Young v. Lathrop

Pearson, C. J. The point is this. A debtor makes a volun — 69 — tary deed of land for the benefit of himself, with an intent to defraud his creditors. Afterwards a creditor takes out execution upon a judgment against the debtor for a pre-existing debt and puts it into the hands of the Marshal. A fterwards the fraudulent grantee, for a valuable consideration and a full price, makes a bona fide sale, and executes a deed to the defendant for the land, the defendant having no notice of the fraud and covin between the debtor and the grantee. This sale and deed were subseq%i,ent to the teste ot the execution. Afterwards the Marshal sells under the execution, and the plaintiff’ becomes the purchaser and takes the deed of the Marshal. "Which has the title ? the defendant who was the first to purchase and take a deed from the grantee, or fie plaintiff who purchased under an execution the teste of which was prior to the defendant’s purchase ? It is settled, without any conflict of the authorities, that a purchaser of a fraudulent donee, bona hde and for a valuable consideration at a full price, without notice of the fraud, acquires a good title under 27 Eliz., against a subsequent purchaser of the donor, bona fide and for valuable consideration at a full price. , It is also settled, but after some conflict of the authorities, that a purchaser of a fraudulent donee, bona fide and for a valuable consideration at a full price, without notice of the fraud, acquires a good title under 13th Eliz., against creditors, and purchasers under their execution for a debt existing at the time of the fraudulent conveyance, at a sale subsequent to the sale of the fradulent donee. Eor both of the purchasers are bona fide, for valuable consideration, and the one to whom the first sale was made is preferred, under the maxim — “ Prior est in tempore, portion est in jure.” Eoberts on Fraudulent Conveyances 392, 462, and the cases there cited. Anderson v. Roberts, 18 Johnson 515. Brace v. Smith, 2 Mason 252. The dictum of Ruffin, Judge, in Hoke v. Henderson, 3 Dev. 12, is put on the ground of unfairness to the creditors of the — 70 — fraudulent donor. He gives no weight to the proviso in favor of bona fide purchasers, and after setting out the argument on the side of the creditors, waives a discussion, “ because the point is not presented by the facts of the case, for the land was sold under the execution against the donor, before the sale on the side of the fraudulent donee.” This question is put at rest by Rev. Code ch. 50, secs. 1, 2, and é; for the proviso, (which will be again referred to), applies to the 1st sec. which is 13 Eliz., and also to the 2d, sec., which is 27 Eliz. Whatever may b.e said about fairness or unfairness towards creditors, the Legislative will gives preference to a bona fide purchaser, for valuable consideration at full price and without notice of the fraud and covin. In our case the plaintiff says he is taken out of the operation of this maxim, by the effect of the teste of the execution under which he claims title ; for the execution relates back to the teste, and gives to the creditor a lien- on the property of the debtor, which lien is prior in point of time to the sale of the fraudulent donee to the defendant. The case turns upon this point. No direct authority was cited. In Brace v. Smith, Sup., at page 279, Justice Story, after denying the distinction, between the operation of the 27 Eliz. and the 13 Eliz., in respect to bona fide purchases for valuable consideration without notice, says, “I have searched with some diligence to ascertain if that distinction Iras been recognized in any adjudged case or in any elementary treatise in England. Hitherto my researches have been unsuccessful. In Wilson v. Womal, Godbolt 161, however, Lord Chief Justice Coke, than whom no man was probably better acquainted with the statute in its true construction, lays down a doctrine that in terms denies the distinction. He says that, “ If lessee for years assign one his term by fraud to defeat the exe-, cution (upon a judgment against him), and the assignee assigneth the same unto another bona fide, that in the hands of the second assignee it is not liable to execution.” — 71 — G-odbolt’s reports are not in oto library, and we are not able to see certainly, from this extract, that the execution bore teste before the bona fide assignment; but we infer the execution was in the hands oí the sheriff, from the words ‘£ assign one his term by fraud to defeat the execution (upon a judgment against him.)” If so, this is a direct authority for the position that a bona fide sale of the fraudulent donee, although after the teste of the execution, passes a .good title to the purchaser against the creditor, and a purchaser at a sale under the execution subsequently made. Let us see how the question stands, on the reason of the thing.” A lien does not vest the title in the creditor, but leaves it in the debtor until a levy and seizure in respect to personal property, and until the sale under the execution in respect to land. This is settled. Frost v. Etheridge, 1 Dev. 30. The effect of a lien is merely to tie up the land in the hands of the debtor, so that he cannot, either by a voluntary conveyance or by a conveyance for -valuable consideration, deprive the creditor of his right to have the land sold for the satisfaction of the execution. So, the lien created by a lis pendens does not divest the title, but merely ties up the property until the determination of the suit. In our case, before the teste of the execution, the debtor had passed the land to the donee, and although the conveyance was fraudulent, still it effectually passed the title and was valid as between the donor and donee* So, when the execution issued it had nothing to operate on, for the debtor had nothing and the lien created by the teste cordd not take effect as to him, and it could not take effect on the land in the hands of the donee, except by three of the 13th Eliz., which makes the conveyance void as to creditors. If the donee had retained the land until it was sold under theexecution, as the property of the donor in respect to his creditors, the purchaser would have acquired a good title. But the donee did not retain the land, but sold it to the defendant, who was a bona fide purchaser tor valuable consideration, at a full price, and without — 72 — notice of such fraud, before it was sold under tbe execution ; and the defendant insists that he is protected by the proviso in the statute, 13 Eliz., which has the effect to make the first section inoperative, and to render the original conveyance valid as against creditors in favor of such bona fide purchaser, and if so the creditor could acquire no lien, for the debtor had parted with the land, and in respect to the bona fide purchaser the conveyance was valid, both in regard to the debtor and his creditor. In other words, if the purchaser comes within the proviso, that takes from the creditor all benefit which he would otherwise have had under the first section. The proviso is in these words (section 4, chapter 50, Rev. Code): “Nothing contained in the foregoing sections shall be construed to impeach or make void any conveyance of any lands bona fide made upon and for good consideration to any person not having notice of such fraud.” It is settled that good consideration means valuable consideration, or a fair price. ¥e can see nothing to take the conveyance to the defendant out of the operation of this proviso, or any principle upon which it can be impeached or made void in the face of these express terms. The proviso can only be made operative by giving to it the scope and effect of purging the original conveyance of the fraud with which it was tainted, by allowing the bonafides and the full valuable consideration of the second conveyance to supply the want of these qualities in the first, so as to perfect the title of the bona fide purchaser, by carrying it back to the donor and claiming the title from him, and thus prevent the title of the first purchase from being “impeached and made void.” When the plaintiff says, “ My title goes back to the teste of the execution under which I claim,” the defendant replies, “My title goes back to the original conveyance made by the debtor, which is purged of the fraud of which I had no noticeand when the plaintiff says, “ The first section makes all conveyances made in fraud void as to creditors,” the defend — 73 — ant replies, “The 4th section makes my title good, and'declares that nothing contained in the 1st section shall be construed £ to impeach or make void my title.’ ” It was said on the argument, “ This effect given to the proviso will defeat the object of the act, which vras to protect creditors,” for debtors will make fraudulent deeds on purpose to enable donees to sell and defeat creditors. That may be so; but the object of the proviso evidently is to protect bona fide purchasers, and when the question is, shall the creditor lose his debt or the bona fide purchaser his money, the proviso gives the preference to the purchaser. The result is, that the first bona fide purchaser, whether under the donee or under the execution against the donor, acquires the title. The judgment below is reversed upon the facts found by the referee.