Heath v. Page , 63 Pa. 108 ( 1870 )

The opinion of the court was delivered, January 3d 1870, by

Agnew, J. —

The numerous assignments of error to the charge and answers of the court to points, will be resolved by the- disposition we shall make of a few principal questions. This was an execution attachment against John Heath, as garnishee, under the following circumstances.

Elijah Heath had lent money to John H. Page, at usurious interest. The deed from John H. Page to Elijah Heath, for property accepted by Heath in payment of the debt, and hy which the usury was consummated, bears date December 13th 1861, and was acknowledged December 31st 1861. In Heath v. Page, 12 Wright 145, it was held, however, that the usury was not complete until the 14th day of April 1862, when satisfaction was entered on the mortgage given to secure the debt. On the 2d of July 1862, Page sued Heath for the excess of interest paid him, and recovered judgment June 27th 1864. The declaration was in indebitatus assumpsit, and laid the time when the debt accrued for the excess of interest as of the 1st of February 1862. Elijah Heath conveyed the property from which the money attached in the hands of John Heath arose, to Charles Gaskill, by deed dated 29th of April 1862, reciting a consideration of $7000. Gaskill and wife conveyed the same property to John Heath, the garnishee, by deed dated May 26th 1862, reciting a consideration of $8000. It is conceded that both these deeds were purely voluntary, no money being paid by either grantee. John Heath sold and conveyed the property to Gibson A. Mundorf, a boná fide purchaser, without notice of any fraud, by deed dated December 26th 1864, for the sum of $14,750 paid in full to Heath. This is the money attached in the hands of John Heath. Then, whether we take the date of Page’s deed to Elijah Heath, in payment of his mortgage, the date laid in the declaration in the suit for the excess of interest, or the date of. the satisfaction of the mortgage of Page to Heath, the usury was complete before the 29th of April 1862, the date of E. Heath’s deed to Gaskill, and Page’s right to recover the excess had already vested. Page, therefore, was an existing creditor to be affected by Heath’s deed to Gaskill, unless his claim for the excess of interest is not a debt, and he not a creditor, within the protection of the statute of 13 Elizabeth. This then is the first question.

For one hundred and thirty-five years the legislation of the state, on the subject of interest, viewed usury as a crime, and denounced upon it, a forfeiture of the money lent, as its punishment. That which was recoverable under the Act of 1723, for usury, was a penalty, half of which went to the government, and half to any informer who should sue for it. But with the changes wrought in the commerce, and in the ideas of the people, came a change in their legislation; and in 1858 the lawful rate of interest in all cases where no express contract should be made at a less rate, was established at six per centum per annum. When a greater rate is bargained for, no penalty is exacted, but_ the borrower or debtor is not bound to pay tbe excess, and may retain or deduct it from the debt, or having paid it, may recover it back at any time within six months after the payment. Thus the excess of interest over six per cent, is evidently the money of the borrower, which, when received by the creditor, he cannot retain, but holds for the use of the debtor, and for which an action of assumpsit lies. It has no cast of a penalty. Hence, in answer to an objection that the action should have been in debt and not in case, this court, through Woodward, C. J., in Heath v. Page, 12 Wright 146, said that “the action is not for a statutory penalty, hut is to recover back an excess of interest, voluntarily paid upon a usurious contract.” Interest, in its very nature, is but an incident of a debt, and therefore partakes of its kind; and when detached from the principal becomes itself a debt. It was upon this inherent quality as a debt, this court held that coupons for interest bear interest: Beaver County v. Armstrong, 8 Wright 63. The law of interest under the Act of 1858, now detaches the excess of the interest from the debt of which it was a part, and returns it to the debtor as his own; and it is therefore recoverable in assumpsit, as we held in Heath v. Page. At the instant, therefore, that Page’s right of action accrued to recover the excess, he stood in the relation of a creditor to Heath for so much money had and received by the latter to his use.

