Porter v. Duglass

Mr. Chief Justice Smith delivered the opinion of the court. This writ was brought, in the circuit court of Madison county, on a sealed note, by William Montgomery, for the use of Robert B. Duglass against David M. Porter, the plaintiff in error, and W. P. Anderson. The defendant Porter pleaded his certificate and discharge in bankruptcy under the act of congress passed in 1841, in bar of the action. The plaintiff replied, and in his replication stated that the defendant, in the schedule of property and rights of property rendered by him in bankruptcy, failed to surrender certain property, particularly described in the replication, which was at the time of filing his said petition the property of the defendant; and, as such, ought to have been surrendered by him for the benefit of his creditors; averring that the failure of the defendant to surrender said property was a wilful concealment of the same, contrary to the provisions of the said act of congress. Issue was joined on the replication, and the cause having been, upon that issue, submitted to the jury, a verdict was rendered for the plaintiff. A motion for a new trial was made, which was overruled. A bill of exceptions was filed to the judgment on the motion; and a writ of error sued out to this court. Before we proceed to consider of the questions which arise upon the merits of the case, we will dispose of the objections which are raised to the bill of exceptions. It is said, in the first place, that this court cannot notice the contents of the bill of exceptions, because it does not properly constitute a part of the record. We think this objection untenable. The bill recites the motion for a new trial, sets out the reasons in support of the motion, the judgment on the motion, and shows that the exception was taken during the term of the court at which the verdict was rendered. This was unquestionably sufficient. — 393 — "Whether the bill was or was not sealed by the judge and filed during the term of the court, are matters which it is incompetent for us to inquire into, upon the suggestion of counsel. In the next place, it is insisted that the bill of exceptions does not profess to set out all of the evidence or the substance of the evidence; in fact, that it does embody the evidence, but contains a statement of “ the facts which appeared in evidence ” on the trial. This objection is also not tenable. When a bill of exceptions purports to set out the evidence :in a cause, it is presumed that it contains the whole of the evidence, or the substance of the evidence, as required by the statute; unless the contrary expressly appears from the bill, or from some other part of the record. It is certainly no objection that the bill contains the facts which appeared in evidence, instead of the evidence itself. If the facts of a cause were admitted and established by the agreement of the parties litigant, it would constitute quite as good a foundation on which to base the judgment of the court, as the facts established by the evidence would be. In the case before us, however, the bill of exceptions is not to be understood as professing to contain a state of facts admitted by the parties, but as purporting to set out the evidence in the case. Passing by several exceptions taken to the action of the court, and which stand first in order, we will proceed to the consideration of the main •:;./< ion in the cause, that is, whether the failure or omission (which is admitted) of the defendant to surrender upon his schedule the slaves described in the replication of the plaintiff, was guilty of a wilful and fraudulent concealment of his property or rights of property, in contravention of the act of congress of 1841 in regard to bankrupts. It appears from the evidence that the defendant Porter was in the possession of and owned a tract of land in Madison county, containing fourteen hundred acres, and some thirty-odd slaves, with stock, and other articles of property usually attached to a cotton plantation, which, in the spring of 1839, he sold to Robert Shotwell, for $50,000. The negroes sold to Shotwell included those named in the replication. Shotwell was to pay $36,000 in the notes of different individuals, and — 394 — the remainder of the purchase-money was to be paid in the liabilities of Porter, which Shotwell was to take up. Porter executed a deed of conveyance for the property, which was duly recorded. Porter, at the time of the conveyance, or soon thereafter, took from Shotwell a written obligation, by which he was entitled to repurchase the property within eight years from the date of sale. Porter, in making the contract for the sale and purchase of the land and slaves, acted for himself and wife. Porter stated, that on his marriage he had received with his wife property nearly equal in value to the negroes named in the replication, and that he thought-it but just, as Mrs. Porter was-entitled to dower in the land, that Shotwell should transfer to her in consideration therefor the said slaves. Mrs. Porter would not consent to relinquish her dower unless Shotwell would agree in writing to convey to her the said slaves, and the trad¿ could not have been made unless Mrs. Porter had agreed to relinquish her dower in the land, which was worth more than the slaves. Shotwell consented to this proposition, and bound himself in writing accordingly. The slaves sold by Porter to Shotwell, including those specified in the replication, were taken to Canton and sold by the sheriff, under executions against Porter; at which sale Shot-well purchased the whole of them. In the fall following, Shotwell having ascertained that liens of which he had no knowledge when he made the purchase existed against Porter’s property; in consequence of this a new contract, or a modification of the original one, was made by Porter and Shotwell, by which Shotwell was to give for the property one thousand bales of cotton, in four annual payments, of two hundred and fifty bales each; out of this, however, was to be deducted some $8,000 or $9,000, which Porter had received under the first contract. In this new contract, Shotwell bound himself to convey the said slaves to Mrs. Porter, who had, pursuant to the original contract, relinquished her right.to dower in the land. Shotwell was also bound, with Porter’s assistance, to buy up the judgments which were liens on the property; allowing Porter the benefit of all discounts on the same; the amounts expended