became evident, that a specific execution of the contract, so far as respects the bond, could not be enforced. The bond had been cancelled by the deceased, and the legal title to the land, had passed from the heirs to bona fide purchasers. The relief peculiarly appropriate to tills state of things, seems to be, to reimburse the petitioner from the personal fund of the deceased. This has been done, by applying the value of the land which the petitioner iias lost, and which the estate of the deceased has thus acquired, to the discharge of so much of the debt due from die petitioner to that estate. This appears to me to be clearly within the power of a court of chancery; to be equitable between the parties; and terminates at once a controversy, which, if specifically decreed, would result in a pecuniary reimbursement from the heirs to the purchasers.

I would, therefore, affirm the decree of the Superior Court.

Mitchell, Oh. J. Reeve, and Trumbull, Js. concurred in the opinion delivered by Baldwin, J.

Judgment of the Superior Court reversed