Kitchell v. Jackson

SOMERVILLE, J. The question presented is, whether the gra/ntee in a fraudulent eonveycmce is cha/rgedble with the rents [561] of the real estate, which has been conveyed to him, the conveyance under which he holds having been declared void for actual fraud, on bill filed by creditors of the grantor. Where the grantee holds under a secret trust for the benefit of the grantor, it is every where conceded that he would be chargeable. A distinction was made, however, in Marshall v. Croom, 60 Ala. 121, exempting from the operation of this principle the case of a mere fraudulent vendee, who holds under a conveyance, which was intended to vest in him the legal title and beneficial use of the property conveyed. We are asked to review the correctness of this rule as thus declared in this case. We have given the subject a careful consideration, and are of opinion that this case does not announce the sounder and better doctrine, and ought to be overruled. It is true that there are some forcible reasons in favor of the principle as it is there stated, which have induced its adoption by the highest courts of some of our sister States.—Robinson v. Stewart, 10 N. Y. 189; Simpson v. Simpson, 7 Hump. (Tenn.) 275. But we are clear in the conviction that the opposite doctrine is not only favored by a sound and controlling public policy, but is sustained by a current of authorities which are rapidly approaching comparative unanimity. The obvious reason is, that a conveyance infected with actual-, as distinguished from constructive fraud, is void as to the creditors of the grantor, in all eases where the grantee participates in the fraudulent intent of the grantor. It is the policy of the law to discourage fraud in all of its phases, and especially actual fraud, which involves an intent criminal in its nature, always difficult of detection, furtive in its artifices, and damaging in the dishonesty of its consequences. It is the universal maxim of the law, as it is of common honesty, that no one shall be permitted to build a legal right upon the basis, of a legal wrong — that actual fraud can be the source and origin of no right which will be recognized by law. Hence, the rule is that a fraudulent grantee must forfeit every right, legal and equitable, sought to be derived from the fraudulent conveyance, when the courts have once stamped on it the imprimatu/r of their condemnation, declaring it void because of its being infected with fraud. It has been well said “ that there is no instance of any reimbursement or indemnity afforded by a court of equity to a pc/rticeps criminis in a case of positive fraud.”—Bump on Fraud. Con. (3d EcL) 613. This principle was applied in Stapler v. Hurt's Ex'rs, 16 Ala. 799, 805-6, so as to hold the fraudulent grantee liable for the hire of certain slaves, from the time he obtained possession of them. The theory of the law in all such cases is, that the fraudulent grantee must be considered as a 'trustee 'of the rents and [562] profits, as well as of the corpus of the property itself, inasmuch as he acquired them through his own fraud, and that he, therefore, holds them in the right, and for the benefit of the attacking creditors. In Bean, v. Smith, 2 Mason, 252, Mr. Justice Story adjudged the fraudulent grantee to be chargeable with rents of lands declared to have been fraudulently conveyed to him, observing: “ The principle is not new that a party who' obtains an estate in fraud of the rights of another, shall be held the trustee of him whom he has defrauded. The doctrine has been applied even to those who claim as innocent parties, where it is directly through the fraud, without any intervening acts or considerations of their own; for it is against conscience that one person should hold a benefit derived through the fraud of' another.” “If the precedent were to be made for the first time,” he adds, “ I should have no difiBcutly in holding this doctrine upon the eternal principles of justice and morality.” The same rule was adopted by Judge Marshall in Backhouse v. Jett, 1 Brock. 500, where all the English authorities are reviewed with that great clearness and discrimination which ever characterize the decisions of this learned jurist. The liability was held to run from the time of demand made by the creditor, which was held to be from the date of the filing of the bill. We need not consume time in reviewing the numerous American authorities holding the same doctrine. These are collated by Mr. Bump in his work on Fraudulent Conveyances; and we are of opinion that they are almost unanimous in support of the conclusion we have above announced. — Bump on Fraud. Con. (3d Ed.) 612, note 1; Jones v. McLeod, 61 Ga. 602; Sands v. Codwise, 4 John. 536; Brown v. McDonald, 1 Hill (S. C.), Ch. 297; Strike v. McDonald, 1 Bland (Md.), 57; Ringgold v. Waggoner, 14 Ark. 69; Kipp v. Hanna, 2 Bland (Md.), 26; 1 Freeman on Judg. § 352. As to the time from which the rents or profits should be estimated, there is a conflict in the adjudged cases. We prefer the rule adopted in Pharis v. Leachman, 20 Ala. 662, 687, where they were allowed only from the service of the summons on the fraudulent grantee — which, strictly speaking, is the true time of the demand on him for the rents. In Backhouse, Adm’r v. Jett’s Adm’r. 1 Brock. 500, the conclusion reached by Judge Marshall, after a full discussion of this particular point, was, that the account should be taken, not from the time of acquiring possession, but from the time of the demand, which he construed to be from the filing of the bill. In the case of fraudulent conveyances, as distinguished from mere secret trusts, at least, this seems the better rule, with the limitation we have above suggested, as followed in Pharis v. Leachman, supra. [563] TJnder these views, the court erred in refusing to decree to complainant the rents received by the Planters’ and Merchants’ Mutual Insurance Company from the “Home place,” which is described in the pleadings. They are chargeable for such rents from the time of the service of the summons on them, giving notice of the demand made by the complainant. The taxing of the costs was a matter within the wise and ■ just discretion of the chancellor, and is a matter not revisable in the appellate court. — Code, § 3900; 1 Brick. Dig. 733, § 1374. The decree of the chancellor is reversed, and the cause remanded, that the proper account may be ordered by the chancellor to be taken by the register.