Howe v. Ward , 4 Me. 195 ( 1826 )

Mellen C. J.

delivered the opinion of the court, at the ensuing November term, as follows.

In this case the plaintiff claims title to the locus in quo under a deed from Waterhouse to him, bearing date April 5, 1823 ; and the defendant claims title to it in virtue of the levy of his execution thereon, as the property of said Waterhouse on the 16th of July 1824. If, as against Ward, the close passed by the deed to the plaintiff, then the objections to the bond and the levy arc of no importance, as the conveyance was prior to the levy. If, as against Ward, the deed was fraudulent and!roid, then the plain-titf has no title to maintain the present action for merely taking bay from the premises in question, although, at the time of the levy, Waterhouse occupied the same as tenant of the plaintiff; such an act of trespass being an injury to the tenant, and not to the landlord, as was decided by this court in the case of Little v. Palister 3 Greenl. 6. These objections may therefore be laid out of the case ; and the only question for consideration is, whether Ward, at the time the deed was given, was such a creditor of Waterhouse, or was so situated in relation to that conveyance or is so affected by it, as that he is thereby entitled to contest its operation, by shewing that it was in its/origin fraudulent, and made with intent to defeat the rights of creditors. Upon the evidence which was admitted to the jury, for the purpose of shewing that such was the character and design' of the deed, they returned their verdict in favor of the defendant. Was the proof properly admitted? The main question presented in this cause is worthy of consideration, in two points of view. The first inquiry is whether Ward may be considered as having been a creditor of Waterhouse, at the time the deed was executed ; and the second is, whether the deed was made under such circumstances, and with such fraudulent intentions, as to be void with respect to Ward, if not then a creditor by virtue of the statute of 13 Eliz. ch. 5, which has been adopted here as common law.

The consideration of the first point leads us to the examination of some of the peculiar rights and liabilities of sureties. So far as the obligee of a bond, or promisee of a note, is concerned, the principal and sureties are each and all equally liable ; but as between or among themselves, each surety is liable only for his proportion ; and such proportion will depend on the number of sureties, in case none of them prove to be insolvent or negligent. What then is the legal relation in which one of the sureties stands to each of the others? The answer is, at the time of executing an instrument by several persons as sureties, each one impliedly promises all the others, that he will faithfully perform liis part of the contract, and pay his proportion of loss arising from the total or partial insolvency of the principal, and to indemnify them against any daniages by reason of his neglecting so to do. A similar promise is implied on the part of the principal, to indemnify and save harmless each of the sureties. This promise, in both cases, is conditional in its nature. The principal may remain solvent, and punctually pay the debt; and, again, in case of the failure on the part of the principal to pay, each surety may honestly pay his due proportion. It is a promise which may never be broken; but it is binding until broken or performed. In this respect, such a promise resembles that by which a man binds himself to pay a certain sum of money at a future day; here-a debt exists in presentí though payable in futuro. The debt exists long before a right of action accrues for its recovery. There is no question as to the right of a creditor, whose debt is payable at a future day, by the express terms of the contract, lawfully to impeach a conveyance as fraudulent, made by his debtor after contracting the debt ; because though he cannot maintain an action on the contract, until it shall have been violated by nonpayment at the day; still he has an interest in the property conveyed, as' a fund out of which the debt ought to be paid ; and may therefore shew, if he can, that the debtor has conveyed it away fraudulently to defeat his rights. Now can there be any sound distinction between sucha contract, and the implied contract, which in case of suretyship exists between the principal and the sureties, and between each surety and all the others? The case of Mountford v. Ranie Keb. 499, is not inapplicable to the case before us. One G. had given a bond to Sir John Lenthall, who was sheriff and lessor of the plaintiff; he obtained a judgment on spire facias against the heir and tertenants, claiming under the ancestor and obligor. The defendant set up a settlement by recovery to the use of trustees for sixty years, subject to the disposition of the grantor, which conveyance was made fourteen years before the ancestor became bound . as security for -the prisoner who had escaped; Kelyng C. J. and Rainsford J. firmly agreed, as tbe reporter says, in pronouncing the conveyance fraudulent, although the plaintiff had only become a creditor by the escape of the prisoner ; and so instructed the jury. Twydsen J. contra. Roberts, in his treatise on the construction of the 13th & 27th of Elizabeth, says, in page 549, that there is a distinction between demands fundamentally originating after a conveyance by way of family settlement, or provision, or advancement, and such as arise upon an obligation prior in date to the conveyance, with a condition to perform some collateral act; for it cannot be said that an obligor in a bond, before the pecuniary demand arises by its forfeiture, can be ignorant of his liability or danger, so as to exempt him from the imputation of fraudulent intent upon the statute ; and that whether the person making such voluntary settlement be principal, or only a surety in the bond, can make no difference in such view. In the case before us, it appears that the bond in question was signed Sept. 13, 1821, Ward and Waterhouse being two of the sureties ; and that March, the principal, died insolvent about the first of April 1823. Of course he was insolvent before the deed was given ; and the sureties were then placed in a situation in which they were absolutely liable to pay all eventual losses occasioned by the conduct and insolvency of March. At that moment each surety was absolutely bound to bear and pay his share of such losses; and yet in these circumstances, Waterhouse conveyed to the plaintiff the land in question. The circumstances in which sureties stand in relation to the principal, and to each other, seem to distinguish their claims from ordinary demands. There is a perfect understanding among them that they are all embarked in a common cause by common consent; and this understanding amounts in law to an implied promise of indemnity by each to all ; and, for the purpose of the present argument, such implied promise is equal to a bond given by each surety to all the others, and by the principal to all; conditioned that the obligor will faithfully pay his proportion of any eventual loss, and effectually protect them from all damage on account of his negligence or failure. Such a bond would surely constitute the obligees creditors of the obligor, so far as to entitle them’to impeach any of his subsequent conveyances on the ground of fraud,

