Brackett v. Waite

Baylies, J., delivered the opinion of the Court. — It appears that on the 19th May, 1830, William Ford, of Braintree, in Orange county, possessed an estate of the value of $60,000, and was then owing about $16,000 ; that for love and natural affection only, the said William Ford then deeded lands of the value of $1000, lying in said Braintree, to his daughter, Clara, who was the wife of Heni-y Brackett, jr.; that on the 16th July, 1830, a flood came, and swept off $50,000 worth of said Ford’s estate, whereupon he was insolvent. At the time said Ford deeded the land to his daughter, Clara, he was owing Daniel Waite about $1000 on notes, dated 7th July, 1827 ; and to secure the payment of these notes, said Ford on the 28th July, 1830, mortgaged the lands, which he had deeded to his daughter,to said Waite ; and the question is, who has the better right to these lands, the daughter, who claims by her deed, or Waite, who claims by his mortgage. The county court charged the jury, “ that said Waite was to be viewed as a creditor of said Ford, whose debt — 396 — existe(^ before said 19th of May, 1830, and that, as to such cred-¡tors, the deed of said Ford, made for love and natural affection only, was void, though the grantor at the time was solvent, and bad visible property amply sufficient to pay all his debts, if he af-terwards became insolvent.” To support this charge, the defendants rely on the case, Heade, Administrator of Reade vs. Livingston et al., 3 Johns. 481. In that case, Newt, Chancellor, after remarking upon several English cases, says, “ The conclusion to be drawn from the cases is, that if the party be indebted at the time of the voluntary settlement, it is presumed to he fraudulent in respect to such debts, and no circumstance 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 line of distinction set up, or traced in any of the cases. The attempt would be embarrassing, if not dangerous to the rights of the 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 in the ivay of his existing debts. This is the clear, and uniform doctrine of the cases, and it is sufficient for the decision of the present case.” If the law be as it is here stated, no well founded objection can be made to the charge of the county court. But it is believed by this Court, that the principles of law, relating to voluntary settlements, are not understood, in England, precisely as above expressed. In 1 Roper's Husband and Wife, p. 307-8, it is said, “ The act of the 13th of Elizabeth, c. 5, does not make void voluntary settlements against creditors, but merely declares, that a fraudulent deed shall be void against them. Hence it seems to follow, that although a man be indebted at the time he made a voluntary settlement, yet it is no further void on that account, than as affording a presumption of fraud.” “This principle will serve asa guide lo the understanding of the cases, and the distinctions which have been made ; the conclusions to be drawn from which I shall endeavour to collect, and state them shortly. “ If the husband, when he makes the settlement, after marriage, upon his wife, be not indebted at the time, subsequent debts will not defeat it. Upon this point Ld. Hardwicke, in Townshend vs. Windham. 2 Ves. Sen. 11, thus expressed himself: "If there be a voluntary conveyance of real estate or chattel interest by one not indebted at the time, although he afterwards becomes indebt» — 397 — ed, if that voluntary conveyance was lor a child, and no particular evidence, or badge of fraud, to deceive or defraud subsequent creditors, that will be good ; but if any mark of fraud, or intent to deceive subsequent creditors, appears, that will make it void, otherwise not; but it will stand, though áfterwards he becomes indebted.” “If the husband happen to be indebted at the time of making the settlement, the principle o $ presumption before stated, furnishes the following distinction : — If his debts be considerable,and the effect of the settlement would be, if substantiated, to defeat the creditors of their demands, then such settlement is void as fraudulent, under the act of the 13th of Elizabeth. “ But it would not be so, it is presumed, if the debts were of inconsiderable amount; because their existence furnishes no presumption of the settlement having been made with an intent to deceive and defraud creditors ; and common sense would revolt at a decision, that a voluntary settlement made by a husband, having a rental of £5000 a year, should be void, if it happened, that when he made such settlement he was indebted in the trifling sum of £100. This point came under Lord Alvanley’s consideration in Lush vs. Wilkinson, 5 Ves. Jr. 384. “ dfewland on Contracts, p. 383,4, 5, says : “ I shall now return to the statute of 13th Eliz. It will be found by examining the cases on this statute, that there is another circumstauce, which has been considered to be a badge of fraud ; I mean where a voluntary conveyance is made by a person indebted, at the time. This is construed to be proof of fraudulent intention with respect to creditors, although the deed may be in consideration of blood or of natural love and affection. Lord Coke, in Twyné’s case, says, when a man, being greatly indebted to sundry persons, makes a gift to his son, or any of his blood, without consideration, but only of nature, the law intends a trust between them.” “ It is material, likewise, to remark, that to impeach a voluntary settlement made on a meritorious consideration, it seems to be necessary, that the person making it,not only should be indebted, but should he insolvent at the time. Lord Alvanley, in Lush vs. Wilkinson, 5 Ves. 384, says, “ a single debt will not do ; every man must be indebted lor the common bills for his house, though he pays them every week ; it must depend on this, whether he was in insolvent circumstances at the time.” • “ And this is certainly the rational construction of the statute, on which we are commenting. For it was intended to prevent — 398 — convey!lnces °f