Coburn v. Pickering

Sichakkson, C. J., delivered the opinion of the court. In this case, the sate of the goods by Sampson to Delano, was absolute and unconditional, and was made Upon a valuable and adequate consideration ; and the only question at the trial was, whether it was made bona fide f It was admitted, that the goods were not removed, but were, by an agreement made immediately after the sale, left in the possession of Sampson, for his accommodation, and were, in fact, used by him, as before the sate. The court being of opinion, that such a sale could not, in law, be deemed bona fide, directed the jury to return a verdict for ttie defendant ; and to this direction the plaintiffhas taker, several exceptions, which we shall now proceed to consider. In the first place, it is objected, that thé question, whether the sale was made bona fide, was a question of fact, to be settled by the jury, and not a question of law for the decision of the court. In order to render the question, involved in Chis objection, more intelligible, it may be useful to examine with attention, and ascertain with some precision, what absolute sales of goods áre to be considered as made bona fide, and what mala fide, within the meaning of the rule, which requires all sales of goods, to be made bona, fide, in order ta — 424 — ¡je va]j(j as against creditors. A much broader view of the subject might be taken ; but, in the present case, it is not necessary to extend our enquiries beyond absolute sales. A sale of goods, in order to be considered as made bona fide with respect to creditors, must be made without any trust whatever, either express, or implied. This is the doctrine of Twyneh case ; and we are not aware, that the soundness of it has ever been questioned. It is not permitted to a debt» or to convey away his goods, by sale, with any secret understanding between him and the vendee, that the goods shall be faolden for the benefit of the vendor, in any way, whatever. The nature of the benefit, reserved in the sale, is immaterial. It matters not, whether the benefit is to consist in the usé of the goods, or in some other favor to be shown by the vendee. Any thing of this kind is a trust, and what the law denominates a fraud. “ For that,” says Lord Coke, “ which “ between the donor and donee, is called a trust per nomen “ speciosum, is in truth, as to all creditors, a fraud.” Nor are the grounds, on which this doctrine is founded, unsatisfactory. All conveyances, with secret reservations for the benefit of the vendor, tend directly to hinder and delay creditors. They hold out false colours and false appearances, and mislead and deceive creditors. They give to the property of the vendor, the appearance of belonging wholly to another, when, in truth, he has an interest in it, concealed under the trust. It is for this reason, that a trust, of this kind, is in law, a fraud. As the obvious tendency of these reservations and trusts is to deceive and defraud creditors, it has not been deemed necessary to stop to enquire into the particular views or motives of individuals, in each case ; but all courts, relying on the presumption, that every man intends the probable consequences of his acts, have at once pronounced all these trusts to be frauds, not only within the meaning of the 13 Eliz. C. 5, but at common law ; and have held, that sales without any trust whatever, and such sales alone, are to be considered as bona fide sales with respect to creditors. The nature of a bona fide sale, may be further illustrated by an examination of the two species of trusts, mentioned by Lord Coke in Twyne’s case. “ Every trustj” says he, “ is — 425 — u either expressed or implied. An express trust is, when in “ the gift or upon the gift, the trust by word or writing is “ expressed. A trust implied is, when a man makes a gift u without any consideration, or on a consideration of nature •i or blood only.” And to explain the nature of an implied trust, he says, “ when a man, being greatly indebted to sundry “ persons, makes a gift to his son, or any of his blood, without “ consideration, but only of nature ; the law intends a trust between them, that the donee would, in consideration of “ such gift being voluntarily and freely made to him, and iC also, in consideration of nature, relieve his father orp.ousin t£ and not see him want, who had made such gift, to him,”-— Thus it seems, that whenever a man in debt transfers his property, without a valuable consideration, as such a transfer tends to injure his creditors, the law presumes the trust, and pronounces the transfer fraudulent. No man is permitted to giveaway his property to the injury of his creditors. Every such gift is a violation of good faith, and, in law, a fraud. It is not necessary, that fraud should have been