Cavanaugh v. Britt , 90 Ky. 273 ( 1890 )

JUDGE HOLT

delivered the opinion of the court.

The appellee, Joseph Britt, obtained a judgment in the Jefferson Court of Common Pleas on May 1, 1872, against John Cavanaugh, the husband of the a.ppe'1lee, Catharine Cavanangh. An appeal was taken to this court, and the judgment' superseded. The appeal was dismissed in 1878. The mandate of this court was filed in the lower court on April 6, 1878, an execution sued out upon the judgment, and returned “no property” on May 2, 1878. November 5, 1873, the husband made a conveyance of all his property to the appellant. It was a sweeping transfer. No property was described. It conveyed, or at least attempted to convey, to her all the property of her husband of every description. The recited consideration is love and. affection. This action was brought by the appellee on December 7, 1887, to set aside the deed as not only voluntary, but actually fraudulent, and to subject to the payment of the judgment four lots of land, which the debtor owned at the time of its rendition, and which are now claimed by the appellant under the deed from her husband.

Several defenses are pleaded. Among them is payment. There is no evidence, however, to support this plea. Also, that there was not only a good, but a valuable consideration for the deed. It is evident, however, that if not actually fraudulent, it was constructively so as to the existing creditors of the grantor, and, at best, but a voluntary'conveyance. The grantee also relies upon not only the five, but the ten years’ statute of limitation as to actions seeking-relief for fraud, and whether the conveyance to her is protected by the lapse of time is the only real question in the case.

Under our statute an action for relief upon the ground of fraud or mistake must be commenced within five years after the cause of action accrues ; and section 6, artide 3,- chapter 71, of the G-eneral Statutes says: “In actions for relief for fraud or mistake, or damages for either, the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake; but no such action shall be brought ten years after the time of making the contract or the perpetration of the fraud.”

The five years’ provision of the statute merely perfects the first clause of this section, and fixes the limitation as five years from the discovery of the fraud, or, as construed by this court, as five years from the time when the creditor, in the exercise of ordinary diligence, should have discovered it. (Dye v. Holland, 4 Bush, 635.)

The Legislature has seen fit, and wisely, no doubt, to also provide that an action to annul a conveyance as fraudulent as to antecedent creditors is barred in ten years after its execution, regardless of the time when the creditor may discover the fraud. This applies to constructive as well as actual frauds. It was intended to quiet old transactions, and to fix a time beyond which the parties should not contend as to when the fraud was discovered. It would be unreasonable to suppose, however, that it intended, when it so limited the time, that the creditor should he barred of his action at the end of it, if, during that period, some other provision of law had prevented him from bringing it.

In the case now before us the debtor superseded the judgment. It remained so until April, 1878. .This deprived the appellee of the right to bring any action looking to the collection or even the protection of his judgment. The superseding of it prevented any step in that direction. This condition resulted from the act of the debtor, who was a necessary party to any suit to annul his conveyance. The law gave him the right to thus stop his creditor from proceeding to collect his demand, and it would be unreasonable to permit him to exercise this right, and then allow one holding under a fraudulent conveyance from him to claim that the time during which the right to sue had been thus suspended, should be estimated as a part of the limitation. This would bar the creditor of a right by lapse of time, when, during the same time, he was forbidden by law from exercising the right, and would have been in contempt of ■ court if he had attempted to do so.

It was decided in Johnson v. Williams, &c., 82 Ky., 45, that after a judgment has been obtained and superseded by the debtor, the creditor has no right to bring an action upon it, and protect it by suing out an attachment against the debtor’s property. He can not harass the debtor with another suit while the judgment is thus suspended and the right to it in question. This being so, it is not supposable that such a solecism exists in the law as to say that one must exercise a right within a certain period, or he shall be barred from doing so, when, during that same time, it forbids the exercise of the right. Moreover, section 21, article 4, chapter 21, of the General Statutes provides: “In all cases where the doing of an act necessary to save any right or benefit is restrained or suspended by injunction, or other lawful restraint, vacancy in office, absence oí an officer, or Ills refusal to act, the time covered by the injunction, restraint, vacancy, absence or refusal to act shall not be estimated in the application of any statute of limitation.”

In the case of Phillips, &c., v. Shipp, &c., 81 Ky., 436, to which we have been referred, the judgment sought to be enforced against property in the hands of a voluntary grantee had not been superseded.

While, however, ten years had not elapsed before the bringing of this action, during which the appellee could have brought it, yet over nine years had; and the limitation of five years being aptly pleaded, the burden rested upon the appellee, by proper pleading, and evidence in support of it if denied, to avoid the effect of the plea. His reply merely avers that he did not discover the fraud until within five years before the bringing of the action. His testimony only goes this far, and, according to the repeated ruling of this court, it is insufficient. In such a casé it is incumbent upon him to reply, not only that he did not discover the fraud within five years before the institution of his action, but that the exercise of ordinary diligence upon his part would not have led to the discovery; and if his replication be denied, he must, by testimony, present a state of case showing that the exercise of such diligence by him would have been of no avail. (Zackay’s Adm’r v. Hicks, 7 Ky. Law Rep., 755; Cotton v. Brown, 9 Ky. Law Rep., 115; Woods v. James, &c., 87 Ky., 511.)

While the recording of the conveyance may not have operated as constructive notice to the appellee of its existence, lie being an antecedent creditor, yet it is a circumstance which may be considered in determining -when the discovery of the fraud might, by the exercise of ordinary care, have been made.

A creditor has a right to regard the condition of his debtor when the debt was created as continuing, but he has no right to shut his eyes, and then say that he did not discover the fraud until within five years before the bringing of his action. If so, then his negligence would often work great hardship to voluntary but innocent grantees. If the circumstances surrounding him are sufficient to lead one of prudent mind, in the exercise of ordinary diligence, to discover the changed financial condition of his debtor, then he is required to exercise that diligence within a certain time or hold his peace. In this instance the creditor resided in the county where the deed was made at the time of its execution. It is true he moved to another county, not very distant, not long after'; but he returned in 1882, and yet his action was not brought until five years thereafter. He had a return of nulla bona as early as 1878, and his long delay implies laches upon his part, which his own testimony in no way excuses. Opportunity should not, therefore, be given for an effort to cure the defective pleading.

The appellee complains by a cross-appeal of the rejection by the lower court of an amended petition assailing the conveyance to the appellant as void for want of description of the property conveyed. It was tendered after, the pleadings had been fully made up, and was based upon a fact known to the appellee when he brought his action. This court can not, therefore, hold that the court below abused its discretion, even conceding the sufficiency of the proposed pleading.

The judgment is affirmed upon the cross-appeal and reversed upon the main appeal, with directions to dismiss the appellee’s petition.