Pawley v. Vogel

Holmes, Judge, delivered the opinion of the court. The plaintiff and his wife bring this suit upon a claim for the delivery of personal property, of which it was alleged that the wife was entitled to the possession against the sheriff, who had levied upon and seized the property under execution upon a judgment'against the husband. The answer denied that the plaintiffs were entitled to the possession, and set up the further defense that the claim of the wife was fraudulent and void as against her husband’s creditors. This matter was involved in the issues already made under the denial of the allegations of the petition. It appeared in 'evidence on the trial that the plaintiff, Morris Pawley, in 1859, being largely indebted and insolvent, took a lease from Henry Shaw of a lot of ground'on Grand avenue, for a long term of years, upon rents reserved, which was expressed to be made to him as trustee fo the sole and separate use of his wife ; that the wife, and himself as trustee, in 1860, borrowed money of the lessor, and gave their notes and a deed of trust on the lease- ’ hold property to secure the payment thereof; and afterward, in — 300 — 1864, made another loan from the lessor, in the same way; and, with the moneys so obtained, together with a small sum which she had earned, and another sum which she had received as a gift from her father, erected and furnished a house on the leased lot, in which they lived; that the leasehold and house were afterward sold at a large advance on the cost, and the balance, after paying the loans, rents, and interest, was invested in the Missouri Iron Works, in the husband’s name as trustee for his wife, being himself the superintendent of the works, and having the management of the whole business from the beginning in his character of trustee. It would seem that the moneys loaned and the moneys which had come into the hands of the wife, and the fruits of their joint industry during the whole period of these transactions, went into the funds of the trust so created. It appeared that the furniture in question in this suit was purchased out of the moneys borrowed, and not out of the money which the wife had received from her own earnings, or from her father, and the property was found by the sheriff in their residence. Without going more minutely into the details of the transaction, we are constrained to say that the whole evidence showed a state of case which could scarcely be considered otherwise than as a plain scheme of fraud upon the rights of creditors prior and subsequent. The court below (as well as the parties) appears to have proceeded upon a strange misconception of the principles of law which ought to govern such a case. It is, perhaps, not surprising that an insolvent man, laboring under the burden of debt, should be induced to resort to ingenious contrivances, in contravention of law, in his efforts, laudable when fair and honest, to raise himself above the condition of a proletary and to provide suitably for his family. But the laws cannot be perverted to the purpose of defrauding creditors of their just rights. Nor is it credible that, in any country, laws could ever be made with the express design of giving a legal sanction to positive fraud. No authorities are produced in support of the plaintiffs’ case. Reference is made to the act of March 5, 1849, which is continued in the revision of 1855, exempting additional property from execution, as having some bearing upon the matter. (R. C. — 301 — 1855, p. 754, § 1.) This statute has been the subject of comment in this court in several cases. In Phelps v. Tappan, 18 Mo. 393, it received a construction as to its general object and intention, and it was said that the act seems to have been suggested by some provisions of the Spanish law which once prevailed here, and that the Legislature could have contemplated only property acquired by a lucrative title—that is, by the gratuitous gift of another; and not property acquired by an onerous title—that is, by purchase for a consideration paid, or by the fruits of the joint industry of the husband and wife. In White v. Dorris, 35 Mo. 187, it was held that the statute merely made additions to tha kinds of property which were previously exempted from levy and. sale under executions, and, as it was admitted that there was no-fraud and no resulting trust, the property in question was held to-be exempt from sale under execution against the husband. It does-, not affect the right of the husband to reeeive and dispose of such property of the wife. (Boyce v. Cayce, 17 Mo. 47.) It does not ■ exempt the property from the indebtedness of the husband created after the reception of such property by the wife. (Cunningham v. Gray, 20 Mo. 170.) It does not certainly appear whether the-money received by the wife from her father was put into the gen-eral fund before or after the creation of the debt in question ; but; this was immaterial. It was distinctly proved that the property' levied upon by the sheriff was purchased with the money borrowei in 1864. In the view we must take of the matter, this statute had no application to the case made. This lease was not properly to be considered as a settlement of money or property in trust for the sole and separate use of the wife at all, within the doctrines of equity on this subject. Such was not the real nature of the transaction. These doctrines relate to property that belongs to the wife before marriage, or