But independently of this reasoning, on authority the claim falls within the letter and spirit of the statute of 13 Elizabeth. The statute makes “utterly void, frustrate, and of none effect,” all conveyances and other recited instruments and acts, “ as against that person or persons, his or their heirs, successors, executors, administrators and assigns, and every of them, whose actions, suits, debts, accounts, damages, penalties, forfeitures, heriots, mortuaries and reliefs, by such guileful, covinous, or fraudulent devices and practices, as is aforesaid, are, shall or might be in any way disturbed, hindered, delayed or defrauded:” Boberts’ Digest 296. It was, therefore, said in Twyne’s Case, 1 Smith’s Lead. Cases, p. 5, “ that this act doth not extend only to creditors, but to all who had cause of action, suit, or penalty, forfeiture, fe.” “And it was resolved that this word forfeiture should not be intended only of a forfeiture of an obligation, recognisance or such like (as it was objected that it should, in respect that it comes after damage and penalties), but also to everything which shall by law be forfeit to the king or subject.” This would include the penalties under the Usury Act of 1723. In Shontz v. Brown, 3 Casey 131, Woodward, J., said, that the question is not to be answered by a sharp definition of the word “creditors,” as the statute avoids conveyances made to defraud creditors and others. He remarked, also, that the statute extends to contingent liabilities, and thought it would protect a plaintiff in an action for scandal, or on a contract of marriage.

Now as we have seen that Page’s right of action arose not later than the 14th of April 1862, and before Heath’s deed to Gaskill of the 29th of April 1862, he stood protected by the statute of 13 Elizabeth. This relieves the case of numerous assignments of error and authorities.

