Hubbard v. Taylor ( 1858 )

Martin Ch. J.:

This is an action of replevin, brought to recover certain personal property claimed by the plaintiff, which was taken from his possession by virtue of two writs of attachment issued against the goods and chattels of one John C. Baughman. On the 20th day of November, 1855, the plaintiff, as the case shows, was the creditor of said Baughman in the sum of $15,000, for cash advanced; and was also liable on his paper, as endorser and accommodation acceptor, to the amount of $22,000; and on that of the firm of Baughman, Hubbard & King, and of Baughman & King, their survivors, to the amount of $104,000. Aside from these relations, the plaintiff was unconnected with the business of either Baughman, or the firm of Baughman & King. At this time, Baughman, being in failing circumstances, sold to the plaintiff the personal property mentioned in this case, in consideration of this indebtedness of $15,000, and in satis, faction thereof; and he also conveyed to him, by deed, for the consideration of $45,000, certain real estate, and took back a mortgage, conditioned for the payment of said $45,000, by the extinguishment by the plaintiff, within five years, of that amount of the liabilities upon which he was holden as endorser or acceptor; or, in case of the liabilities being taken up by Baughman, or the firm of Baughman & King, for the payment of that sum, with interest, to Baughman, within five years. The plaintiff thereupon took possession of the property, and continued to hold and enjoy the same, until the attachment of the portion of the personal property for the recovery of which this action is brought.

To defeat the plaintiff’s recovery, it is insisted by these defendants that the sale of this property was designed to hinder, delay, and defraud creditors, and is therefore fraudulent and void.

. Had the transaction been confined to the turning out of the personal property in satisfaction of the indebtedness of $15,000, no question of its bona fide intent could have been raised; for it appears from the case, that the property was no more than adequate for the payment of that sum; and it is not denied by the defendant’s counsel, nor can it be, that an insolvent debtor may prefer one creditor over another in the payment of his debts. The' difficulty suggested by the defendants springs from the conveyance of the real .estate; which, it is claimed, “was intended as a substitute for, and to subserve the purposes of, an assignment, with the implied conditions that would render such an instrument void”; and that, as it was executed at the same time with the sale of the personal property, it gives character to that sale; that both must be regarded as constituting but one transaction, and be held fraudulent and void as to creditors. We have no hesitancy in holding that the transaction was entire; that it was in furtherance of a single design, and the result of a single negotiation. Indeed, the recital in the mortgage of the conveyance of $60,000 worth of property — clearly refering to that of the personal property at $15,000, and the real at $45,000 — sufficiently establishes this to have been the view taken by the parties themselves. If, therefore, the conveyance of the real estate shall be found to be fraudulent and void, it would follow that the sale of the personal property must be so regarded also. If it was the purpose of this sale that the property should thereby be placed beyond the reach of Baughman’s creditors, and that Hubbard should hold it, not as the absolute owner, but as the trustee in fact of Baughman, and to enable him more leisurely and advantageously to settle his debts and compound with his creditors;' — if, in short, its design was to hinder and delay them, it could not for a.moment be upheld; and however harshly our judgment might operate upon the plaintiff, that judgment would only be consequent upon his own acts. While a party may well protect himself from the consequences of liabilities assumed for another, and receive payment of indebtedness to himself, yet he can only do this with such single purpose, and can not permit any considerations of sympathy or friendship for his debtor to enter into the transaction, and make it subserve the double purpose of protection to himself, and protection to his debtor against the just claims of others.

An examination of the facts and the evidence reported in this case, has failed to convince us that this transaction is in the least degree tainted with fraud. Baughman, finding himself to be insolvent, was desirous to pay to Hubbard the amount in which he was indebted to him, and to protect him, as far .as possible, from loss by reason of the eonfidential liabilities he had incurred on his account, and. that of the. firm of Baughman, Hubbard & King. For this latter purpose the real estate was conveyed. This conveyance was for the consideration of $45,000; and there is nothing before us to show that this was less than the fair cash value of the property. Plaintiff was liable, as endorser and accommodation acceptor for Baughman, and the firm of Baughman, Hubbard & King, to the amount of $126,000 — a liability generally regarded in' the commercial world as of a more sacred character than any other, and as demanding special protection. The property thus conveyed was not passed to an indifferent person, but to one against whom the holders of the paper might pursue their legal remedies for its collection; so that it was as accessible in his hands, for the purpose of satisfying these creditors, as it was in those of Baughman himself. The property thus transferred, if it had been seized in execution, or taken towards the payment of these liabilities, would not have satisfied a moiety of them. Under such circumstances, we can only regard the condition of the mortgage (which is esteemed by the defendants as a strong evidence of fraud) as one inserted to provide for a contingency almost impossible to arise, and which really was not in the serious contemplation of the parties. It was made in anticipation that the plaintiff would be compelled to take care of the paper upon which his name appeared, and contemplated such a result — an inevitable one, it would appear, from the situation of Baughman. The fact that it provided for the payment of the pinchase-price, with interest, in cash, in five years, in case this indebtedness was paid by other parties than the plaintiff, evidences a superabundant caution in framing the contract of purchase, rather than an expectation that the alternative would ever occur which would render it operative. At any rate, viewed in the light of surrounding circumstances, it in no degree characterizes the transaction; nor does it furnish any evidence of a fraudulent design upon other creditors.

This is rendered more apparent by the fact that, within •a short period after the grant, the evidence shows that this plaintiff had actually' paid over 1100,000 of these liabilities, ■and thus satisfied, and more than doubly satisfied, the condition of the mortgage, and rendered the latter contingency provided for impossible of occurrence. Under these circumstances, we can not well see how this conveyance and mortgage can be held to create a trust in favor of Baughman, nor indeed in favor of any one. The fact appearing affirmatively that nothing would be left if the property was used to pay the debts mentioned in the mortgage, there could be no resulting trust, and the character of an assignment can not, therefore, reasonably attach to the conveyance.

Nor can we discover anything in the testimony of the witnesses evidencing fraud —that of Baughman is clearly and •conclusively of the opposite tendency. The letter to Jones comes to us without any explanation of the occasion of its ■being written, except what may be gathered from itself. This letter, and the testimony of Whittemore, do not establish the fraudulent intent to hinder and delay, nor that the deed and mortgage were intended to operate in fact as an assignment; they only show why the plaintiff was unwilling to accept an assignment, and thereby subject himself to greater loss, on account of his obligations in behalf of Baughman and •others, than would occur were the property absolutely conveyed to him. All the testimony shows a desire on the part 'of the plaintiff and Baughman to save the former, as far as •possible, from loss; to place means in his hands which- would be accessible to him, and to the creditors, for the discharge of the debts upon which he was liable' — without any design •respecting others, and without any expectation (and, as the proof shows, without any ground for expectation) that he would •be thereby wholly saved from loss, or that anything would be left for others. Under such circumstances, it would be hard indeed to hold that the design of the parties was to ■anticipate that which could not occur, and, upon such a foundation, hold the transaction fraudulent.

The judgment of the Circuit Court must therefore be re-, versed, and new trial ordered.