Dugan v. Vattier

Blackford, J. William Burke and Charles Fattier-filed a bill in chancery against Thomas Dugan* Elias .Conwell, and others, in the Dearborn. Circuit Court.. • • The bill charges, that James Conn in his life-time was indebted to each of the complainants; that since Conn’s death, th.e complainants have obtained judgments against his administrator for their respective claims; and that there'is no personal property to satisfy the judgments'. It is also charged, that, pursuant to a corrupt agreement between Conn and Dugan, a conveyance of all Conn’s real estate was executed by him to [246] Dugan, without consideration-, for the purpose of defrauding the complainants and others,- the creditors of Conn. It is further charged, that Conwell fraudulently purchased a part of the land from Dugan, with notice of the fraud in Dugan’s title. The object of the bill, is to obtain a decree subjecting the land in question to the debts of Conn.' , All the material charges in the bill are denied in the answers' of Dugan and Conwell. . The following aré believed to be the facts: — In 1820, Conn, being indebted to various persons in a much greater -amount than his property was worth, conveyed all his .real estate to Dugan, without any consideration, for the express purpose of fraudulently securing' it, for his own use, from the demands of his creditors. "At the date, of this conveyance,- Conn owed the debt now demanded by .ZW/ce,-to.the person from whom Burke obtained the right . to. it. After- that time, Conn became indebted to Vattier. In 1825, Dugan sold and conveyed a part of the land to’ Conwell for 300 dollars. Conwell, after having-paid 200 dollars, of the purchase-money, received notice of the fraudulent title under which Dugan claimed. The residue of the purchase-money still remains unpaid. - Since these transactions, Conn being dead, judgments have been obtained by Vattier and by the-person'under whom Burke claims, for their respective debts, against Conn’s administrator. Upon these facts, the Circuit Court decreed in favour of the complainants against Dugan and. Conwell. There can be no doubt respecting the correctness of.the décree in this case, except as it-regards the title of Conwell. It is contended by him, that as his deed was executed, and two-thirds.of the-purchase-money paid, before notice of the fraud, his -title cannot be impeached. ■ - This is a •' case in which a debtor makes'a deed to defraud his creditors, and the fraudulent grantee sells the land to a third person. We have a statute which expressly declares the original deed, in- such a case, to be absolutely null and void; and it is a question which has excited great interest, whether such a fraudulent grantee as Dugan is, can, consistently with the provisions of a statute like ours, convey to any person, under any circumstances, a valid title to the premise's. ■ That he cannot do so, is decided by the Supreme Court of Connecticut, in Preston v. Crofut, 1 Day, 527, note; and by the Court.of chancery in New-York, in [247] Roberts v. Anderson, 3 Johns. Ch. Rep. 371.. But a decision, directly to the contrary, has since been made by the Court of Errors in JVew-York, in Anderson v. Roberts, 18 Johns. R. 515; and by. the Circuit Court of the United States in 'the first-circuit, in Bean v. Smith, 2 Mason, 252. If we concurred in opinion with th.e Supreme Court- of Connecticut, and the Court of chancery of New-York, that opinion would put, an end, at once, to the question of notice in the case before us. ' We should then consider,'that Conwell could -have-no claim to the premises uiider his deed from Dugan, even if all the purchase-money had been paid by Conwell, previously to his notice of the fraud. ..The contrary opinion, however, as expressed in the cases of Anderson v. Roberts, arid Bean v. Smith, to which we have referred, appears to us to be the'most reasonable, and to comport.best with the spirit of the common law and of the statute. It becomes nécessary for us, therefore, to determine what effect the notice, received by Conwell-whilst one-third of the purchase-money was unpaid, has upon the validity of his title. . The most that he can ask, under a statute which declares his grantor’s title absolutely void, is to be placed upon the same footing with the purchasers of real estate, for which,some other person, at the time of, the purchase, has an equitable title. . . . • The question, as to the.'effect of a notice of a prior equity, is not- a new