Magniac v. Thompson

16 F. Cas. 451

• Court: U.S. Circuit Court for the District of Eastern Pennsylvania
• Decided: April 15, 1831
• Status: Published

Opinion

BALDWIN, Circuit Justice

(charging jury). The real parties to this suit are the plaintiffs and Mrs. Thompson, and the real question between them is, whether the marriage contract was valid, if it was, then Mr. Thompson had a right to apply his property towards its fulfilment, and it is lawfully held by the trustees of Mrs. Thompson. If the contract is not valid, then Mr. Thompson is in law deemed to be the legal owner in trust for his creditors, not because the marriage contract is not binding on him, but because his indebtedness at the time put it out of his power to divest himself of property to the injury of his creditors. It appears that the plaintiffs are the only creditors of Mr. Thompson, the existence of the debt is proved by Mr. Fisher, and the judgments confessed by Thompson, which are conclusive against him as to its existence and amount; they are also legal evidence to affect the settlement by showing the indebtedness of Mr. Thompson at the time. Hinde v. Longworth, 11 Wheat. [24 U. S.] 210. No evidenee has been offered to impeach the fairness of the debt, and you will take it as proved. The case must turn on the validity of the marriage contract, which is good as between the parties and as to all the world, unless it is liable to impeachment for fraud in fact or fraud in law. As to creditors, fraud in fact, or actual fraud, consists in an intention to injure, defraud, delay or prevent them from recovering their just debts, by any contract, gift, deed, settlement or agreement, withdrawing or attempting to withdraw the property of a debtor from the reach of his creditors. The English statute of 13 Eliz. c. 5, declares all such acts null and void as to creditors, this statute is in affirmance of the common law, is in force in this state and New Jersey, and you will consider it as binding as a law of the state. Proof of fraud need not be express, it may be inferred from circumstances, but ought not to be presumed without either, a jury ought to be satisfied from facts that there was a dishonest intention, and not to infer fraud merely because they have doubts of the fairness of the transaction. From the conduct and situation of the parties, and the effects intended to be produced by the act, something should be made to appear inconsistent with integrity, so as to admit no reasonable interpretation but meditated fraud. [Conard v. Nicoll] 4 Pet. [29 U. S.] 295, 297. Both parties to the alleged act of fraud must concur in the illegal design, the debtor may lawfully sell his property, or prefer one creditor to another, with the direct intention of defrauding other creditors, but unless the purchaser or preferred creditor receives the property with the same fraudulent design, the contract is valid [Sexton v. Wheaton] 8 Wheat. [21 U. S.] 238, &c., against other creditors or purchasers who may be injured by the transaction. The admissions or declarations of the debtor, as to the object intended to be effected, are evidence to contradict his answer to a bill brought to annul the act as fraudulent, but not to affect the parties claiming under it, or to have a bearing on the whole case [Venable v. Bank of U. S.] 2 Pet. [27 U. S.] 119, 120; 2 Hals [7 N. J. Law] 173, 174; you must therefore have evidence to affect Mrs. Thompson and her trustee Mr. Kichard Stockton with fraud, in participating and concurring in the fraudulent intention, before you can pronounce this marriage contract void for actual fraud.

