Millington v. Hill, Fontaine & Co.

Cockrill, C. J. This appeal grows out of the ' successful effort of certain judgment and mortgage creditors of Seth W.. Bolton to subject á plantation in Deshacbunty, which he had conveyed to his sister, Mrs. Millington, to the-payment of-their respective claims. The suit was begun by a creditor’s bill filed by W. B. Galbreath, a judgment creditor, to' which the other judgment and mortgage creditors, Mrs. Millington and her husband, and the administrator of S. W. Bolton, were made parties. ' Cross-bills were filed by the defendant creditors to settle the priorities of their liens, and by Mrs. Millington.» to assert the priority over all, of her claims. The plantation was unoccupied and not in cultivation when the bill was filed, and a receiver was appointed by the court to lease the place and collect the- rents. Upon the hearing, the court found that Mrs. Millington’s purchase was a fraud upon the rights of Bolton’s creditors, marshalled the liens, made a distribution of the fund raised by the receiver, and condemned the, lands to be sold to pay off ,the residue of the claims charged against them. Mrs. Millington and her husband alone appeal. The history of the transactions connected, with the purchase of the plantation,- is as follows: In 1876, Seth W. Bolton resided in Desha county, and-was the owner of the plantation in dispute. He was, at that tibie, indebted beyond his ability to pay. One or more -judgments had been rendered, and two actions for the recovery of money were pending, against him. One of these was Galbreath’s, to collect a debt of something more than $5000, to which there was no defense. Bolton expressed a willingness to secure this debt, if security was insisted upon; and, at this juncture, left home with the avowed object of conferring with Galbreath about the security and the extension of the time of payment of the debt; but, instead of calling upon Galbreath, he went direct to the home of his sister, Mrs. Millington, the appellant here, in Shelby county, Tennessee, and there, upon a Sabbath night, and -with much haste, considering the importance of the transaction, concluded a sale of the' place to her. The trade was consummated the next morning by the delivery of a deed reciting a consideration of $10,000. The consideration consisted of an agreement by Mrs. Millington to discharge certain notes held by Hill, Fontaine & Co., amounting, as the deed recited, and the parties agreed, to about $6000, and secured by two mortgages on the plantation, reference being made in the deed to the records of Desha county to identify them; and for the residue of the purchase price and as a cash payment of $4000, Mrs. Millington transferred to Bolton two bills of exchange, drawn by E. M. Apperson upon and accepted by E. M. Apperson & Co., for $2000 each. Within a few days after this transaction these two bills gave rise to a litigation in the Tennessee courts between Galbreath, Bolton and Mrs. Millington, which has an important bearing upon, the litigation between the same parties here. It arose in this way. Galbreath sued Bolton, in Memphis, for the recovery of the debt already in suit in Arkansas, and impounded the two bills of exchange by causing an attachment to be levied upon them as Bolton’s property. Mrs. Millington intervened in this proceeding, claimed the bills as her own, and undertook to show that soon after transferring them to Bolton, she purchased back one of them for $1600 in gold, and that the other was re-transferred to her as indemnity against a further lien that her husband and brother upon further consideration supposed might be established against the land. Galbreath answered that the- re-transfer of the bills to Mrs. Millington was fictitious, and part'of a general scheme entered into between Bolton and his sister to cheat, hinder and delay the creditors of the brother; the first step in the scheme, being, as he alleged, the purchase of the plantation. Upon this issue a mass of testimony was taken, and the chancellor before whom the cause was heard* found that the whole transaction was concocted in fraud, and by appropriate decree subjected the proceeds of the bills of exchange, which had in the meantime been, collected, to the satisfaction pro tanto of Galbreath’s debt. Mrs. Millington prosecuted an appeal from this decree to the supreme court of Tennessee, where the testimony was reviewed, the facts carefully collated, and the chancellor’s conclusions indorsed in strong and unequivocal language by the supreme court commission, and the decree remained undisturbed. It was after the determination of that