The present question seems different from that which has often been made and decided, as to the time when a surety can prove his demand on the principal before the commissioners, incase of the bankruptcy of such principal. It is settled that in such a case, the surety has no right of action on an implied promise against the principal, until he himself has paid or absolutely assumed the debt as his own. 1 Dane’s Abr. 195, 196. 3 Wils. 13. Chilton v. Whiffin. Cowp. 525. Taylor v. Mills & al. Dougl. 160. Alsop & al. v. Price. Though if the debt be absolutely due, and payable in futuro, it may be proved under the commission before the day of payment. The question now before us is, whether the defendant, at the time the deed was given to the plaintiff, was a creditor of such description, and so situated, as to be entitled to contest the deed, and shew it to have been made for the fraudulent purposes before named. It may be further suggested as an argument in favor of the view which we have taken, that if a co-surety or co-obligor cannot be legally considered as a creditor, so far as to impeach a fraudulent conveyance made by another co-surety or co-obligor, for the purpose of se^ curing his property from all liability to contribution, the consequence will be that any such co-surety or co-obligor may completely shelter his property, and place it beyond the reach of process, and thus leave such as shall have paid the whole debt, or more than their just proportion, destitute of all remedy against him as to his estate thus fraudulently conveyed. , Such a consequence is not to be disregarded, nor a principle leading to such a consequence to be respected in a court of justice. It would defeat the very design of suretyship, by rendering it, to a certain extent, useless or dangerous.

The consideration of the second point renders it necessary to examine the before mentioned chapter of the 13th of Elizabeth, and ascertain the extent of its provisions, and the construction which it ought to receive. It is believed that the language of the section is broader and more comprehensive than the construction which the courts of Massachusetts have generally given to it, or than has been usually, in practice, considered as the true one, in the trial of causes in this State. This idea seems to have been entertained and often expressed by the court, sometimes directly and sometimes incidentally, as may be seen in the case of Northampton Bank v. Whiting 12 Mass. 110. Brooks v. Powers 15 Mass. 247. Quincy v. Hall 1 Pick. 357, and Badlam v. Tucker & al. ib. 389. It has long been a received opinion that no man could legally be permitted to impeach a conveyance as voluntary or fraudulent, unless he was a creditor of the person who made the conveyance at the time it was made. Voluntary and fraudulent conveyances have not been sufficiently distinguished.

In our common actions of replevin, where questions as to the validity of the sale of chattels are daily tried ; and in real actions between creditors claiming under executions levied bn debtors’ lands, and persons claiming the same lands under the debtors’ deeds made prior to such levies, it has been the common practice to call on the person who contests the fairness and validity of the sale, to prove, in the first place, that he was a creditor of the alleged fraudulent vendor, or grantor, at .the time of sale; and this principle and practice seem to have been founded on the idea that unless this fact appeared, he could have no interest in the inquiry ; that as against him the sale was good at the time it was made ; and that he could not afterwards acquire the right to impeach such a conveyance.