The facts of this case, which are not complicated, are for your consideration, they seem more satisfactory than are usual in such cases, and we think proper to say, that in our opinion an inference of intention as fraud, would be a very severe comment on the conduct of the parties; it is however for you to decide, and if you think there was intentional fraud in both parties, you will find for plaintiffs. You are to decide another matter of fact, whether Mr. Thompson has concealed or has in his possession any part of the property he owned in 1825, other than what has been invested in the house and furniture and the securities in the hands of Captain Stockton, in doing which, you will discriminate between the deliberate design tc defraud by secreting property for his own use, and losses incurred by casualties and want of prudence or discretion. This question depends on what he has in his actual possession or control, not what he ought to have had, what he has disposed of for any other use than his own, or what has been applied to the marriage contract, which is a subject of distinct consideration. The next and most important question is, whether the marriage contract is fraudulent in law, and for that reason void as against the plaintiff, that is, though the intention of the parties was honest, the policy of the law forbids the execution of the contract, and takes from it all legal efficacy as to the creditors of Thompson. By the sixth section of the statute of 13 Bliz., it is provided, that it shall not extend to any interest in land or .goods and chattels, made on good consideration, bona fide, lawfully conveyed or assured to any person, not having at the time of such conveyance or assurance to them made, any manner of notice or knowledge of such fraud, covin or collusion. The words of the law require that both parties must concur in the fraud, so it has been held for two hundred and sixty years. There are in law two kinds of consideration, “good,” which is natural love and affection, and “valuable,” which is money or marriage; the word “good” in the sixth section has always been held both in courts of law and equity to mean a valuable consideration.

Hence the law has been expounded to embrace three kinds of conveyances: (1) Those made with a fraudulent intent in both parties, which are declared void as well by the enacting part of the law as by the exemption from the saving in the sixth section, without regard to the consideration. (2) Voluntary conveyances made for good consideration, without fraud in fact, but as they tend to defraud creditors if they vest the property, the policy of the law makes them void for legal fraud, which it imputes to them on account of their tendency, which is deemed equivalent to actual fraud. (3) Conveyances for valuable consideration, bona fide, without notice of any fraud or covin by the person receiving the conveyance, which are excepted out of the statute, are valid at common law to pass the property conveyed, and entitle the purchasers to the protection of all courts. If you should find that this contract does not come within the first class, it cannot come within the second, for if made in contemplation of marriage, the intended wife is on the footing of a creditor or a purchaser for money, and not of a voluntary grantee for the mere consideration of love and affection, or as a volunteer. There is a marked difference between a provision for a wife and children before and after marriage, where there is no poition or money paid as the consideration; in the first, the consideration is as valuable as the debt due a creditor, or the money paid by a purchaser, in the latter it is merely voluntary. There is indeed a moral obligation to provide for the support and comfort of a family, but it must yield to the higher legal obligation towards those who have claims on the property of their debtors. As between creditors and volunteers a man must be just before he is generous. But where conflicting claims arise between creditor and creditor, purchaser and purchaser, or purchaser and creditor, the first inquiry is, whether the party claiming the debt or the property purchased has such a right as is recognized by a court of law; the next is whether such right has been acquired under such circumstances as will annul or modify it in a court of chancery by the established principles of equity. As between debtor and creditor the latter has a right to as much of the debtor’s property as will. pay his debt, but the debtor may prefer one creditor to another, or give all his property to one, and it is neither fraud in fact or law without covin or collusion. He may make a sale of his whole estate, turn it into money, and distribute it at pleasure among his creditors, and the bona fide purchaser will hold it against all creditors who have not previous liens. [Sexton v. Wheaton] 8 Wheat. [21 U. S.] 242; [Hinde v. Longworth] 11 Wheat. [24 U. S.] 213, 214. These principles cannot be shaken.

