Birely's Exr's v. Staley , 5 G. & J. 432 ( 1833 )

Dorsey, J.,

delivered the opinion of the court.

Of the fraudulent character of the conveyances in question, on taking a full survey of all the facts and circumstances of this case, and drawing such inferences as a jury might reasonably make, we entertain no doubt. In deciding in favor of the appellants the various questions of law, presented by the able and ingenious argument on the part of the appellees, we cannot but admit, that some of our conclusions have been adopted, not without difficulty and hesitation.

It was insisted in behalf of the appellees, the conceding the appellant’s right to relief, upon the ground of the invalidity of the deeds, under the statute of Elizabeth, yet that the decree of the county court denying such relief, could not be reserved, on account of various defects in the proeedings of the appellants, by which it was sought; and first, that the bill of complaint was filed in the name of two creditors; whereas, all of them, or one only, should have been made a party complainant. This is a mere formal objection, not taken in the court below. If it had been, it might, (if sustainable) have been removed by amending the bill. The appellees admit that one creditor may sue alone. Then why may not two ? Rules of pleading in equity are not governed by the same technicality as to matters of form, that controls proceedings at law. Courts of equity look to substance, not form. The distinction then, (if it exist at all, which we cannot admit,) is a mere matter of form; nothing in reason or substance can be urged in its support. If one of many creditors proceed, and be successful, the fund is retained in chancery until all the creditors are notified to come in, and assert their claims. The same practice prevails on like proceeding by two.

Secondly, it is alleged, that it is not stated in the bill, according to the usual form, that the complainants proceed on behalf of themselves and other creditors.

This objection we think fully answered, and the requisition, if it exist, substantially gratified, by the prayer in the bill, that the property be sold for the benefit of the creditors of Jacob Staley.

'The third defect suggested, is, that the bill does not show or aligo, that the complainants were creditors at the time of filing their bill; but only at Jacob Staley’s death. If it were conceded, that this fault would have been fatal on demurrer, it cannot avail the appellees, as the question now arises before the court. The strong, if not necessary implication of the existence of the complainant’s claims, at the time of the filing of their bill, clearly arises from the facts therein set forth; but that implication is made irresistible by the answer of the appellees, who admit, that the notes, single bills, and bonds exhibited, show the “true amount of the debts due from Jacob Staley deceased, to the complainants.

The fourth defect relied on, is, that the complainants stand before the court, as simple contract creditors only ; whereas, to entitle themselves to the relief prayed for, they should have set forth in their bill, the judgments to bind the land, and Ji fa’s to bind the personal property. In sustaining the appellants in the teeth of this objection, we do not mean to shake the general principle, that where a creditor seeks the aid of a court of equity, to pursue property fraudulently conveyed away, a judgment must first be obtained against the debtor, before his lands fraudulently granted can be reached; nor that in such a pursuit of personal property, a fieri facias also must first have issued. In examining the authorities referred to by the appellees, to sustain their position, chancellor Kent, in reference to personal property says, in Hendricks vs. Robinson, 2 Johns. Ch. R. 296, “the preliminary step which seems to be required, is, that the judgment creditor should have made an experiment at law, and bound the property by actually suing out execution ; ” and in Brinkerhoff vs. Brown, 4 Johns. Ch. R. 677, “if he seeks aid as to real estate, he must showa judgment creating a lien upon such estate; if he seeks aid in relation to personal estate, he must show an execution giving him a legal preference, or liens upon the chattels.” And in Shirty vs. Watts, 3 Atk. 200, a judgment creditor who had not taken out execution, having brought a bill to redeem against the mortgage of leasehold interest, Lord Hardwick decreed, that “the bill must be dismissed, because till execution, the plaintiff has no lien on the leasehold estate.” If then the creditors’ claims to relief rest upon their liens thus to be acquired, (a position not entirely free from doubt) it follows as a necessary consequence, that out of the fund pursued, if land, they must be paid according to the seniority of their judgments: if personal property, according to their respective priorities, acquired by the delivery of their several fi fa’s to the sheriff. Would it for a moment contend, that a court of equity in Maryland, in the distribution of funds brought within its jurisdiction, by a proceeding of such a character as the present, would sanction any priorities asserted in virtue of judgment, rendered against his personal representative, after the death of the fraudulent grantor ? We think not. All creditors without judgments in the life time of the fraudulent grantor, would come in pari passu. No subsequent judgment would ere-ate any lien. The frequent decisions of the courts of this State have long since settled, so as to preclude all debate on the subject, that a judgment against an executor or administrator, not only does not bind real assets, but that it is not even prima facie evidence of a debt, where the real estate of a deceased debtor has been sold for the payment of all debts against him. Of what possible avail then, would the required judgment against the executor or administrator of Jacob Staley be, to charge the real estate in question ? It has not been intimated that any judgment should be shewn against the heirs of the deceased. Indeed, having no assets by descent, such a judgment could not be obtained against them.

