Hunt v. Knox

34 Miss. 655

• Court: Mississippi Supreme Court
• Decided: October 15, 1857
• Status: Published

Opinions

Handy, J.,

delivered the opinion of the court.

This bill was filed in the Superior Court of Chancery, on the 7th November, 1849, by the appellant, alleging that on the 25th September, 1848, he had recovered a judgment at law against Andrew Knox and Ambrose Knox, for the sum of $7725 36, with interest and costs, and that an execution, issued thereon, had been returned by the sheriff “ nulla bona.” The bill charges that the defendant bad made several conveyances fraudulently and for tbe purpose of hindering and delaying bis creditors; in consequence of which his property could not be fairly subjected to the satisfaction of the appellant’s judgment, and the judgment remained unsatisfied. The particulars of the alleged fraudulent arrangements are fully stated, and the defendants required to answer; and the bill prays that an account be taken of the amount due upon the judgment, that the alleged fraudulent deeds be set aside, and that the property of the defendant, Ambrose Knox, be decreed to be sold for the payment of the amount found due the complainant.

At the return time of the process, Ambrose Knox filed a demurrer to the bill, which appears to have remained undisposed of until February, 1856, when it was disallowed, and an answer required; and on the 3d June, 1856, he filed his answer, denying that the deeds mentioned in the bill were executed for the fraudulent purpose therein charged, and alleging that they were made for the purpose of preferring certain creditors, and undertaking to explain them.

The answer further sets up, as a ground of defence, that the respondent, Ambrose Knox, was merely a surety for Andrew Knox, in the judgment sought to be enforced; and alleges that on the 5th February, 1850, certain articles of agreement were entered into between the complainant and Andrew Knox, by which it was agreed, that Andrew Knox should pay the judgment, with interest, in four equal annual instalments (after deducting a bill of exchange for $1500, drawn by Andrew Knox on Payne and Harrison, and by them to be accepted), from the 1st January, 1850 ; and that if the said instalments should be paid as they became due, the residue of the judgment should not be attempted to be coerced; and when all of the instalments should be paid, the judgment was to be entered satisfied. And the answer alleges that, in addition to the draft for $1500, received by the complainant, Andrew Knox drew his draft, on the 1st January, 1851, on Payne & Harrison, for $1680 84, in part payment of the judgment, which was accepted and paid, and by means thereof further time was given to Andrew Knox to pay the residue of the judgment, and that in like manner the sum of $1590 was paid by accepted drafts, drawn by Andrew Knox, on the 13th June, 1853. The answer charges that this time of payment was given to Andrew Knox, without the knowledge or consent of the respondent, his surety, and that he is thereby discharged.

The agreement referred to in the answer, and made an exhibit to it, is signed by the complainant, through his attorney, and by Andrew Knox. After reciting the judgment at law, and that the complainant had filed this bill to enforce it, and that Andrerv Knox was willing to pay it by instalments, to which the complainant acceded, it states, that the parties had agreed that Knox should pay the judgment with interest (after deducting therefrom a bill of exchange for $1500, drawn by him on Payne & Harrison, and to be by them accepted), in four equal annual instalments, from the 1st January, 1850; and, if Knox should pay the instalments as they respectively fall due, either by money or satisfactory acceptances, &c., that complainant should not attempt to coerce the payment of any further part of the judgment, for the year when such instalment should be so paid; and when all of the instalments should be fully paid, that the judgment should be satisfied; and should any of said instalments not be paid when they became due, that the complainant should have power to collect the part of the judgment then remaining due, by execution or otherwise; the judgment and this suit in chancery to stand, with any right or Hen existing under either of them, unimpaired against any of the parties thereto, as a security for the bill of exchange and for the instal-ments. It was further agreed, that Knox should confess a judgment in the Circuit Court of the United States at New Orleans, at some early day thereafter, for the amount of the judgment, after deducting the bill of exchange, as a further collateral security for the payment of the several instalments.

