McLean v. Letchford

Chalmers, J., delivered the opinion of the court. On the 30th of May, 1878, J. N. McLean, Sr., and his two sons, G. A. McLean and J. N. McLean, Jr., said two sons being merchants and partners, under the firm name of G. A. McLean & Co., were the owners of three plantations on the Tallahatchie Liver, known respectively as Wildwood, Gold-dust, and Glenboro. These plantations, with the personal property situate upon them, were worth about forty thousand dollars, but were resting under mortgages amounting to two-thirds or three-fourths of their value. On the day above named a sale of the entire property took place under the junior encumbrance, the same being a trust-deed with power of sale, [181] owned and held by Richardson & May, of New Orleans, for |10,150-. At this sale the property was bought by Jesse W. McLean, a third son of J. N. McLean, Sr., for the amount due on the trust-deed, he paying the sum of |2,500 in cash, and executing his notes for the residue, payable'during the ensuing winter. The notes were met as they fell due by shipments of the cotton growing on the land at the time of sale. The trust-deed was extinguished and marked satisfied on the records of the county. Within the next three years Jesse bought in and had transferred to himself the other mortgages resting on the property. At tire time of the sale the mort-gageors were indebted many thousands of dollars to sundry persons, whose debts were wholly unsecured. The holders of these debts have filed the bill in this case attacking the conveyance under which Jesse holds the property, as being in fraud of their rights and void as to them. They charge that the sale at which Jesse bought was brought about and took place at an unusual time of the year, that it was •quietly and furtively conducted in order that Jesse alone might become a bidder, that in its inception and all its subsequent History, it was a fraudulent scheme, devised and carried through for the benefit of the McLean family, its primary object being to invest the title to the property in Jesse, who alone of the family was unembarrassed, in order that he might hold it, first for his own reimbursement.and then for the benefit •of the family generally, and that, the cardinal end sought to be attained was to hinder, embarrass, and defraud them in the collection of their just demands. The answer denies all the material allegations of the bill, asserts the entire bona fides of the purchase by Jesse, and denies that he holds the property under any trust, express or implied, for any other person. Upon the issues thus joined an enormous mass of evidence was taken, much of it circumstantial, but much of it also direct, positive, and to the last degree conflicting and irreconcilable. The chancellor found the issues of fact in favor of the com [182] plainants ; declared the sale to Jesse fraudulent and denied him any reimbursement for the money expended in the acquisition of the property, or for its improvement, or in the purchase and transfer of the outstanding mortgages. A careful and laborious examination of the evidence has conducted us to the same conclusion upon the facts. It is impossible to resist the belief that the conveyance to Jesse was contrived and brought about by his brother, J. N. McLean, Jr.,, for the purpose of keeping the property in the family by defrauding the unsecured creditors of his father and of G. A. McLean & Co. ; and that Jesse, with full knowledge of the end to be attained, lent himself and the little money that he had, amounting at most to four or five thousand dollars, to the carrying out of his brother’s scheme. That Jesse did this with some reluctance, influenced more by the desire to aid his family and save a home for his aged and infirm father, than with any intent to better his own fortunes, may soften his offence in the eyes of the world and in the forum of the moralist, but. cannot change his attitude in the judgment of the law. We can know him only as a fraudulent grantee in fact, and in that, attitude must determine his rights. Those rights stand upon a wholly different and far more precarious footing than if he was free from any imputation of intentional wrong, and was-deemed a fraudulent grantee only because of some legal relations between himself and another, or if his act was only constructively fraudulent by reason of some rule of law. He has filed no cross-bill in the case, and perhaps on that ground alone we might decline to consider his claim to reimbursement; but as in several cases in our reports reimbursement has been decreed without a cross-bill, in favor of grantees, where there had been constructive fraud, or where there had been actual fraud only upon the part of the grantor, we will, without deciding that such practice is admissible in the case of a grantee privy to or guilty of actual mala fides, proceed to examine his claim to reimbursement. Manifestly he can recover nothing that he paid on the Rich [183] ardson & May mortgage. That was the vehicle of his fraudulently obtained possession. It was that which made the fraud possible. The money paid on it was the price which the fraud cost him. To allow him the money back would be to repay him that which he expended in accomplishing the very thing which the law prohibits and condemns. If it was wrong in him to obtain the title and the possession for a fraudulent purpose, it must be wrong to repay him the price paid therefor. He can base no right upon the fact that his payment extinguished a paramount lien which was superior to the rights of the complainants, because the mortgage was distinguished in and by the fraudulent acquisition of the property, and to revive it for his benefit would be both to contravene his own act and to cause a repayment of money expended in the act and for the purpose of perpetrating the fraud. Bump on Fr. Conv. (2d ed.) 594, and authorities cited. It is furthermore admitted that the trust-deed was paid off, except as to the cash payment, by the shipments of cotton growing on the land at the time of the sale — certainly there can be no right of reimbursement as to this. It was, indeed, an additional act of fraud against the creditors of the mortgageors to apply the crops to the payment of what had become his individual debt. With regard to the other mortgages subsequently bought up by and transferred to him, we'think that the burden of showing that they were purchased with his own means and not from the proceeds of the property, was upon him. If he had demonstrated this fact it would have presented for our decision a question upon which the authorities are by no means uniform, it being shown, that it was a part of the original scheme that he should pay off or buy up the outstanding encumbrances. The question has been exhaustively and ably discussed by counsel, and the authorities bearing on it will be found in their printed briefs. We have not found it necessary to decide the point, for the reason that we are impressed with the belief that not a dollar of defendant’s money, except the [184] cash payment on the Kichardson & May trust-deed, and sundry sums advanced in making the crops, which it is shown were returned to him out of the crops, ever was expended upon the property or in the purchase of the subsequent encumbrances. If we are in error in this, it is because the defendant, with every opportunity and inducement to do so, has failed to point out clearly and satisfactorily an}'' other expenditures from his own means. All besides the cash payment seems to us to have been derived either from the revenue of the property, or from the assets of G-. A. McLean & Co., which were fraudulently diverted from the creditors of the concern, for the purpose of aiding Jesse in cultivating the plantations, and relieving the encumbrances resting upon them. We know of no principle or authority which would justify reimbursement of such sums, nor sanction the enforcement of mortgages thus acquired. Many of the complainants are non-residents. Interrogatories addressed to them were filed in the clerk’s office, and notice thereof given to their attorneys, as authorized by sect. 1943 of the Code of 1880. Upon their failure to answer, a motion was made to dismiss the cause as to them, in accordance with the provisions of the statute. This motion was properly overruled by the chancellor, not because no commission to take their depositions had been applied for, as is suggested by counsel, since the issuance of a commission is not contemplated by the statute, but because sufficient time did not intervene between the filing of the interrogatories and the making of the motion. The complainants were residents of many different and distant States, and less than thirty days elapsed between the notice given their attorneys and the final hearing of the cause. The severe consequences of a failure to answer interrogatories under this statute should not be visited on complainants, except where there has undoubtedly been ample time to comply with its requirements. Affirmed.