actually intended. The language of the law is, that no man shall be heard to say, that he acted honestly, and with good faith, in giving away property, which, in equity and good conscience, ought to have gone to pay his just debts. Express trusts may be created, not only by writing, or by parol, hut by a secret understanding between the parties, when nothing is said or written on the subject. But, in whatever way they may be created, their nature is the same. Such being the nature of secret trusts, and of bona fide sales ; we will now proceed to inquire, how far possession of a chattel by the vendor, after a sale, is evidence of a trust. After a most attentive and careful examination of the books, on this subject, we have not been able to entertain a doubt, that the true rule, to be deduced from all the adjudged cases, is, that when the sale is absolute, possession and use of the goods, afterwards, by the vendor, is always prima facie, and, if unexplained, conclusive evidence of a trust. 2 D. E. E. 587, Edwards vs. Harben.—3 Coke 80, Twyne’s case.—1 Cranch 309, Hamilton vs. Russell.—4 Binney, 258, Dawes vs. Cope.—3 Cranch 73, the United States — 426 — vs. Hoe.—1 Taunt. 381.—1 Pick. 295.-4 Johns. 387.-2 Buls. 225.—1 Esp. N. P. C. 205.—1 Campb. 332. To this rule, it can hardly be said, that any exception is to be found in the books. For the cases of .sales of ships at sea seem not to come within the spirit of the rule, until the vessels arrive in port ; and then the rule itself applies.—4 Mass. Rep. 659, Haines vs. Corliss.-8 do. 287.—4 do. 661. So cases of goods, bought at a sheriff’s sale, and afterwards loaned to the execution debtor, have been held not to come within the rule. 2 Bos. & Puller 59, Kidd vs. Rawlinson.—2 L Ray. 724, Cole vs. Davies.—4 Taunt. 823. And the case of Steel vs. Brown & Parry, (1 Taunt. 381,) where it was decided, that a bill of sale of goods, made for a valuable consideration, unaccompanied with possession, was valid as against the vendor, and as against a creditor, with whose knowledge it was made, is not within the rule ; because the assent of the creditor puts him on the ground of a party to the sale. In no one of the cases, cited by the plaintiff’s counsel, is there a decision not to be reconciled with this rule. Cadogan vs. Kennet, Cowper, 432, and Haselinton vs. Gill, 3 D. & E. 620, note, are cases of marriage settlements, and the de^ cisions rest on grounds peculiar to that species of contract. In those cases, possession is perfectly consistent with a bona fide'sale, and, of course, furnishes no evidence of fraud. Barrow vs. Paxton, (5 Johns. 258,) was a case of mortgage, and not an absolute sale ; and the sale of the goods was questioned, by a subsequent purchaser, and not by a creditor.— The decision^ in that case, does not, therefore, bear upon the point we are now considering. In the case of Beals vs. Guernsey, (8 Johns. 446,) the general rule, which we have laid down, was admitted ; but an explanation of the possession, which the court deemed satisfactory, was given. That decision, therefore, is so far from being repugnant to the rule, that it is founded upon the rule. Haven vs. Low, (2 N. H. Rep. 13,) was a case of mortgage ; and the decision is not directly in point. It was decided, that when the possession of goods mortgaged is retained by — 427 — the mortgager, that circumstance alone is not conclusive evidence of fraud. The decision was, therefore, in perfect accordance with the rule, we have laid down. For when the court say, that the possession of the goods is not conclusive evidence, all that is intended is, that it “ may be rebutted “ or explained.” We have no hesitation in saying, that there is no contradiction, in the decisions on this point. All the cases are reconciled by the distinctions we have stated. There may be 'some loose and inaccurate dicta of judges, in delivering opinions, which, if taken separately, aud understood in a broad sense, without any refereuce.to the particular circumstances of the case, under consideration, may seem to be not easily reconciled with the rule ; but, in the decisions, it is most confidently believed, that no clashing is tobe found. But it is said, that all the decisions, from which we deduce this rule, are founded upon error and mistake, in confounding the statutes of 13 Eliz. C. 5, and the 21 Jac. 1. C. 19. If there be an error of this sort, it is one, to which the maxim of communis errorfacit jus may be most happily applied ; for it seems to have been the error of all the English courts, and of all the courts in this country, whose attention can be ascertained to have been directed to the subject. There cannot, however, have been any such mistake. For Twyne’s case, which, in substance, contains the rule we have laid down, and has ever since