Burt v. Keyes

4 F. Cas. 858, 1 Flip. 61
CourtU.S. Circuit Court for the District of Northern Ohio
DecidedNovember 15, 1861
StatusPublished
Cited by3 cases

This text of 4 F. Cas. 858 (Burt v. Keyes) is published on Counsel Stack Legal Research, covering U.S. Circuit Court for the District of Northern Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Burt v. Keyes, 4 F. Cas. 858, 1 Flip. 61 (circtndoh 1861).

Opinion

WILLSON, District Judge.

The two important inquiries involved in the case are: 1st— Was the sale made by Henry Keyes to his two sons, on the 2Sth of February, 1858. a fraudulent sale as to his creditors, and 2nd— If the sale was fraudulent, then have these complainants any prior equities over the other creditors of Henry Keyes by virtue of this proceeding in chancery, or do his creditors all stand upon equal footing under the operation of the 17th section of the act of the Ohio legislature, regulating assignments, passed April 6, 1859. 56 St. p. 225.

Fraud is not to be considered as a simple fact, but a conclusion to be drawn from all the circumstances of the case. It may be inferred from the nature of the contract itself, or from the condition or circumstances of the parties. The general principle is well settled, that equity will give relief against presumptive frauds, apd therein will go further than courts of law, where fraud must be proved and not presumed. It is.true that some eminent judges have said that a deed cannot be fraudulent unless it be fraudulent both in law and equity. But it was the clear doctrine of Lord Hardwicke, and of the English court of chancery up to his time, that there are many instances of fraud that would in equity affect instruments in writing concerning lands, of which the law could not take notice.

In accordance with these principles, a great number and variety of modern cases have been decided in England and in. this country, and relief afforded in equity, where, from the nature of the transaction and situation of the parties, fraud might be presumed.

What then, were the circumstances attending the sale of the land in question, on the 28th of February, 185S, and what was the relation of the parties in that, transaction to one another and to the creditors of Henry Keyes ?

From the bill, answers, and the mass of testimony produced at the hearing of the cause, some leading facts stand out as prominent, as they are in themselves important.

It appears that for some time previous to February, 185S, Henry Keyes was a partner in the mercantile firm of Keyes, White & Co., doing business at Beloit, in the state of Wisconsin. The individuals comprising that firm were Ira White, the defendant Keyes, and his son. Martin Keyes. As between the partners themselves, Henry Keyes had no pecuniary interest in the profits of the concern, but entered into the firm to give it credit and to advance the interese of his son Martin. From the acknowledged wealth of Henry Keyes, the firm easily obtained credit for • goods purchased to a large amount, so that on the 8th of February, 185S, its outstanding liabilities had accumulated to the sum of $54.800. On that day the concern failed and made an assignment of the company’s assets at Beloit, to Edwin R. Wadsworth, for the benefit of the creditors. The assignment was made, and the proper transfer of the assets executed by all the partners, including Henry Keyes. It is not a little singular, that the testimony of Ira White, the book-keeper of Keyes, White & Co., and that of Wadsworth, the assignee, though full in other respects, does not disclose the character or amount of the assets that passed into the hands of the assignee.

[860]*860It was within the next twenty days after the assignment of the company’s property, that Henry Keyes conveyed all his unencum-hered real estate in Ohio, to his two sons, Elias and Henry P. Keyes, and the sale was made upon an extended credit, running through a period of ten years.

Henry Keyes, in his answer, avers, that in ■consequence of his impaired eye-sight, and the increasing infirmities of old age, he had for a long time previous contemplated some arrangement with his sons, by which he .should be relieved from the cares incident to the management of his property. And he says the conveyance made by him on the 28th of February, was done in good faith, and without reference to any pecuniary em-barassment of his own, or that of Keyes, White & Oo. But we are unable to reconcile this interpretation of the purpose of the conveyance with the necessary consequences of the transaction upon the rights and interests •of creditors.

It clearly had the effect of hindering and ■delaying the creditors of Keyes, White & Co. in the collection of their debts from the only responsible member of the firm, and in making the conveyance, Henry Keyes must be considered as having contemplated the legitimate consequences of his own act in that regard. So far as the rights of third persons are concerned, it is an unwarrantable assumption to claim that the chief and responsible partner knows nothing of the affairs of the partnership. He had already been called upon to adjust its debts, and had in fact pledged, by way of mortgage, his.private property for the payment of $20,000 of the liabilities of the firm.

This pecuniary embarassment of the firm ■of Keyes, White & Co., this extension of the payment of $20,000 of the liabilities which had become due, and security given therefor, .and also the assignment of the assets of the firm to a trustee for the benefit of creditors, were facts known to all the parties to the conveyance (made on the 28th of February, 1S5S), when the deeds were executed.

There is some testimony tending to show that no change of possession of this property was had after the alleged sale, and that Henry Keyes has since that time, had the sole management and control over it.

But from a just view of the undisputed tacts in the case, the fraudulent sale is sufficiently apparent, without any consideration of the fact of the vendor’s retaining possession or control of the land. It is perfectly clear from all the circumstances attending the bargain and sale, and from the intimate family relation of the parties to the transaction, that the purpose of the pretended sale, was, either to save the property of Henry Keyes from the sacrifice of a forced sale upon .attachment or execution, or to put his property in such a condition as to enable him to coerce a compromise with his creditors on terms favorable to himself. In either view, the conveyance must be declared fraudulent and void.

We come to this conclusion with less reluctance, since it appears that after the commencement of this suit, the .parties to the deed have themselves abandoned the sale, and cancelled the securities given for the purchase price.

The next inquiry is: Have these complainants, by this proceeding in equity, obtained rights in or liens upon the property in question, to the exclusion of the other general creditors of Henry Keyes? Or do all of his creditors stand upon equal footing under the operation of the act of the Ohio legislature of April 6, 1859?

The 17th section of the state law provides, that “all transfers, conveyances or assignments made with the intent to hinder, delay or defraud creditors, shall inure to the equal benefit of all creditors in proportion to the amount of their respective claims, and the probate judge, after any such transfers, conveyance or assignment shall have been declared by a court of competent jurisdiction, to have been made with the intent aforesaid, on the application of any creditor, shall appoint an assignee according to the provisions of this act, who, upon being duly qualified, shall proceed by due course of law to recover possession of all property so transferred, conveyed or assigned, and to administer the same as in other cases of assignments to trustees for the benefit of creditors.”

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Bluebook (online)
4 F. Cas. 858, 1 Flip. 61, Counsel Stack Legal Research, https://law.counselstack.com/opinion/burt-v-keyes-circtndoh-1861.