O'Doherty v. Toole

WRIGHT, C. J. The main questions raised by the record in this case are: (1) Had the appellant and creditor, under the general law, the right to pursue the property fraudulently conveyed by the debtor, in the hands of the vendee, without joining the executor of the deceased debtor? (2) If so, has the law of this territory contravened that right, or by it is the debt barred and the right lost, because the claim was not presented for allowance in the probate court within the 10 months allowed by said law? John O’Doherty, the appellant and creditor, had recovered judgment against James H. Toole, the husband of respondent, Louisa M. Toole, and one Hudson, during the life-time of said Toole, in the district court of Pima county, for about $3,800. The exact date of the judgment was May 29, 1884; the appel — 292 — lant having been a creditor of the said Toole some months prior to the date of the judgment. On the first day of November, 1882, Toole executed a deed to the respondent, his wife, whereby he deeded to her' certain premises in the city of Tucson, worth at the time probably $15,000. This was a voluntary conveyance, made in consideration of one dollar and love and affection; and the judge below, in his first conclusion of law, finds that the deed was fraudulent and void as to appellant, birt that it vested a good title in respondent, as to said Toole, his heirs, devisees, and assigns; and, in his second conclusion of law, he finds that respondent was and is estopped from denying that said deed was and is void as to the creditors of the said Toole. These findings or conclusions of law were undoubtedly correct. The evidence showed that, after Toole had executed this deed to his wife, the respondent, she and he suffered it to lie in a drawer, along with other papers of his, for nearly two years; that it was not recorded until two months after the assignment, in May, 1884; that during all that time the public, including' appellant, had no intimation whatever that the property had been deeded by Toole to his wife; that, on the contrary, Toole gave the property in to the assessor as his, during the years 1883 and 1884, and paid the taxes thereon during those years; that he continued to act towards the property in every respect as though it was his, thereby in a measure superinducing the deposits, by appellant and others, in the bank of Hudson & Co., and the consequent loss of their money. ' In a word, here was a case of actual fraud, and the court below so found. Now, the appellant was a judgment creditor of the said Toole; and his judgment having been regularly docketed, was and is a lien upon the property so conveyed by Toole to his wife, the respondent here; and while said property, by virtue of said conveyance, ceased to be a part of Toole’s estate, the deed being good between the parties thereto, it was and still is subject to the lien of appellant’s judgment. While, as the learned judge, below observed, it was fraudulent and void as to creditors, it was good as to Toole and his heirs and assigns. Appellant’s judgment, it was true, was a valid and subsisting claim also against the said Toole’s estate; and, until the expiration of the 10 months — 293 — allowed by statute for presenting claims, it might have been presented and allowed against said estate; but, because it was not thus presented and allowed, and is therefore forever barred as a claim against said estate, has the appellant lost his remedy against the property so fraudulently conveyed to respondent as aforesaid? Clearly not, we think. Indeed, we believe no' doctrine of equity is more generally and explicitly settled in this country by general law than that creditors may pursue property fraudulently conveyed into the hands of the vendee. This doctrine has come down from the old statute of 13 Eliz. An examination of the cases will show that the law has been settled, almost uniformly, in accordance with the spirit of that statute in all the states; and, while confined largely to the domain of chancery courts, its principles have generally obtained in courts of law; the main difference being that in the latter fraud must be proved, while in the former it is often presumed; in the one the chancellor stands upon the broad plains of conscience; in the other the judge may not go beyond certain stern and inflexible rules. It is the province of a court of conscience to tolerate no unclean thing. Honesty and fair dealing are the vitalizing currents of its healthy existence. He who would have others be honest, must be careful that he himself is not dishonest. Here no man is to be allowed to profit by his own wrong. He cannot rightfully ask that others keep their houses in order till he has dusted his own floors. As was said by Judge Bliss of the supreme court of Missouri, in McLaran v. Mead, 48 Mo. 115: ‘ ‘ The husband will not be permitted to hold property in the name of his wife, or withdraw it from the reach of his creditors, and give it to her, so as to shield it from execution.” In that ease reference is made to the strong case of Gault v. Saffin, 44 Pa. St. 307, where Judge Bead holds that a husband cannot fraudulently cover up his property through the agency of his wife; but that the same, when thus covered up, may be discovered by the creditors of the husband. To pursue property fraudulently conveyed by a testator in his life-time, it is not necessary to have the deed first set aside. The judgment creditor may go into a court of equity, and have a decree ordering the sale of the property to' satisfy his debt. And where there is a — 294 — voluntary conveyance by a husband to his wife of real estate, and such conveyance is not recorded, although the husband is insolvent; and the husband continues to act towards the property as though it were still his own, and thereby deceives his creditors to their injury,—a court of equity will set aside said conveyance as void, or grant other proper relief, at the