in the purchase of the judgments.to be deducted from the value — 395 — of the thousand bales of cotton. In the winter of 1839 or 1840, Porter being without money or credit, declared himself unable to assist Shotwell in relieving the property from the numerous judgments against Porter which had then come to light. It was then agreed that they should mutually release each other, and that their previous contracts should be can-celled ; Shotwell still promising to convey to Mrs. Porter the said slaves, provided he should get out of his difficulties. The slaves were conveyed by Shotwell to Mrs. Porter, as her separate property, by deed which was duly acknowledged and recorded. He conveyed them not because he thought himself legally bound to do so, for he believed Porter, without the consent of his wife, could release him from his contract to do so, but because he felt morally bound. Porter did not pay for the slaves in money, labor, or otherwise, nor did he furnish the money or means with which the executions were purchased under which the slaves were sold. Shotwell did not take possession of the slaves named in the replication, but they were left in the possession of Mrs. Porter. On this state of facts, whether the sale made by Porter to Shotwell, was or was not void as to the creditors of the former, it is clear that Mrs. Porter, by virtue of the conveyance to her and her subsequent possession under it, acquired a valid title as against Porter or Shotwell. By the sale to Shotwell, and especially by the sale made under the execution, Porter was divested of all right or title to the slaves ; and the conveyance by Shotwell as effectually deprived him of all claim to them. The conveyance to Shotwell of the property and the sale of it, made under the executions, occurred nearly two years before the passage of the bankrupt act. It is manifest, therefore, that these transactions, however unfair they may have, been, were not frauds committed in view of the enactment of the statute, nor in violation of its provisions. 5 U. S. Statutes at Large, 442, c. 9, § 2. • Where a party has been by a decree of the proper court declared a bankrupt, all his property and rights of property of every description, whether real, personal, or mixed, are “ by mere operation of law, ipso facto, from the time of such decree, — 396 — deemed to be divested out of such bankrupt without any other act, assignment, or other conveyance whatsoever,” and are vested, by force of the same decree, in the assignee, who is empowered “ to sell, manage, and dispose of the same; ” and to sue and defend in all cases, subject to the orders and directions of the court, “ as fully to all intents and purposes as if'the same were vested in, or might be exercised by, such bankrupt, before or at the time of his bankruptcy, declared as aforesaid.” U. S. Stat. at Large, 43, c. 9, § 3. It is manifest under these provisions of the statute, that the assignee could not maintain any action to recover property conveyed by the bankrupt before the decree which the bankrupt himself could not maintain, if there had been no decree in bankruptcy, except in the cases specified in the second section of the statute, however fraudulent and void as to creditors such conveyance may have been. That section provides that all future payments, securities, conveyances, or transfers of property, or agreements made or given by any bankrupt, in contemplation of bankruptcy, and for the purpose of giving any creditor, indorser, surety, or other person, any preference or priority over the general creditors of such bankrupt; and all other payments, securities, conveyances, or transfers of property, or securities made or given by such bankrupt, in contemplation of bankruptcy, to any person or persons whatever, not being a bond fide creditor or purchaser, for a valuable consideration without notice, shall be deemed utterly void, and a fraud upon this act, “ and the assignee under the bankruptcy shall be entitled to claim, sue for, recover, and receive the same as part of the assets of the bankruptcy.” Porter’s interest and title to the slaves in question were completely divested by his conveyance and the execution sales. Hence no title as to them could vest in the assignee, by virtue of the decree in bankruptcy, as he succeeded only to the rights which Porter then possessed. The transfer and the sales under execution were not made in contemplation of the passage of the act, nor in violation of its provisions, consequently, upon the hypothesis that these transactions were fraudulent and void as to the creditors, the assignee could not have recovered them from — 397 — Shotwell as assets belonging to the bankruptcy. The question arising upon the issue, was not whether the property was liable in the hands of the vendee for the debts of Porter, but whether in rendering this schedule, his omission to include the slaves was an act of wilful concealment of his property, or rights of property. There is a clear distinction between the right which a person may claim to recover property in the possession of another, and the right of the creditors of the claimant to subject the same property to the payment of their demands. A conveyance made without consideration, or upon one that is fraudulent, is valid between the parties, hence the vendor is debarred of all right to recover back the property; but as to creditors, it is void, and will not prevent them from subjecting the property conveyed to the payment of their claims. Hence, in the case at bar, the slaves may have been liable in Shotwell’s hands for Porter’s debts, but for that reason alone the assignee who stood in the place of Porter, would not have the right to sue for and recover them. Upon this view, the question at issue must be tested by the right of the assignee to recover the property in question from Mrs. Porter. This is evident; for if the assignee was not entitled to sue for and recover them as assets of the bankruptcy, Porter was under no obligation to surrender them in his schedule. The distinction between the right of the assignee to sue for and recover the slaves, as assets of the bankruptcy, and the right of the creditors to subject them to the payment of their demands, appears not to have been considered by the court in charging the jury. The question, whether the defendant had been guilty of a fraudulent and wilful concealment, was made to depend upon the question, whether, on account of the alleged fraud,, the