Chester County Trust Co. v. Pugh

Opinion by

Mr. Justice Brown,

Thomas B. Brown was insolvent on April 1, 1911, when he conveyed the property in controversy to Edwin A. Pugh, one of the appellants. The conveyance was for the purpose of defrauding creditors, and this Pugh knew. Brown could not have had it set aside, for neither the law nor equity “will extricate a rogue from his own toils.” But he died insolvent, and what he could not have done in his lifetime his administrator has undertaken to do, for the benefit of his creditors, for as to them the conveyance is admittedly void. What they might have done in Brown’s lifetime, or might do now, to bring the property within their grasp is not the question raised on this appeal. The narrow question for determination is the right of Brown’s administrator to institute this proceeding for the benefit of his creditors.

While it is conceded by counsel for appellants that Brown’s conveyance is open to attack by his creditors, it is contended that, as he could not have attacked it while he lived, his personal representative stands on no higher ground, and Williams v. Williams, 34 Pa. 312, and Fowler’s Appeal, 87 Pa. 449, are cited in support of this. Neither of these cases, however, is to be so regarded, for the question now before us was not raised in either. In the first, land upon which it was alleged the owner had placed a fraudulent mortgage was sold under an order of the Orphans’ Court, and what this court decided was that the proper place for the defrauded creditors to attack the mortgage was in the Orphans’ Court, on the distribution of the proceeds of sale, which had taken place before the sci. fa. was tried. It is true that, in so holding, Mr. Chief Justice Thompson said the administratrix, as the personal representative of the deceased, could not defend against the mortgage on the ground of fraud, but nothing was said as to the right of an administrator, when acting as trustee for creditors, to ask that a fraudulent conveyance of his decedent be set aside. In the second case — Fowler’s Appeal — creditors had filed a bill to set aside a fraudulent conveyance, and nothing more was decided than that it was not necessary for the administrator to intervene if the creditors preferred to proceed themselves; but there was at the same time a clear intimation that the administrator might have proceeded for the protection of defrauded creditors, when it was said: “Whatever standing the administrator might have to impeach this deed would be derived solely from his position as trustee for the creditors defrauded.”

An administrator serves in a dual capacity. While he is the personal representative of the deceased, he acts at the same time as trustee for the latter’s creditors, “and in that capacity he is bound to protect their interest”: Buehler v. Gloninger, 2 Watts 226. In this respect he is unlike an assignee for the benefit of creditors, who stands in the shoes of the assignor, and, for the purpose of paying creditors, converts for him what passes by the deed of assignment. His rights rise no higher than those of his assignor, and, being but a volunteer, he has no right to impeach the validity of a gift or transfer by the assignor on the ground of want of consideration and its consequent fraudulent character as against existing creditors. While an administrator, as the mere, personal representative of a decedent, can take no steps to set aside a fraudulent act for the benefit of heirs, next of kin, legatees or devisees, his right to do so for the benefit of creditors, for whom he is trustee, has long been recognized in this State. In Stewart v. Kearney, 6 Watts 453, Kearney had made a fraudulent transfer of certain personal property, and brought suit to recover the value of it after it had been sold by his transferee. He died during the pendency of the suit, and his administrator was substituted as plaintiff. In holding that the decedent could not have recovered, but that his administrator could maintain the action, Mr. Chief Justice Gibson said: “For the benefit of the fraudulent vendor, or those who stand in his place, by testament or descent, ho action lies; but against the interests attempted to be defrauded, the sale is a nullity, and this action is maintainable in the name of the administrator, as a trustee for the creditors, according to Buehler v. Gloninger, 2 Watts 226, only so far as the property in contest may be needed for payment of debts, whose existence the plaintiff would be bound to show.” If an administrator may sue for the benefit of creditors for the recovery of the value of goods fraudulently transferred by his decedent, why should he not have the same right as to fraudulently conveyed real estate? Land is as much an asset for the payment of the debts of a decedent as is his personal property, and the right of an administrator to recover either is the same when he acts in his capacity as trustee for creditors. This was distinctly recognized in Bouslough v. Bouslough, 68 Pa. 495, where, in referring to the fraudulent conveyance by a decedent, Mr. Justice Agnew said: “Indeed, he cannot avoid his own conveyance or gift even though fraudulent as to creditors. The same rule follows the estate into the hands of his executor or administrator, who cannot set aside the fraudulent act for the benefit of his heirs or next of kin. But when the interest in the subject changes, a different rule prevails. Therefore the executor or administrator may set up the fraud, and avoid the act of the decedent for the benefit of creditors where the estate is insolvent: Buehler v. Gloninger, 2 Watts 226; Stewart v. Kearney, 6 Watts 453.” Another case to which reference may be made is Skile’s Appeal, 110 Pa. 248, where, on a bill filed by the administrator of an insolvent decedent, a decree was made ordering a reconveyance to the administrator of the property found to have been conveyed by the decedent in fraud of creditors.

The general rule as to the right of the appellee to file this bill is thus laid down in Schouler, Ex’rs, 220: “Any gift, assignment, conveyance, or transfer of property within the statute 13 Eliz. c. 5, and analogous legislation, is void against creditors, and consequently it becomes the duty of a personal representative to procure the property by instituting, on their behalf, appropriate proceedings, considering the means of litigation at his disposal, and the proof obtainable.......Generally speaking, property which has been assigned or conveyed by the deceased, after the manner of a gift, confers a title upon the donee or grantee, subject to the demands of prior existing creditors of the estate. The executor or administrator, representing these and other interests, against the express or implied wishes of the deceased himself, if need be, may procure all assets suitable for discharging demands of this character.......The personal representative’s right and duty to have a fraudulent transfer set aside may extend to proceedings by bill in equity to reach real estate thus fraudulently conveyed, so far, at least, as the interests of creditors may require real property to be reached for the satisfaction of debts.” In some jurisdictions this rule is followed; in others it is not. But it is to be regarded as obtaining with us, and the decree is, therefore, affirmed at appellants’ costs.