Buck v. Sherman

Whipple, J., delivered the opinion of the Court. The complainant having acquired a specific lien on the real estate described in the bill, his right to invoke the aid of a court of chancery to set aside the mortgage executed by Benjamin to Elias B. Sherman, is unquestionable, if, from the facts disclosed on the hearing, it shall be apparent that the mortgage was executed with a view to defraud creditors. Such a mortgage constitutes a cloud on the title, to remove which the complainant has a right to appeal to the powers with which courts of equity are armed, and which are liberally and beneficially exercised in a large class of cases. Was, then, the mortgage in question a device by which the rights of creditors were delayed, hindered or defrauded ? If so', it must be adjudged void. The solution of this question decides the case. In that class of cases within the range of which the present one falls, it is to be observed, that it is not required by the complainant, that fraud in fact, or an express intent to commit a fraud, was contemplated. It is sufficient if it appears from the whole case that the effect of the .acts of the defendants was to delay or hinder creditors in the collection of their just debts. The determination ,of the question before us is involved in some difficulty, growing out of the somewhat peculiar and complicated character of the transactions disclosed by the bill and answers. So far as the mortgage was intended to secure James Sherman, Jr., the transaction is stripped of all doubt and difficulty. The answers of all the defendants so far as they are responsive to the allegations contained in the bill, must be taken as true, and these answers show [181] a Iona fide debt due from Benjamin to James, at the time of the execution of the mortgage. But can the set-off of the real estate to James in satisfaction of this debt be sustained ? It appears that no proceedings were had to foreclose the mortgage, either in chancery or by advertisement, but that the whole proceeding was had between Elias B. and Benjamin Sherman, the former representing his brother James. It seems also, that the set-off was made after the levy by the complainant and the filing of the original bill. This feature of the case is open to animadversion : it bears on its face an unfavorable aspect. No notice was given to the complainant of the proceeding, although he was interested in the real estate under the levy. It was proper that his rights, if any he had, should be respected. The principles of natural justice, and the law of the land will not sanction such a proceeding. No man’s right can be legally affected without notice, actual or constructive. But was it competent, in a legal point of view, for the parties to dispose of the real estate named in the mortgage ? In other words: Does the statute under which the proceeding was conducted, authorize the set-off of real estate which is covered by a mortgage, without first proceeding to foreclose, either in equity or by advertisement ? I think it does not. It is not to be disguised that the provisions of the act under which the parties proceeded, are involved in some mystery. It bears on its face some of the strong features by which the legislation of that day was characterized; but we think that a comparison of the first and sixth sections evidently contemplate a foreclosure of a mortgage, before the provisions of the second section can become operative. Where a statute admits of two constructions, one reasonable and sensible, and the other unreasonable and insensible, the duty of courts is obvious. That construction which is consistent with good sense and [182] sound reason must be adopted. We think, therefore, that all the proceedings had under the provisions of the act in question, must be set aside, and held for nought. The effect of this decision will be to leave the parties in the same plight they were in before such proceedings were instituted. The next question to be considered is, whether the mortgage is fraudulent so far as it purports to secure Elias B. Sherman against the several promissory notes mentioned in the pleadings. Without expressing any opinion as to whether the transaction in this respect was fraudulent in fact, on the part of Benjamin, we cannot presume, under the aspect which the case now assumes, that a fraud was perpetrated by Elias B. The complainant chose to rely upon the case made by the bill and answer; by that case he must abide. The answers leave the notes in the hands of Benjamin. Whether he has negotiated them or not, does not appeal-. If he has, then Elias B. ought to be protected against eventual liability upon them. If not, the complainant has an appropriate remedy by which to prevent their negotiation. Ip order to authorize us to declare the mortgage void so far as it was intended to indemnify Elias B. Sherman, it must appear that the transaction was fraudulent on the part of both Elias B. and Benjamin. While the stern principles by which courts of equity are guided, will be applied in all their strictness to cases of fraudulent conveyances, where the fraud is clearly established, yet we cannot presume that fraud actually exists upon slight circumstances. The proof should be so clear and conclusive as to leave ,no rational doubt .upon the mind as to its existence. It is not our purpose to .express any opinion upon this part of -the case, as respects the motives or intentions of Benjamin; but we are not permitted to declare that the conduct of Elias B. was [183] fraudulent. All doubt as to the true character of the transaction could have been easily explained, had the parties thought proper to have shed more light upon the notes in question. If the notes were intended for the purpose stated in the answers, it would have been more natural that Elias B. should have stood in the relation to them of an endorser, rather than a mater. But, above all, it is somewhat unaccountable that the parties observe a studied silence respecting the disposition made of them. It would have been more satisfactory to us, had the defendants, in their answers, disclosed the fact that the notes had been used for the purposes stated in those answers. They having failed to do so, it was incumbent, under the circumstances, that the complainant, in order to show the transaction fraudulent on the part of Elias B. to have proved that they had never been negotiated, or other facts or circumstances tending to show that the notes and mortgage were intended to protect the real estate of Benjamin from execution. Upon the whole, we are of opinion, that the decree of the Chancellor, dismissing the bill generally, must be reversed : And we order and decree further, that the proceedings had under the provisions of the act entitled “An act to provide for the transfer of real estate on execution, and for other purposes,” approved February 17, 1842, be vacated and held for nought. The effect of this decree will be simply to vacate the proceedings had under the act of 17th February, 1842, and to withhold all other relief under existing circumstances. This will enable the complainant to institute such further proceedings as he shall deem proper, with a view to the satisfaction of his judgment. Decree reversed.