suit that Galbreath filed the bill that gives rise to this appeal. A transcript of the entire Tennessee record found its way by common consent into this litigation, and is submitted to our consideration. Counsel who represent the Galbreath interest here, argue that the Tennessee decree renders the questiou of fraud in the purchase made by Mrs. Millington res adjudicata, so far at least as Galbreath is concerned; but the effect of Galbreath’s proceeding in Tennessee precludes him from inquiring into the question of fraud, and so ends his litigation here in limine. He had charged in his answer to Mrs. Millington’s assertion of title to the two bills of exchange in the Tennessee suit, that the purchase of the lands was a fraud on his rights as a creditor of Bolton. Thereupon Mrs. Millington, while ¿leafing the fraud, offered to re-convey the lands to Bolton, and permit .Galbrcathto subject them to the payment of his debt if he would release the bills of exchange from the levy of his attachment. Galbreath declined this, prosecuted his attachment and reaped the benefit of the.land sale by appropriating- the consideration he alleged was paid for n. The acceptance of the benefit arising to him from the transaction, with knowledge of the surrounding facts, estops him from afterwards questioning the sale, 3. Fraudulent Conveyance:— Hots* far good. 2. When creditor estopped. A conveyance to defraud creditors is good as between the parties ;md their privies, aldiough.it niay be avoided by the creditors of the fraudulent grantor. ■ If the creditors condone the fraud, the grantee's tifio is good against all comers, and when any creditor, with knowledge of the wrong that has been done him, makes his election to take from the grantee the purchase price agreed to be paid for the land, his conduct is, in effect, an affirmance of the sale and a waiver of the right to complain of the fraud. Lemay v. Bibeau, 2 Minn., 291; Hathaway v. Brown, 22 Ib., 214; Butler v. O’Brien, 5 Ala. (N. S.), 316; Rennick v. Bank of Chillicothe, 8 Ohio, 529; Frierson v. Branch, 30 Ark., 453; Pickett v. Merchants Nat. Bank, 32 Ib., 346. There is nothing in the record, however, to debar the other judgment creditors from'asserting their claims against the lan-d. But it is argued on behalf of Mrs. Millington, that however fraudulent tin: intent of her brother may have been in effecting the sale to her, there is nothing- to show that she participated in. his design or knew of his embarrassed affairs. Without recounting the facts and suspicious circumstances surrounding the transactions,'the bona fides of which has been questioned in these litigation's, it must suffice to say we have weighed them, carefully,' ánd cannot escape the conclusion arrived .at' by'the' Tennessee, supreme court commission i‘n the opinion that’’ has been furnished us, reviewing the 'same testi"mony that" the case 'is "submitted to us upon almost without'variation. It is true that the fact'at 'issue in that case was as to the bona fid.es of the transfer Of the bills of exchange by Bolton to Mrs. ’ Millington, but the negotiation "for the -purchase of . the land was unearthed with great detail of' circumstance, and 'the good faith.of that tans action was considered by the Tennessee court, under the familiar rule that it is competent in this class of cases' to show othé'r'conveyánces than the one attacked to be fraudulent if made about the same time 'and as a part of the samé scheme'of fraud.- -It is-upon the same principle that we-now weigh an;d consider the fraudúlent at-tempt-of Bolton and Mrs. Millington to place the bills' of exchange givefl as part of the pretended purchase price of the land beyond the reach'of Bolton’s creditors,-the question really'decided'in-the Tennessee case. '-'While-the Tennessee decision-is not binding upon us, we concur in the conclusion reached, that-both transactions áre of a piece and fraudulent. - • ■ 3. Fraudulent grantee without remedy. It is also' urged that'Mrs. Millington’s money having been appropriated by Gálbreath, a creditor’of her vendor,'to the payment of his debt, the land should not now be taken to sátisfy debts thatwére not liens at the date of her purchase; or, that if it is condemned to pay these debts, she should be allowed to share iri the assets as the equitable assignee of the extinguished demand. - . ' - - - It is-not true, in'the outset, that Mrs. Millington’s money has been taken in satisfaction of liér vendor’s debt. The decree in the suit betweén her, her vendor and his creditor settled the question that the money was her vendor’s. It became his by virtue - of her purchase of