Bertrand v. Elder

Mr. Justice CohptoN delivered the opinion of the court. On the 23d of November, 1848, George O. Watkins, who was then the owner of lots 8 and 9 in block 35, of the city of Little Bock, sold them to David Bender for $2500 00, and executed to him a bond for title. The purchase money having been paid, Watkins and wife, by deed dated the 15th of April, 1852, conveyed the lots to Mrs. Charlotte Bender, the wife of David Bender. The deed was thus made at the request of the husband, and though it recites the payment of the purchase money as having been made by Mrs. Bender, the testimony abundantly shows that it was in fact paid by the husband, and that the conveyance to the wife was voluntary. At the time the deed was made, Bender was indebted to St. Johns’ College, in the sum of $500 00, by bond dated the 24th of March, 1852, due twelve months after that- date, and on which judgment was recovered against him on the 14th of July, 1857, for $659 50, with cost of suit. Under an execution issued on this judgment, the lots were sold by the sheriff at public sale, on the 3d of May, 1858, and Charles P. Bertrand became the purchaser. Mrs. Bender died on the 30th of November, 1857, without children by Bender, but having Marcus M. Elder, a son and only heir hy a former husband, her surviving, who claimed the lots as her sole heir, and who, soon afterward, instituted an action of ejectment for their recovery, and obtained judgment by default. Bertrand then exhibited the bill in this case to have the title set up by Bender declared invalid, and his own established and quieted; and the question submitted to us, on appeal to this court, is, whether, under the circumstances developed in the record, the voluntary conveyance to the wife can be sustained against Bertrand, he having purchased the premises at execution sale under a judgment against the husband at the suit of an existing creditor. There is some diversity of judicial opinion touching the rights of creditors, where a voluntary disposition of property has been made by the debtor. The counsel for Bertrand relies on Reade vs. Livingston, 3 Johns. Ch. Rep. 479, which was a voluntary settlement by the husband of property upon the wife, and in which Chancellor Kent held, that the voluntary conveyance of a party indebted at the time of its execution is presumed to be fraudulent with reference to the claim of an existing creditor, and that such presumption is an inference of law, not open to explanation, and which rto circumstances will be permitted to repel. He says : “The conclusion to be drawn from the cases is, that if the party be indebted at the time oí the voluntary-settlement, it is presumed to be fraudulent in respect to such debts, and no circumstances will permit those debts to be affected by the settlement, or repel the legal -presumption of fraud. The presumption of law in this case does not depend upon the amount of the debts, or the extent of the property in settlement, or the circumstances of the party. There is no such lino of distinction set up or traced in any of the cases. The attempt would be embarassing, if not dangerous to the rights of creditors, and prove an inlet to fraud. The law has, therefore, wisely disabled the debtor from* making any voluntary settlement of his estate, to stand m the way of existing debts.” Though the decision in this case is not unsupported, the decided preponderance of authority, both in this country, and in England, is against it, and establishes a rule less rigid, and, in our opinion, more consistent with a sound interpretation of the statute of frauds. In Hinds's Lessee vs. Longworth, 11 Whea. 213, the voluntary conveyance of certain real estate by Thomas Doyle, to his son, was sought to be set aside by persons claiming as judgment creditors upon antecedent debts; and the rule, as now firmly established in the Supreme Court of the United States, was laid down in the following language : “A deed from a parent to a child, for the consideration of love and affection, is not absolutely void as against creditors. It may be so under certain circumstances; but the mere fact of being in debt to a small amount, would not make the deed fraudulent, if it could be shown that the grantor was in prosperous circumstances and unembarrassed, and that the gift to the child was a reasonable provision according to his state and condition in life, and leaving enough for the payment of the debts of the grantor. The want of a valuable consideration may be a badge of fraud, but it is only presumptive,' and not .conclusive evidence of it, and may be met and rebutted by evidence on the