But suppose we are wrong in this view of the subject; and that the inefficacy of the judgment as a lien does not of itself dispense with the necessity for its existence; still we are of opinion, that the objection, as now presented to us, ought not to be sustained. It is raised for the first time, as far as the record informs us, in the appellate court, after the parties have incurred great expense, and consumed much time, in litigating their rights upon the merits of the controversy. Had it been relied on in court below, either by demurrer, a plea in bar, or as a substantive ground of defence in the answer, it could have been easily obviated. As now presented, it works gross injustice, and is a complete surprize on the complainants. It becomes this court therefore, to listen to it with a reluctant ear, and to be even astute in the discovery and combination of the facts in the cause, that the unjust operation of this unseasonable objection may be frustrated; and we feel ourselves warranted by the pleadings and circumstance of this case, in drawing such inferences of fact as enable us to surmount this difficulty. It is not a defence set up in the answer. It forms no part of the issues in the case. The complainants were not called on to account for the omission. If the deceased left no assets, the natural presumption is, that no letters of administration would have been taken out on his estate; that had he left such assets, letters would have been granted; and the fair inference in that event is, that the appellees in one of the three usual modes in which their object could have been effected, would have required that the administrator might be brought before the court, and be made to apply the effects in his hands to the satisfaction of the complainants’ debt; thus extinguishing their right to prosecute any claim against the property conveyed. Not having done so, at this stage of the cause, the just conclusion is, that no administration was ever granted on the deceased’s estate, because he left none; and this conclusion is rendered in the highest degree probable, if not irresistible, when we advert to the facts, which we assume as established by the record; that Jacob Staley, at an advanced age, to hinder and defraud his creditors, about five months before his decease, had conveyed away all his property, both real and personal, and from the time of such conveyance until the day of his death, lived as a dependent with one of the fraudulent grantees; and was admitted by all parties to have been insolvent at the time of his death. Weighing all these facts and circumstances in connexion, and adverting to the time at which this question has been agitated, we deem ourselves justified in inferring, that there exists no personal representative of the deceased, against whom a judgment could have been recovered; or to answer another objection raised by the appellees, who ought to have been before the court as a party to these proceedings.

But, say the appellees, even although it were proved that there were no assets, the complainants were bound to have taken out letters themselves, in order that proper parties might have been before the court, and the necessary preliminary judgments obtained. Would that have been accomplished by their administering ? Could they sue and recover judgments at law, or file bills in a court of equity against themselves ? Nay, would they not have been obliged to adopt the same course of proceeding, and established their claims in the very same way, if they had. administered, which they are now prosecuting without such administration. Where then the advantage or necessity of this unimportant, superfluous issue of letters of administration.

The aforegoing views of this case, render it unnecessary for us to consider the point so much controverted in the argument, whether the complainants’ exhibit No. 2, is any further to be regarded as a part of the bill, than to show the precedency of the suits, of which it was referred to as the proof.

The bill having charged that by the deeds complained of, Jacob Staley had conveyed to the appellees all his real and personal estate, and their answer having denied that fact, and averred that after the delivery of the deed to them, he “was seized and possessed of real estate, both in Frederick and Montgomery counties, abundantly sufficient” as they believed, to pay the claims of the complainants in this behalf,” it was insisted that the defence is sufficiently established by the answer, and is a bar to the relief which has been sought by the bill. To this doctrine we cannot accede. The fact, of Jacob Staley’s owning other ieal estate in Frederick and Montgomery counties, is a matter put in issue by the appellants; and being an affirmative allegation, the onus probandi rests upon the appellees. Aware of this, they have attempted to prove it, but by testimony inadequate to the object. The mere production of deeds of conveyance, unaccompanied by any proof of the existence of the property conveyed, and the title of the grantor thereto, or his possession thereof, or the possession thereof by the grantee, is wholly insufficient for that purpose. In Sands vs. Hildreth, 14 Johns. Rep. 499, Spencer, J., says, “it has been argued, that Sands (the grantor) might have had property abundantly sufficient to satisfy his creditors, independently of the lands sold to the respondent. This however is not proved, and if it were true, the appellant was bound to make out the fact. Not having done so, the inevitable conclusion is, that Sands had no other property, out of which his creditors could obtain satisfaction.”

But suppose the allegation as to real property be true, it forms no barrier to a decree in favor of the appellants. To be so, it should have alleged not merely a sufficiency of other estate to pay the claims of the complainants, but all the debts due by Jacob Staley.

It has been attempted to support the deed in question, on the ground, that being executed with a view to a sale for the payment of the debts of all the creditors, it stands untainted by fraud. If such were the object of the instrument, it should have formed a part of its contents, or been elsewhere reduced to writing. Being upon its face, an absolute deed of bargain and sale, and being proved not to have been a bona fide conveyance, as such, it is covinous and fraudulent as against the complainants, and in violation of the statute of Elizabeth; nor can it be bolstered up by the fact of there having been a secret oral contract between the grantor and grantees, that the property conveyed should be held in trust, and sold for the benefit of the creditors of the grantor. The answer set up no such defence. Nor can it be supported on that ground, even if in a proper state of the pleadings, it might be so relied on. The necessary tendency of such a transaction is covinous and fraudulent, so far as the pursuing creditors are concerned. A secret contract so made could not be enforced, either at law or in equity, at the suit of the .grantor or his creditors. The deed was executed according to the intention of the contracting parties; no mistake or surprise in obtaining it; nor was any fraud, duress, or imposition practised upon the bargainor. The secret agreement is a nullity under the statute of frauds, and there is no head of equity jurisdiction, under which relief could be successfully sought, on such a contract. A court of chancery should therefore stamp on it the mark of reprobation.

■ The effort which was made for the rejection of the testimony of Joseph Miller, on the ground of its being given in answer to a leading interrogatory, is wholly without foundation, as all the material facts to which he deposed, were elicited by interrogatories which stand free from all exception.

Decree reversed, and a decree was passed hy this court for a sale of the property in the proceedings mentioned.

Buchanan, Ch. J., dissented.