Hall v. Sands

The opinion of .the Court was drawn by Davis, J. By our Eevised Statutes, c. 76, § 13, derived from the statutes and Province laws of Massachusetts, a levy may be made upon laud fraudulently conveyed by a debtor. This applies to land of which the debtor had the legal title before the conveyance. And, by c. 81, § 28, all real estate liable to be thus taken in execution may be attached on mesne process. By such attachment, the creditor acquires a lien upon the property, which is preserved and [358] perfected by the levy, so as to be good against any intervening conveyance. Such a lien, by attachment, may be seemed as well in actions on the case for torts, as in suits upon contracts. Lowry v. Pinson, 2 Bailey, 324. And the plaintiff in such an action becomes a creditor when he recovers his judgment. By the statute 13 Eliz., c. 5, all such conveyances are void, but " only as against that person or persons, his or their heirs, successors, executors, administrators and assigns, whose actions, suits, debts, accounts, damages, penalties, &c., are, shall, or might be in any way thereby disturbed, hindered, delayed, or defrauded.” By the statute 27 Eliz., c. 4, all voluntary conveyances, whether fraudulent or not, were made void as to subsequent purchasers, without notice. Though these statutes were entirely distinct, they have often been connected, for the reason that a voluntary conveyance, by an insolvent debtor, is also presumed to have been fraudulent, with the reservation of a secret trust for his own benefit. Such a conveyance being void for one reason as to one class of persons, and void for another reason as to another class, some confusion has resulted in the judicial decisions. Under the first statute, a fraudulent deed, whether voluntary, or for a good consideration, is void as to all persons liable or intended to be injured thereby. Such is the obvious meaning of the language. But the fact that it is voluntary is not, therefore, immaterial. It may affect the case in two very important particulars. 1. Upon the question of intent to defraud any person, it may be decisive. For, often, the most conclusive evidence of fraud, if the grantor was in debt, is the fact that he received no consideration for his deed. 2. And it may be quite as decisive upon the question as to what persons were liable or intended to be defrauded. For if it was both fraudulent and voluntary, so as to raise the presumption of a secret trust, it is a continuing fraud, [359] 'affecting those who subsequently give credit to- the grantor. He not only puts his property beyond the reach of existing creditors ; he keeps it beyond the reach of subsequent creditors. His conveyance operates, and must be presumed to have been intended to operate, to the injury and delay of both classes of creditors alike. It is therefore void as to both alike. Carlisle v. Rich, 8 N. H., 44; Parkman v. Welch, 19 Pick., 231. . A debtor may make a fraudulent conveyance for a good and sufficient consideration, and afterwards, with the proceeds of the sale, pay or adjust all claims against him. Such cases are not infrequent. It is not easy to perceive how such a conveyance could operate to the injury of subsequent creditors; or that it could have been. made for that purpose. That such must have been the purpose, or effect, in order to render the deed void as to them, seems to be clear. Howe v. Ward, 4 Greenl., 195. The same conclusion would seem to result, not only from the language of the statute, but from the construction given to it, in that class of cases where debtors have conveyed property not liable to attachment or execution. Such conveyances, though made with a fraudulent intent, are held to be valid, for the reason that creditors cannot be injured by them. 1 Story’s Eq., §§ 366-369; Legro v. Lord, 10 Maine, 161. In the case at bar, the conveyance was a mortgage, and was made June 24, 1851. Nearly ten years afterwards, Eeb. 9, 1861, the plaintiff commenced his action on the case for slander, and attached the premises as the property of the mortgager. The mortgage was assigned to the defendant, April 4, 1861; and the mortgager released the right of redemption to the defendant, April 15, 1861. The plaintiff recovered judgment against the mortgager, May 22, 1862, and extended his execution on the premises, June 5th, 1862. By his attachment, his rights are superior to those of the defendant under his release of the equity of redemption from the mortgager, but inferior to the rights of defendant as as [360] signee of the mortgage, unless the mortgage was fraudulent and void as to him. He could not be considered a creditor until long after the mortgage had been given. And the jury were instructed "that, if the mortgage was fraudulent, it could only be avoided on that ground by the then existing creditors of the grantor.” The question, whether subsequent creditors ‘ were intended or liable to be injured by it, was not submitted to the jury, or alluded to as having any bearing on the case. A fraudulent mortgage is almost necessarily a continuing fraud, affecting subsequent as well as prior creditors. But it is not correct to say of any fraudulent conveyance, as a rule of law, that it can only be avoided for that reason by " existing creditors.” The question is one of fact. If it is valid as to subsequent creditors, in any case, it is on the ground that they were not intended or liable to be delayed, disturbed, hindered, or defrauded by it; and the jury should be so instructed. The instructions were therefore erroneous. The exceptions must be sustained, and a new trial granted. Aitleton, C. J., Cutting, Walton, Dickerson and Barrows, JJ., concurred.