Abbe v. Newton ( 1848 )

Hinman, J.

The plaintiffs, Araha Newton and wife, seek to foreclose a mortgage, executed to the wife, previous to her marriage, by Timothy H. Abbe and his wife Elizabeth. The mortgagee was then a single woman, the widow of Reuel Ensign, and the mother of said Elizabeth, who was her only child.

The mortgagors are made parties to the bill; but Elizabeth was a minor when the mortgage was executed ; and her husband has no longer any interest in the property, and no decree is now asked for against them. The case, as to them, therefore, may be dismissed, without further notice.

The note secured was given in consideration of a sale, by the mortgagee, of a small portion of her dower and of her interest in the personal estate of said Reuel Ensign. She released to her son-in-law all her interest in said personal estate, and to that part of her dower not included in a portion of the dwelling-house, which she reserved. It appears from the finding, that the value of this property was less than one third part of the note given for it. Its precise value does not appear ; but facts are stated, from which it is clear, that it was not only less, but very much less, than one-third of the note. The annual value of the whole real estate of Reuel Ensign is found to have been from seventy to eighty dollars only. Deducting from one third of this the sum. of twenty dollars, the annual value of that part of the house which she reserved, and there is left about the sum of seven dollars, as the annual value of the dower conveyed : and for this, and the sum of 58 dollars, 59 cents, in personal estate, she obtains a note of 1000 dollars, secured by the mortgage in question. A clearer case of grossly inadequate consideration, it cannot be supposed will often arise. We think, also, that it may fairly be inferred from the circumstances, that the parties understood the consideration to be inadequate. It is found, that it was their expectation, that the note would not be paid ; but that the interest on it would be paid annually, during the life of the mortgagee ; and then, that it would become the property of said Elizabeth, as her only heir.

There may not have been enough in this expectation to authorize us to hold it to be inequitable to enforce the contract as against Timothy II. Abbe; though it is apparent, that to do so, would, to some extent, operate as a surprise upon him; but in connexion with the inadequacy of the consideration, it shows most clearly, that the parties understood and knew, that the consideration was inadequate. The inequality between the note and the value of the property, is so great, that it is hardly credible, that it should not have been seen ; but when it is found that it was the mutual expectation of the parties, that the note was never to be paid, it explains their willingness to execute the contract, notwithstanding the inadequacy; and thus it furnishes additional evidence of the inadequacy having been known. This expectation was, without doubt, founded, in great part, upon the inadequacy of the consideration. This, and the family confidence then existing between the parties, were the only circumstances that could have raised any such expectation ; and, together, they induced Mr. Abbe to think that his mother in-law would not make use of the legal claims which the transaction gave her, to his injury; but, that she would do right with him, in regard to the note.

So far, then, as the securities exceeded the value of the property, they were entirely voluntary. In other words, the note was, in great part, and so far as a promise to pay can be considered such, a mere gift.

We are aware, that as there was a consideration sufficient to support his promise, it could not benefit Timothy H. Abbe, because he knew that he was making an improvident contract. Indeed, this circumstance would be strong evidence, that he was not deceived or defrauded ; and, on this ground, would operate against him. His rights, however, are not now in controversy ; and in regard to Timothy Abbe, a creditor of his, the fact that the note and mortgage, the greater part of them, were without consideration and voluntary, and so understood to be, at the time, becomes, in connexion with other circumstances proved in the case, of the utmost importance.

In the case of Salmon v. Bennet, 1 Conn. R. 525. the validity of a voluntary conveyance, against the claims of a creditor whose debt existed at the time, was considered ; and the principles upon which it was thought such conveyances ought to rest, were laid down by the court, with great clearness and precision. That decision, so far as it goes, has ever been considered as settling the law of the state on the subject. It has, indeed, been doubted, on the ground of its going too far in upholding such conveyances ; but not, to our knowledge, on the ground that the principles designed to guard against fraud, are there laid down with too much strictness or rigour.

The validity of such conveyances has, also, been the sub-of much enquiry elsewhere; and there has been much professional controversy on the subject. We shall not enter jnto We are satisfied with our own decision — the more so, since, as remarked by a distinguished judge, “there is much reasonableness and equity” in its doctrines, and there is reason to believe they will, finally, very generally prevail.

See 1 Sto. Eq. 356. s. 363, 4, 5.

We think the principles laid down in that case, decisive of this. After stating, that it was not necessary that an actual fraudulent intent should be proved, in order to render such conveyances invalid against existing creditors, Judge Swift, in delivering the opinion of the court, says: “ If the grantor is considerably indebted and embarrassed, at the time, and on the eve of bankruptcy; or if the value of the gift be unreasonable, considering the condition of the grantor, dispro-portioned to his property, and leaving a scanty provision for the payment of debts ; then, such conveyances will be void.”

Admitting, without enquiry, for the purposes of this case, merely, that Mrs. Newton might, as the mother-in-law of the mortgagor, properly be the subject of a reasonable provision, as a voluntary settlementupon her, which would be protected from the claims of creditors; we still think, that upon these principles, this conveyance, so far as it was without consideration, must fail, as against Timothy Abbe, a creditor of the mortgagor. Timothy H. Abbe was under no legal or moral obligation to maintain or support his mother-in-law; and however willing, while his marriage to the daughter was yet recent, we have found no evidence that he was able to do so. On the contrary, on the 23d of April 1844, when the conveyance was executed, he was not only indebted to Timothy Abbe, in the sum of 600 dollars,- on a note now in suit, and by virtue of which this property has been attached; but he was also largely indebted to other persons. The amount of this large indebtedness is not indeed found ; but by this expression, it was undoubtedly meant, that he was largely indebted in reference to his means of payment; and as it appears, that within about two years, he became a bankrupt, it is an obvious inference, especially in the absence of any proof to the contrary, that this conveyance materially aided, if it was not a principal cause of, his insolvency and failure. If this was not so, it should have been shown by the plaintiffs.

The circumstances are so suspicious as fairly to cast upon them, not only the burden of showing that the transaction was honest, but that the gift was one which Mr. Abbe could make, without depriving him of the means of being just to his creditors.

For these reasons, and inasmuch as there was no fraud in fact, we think the superior court should have found the actual value of the property conveyed by Mrs. Newton, and should have considered that sum, with the interest upon it, as the amount equitably due upon the note. It follows, that in allowing the whole face of the note to the plaintiffs, there was error; and the decree must, therefore, be reversed.

In this opinion the other Judges concurred, except Storrs, J., who expressed a qualified dissent.

Decree reversed.