McLane v. Johnson , 43 Vt. 48 ( 1870 )

This doctrine was recognized by

Savage, C. J.,

in Wadsworth v. Havens, 3 Wend., 412.

That a fraudulent intent, in making a conveyance without valuable consideration, vitiates such conveyance as to subsequent as well as to prior creditors, is shown to be the idea entertained by the most eminent American judges, in Sexton v. Wheaton, 8 Wheat. Rep., 229, opinion by Marshall, C. J. ; in Salmon v. Bennett, 1 Conn. Rep., opinion by Swift, C. J.; in Benton v. Jones, 8 Conn. Rep., 186, opinion by Hosmer, C. J.; Howe v. Ward, 4 Greenl., 195, opinion by Mellen, C. J. See also Damon v. Bryant, 2 Pick., 411; Carpenter v. McClure, 39 Vt., 9, in which it is said that the current of decisions is to the effeet that “ such transactions are void as to all creditors.” In Smith v. Lowell, 6 N. H., 67, the doctrine as expressed in the cases and books, supra, was directly applied in a suit at law. We cite it only as showing the assertion and application of the doctrine. Webster being in debt and in embarrassed circumstances, in 1826, conveyed land to Chandler, but continued in possession till the spring of 1880. In May, 1830, Chandler conveyed to Dewey, who on the same day conveyed to the defendant. The plaintiff, in April, 1830, attached the land on mesne process against Webster, and in May recovered a judgment against Webster in said suit, on a debt that accrued long aftei* the conveyance from Webster to Chandler, and thereupon caused said execution to be levied on said land, and brought his writ of entry to recover possession under his title acquired by said levy. The defendant was regarded as standing in the same, and no better, right than Chandler would have stood if he had not conveyed the land. Upon the evidence the court were requested to charge the jury, that if they believed an honest debt existed from Webster to Chandler, and the conveyance was made in good faith, either to secure it by way of pledge, or to pay it, the conveyance must be held to be valid. “ But the court instructed the jury that as the conveyance was absolute on its face, in order to sustain it, they must be satisfied it was made in payment and satisfaction of the debt.” Richardson, C. J., in pronouncing the opinion of the court, said : “ It is settled that a conveyance made to defraud creditors, is void as against those who become creditors after the conveyance ; ” and on this ground the plaintiff had judgment.

In Parkman v. Welch, 19 Pick., 231, Crombie, being largely indebted, conveyed land to Welch, without consideration, in 1829. In 1834, the orator obtained judgment against Crombie on a debt that accrued subsequently to said conveyance, and levied on the land. This bill was brought to avoid that conveyance. The point was made for the defendant, that “ the deed from Crombie to Welch cannot be impeached by the plaintiff, because he was not a creditor of Crombie at the time that conveyance was made.” The court, by Dewey, J.: “ This raises the question, whether the effect of the St. 13 Eliz., ch. 5, is to avoid conveyances made upon secret trust, and with fraudulent intent, as well in favor of subsequent as previous creditors. On this subject we apprehend the law is well settled : * * that a conveyance, fraudulent at the time of making it, might be avoided in favor of subsequent creditors; ” and cites books and cases. And on this view and application of the law the case was decided for the orator, holding the conveyance void.

In Clark v. French, 23 Maine, 221, referred to in note to 1 Am. Lead. Cas., supra, the conveyance was made more than a year before the debt accrued to the creditor who was claiming to invalidate it, and the point was directly and explicitly in judgment, whether such subsequent creditor was entitled to assert the invalidity of a conveyance, that was colorable and without consideration ; and it was held that he was so entitled; and in the opinion, the views were announced which have been presented in our extract supra from 1 Am. Lead. Cases. The books and cases thus referred to, and others cited in those books and cases, present the views and reasons, upon which the doctrine rests, so fully as to render discussion at this tim^a profitless gratuity, and they seem to us to bear the force of authority as to the law of the subject as involved in the case now in hand.

