Denton v. Willcox

The judgment of the court was pronounced by Eustis, C. J. This controversy grew out of an agreement* between the plaintiff and J. Willcox, one of the defendants, of which the following is a copy. “Whereas difficulties and embarrassments exist between G. W. Denton and Jacob Willcox, arising from their business in New Orleans, under the commercial firm of Willcox Fearn, and from the obligations and endorsements of said Denton for said Willcox, as one of the firm of Willcox, Anderson Co., and which difficulties the parties have mutually agreed on terms for adjustment of, to wit: — The said Denton, on his part, has agreed that, in consideration of the said Willcox obtaining his release on all the judgment claims hold by the Bank of the United States against him, and which aro believed to consist of the following, viz: one for the sum of thirty-eight thousand and thirty-three dollars and fifty cents; one for the sum of four thousand four hundred 'and eighty-seven dollars and thirty-nine cents — both with interest from maturity of the different obligations, sued in the Commercial Court of New Orleans; also from the judgment or judgments originally obtained by the United States Bank,' against Mr. Denton, and now held by James Erwin, as well as all other claims or implications existing against Mr. Denton, of every nature or kind, for account of Willcox 8¡ Fearn, Willcox, Anderson Sf Co., or Jacob Willcox individually; and further, that said Denton is to retain for his own use the lands entered for their joint benefit, in the States of Louisiana, Mississippi and Arkansas, (remaining unsold,) the titles to all which, with one exception, were taken, and stand in the name of said Denton; also a small lot of ground in the City of New Orleans, adjoining the cotton press on Magazine street; also, to retain all the yent money collected by him, for dues on said cotton press, from J. S. Wood, — 61 — “Now, in consideration of the foregoing, the said Denton has agreed to, and hereby binds himself to hand over to said Willcox, as cancelled and satisfied, the notes given to him by said Willcox, in settlement of his claim on assets of Willcox 8f Fearn, amounting to $100,000. “The note of Willcox, Anderson 8p Co., paid by said Denton to the Union Bank of Louisiana, $3,870. “ The obligation of H. W. S. Hills, given him as security or indemnity for any and all losses sustained by him on account of said Willcox 8f Co. “ Also, to reconvey to said Willcox, or such other person as he may name, full titles to the house, slaves and furniture in New Orleans, if in his name, situated in Julia street, (in the Thirteen Buildings,) and now occupied by said Willcox; also, to convey such titles or claims on nine sections of land in Mississippi, as may belong to him, to A. SfJ. Dennistoun Co., which are referred to in the offer made them for settlement of She-ir account against said Willcox, and by them accepted. “And the said Jacob Willcox, on his part, hereby covenants and agrees with the said G. W. Denton, for and in consideration of the foregoing, on his part, to have him released from any and all claims under the judgments referred to as belonging to the Bank of the United States, or their assigns, or any other claims they may hold on him, for account of said Willcox, in any manner whatever; also, to relieve the name of said Denton, as endorser on the paper of Willcox, Anderson <%• Co. It being well understood, that Willcox will need the aid of security the house will give, to complete the agreement on his part, the transfer of title will be made,'when so required, for the purpose named. “ In witness of this agreement, the parties have affixed -their signatures, and interchanged the same. “New York, October, 1844. (Signed) “Jacob Willcox, “G. W. Denton. “ It is expressly understood by the parties to the above agreement, that all expenses attending the transfers therein aamed, are to be at the expense of Jacob Willcox.” Vason, another of the defendants, had become the owner of the judgments recited in the agreement as belonging to the Bank of the United States. They were against Denton, Willcox and Huntington, one for $38,146 83, and the other for $4,551 16, both bearing interest. There is a discrepancy between the extract from the judgment docket and the mortgage certificate, as to the dates and amounts .