The correctness of the above principle has been often doubted in some of our courts of law ; and this court is called upon, in the cause before us, to examine this question, and pronounce an opinion, whether the principle and practice above mentioned are in conformity to the language and true intent and meaning of the 5th ch, of the 13th of Elizabeth. By this statute, “ every feoff- “ ment, gift, grant, alienation, bargain, and conveyance of lands, “ tenements and hereditaments, goods and chattels or any of them” by writing or otherwise, “ that had been or afterwards should be” had or made to or for any intent or purpose — “ to delay, hinder “or defraud creditors or others of their just and lawful actions, “ suits, debts, accounts, damages, penalties, forfeitures” &c. is declared to be “clearly and utterly void, frustrate and-of “ nb effect ; any pretence, colour, feigned consideration, expressing of use, or any other matter or thing to the contrary “notwithstanding.” A proviso follows, which need not now be noticed. In Cadogan v. Kennet Cowp. 432, Lord Mansfield says, “ The rules and principles of the common law, as now univer- “ sally known and understood, are so strong against fraud in every “ shape, that the common law would have attained every end “proposed by the statutes of the 13th and 27th of Elizabeth; “ these statutes cannot receive too libera] a construction, or be “ too much extended in suppression of fraud.” Still, at common law, a fraudulent conveyance could be avoided only by him who had a “ former right, title, interest, debt on demand.” Twyne's case 3 Co. 80. Roberts on Fraud. Conv. 13 says that “ the first expounders of the statutes of Elizabeth against fraud- “ ulent conveyances have given them a very strong construction “ against voluntary dispositions; and particularly the statute “ made for the protection of creditors, they have understood in “ a sense correspondent to the probable intention of the makers, “ to supply the defect of the common law and of former statutes, “ where they fell short of relieving those whose debts had arisen “ subsequently to the fraudulent alienation.” In Taylor v. Jones 2 Atk. 601, Lord Hardwicke observed upon the words in the 13 Eliz. “ to defraud creditors and others,” that the word “ others” seemed to have been inserted to take in all manner of persons; as well creditors after, as before, the conveyance, whose debts should be defrauded. Even voluntary family settlements, which the law appears to favour more than any other species of conveyance, though made by one not indebted, are not always safe against subsequent creditors. In Walker v. Burrows 1 Atk. 94, Lord Hardwicke said that to impeach.such a conveyance, it was necessary to prove that the person conveying was indebted at the time of making the settlement, or immediately after the execution of the deed. In Stileman v. Ashdown 2 Atk. 481, it was decided that a settlement upon children, even though made by a person not indebted at the time, might be void as against subsequent creditors, if any thing in the transaction afforded ground for an inference that the provisions were made with a view to becoming indebted. In the case of Lord Townsend v. Wyndham 2 Ves. 10, Lord Hardwicke says, “ if there is a voluntary, conveyance of real estate, or chattel interest, bj one not indebted at the time, though he afterwards becomes indebted, and that voluntary conveyance is for a child, and without any particular badge or evidence of fraud to defraud subsequent creditors, that will be good; but if any mark of collusion, or fraud, or intent to deceive, or defraud subsequent creditors appears, that will make it void, though he afterwards becomes indebted.” In the case of Fitzer v. Fitzer 2 Atk. 511, the debt of the creditor arose subsequent to the voluntary settlement. The cases of Fin v. Hills 1 Con. Rep. 295, and Jackson v. Myers 18 Johns 425, and Jackson v. Swann ib. in note, are founded on the principles above stated. See also Hinde’s lessee v. Longworth 11 Wheat. 199, and Sexton v. Wheaton 8 Wheat. 229. In each of the two former cases, property had been conveyed by a person against whom judgment was recovered in an action for a tort; in both cases the property was conveyed after the cause of action, and before judgment was recovered; but the court set aside fhe conveyances as fraudulent, aná against the provisions of the acts in the respective States, similar to the above mentioned statute of Elizabeth. The same principle is recognized by the court in Jackson v. Ham 15 Johns. 261. Newland, in his treatise on contracts, page 389, says that the deeds which areybvoided by the statute of the 13th Eliz: are void as well again^f those creditors whose debts were contracted subsequently to such deeds, as against those creditors whose debts were in existence at the execution of the deeds. In Lush v. Wilkinson 5 Ves. 384, Lord Alvanly says, that to impeach a voluntary settlement, made on a meritorious consideration, it seems necessary that the person making it should be insolvent at the time; a single debt would not do ; it must depend on this, whether he was in insolvent circumstances at the time. “ The opinion of courts of equity appears to be that the conside- “ ration of natural love and affection is a good consideration,, “within the proviso of the statute, and sufficient to support a deed against creditors, unless from other circumstances it can “be shewn to be mala fide. jYewland 886. This is agreeable to the opinion of Lord Ilardwicke before mentioned, in the case of Townsend v. Wyndham.