A contract in consideration of a future marriage creates a legal and equitable obligation to perform it in good faith; if the contract is executed, the parties become purchasers, if it remains executory till after marriage, they become creditors after Its consummation, or assume pro tanto the character and rights of both, if executed only in part, entitled to the protection of all courts in enjoying what is granted, and their aid in enforcing performance of what remains to be done. And if either party voluntarily perform what a court would compel to be done, it would be as valid as if done by its judgment or decree, or as if the execution had been completed on the date of the contract. The law is express in referring to the time of the conveyance and assurance, and embraces not only perfect grants and gifts but “any estate or interest in lands, goods and chattels, made, conveyed or assured.” On these principles it is the opinion of the court that the evidence brings the marriage contract within the sixth section of the statute, unless you shall find it not made in good faith, or with notice of fraud in Thompson brought home to his intended wife, and that Thompson actually entered into it with a fraudulent, cov-inous or collusive intention. If you do not so find it, then Mr. Richard Stockton is considered, at law, a bona fide purchaser for a valuable consideration, without notice so far as the contract has been executed by Thompson, and his creditor for what is executory. Mrs. Thompson has the same character in equity, and Captain Stockton is now standing in all respects in the situation of his father. The case then is a contest between Captain Stockton, the legal, and Mrs. Thompson the equitable purchaser of the house, furniture and securities, by the contract and the marriage, of the lot as her marriage portion, and the plaintiff the sole creditor of Mr. Thompson. Thus they stood at the commencement of the suit, and as creditors at the time of the contract and confirmation of the marriage, Mr. Stockton and Mrs. Thompson having performed their stipulations had a perfect right to call on Thompson at law and in equity to perform his. As a purchaser Mrs. Thompson is one of the most favoured class, the consideration she has given is as valuable as money, it need not be considered as more so; as a money purchaser of property, a conveyance before marriage by her intended husband would be as valid though he was in debt as if he was not. If he held the legal title the interest would vest by his deed, though he held it in trust for others, as fully and completely as if Thompson had a right as perfect in equity as at law, provided she had no notice of the trust. This is an universal rule, a principle never questioned, and .protects all bona fide purchasers for valuable consideration without notice before the .money paid or the condition of the grant performed; it applies to Mrs. Thompson not as a privileged purchaser, but as a purchaser from one who has the legal title, subject to an unknown trust for the use -of a third person. Placing the plaintiff in the situation of a cestui que trust, and he cannot be placed in a better one, it is a strong one against him; the debt to him was contracted but a few days before the date of the marriage articles, and in a part of the world so remote as to exclude the possibility of notice to any of the parties, which differs this from the common cases of a trustee conveying the legal estate to the injury of cestui que trust, where the trust is necessarily known to the trustee, and he is guilty of direct fraud. Hard as the application of this principle may be, it is not relaxed even in favour of the widow or orphan who has been defrauded by their trustee selling what is not his own; a loss must fall on one of two innocent sufferers whose claims may be supposed equal In justice and equity, in such case the law leaves the property with the one, who has acquired the legal title by fair purchase, in good faith and without notice. A creditor of a fraudulent debtor who settles on his intended wife property which he is bound to apply to the payment of his debts, is entitled to no more favour, than any other person whose property is unjustly conveyed by his trustee to pay his own debts, to rob one family to save another, or secure a provision for an expected one of his own. The creditor can be no where more favoured than the infant, the ward, the widow, or the orphan, whose property is held in trust without lien or security, and subject to a sale by the trustee. The creditors of a deceased debtor have the same rights as those of a living one, yet if the executor sells the personal property to pay his own debt, a purchaser without notice or collusion will .hold it even in equity. This is as much a violation of moral honesty and breach of faith, as to settle it on an intended wife, to whom he was under as high an obligation to pay the consideration of the marriage contract, as a bond given for money lent, or property purchased. Vide [Vattier v. Hinde] 7 Pet. [32 U. S.] 268.

The consideration of this contract is both marriage and property, the value of the first cannot be, and of the last has not been ascertained in dollars; but at law, the mere inadequacy of consideration is no ground for declaring a conveyance of real or personal property void, if there is any consideration, the conveyance is valid at law; the amount cannot be inquired into as respects the grantor, his creditors or subsequent purchasers, in the absence of actual and legal fraud in the grantor or notice of it to the grantee. The only resort of parties who complain of equitable fraud, or other circumstances which would invalidate it in equity, is to those courts; they only can decide upon the adequacy of a pecuniary fund, or the equality of marriage to a given sum of money or value of property, under the circumstances of the case. Cases may exist where equity would compare and estimate them for the relief of a creditor, a purchaser, or perhaps the party, in a strong and clear case of injustice; but we know of no instance where it has set aside a purchase for valuable consideration on a marriage contract, when made bona fide and without notice of fraud or defect of title. Those claiming under them have ever been the peculiar favourites of courts of equity, and their rights can never be disturbed unless in extreme cases, none have yet arisen, when they do arise they will be exceptions to a rule which is as yet without any, and growing out of the necessity of the case.

