Forrester v. Hanaway

Mr. Justice Mercur delivered the opinion of the court, October 9th 1876. This was an action of ejectment. It was referred under the Act of 6th April 1869, Pamph. L. 725, and its several supplements. The main facts found by the referee are substantially these: Merrifield sold the lands in question by two written contracts to McNamara. The first contract was executed in May 1869 in consideration of $350, to be paid for the land therein described; $44 thereof to be paid down and the residue in five equal annual payments with interest. The other contract was for a lot, adjoining the former, and was executed in June 1869. It stipulated for the payment of $300, of which $50 was to be paid down, and the residue in five equal annual payments with interest. The $50 down payment was made on the last contract; but no other payment had been made on either contract. McNamara entered into possession of both lots, erected buildings, and made improvements thereon, to the value of from $2000 to $3000. He continued in possession until 16th December 1871. At this time the amount unpaid on both contracts was about $693. In January 1871 the creditors of McNamara began to enter judgments against him. They became liens on his equitable interest in the lands. Before the 1st of October following these liens exceeded [223] $3000. In May 1871, a fi. fa. was issued on one of these judgment liens and the land was levied on. An inquest was held and the land condemned. In November 1871, a vend. exp. was issued, and the land duly advertised to be sold on the 16th December following. All these facts were known to Merrifield. Yet with a full knowledge thereof, on the 15th December, being one day preceding the intended sheriff’s sale, he and McNamara entered into a written agreement by which an action of ejectment for the lands was commenced, judgment confessed in favor of Merrifield with leave to issue a writ of habere facias, and the writ was issued on the same day. On the next day, the writ was executed by giving possession to Merrifield. By deed dated the same day and acknowledged two days thereafter, Merrifield, for the consideration of $699 therein recited, conveyed the lands to the defendant in error. When the lands were exposed at sheriff’s sale on the 16th December notice was given by Merrifield of his recovery in ejectment, and that possession had been given to him in pursuance thereof. Thereupon the writ of vend. exp. was stayed by the plaintiff in the execution. An alias vend. exp. was subsequently issued on which the land was duly sold on the 10th February 1872 to the plaintiff in error. A deed therefor was duly executed, acknowledged and delivered to him. The purchase by the defendant from Merrifield was not on a good and valuable consideration. The defendant did not know either Merrifield, McNamara, nor the land. He never paid anything for the land and knew nothing about it. • C. Smith, Esq., paid the money to Merrifield. Smith called on the defendant and requested “the use of his name to hold in trust for some one.” The name of that “ some one” does not appear to have been proved. The referee therefore found that the defendant “holds the title as a ■naked trustee for a nameless cestui que trust.” The plaintiff requested the referee to find that the judgment confessed in ejectment was entered into by the parties thereto, for the purpose of defrauding the judgment creditors of McNamara; also that the judgment confessed was void as to the creditors intended to be defrauded. The referee refused to find as requested; but says he “ has found all the facts in his general finding, and is of the opinion that the law, when applied to those facts, does not constitute fraud on the part of Merrifield that would avoid his judgment in ejectment.” He therefore found for the defendant. The court confirmed the finding and entered judgment. The correctness of the referee’s conclusion of law is the important question in the case. The controversy is between the purchaser at sheriff’s sale of McNamara’s equitable estate, and one who acquired a conveyance from Merrifield in the manner stated. The defendant stands on no higher ground than Merrifield occupied. Did the latter then recover the [224] land in such a manner as to successfully remove all McNamara’s equitable estate out of the reach of his lien creditors ? It is true, where liens are entered against an equitable estate, their value depends on that estate, and they survive or perish with it: Campbell et al.’s Appeal, 12 Casey 247. Such a lien creditor runs the risk of the estate of his debtor being recovered by the holder of the legal title by means of a fair and usual proceeding at law. He has a right, however, to claim protection against a fraudulent combination to divest the lien of his judgment: Stahle v. Spohn, 8 S. & R. 317. The facts found by the referee show McNamara had an estate worth some $2000 beyond the unpaid purchase-money. Some of that money was not yet due. A part of it was payable about two and a half years thereafter. He was entitled to a conditional verdict to secure him in that further time. We may assume the judgment creditor had knowledge, either actual or constructive, of the written contracts. He then knew that some of the instalments were past due; but he also knew others were payable at future times. He was on the eve of selling the equitable estate, so that the purchaser thereof might, with safety, pay the purchase-money due on the legal title. If an action of ejectment then commenced had been suffered to take its regular course, ending in a conditional verdict, or if the confession of judgment had stipulated for a payment at some future time, as in Damon v. Bache, 5 P. F. Smith 67, the rights of the lien creditor, and the purchaser under the same, .as well as the rights of Merrifield, could have been duly protected and enforced. The agreement between the owners of the legal and the equitable title, by which the latter was given up, is designated by the referee as “ very sharp practice, indeed.” It was, in fact, not only a change of the contract, so as to make instalments, payable in the future, due at once ; but also to yield up, for no consideration, an estate of large value, an estate then in the grasp of McNamara’s creditors, and the proceeds of which they were entitled to receive. This case must not be confounded with that class of cases in which it has been held that one creditor may be preferred by a confession of judgment; although it be done with the design and effect of removing the property from the reach of another creditor, equally meritorious. In those cases the injury to one is an incident necessarily flowing from the legal protection of the other, who could not otherwise be protected. It is where the estate is insufficient to protect both creditors. In this case Merrifield needed no additional protection. He was already fully secured. A sale of the equitable estate in no wise affected his legal title: Canon v. Campbell, 10 Casey 309; nor his remedy to enforce payment by ejectment. During the impending sheriff’s sale, and with unusual haste, the agreements as to the times of payment were changed; the judg [225] ment was confessed; the whole estate of McNamara was relinquished ; the writ of possession was issued and executed. Immediately thereafter, the land was professedly sold for about the amount due for the legal title, being one-fourth its just value, and a conveyance thereof made to a trustee for some unknown person. Who was to permanently enjoy the benefits of the value of the estate, thus wrested from McNamara’s creditors, the evidence fails to disclose. If Merrifield received no more than the consideration recited in his deed to the defendant in error, they were not enjoyed by him, but by some “ unknown person.” All the facts proved, naturally lead the mind to the conclusion that the primary object of the arrangement was to remove the estate of McNamara out of the reach of' his lien creditors. If the conclusiveness claimed for that judgment by the defendant in error be given to it, such will be its undoubted effect. As every sane person is presumed to intend the natural and probable consequence of his own deliberate act, it follows that the facts found prove such to have been the intent. They prove a constructive fraud on the lien creditors of McNamara. In its effect this is tantamount to actual fraud, and the policy of the law makes the act illegal: McKibbin v. Martin, 14 P. F. Smith 352. Legal fraud, where the facts are ascertained, is for the court: Dornick v. Keichenback, 10 S. & R. 90. Possession then having been obtained by the holder of the legal title under circumstances which we must declare a fraud on the lien creditors of McNamara, it follows that the purchaser at sheriff’s sale is entitled to recover that possession from the defendant in error, without making a tender prior to bringing ejectment: Harris v. Bell, 10 S. & R. 39; Grigg v. Patterson, 9 W. & S. 208; Heft v. McGill, 3 Barr 256; Ives v. Trors, 5 Id. 121; D’Arras v. Keyser, 3 Casey 240. We think therefore the able referee and learned judge erred in their conclusions of law, and the assignments are sustained. Judgment reversed and a procedendo awarded.