property was liable for his 'debts. The instructions, hence, laid down. an incorrect rule for the guidance of the jury; and we shall be compelled to reverse the judgment, unless upon the-facts of the case the verdict was correct. If the view we have taken of the act is the proper one, it would not admit of question, if Shotwell had retained possession of the slaves named in the replication, or had transferred: — 398 — them to any other person than Mrs. Porter, unless upon an express or secret trust for the benefit of Porter, that the assignee would not have been entitled to recover them; and hence upon the rule laid down, the omission to enter them on the schedule was not an act of wilful concealment of his property or rights of property on the part of Porter. But Shotwell conveyed the slaves to Mrs. Porter, who holds them as her separate estate ; and it remains to be ascertained, whether that fact can have any effect upon the rights of the parties. We are of opinion that the conveyance from Shotwell to Mrs. Porter did not vest Porter with any title or right of property in the slaves conveyed; and hence that they could not have been recovered from Mrs. Porter by the assignee, to whom they were conveyed “ in her own right, as her individual property, with the right to sell, give, or convey the same to whom she might please.” Porter, as the husband, was entitled to the possession by virtue of his marital rights ; and would in equity be considered as holding it in the character of trustee for the wife. As such, he was not entitled to appropriate the slaves themselves, or the proceeds of their labor, to his own use, without her consent. No presumption could arise from the fact of his possession alone, which could warrant the conclusion that the property was his, or that he held a secret trust in it. If the consideration, as it is insisted, upon which the conveyance was based, passed from Porter, the property might have been reached by his creditors; but, as we have shown, the rights on the part of the creditors to subject the property may have existed, although Porter had been divested of all right or title. An attempt was made to impeach the witness offered in behalf of the defendant. Why this attempt was" made we are unable to imagine. For if the testimony of this witness were disregarded, the record would present a clear case jn favor of the defendant. Without the testimony of this witness, 'the record would show that Mrs. Porter claimed under the deecT^ from Shotwell, who purchased these slaves at the sheriff’s sale, without a suspicious circumstance attending the transaction. But whatever may have been the opinion of the jury in regard — 399 — to the credibility of this witness, from the facts as they appear in the record, we think the effort to discredit was made without success. Taking then the whole evidence, it is at least extremely doubtful, whether the consideration did actually pass from Porter. In the first contract, Shotwell agreed and bound himself, in a written obligation, to transfer the slaves to Mrs. Porter when the title should be made perfect in him. If the witness is to be believed, the consideration of his agreement was the relinquishment of her right to dower in the land, which, according to the same witness, was worth more than the slaves. The witness thought that he had been released from his agreement by the subsequent alterations made in the original contract between him and Porter. But Mrs. Porter, in pursuance of the original agreement, had relinquished her dower, and if Shotwell’s promise to convey the property to her was, in fact, made upon that consideration, it was undoubtedly valid, and could have been enforced. Upon a full view of the subject, we are of opinion that the evidence did not establish a “wilful concealment ” by the defendant, “ of his property or rights, or rights of property.” The reasons assigned by the court for the judgment in the case of The State v. Bethune et al., 8 Ired. 139, cited by counsel, appear at first view to be in conflict with the rule above laid down. That was a case arising under the same statute. A judgment was tendered against the defendant in 1838, who was discharged as a bankrupt in 1842. In 1847, a scire facias to revive the judgment was sued out, to which the defendant pleaded his discharge and certificate as a bankrupt. The plaintiff replied that he had conveyed his property for the purpose of hindering and defeating his creditors, and that he had fraudulently and wrongfully omitted to render a correct schedule of his property. The proofs showed that before the judgment was rendered, the defendant had conveyed to his father, land, a wagon, four horses, and gear, without consideration, or for a very inadequate one ; and that he had retained the possession from the time of the sale for nine years, the vendee never having set up any claim to the property during such possession. Unquestionably, the verdict and judgment which were ren — 400 — dered for the plaintiffs were correct,' upon the pleading and proofs. The plaintiff’s replication put in issue the bona fides of the sale and conveyance. This was, according to what we deem the just construction of the statute, unnecessary and improper. The possession, unexplained, of personal property of the description shown by the evidence, for so long a time, was undoubtedly sufficient to raise the presumption of the fraud in the sale which was averred in the replication. The question whether the sale was fraudulent or not, was the point chiefly considered by the supreme court. The true ground, however, is stated in the opinion, which was, that “ a possession, derived from a father, of a wagon and team, where continued so long, is by presumption of law a gift, unless the contrary distinctly appears.” If title by donation was the legal presumption arising from the possession, under the circumstances detailed by the evidence, the jury and court were justified in the conclusion that there had ■been a wilful and fraudulent concealment of his property by the bankrupt. That case is, therefore, not an authority, in opposition to the doctrine which we have above laid down. Let the judgment be reversed, the cause remanded, and a new trial awarded in the court below. Handy, J., having been connected with this case in the court ■below, gave no opinion. A petition for a reargument was filed in this case by the ■counsel for the appellee, but the court refused to grant a reargument.