In the present case we perceive nothing which gives it any unusual features. Prom the evidence it appears, that at the time of the contract of marriage, Mr. Thompson was abundantly able to make the stipulated settlement and pay all his debts. His inability has been accounted for by heavy and unexpected losses on investments made by his agent in good faith; without any ground for the imputation of dishonesty or imprudence in Thompson, his situation is such, that his wife must lose 30,000 dollars of her settlement, or his only creditor lose 12,000 dollars of his debt. Admitting their equities tobe equal, she has a legal advantage which no court can take from her; unless her conduct can be impeached for fraud, actual or legal, it would be as unjust as illegal and inequitable, to visit alone on her the consequences of her husband’s misfortunes.

Considering Mrs. Thompson therefore as a purchaser under the marriage articles, we are decidedly of opinion, that there is no legal fraud attending the transaction which would invalidate it in a court of law, or any matter given in evidence which would impair its obligation in a court of equity. If she cannot be viewed as the purchaser of the property contracted to be invested for her use, she is certainly a fair and honest creditor from the time of executing the contract, if not from the time of the proposed settlement in August preceding, and after the engagement of marriage was made. If however she was a creditor on the 19th of December, Thompson had a right to prefer her in preference to any other creditor, to the extent of his whole property whenever he could realize or reduce it to possession. The mere priority of plaintiffs’ debt, in point of time, could not affect such preference from being effectual, nor could the previous authority to Mr. Fisher to contract the debt, affect the inchoate rights of Mrs. Thompson by the engagement and proposed settlement in the summer of 1825, which you may fairly infer from the agreement was in a course of execution, by Thompson having begun to build on the lot, of which Mr. Stockton was to stand seised in trust, before the date of the articles. If the settlement had taken Thompson’s whole estate, and the certain consequences of its execution, or the intention of the parties had been to exclude the plaintiff from the payment of his debt under cover of the agreement, we would give him relief on the equity side of the court, but the present state of things has not resulted from the effect of the agreement, or the intention of the parties, unexpected losses alone have led to it, the consequences of which are these. The plaintiffs’ debt was 63,000 dollars, of which there is now due of principal and interest 12.000 dollars; the debt of Mrs. Thompson estimating the house and furniture at 1S.000 dollars was 5S.000, .of which there is now due 35,000 dollars if Morris’s debt is not good, or if good, 30,500 with interest from December, 1823. Though this inequality of loss would be of no importance at law, it would be a powerful circumstance in equity, on an application by the plaintiff for relief, and the present case would be very different if the whole 40,000 dollars had been invested. This view of the merits-of the case suffices for the decision of the points directly at issue, without adverting to others which have been made as to contracts for settlements made after marriage; the nature of the issue required us to so view the case. It has been urged by the plaintiffs’ counsel, that there has been no delivery of the contract in the present case, but the evidence is sufficient in law to prove it, the building and furnishing the house tend strongly to prove it satisfactorily; the contract is also said to have been abandoned, this is not to be presumed, and we think the facts in evidence do not amount to proof of abandonment by Mrs. Thompson, or any acts done by her which could impair her rights. The omission of the trustee to enforce the payment of the money, and to record the deed, is no waiver by her, and any acts done by him inconsistent with the agreement, would not impair the legal validity of her rights; the acts of a parent are never so' construed, unless clearly intended to be so; the law as to these objections is well settled in Carver v. Astor, 4 Pet. [29 U. S.] 28, 82. 93-99.