property, made with a design to defraud creditors. When, therefore, a person makes a voluntary settlement of his property, and is at the time in insolvent circumstances, as it must be obvious to him, he is doing an act which must deprive his creditors of the means of procuring the payment of their debts : this is a case, which plainly falls within the statute.” “ But to say, that the mere circumstance of the person being indebted at the time, without reference to the comparative state of his debts, and of his means of paying them, shall be a sufficient proof (though the conveyance is. on a most meritorious consideration) of fraudulent intention, with respect to his creditors, is to assert, that a person, who, being seized of a landed estate in fee of £1000, settles, after marriage, on his wife a jointure of £30 a year, if he owes £30 at the time, and that sum only, shall be considered to make the settlement with a view to delraud his creditors. If Lord Alvanleifs idea, therefore, be correct, it will be necessary to remember the sense in which the term “ indebted” is used, when applied to these cases.” In the case of Salmon vs. Bennett,1 Con. Rep. 525, Swift, Ch. J., gives the opinion of the court as follows : “ Fraudulent and voluntary conveyances are void as to creditors; but in the case of a voluntary convey anee,a distinction is made between the children of the grantor, and strangers. Mere indebtedness at the time will not, in all cases, render a voluntary conveyance void as to creditors, when it is a provision for a child in consideration of love and affection ; for if all gifts by way of settlement to children, by men in affluent and prosperous circumstances, were to be rendered void upon a reverse of fortune, it would involve children in the ruin of their parents, and in many cases might produce a greater evil than that, intended to be remedied. Nor will all such conveyances be valid ; for then it would be in the power of parents to provide for their children at the expense of their creditors. Nor is it necessary, that an actual or express intent to defraud creditors should be proved ; for this would be impracticable in many instances, where the conveyance ought not to be established. It may be collected from the circumstances of the case. But in all cases, where such intent can be shown, the conveyance would be void, whether the grantor was indebted, or not. In order to enable parents to make a suitable provision for their children, and to prevent them from defrauding creditors, these principles have been adopted, which appear to be founded in good policy. Where there is no actual fraudulent intent, and a voluntary conveyance is made — 399 — to a child in consideration oflove and aflection, if the grantor is in prosperous circumstances, unembarrassed, and not considerably indebted, and the gift is a reasonable provision for the child, cording to his state and condition in life, comprehending but a small portion of his estate, leaving ample funds unincumbered for the payment of the grantor’s debts, then such conveyance will be valid against debts 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 a bankruptcy ; or if the value of the gift be unreasonable, considering the condition in life of the grantor, -disproporiioned to his properly, and leaving a scanty provision for the payment of his debts ; then such conveyance will be void as to creditors.” Kent, chancellor, speaking of the above decision in Connecticut, says, “ The court do not refer to authorities in support of their opinion, and, perhaps, they may have intended not to follow, strictly, the decisions at Westminster Hall, under the statute 13 Eliz. I can only say, that, according to my imperfect view of those decisions, (and by which I consider myself governed,) this case was not decided in conformity to them ; .but I make this observation with great defference to that couit.” Reade vs. Livingston, (3 J. C. R. 504.) But if I understand the elementary writers, JVewIand and Roper, on this subject, they do fully support the opinion delivered by Sioift, Ch. J., in (he above case. And,in addition, the same principles are advanced by' the Supreme Court of the United States in their opinion delivered in the case, Hendee's Lessee vs. Longworth, 11 Wheat. 213. In this case the court say : “ A deed from a parent to a child, for the consideration oflove and aflection, 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 ire prosperous circumstances, and unembarrassed, and that the gift to the child was a reasonable provision according to his state and condition in fife, 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.” 1 consider, that the whole doctrine of the law, as to fraudulent conveyances under the statute of 13th Eliz. will apply to frauds ulent conveyances under our statute, ch. 32. s. 7, (Slade's Ed.) — 400 — Now, if we apply the principles of law, as explained by the elementary writers, aforesaid ; and as recognized by the courts of law as aforesaid, to the facts in the case under consideration, we cannot but see, that these facts afford no ground for presumption of fraud in William Ford, at the time he executed his deed to his daughter, Clara. For at that time Wm. Ford was in prosperous circumstances — his estate was worth $60,000, and he owed only $16,000 — his gift to his daughter, Clara, was a thousand dollars’ worth of land, which left enough of the estate to pay all his debts, and $43,000 over and above. The gift was not unreasonable, and affords no presumption, that it was made to injure creditors. If the deed to the daughter was not fraudulent in the beginning, it was not made so by subsequent events ; such as the waters sweeping oft $50,000 worth of the grantor’s property, and rendering him unable to pay his debts. This Court is satisfied, that the county court in their charge, did not instruct the jury according to the principles of law. For this reason alone, we reverse the judgemedt of the county court, and grant a new trial. The plaintiffs to recover their costs at this Court.