We come now to the second principal question in the cause, to wit, the nature and attachable character of the money in the hands of John Heath. It is urged that the property having come to him through Charles Gaskill as land, and the money being the proceeds of his own sale to Mundorf, the fund is not a debt due to Elijah Heath, and is not attachable. In solving this question it is to be noticed first, that the judgment of Page v. Heath entered on the 27th of June Í864, was not a lien (aside from the fraud) on the land conveyed by Heath to Gaskill, in April 1862. The land, therefore, can be followed only on the ground of fraud in the conveyance. It is to be observed, in the second place, that the land itself cannot be reached at all, it having passed into the hands of Mundorf, a bond, fide purchaser for value, without notice of the fraud, on the 26th of December 1864. The fi. fa. levied in October 1864, was not against John Heath, and therefore did not lie in the path of Mundorf in tracing the title of John Heath; for when he would arrive at the deed from Elijah Heath to Gaskill he would find it prior to the judgment of Page, and therefore, unless he had notice of the fraud, he would be bound to look no farther than the judgment. As the case stood at the service of the attachment, John Heath held the proceeds of the sale to Mundorf, which alone can represent the title that Elijah Heath had in the premises; and if, by reason of the fraudulent conveyance, and the subsequent conversion of the land into money, by a sale to a boná fide purchaser, the money cannot be followed, the creditors of Elijah Heath are baulked by the fraud, and the statute of 13 Elizabeth rendered abortive. But this is a consequence not to be tolerated, while the only fund representing Elijah’s interest remains in the hands of a mere volunteer who has paid no consideration; and this we rule on both principle and authority. The objection that there is no privity between Elijah and John Heath, to constitute the relation of creditor and debtor, is answered by the reasoning of Chief Justice Gibson, in Englebert v. Blanjot, 2 Wharton 245; “What then,” says he, “is the interest of a debtor in property fraudulently conveyed by him ? As regards benefit to himself, absolutely nothing; but as regards benefit to those attempted to be defrauded, something tangible and substantial. Eor the benefit of these the ownership remains in him as a trustee ex maleficio. On no other principle could the legal title be sold, even on judicial process against him; yet it is constantly seized in execution as his and sold as his. The title remains in him so far as is necessary to protect the interest of his creditors.” The same doctrine is re-asserted in Moncure v. Hanson, 3 Harris 391 and 395. This is the necessary effect of the statute of 13 Elizabeth, which avoids the fraudulent conveyance as to creditors only. As between the parties the title passes, but the law arrests it in favor of creditors, and treats the title as still in the grantor. In order to effectuate the statute, the same principle must reach the proceeds representing the grantor’s estate, when the title has passed into the hands of an innocent grantee, from whom it cannot be recalled; and for this we have authority. The same principle has been applied, in many cases, where the debtor had made an assignment for the benefit of creditors and the deed became void as to creditors generally, by reason of its not being recorded within thirty days under the Act of 1818. In these cases, both foreign and execution attachments were supported against the assignee in favor of creditors : Flanagin v. Wetherill, 5 Wharton 280; Stewart v. McMinn, 5 W. & S. 100; Wharton v. Grant, 5 Barr 39; Watson v. Bagaley, 2 Jones 164; Mitchell v. Stiles, 1 Harris 306; Hennessy v. Western Bank, 6 W. & S. 301; Raiguel & Co. v. McConnell, 1 Casey 362; Driesbach v. Becker, 10 Casey 152; Gerlach v. Coates, 8 Wright 43. The principle of these cases cannot be distinguished from the present. The Act of 1818 made the unrecorded deed void as to the creditors only, while as between the parties to it, the conveyance is good, and no contract can be implied oh the part of the assignee to refund the proceeds of his sales, except for the surplus remaining after the execution of the trust. The cases cited are too numerous, and the doctrine too well settled, that attachment execution will lie in behalf of the creditor, to be now overthrown on the ground that there is no actual contract to restore the proceeds of sale. The remarks of Sergeant, J., in Stewart v. McMinn, supra, are directly in point: “Although the assignment is null and void against creditors, yet it is good as between the assignor and assignees; the assignor, therefore, not being able to demand the funds, they are not, it is contended, a debt due to him. If we are bound down to the rigid letter of the act, this position may, perhaps, be true. But we think we must look at the spirit of the act giving the attachment, and endeavor to effectuate its design and object; and these were to enable creditors to reach funds belonging to the debtor which could not be seized on a fi. fa., but were in the hands of a third person, such as debts and other choses in action, goods pawned, &c., and that for the benefit of the creditors, and to give them a remedy, the funds in hand or uncollected may be considered as debts due to the assignor. Indeed, if it were not so, the creditors would not be able to reach them, and the assignment would, so far, be rendered valid as to creditors, notwithstanding the express enactment of the law to the contrary.” These decisions bring us fairly up to the present question and to the cases directly in point. In Mench v. Beidelman, 2 Grant 319, the attachment execution is held to be an appropriate writ for the creditor in the case of a fraudulent sale of store goods, where the fraudulent vendee has sold part and has part in hand. “ It is certainly true, (said Lowrie, J.), that the money received by him (the vendee) for the part sold is not legally a debt due by him to the fraudulent vendor; for the law will not help to enforce the fraud; but in the intention of the parties it is a debt, and the creditors may treat it as such and attach it, and so we decided last year at Philadelphia in the case of Tams v. Tams; and there have been previous decisions going in the same direction.” As there is no difference in principle and reason, between the proceeds of the sale of goods, and of lands fraudulently conveyed, so there is none in authority, as the following cases prove. In Mitchell v. Stiles, 1 Harris 306, the debtor conveyed his real estate under a deed of trust to sell it and pay the proceeds according to his written appointment, and execution attachment was levied of the proceeds of sales in the hands of the trustee. Still more to the point is Coates v. Gerlach, 8 Wright 43, where the execution attachment was held to lie against the proceeds of real estate in the hands of a boná fide purchaser, who had not paid over the money, after a voluntary conveyance by a husband to his wife, and a sale by the wife to the purchaser, in whose hands the attachment was laid. These same cases also prove the secondary position that a grantee who is a mere volunteer, so long as the money remains in his hands, stands on no better footing than the grantor. He holds without consideration the money of the grantor, of which he is deemed to be a trustee ex maleficio, for his creditors. The beneficent and remedial provisions of the statute of 13 Elizabeth would be of little avail if a fraudulent grantee could pass the property over to a mere volunteer without notice of the fraud, and then claim on that ground that it or its proceeds were safe from the pursuit of creditors. It is only when the property comes into the hands of a purchaser who has paid a valuable consideration for it, it or its proceeds are protected by a want of notice of the fraud: Rogers v. Hall, 4 Watts 359; Hood v. Fahnestock, 8 Watts 489.