©f these judgments; but no question as to their identity is made, and we assume the dates recited in the mortgage certificate, the 11th of March, 1843. The plaintiff obtained an injunction against the issuing of execution on these judgments, tendered a performance of his part of the agreement, and prayed for a perpetual injunction against any future execution on them, and that they be deemed to be satisfied, on the ground that Vason held them subject to the conditions of the agreement, that Willcox was bound to release Denton from the judgments, under the agreement, that Hills Co. purchased them from the trustees of the Bank of the United States on account of Willcox, that they were, in fact, parties themselves to the agreement, and on the purchase Denton ceased to be bound as a defendant by the judgments, and that Vason, holding the judgments through Hills Sp Co., could derive no greater rights than they possessed, and was subject to all the equities which Denton had against the — 62 — original purchasers under the agreement. Hills Sf Co. were made parties defendant, but, disclaiming any interest, withdrew from the suit. Willcox was made a defendant, and answered on the merits. No judgment was asked against him; and the issue is between the plaintiff and the defendant Vason. It is charged also in the petition that Willcox, or some other person for his use, has an interest direct or indirect in the claim under these judgments, and that if they should be satisfied out of the proceeds of Denton’s property, part of them will inure to the benefit of Willcox. Vason denies, in most positive terms, the allegations, so far as they affect him or his rights, which he asserts as a bond fide purchaser of the judgments, without notice or combination, from A. T. Burnley Sf Co., to whom they were sold by Hills Sf Co. The judgment of the court maintained the injunction, except for the sum of $7,971 61, the amount paid by Vason to A. T. Burnley Sf Co. for the judgments, and the defendants Vason aud Willcox have appealed, and Denton has united in the appeal. ■ It is charged in the petition that, the purchase by Vason was of ,a litigious right, which, as an attorney and counsellor at law, he was prohibited from making, under the article 2422 of the Code.* We do not conceive that the judgments purchased by him come within the prohibition of that article, and we take this opportunity of remarking that, if there was any thing exceptionable in this transaction on the part of Mr. Vason we should feel ourselves bound to notice it, but we are of opinion that he did what he had a right to do, and that his purchase was bona fide, and that his conduct is not obnoxious to censure. An exception has been taken in this court to the plaintiff’s right of action, that the agreement which the plaintiff seeks to enforce was illegal, immoral and fraudulent throughout, conceived and carried on for the purpose of screening the property of both Denton and Willcox from their creditors, and consequently that a court never can lend its aid in carrying it into effect. If the agreement be, and it is alleged, tainted with those vices, our duty is plain, and leaves us no discretion in its performance; and, in order to form a correct opinion of its character and object, it is necessary to go back to its origin. The plaintiff and Willcox were merchants, doing business in New Orleans under the name of Willcox Sf Fearn. They had purchased out the interest of Fearn. Denton was a silent partner, and by an instrument under private signature, on the 15th June, 1840, sold his interest in the partnership to the defendant Willcox for $100,000, for which the latter gave the plaintiff his notes; and, as a further consideration for the sale, Willcox agreed to pay a balance appearing to be due Denton on the books of the firm of Willcox Sf Fearn, and assumed the payment of the losses on cotton in 1839, which amounted to $66,000, of which Den-ton’s share was one half. For the purpose of securing the performance of the conditions of this agreement, which embraced not only what is before stated, but provided for the protection of Denton against the'debts of the firm of Willcox Sf Fearn, and all his liabilities on account of Willcox personally, or of the house of Willcox, Anderson Sf Co., (a new firm which succeeded Willcox Sf Fearn,) it — 63 — was provided that, the titles to the real estate belonging to that partnership, and also that belonging to Willcox personally, should stand in the name of Denton, and be retained by him as hypothecated for that object. Willcox reserved the privilege of selling any of the real estate or slaves thus mortgaged, on furnishing satisfactory security in lieu of that disposed of. Willcox assumed all the debts of Willcox 8c Fearn, and Denton was to be held harmless. It appears that this property, which figures in the agreement of 1844, and which never ceased to belong to Willcox, was in the name of the silent partner of the bankrupt concern of Willcox 8{ Fearn, and by the agreement of 1840 was so to remain. It is stated in the printed argument of Willcox that, it had been so