We have been requested to charge you, that in point of law the covenant on the part of Mr. Richard Stockton to stand seised to uses, operated as an immediate conveyance to his daughter before marriage, and that by the marriage, Thompson became the owner of the furniture in his own right, and had the exclusive us$ of the house and lot unin-cumbered with the trusts of the agreement. But inasmuch as by the covenant contained in that agreement, Mr. Stockton was not to stand seised to the use of his daughter till after marriage, the court instinct you as matter of law, that the marriage articles do not operate by the statute of uses (27 Hen. VIII.), to pass the legal estate to the lot, or any other property referred to them to Mrs. Thompson. ’That it remained in Mr. Richard Stockton during his lifetime, devolved by his death on his heir at law, Captain Stockton, and now remains in him on a trust execu-tory, it never was and is not now one executed by that statute.

We have also been requested to charge you on three other points of law: (1) That the expenditure of 5,000 dollars, in furnishing the house is, per se, fraudulent on creditors. We think not. 'Furniture is a part of the marriage contract, to be provided by Thompson as he should think fit. He had a reasonable discretion which he might exercise according to their station and associations in life, proportioned to the kind of house and extent of income. The trustee could not at law, or the wife in equity, compel Thompson to furnish it extravagantly, or at useless or wanton expense; if he had done it voluntarily, it would not be within the true spirit and meaning of the. marriage articles. and might be deemed a legal fraud on creditors as to the excess. But before we could say that it is a fraud in law, to expend 5000 dollars in furnishing, a house costing 13,000, and the establishment to be supported by the income of 40,000 dollars invested, we must be satisfied that it is extravagant and unwarranted at the first blush, and to an extent indicating some fraudulent or other motive, unconnected with the fair execution of the contract. Not being so satisfied, or that there has been a clear abuse of the discretion confided to Mr. Thompson by the contract, we cannot charge you as requested. (2) That the delivery of the notes to Captain Stockton in 1829 was a fraud per se. We instruct you that this was no fraud, if it was done in order to comply in part with the agreement; if it was colourable, made with the intention of covering and concealing so much, under pretence of the marriage contract for Thompson's use. and so received by the trustee, it was legally fraudulent as to creditors; but though delivered with such intention by Thompson, if not so accepted by Captain Stockton, then he might apply them to the trust fund, and was bound to do so. Being done to carry the agreement of December 1S25 into execution, its having been done on the eve of the judgment confessed in New Jersey, makes no difference; had it been to make a new settlement after marriage, if it was in consideration of a portion or property, it would not liave been fraudulent per se. The time which intervenes between making provision for a wife, and the contracting the debt or obtaining a judgment against the husband, is not a matter which makes it per se a fraud, it may or may not be suspicious, and connected with other circumstances deemed evidence of it. [Wheaton v. Sexton] 4 Wheat. [17 U. S.] 506, 507; [Sexton v. Wheaton] 8 Wheat. [21 U. S.] 238; 3 Johns. Ch. 485, 494. (3) That tlie marriage agreement is void because not recorded within the time required by the law of New Jersey for recording deeds. The covenant to stand seised to the uses declared, would come within this law if the uses were executed by the statute, so as to make it an actual conveyance or deed passing the legal estate; but being executory, it is only a covenant giving an equitable estate to those for whom the trust was created and continues, and not a deed. But considering it as a deed, the want of recording does not make it void between the parties, though it would become void as to the creditors (perhaps), and purchasers from Richard Stockton without notice, but the omission to record this agreement is no fraud on the plaintiffs, and cannot affect them. Not being void between the parties, it gives Thompson no other estate or interest but such as arises from the trust; he can have none incompatible with it, our instruction therefore is that the marriage contract is not void for want of being recorded in time. The possession and occupation of the house by Thompson is consistent with and a part of the agreement, his use of it and the furniture is a necessary consequence of the marriage, and if the contract is valid, such possession is no evidence or badge of fraud. You will apply these principles of law to the evidence and find according to your opinion of the facts.

The jury found for defendant; judgment was rendered on the verdict and affirmed by the supreme court on a writ of error. 7 Ret. [32 U. S.] 348.