Fargo v. Ladd

By the Gowrt, Smith J, The bill of complainant in this [116] case, after alleging the sale of the premises to the defendant, Eeed, the payment of a portion of the purchase money, and the execution of a noté and mortgage for the residue to Eox-ana Fargo, chai’ges that the latter assigned said note and mortgage in writing to the defendant, Ladd, that no consideration was paid for such assignment, and that the same was colora-ble, and that Ladd had full knowledge of Lyman Fargo’s agency, and of complainant’s claim to that portion of the purchase money secured by the note and mortgage. To these direct charges, Ladd answers, on oath, as required by the bill, admitting that he knew that the legal title to the lots sold came from the complainant, alleges that at the time of the transfer of said property, and of the assignment of said mortgage, he believed, from the acts and transactions of said complainant and of said Lyman Fargo, that if the property, at the time of sale, was in the name of the complainant, it was only in his name to protect it from the creditors of Lyman Fargo; and that the contract was made with Eeed by Lyman, as principal, and not as agent; and that complainant did not participate in the same, any further than by executing the deed; that Lyman Fargo received into his possession the property taken in part payment, and when complainant came to Idenasha to bring the deed, he found Lyman in possession of such property, and left him in such possession ; and that he believed, at the time he purchased the mortgage, the same was given to Eoxana by consent of complainant ; and he denies that the transfer was made to him to defraud complainant, but alleges that said transfer was bona fide, and for a valuable consideration. This answer is, in the main, responsive to the bill, and is wholly uncontradicted by the evidence ; but, on the contrary, is supported by the testimony of Eoxana Fargo. Even if Ladd does not occupy a position entiiling him to protection as a bona fide holder of the note and mortgage, the conduct of the complainant would seem calculated to have justified him in looking upon Eoxana as the rightful owner of the mortgage, and from whom it would be safe to purchase. [117] A ratification of a part of an tie authorized transaction of an agent, is a confirmation of tbe whole. F. L. and T. Comp vs, Walworth, 1 Comstock, 433. A principal cannot be allowed to conduct himself in such a manner as to mislead the public, and then avoid the consequences of his acts by a simple disclaimer of authority in the agent. But the view we have taken of this case renders it unnecessary to decide to what protection the defendant, Ladd, may be entitled, either as an innocent holder of the note and mortgage or as one contracting under a misapprehension, induced by the course of the complainant himself. The testimony before us, coupled with the acts and relations of the parties as disclosed in the case, shows that, previous to the immediate transactions upon, which the suit is founded, and even before Lyman Fargo removed to Menasha, he had been in the habit of holding more or less property in the name of Isaac Fargo, the complainant, for the purpose of keeping it out of the reach of his creditors, which he managed, used, converted, sold and transferred, at his pleasure, and for his own exclusive benefit, under an assumed agency from said complainant. We think the testimony satisfactorily shows that he procured the lot and made the improvements which were the subject of the sale to Reed in this manner; and that there entered into said property and improvements, both the remnants of his property at Lake Mills, and his own continued care and labor. And although it would seem from the testimony of Roxana Fargo, that the complainant, at some time, had some actual interest in the property (whether for advances or otherwise, does not appear,) the same testimony that develops the interest, explains the fact and manner of its extinction, with a particularity favoring its rebuttal or contradiction if the testimony were untrue. The case here made, varies little from the simple and ordinary case of a conveyance to defraud creditors, and the use of the complainant’s name by Lyman Fargo, as a cloak to conceal his property from his creditors, places the parties in the same relations, and involves substantially the same liabilities; [118] and this court is prepared to bold, and does bold, in accordance with numerous and uniform decisions, that conveyances of property, and agreements between parties, to defraud creditors, tbougb void, as to creditors, are nevertheless valid and binding on tbe parties themselves and their personal representatives. Hawes vs. Leaders, Cro. Jac., 270; Warburton vs. Akin, 1 McLean, 460; Reichart vs. Castolcor, 5 Binn., 109; Osborne vs. Moss, 7 J. E., 161; Hendricks vs. Mount, 2 South., 738; Drinkwater vs. Drinkwater, 4 Mass., 357; Findley vs. Cooley, 1 Black., 262. Were, then, this a proceeding on the part of Lyman, Eargo or his representatives, (not on behalf of creditors,) to divest Isaac Eargo of the legal title to the foundry property, which Lyman had thus fraudulently taken in his name, there could be no doubt of the rightful application of the foregoing doctrine to the case, and the court would be obliged to hold that the parties, being inppa/ri delicto, were not entitled to relief in a court of equity. But we think there is another principle also involved in this case. We may assume that the legal title to certain lots in Menasha, belonging, in fact to Lyman Eargo, had been vested in Isaac Eargo, with his consent, for the purpose of covering the property and concealing it from the creditors of the former. That Isaac Eargo permitted said Lyman, who was his son, to use and manage the estate to his own exclusive benefit, and ultimately to contract the sale of the same to Eeed, to apply a portion of the purchase money arising upon said contract to the payment of his own liabilities to Eeed, and, said sale being perfected, prepared to divest himself of the title, and executed a deed of the property, and delivered the same to his son, for the use of the purchaser, on compliance, by the latter, with such terms as his son might dictate, and which deed was so delivered, upon a mortgage being executed according to the direction of said Lyman. While it is conceded that Isaac Eargo could not have been compelled to reconvey the estate to Lyman, on account of their mutual complicity in the fraud, can it be contended that it was incompetent for him to give it up, or to dispose of it otherwise, [119] at tbe request of Lymán, voluntarily ? Most certainly not. And tlie whole conduct of tbe complainant, in permitting Lyman to exercise unlimited control over the property, and to contract it away, and in delivering up to him tbe title deed to be disposed of, as far as we are at liberty to judge, for his exclusive use and at bis unrestricted pleasure, indicates, we think, simply an intention on bis part to fullfil, to tbe end, tbe trust upon which be entered when be accepted tbe title, or first permitted the irse of bis name in tbe manner before mentioned. Is not tbe presumption strong that, but for tbe death of Lyman and tbe termination of tbe parental relation between tbe parties, tbe complainant would not now be found resisting tbe disposition made of tbe property by bis son, and jealously seeking to thwart tbe realization of tbe claim by Ladd. In Turner vs. Campbell, 3 Gratt., 77, it was held that, although a party to whom property is conveyed upon a fraudulent secret trust, may bold it as bis own as against tbe grantor and bis representatives, yet if be assents to tbe trust, and executes it in part, it is not competent for one oestui que trust, who -may have got possession of tbe property, to set up tbe fraud, to defeat tbe claim of another oestui que trust to bis share of tbe property. This seems to be just; and we do not think we are weakening- tbe force of tbe wholesome rule of equity to which we have before alluded — that as between tbe parties, agreements, void as to the creditors, would be perfectly binding, in bolding, that where tbe grantee of property fraudulently conveyed bad voluntarily reconveyed tbe same to tbe grantor, in apparent execution of tbe fraudulent trust, be cannot afterward make a valid claim to tbe property, or its proceeds, on tbe ground of tbe original fraudulent conveyance. In this case tbe complainant, by bis own act, divested himself of a title which be bad received in fraud of law and equity, does not seem called to reinvest him. • Tbe decree of tbe court below is reversed, with costs, and tbe cause is remanded for further proceedings in conformity with this opinion.