Muse v. Yarbórough

Bullard, J., delivered the opinion of the court. The syndic of the creditors of John Bostwick instituted the present suit, in order to annul the disposition of certain property, shortly previous to his surrender, on the ground of fraud, and certain nullities in the proceedings. The principal facts alleged are, that Bostwick, some years ago, obtained from Yarborough a letter of credit, addressed to the house of Reynolds, Byrne & Co., for a sum not to exceed five thousand dollars; that in order to secure and indemnify Yarborough, he and his wife gave a mortgage on — 528 — the property now in controversy, and also executed a pledge of two promissory notes of two thousand dollars each; that long before Yarborough had paid any thing on account of the letter of credit, Bostwiclc, the insolvent, on the 5th November, 1833, confessed a judgment in his favor, a short time before his failure, and the property mortgaged and pledged, was seized and sold. Previous to the seizure on execution, Yarborough transferred the judgment and all his interest, to M- and E. Boatner, who, as well as their assignor, are made parties. The property, consisting of lands, slaves and notes, was sold in mass, and purchased by the defendants!, Boatner. The plaintiff not only alleges the nullity of the original mortgage and pledge, and the confession of judgment, and the sheriff’s sale,, on various legal grounds, but he distinctly charges and alleges that the whole proceeding was a fraudulent and collusive contrivance', concocted among the defendants and, J. Bostwicb, to cover the property of the latter, then insolvent, to the full knowledge of all the parties concerned., The judgment, on the confession of Bóstwick and wife, was signed in November, 1833 ; the property sold on execution, on the 3d of February following, and the surrender made on the 12th of the same month. The whole transaction, except the executing of the mortgage and pledge, took place within the three months next preceding the failure. To the petition of the syndic, the defendants pleaded the following exceptions, which have been relied on in argument, together with others which were abandoned : 1st. That the syndic is barred and prescribed by the lapse of ten days from the meeting of the creditors before the notary, the creditors having failed to'make opposition to the surrender, on account of frauds and nullity in the proceedings, or of any. previous frauds in the transactions of the ceding debtor. 2d. Tliat the syndic, not being the representative of the ceding debtor, cannot exercise any rights merely personal to him. 3d. That being the representatives of the creditors who accepted the surrender without opposition, the syndic-is limited in his functions and rights, and the property surrendered. 4th. — 529 — Because a suit, either against the ceding debtor or other persons, on account of fraud and nullities, cannot be carried on after the surrender. 5th. That the creditors cannot inquire into the proceedings previous to the execution on which the sale was made. 6th. That the syndic cannot maintain an action to avoid a forced alienation of property of the ceding debtor, prior to the surrender. 7th. That the syndic cannot maintain this action to rescind said sale, because the property belonged to Susan Bostwick, a joint debtor, and against whom a joint judgment was obtained and executed, by the forced sale above mentioned. These exceptions having been overruled, the defendants (answered, denying any amicable demand, but admit the sheriff’s sale; and they allege, that the property acquired by them, was that of Susan Bostwick, the wife of the ceding debtor, separated of property from him, and was sold as such-They further plead the prescription of one year. Upon the-issue thus made up between the parties, the case was submitted to a jury, whose verdict, being against the defendants, was followed by a judgment, annulling the alienation, and restoring the property to the mass. The defendants appealed. Our attention is first called to the exceptions, the last of which may be considered rather as an answer to the merits, setting up the title of Mrs. Bostwick, independently of her husband, and will be noticed hereafter. -The rest, when analysed, resolve themselves into the following propositions, which have been maintained in argument. 1st. That no opposition having been made within ten days, on the ground of fraud, but the creditors having accepted the surrender, the functions of the syndic are confined to the administration of the property, and exercising the actions surrendered, and that he cannot inquire into any nullities or frauds in the transactions of the insolvent, prior to the cession. 