other side.” Chief Justice Maeshall, in Hopkirk vs. Randolph et al., 2 Brock. refused to set aside tlie voluntary conveyance of a father to his daughter, as fraudulent, though the father was indebted at the time of the conveyance, it appearing that his fortune was ample, and the gift to the daughter comparatively trivial. Commenting on the statute against fraudulent conveyances, he said : “Hut as this intent” (to hinder and delay creditors) “ is concealed within the bosom of the actors, it would be the duty of the court to infer it from the character of the transaction and as the equity of the creditors is generally stronger than that of mere volunteers, the court ought to lean to the side of the creditor, and to consider every gift or voluntary conveyance as coming within the statute, the fairness of which was not conclusively proved. Even independent of the statute, gifts or voluntary conveyances, which obviously defeated the claim of a creditor, would be considered as fraudulent, so far as regarded him. The donee, therefore, would always be required to prove the fairness of his title. If he be not a purchaser for a valuable consideration, it would be incumbent on him to show a case, not only without taint, but free'from suspicion. If the circumstances of the gift be such that, accord ingto any reasonable probability, it might originate-in any impure motive, or might, in fact, prove injurious to creditors, by withdrawing a subject to which they had just pretensions, the fair construction of the act would comprehend it. But a construction which should, under all circumstances, comprehend every gift, merely because it was voluntary, might derange the ordinary course of society, and produce much greater injustice than it would prevent.” And in another'part of the opinion, referring to Sexton vs. Wheaton, 8 Wheat. 229, a case in which the chief justice himself delivered the opinion of the court, he remarked: “ The Supreme Court of the United States has said ‘ that in construing the statute of the 13th Eliz., courts have con sidered every conveyance, not made on consideration deemed valuable in law, as void against previous creditors.’ This is a general proposition concerning the extent of the English decisions, not a decision of the court itself declaring that every gift, however trivial, is at any distance of time, and under any circumstances to be avoided by a creditor. ■* * The general proposition was all which could be in the mind of the court, since the case was one of a subsequent purchaser, and did not lead to any minute investigation of the distinctions which might possibly exist in cases of gifts made by persons indebted at the time.” But whatever doubt might have been entertained as to the doctrine in that court, growing out of the expression of the chief justice in Sexton vs. Wheaton, none lias existed since the subsequent decision in Hendés Lessee vs. Longworth, from which we have above quoted. In Salmon vs. Bennett, 1 Con. 525, a conveyance to a child in consideration of natural love and affection, made without fraudulent intent, at a time when the grantor was free from embarrassment, the gift constituting but a small part of his estate, and being a reasonable provision for the child, was held valid against an existing creditor. In this case, it was said by Swift, Oh. J.: “Where there is no actual fraudulent intent, and a voluntary conveyance is made to a child in consideration of love and affection, if the grantor is in prosperous circumstances, unencumbered, and not considerably indebted, and the gift is a reasonable provision for the child according to his state and condition in life, comprehending but a small portion of his estate, leaving ample funds unencumbered for the payment of the grantor’s debts, then such conveyance will be valid against creditors existing at the time. But though there be no fraudulent intent, yet if the grantor was considerably indebted and embarrassed at the time, and on the eve of bankruptcy; or if the value of the gift be unreasonable, considering the condition in life of the grantor disproportioned to his property, and leaving a scanty provision for the payment of his debts, then such conveyance will be void as to creditors.” Anri per Gould, J.: “Evidence of indebtedness at the time at least, and, as I conceive, of indebtedness amounting, or approximating to embarrassment, must be shown. For, if any degree of indebtedness, however small, would defeat such conveyance ; they would, virtually, b&per se fraudulent; since no individnl, perhaps, or, at least, hardly any one, in the community, is at any time absolutely free