Eddy v. Baldwin

LEONARD, Judge, delivered the opinion of the court. We have come to the conclusion that the court erred in exluding the proof, offered through the witness Ladd, of Eddy’s control over and interference with Baldwin in reference to the cash account kept by the latter as the clerk of Beach & Eddy. The judgment against Baldwin, which was founded mainly on the items in this account, may conclude him as to the nature and dates of the several items of indebtedness on which the recovery was had ; but does it also conclude the other defendants here to the same extent, so as to preclude them from [594] showing, for the protection of their own rights, that no such indebtedness existed at the times indicated ? We are not aware of, nor have we been referred to, any case to this effect; and, upon principle, we think it can not be so. It is of course conclusive against the world of the party’s indebtedness at the time of the recovery ; but we do not see how it can be held conclusive against a grantee in an alleged fraudulent conveyance of such indebtedness at a time long anterior to the judgment, for the purpose of impeaching the conveyance as fraudulent by reason of the then existing indebtedness of the grantee. The principal matter in this case to make out the alleged fraud, was the husband’s indebtedness at the date of Hall’s deed of May, 1844, to Willi, for the use of the wife ; and, as the husband’s discharge in bankruptcy, in 1843, extinguished all his general prior indebtedness, it became material to show that the several items of the judgment indebtedness existed before the date of the deed, which was several years before the judgment, and that they were also of such a character as exempted them from the operation of the bankrupt’s certificate. We do not know that the rejected proof would have weighed much with the jury against the fair presumption of such indebtedness furnished by the recovery, or, indeed, that it ought to have had much weight; but yet we think it was competent evidence, and that therefore the court erred when they excluded it. Passing from this point to the substantial merits of the case, we remark, that this suit is not to subject the lot to the payment of a debt, but to try the alleged fraud in equity, in order, if it be found, that it may be so decreed, and the proper title passed to the purchaser, and the matter thereby concluded, once for all, instead of being left open for interminable litigation at law. And here the first question that meets us is, supposing the settlement to have been fraudulent in fact against the husband’s creditors, whether the lot was subject to an execution sale for the payment of his debts ? The objection is, that the lot never belonged to the husband, and that, of course, he never made any disposition of it to be adjudged fraudulent and void as against [595] bis creditors. In Rankin v. Harper, (ante p. 579,) where a father had purchased land in the name of his son to defraud his creditors, we determined that the use resulted to the father for the benefit of his creditors, and that the land was subject to be sold under execution as the father’s property, and we refer to our opinion in that case for the grounds of our decision. It is true that in that ease there was no expressed use, and so the trust would of course have resulted to the party who paid the price had the deed been taken in the name of a stranger ; but it was there insisted that the purchase being in the name of a child, it was an advancement, and not a resulting use ; but we held that, although this would have been so, had it been an honest transaction, yet, as the purpose was to defraud creditors, the presumption in favor of an advancement was repelled, and the use resulted to the debtor in favor of his creditors. In other words, it was decided that a purchase by a debtor with his own funds in the name of another, whether child or stranger, to defraud creditors, was a fraudulent disposition of his property, and that the purchased land was subject to sale under our execution laws. The present ease, however, is distinguished from that case, by the fact that here the use is expressly declared in favor of the wife, and therefore it is said that, according to the principles of law, there can be no resulting trust. We think, however, that ought not to be allowed to take the case out of the rule there established. The great principle on which the statute against fraudulent conveyances stands is, that a man shall not dispose of his property so as to have the enjoyment of it himself, and yet keep his creditors at arm’s length ; and all the schemes that are from time to time cunningly devised by men for that purpose, are met and rendered ineffectual by the courts, as far as it is possible to do so consistently with the principles of the law. We see no legal reason why, if, in the one case, the legal presumption that the purchase was an advancement for a child was properly met by proof that it was a trick to defraud creditors, the same evidence should not be allowed in the present case to counteract [596] the expressed, use, and create a resulting trust to the debtor lor the benefit of his creditors. If the property was bought with his funds, and the form of the conveyance was a mere contrivance of the parties to secure the property against his creditors, it of course ought not to prevail under any system óf law, and we think the principles of our own law, as they now stand, are sufficient to answer the purposes of justice in this, particular. The proceeds of the lottery ticket, and of the wife’s jewelry and industry, belonged to the husband; and, iE they were invested in the purchase of the lot, it must, as against the husband’s creditors, no matter how it might be as against himself and mere volunteers be considered as a voluntary post-nuptial settlement. According to the doctrine of some of the cases, (Reade v. Livingston, 3 Johns. Ch. R. 500,) if the party be at all indebted at the time, the transaction is void as to existing creditors as a sheer matter of law; while, according to others, (Sexton v. Wheaton, 8 Wheat. 229,) it can not be impeached upon that ground only; but the presumption of fraud arising from the fact of indebtedness may be repelled by contrary proof. The present case, however, was put to the jury on the ground that the purchase of the lot, in the name of the trustee, was intentionally contrived between the parties — husband and wife — to defraud creditors ; and it is upon this ground that we have considered the property as subject to an execution sale for the payment of the husband’s debts. The question has not. been raised here whether any indebtedness on the part of the husband will annul the settlement in favor of existing creditors, and we presume it will not be made in the future trial of the case ; and so we are not now called upon to express any opinion upon that point. The judgment is reversed, and the cause remanded.