been considered and followed, as sound law, was decided more than half a century before the statute of 21 Jac. I. C. 19, was made. And, independent of authority, the rule itself seems to us, to rest upon grounds the most satisfactory. An agreement to let a vendor retain the possession and use of goods, after an absolute sale, is not a common and ordinary thing in the course of business. It is, therefore, calculated to excite suspicions ; and it is the bounden duty of all courts, for the safety and protection of creditors, to call upon, and hold the vendee, in all such cases, to explain clearly and satisfactorily, how an absolute sale could have been bona fide, and yet the vendor retain the use and possession. Such a separation of the use — 428 — from the title to personal property, would afford a cover for innumerable frauds against creditors, if they were, by law, compelled to unravel each transaction, and shew actual fraud. It would rarely be iu their power to do this, in the most fraudulent cases. All would be contrived, originally, by the parties to the fraud, to meet the attack ; and the fraud would be carefully covered, by fortresses, impregnable by any evidence, which it would be in the power of creditors, to bring against them. But, let the burthen of proof be thrown upon the vendee, in these cases, to show, that the sale was bona fide, if it really were so, he, being a party to the transaction, knows where the evidence is, and can easily show the fact j and if it were not bona fide, the fraud can rarely escape detection. It tjhus seems to us, to be settled, as firmly as any legal principle can be settled, that the fraud, which renders void the contract, in these cases, is a secret trust, accompanying the Sale, and that, in cases of absolute sales, possession and use, by the véndor, after the sale, is always prima facie, and, if unexplained, conclusive evidence of a secret trust. It is, therefore, very clear, that fraud is sometimes a question of fact, and sometimes a question of law. When the question is, was there a secret trust ? it is a question of fact. But when the fact of a secret trust is admitted, or in any way ¡established, the fraud is an inference of law, which a court is bound to pronounce. This is the doctrine of Edwards vs. Harben, 2 D. & E. 589,—is strongly recognised in Sturtevant vs. Ballard, 9 Johns. 339,—was laid down in Stone vs. Grubham, 2 Buls. 225,—was distinctly acknowledged to be law by the supreme court of the United States, 1 Crunch 318, and by the supreme court of Massachusetts, 1 Pick. 295, and of Pennsylvania, 4 Binney, 258. Upon these principles, the question, we are now considering, is easily settled. It was admitted, that the sale of the goods by Sampson to Delano was absolute, and that Sampson retained the possession, and had the use of the goods, as before the sale. There was no question as to the facts. The question was, whether, upon these facts unexplained, the — 429 — sale could, in law, be deemed to have been made tona fide. The whole dispute turned Upon a matter of law, and not of fact. And so with respect to the explanation, which the plaintiff gave of the transaction, and upon which he relied, as rebutting the presumption of a secret trust, arising from the possession and use of the goods, by the vendor, after the sale, the fact, that the agreement, as to the possession, was made after the sale was completed, was taken for granted ; and the question was, whether, in law, it was sufficient to repel the presumption arising from the possession and use of the goods. We are therefore of opinion, that there was no question of fact iu dispute, between the parties, upon the trial, which could have been submitted to the jury, and that this exception must be overruled. But, it is further excepted to the direction of the court, that the explanation given by the plaintiff was, in law, sufficient to repel the presumption, arising from the possession and use of the goods; and we will now proceed to examine this exception. The ground, which counsel take, is, that the original contract, not being fraudulent at the commencement, shall not become so by matter ex post facto. The principle may be conceded ; but how does it apply in this case ? Lady Lambert's case, which has been cited in Shepherd's touchstone, was a mortgage, and is said to have been made bona fide, and for a valuable Consideration. In such a case, there could be no doubt, that the principle applied.