from debt.” The decision in Reads vs. Livingston; has not been followed in New York. O.n the contrary, by a series of subsequent adjudications in the highest courts of that State, the rule that a conveyance, or settlement, in consideration of blood and affection, by one indebted at the time, is prima facie only, and not conclusively fraudulei t, is now well settled. Seward vs. Jackson, 8 Cow. 406; Jackson vs. Town, 4 Cow. 599; Van Wyck vs. Seward, 6 Paige, 62 ; Bank of the United States vs. Housman, Ib. 526. The same doctrine prevails in Maryland, Kentucky, Tennessee and South Carolina. Williams et al. vs. Banks, 11 Mary. Rep. 198; Atkins vs. Phillips, 1 Mary. Ch. Rep. 507; Worthington et al vs. Shipley, 5 Gill 449; Taylor vs. Eubank, 3 A. K. Marsh. 239, 241; Burkey vs. Self et al., 4 Sneed, 121; Jacks vs. Tanno, 3 Dessaus. 1. It was also decided in the High Court of Chancery, and in the Supreme Court of Maryland, that when the indebtedness of the grantor, and the voluntary character of the deed are established — the deed being then deemed prima facie fraudulent — the onus is on the party claiming under the deed to show, affirmatively, the circumstances which shall repel the presumption of fraud thus raised. Sewell vs. Baxter and wife, 2 Mary. Ch. Dec. 447; Bullet vs. Worthington, 3 Ib. 99; Williams et al. vs. Banks, 11 Mary. Rep. 198. In Bullett vs. Worthington, supra, Chancellor Johnson said “ The party who sets up a voluntary conveyance in opposition to the claims oí pre-existing creditors, is required to show, by evidence which leaves no reasonable doubt upon the subject, that the means of the grantor, independent of the property conveyed, are abundantly ample to satisfy them all. If there be a reasonable doubt of the adequacy of his means, or if his property be so circumstanced, that delays, difficulties and expense must be encountered before it can be made available to his creditors, then, as I conceive, the voluntary conveyance must fall, because then it has the effect to hinder and delay his creditors.” These remarks of the chancellor wore quoted with approbation by the Supreme Court in Williams et al., vs. Banks, supra, and the principles asserted, re-affirmed. In Dodd vs. McCraw, 3 Eng. 83, JohnsoN, C. J., said: ‘‘The mere fact of an existing indebtedness, does not render, a voluntary conveyance absolutely fraudulent or void in law, as against the creditors whose debts were previously contracted, if‘there was no intention on the part of the- grantor to delay or defraud liis creditors.” Though the deed in that case was assailed by a subsequent creditor, Van Wyole vs. Seward and Salmon vs. Bennett were relied on as authority, and the case may be fairly regarded as, at least, indicating the opinion of the Chief Justice upon the point now before the court. It may be remarked, without attempting a review of the conflicting cases in England, that the latest decisions there do not sanction the rigorous doctrine of Chancellor Kent, in lieade vs. Livmgston. In a case precisely in point, it was said: “ There has been a little exaggeration in the arguments on both sides, as to the principle on which the court acts in such cases as these : on one side it has been assumed that the existence of any debts at the time of the execution of the deed, would be such evidence of a fraudulent intention as to induce the court to set aside a voluntary conveyance, and oblige the -court to do so under the statute of Elizabeth. I cannot think the real and just construction of the statute warrants that proposition, because there is scarcely any man who can avoid being indebted to some amount: he 'may intend to pay every debt as soon as it is contracted, and constantly use his best endeavors, and have ample means to do so, and yet may be frequently, if not always, indebted in some small sum. There may be a withholding of claims, contrary to his intention, by which he is kept indebted in spite of himself: it would be idle to allege this as the least foundation for assuming fraud or any bad intention. On the other hand, it is said that something amounting to insolvency must be proved to set aside a voluntary conveyance: this, too, is inconsistent with the principle of the act, and with the judgments of tbe most eminent judges” — Per Lord LaNgkdale, in Townsend vs. Westacott, 2 Beavan, 345. In tbe subsequent case of Gale vs. Williamson, 8 Mees. &. Wels. 409, determined in tbe Exchequer, tbe same principle was decided. Rolfe, BaRON, at page 410, says: “ It is a mistake to suppose tbat tbe statute makes void, as against creditors, all voluntary deeds. All tbat it says is, tbat tbe