The errors assigned to those portions of the charge which relate to the proportion of the property retained by Elijah Heath, when he conveyed the property in question to Charles Gaskill, are of but little importance, as this was, according to the testimony, a case of positive fraud. But we may say in reference to these errors, that the statute of 13 Elizabeth embraces all cases where the effect of a voluntary conveyance is to hinder and delay, as well as to defraud creditors. Hence, where a debtor denudes himself of all tangible property within the state, and then leaves it, carrying with him all his choses in action, and leaving nothing to the process of his creditors, makes no provision for the payment of his debts, and remains abroad without known residence, it is a case of hindrance and delay, and seriously embarrasses the creditors in their remedy, and falls within the statute. Such were the facts upon which the instruction of the court was given, and we see no error in it. The objection that the court submitted the question of John Heath’s knowledge of the voluntary character of his father’s deed to Charles Gaskill without evidence, has no just foundation. Elijah Heath, John Heath and his wife, who is a daughter of Gaskill, lived together in the same house in Allegheny City, while Gaskill was distant from them from three hundred to four hundred miles. The agreement between Elijah Heath -and Gaskill for the transfer of the property to avoid the payment of the bond to the United States, was made at Heath’s, in Allegheny City. John Heath received two deeds from Gaskill, one for the property in question, the other for the Allegheny City property. From the nature of the circumstances, as well as from the deed itself, John Heath knew that the property conveyed by Gaskill was his father’s property. He must have known also the notorious fact' of his father’s liability for Hastings, and the robbery of the latter; and Gaskill says, John probably knew of the intended suit by the United States. It is admitted John paid Gaskill nothing. The deeds came through Keenan to him. He never acknowledged their receipt, or thanked his father-in-law for his gift, and, most strange of all, no communication ever passed between Gaskill and John, or his wife, on the subject. Gaskill says they never conversed on the subject, and that he simply made the deed to John, because he was so directed by Elijah Heath. John sold the property in question for $14,750. The idea, therefore, that all this took place without John’s knowledge of his father’s purpose, and without a word’s conversation with Gaskill, on the presumption of a bond, fide transaction on the part of John, is too preposterous to be believed. But on the supposition of John’s previous knowledge of his father’s purpose, it is easily believed. Then it would be his policy to have no correspondence with Gaskill, that he might appear to be without knowledge.

The prior levy, which was necessarily abandoned by reason of John Heath’s sale to a bond fide purchaser for value, was not in the way of the execution attachment. It is only when the execution or other final process is inconsistent with the attachment, that the latter becomes irregular: Tams v. Wardle, 5 W. & S. 222; Coleman v. Mansfield, 1 Miles 56; Newlin v. Scott, 2 Casey 102; Kase v. Kase, 10 Casey 128; Pontius v. Nesbit, 4 Wright 309.

There was no error in receiving the deed made by Elijah Heath on the 24th of April 1864, for the purpose of showing the fraudulent intent of the deed made on the 29th of April. In cases of fraud much latitude in the evidence is allowed. The only true test is, whether the evidence can throw light on the transaction, or whether it is totally irrelevant: Zerbe v. Miller, 4 Harris 495; Covanhovan v. Hart, 9 Harris 495; Kaine v. Weigley, 10 Harris 183.

It was error to receive the certificate of the clerk of the Circuit Court, and copy of the docket entries in the case of the United States v. Hastings and his sureties. But it did the defendant no injury. The paper showed nothing but a suit brought, the plea, rules for taking depositions, and the continuances, while the important and operative facts of Elijah Heath’s indebtedness to the United States, his expectation of being sued, and his purpose in conveying his property to Gaskill, to prevent the collection of the debt by the United States, are all proved by the testimony of Gaskill, the witness of both parties. The error, therefore, in admitting the paper was immaterial.

The only ground, alleged in the bill of exception, against the admission of those parts of Charles Gaskill’s deposition, read by the plaintiff, was that the declarations proved, were made in the absence of John Heath. But all these portions had relation to the declarations of Elijah Heath to Gaskill, before and at the time of the fraudulent arrangement to transfer his property, to defeat the collection of the claim of the United States. Such declarations are a part of the res gestee, and are not to be likened to declarations made by a grantor after he has parted with his title, to the prejudice of his grantee. There was no error therefore in admitting these declarations: Covanhovan v. Hart, supra.

The true value of the land was a circumstance bearing on the question of fraud: Hamet v. Dundas, 4 Barr 178. Finding no error in the record the judgment is affirmed.