The only testimony in the cause is that of Thomas A. Marshall, Esq., who made the agreement, as attorney for the complainant, with Andrew Knox. He states that Ambrose Knox was not joresent when the agreement was entered into, it being made by deponent and Andrew Knox; that deponent shortly afterwards wrote to Ambrose Knox, advising him of it, and desiring his consent to it in writing, to which application he never received an answer; that the drafts of 1st January, 1851, and 18th June, 1853, mentioned in the answer of respondent, were received and paid, but that no confession of judgment in New Orleans was made, to bis knowledge ; that the draft on Payne & Harrison for $1500 was given at the time the agreement was made, as he thinks, and was received as a payment to that extent upon the judgment.

Upon the hearing, the bill was dismissed, and from that decree this appeal was taken.

The first question for consideration is, whether the agreement made between the appellant, through his attorney, and Andrew Knox, the principal debtor, had the effect to discharge the appellee, his surety, by giving time of payment without the consent of the surety.

The principles involved in this inquiry have been the subject of frequent adjudication in this court, and the rules governing it are as well settled as any branch of the law. The only doubt that can arise in such cases is, with regard to the facts, and whether the particular acts of the creditor amount in law to a new and valid agreement, upon a new and sufficient consideration, to give time to the principal, without the knowledge or consent of the surety. The rule is firmly settled, that in order to cause the discharge of the surety, there must be a new contract between the creditor and the principal, founded upon a new and distinct consideration, extending the time of payment, or otherwise varying the terms of the original obligation to the surety’s prejudice, and without his consent, whereby the creditor is bound in law not to proceed against the principal, according to the original obligation; and in consequence of which contract .the surety is debarred of the right, to satisfy the obligation which he contracted, and to be sub-rogated to the creditor’s rights against the principal, as they stood by the terms of the original contract. Newell & Pierce v. Hamer, 4 How. Miss. 684; Wade et al. v. Stanton, 5 Ib. 631; Payne v. Commercial Bank, 6 S. & M. 24; Union Bank of Tennessee v. Govan, 10 Ib. 344; Roberts v. Stewart, 31 Miss. 664.

In the present case, there is no question but that the agreement for indulgence in paying the judgment, was made by the appellant with the principal debtor; and there being no sufficient evidence to show that this was done with the knowledge or consent of the surety, it must be regarded as having been done without his consent. But it is insisted, in behalf of the appellant, that the agreement was not binding in law upon the appellant, because it was not made upon any new and distinct consideration, sufficient in law; but that the consideration, so far as it was executed, was but the performance of what the debtor was already bound to do, and the creditor got nothing which he was not entitled to, without the agreement; and hence, that the arrangement is wanting in an essential feature to make it binding — a new and independent consideration. Let us examine the transaction with reference to this view.

The arrangement made between the parties was simply this. Andrew Knox proposed to pay the judgment which Hunt held against him, by instalments, paying fifteen hundred dollars, in part of the judgment, at the time, by an acceptance of third persons for that sum, and paying the residue of the judgment in four equal annual instalments ; and upon his prompt payment of each instalment, execution was to be stayed for the residue of the judgment until the next instalment became due, and so on until the whole judgment was paid; but in default of payment of any of the instalments, the balance of the judgment then due should be collected by execution, or otherwise. These terms were accepted, and the agreement was accordingly made by Hunt, and Knox paid the sum of fifteen hundred dollars by an accepted draft at the time, and subsequently paid two of the instalments by accepted drafts. It was also further agreed, as part of the transaction, that the judgment and the suit in chancery should remain unimpaired as to Hunt’s rights against all the parties thereto, as a security, and that Knox should confess a judgment at an early day in New Orleans, for the balance due on the judgment, as a further collateral security for the instalments. But the judgment was not confessed, and if the defence set up by the answer be true, Andrew Knox failed to take the proper steps to preserve unimpaired the rights of the creditor upon his judgment, by obtaining the consent of his surety to it.