instance of the creditors. See Fellows v. Smith, 40 Mich. 689; Lee v. Figg, 37 Cal. 328, 99 Am. Dec. 271; Lander v. Beers, 48 Cal. 546; Robinson’s Ex’r v. Robards, 15 Mo. 459; King v. Moon, 42 Mo. 551. Thus far, then, the court below was right in its findings that said deed from Toole to his wife was fraudulent and void as to the former’s creditors, and that the latter was estopped from denying that such was the case. We entertain no doubt, however, that the court was in error in deciding that the judgment creditor, the appellant here, having failed to present his judgment as a claim against Toole’s estate in the probate court of Pima county, within the 10 months allowed by the statutes of the territory, could not maintain this action because his claim was thereby forever barred as a claim against said estate. The nisi prius judge had already found as a fact, as alleged in the complaint, that the estate of Toole was wholly insolvent. No beneficial purpose, therefore, would have been subserved by presenting appellant’s judgment claim against it; the real estate conveyed by Toole to his wife, as we have already observed, having ceased to be a part of his estate. We repeat, it is true that the appellant, having failed to present his judgment claim against Toole’s estate within the 10 months allowed by statute, it became thereby forever barred as a claim against said estate; that is, the appellant lost his remedy to collect his debt against the estate proper. In construing statutes of limitation appertaining to various subjects, and found in different parts of the general body of laws, reference should always be had to the object designed to be- accomplished in fixing each period of limitation. This period of limitation for presenting claims against an estate is brief,—purposely made so by the legislature. The object of administration is to pay off the debts and wind up the estate of the deceased, that the heir may not be long delayed in coming to his inheritance. — 295 — But would it not be unreasonable, and even unjust, to infer that, because forsooth the law-making department of the government had provided for the speedy transmission of estates from ancestors to descendants, it thereby became, in effect, the coadjutor of fraud, by contravening the well-established rules of equity, and by enabling a fraudulent dead man, through his representatives, to do what a dishonest live one could not do % Clearly so; unless, possibly, the estate would suffer injury or the heirs incur loss, neither of which events could happen; for we have seen that the conveyance, though fraudulent, was good between the parties, and the property, by virtue thereof, ceased to be a part of Toole’s estate; and his heirs, devisees, and assigns, being privy with him, are bound by his conveyance. Toole, if living, could not question the lien of appellant’s judgment upon the property which he had fraudulently conveyed. Ought his representatives to be allowed to do so % True, as we say, by his fraudulent deed, Toole and his legal representatives were and are absolutely concluded, and the property it conveyed has become foreign to his estate; but it is also equally as true that appellant’s judgment was and is a specific lien upon that property in the hands of respondent. Hence it is difficult to see how the court below arrived at the conclusion that, because appellant had failed to present his judgment claim against Toole’s estate within the statutory period, this action which seeks to subject that property to the payment of his debt could not be maintained. The learned counsel for the respondent contends that the court below did not find, as a fact, that the deed from Toole to his wife was made with intent to defraud creditors. The record does not bear out this claim. In the seventh finding of fact by the court below this language is used: “Said deed was made to provide against the hazards and contingencies of the banking business, and for the purpose of hindering and delaying the creditors of Hudson & Co.” Toole himself was the “Co.” We are entirely satisfied that the conduct of Toole and his grantee, the respondent here, contemporaneously with and after the execution of this deed, was such as fully warranted the judge below in finding actual fraud; — 296 — such as rendered it null and void both as to existing and subsequent creditors. Counsel relies upon the late case of Bittinger v. Kasten, (Ill.) 19 Reporter, 299. But that is by no means a parallel case. There the complaint did not allege insolvency on the part of Kasten, nor that he was indebted, beyond the plaintiff’s claim, at the time of making the deed to his wife; neither did the court find that his subsequent conduct was fraudulent, nor that the conveyance was made to provide against any financial hazard, or was not recorded; but it was admitted that the property was conveyed by the defendant to his wife as a reasonable provision for her. The court below and the appellate court seemed to have been satisfied of the good faith of the parties, and that the defendant, by having the property deeded to his wife, did not intend to delay or defraud his creditors. In other words, there was no actual fraud. But the learned counsel for respondent contends that the executor of Toole’s estate should have been requested and that he was the proper party to have brought the suit to have the fraudulent deed of his testator set aside, and the property revested in the estate as assets. Comp. Laws 1877, c. 29, §§ 202, 203, do give the executor or administrator the right, when the assets are not sufficient to pay the debts of the estate, to bring suit to set aside a fraudulent conveyance of the testator or intestate; and this for the sole purpose of paying the creditors’ claims; but it does not say, and it surely does not mean, that the 'executor or administrator is the only party that has that right. Instead of being restrictive, was not this statute designed to aid the