the.lands, and she became the owne'r of the lands; but, by virtue of the fraud that entered into the purchase, it .was subject to the incumbrance of the debts then existing against her vendor. The largest of his , creditors sought to, and did, discharge his debt out of the pur..chas.e money she paid for the.land and relieved the .land to that .extent. .... ■. .. ..... ■ . On the other'hand, we do not deny the principle that where a. person pays money for which- another is liable, equity will clothe his claim-with the -garb, the-contract he has discharged .was invested w-ith, but it is_never applied in aid of- a. fraud. It •is a. maxim .that “ he .that- hath.' committed iniquity shall not ¡have .-equity,’? and in accordance, with it, it is the. settled rule 'that “-'a'party bargainipg-with a -debtor with fraudulent intent, .does it-at the .peril of having that which.he receives taken.from -hirn. by.-the creditors'of the. debtor.whom he is attempting to defraud, without having any-remedy.to recover-what he parts -with in carrying out the bargain.” Waite Fr. Conv., sec. 192; Railroad v. Soutter, 13 Wall., 517; Pettus v. Smith; 4 Rich. Eq. (S. C.), 197. Mrs, Millington must be left in the snare her own devices have laid. ' ' 4. • Estoppel : Vendee and mortgagee. As a further ’ means of 'ridding the land of Bolton’s debts, ' Mrs. Millington attacked'the validity of the .lien of the' mort'gages already mentioned, upon the ground, as her answer to Hill, Fontaine' & Cods cross-bill alleged, that the debts ‘they secured'were usurious in their inception.- A demurrer to-the answer was sustained. It is clear that- Mrs. Millington was not prejudiced by this ruling. The mortgages had been executed by Bolton before his conveyance to her, and she had not only purchased subject to the mortgage liens,, but. had assumed to discharge the mortgage debts to the amount of $6000, as part of the purchase price tó be paid- by her. Subjecting the lands to the payment "of this amount was thus made the mode for the payment of that much of the-purchase price. Six'thousand dollars of the purchase money, it was agreed should be paid to the parties holding the mortgage notés. A payment upon these notes would, be a discharge pro tanto of the purchase money. Holton thus provided the means with which to pay this $6000, and placed it in Mrs. Millington’s hands for that purpose. It is not a matter that concerns her whether the mortgages arc void, the debts fictitious, or not. ■ Bolton directed in his deed to whom the purchase money yet due for the land, should be paid, and it is not for his vendee to gainsay him the right to do so. To permit-her to hold the lands and repudiate the mortgages, would be to give her the land without exacting the purchase price. If nothing is really due upon the mortgage debts, that fact would enure to the benefit, not of “Mrs. Millington, but of Holton’s creditors. Freeman v. Ault, 44 N. Y., 50; Cramer v. Lepper, 26 Ohio St., 59; Hough v. Horsey, 36 Md., 181; Pickett v. Merchant's Nat. Bank, 32 Ark., 346. Bolton’s administrator was a party to the litigation, made the same defenses that Mrs. Millington attempted, was defeated upon the merits, and declines .to appeal. When the cause liad progressed almost to a hearing, Mrs. Millington filed a cross-bill'in which she asserted claim to a one-fourth interest in a legacy of $15,000 bequeathed to her and three others by her fathér, which she alleged ivas a charge upon the property in dispute, and which she prayed should be declared' a lien in her favor superior to all others. Her father, it was alleged, died in 1863, and although, according to her allegations, Bolton had shortly afterwards accepted the devise of land subject to the charge, this is the first intimation, among all the dealings and transactions between the parties detailed in the record, that this charge was still unsettled. Mrs. Millington, her husband and Bolton, all testified in the Tennessee case, detailing with minuteness the conversations had in the negotiations for the -purchase of the land, and no claim was made for any reduction of price on account of this charge, although it was asserted that the consideration agreed upon was a fair price for the lands. And Mrs. Millington herself testified that she had no information of any indebtedness on the part of her brother. It was now alleged however, that her interest in this legacy was a jpart of the consideration paid by her for the lands. The-allegations of the cross-bill deepen our conviction that the purchase of the land was not in good faith. However, a demurrer to the cross-bill was sustained, and it must