The consideration for the agreement, therefore, rests upon the acceptance for fifteen hundred dollars paid at the time, and the two instalments of the debt subsequently paid. And it is clear that those payments do not constitute a new and distinct legal consideration for the agreement. They were made as instalments and part payment of the debt already due, and which Knox was bound to pay, apart from the agreement; and the agreement imposed no further obligation upon him than he was already under, and conferred no benefit upon the creditor which he was not entitled to under his judgment. Montgomery v. Dillingham, 3 S. & M. 660; Roberts v. Stewart, 31 Miss. 664. When the payments were made, they passed as credits upon the judgment, just as they would have been if the agreement had not been made. •

It does not appear that any benefit was derived to the appellant from the mode in which the payments were made, that is, by means of accepted drafts. The acceptances were given, not as a new security, with any additional benefit to the creditor, but as a mode of payment which, it is to be presumed, was specified for the convenience of the debtor; for the acceptance given when the agreement was made, was given as a payment, and the right to pay the instalments thereafter, either in money or acceptances, was expressly reserved to the debtor. It is, therefore, to be presumed that in making the payments he adopted the mode most convenient to himself, and did not act with a view of giving an advantage to his creditor greater than he would have had by the payment of actual money.

In legal effect, therefore, the agreement is nothing more than a gratuitous promise by the creditor that he will give his debtor time to pay his debt, and will not coerce him by law, if he will pay it by instalments at certain specified times. According to the principles held in the cases above cited, and indeed in the entire current of authorities, this is not such a binding contract in law, as will tie up the creditor’s hands and prevent him from proceeding upon his demand against his debtor as it stood before the agreement was made. The creditor might have proceeded upon his original claim, notwithstanding the agreement; and consequently, Ambrose Knox had the right to go forward and pay the debt and be subrogated to the rights of the creditor against his principal, which were unaffected by the agreement.

There is another view of this agreement which shows that Andrew Knox could not have set it up as a binding contract, staying execution, in case Hunt had thought fit to proceed upon his judgment.

It was made by Andrew Knox, as this defence alleges, without the privity or consent of his surety, and he stipulated that the judgment and tbis suit, with all rights under them, should remain unimpaired against all the parties thereto, as a security for the first hill of exchange and the instalments. This was an important stipulation for the protection of the creditor’s rights; and it was the duty of Andrew Knox to see that it was carried out; and that could only be done by obtaining the concurrence of his surety in it, he being a party to the judgment. If the defence here relied on be true, he failed to do so; and hence an important stipulation in the agreement failed. Hunt, therefore, had the right to refuse to carry out the agreement on his- part, because a material part of it had not been complied with, and a valuable security was likely to be lost to him. If the agreement had been made upon a sufficient consideration in other respects, he had the right to treat it as at an end, by reason of the failure of consideration in a matter most material to his interest, and to proceed with his judgment or suit in equity as if the agreement had not been made. And this appears to be a decisive objection against the binding character of the agreement.

Nor was the agreement to confess a judgment, a sufficient consideration to make it a binding contract. It was executory, and was never performed. Being founded on no sufficient legal consideration executed, it was within the power of Hunt to disregard and abandon it, at any time before the judgment was confessed.

We are of opinion, therefore, that the agreement in this case and the acts of the parties under it, do not operate in law to release the surety, and that the decree cannot be maintained on that ground.

The next question is, whether the relief sought by the bill is barred by the Statute of Limitations.

It appears by an exhibit to the answer of the appellee, that a period of more than seven years had elapsed since the date of the issuance of the first execution, and before the issuance of a second execution, upon the appellant’s judgment. It is, therefore, contended in behalf of the appellee, that although this bill was filed before the judgment was barred, yet the complainant could have no further relief under it, than to have the alleged fraudulent conveyances set aside, to the end that his execution at law might be levied of the property fraudulently conveyed, with the fraudulent obstructions removed; and, inasmuch as the execution is barred, that the relief which can only have reference to the execution at law, and is in aid of it, is also barred; and that the bill was therefore properly dismissed.

The record shows, that while the complainant’s judgment was in full force, he filed this bill for the purpose of subjecting the property of the defendant in the judgment, to the payment of his debt; alleging that it was fraudulently conveyed, so that it could not be fairly subjected to an execution at law; praying an account of the amount due on the judgment, and a decree for the sale of the property for its payment.