placed originally for the purpose of facilitating the transfer of it, should it be required, Denton being the only unmarried man of the firm; but it appears that the real object was equally well attained after the marriage of Denton, and another purpose was also effected, to which neither of these parties could be strangers — by the property being in the name of Denton, it was supposed to be beyond the reach of Willcox1 s creditors. At this time, on the 15th June, 1840 there were these judgments recorded against him, which, in September, 1845, stood on the books of the recorder of mortgages: 1st. A judgment against Willcox, Anderson 8f Co., jointly and severally, for $7,493 50, with interest from the day of the date thereof, 23d November, 1837. 2nd. Another, against the same parties, for $5,158 64, with interest from its date, November 22nd, 1837. 3rd. Another, against the same parties, for $9,760, with interest from its date, 12th May, 1838. Having these judgments to meet, besides the loss of the cotton speculation of 1839, $66,000, it is obvious, with all the real estate of the late firm of Will-cox 8c Fearn, as well as his own dwelling house, slaves and furniture in the name of the- silent partner Denton, there were other objects effected by that state of things besides the facilities of conveyance, which no professional man can ask a court of justice to countenance. The agreement of 1840 was the basis of that of 1844, on which the plaintiff rests his claim for relief. This agreement, made in New York four years after, provides for the conveyance of the Julia Street property, (the dwelling house of "Wilcox,) his slaves and furniture, the delivery up of the notes of $100,000 and others held by Denton, to Willcox, in consideration of the latter’s procuring the release of the former from certain judgments which are set forth in the plaintiff’s petition, and certain other claims which it is not material now to notice. The last clause of the agreement is the key to the whole, and discloses the original purposes of these parties: tllt being well understood that Willcox will need the aid of the security the house will give, to complete the agreement on his part, the transfer of title will be made when so required for the purpose named.11 That is, is in order to enable Willcox to buy up these judgments, the means must be furnished by Denton1 s uncovering the title and conveying the house; but not to him, Willcox, for then it would come under the general mortgages recorded against him, but to Willcox, or such other person as he may name. The counsel of the plaintiff gives this view of the matter in his printed argument. “After the arrival of the procuration to Josephs, difficulties arose in reference to the transfer of the property. There were numerous judgments against Willcox, many of them, and of large amounts, of prior dates to the — 64 — judgments now in question; hence Willcox did not desire that the property should be transferred to himself, because that step would have placed it most effectually beyond his control.” The judgments recorded against Willcox taking precedence of those mentioned in the petition, rendered the latter without value, so far as his name was concerned; and it is apparent that, as Denton merely held a mortgage on the property in his name, whenever the debt for which it was given became extinguished, the property must of right fall under the mortgages recorded against the owner, and they also have the benefit of any diminution of the debt. The first mortgage creditor is first in right, and any disposition of the property to his detriment is a fraud, and any agreement between parties, having that for its object, is illegal. Denton had no right to give any such direction to property on which he only had a mortgage to the manifest loss of bond fide mortgagees. A release of his mortgage could not inure to the benefit of Willcox at the expense of his creditors. There were other judgments against Willcox, of which we will take the plaintiff’s own account. We find what follows in the printed argument of his counsel: . “Willcox met with other serious difficulties in his negotiations. In addition to the judgments of which his friends had obtained the control, there were others against him originally belonging to the Uuited States Bank, but which had been sold by the sheriff, at the sale of the various credits belonging to that institution. They were adjudicted to W. A. Gasqueb and G. Morgan, and by them transferred to A. Erwin. It would seem that Erwin had acquired them under some secret understanding with Willcox, and that there was a difference between them as to the balance due, Erwin claiming $7,500, and Willcox contending that he was bound only for $5,000!.” These judgments are also referred to in the agreement of October, 1844. Willcox contracted to release Denton from them, as well as from those held by the United States Bank. In the agreement they are said to belong to James Erwin, but he held them as agent of A. Erwin. But there is another branch of the affair between Denton and Willcox which is in keeping with the rest of it, and discloses the purpose of their combinations. Denton was a silent partner, and in solido bound for the debts of Willcox 8f Fearn, and was also involved to the extent of $66,000 on cotton shipments made with Willcox in 1839. He held, in his own name, real estate in New Orleans, and lands and slaves in Mississippi and elsewhere, belonging to the firm or to Willcox, and retained them as a security for the performance of the condition of the agreement of the 15th June, 1840. But by the agreement of 1844, on which the plaintiff has founded his action, her etains for Ms own use the lands entered for their joint benefit in the States of Louisiana, Mississippi, and Arkansas, remaining unsold, and a small lot of ground in New Orleans, &c., to the detriment of creditors, who, from the secrecy of his relations towards Willcox as a partner, were in the dark as to the ownership of the property and his responsibility as a partner. That there were unsatisfied claims against Willcox Sf Fearn results from the agreement of 1844, by which Willcox binds himself to procure the release of Denton from them, and there is a provision in the agreement for the conveyance of lands in.Mississippi belonging to Denton, to A. J. Dennistoun & Co., in settlement of their accounts against Willcox. — 65 — This looks very much like a joint effort of partners to enable a secret partner not only to avail himself of the ignorance of creditors to escape from his liability in solido, but to close his own account by the appropriation of partnership property to his exclusive benefit. Having ascertained, as far as it can be done from the documents before us, the position of Denton and Willcox, let us examine that of the plaintiff in respect to these two judgments. The first (5023) was obtained in a suit against Denton and others on a bill of exchange, on which Denton was an endorser, which was protested in New Orleans, on the 13th June, 1840, for non-payment. The second (5069) was obtained on Denton’s own notes, three in number, each dated May 23rd, 1840, payable at thirty, forty-five, and sixty days respectively, to the order of Willcox, and each amounting to §5,000, pi’otest of which was waived by the endorser, and on three notes of Willcox, Anderson & Co., endorsed by Denton, and protested before the 15th June, 1840, the date of the first agreement. These suits were instituted on the 5th and 19th April, 1842, respectively, and judgments were obtained on them only in 1843; but on the 6th June, 1842, the plaintiff confessed a judgment in the Parish Court of New Orleans, in favor of James Erwin for 63,000 with interest, a portion of which related back to 1837. In December following the confession of judgment, it appears to have been transferred to Andrew Erwin, of Tennessee, and being recorded before the two judgments under consideration were rendered, operated as a general mortgage to their detriment on all property in the name of Denton. The verity and validity of this judgment is assailed by the defendant Vason, who charges that it was a mere cloak, and afforded the moans to Denton to defy his creditors and those of Willcox and weary them out, by standing in the way of a pursuit of their lawful rights. Bearing in mind the statement of the plaintiff’s counsel concerning the relations between Willcox Sy Erwin, which we have just recited, let us hear what his witness says concerning this judgment. Jacques, a witness examined in New York, after stating the understanding between Denton and Hills Sy Co. in relation to the purchase of the judgments, says: “ Denton positively said that he would make title to the house, negroes and furniture, if the latter was in his name, immediately on his arrival in New Orleans; that he was unable to do so at that present time, in consequence of Mr. James Erwin holding a certain judgment against him, taking precedence on record to those held by the United States Bank, but that judgment was under his, Denton’s, control; that he would write to Erwin on that day to facilitate his action in the matter on his arrival in New Orleans, when he would make title to the house, &c., either by directing Erwin to waive the judgment held by him, or by a formal sale under that judgment, which ever might prove the most feasible plan.” This account of the judgment, of the power Denton had over it, and of the purposes