Prout v. Vaughn

The opinion of the court was delivered by Barrett, J. The statute enacts, chapter 65, s. 28, that all fraudulent conveyances of lands, or of any estate or interest therein, procured, made, or suffered, with intent to avoid any right, debt, or duty of any person, shall, as against such person, be utterly void. The same is in substance and effect repeated in chapter 113, s. 32, and by section 33 it is made a penal offense. [457] The report states the various conveyances of real estate and personal property made by the defendant to his children, two of whom are the trustees summoned in this case, and that, íf operative, said conveyances would substantially place all his property beyond the reach of his creditors; and that he intended thereby to accomplish that result; and that said trustees understood his object and what the effect would be. This makes a case within the statute of a conveyance utterly void, as against the defendant’s creditors ; and in this case, the plaintiffs were such creditors, as is understood and treated in the argument. The conveyance to the trustees was inoperative as against the plaintiffs, and their mortgage back to the defendant had no effect upon the title as against the plaintiffs. Whatever might be the case with the claimants as to their mortgage security by the assignment to them of said notes and mortgage by the defendant, in case they were in fact holding the position of bona-fide purchasers without notice of the vitiating fraud, still they cannot be regarded as holding such position in the present case. They took said assignment by way of security for a pre-existing debt and liability, and for future debts and liabilities.. They paid nothing as for a purchase. They advanced nothing by way of present loan. They incurred no new liability. This being so they can stand, as against parties entitled to impeach the title conveyed by the defendant to the trustees, only upon the title which the defendant had by the transactions between him and the trustees. This is so irrespective of the fact that Phillips, one of the claimants, knew, before said assignment to him and the other claimant, of the fraudulent character of the transactions between the defendant and the trustees. It is claimed that the effect of the fraudulent intent as to creditors, upon which the defendant and the trustees acted, is avoided by the fact that the property was at last appropriated to the payment and security of lawful creditors of the defendant; and the case of Gregory v. Harrington, 33 Vt. 241, is cited and relied on. In that case the intent of the sale and transfer was to enable the vendor to appropriate the property to the payment of certain of his creditors, and that intent was carried out. Such intent was [458] not fraudulent in the sense of the statute, nor unlawful in any view. In this case the intent of the transaction of conveyances by the defeiidant, was not to pay any creditors, but his daughter and one son to the amount of $2,000 of existing indebtedness, with a property of the value of $16,000. The subsequent disposition of it was not the carrying into effect of any purpose that existed in the making of said conveyances, but was contrary to the purpose that then existed, which was, “ to place substantially all the defendant’s property beyond the reach of his creditors at that time, and until the notes and installments should fall due.” The personal property that went to the benefit of the creditor Capron was appropriated by force of attachment and sale on execution, in defiance of the conveyance by defendant to the trustees. The assignment of the note and mortgage to the claimants was more than a fortnight after the fraudulent conveyance to the trustees. Such an afterthought appropriation to the claimants, and such an in invitum appropriation to Capron could not operate to give validity to conveyances that were “utterly void”, “ null and void ”, at the time they were executed between the parties, and which had rendered them liable to criminal penalty. The fact that part of the purchase price was to be paid by applying it in payment of $2,000, owing by defendant to the trustees, does not save the transaction from the inherent fraud that vitiates it. A transaction by which the payment of $2,000 to two creditors, was to be made the occasion of putting $14,000 of the property conveyed beyond the reach of the defendant’s other creditors, by the intent and co-operation of the parties to said conveyance, is vitiated by the intended and enacted fraud which is necessarily involved in the transaction. The doctrine of Pope v. Andrews, 1 Sm. & M. Ch. 135, we regard sound, and properly applied in that case. That doctrine is decisive in this. The views thus expressed as to the character and results of the transactions in question, do not lead to our holding that the plaintiffs can reach the property or its avails, which was the subject of the fraudulent and void conveyances, by trustee process. The personal property had been otherwise taken by process of law before the trustee process was served. [459] The notes had been transferred to the claimants before the process was served. The plaintiff claims that the entire transaction between defendant and trustees was void, and the court so hold. This leaves the title to the real estate as to defendant’s creditors the same as if no conveyance of it had been made by the defendant. This of course leaves the trustees the same as if they had not taken the conveyance and given their notes therefor. Our trustee law is wholly statutory. The “ goods, effects and credits ” meant by section 48, held by a conveyance or title that is void as to creditors; do not embrace real estate, held by such conveyance or title. Such conveyance or title is declared “ utterly void” as to creditors. Such creditors may proceed directly against the real estate by attachment, and so are not embarrassed by such conveyance. If the trustees had made a conveyance of the real estate thus fraudulently conveyed to them which would be valid in their grantee, and so would have realized valuable consideration for their notes given or payments" made for their purchase of the defendant, and the land have got beyond the reach of attachment and levy in behalf of defrauded creditors, we are not prepared to say how the matter would have stood for consideration. This case does not present it, for, as before said, the fraudulent conveyance of the defendant is “ utterly void ” as to defendant’s creditors, and has resulted in no obstacle to attachment and levy upon the estate attempted to be conveyed. The disposition made of the case is upon the ground and views above set forth. The trustees are held not chargeable, because the process does not reach real estate fradulently conveyed by the defendant, and not because the claimants have prior right to what might otherwise be held by the plaintiffs against the trustees. The plaintiffs do not claim to hold the trustees on the score of the note given by them to the defendant. The plaintiffs stand in no relation to the property exempt from attachment that was conveyed by defendant to the trustees. Fraud against creditors is not predicable of the conveyance of property thus exempt; and so the title to it is not impeachable by creditors of the debtor making such conveyance. The exceptions do not state what the judgment- was as to trus [460] tees. It is inferable that it was that trustees be discharged. Such is the judgment of this court. As to claimants, the judgment allowing them costs is reversed, and judgment that plaintiffs recover of claimants one half of’the commissioner’s fees, paid by plaintiffs, — no other costs to be taxed between plaintiffs and claimants.