We do not agree with the position taken in behalf of the appel-lee, that a judgment creditor whose execution is obstructed by means of fraudulent conveyances, can have no further relief in equity than to have the conveyances set aside, and that he must then proceed at law for the execution of his judgment. It is true, that this is the extent of the relief most usually granted in such cases in equity, the reason of which is, that generally it is all that is necessary. But it cannot be questioned that a court of equity has jurisdiction of cases of fraudulent conveyance of property, and though it is concurrent with a court of law, it is much more competent, by reason of its peculiar mode of proceeding, to! administer full relief in such cases, than a court of law. It is a familiar principle, that when courts have concurrent jurisdiction, the court which takes jurisdiction of the subject-matter, settles it conclusively, and renders complete justice. Upon principle, therefore, no reason is perceived why a court of equity, having taken jurisdiction, at the instance of a judgment creditor, to annul fraudulent conveyances of property, should not grant full relief to the defrauded creditor, by decreeing a sale of the' property for the payment of the debt. And this course is well sanctioned by precedent. Hadden v. Spader, 20 John. Rep. 554; Edmeston v. Lyle, 1 Paige, 637; Thurmond v. Reese, 3 Kelly, 449; Trippe v. Lowe, 2 Ib., 306; Planters’ & Mec. Bank v. Walker, 7 Ala. 946. In Edmeston v. Lyle, Chancellor Walworth says, “ The principle being established that every species of property belonging to the debtor may be reached and applied to the satisfaction of his debts, the powers of a court of equity are perfectly adequate to carry that principle into effect.” 641. It is also supported by considerations of justice and right; for otherwise, a junior judgment creditor might bear the entire trouble and expense of an arduous litigation to annul a fraudulent conveyance, and after be bad been successful, the entire property of the defendant might be absorbed by senior judgments, whose owners had borne no part of the trouble or expense of the litigation, and who at law would be entitled to the avails.

But in addition to this, there are plain considerations of equity in this case which call for the relief prayed for in the bill.

The bill was rendered necessary by the alleged fraudulent acts of the appellee. The complainant pursued the only remedy which could afford him adequate relief, in due season, and whilst his judgment was in full force, and would have been satisfied but for the alleged fraudulent acts of his debtor. Before the controversy is terminated, the remedy at law is gone, not by any laches of the creditor, hut in consequence of the unconscientious conduct of the^ defendant, which prevented the enforcement of the execution at law. These circumstances, instead of showing that the creditor should be debarred of all relief in equity because his remedy at law would be barred, furnish a strong reason why equity should grant relief, if it can be done consistently with the powers of that court. His claim is just, and having been prevented from enforcing it by the conduct of the defendant, he has proceeded in the only court where he could obtain adequate relief, in due time. His claim to relief is'to be referred to his right, at the time of filing his bill, and if it was well founded and in full force at that time, but his legal right has become barred by lapse of time, during the pendency of the bill, the very fact that he would be without remedy at law, entitles him to relief in equity.

We, therefore, think that the defence of the Statute of Limitations is not available, and that the decree cannot be justified on that ground.

It only remains to inquire whether the conveyances mentioned in the bill are to be held as fraudulent in law as to the creditors of Ambrose Knox.