to which he could apply it, was given by Denton to Hills & Co., on the 19th of November, 1844, previous to the purchase of the judgments held by the trustees of the Bank of the United States, Its effect would be weakened by any comment. A letter of May 11th, 1845, addressed by one of the Messrs. Hills to their agent, which was produced at the request of the plaintiff, is to the same effect. — 66 — An extract is to this purport: “ Denton stated to me, in the presence of a witness, that he had the control of the judgment against him held by Mr. Erwin, as well as the titles to the house and lot in Julia street, and, he believed, the negroes and furniture, and would immediately on his arrival in New Orleans, make good and sufficient title to the same to you, or our agent,” &c. Huntington, another witness for the plaintiff, proves that the plaintiff put another valuable piece of property in the city which belonged to him, the Harpej property, as it is called by the witnesses, in the name of another person. James Erwin released the property from the judicial mortgage, by an act to that effect, dated the 31st of May, 184&, passed by him as attorney in fact of Andrew Erwin. If we consider this Erwin judgment as the plaintiff himself'has treated it, what weight can be given to it, or to its transfer to Andrew Erwin? We can only treat it as an instrument in the hands of the plaintiff to coerce his creditors to sell their just claims on him to some mutual friend for a bagatelle; which instrument he used most effectually, and to enable him to complete and accomplish his ends he appeals to the ministers of the law. The circumstances attending this judgment, its transfer, its non-execution, and the payment of no portion of it for so long a period, its amount, and the uses to which it has avowedly been applied, produce the conviction on our minds as to its origin and purpose, which we cannot avoid, and'the whole complexion of the testimony, oral and documentary, without one single exception, fortifies that conviction. There are a number of letters before us from Hills Sf Co. to their agent in New Orleans, Mr. Josephs, who was examined as a witness. They were produced at the instance of the plaintiff.' They unmask the whole business. They establish conclusively that it was understood between the parties, that the Erwin judgment was a mere cover to prevent the Bank of the United States from recovering their debt; that their judgments, which Hills Sf Co. purchased, were perfectly good for their amounts independent of the contrivances with which these parties embarrassed their collection, and which had enabled Hills Sf Co. to buy them for about a fourth of their value from those who were in charge of the wreck of the late Bank of the United States. A paragraph from Mi-. Josephs to Hills Sf Co., mentioned in one of these letters, is strongly expressive of his opinion of the transactions which are the subject of our enquiry. “ Mr. Denton will not take any step adverse to your interest. I know his situation well, and even if he feels disposed to pursue the course apprehended by you, he would not dare attempt it, or provoke the publicity it would occasion.” Concerning the law applicable to this case there can be no question. We have been called upon to apply it in the cases of Bernard v. Auguste. 1 Annual Reports p. 70, and in Davis v. Holbrook, Ibid. 176. All the evidence in this case points to one conclusion, and- renders impossible any other hypothesis under the most charitable construction which we are permitted to put on the actions of men. These parties were bankrupt merchants, and it is proved by the plaintiffs own showing that they combined for the purpose of putting their property out of the reach of their creditors, for the object of defrauding them, by first depreciatingtheir debts, by unlawful means, and thereby enabling themselves to purchase them up at an inconsiderable price ; that Ike agreement of 1814 is in furtherance of that combination and plan, ami was — 67 — entered into with that view alone ; that it is immoral and fraudulent, and that no action for relief can be based on it. The judgment of the Commercial Court is therefore reversed, and tho plaintiff's petition dismissed, with costs in both courts. Footnotes [*] The counsel for the plaintiff cited, in support of the position that the purchase by Vason was that of a litigious right, Civil Code, arts. 2422, 2623, 3522, no. 22. The counsel for Vason, on the other hand, cited Favard, verbo Droits Litigieux. Troplong, Vente, nos. 200, 201, 202 and authorities there cited. Merlin, Rep. verbo Droits Litigieux. Code Nap. Ánnoté. art. 1700. Code, lib. 8, tit. 37, de Litigiosis. 1 Maynz., Droit Romain, 326. 9 Mart. 183.