2d. That the syndic cannot attack a forced alienation of any property of the ceding debtor, made prior to the surrender. The syndic, representing all the creditors ■when there has been a cessio bo-norum, as well as every creditor when there has been no cession, is entitled to an action to annul any fraudulent contracl made in fraud of creditors by the insolvent debtor. It is not necessary to the exercise of this action, that opposition on the ground of fraud be made to the proceedings before the notary, within ten days after the appointment of a syndic. The revocato-ry action given to creditors, to annul contracts made in fraud of their rights, may have for its object any contract or transaction of the debtor, especially confessions of judgment, anticipated payments, and even a refusal to accept an inheritance, in fraud of the rights of creditors. I. The counsel for the appellants relies, in support of his first proposition, upon the provisions of the act of 1817, relative to the voluntary surrender which authorizes any creditor, within ten days after the appointment of syndic, to make opposition on the ground of alleged frauds, committed by the ceding debtor, or illegality of the proceedings before the notary, and which declares, that if such charge of fraud be found true by the jury, the party shall be forever deprived of the benefit of the laws made in favor of insolvent debtors. The effect of sustaining a charge of fraud against the debtor, is to declare him a fraudulent bankrupt, and not entitled to his discharge under the act. We think it clear, that this section relates merely to the debtor personally, so far as it regards his claim to enjoy the benefits of the act, because the persons with whom he may have entered into fraudulent contracts may not be parties to the concurso, and such contracts could not be avoided without making them parties. But the act of 1817 must be taken in connexion with the provisions of the Code on this subject. The articles cited in argument, gives to the representatives of all the creditors when there has been a cession, as well as to every creditor when there has been no cession, an action to annul any contract made in fraud of their rights. Louisiana Code, 1965, et seq. The revocatory action thus given, may have for its object any contract or other transaction of the debtor, especially confessions of judgment, anticipated payments, and even a refusal to accept an inheritance in fraud of the rights of creditors. Such mortgages, and judgments confessed, as took place within three months preceding the cession, are presumed to be fraudulent. The Code estáblishes the broad principle, that every act done by a debtor with the intent of depriving his creditor of the eventual right he has upon the property of such debtor, is illegal, and ought, as respects such creditor, to be avoided. Louisiana Code, article 1964. But it is urged, that only such property and rights as are set forth in the schedule, vest in the creditors. We do not — 531 — so understand it. All the property of the debtor is presumed to be embraced in the schedule, because he is to swear that it is; and if any has been omitted, it is clear it does not belong to the debtor, but passes to the creditors, by the cession. A contract tainted with fraud, confers no rights, and property fraudulently disposed of, is regarded as still belonging to the debtor at the moment of his failure, so far as the interests of his creditors are concerned. perty of Pthe £^ the cession,-whether it be mclu-ded in his schedule °r not‘ tainted with ^rights^and propertyfraudu-lently disposed 0f, is regarded “g^thedeb^ oratthemomeni far as the inte-are* con- t.ion> under a collusive judg- ^ debtor*in *®Tor of. =1 cre" ditor, giving a preference over maybcTavóided [{j® in the revocatory __ ., „ - II. It is further contended, that only contracts oi the insolvent can be avoided by this action, and that in this case it is not a contract but a forced alienation ; a sheriff’s sale under execution, which is sought to be annulled ; that the defendants show the sheriff’s deed, and judgment, and exe- ... . , , , .... cution, and that the syndic is without faculty to inquire into the regularity of the proceedings prior to the failure. But if it be true, as alleged, that the confession of judgment which forms the basis of all the subsequent proceedings, was collusive and fraudulent, either because no debt was really due, or because the intention was to give to Yarborough an undue preference over other creditors, and that all the parties conversant of the facts, then looking to the substance rather than forms, we may conclude that the employment of the sheriff and an execution was merely a species of machinery by which a fraudulent alienation was to be effected. It is J * # sufficient to inquire into the character of the judgment confessed, for if that was fraudulent, all the proceedings founded upon it were null and void between the parties ; for, in the eye of the law, no difference exists between a voluntary conveyance of property for fraudulent purposes, and such an alienation disguised under the forms of judicial proceedings. It is true, the mortgage and pledge were made more than a year before the failure of Bostwick. But at the time the judgment was confessed, Yarborough either was or was not his creditor. If he was not, then the judgment as it relates to creditors, was void and conferred no rights ; if he was, then the inquiry is, whether the proceeding was designed