The hill alleges, in substance, that in September, 1840, Ambrose Knox conveyed to his brother, Andrew Knox, about seventy slaves in trust and for the alleged purpose of securing to one Davis, his brother-in-law, the sum of $6377 84, stated to be due him, and to indemnify him as surety for Ambrose Knox to the amount of $4720. The trustee was, by the terms of the deed, to hold and keep the slaves for the purposes specified, and upon failure of Am-brose ICnox to pay the debts mentioned punctually, to sell the slaves to pay the debts and expenses, and to pay the surplus to Ambrose Knox; that in January, 1841, he executed a deed, conveying to one Blackburn, in trust, a tract of nine hundred and sixty acres of land, and all the slaves mentioned in the previous deed, and horses, mules, stock, farming utensils, carriages, tools, provender, and crops of cotton and corn; the trustee being required to take immediate possession of the property, and to receive the profits of it, and to apply the proceeds, 1st, to the payment of all expenses; 2d, to pay the necessary family expenses of the grantor; and 3d, to pay certain specified debts, including the debt to Davis embraced in the previous deed; that in August, 1846, Andrew Knox, under color of the first deed, sold the slaves therein mentioned, with their increase, about seventy-two in number, to Davis, for the sum of §14,417, and conveyed the same to him. The bill charges that these conveyances were colorable, and. intended to hinder and defraud the creditors of Ambrose Knox, and especially the complainant ; that, although not authorized to do so by the terms of the deeds, Ambrose Knox retained possession and had the use and benefit of the land, slaves, and all the other property, from the date of the deeds to the time of filing the bilí, as he did before the deeds were made; that the deeds are fraudulent upon their face, reserving a benefit to the grantor and his family, especially that to Blackburn ; that when the pretended sale was made by Andrew Knox to Davis, the latter was not present, and has not been in this State since; and at the time of the sale, that Ambrose Knox was indebted but little, if anything, to him; that after the sale, the slaves were not delivered to Davis, but remained on the plantation of Am-brose Knox, under his exclusive control, and have been since assessed as his property, and the taxes accordingly paid by him; that the prices at which they were sold -to Davis were pretended, and grossly inadequate; and the sale was made at a most unusual season of the year for such sales, in the month of August, on the plantation, without the knowledge of the complainant or other creditors.

The answer of Ambrose Knox admits that he has continued in the possession of the property, that Davis lived in the State of North Carolina, and that the respondent continued in possession by his consent. By way of justification of the deeds, he states that he was deeply in debt at the time of their execution, and that the deeds were made for the purpose of securing the debts therein specified as preferred debts, and reserving a support to himself out of the property, his intention being to appropriate the proceeds of his property, first, to the payment of the preferred creditors, and secondly, to his creditors at large ; and he denies any fraudulent intent. He states that the sale was made by Andrew Knox to Davis for the purpose of more effectually securing Davis, and that, after the purchase, B>avis agreed that he should have the right to redeem the property by paying the purchase-money and the sum of $2300 loaned to him by Davis subsequent to the date of the deed of trust; and he has subsequently redeemed the property. He further states that under the trust deed to Blackburn, all the proceeds of the crops, except a support, have been applied to the payment of the debts therein mentioned.

It is apparent that the answer is silent as to several of the most material allegations of the bill showing the evidences of fraud; such as, that the sale to Davis was made for a grossly inadequate price, that it was made at a most unusual season of the year, during the midst of the cultivation of the crop; that Ambrose Knox remained in possession during the whole time after the execution of the deeds, treating the property as his own, as before the execution of the deeds, having it assessed as his property and paying the taxes; that he was indebted to Davis but little or nothing at the time of the sale, and that the slaves were not delivered to Davis after the sale. But the possession of the property, which is inconsistent with the deeds, and the use of it for his support, are admitted; the first deed provides that the surplus, after paying a comparatively small amount, shall be paid to the grantor, and the deed to Blackburn expressly reserves the benefit, of having his family expenses paid by means of the property, before the proceeds of it were to be applied even to the specified debts.

Besides the other circumstances appearing 'by the record, and tending to show that the deeds and proceedings under them were fraudulent, as to the creditors of the appellee, the reservation of the surplus to his own use iu the first deed,- and of a benefit to him and his family in the deed to Blackburn, his continuance in possession of the property inconsistently with the terms of both deeds, and his enjoyment of the use and benefit of it for his support, which facts are admitted, are sufficient, upon well-established rules, to condemn the conveyances. - And it is no answer to such objections, that the deeds were made for the purpose of preferring creditors; for though a party in failing or embarrassed circumstances may prefer a creditor, he cannot reserve a benefit to himself in the transaction, because that would enable any debtor to retain his property to his own use, under pretence of conveying it for the benefit of his creditor. The facts appearing in this case, therefore, clearly show that the conveyances mentioned in the bill must be declared void as to the complainant.

It follows from the views of the case, that the decree is erroneous and must be reversed.

But as the defendant Davis was not made a party to the suit by service of process or by publication, and no appearance was entered for him, the decree which would follow from the foregoing views cannot be rendered, and the cause must be remanded for further proceedings after notice given to the defendant Davis.