Henriques v. Hone

The Vice-Chancellor: The defendant, as against Messrs. Hall and Swan or either of them, could have no right of set-off at law or in equity. This is well settled. If they had merely been agents or factors of Moffat in placing the goods in the hands of the defendant for sale, the latter must have accounted to them ; and in an action for the proceeds, founded upon the privity of contract, he could not have made a set off of the money owing to him by Moffat nor have availed himself of such indebtedness as an excuse for not paying over the full amount: Toland v. Murray, 18. J. R. 24. and in this court (3. j. C. R. 569.) is a decisive authority to this effect; Upon the same principle, if the receiver has succeeded to the rights of Messrs. Hall and Swan or derives title under them, it is equally certain there can be no set off: for, there being no equity of this sort as between the defendant and Hall and Swan, none can attach to and follow their transfer to him of the claim for the proceeds of the goods as a chose in action. Is there, then, any difficulty in considering the receiver as án assignee of Hall and Swan, standing in their place and having their rights against the defendant ? This depends upon the effect of the fraud in the original assignment. If the character of this fraud was such [123] as to render the assignment utterly void from its creation and not merely voidable, then, no title passed under it—not , v . , 1 , • , • even as between the parties to the same; but, upon its being set aside, the property would be regarded as having all the time belonged to Moffat and the title to which had never been changed. And, consequently, when taken possession of by the court and placed in charge of a receiver, the latter would be vested with a title proceeding immediately from Moffat (and, of course, subject to all equities existing against him in favor of third persons) and not mediately through assignees under a voidable assignment, which might operate to prevent any such equities from attaching. The courts, in carrying into effect the statute against fraudulent conveyances and giving to it a proper interpretation, have not felt warranted in proceeding upon any broader ground with respect to deeds or ¡instruments brought within its provisions as fraudulent, than this: that they are voidable only as to creditors or purchasers who may think proper to impeach them and are not utterly void. Thus, as against a fraudulent grantor, the conyeyance is effectual, to pass the title,^pd he and his representatives are not at liberty to set. up a claim in opposition to the deed-: Osborn v. Moss, 7. J. R. 161.; and for all the purposes of a valid title in a bona fide purchaser under a fraudulent grantee, such grantee is, in contemplation of law, vested with a. legal and perfect estate. The entire interest and estate of a fraudulent grantor passes from him by such a conveyancewhich would not be the case if it were a nullity—while the title must vest somewhere, for the law does not permit the fee to be in abeyance. It vests, by consequence, in the grantee, subject to be divested whenever the creditors or persons aggrieved think proper to call in question th.e validity of the transaction and show the deed or conveyance to be fraudulent. And when .this is done, the judgment or decree of the court is interposed, and, by force of the statute, such judgment or decree declares the instrument to be void- and void in toto as respects those who have impeached it and giving to them the benefit of their legal diligence. But the court does not declare it void as to other persons, nor will it set the same aside as a nullity between the parties to the instrument. It, only act> [124] upon it as a voidable deed : but not one as void ah initio. This-principle clearly appears from the cases of Anderson v. Roberts, 18. J. R. 515. and Mackie v. Cairns, 5. Cow. 547. In the last case, one reason why the judgment, which had been confessed by the assignor to the assignees subsequent to> the assignment, was held to be ineffectual for any purpose was, that the assignment, although fraudulent as to creditors,, was valid as between the parties and, therefore, no lien* could attach upon the property assigned by means of the judgment. So, in Murray v. Riggs, 15. J. R. 571., where it was considered that a deed, fraudulent as to creditors, was nevertheless capable of confirmation and of being made good by subsequent acts between the grantor and grantees before any steps were taken to impeach it. This could only have been done upon the ground of the title having passed and vested in the grantee and of the deed being voidable only and not absolutely void: for an instrument utterly void and which never had any legal effect is incapable of confirmation. Upon these principles, it appears to me impossible to consider the title to the assigned property as thrown badyipon the assignor Moffat