practice, of making covinous and fraudulent deeds bad prevailed, and, therefore, all feoffments, gifts, etc., of any lands or goods and chattels, as against tbe persons whose actions, debts, etc., by such covinous and fraudulent devices and practices, shall be disturbed, hindered, delayed or defrauded, shall be void. . Tbe courts, in construing tbe statute, have held it to include deeds made without consideration, as being prima faeie fraudulent, because necessarily tending to delay creditors. But tbe question in oach case is, whether tbe deed is fraudulent or not; and to rebut tire presumption of fraud, the party is surely at liberty to give in evidence all tbe circumstances of the transaction.” Tbe principle, as we apprehend, to be extracted from the decisions in England and America, is, tbat tbe voluntary comveyance of a party to bis wife or child, though be be indebted at tbe time, is prima faeie only, and not conclusively fraudulent, in respect to tbe claim of an existing creditor, and that tbe presumption thus raised may be met and repelled by proof on tbe other side. The question of fraud must depend on all tbe circumstances of .the case, looking to tbe state and condition of tbe grantor, tbe extent of tbe property conveyed, and the direct tendency of the conveyance respecting the claims of creditors. This we understand to be tbe conclusion reached by Mr. Justice Story, as indicated in bis work on Equity jurisprudence, where tbe cases on tbe question are fully and critically reviewed, (Story’s Eg., vol. 1, sec. 305;) and such Chancellor Emm? concedes to be tbe tendency of tbe English and American decisions, and expresses tbe fear tbat tbe doctrine in Reade vs. Livingston, and of those English Chancellors on whom it rested, is too stern for the present times. 2 Kent Com., marg., p. 442, (in note,) 8th edition. In the case before the court, it appears that David Bender, at the date of the deed sought to be impeached, was engaged in the mercantile business in the city of Little Kock; and, besides the real estate conveyed to his wife, seems to have had no property other than his capital in trade. In his answer, he admits that he was then “ embarrassed somewhat on account of his indebtedness, and to provide a home for himself and family, in the event of further embarrassment,” or “ too great pressure by his creditors,” he caused the conveyance to be executed to his wife'; but states that “he had, at all times, sufficient means, if he could make the same available, (which he hoped to do,) to meet all his liabilities.” The answer of Elder admits that Bender “was much invplved in debt:” denies that the conveyance was • made to defraud creditors, and insists that Bender, though “ he owed much money,” was not insolvent, but had ample means for the payment, of his debts. These are certainly strong admissions, and upon them alone, it is not easy to perceive how the conveyance to Mrs. Bender could be sustained. Testimony was taken however, and we will proceed briefly to notice it One of the witnesses testified “ that he acted as clerk and book-keeper in Bender’s mercantile establishment, from April, 1849, to August, 1854, and that at all times during that period, Bender had sufficient means to pay his debts, if properly managed.” ITow much he owed, the witness' could not state, though he knew him to be much indebted at the time he left the establishment, in August, 1854. Other witnesses, whose means of information were less favorable, testified, in general terms, that he was regai’ded as solvent, though slow to pay, and at times embarrassed. The precise amount of Bender’s debts, and the exact extent of the means left for their payment, after the conveyance in question, do not appear.. The conclusion may be fairly drawn, however, from all the evidence in the record, that, at the time of the conveyance, Bender was largely indebted, was embarrassed, and thongli not insolvent, his circumstances were doubtful, and his solvency dependent, in a great degree, upon the skillful management of embarrassed mercantile operations. Under such circumstances, even though the admission of Bender indicating an actual fraudulent intent be left out of view, the law requires us to declare the conveyance to Mrs. Bender fraudulent and void, as against the prior creditors of her husband, and we so hold. So much of the decree as dismisses the cross-bill of Elder is affirmed, and so much thereof as dismisses the original bill must be reversed, and a decree entered here in accordance with the prayer of the original bill, and certified to the court below. Mr. Justice Faibohild did not sit in this case.