Mountain v. Whitman

HEAD, J. Bill to set aside conveyance of land as a fraud upon subsequent, as well as existing, creditors of the grantor, and to condemn the land to the payment of the demand of complainant, a subsequent creditor. The appeal is by the defendants, Mountain and others, from a decretal order of the chancellor overruling demurrers to the bill. The objection pressed upon us is, that the bill does not set forth the facts constituting the alleged fraud with sufficient precision. The allegations are, substantially, as follows : That the conveyance was made by the debtor, when he was financially embarrassed, for the purpose of hindering, delaying or defrauding his creditors, and in order to place the land beyond the reach of his then creditors, and also beyond the reach of those to whom he might subsequently become indebted, and it was accepted by the grantee with full knowledge or notice of that intention ; that it was executed and delivered under a collusive agreement or understanding between the grantor and grantee, that it should be kept secret from the world until the grantor, or his firm, Mountain & Sons, of which he was a member, should become unable to further carry on their business, in which they were then engaged, and that it should be recorded in time to prevent the property conveyed from being subjected to the honest debts of the grantor, or of his said firm. [634] That the grantee, pursuant to some other fraudulent arrangement, withheld the conveyance from record from the time of its execution, December 22, 1891, until June 27, 1892, when the same was recorded. The grantor retained the possession and apparent ownership of the property until after the complainant’s debt accrued. We have omitted, in this statement, the averment that the deed was withheld from record pursuant to the said collusive agreement above stated, for the reason, that it is alleged in the alternative with, and overcome by, the averment, less favorable to the complainant, that it was withheld pursuant to some other fraudulent arrangement. If the bill had stopped here, we think it would have been sufficient. The statute is, that all conveyances &c. made with intent to hinder, delay or defraud creditors &c. are void. It is the fraudulent intent, inducing the execution of the conveyance, which avoids it, without regard to whether or not the act and intent are followed up by acts fraudulently agreed to be thereafter done, for the purpose of actually producing hindrance or delay to the creditor. Thus, if the conveyance was executed with the fraudulent agreement as alleged, the vitiating influence of the agreement would not be obviated by the fact that the'instrument was thereafter withheld from the record pursuant to some other fraudulent agreement not specified. But the bill does not stop with this. It proceeds to allege, in the alternative, to the effect, that if the foregoing facts are not true, the complainant “charges that said conveyance was made and delivered under some other collusive agreement” between the grantor and grantee, whereby the grantor “reserved a substantial benefit in said property which could not be subjected to the payment of his debts.” The sufficiency of the bill then, if considered, should be tested by the last alternative ; the well known rule in pleading of this kind, being, that if either alternative is bad the whole pleading is bad. The insufficiency of the last alternative is obvious. It .should have been stated what the collusive agreement was, and described definitely the benefit reserved. But, .as the complainant’s pleading is bad, so, also, do we find the respondent’s. The demurrers do not raise the objection now insisted upon. It can not be seriously insisted that the first nine grounds of demurrer raise the objection, or, indeed, that they raise any objection of merit to [635] the bill, in any particular. Do the 10 th and 11th grounds, or either, raise it? Clearly not. The 10th simply demurs that the bill, does not show how or in what manner the conveyance tended to hinder or delay the creditors existing or subsequent of the grantor. This is a mistake. The execution of the deed itself is the act which tends to hinder or delay the creditor. As to existing creditors every conveyance of his property by one not having sufficient property or means to pay his debts, has that tendency. It is void, however, only when voluntary, or the fact of execution has imparted to it. the corrupt intent that it shall produce that effect, or some benefit is reserved. If infected with actually fraudulent intent, it is void also as to subsequent creditors, and the law imputes it to the effect of hindering or delaying them. The bill does, after a manner, allege actual fraud. The allegations, it is true, are defective, on a good demurrer. They will support relief, however, iu the absence of demurrer. The present demurrer does not touch the allegations of fraud. The 11 tli ground is simply a general objection that no fraud is shown. General demurrers are not allowed in our system of pleading. Affirmed.