— But, before that principle can be applied to this case, it must be shown, that the sale was bona fide, and not fraudulent at the commencement. Now it happens, that this is the very matter in controversy. The only dispute is, whether the sale can be considered as made bona fide ; and, until that question is settled, the principle cannot be applied. Another answer to this objection is, that there is a wide difference between a mortgage of land and chattels reai, and mortgages of mere goods and moveables, in the one ease, the title deeds are the proper documents to shew the title ; and possession cannot mislead. But, in the case of persona! — 430 — chattels, possession is the common evidence of title. In a mortgage of real estate, it, is not, therefore, a badge of fraud, that possession does not follow the deed. Rob. on Fraud* Con. 55G. In that case, we may safely apply the principle, that if the transaction be not fraudulent at the commence^ ment, it shall not become so by matter ex postfacto. But, in relation to sales and mortgages of personal property, different rules are adopted in this respect. In order to increase the difficulties of fraud, courts have thought it expedient to require certain signs of good faith, which cannot be reconciled with fraudulent purposes. One of these signs is, that possession shall accompany and follow the sale of personal chattels. There has been a constant exertion, by individuals, to evade this rule, and to separate the possession and use of goods, in these cases, from the title, in such a manner as to render the transaction apparently bona fide. But, from the days of Queen Elizabeth, to this hour, those exertions have been met and resisted by all courts, where the common law is known and respected, with all the firmness and uniformity, which the importance of the rule has demanded*— No rule could have been devised, better calculated to check fraud. Nothing has been found so embarrasing to those, who have been disposed to act without good faith. As soon as it was settled, that not the original contract alone, but the whole transaction and its tendencies, were to be considered, and a judgment of the original Intention formed, not from evidence of actual intention, but from the subsequent conduct of the parties ; it gave the creditors the means of detecting fraud. And, when to this was added the rule, that possession and use, by the vendor, should, if unexplained, be conclusive evidence of fraud, it threw the burthen of proof upon the parties to the sale, to clear it from suspicion, and it became, in the highest degree, difficult to escape detection in a fraudulent transaction. These rules have been in constant use for more than two centuries ; and experience has given an ample illustration of the wisdom, with which ihey were devised, and of the efficacy, with which they may be applied- But the principle, for wiueu the learned counsel of the plaintiff has — 431 — contended, that the original contract is to form the criterion, by which the honesty of the sale is to be determined, stands in direct opposition to these rules. Nor is this all. It stands wholly unsupported by authority, and seems to have made its appearance for the first time, in this case. To give it any countenance in our courts, would, in our judgment, take from creditors some of the most efficient means of detecting fraud, which human ingenuity has been able to invent. We therefore think, that the objection must be overruled. One other circumstance has been mentioned, as sufficient to clear this case from all suspicion of fraud; and that is, that a rent for the use of the goods was agreed to be paid : and the case of Watkins vs. Burch, (4 Taunt. 823,) seems to have been cited in support of this proposition. But, as we have before remarked, that was a case of a sale by the sheriff, and the actual payment of rent was thought to strengthen the evidence of the fairness of the transaction ; because such payment was not likely to have followed a collusive purchase. But, in a case, like the present, of an absolute sale by the owner of the goods himself, to his debtor, an agreement by the vender, to pay rent for the goods, is not only not inconsistent with that species of trust, which the law deems a fraud, but may, in fact, constitute a part of the agreement, on which such a trust arises. That case is also distinguishable from this, in a very important particular. There the rent was actually paid. Here there was nothing but an agreement to pay. We have now considered all the exceptions, which have been taken in this case- We hare examined them with the utmost attention, not so much because we deemed the law to be doubtful or obscure, as because such an examination seemed to be due from us, to the very able and ingenious argument of the plaintiff’s learned counsel. And after the best consideration, we have been able to give to the subject, we have no hesitation in saying, that the grounds, on which the nlaintiff has rested his motion for a new trial, are, in our judgment, insufficient to sustain it, and that the defendant is legally entitled to Judgment on the verdict..