Fenton v. Ham

Bay, Judge, delivered the opinion of the court. This suit was instituted in the Buchanan Court of Common Pleas upon a promissory note for the sum of $1,735.94, [411] executed by defendant and paid or payable to one Kelly, and assigned by said Kelly to said plaintiff. The answer of the defendant alleges that on or about the 12th of December, 1860, about four months prior to the execution of the note, the defendant and Kelly entered into a partnership for the purpose of selling goods, wares, and merchandise, in the town of Rushville. That at the time of forming said partnership Kelly represented that his indebtedness did not exceed the sum of $1,200, whereas it amounted in fact to about six thousand. That about the date of the note an agent of the creditors of Kelly came to Rushville to secure the said indebtedness ; that on the night of his arrival Kelly, defendant, and plaintiff, met at the house of defendant, and it was then and there agreed between them that Kelly should make a sham sale of his interest in the goods to defendant, and that defendant would execute a note to Kelly which was to be immediately transferred to plaintiff, so that plaintiff could represent to said agent that Kelly had no property whatever and that it would be useless to sue him. That the transaction was the result of a combination between the three to defraud the creditors oE Kelly, and the note sued on was executed in pursuance thereof, and with the understanding that it was to be returned to the defendant. That shortly afterwards Kelly died, and after his death this suit was instituted. Upon the trial of the issues so made, defendant offered to prove the facts stated in his answer; which was objected to by plaintiff, and the objection sustained. Judgment being rendered for plaintiff, defendant filed his motion for a new trial; which being overruled, he now appeals to this court. The only question presented for our considerations is, whether the matter set up in the answer constituted a good ground of defence; and this question we think has been definitely settled by this court in case of Hamilton v. Scull’s Adm’r, 25 Mo. 165. That was a suit commenced in the Probate Court of St. Louis county to establish a demand against decedent’s estate upon a note executed by the intestate to the plaintiff. [412] The defence set up was that the note was given for the purpose of defrauding the creditors of the plaintiff, and that both parties to the instrument participated in. the fraud. The case was tried in the Circuit Court upon an appeal from the Probate Court, and upon the trial the defendant offered to prove the alleged fraud; but the court rejected the evidence, and upon an appeal to this court it was held, that the defence was a valid defence, and that the court below erred in rejecting the evidence; while it was admited that a party who fraudulently conveys away his property cannot invoke the aid of the law to set aside such a conveyance and thereby regain possession of the property; yet it was contended that, in case of an executed contract, fraud may be set up as a defence where the party seeking to enforce the contract participates in the fraud, and this doctrine fully recognized in Chit, on Contr., p. 680. It is there jlielid that, while a party who has executed a bill of sale of hi^i'^oods cannot be allowed to impeach it on the ground it^was given to defeat the claims of creditors, yet when theicoi&ract has .for its object and consideration a fraud on ^raircl' person, and both the parties to the agreement are guilty of the fraudulent intention, it ought not to be per-to either of them to found a claim upon such a contract in a court of law. With the concurrence of Judge Dryden, the judgment will be reversed and the cause remanded.