King v. Wilcox

The Chancellor. I have no doubt, from the evidence in this cause, that there was actual fraud in the conveyance of July, 1828; and that the whole of the transactions between the defendants in relation to the premises, were intended to hinder, delay and defraud the creditors of Wilcox, and to prevent them from collecting their debts out of the premises in question. The reasons assigned in the opinion of the vice chancellor for coming to that conclusion, are perfectly satisfactory to my mind upon that point. The vice chancellor is also right in supposing that the alleged compromise of the complainants’ debt, by the bargain made with Swan, and the conveyance of the worthless Michigan village lots, which bargain was never ratified by the complainants, did not amount to an accord and satisfaction of the amount due them upon their judgment. The whole of that transaction was a gross fraud attempted to be practised upon the complainants and their agent; and if the notes which were delivered up had been valid securities, and the transaction had taken place in this state, Wilcox would have been liable to indictment for obtaining such notes by false pretences, and false representations in relation to the nominal village of Ionia. The only remaining questions to be considered, therefore, are whether the complainants, whose debts were contracted subsequent to the fraudulent deed of the premises, were éntitled to a decree declaring such deed fraudulent and void as to them, as well as to those who were creditors previously? And whether the provisions of the decree were right in reference to the rents [594] and profits of the premises and the improvements made thereon by the defendant Sawyer, subsequent to July, 1833, when he took possession 7 There appears to have been much conflict of opinion among the judges of different courts, in England and in this country, whether all voluntary conveyances, without a valuable consideration were, not void, under the provisions of the statute, 13th Eliz. ch. 5, as to creditors whose debts existed at the time of the conveyance'; some holding that the existence of such indebtedness rendered the voluntary conveyance constructively fraudulent as to pre-existing debts, without reference to the amount of such debts, or the value of the debtor’s remaining property; and others holding that the existence of such debts was merely prima facie evidence of fraud, which might be rebutted by proof that there was in fact no intention to defraud. And those who held that the conveyance was absolutely void as to pre-existing debts, seeing the injustice of applying the same rigid rule of construing the statute in reference to debts subsequently contracted, necessarily made a distinction between a conveyance actually fraudulent as to creditors, and one which was constructively fraudulent as to debts previously existing. This distinction is maintained by Chancellor Kent, in the case of Reade v. Livingston, (3 John. Ch. Rep. 481,) who held a voluntary conveyance to be constructive and conclusive evidence of fraud in relation to pre-existing debts. Upon a full examination of all the cases, the legal principle appears to be established, that where a voluntary conveyance is made and received with an actual intent to defraud the then existing creditors of the grantor, it is not a bona fide conveyance, which can protect the grantee against the claims of subsequent creditors. This was clearly the opinion of Chancellor Kent in the case just referred to. And Mr..Justice Story says, “where the conveyance is intentionally made to defraud creditors, it seems perfectly reasonable that it should be held void as to all subsequent, as well as to all prior creditors; on account of ill faith.” (1 Stor. Eq. 352, § 361. See also 1 Dana’s Rep. 533; 2 Pick. Rep. 411; Palm. Rep. 415; 4 Day’s Rep. 284; Mason v. Rogers, 1 Root’s [595] Rep. 324.) The vice chancellor was, therefore, right in setting-aside this conveyance as fraudulent, in reference to the judgment of the complainants and the two notes; which notes they signed as sureties for Wilcox, while he remained in possession of the premises and exercised acts of ownership over the same. I think, however, there is a slight error in the decree in reference to the rents and profits, and the improvements. So far as respects the mortgages, the rents and profits are unquestionably an equitable offset, after deducting for taxes and assessments, except such part of the rents and profits as have arisen exclusively from improvements made by Sawyer; who is treated as the assignee of the mortgages in possession of the mortgaged premises. The decision of Chancellor Kent, in the case of Moore v. Cable, (1 John. Ch. Rep. 385,) went to deprive the mortgagee in possession of the benefit of improvements made upon the land, without the consent of the owner of the equity of redemption, except so far as to give him the benefit of the increased rents and profits arising from such improvements. In this case, however, the complainants were not the owners of the equity of redemption in the premises, but only had a lien thereon to the extent of their judgment. And if the defendant Sawyer has made permanent improvements, which will enhance the value of the premises, and enable the complainants to obtain a greater sum, upon the sale, towards satisfying their judgment, than they could have obtained if those improvements had not been made, it is but equitable that he should be allowed therefor. The decree appealed from must, therefore, be modified, so far as to direct the master in taking the account of the rents and profits, not to charge the defendant Sawyer with the increased rents and profits which have arisen exclusively from the improvements made upon the premises by him. The master must also be directed to inquire and report how much the actual value of the premises is increased, by reason of permanent improvements made by Sawyer, which are still remaining on the premises, beyond what such value would now have been, if .those improvements had not been made. And the decree must [596] direct that such increased value, as reported by the master, be first paid to Sawyer out of the proceeds of the master’s sale, after deducting therefrom, by way of offset, the costs allowed to the complainants, by the decree. With this modification, the decree of the vice chancellor is affirmed with costs.