Withrow v. Warner

The opinion of the court was delivered by Collins, J. The burden of complaint of the appellant is that, while disclaiming any right to presume fraud on his part, and conceding that there is no evidence that he knew of his grantors fraudulent intentions, the vice-chancellor nevertheless proceeds to deprive him of the fruits of his bargain. The concession, if warranted, had weight only as against an absolute avoiding of the deed. To work such a result it is necessary that it should appear that the grantee had knowledge of or participated in the fraudulent intent of the grantor; but where, in such a suit as is involved in this appeal, the evidence, though not sufficient to induce the court to avoid the deed absolutely on the ground of fraud, is sufficient to excite a well-grounded suspicion as to the adequacy of the consideration and [803] the fairness of the transaction, the court will permit the conveyance to stand only as security for the consideration actually given. Such was declared to be the doctrine of courts of equity by Mr. Justice Depue in the case of Muirheid v. Smith, 8 Stew. Eq. 303, 312, decided in this court. In that case the majority of the court had no doubt of the adequacy of consideration or of the bonajides of the deed ; but the doctrine so declared in the opinion read for the minority was not in any way challenged in the opinion read for the court. On the contrary, it was impliedly, if not expressly, upheld. It had been enunciated in almost the same terms by Chancellor Kent in Boyd v. Dunlap, 1 Johns. Ch. 478, and approved by this court in Demarest v. Terhune, 3 C. E. Gr. 532. The only essential difference between the case last cited and that now before us is that in the one the consideration of the deed held to be a mortgage was an antecedent debt, while in the other it is a money payment. This difference does not affect the principle involved. The doctrine declared was, in this court, in the case of Winans v. Graves, 16 Stew. Eq. 263, 276, held applicable to a new consideration. In Demarest v. Terhune, ubi supra, it was adjudged that when the consideration of a conveyance made by a debtor in failing circumstances is shown to be inadequate, the burden of proving bona jides is thrown on the grantee, and that if the honesty of the conveyance is left in doubt, upon the evidence, the sale will be set aside on equitable terms. Upon the facts proved in this case the appellant has no ground to complain of a decree securing him, as by way of mortgage, the sum he claims to have paid for the property. It has been suggested that the frame of the bill is not adapted to such a decree. The bill is not quite accurately stated in the opinion below. It simply charges that to prevent the complainant from collecting his debt the conveyances and mortgage recited were given; that “no consideration whatever was paid.or exists or did exist for any of the said conveyances or mortgage,” and that the grantor remains in possession. It prays that “ the said fraudulent conveyances and mortgage * * * may be set aside and declared null and void,” and for other relief. [804] In Winans v. Graves, ubi supra, it was assumed that such a bill would not warrant the relief there, as in this case, deemed appropriate, although it was intimated that proper amendments-might be made in this court; but it evidently was not noticed by the learned judge who wrote the opinion in that case that in Demarest v. Terhune, ubi supra, it had been directly decided that a like bill was sufficient for the purpose. Chief-Justice Beasley, in delivering the opinion of this court, said : “Nor is the frame of the bill inapplicable to this aspect of the case. It proceeds upon the point of a conveyance without consideration, and which was, on that account, a fraud upon creditors. The case laid, therefore, is partially proved; the conveyance, though not wholly, is in some degree voluntary, and is thus far constructively a fraud, delaying, and if not set aside or controlled, defeating creditors. I do not, consequently, find any difficulty arising from the structure of the pleadings in granting relief in the form indicated,” and it was decreed that the deed should stand as a mortgage. The relief, therefore, intended by the learned vice-chancellor in the present case should be effectuated, but by inadvertence the-decree has been made too broad. It directs a conveyance to the complainant upon payment of Mr. Withrow’s claim. The-utmost that complainant could ask was a sale of the premises-to pay, first, the Withrow claim, and then his judgment. Let the decree be reversed, and the cause be remitted with instructions in conformity with this opinion. No costs will be allowed in this court. For reversal — Collins, Depue, Dixon, Garrison, Gummere, Lippincott, Ludlow, Van Syckel, Adams, Bogert, Hendrickson, Nixon, Vredenburgh — 13. For affirmance — Krueger—1-