In the cases of voluntary settlements on good consideration, as distinguished from valuable, the effective point is that such settlements are held to be in themselves fraudulent as to creditors if the grantor was insolvent, or was indebted at the time of the settlement to such an extent that such settlement deprived him of means necessary in order to pay his existing indebtedness. Thq fraud works the invalidity; and the fact of being thus insolvent, or thus indebted, is regarded as a conclusive “ argument of fraud, ” without inquiring as to the actual fraudulent intent. So in cases of conveyance, with the actual and active intent to delay or hinder creditors, the fraud operates the invalidity, in whatever way such fraud may be proved.

. The present is not a case of trust, between the parties to the transaction, to be set up and enforced by the cestui que trust or his representatives. It is a question of fraud by reason of a secret trust with fraudulent intent, as affecting the validity of the conveyance,—the matter of a recognized trust relation being involved only in subserviency to the theory of the law, as to the relation and character in which- the fraudulent grantee holds the estate with reference to the parties entitled. Henee all the doctrine of the law and the cases as to the proof of a trust, aliunde the deed of conveyance, whether it may be by parol, or must be by writing, are not involved in this case. Here the question is one of fraudulent intent; and such intent may be proved by any kind of evidence by which fraud in any other case may be proved. When that is proved, then ensues whatever of trust relation there may be ; but such relation is practically regarded only with the view of preserving the symmetry of the legal theory in making-out the proper destination of the property, in order to answer the rights, equities, and duties of all parties interested. Hence, all that part of the learned argument and the books cited on the subject of trusts, whether express or implied, both in reference to the proper evidence, and the quality, and incidents, and results of such trusts, need not be further considered in this case.

Having thus considered the subject, with reference to the law as it stands upon the common statute against fraudulent conveyances, originating with 13 Eliz., ch. 5, it is now to be remarked that sec. 43, 45, 47, of ch. 52 of our General Statutes, seem to proceed upon the same idea of the law as is shown to exist under said St. 13 Eliz.

In Sec. 43, the proceeding of selling, under a license from the probate court, may be had by the executor or administrator, if the deceased had, in his life-time, conveyed, <fcc., u with intent to defraud his creditors, or to avoid any right, debt, or duty of any person, or had so conveyed such estate that by law the deeds or conveyances are void as against his creditors, and the estate attempted to be conveyed would be liable to be attached by a creditor of the deceased in his life-time.” Those alternatives are not intended to be equivalent modes of expressing the same thing, but to cautiously provide, by varied expression, for a wider range and variety of cases, than perhaps either form of expression would of itself embrace. “Had, in his life-time, conveyed,” &c., by the natural and only just force of the language, embraces any such conveyance, made at any time in the said life-time. “ With intent to defraud his creditors, or to avoid any right, debt, or duty of any person,” does not limit the operation of the provision to the case of parties who were the specific objects of said intent: the language differing in this respect from that of sec. 32, ch. 113, Gen. Sts., declaring fraudulent conveyances void, “ as against the party or parties only whose right, debt, or duty is attempted to be avoided,” &c., in connection with provisions making them a penal offense ; and also differing from that of sec. 28, ch. 65, Gen. Sts., which also declares fraudulent conveyances void “ as against such person whose right, debt, or duty shall be so intended to be avoided, his heirs or assigns.” Take, again, what follows : “ or had so conveyed,” (meaning in his life-time, and at any time within it,) “ such estate that by law the deeds or conveyances are void as against his creditors, and the estate attempted to be conveyed would be liable to attachment or execution by a creditor of the deceased in his life-time.” Making allowance for the inattention to rules of grammar in the use of modes and tenses in this last clause, it is obvious that the meaning is, that, if property had been so conveyed by the deceased in his life-time that a creditor-—-that is, any creditor of the deceased — might have held it by virtue of attachment and-levy of execution, then the property would be subject to the proceeding provided in that section. It was not meant to have its operation depend on the relation of a present existing creditor to the act of the fraudulent conveyance, as being an object of the actual intent of the fraudulent grantor in making the conveyance. This seems to be made obvious by the fact, that, while the section provides that the proceeding may be had in case the fraud was directed to a single creditor, it provides also that the property may be applied to supply any deficiency of assets for the payment of all the debts of the deceased. There can be no doubt that the property conveyed in this case could have been successfully attached, and levied upon, and held by the party, to avoid whose right the conveyance was made. The fact that resort to a court of chancery would be necessary to clear the title, under the levy, from the cloud of the fraudulent conveyance on record, does not bear on the operation of this provision of the statute: for the very fact that is assumed in the provision, of there having been a fraudulent conveyance of the property by the debtor, so that the title of record is in the fraudulent grantee, and still the property subject to the execution of a creditor, necessarily involves the idea that resort must be had to a court of chancery to perfect and clear the title under the levy. The 43d section provides for sale by the administrator, under license of the probate court, of the property thus fraudulently conveyed.