which may have been given or bequeathed to her after marriage and expressly settled to her sole and separate use by the creation of a trust for that purpose. This lessor did not propose to make a gift of anything. A voluntary gift or settlement by the husband on his wife, while indebtedness exists, or in contemplation of future indebtedness, will be fraudulent and void as against his — 302 — creditors. In the view of a court of equity, the wife may contract and incur liabilities in reference to such separate property when once settled upon her, and may dispose of it as a femme sole ; but such separate estate is unknown to a court of law. She may pledge and bind that property, but none other; her general disability at law continues as before ; but a court of equity may proceed in rem, against that property, though not in personam against herself, and subject it to the payment of her separate debts. (Adams’ Eq. 43-45 ; 2 Story Eq. Jur. § 1397.) It is plain that the wife had no money settled to her separate use, and with which she could deal in this manner, before this lease was taken. The leasehold was the equivalent of the rent. The rents- must have been paid by the husband, or with the fruits of their joint industry. The rents were really to be paid by the husband, and he only was bound by the covenants of the lease. The wife’s money in his hands was his own money. In law, husband and wife are one person. Where a wife has money settled to her separate use, or has property of her own under an agreement with her husband upon a valuable consideration made before or after marriage, with trustees, in a proper instrument executed for her benefit and to the effect that she may carry on a separate trade on her sole account, in the name of her trustees, such an agreement may be protected at law and may be enforced in equity for his benefit against him and his creditors ; but a voluntary agreement of this kind will not be good against his creditors. (2 Story Eq. Jur. §§ 1385-6.) But that these familiar and well-settled principles appear to have been overlooked, or wholly disregarded, it would seem that it should be unnecessary to repeat them. Here was really no such case of a separate trade being carried on by the wife with her separate estate in this manner; there was no agreement between them of that nature ; but, in truth, the husband was carrying on his own trade with his own money, or with moneys that were donated by himself in the name and under the cover of being his wife’s trustee, for their common advantage, and in direct and plain fraud of the rights of creditors. This is a thing which neither law nor equity can allow to be done. — 303 — From the evidence it clearly appears that all the moneys that went into this leasehold estate, or into the iron business, or into the property levied on, were funds belonging in law to the husband, or placed at his disposal, or were the fruit of the joint industry of the husband and wife under the arrangement, which was voluntary merely. It may be conceded that as fast as money was acquired or value was created, after the lease was taken, it was allowed by the husband to go into this trust for the benefit of the wife. As between the parties themselves, such a voluntary settlement may be good. We do not say that a court of equity would not uphold such a trust"and settlement for her benefit against him; but as between him and his creditors prior and subsequent, being attended with badges of fraud, it can be regarded in no other light than as a continuous scheme of fraud upon them. A voluntary settlement in favor of the wife by a husband who is not indebted at the time, cannot be impeached by subsequent creditors merely on the ground of its being voluntary. But if he were indebted at the time, or if it were made with a view to being indebted at a future time, it will be void as against creditors prior and subsequent. (Sexton v. Wheaton, 8 Wheat. 229.) And if it be a grant by the husband of his whole estate to the wife, it will be inoperative both at law and equity. (2 Story Eq. Jur. §§ 1374-5.) The husband and wife are joined as plaintiffs. The suit is an-action at law, and not á proceeding in equity. The petition alleges that the wife is entitled to the possession of the property. If that were true, her possession was his possession at law, and ■there was no reason for joining her. He was himself the owner of the legal title and had possession. A court of law could take no cognizance of the trust or of the equity of the wife in such an action. The defense of the sheriff on the evidence was completely made out; and the claim of the plaintiff, to recovep this property from him in this suit, was a solecism in law. If the trust could be maintained in equity in favor of the wife against her husband’s creditors; the proper remedy would have been a proceeding in equity on her behalf to establish the settlement and to obtain a perpetual injunction to restrain a sale of the property — 304 — under a judgment at law against Mm. We are of tbe opinion,, therefore, that the defendant’s instruction, to the effect that on the evidence the plaintiff was not entitled to recover, should have been given. It will be sufficiently apparent from the principles enunciated herein that the court below erred both in giving and refusing instructions, and it is not deemed necessary to discuss them more in detail. The judgment will be reversed and the cause remanded. The other judges concur.