creditor, by conferring upon the executor or administrator of the fraudulent grantor the right to bring suit to set aside the fraudulent deed of such grantor, that the property thereby conveyed might be subjected to the payment of the creditor’s debt? And does it not apply more particularly to general creditors, rather than to those creditors having specific liens? Did the conferring of a cumulative legal remedy, without words of divestiture, ever take- away an equitable right? Because the statute says the executor may, does it mean that the judgment cred — 297 — itor himself shall not pursue the property fraudulently conveyed ? The territorial law confers this additional statutory right; but it does not take away the well-established equitable remedy. The legislature simply made that statutory which was already within the clearly defined rules of equity; but it certainly did not mean that, to that extent, there should be no equitable remedy in the creditor. The utmost construction of which we think this statute would admit would be that the remedy is cumulative and concurrent with that of the general creditor. The administrator, in those states where the right is by statute conferred upon him, is certainly not a necessary party to a suit to subject property, fraudulently conveyed by his intestate, to the payment of the debt of a judgment creditor. See Merry v. Fremon, 44 Mo. 518; Zoll v. Soper, 75 Mo. 460; Hagan v. Walker, 20 Curt. Dec. 17; Morris v. Morris, 5 Mich. 180; Hills v. Sherwood, 48 Cal. 393. The horn-books clearly support this view. Mr. Wait, in' his admirable work on Fraudulent Conveyances, at page 177, § 113, uses this language: “The legislation, clothing personal representatives with the power to appeal to the court to annul covenous alienations made by the deceased, is highly salutary in practice. The concurrent right of the creditor to seek redress is also of the utmost importance; for the personal representative is usually selected by, or is a near relative of, the deceased, and may in some cases be prompted by motives of friendship or self-interest to shield the parties who have depleted the estate, and in some instances is himself the fraudulent alienee.” See, also, page 175, § 112. Also, Bump. Fraud. Conv. (3d Ed.) 548. It is ordered that the judgment of the county court be reversed, and the cause remanded to the district court of Pima county, with directions to enter up judgment in favor of appellant, and against respondent, declaring said deed by James H. Toole to his wife, the respondent here, fraudulent and void as to creditors, including appellant, and ordering the property conveyed by said deed to be sold by the sheriff of said county, and the proceeds, after payment of costs of sale, devoted to the payment of appellant’s debt; and for interest and costs of both suits. If there should be a — 298 — surplus remaining over, it should be paid over to Mrs. Toole, the respondent; who will hold it, however, subject to the claims of other creditors of her husband, James H. Toole, should there be any. BARNES, J. By the probate act it is provided that, “if a claim be not presented within 10 months after the first publication of the notice, it shall be forever barred.” Comp. Laws, 1647. This provision is borrowed from the statutes of California, where it has received judicial construction. In Fallon v. Butler, 21 Cal. 24, 81 Am. Dec. 140, it was held that a mortgage upon real estate may be foreclosed by action against the administrator, although the debt has not been presented as a claim against the estate and allowed, where the only object is to reach the property mortgaged, and no judgment is asked against the estate. In that ease the court holds that the term “claims” in the probate court act “only has reference to such debts or demands as might have been enforced against him [intestate] by personal action for the recovery of money, and upon which only a money judgment could have been rendered.” “In this sense a mortgage lien is not a claim against the estate.” This ease is approved in Pechaud v. Rinquet, 21 Cal. 76; Willis v. Farley, 24 Cal. 498; Orr’s Estate, 29 Cal. 104, and Brown v. Orr, 29 Cal. 122. However, in Ellis v. Polhemus, 27 Cal. 350, the court held the word “claim” to be broad enough to embrace a mortgage or any other lien. In Christy v. Dana, 34 Cal. 553, foreclosure was sought against property conveyed by decedent in his life-time. The court held that it was not barred because not presented against estate of decedent, “as intestate at the time of his death had no interest in the land.” In Sichel v. Carrillo, 42 Cal. 505, mortgage by a wife on her separate property, to secure note of the husband, was sought to be foreclosed, and it was held not to be barred by failure to present claim against the estate of husband. In Schadt v. Heppe, 45 Cal. 433, foreclosure was sought against property set apart to widow as a homestead. The claim was not presented, and it was held not to be barred, as “the estate has no interest whatever in the property mortgaged.” In Pittee v. Shipley, 46 Cal. 154, the question arose squarely, — 299 — and the court held that a mortgage upon property which becomes general assets of the estate is barred if the claim is not presented within 10 months. In the case at bar a judgment had ripened into a lien in the life-time of intestate. After his death the widow asserted title under an unrecorded deed, which is held to be fraudulent as against creditors. This deed is binding upon intestate and his heirs, but is voidable as to creditors. The property is not a general asset of the estate; hence the cases above cited (Christy v. Dana, Sichel v. Carrillo, and Schadt v. Heppe) must govern. This suit to enforce that judgment lien, and no more, and as the mortgage is sought to be foreclosed against the estate, may be maintained. For these reasons I concur in the decision of this case. PORTER, J.—I concur in the judgment of affirmance.