Sec. 45 authorizes, and makes it the duty of the executor or administrator, in the same class of cases, “ to commence, and prosecute to final judgment, any proper action or suit, in law or equity, for the recovery of the property so conveyed, and he may recover, for the benefit of the creditors, all such real estate, so fraudulently conveyed,” &c., &c. This proceeding goes to the matter of title, and subjects the property to the same appropriation for the benefit of creditors, in the hands of the executor or administrator, as if it had not been conveyed by the deceased, and the title had remained in him at his decease, the same that it was up to the time of such fraudulent conveyance.

These provisions of our statute lay out of this case what, in Am. Lead. Cas., 43, is said to have been much disputed,' viz., whether an administrator may set aside a fraudulent conveyance of his intestate, when the property is wanted for the payment of debts.

It seems proper to remark, in this connection, that the original statute, expressly authorizing such proceedings and suits by the executor, or administrator, or the creditors of a deceased person, was enacted in 1831. See Laws of Vt., 2d vol., by Thompson, 64-5. The case of Martin’s Adm’r v. Martin, 1 Vt., 91, was decided in 1828, being an action of ejectment, for the purpose of recovering property fraudulently conveyed by the intestate. The case of Peaselee, Adm’r, v. Barney, Adm’r, D. Chip. Rep., 331, was decided in 1814, in which it was held that an administrator could not, by bill in equity, set aside a fraudulent conveyance of his intestate, in behalf of creditors, but that the creditors themselves might do so. It is readily supposable that the statute of 1831 was designed to relieve the subject from the embarrassment under which it was laboring by reason of those decisions, and to furnish a facthe and simple remedy in such cases, answerable to the requirements of the justice and equity involved.

Without pursuing the subject, the .application and result, in the case before us, of the views thus presented, require no further exposition. We find the said conveyance by Jesse Johnson to the defendants to be fraudulent, within the meaning of our statutes against fraudulent conveyances, and hold that the orator, as administrator, may maintain this suit for the recovery of the real estate conveyed by said deed. The bill prays that an account niay be taken of money received by the defendants, and of damages done by them. But those matters were not brought to the attention of the court in the argument, and have not been considered.

The cause is remanded to the court of chancery, with the following mandate:

The decree is reversed. The cause is remanded to the court of chancery, to the end that a decree may be made that the conveyance by said Jesse Johnson to the defendants is void as to the creditors of said Jesse, to the extent of the deficiency of the assets of the estate of said Jesse to pay the debts against his estate, and that the orator as such administrator has the power of sale, and the right to convey, to the same effect as if the conveyance to the defendants had not been made, so much of said real estate so conveyed by the said Jesse to the defendants, as shall be necessary to make up.such deficiency of assets, and that all necessary and proper orders may be made, and proceedings had, for carrying into' effect such decree by such sale, unless the defendants themselves shall make up such deficiency, by paying the amount thereof to the administrator of said Jesse; and further, that, when such sale shall have been made by said administrator, the defendants be decreed to make proper and effectual conveyance and assurance of title of the portion so bargained by the administrator;—the cause to stand in said court of chancery, for effectuating all the matters embraced in the premises; and that the orator recover costs of suit, to be duly taxed and allowed.