Mr. Dane, in his learned Abridgment, Vol. 1, page 668, lays down the position that one insolvent cannot make voluntary conveyances or settlements ; that is, for love and affectiou ; and in support of the position cites a long catalogue of decisions.; several of which have been mentioned in the course of this opinion ; among others he states the above case of Lush v. Wilkinson 5 Ves. 384, Ambler 121. 1 Ves. 27. 2 Ves. 11. 1 Atk. 93. 2 Bro. C. C. 90. 1 Dane 669, He also lays down the other principle, that deeds avoided by the 13 Elizabeth are also void against subsequent creditors, in those cases where the debtor or person making the deed is insolvent. Then he says, perhaps a voluntary conveyance may be deemed to have respect to them, and made with intent to defraud them. On this head he observes that according to our decisions, one becoming a creditor after a voluntary conveyance is made and known, has no right to complain of it. He refers to Adams v. Adams, Essex Nov. Term 1796, and Parker v. Procter 9 Mass. 390, and considers them the best decisions; and then adds “ there may however “be an exception, as where the deed is unrecorded and unknown “ to him, or actually made with a design to affect after credi- “ tors.” In such a case the principle of the English decisions is the one applicable here. This*seems to be the true and solid-ground. Unless the principle is extended thus far, cases of the most gross fraud may exist $nd yet' not be within the statute. For instance, suppose D. a man possessed of property real or personal, of the value of a thousand dollars, and of which he is the Undisputed owner, to day makes a voluntary conveyance of the same to «#. with the express intent to purchase goods or real, property of B. and defraud him of the value, by means of this artifice; and tomorrow makes the contemplated purchase; all of which arrangement is known to Jl'; surely, in such a case, B may be permitted to contest, and by proof defeat this sale to Jl, although, at the time of the conveyance to <5, B was not a creditor of D. He may do this, becaüse the very purpose of the plan was to cheat B, a subsequent creditor. The supposed case is dearly within the reasohand scope of the statute; and not against any of its language. It is in harmony with the numerous decisions in the English courts upon the point; and although the doctrine seems not to have been so clearly defined and so liberally applied in practice in the courts of Massachusetts, and of this State, hitherto, (as has been before intimated,) yet there is no case, in the reports of either State, by which this extended application of the salutary provisions of the statute is forbidden ; on the contrary/ the Supreme court of Massachusetts have given a clear intimation of an opinion entertained on the subject, as we perceive in the case of Damon v. Bryant 2 Pick. 411. This court cannot doubt that the cause of truth and justice would be aided by extending the construction, defining the principles, and at the same time giving the intended effect to the statute in question, in the manner before mentioned. Thus frauds would bé more easily detected, and guarded against more effectually, than under the limited construction which has so long governed our courts in practice. No possible danger can result from the extension of the principle as proposed; as it goes no further than to permit the introduction of proof to the jury, for the purpose of impeaching a conveyance on the ground of fraud ; and if the party for whose benefit the proof is introduced, was not a creditor at the time the alleged fraudulent conveyance was made, such proof cannot avail him, unless found sufficient to convince the jury that the conveyance was made for the purpose of defrauding him in particular, or subsequent creditors generally, as well as those who were creditors at the time, if there were any such. From the foregoing principles, established or recognized in the cases we have stated, as well as from numerous others relating to the same subject, the following propositions may be deduced; and it may not be useless or unacceptable to present them all in one view.

1. — If a conveyance is made by a man who is insolvent, upon a good and sufficient consideration advanced to him, but not bona fide ; and the purchaser is conusant of and assenting to .the fraudulent intent; it is void against creditors.

2. — A voluntary conveyance, made without consideration, by a man who is solvent, and without any fraudulent intent, is good against subsequent creditors.

3. — -A voluntary conveyance, made without any consideration, by a man who is insolvent, is void against creditors existing at the time of the conveyance.

4. — A voluntary conveyance made without consideration by a man insolvent, may, on that very account, be deemed fraudulent, even as against subsequent creditors; at least that circumstance is a badge or indicium of fraud or trust between the parties, which may lead to that conclusion.

5. — A voluntary conveyance, made without consideration by a man, whether insolvent or not, is void against subsequent creditors, if such conveyance was made for the purpose of defrauding them “ of their just and lawful actions, suits, debts, accounts, “ damages, penalties, forfeitures, &c.”

In all the foregoing cases, the questions of insolvency and intention are before the jury. And now having taken this review of those principles of law which relate to fraudulent conveyances, we recur to an important fact in the report of the Judge, viz. that he “ permitted the defendant to offer evidence that the “ conveyance by Waterhouse to the plaintiff, was made with the “knowledge of the plaintiff, for the purpose of putting said prop- “ erty out of the reach of the sheriff in any suit upon the bond “ aforesaid.” And upon the evidence thus introduced, which we must presume was applicable to the several facts necessary to bring the case within the 13th of Elizabeth, the jury decided that the deed was fraudulent and void, on the grounds upon which the cause was submitted to them. The fraudulent intention of putting the property out of the reach of the sheriff in any suit upon the bond, included the intention of defrauding the defendant, by preventing him from obtaining any indemnity from Waterhouse, for any loss he might sustain by being compelled to pay more than his, the defendant’s, share in consequence of his suretyship.

We conclude this opinion, which is the result of laborious investigation, by saying that we all agree that the evidence objected to was properly admitted to the jury ; and that accordingly there must be Judgment on the verdict,