Albee v. Webster

16 N.H. 362
Superior Court of New Hampshire·Decided December 15, 1844·Published

Opinion

Parker, C. J.

There are some circumstances attending the conveyances in this case, which might be urged upon the consideration of a jury as evidence that the transaction was intended by the parties to it as the means of securing the property of the vendor from his creditors, and appropriating it to the use of himself and his family; and if such were the fact, the amount which was paid, even if it was more than the full value of the property, would be wholly immaterial. The fraudulent design would vitiate the whole transaction, and the defence would be complete.

The case before us at this time however raises no question of that character. If the defendant raised the question of actual fraud at the trial, he did not rest his case upon that alone; and the evidence and instructions raise the question how far the case is fraudulent constructively, by operation of law from the circumstances of the sale to [368] the plaintiff. It appeal’s that the plaintiff offered to prove that he was a creditor of his father, the vendor, and that this furnished a part of the consideration for the conveyance. A debtor may lawfully prefer one of his creditors to others. The' plaintiff also offered to prove that he at the time assumed the payment of certain debts due to others; and this, if done bond fide, would furnish thus far a good consideration.

It appears also that a part of the consideration of the conveyance consisted of an agreement on the part of the plaintiff to maintain his father, mother, and sister; and to pay a certain sum to another sister to whom no debt appears to have been due. This if it had been the entire consideration, would clearly have been constructively fraudulent as to existing creditors. A debtor has no right thus to appropriate and secure his property for the use of himself and his family, to the prejudice of those to whom he is indebted at the time, even if he suppose he has property enough left to pay them and his intentions are fair. It is a withdrawal of funds to which they have a right to resort for payment, upon a consideration which the law does not here acknowledge as one which is valid against creditors. Smith v. Smith, 11 N. H. 460. A quaere was suggested in that case whether, if the debtor retained property sufficient for the payment of his debts upon which his creditors might levy, the conveyance might not be valid. But however much he may have had left, it is evident that it might be lost or expended, and the creditors receive no benefit from it. It is sufficient in such case that the property to which the existing creditors resort, and which was once liable to pay the debts, has been sold upon a consideration which secures it in effect to the debtor’s use, and that such was the direct operation of the transaction as must have been well known to the parties. The vendee can not complain that the law'requires of him before he relies upon such a contract, to inquire and ascer[369] tain that .there aro no creditors to be prejudiced by the transfer.

If such an agreement to maintain the vendor or his family does not form the entire consideration of the sale and transfer, but if the other considerations connected with it are inadequate or insufficient, it is apparent that the same principle must apply and the whole transfer bo void as to creditors. The entire sale being founded on several considerations, one of which was bad and the others inadequate to sustain it, there could be no separation so that any part of the transfer could be held to bo upon a sufficient consideration. Thus far we regard the principles as plain and the result satisfactory.

But the question presented to us by the first part of the ease before us is not yet solved. On the supposition that the good part of the consideration is adequate and sufficient and to the full value of the property, so that if it stood alone the sale would be valid against creditors, is the sale vitiated and the whole avoided, because the parties without any intention to defraud, have connected with it another matter, which if it stood alone, or even if it formed a substantial part of the price without which the sale could not stand, would have been a fraud upon creditors ? This is a case which can very rarely occur, but it is the one presented by the offers of proof by the plaintiff

"We can not say that we have any doubt respecting the true principle which should govern cases of that description, if any exist. "We have certainly had no disposition to disregard the just rights of creditors to a satisfaction from the property of the debtor. But it is not sufficient that the transfer of the property by the debtor has been, upon its face, of a doubtful character, and under such circumstances as to require the creditor to make an examination whether it is valid or not, to inquire what was the consideration for the sale and transfer, and how far that consideration was to the full value of the property con[370] veyed. ’ The principle that if there be two parts of a consideration and one of them be illegal the whole is bad, the consideration being entire, does not apply here. That is a rule by which the validity of the transaction as between the parties may be tested. But the whole transaction may be illegal as between the parties, and creditors have no right to interfere. Clark v. Gibson, 12 N. H. 386 ; Smith v. Bean, 15 N. H. 577.

A sale may be actually fraudulent as to creditor’s for want of sufficient consideration, and yet be made good if full consideration be subsequently paid before creditors interfere. Oriental Bank v. Haskins, 3 Met. 332; Verplank v. Sterry, 12 Johns. 536, 552. So a sale may be fraudulent as to creditors on account of a secret trust accompanying it, but if by a subsequent agreement before the creditors interfere this secret trust is discharged and the sale is otherwise made valid, the fact that the trust once existed will not operate longer to vitiate the sale, the fraud being purged. The principle may be found in Thomas v. Goodwin, 12 Mass. 140, and in Hutchins v. Sprague, 4 N. H. 469; the application of it m the latter case being somewhat doubtful, because there was no sub- ' sequent agreement. These are cases it is true where the transfer is rendered valid against creditors by subsequent transactions. The fraud is purged as it is termed. But they serve to show that the sale is not to be avoided because something has been coupled with it of an illegal character, if in fact it has no operation against creditors.

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Albee v. Webster, 16 N.H. 362 (N.H. Super. Ct. 1844).

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