Wynne, Love & Co. v. Mason , 72 Miss. 424 ( 1894 )

J. B. Harris, Special J.,

delivered the opinion of the court.

1. As the attack on the mortgage to the Colonial Loan Company was formally abandoned in the court below, it will not be necessary to go further into that branch of the case.

2. As to the mortgage to Mrs. Gray, we think the finding of the chancellor on the facts should be sustained. There is no doubt that this mortgage was given to secure a bona fide debt. Mason and his wife had a perfect right to secure it by mortgaging the property. We think Mrs. Gray has sufficiently explained the statement made by her in her. cross-examination that the deed had been recorded before it was delivered. And as the equity of redemption was subject to sale under execution by creditors, it could not be said that the mortgage had the effect of hindering or delaying the matter.

3. The deed made by W. O. Mason to his wife must be set aside as fraudulent and void as to the complainants. It is impossible to reach any other conclusion from the facts disclosed by the record than that the purpose of Mason in conveying this property to his wife was but a part of the scheme devised by him to develop the land in controversy at the expense of creditors. He had gone out of the mercantile business, as the record shows, some time before he purchased this land. He purchased it for $6,500 in cash, in a wild state, less than-a year before he opened the business of Mason & Co., and had begun to develop it. To do this successfully required large expenditures of money, and the result of the venture was in the highest degree uncertain. It was necessary to clear the land, to put houses on it for tenants, and the first years of such a venture were hazardous, meaning all outlay and no income. He did not wish to incumber the land itself, so he concluded to convey it to his wife, and thus place it, as he supposed, beyond the reach of those at whose expense he intended to improve it. He put the title to the land in the name of his wife. The deed was placed upon record, and he immediately opened a small store near it, from the very outset buying everything on credit, and supplying from the store the tenants upon the land while they were engaged in the work of clearing, fencing and digging wells, and paying out from the store money to carpenters and others who were employed by him to improve the land. So far as the record shows, almost the only customers of this store were tenants on the land. If there were any others it does not appear. But, whether there were or not, whatever money came into the store was paid out by Mason for improvements upon the property. The store was a mere incident. The main purpose was the development of the land. The actual results show this to be true, and Mason’s own declarations, so far as they are shown in the record, also show that this was his pxirpose. Mr. Bobinson, his ostensible partner and book-keeper, states that such was the fact, and that when he complained to Mason that everything was going from the store into the place, Mason replied: <cAh, well, I will get the place into fine condition and will then make you manager of it. ”

It is true Mason’s deed to his wife was recorded. This was done only a day br two before the business of Mason & Company was opened. It is also true, however, that the deed was virtually a voluntary conveyance. The money consideration expressed (§51,600) was made up of two items, one being $1,000, arising from the sale of property which belonged to the husband, and the balance being $400 and interest, which is alleged to have come to Mrs. Mason from her mother upon her marriage.

As to the $1,000, the court cannot consider this as sufficient to support the deed. Aside from the restrictions which the statute puts upon transactions between husband and wife, it has been repeatedly held, and, we think, most justly, that a husband cannot, by simply declaring himself a debtor to his wife, convey to her his property upon that consideration at the expense of his creditors prior or subsequent. The husband has a right to pay his wife a tona fide debt, to convey her property, or to be her debtor, and convey property in the satisfaction of the debt, but he cannot support a deed as being upon a valuable consideration which rests upon his mere voluntary promise that he would at some time give her a sum of money. A conveyance made to the wife, the consideration of which is property owned by the husband, is voluntary. 58 Iowa, 115; 59 Ind., 343; 80 Kentucky, 129; lb., 638.

As to the $600, we are of opinion that it does not stand in a much better light. The length of time that Mason had used the money, together with the circumstances surrounding the case — the very atmosphere of the case, so to speak — force us to the conclusion that this, like the $1,000, was an afterthought, and trumped up to meet the emergency of the occasion. But, even conceding that Mason did owe his wife this $400 and interest, it was wholly inadequate to support the conveyance of real estate worth $6,500.

It is earnestly insisted by counsel for the appellees that, as the creditors who are assailing this conveyance are subsequent creditors, and that, as the deed was recorded, they had notice of it, and consequently they cannot claim to have been defrauded. But whatever may be the effect, ordinarily, of the recording of a deed, as constructive notice, it was not intended that the registry laws should constitute a shield for actual fraud. It has been held in this state in a well-considered case that the holder of a recorded title may, by conduct inconsistent with such title, be estopped from asserting that title as against a party who has been misled by his conduct. Staten v. Bryant, 55 Miss., 261.