and as taking a new start from him» when the assignment to Hall and Swan was declared void as to the creditors who had taken measures to impeach it. The effect of the decree was only to divest the assignees of their right and control over the property by virtue of the assignment, so as to have the property applied to lawful purposes, namely, to the payment of the debts of the assignor owing to such of his creditors as did not choose to submit to his terms, but who pursued their legal remedies and thereby acquired preferences over others and priorities of payment out of his estate. And this court then takes the property under its own charge through the medium of its officer, a receiver,, and appropriates it accordingly. In practice it is usual to direct a release of the right of a party under a deed which is set aside as constructively fraudulent: Dey v. Dunham, 2. J. C. R. 194. But it would not be necessary to direct a release or reconveyance where a deed is declared an absolute nullity from fraud or imposition in the manner of obtaining it, except- under spe [125] cial circumstances and ex abundanti cautela: Livingston v. Hubbs, 2. J. C. R. 512. This distinction was taken by Lord Loughborough, in Bates v. Graves, 2. Ves. Jr. 294 ; and it appears to have been observed and acted upon in other cases. The practice upon a decree ,of requiring a release or conveyance by a person holding under a voidable deed upon setting it aside, shows the understanding to be that the legal title, at least, remains in him and does not return and revest in the original grantor. Hence, the propriety of requiring Messrs. Hall and Swan to execute to the receiver a release or transfer of the property and its proceeds. And I think it follows, as an inevitable conclusion, that the receiver must be deemed de jure as well as de facto the assignee of Hall and Swan and deriving title under and through them and not immediately from Moffat. The circumstance of his uniting with them in making such transfer does not vary the case. It was, as to him, a matter of form, provided the views I have already taken be correct. But—supposing the title to the property to have reverted to Moffat and that the receiver takes it as coming directly from him and not through the medium of Hall and Swan, S, it appears to me there would yet be an insurmountable culty against allowing to the defendant the benefit of an equity which he now claims. He received the goods from Hall and Swan; and, asJftready shown, was primarily bound to pay over the pfoc^F to them. Now, as between Moffat and Hall and Swan, the assignment is still good. Neither of them are at liberty to invalidate it; and as respects the defendant himself, he has taken no steps towards setting it aside—nor is he in a position to attack the same, on account of not having obtained a judgment against his debt- or. And so far from putting himself in the position of a judgment creditor, he appears to have been content to remain a creditor at large and to come in under the assignment for a dividend or dividends upon the terms which the debtor thought proper to prescribe. The defendant admits his never having disputed the validity of the assignment. Although the assignment may be void as to creditors generally, legal measures are still necessary on their part in order to avoid it; and he who does not join or concur in [126] proceedings for the purpose and takes no steps to place himself in a situation to receive a benefit from the debtor’s propertyf eXcept such as th,e latter chooses voluntarily to allow, must be deemed as acquiesing. So long as he does acquiesce he will be bound by any assignment or disposition the debt- or may have made of his property and, for this reason, the assignment from. Moffat to Hall and Swan may likewise be considered a valid assignment as respects the defendant Mr. Hone ; and as a- part of the assigned property has come to his hands .to be disposed of for the .purposes of the assignment, he cannot, in this collateral manner, set up a "claim or right to retain the property or its proceeds, in opposition to the title which it apparently confers. If, upon any principle, Mr. Hone, as a creditor at large, has a right of retainer or set-off, then, clearly, Mr. Swan, who is also a creditor of Moffats’, had.the same right: and, as between them in relation to the particular sum in question, Mr. Swan would have tfy/preference : because he was entitled to receive the money from Mr. Hone. Nor has Mr. Swan waived the right in favor of Mr. Hone. The prder which he.gave was for the payment of the money to thp Receiver ; .and not for the purpose of enabling him to compen* sate .or set off the debt owing to him by Moffat against tlm proceeds of the goods in his hands. In no view of the case has the defendant any right t^Btain or make the set off. There must be a decree payment the one thousand and sixty-eight, dollars, with interest and costs.