one in .this Court. It was discussed here several years ago, and ah opinion then expressed, that unless the deed be executed and the purchase-money paid, before- notice, the prior equity must prevail. Gallion v. M’Caslin, November term, 1820. So, also, it was held by this Court at the last term, that a party cannot be considered as an innocent purchaser, if, after the purchase, but before payment' of the purchase-money,, he receive notice of the prior equity. Hunter v. Holcroft et al. The same doctrine is laid down by Mr. Sugden. His language is as follows:--"Notice,before actual payment of all themoney, although it be secured, and the conveyance actually executed, or before the execution of the conveyance, notwithstanding that the money be paid, is equivalent to notice before the contract.” Sugd. on Vend. Phila. ed. of 1820, p. 530. That the deed must be executed before the receipt of the notice, is decided in Wigg v. Wigg, 1 Atk. 382; and that the purchase-money must be paid before .the notice, is decided in [248] Harrison v. Southcote, 1 Atk. 528, in Story v. Lord Windsor, 2 Atk. 630, and in Tourville v. Naish, 3 Peere Williams, 307. We have been referred by the counsel of Conwell, for a contrary opinion, to the case of Youst v. Martin, 3 Serg. & Rawle, 430. The previous decisions, however,'which we- have cited, must govern the case before us. . It is our opinion, that the transaction between the fraudulent grantee and the purchaser from him, must be completely closed, by the payment of all the purcha.sé-money and by the execution of the deed, before the notice,-or. the purchaser cannot hold the property from the original grantor’s creditors, whom the original grantor and grantee have attempted to defraud (1). J. Sullivan, for the plaintiffs. G. H. Dunn and D. J. Caswell, for the defendants. It- is objected by-the plaintiffs in error, that the complainants, having distinct demands, should have brought separate‘suits.That objection is.answered by the case of Brinkerhoff v. Brown, 6 Johns. Ch. Rep. 139. Stevens, J. having been of counsel in the cause, was absent.' Per Curiam. The decree is affirmed with costs. Footnotes [(1)] This question has been decided, in accoidance with the case in .the text, by the Court of Appeals of Virginia. Carr and- Green, Js. held, that to sustain the plea of a purchaser without notice, the party must' be a complete purchaser before notice; that is, he must have obtained a. conveyance, and paid the ■whole of the purchase-money. Carr, J. refers to most of the authorities cited in the text, and also to Moore v. Mayhow, 2 Freem. 175,—Jones v. Stanley, 2 Eq. Cas. Abr. 685,—Jerrard v. Saunders, 2 Ves. jr. 454,—Mitf. Pl. 215, 16,—Hardingham v. Nicholls, 3 Atk. 304,—3 Newl. Eq. 145,—and Beame’s Pl. 247. He concludes by saying — “I cannot see how a defendant can, in the ■character of purchaser without notice, avail himself of payment of a part of the purchase-money, though paid before notice, and have a decree of the Court that such payment should constitute a lien on the land: it is not at all within the issue: it does not make him a purchaser -without notice: and without this, he cannot interfere with the prior lien. Suppose, instead of part, he had paid the ■whole of the purchase-money, but got notice before he had a deed; he would surely have as much.right to have the -whole, as a part, made a lien on the land; and this being the full value of the land, would wholly disappoint the prior incumbrancer. I am clearly of opinion, therefore, that the purchaser must show, that he had paid the -whole consideration before notice, in order to protect his purchase.” Cabell, J. dissented, saying that the purchaser should he protected to the extent of his payment. The other two judges were absent. Doswell v. Buchanan's ex’rs. 3 Leigh, 365. There is, also, the following recent case on the subject, in the United States’ [249] Circuit Court, first circuit. A bill in equity was brought to set aside a conveyance-asserted to have been procured by ftaud. One of the defendants pleaded, that he was a bona fide purchaser under the grantee of parcel of the premises, without notice of the asserted fraud, and that he had paid a part of the consideration-money, arid that the residue was secured by. mortgage. ■ Held, that this plea furnished no bar to the bill; that it should have averred, that the -whole consideration of the purchase had been paid, before notice of the plaintiff’s title. Wood v. Mann, 1 Sumner, 506,