to give him an undue preference over other creditors. In either — 532 — case the jury might well pronounce that there was collusion and fraud. > The revocato-ry action to annul a fraudulent sale, brought by the syndic of the creditors, is not prescribed, if it is commenced within a year after his appointment. But although the direct action to annul a judgment of separation of property, on the ground of fraud and collusion,may be prescribed, yet the party cannot be precluded from offering evidence to invalidate such judgment, when it is opposed to him by way of exception by the defendant. III. This brings us to the title of Susan Bostwick, who is alleged'to have been legally separated of property from her husband and owner of the property in controversy. It is conceded on all hands, that if the community of acquests and •gains still existed between Bostwick and wife, it is quite immaterial in whose name the property was acquired. The defendants allege the separation by way of exception, and as the basis of the separate title of Mrs. Bostwick, and the plaintiff in the progress of the trial offered evidence to show that John Bostwick continued to administer all the property in the town of Clinton, and that there was fraud and collusion in the pretended separation of property. The introduction of such evidence was opposed, on the ground that it would be to allow the judgment to be attacked collaterally, and that the plaintiff is barred by prescription. The evidence was admitted and the defendants took a bill of exceptions, in which the opinion of pur learned brother is clearly stated. With respect to the plea of prescription, the judge held, that this suit having been brought within one year after the appointment of the syndic, the action is not prescribed. In this he was clearly right; but if the defendants meant to say that the plaintiff’s direct action to annul the judgment of separation, on the ground of fraud and collusion being prescribed, he was.also precluded from offering evidence to invalidate it when opposed to him by way of exception, we think the proposition equally untenable. He may never before have had any interest in questioning the validity of the separation. The property had been sold in pursuance of a judgment upon air obligation, apparently entered into by both husband and'wife, and. for aught that appears, she had acquiesced. The purchasers assert her title to the whole property as separated of property ; and although a direct action to annul the separation may be prescribed, if indeed such an action be in any case necessary, we think the maxim applies, “ quae, temporalia sunt acl agendum perpetua ■punt ad excipiendum.” The court below recognized the well — 533 — settled principle, that inasmuch as no replication is permitted in our practice, every averment in the defendant’s answer must be considered as denied, and the plaintiff permitted to show that they are unfounded in law and fact. This doctrine has been repeatedly recognized by this court. 4 Louisiana Reports, 257. 1 Martin, N. S., 1. According tc the practice in this state, no replication is permitted, consequently every averment in the defendant’s answer must be considered as den.ied¿ ?nd t1ie plaintm is permitted to show founded" hf law and *ac1, separation must bearing ail the parties ¡ and it is null if it has not been execu-tfV/XSfof the wife, evidenced by an au-thentio act, etc. A voluntary separation of property be-Indlvife^nuiil !h®l'e must be}\ judgment, and if it is not followed exeratfontitpre-duoe?n0 effeo!s’ even between the The judgment of separation was pronounced in 1822, but appears neither to have been published, nor any attempt made to execute it until 1828. At that time an execution appears to have issued and was satisfied by a sale of some of the husband’s property. The code which was in force at that time, declares, that 7 7 every voluntary separation of property is null, both as respects third persons, and the husband and wife between themselves, To render such separation valid, it must be ordered by a court of justice, after hearing all parties, and the judgment is null if it has not been executed by the payment of the rights and claims of the wife, evidenced by an authentic act, Al, i h ni . , ., . ,. or at least a bona jiae non-mterrupted pursuit to obtain payment. Louisiana Code of 1808, page 343, articles 87 and 88. ... . ... , , ,, All the evidence in this case tends to show, that the pretended separation was a voluntary one, and as such, did 1 1 , , . „ ’ , ’ . not put an end to the community of acquests and gains, What the law declares to be null, we cannot consider as valid for any purpose. It is not the mere judgment of . , • i i i • „ separation which renders the parties separate of property, The judgment recognizes the necessity for a separation, and judicially authorizes it: but if not followed by a bona fide J J , rf J J execution, it produces no effects even between the parties, 13 Toullier, Nos. 69, 73, 75. It is, therefore, ordered, adjudged and decreed, that the judgment of the District Court be affirmed, with costs.