be met upon its merits. Without-saying anything as to the allegations that the release of the legacy was 'a part consideration of the purchase which we find to have been fraudulent, oras to the necessity of bringing in the co-legatees as parties, we may rest the correctness of the chancellor’s action in dismissing the cross-bill upon the fact that it shows upon its face that the legacy was barred by tlie statute of limitations. ¿’imitations ?» d¿s.tb f°r lega <>.. sam« in. equity as at law. It has been held in England and in this -country that the statute of limitations is no bar to a suit to recover a legacy, (see note to Hedges v. Norris, 32 N. J. Eq., 192,) but with us this-is true only where the suit is against an executor or another, who is charged by the will with an expressed trust in relation to the legacy. The fact that the suit is in equitv avails nothing, for " . the statute where applicable at all is as binding in equity as at law. McGaughey v. Brown, 46 Ark., 25. In seeking for the statutory rule that shall govern in such a case, it is necessary to ascertain the legal effect of the devise and consider what are the nearest analogies to it, for there, is no statute which in terms bars a legacy. Tile provision of the will of...I. L. Bolton under which the appellant claims is as follows : “I give to my son, Seth W. Bolton, my entire interest, both real and personal, in Desha county, Arkansas, by his paying to my estate, or other heirs, the $15,000 I have paid for the places.” 7. Same:— Legacy charged on land. Seth Bolton accepted the-devise and-in, doing.;so,.he by :-implicatian agreed to pay the sum igiven -to the -other heirs.--. Williams v. Nichol, ante, p. 254. While the will makes,,it-incumbent upon him to pay-the legacy,, it-does -not devolve, .upon him such duties and obligations as create a direct trust and prevent the statute .of limitations.frpm running in his favor. His, agreement to pay is an implied contract and. -not in writing, and., is therefore within, the letter .of the three, years statute. Etter v. Greaawalt, 98 Pa. St., 422. But, the $15,000 .also became a charge under the will .upon th,e.land.itself, and'it is this equitable lien "the appellant seeks to .enforce.. The question is, what statute appliés? We can not adopt the analogy that governs suits on mortgages because a mortgage is .the. conveyance of the legal estate and'g'ives the mortgagee his^action for the possession of the mortgaged, premises, while' the equitable charge created by the will gives'no right of possession. It is more nearly allied to' the mortgage in those states where the'-Utter 'is rée'Ognizéd as' a security only and as conveying no" title. • ‘-But ás the testator evidently intended that Seth Bolton should take the. estáte only upon paying- so much of á'ctínsiderátion Tor'hywé may i-nfer from this-that the payment'df the legacy was in párt at least the consideration of the devise, and from this we' derive -a-strong support for the analogy to the 'Vendor’s-equitable lien for'the- unpaid purchase money. •' ' ■" ' .' Now, in those jurisdictions'where the mortgage conveys no title, the lien is regarded as an incident to the debt merely, and is barred when the debt can no longer be enforced, and the same rule is applied by this court to the equitable vendor’s lien. Stephens v. Shannon, 43 Ark., 464; Waddell v. Carlock, 41 Ib., 523. And this rule is held to govern the equitable .charge of a legacy in the only case in. point .that has come, to our notice. Yearly v. Long, 40 Ohio St., 27. There it is held that the personal remedy .against.the, devisee .being barr.ed. the lien was discharged. But whatever statute governs, the remedy in this case is barred, for the statute was set in motion in i 86.3,,and if the charge could be regarded as a liability created by “a writing under seal” (as to which see Wait v. Carniten, 21 W. Va., 516; Prewett v. Wortham, 79 Ky., 287; Borst v. Corey, 15 N. Y., 505), and the suit an action to-enforce it (Sec. 4484, Mansf. Dig.), still, more than ten years have elapsed. 8. Same:— T a c k i ng disabilities. Mrs. Millington unde-rtook-to-evade the.,force.of thé:-statute by alleging that shé .was- under-age in 1863, and afterwards' married and is still covert, but she cannot tack her disabilities in this way. She should have brought her suit within the. period allowed her by the statute after coming of age, notwithstanding her-coverture: -'*' - ..... " •• •" The only error ihthe record is as to'the Galbreath judgment, and the decree must be reversed with-instructions to'modify-it by disallo'wih'g'that claim, and it'is' so ordered'." - ■ ' ■ ■