All the authorities agree in holding that a voluntary conveyance is presumptively void as to existing creditors, and the burden of proof is on the party making the conveyance to support it. The authorities are equally unanimous that a voluntary conveyance can be set aside by subsequent creditors if made with the intent to defraud them, the only difference being that, as to the subsequent creditors, the burden of proof is on them to show that the conveyance was made for the' purpose of defrauding them. The. result is the same in either case, and the question is one of the burden of proof.

While it is true it has been held that a man who is not in debt can convey all his property to his wife, and the conveyance be upheld as against subsequent creditors, although they may give credit upon the faith of the particular property, it will be found that the cases which support this proposition depend upon th'e particular facts of each case. In the case at bar, the truth is that Mason not only conve3''ed all his property to his wife, but he did it for the purpose of placing it beyond the reach of prospective creditors, at whose expense he intended to develop and improve the very property conveyed. It is not the case of a'man who conveys his property and embarks in an independent business which has no reference to the property conveyed; but this is a case in whióh the very purpose of the conveyance was to improve the very property conveyed at the expense of the grantor’s prospective creditors, and he did so improve it; and if there was nothing else in the case than this, we think it is well settled that one cannot hold an interest obtained through the fraud of another any more than if the fraud was committed by himself. See Lawrence v. Hand, 23 Miss., 103; Powers v. Johnson, 10 Smed. & M., 169; 3 Iredell’s Eq., 219.

We think it has been abundantly settled that the mere recording of a deed is no protection from actual fraud. Staten v. Bryant, supra; Murphy v. Jackson, 69 Miss., 403; 60 Ala., 192; 38 Ib., 115; 52 Ga., 183.

We think the proof in this case not only shows actual fraud on the part of Mason himself, but we are warranted in concluding that Mrs. Mason herself participated in the scheme which Mason undertook to carry out. While our recent statutes have to some extent modified the legal relations between husband and wife in freeing the wife from some of her common law disabilities, yet the statutes have not undertaken, nor have they in fact affected the actual relation existing between husband and wife, and it is this actual relation which is the basis of the salutary rule that transactions of this character between husband and wife must be viewed with suspicion, and their fairness clearly established.

It is true that Mrs. Mason denied that she knew anything of the purpose of her husband, but she certainly did know that the land which she claims was brought into value through the business of Mason & Co. She knew that she had no money and that her husband had none, and that these improvements were being made at the expense of some one.

But Mrs. Mason’s statements cannot be taken, we think, as amounting to very much, as she has been very clearly discredited as a 'witness in this case. If she did not actively participate in the fraud, she was a very willing and passive instrument in its perpetration, and we think, as to these creditors, under all the circumstances in the case, it would be highly inequitable to allow her to reap the benefit of her husband’s fraud. We, therefore, conclude that, subject to the prior incumbrances of Mrs. Gray and the Colonial Loan Company, the land must be sold to pay the complainants’ debts and interest. The proof is that the property is amply sufficient to pay all the debts, and to leave Mrs. Mason and her husband a large surplus. Mrs. Mason herself has gotten from the property more than $400— if she, in fact, parted with.that sum. She states herself that the money obtained from the Colonial Loan Company was placed to her individual credit in the banks in Memphis, and used by her — at least half of it. Therefore, on this branch of the case, the decree of the chancellor must be reversed, and the decree will be rendered here in favor of the appellants for the amount of their debts and interest.

But the decree must also be reversed on another ground. On the dissolution of the injunction against Mrs. Gray and Odom, trustee in her mortgage, the chancellor awarded $150 attorney’s fee. This was error. No damages were allowable in this case unless they were allowable under § 572, code 1892, which provides for five per cent, damages on the dissolution of injunctions to stay sales under deeds of trust or mortgages with power of sale. They were not allowable under this section because the injunction was wholly inoperative, because no sale was threatened, as the debt was not due, and by the very terms of the deed of trust no sale could be made until 1896. The defendants, therefore, were not in any way affected by the injunction. They were not delayed and not damaged, and no attorney’s fee should have been allowed. Williams v. Bank, 71 Miss., 858.

The decree of the loioer court, in so far as it dismisses the complainants hill as to the Colonial & United States Mortgage Company, Limited, and Mrs. B. T. Grcvy and J. W. Odom, -trustee,-is hereby affirmed, and as' to all other matters it is reversed, and a decree will be entered here in famor of complainants for the amount of their judgments, a/nd ordering a sale of the land, subject to the prior incumbrances above referred to, for satisfaction thereof.