Potter v. McDowell

31 Mo. 62

• Court: Supreme Court of Missouri
• Decided: October 15, 1860
• Status: Published

Opinion

Scott, Judge,

delivered the opinion of the court.

The result of this trial is a little surprising, when we read the instructions given for the plaintiffs; but that surprise is somewhat diminished on looking at those given for the defendant. The issue on the case was, whether the defendant, McDowell, had fraudulently conveyed and assigned his property and effects so as to hinder and delay his creditors. It is evident, from the tenor of the instructions asked by the defendant, that he sought an advantage by having the jury told by the court that they must find that there was an actual fraudulent intent on his part to hinder and delay his creditors in order to find a verdict for the plaintiffs. This is not the precise language of the instructions, but, taking them all together, they must have produced this impression on the minds of the jury, or otherwise we can not account for the verdict. When a voluntary deed is made by a debtor in embarrassed circumstances, and a question arises as to its validity, in order to render the deed fraudulent in law as to existing creditors it is not necessary to show that the debtor contemplated a fraud in making it, or that it was an immoral or corrupt act. These are matters with which the jury has nothing to do. The law does not concern itself about the private or secret motives which may influence the debtor. It does not deal with his conscience. He may make the deed with the most upright intentions, really believing that he has a right to do so, and that it was liis right and duty to do it; and yet, if that deed is voluntary and hinders and delays his creditors, it is fraudulent. The law presumes that every man intends the necessary consequences of his acts; and if the act does hinder and delay his creditors, then the law presumes it was made with a fraudulent intent, however pure in reality the motives of the debtor may have been.

The instructions given by the court may have been warranted by the case of Gates v. Labeaume, 19 Mo. 29; but they do not harmonize with the law as declared in the case of Lane v. Kingsbury, 11 Mo. 402, decided before, nor that of Reed v. Pelletier, 28 Mo. 177, decided since that case. In cases where the question of fraud is one proper to be submitted to the jury, they must be influenced by the same policy in applying the law to the facts found by them as would influence the courts, otherwise there would be no uniformity nor stability in the law.

There seems not to have been much doubt but that the deeds of the 14th of October, 1857, conveying the St. Ange lots, the slaves and the life interest of Mrs. McDowell in her father’s real estate, were without consideration and voluntary. The St. Ange property was McDowell’s ; the slaves he acquired through his wife; but any property he may have obtained by means of his marriage he could not afterwards, to the prejudice of his creditors, settle on his wife without a valuable consideration. Although there is a valuable consideration recited in these deeds, the trustee Stevens testifies lie was not aware of their existence in March, 1858. Indeed the subsequent conduct of the parties in relation to the St. Ange property and the slaves in March, 1858, shows in what light the deeds of October 14, 1857, conveying that property in trust for Mrs. McDowell were viewed.

But although the deeds of October, 1857, were voluntary, yet it is maintained that the subsequent conveyance of the property covered by two of those deeds by J. McDowell and wife to A. J. L. Stevens, for a valuable consideration, before the issuing of the writ of attachment took away any ground for an attachment that might have existed prior to the execution of those conveyances ; that, at the date of the affidavit in Api’il following, it could not be affirmed that the defendant had fraudulently conveyed his property to hinder and delay his creditors by reason of conveyances to the wife in October, 1857, when the property in those conveyances described had been subsequently and before the attachment in good faith disposed of for the benefit of creditors. The deeds of October, 1857, however they may have been regarded as to creditors, were binding between the parties. The title passed to the trustee to the use of Mrs. McDowell. Now if Mrs. McDowell afterwards conveyed this property for the payment of her husband’s debts, does it therefore follow that the conveyances made by him to her were not fraudulent ?

But the deed of March 31, 1858, by which Mrs. McDowell attempted to convey away the real estate granted in trust to her by the deed of October 14, 1857, was not executed in a manner to be effectual according to the terms of the trust deed to Stevens for her. use. If she could dispose of the entire estate, could she defeat the interest of her heirs otherwise than by complying with the terms of the trust deed ? Or, the deed of March 31, 1858, having been acknowledged before a justice of the peace, with the wife’s relinquishment of the right of dower, are we to come to the conclusion that the parties regarded the deed of October, 1857, as voluntary and void, and consequently the husband had a right to sell the property as his own ? Could he do this — as between himself and wife the deed was valid ?

A question was made whether the deed of March, 1858, executed by McDowell and wife to Stevens, conveying the St. Ange property, was fraudulent and void. That, we conceive, was a question for the jury, as the invalidity of the deed depended upon extrinsic facts. That deed may be viewed in two lights. If we look upon it as an original act conceived and carried into effect on the day of its date, without any connection with the previous dealings with the property described in it, ortr mistrust as to its good faith might well be excited. When men’s designs are correct, thej'- are usually content to carry them into effect in the usual mode. It is very unusual for men, who are in embarrassed circumstances, to sell property on a long credit and use the notes not in the actual payment of their debts, but to place them as collateral security in the hands of preferred creditors. Nearly all, if not all, the bonds for the St. Ange property were disposed of in this manner. If the consideration received for such sale would not avail actually to discharge the debts, why make it ? Why dispose of the land and take bonds on long time, and thereby withdraw the land from the reach of his creditors, and substitute, in its stead, postponed bonds which would be subject to his own absolute disposal ? But if we consider this deed in connection with the deed of October, 1857, the manner in which that deed was disregarded and attempted to be set aside, and all the circumstances attending this transaction, a jury would be well warranted in coming to the conclusion that the deed of March, 1858, was made to hinder and delay the creditors of McDowell.

As to the deed of February 25, 1858, there is not enough in the record to enable us to pronounce an opinion upon it. The giving a time within which to execute a trust is not fraudulent provided the time is not unreasonable. What is a reasonable time must depend iipon the character of the property and the circumstances of the case. Under this rule, in case of an assignment to pay a particular debt or debts, it would not be allowable, under pretence of securing such debts, to hold property more than is sufficient to satisfy them to the prejudice of other creditors. A deed conveying, in trust for the payment of a debt, articles consumable in the use, may be fraudulent, the grantor remaining in pos session of them ; unless they are not to be used, and may be kept without damage until the trust debt shall become payable. In analogy to other decisions made of late years on the statute of Elizabeth concerning fraudulent conveyances, a deed embracing such articles would be void as to them without affecting its validity as to other property of a different character conveyed by it.

As to the question whether the deeds of October, 1857, being voluntary, were fraudulent as to existing creditors, we do not consider that in order to make them so, that the defendant should have been insolvent at the time of making them. If a debtor is in embarrassed circumstances, and makes a voluntary conveyance, and is afterwards unable to meet bis debts owing at the time of the assignment in the ordinary course prescribed by law for their collection, or is reduced to that situation that an execution against him would be unavailing, such conveyance is void as to those debts, and the property conveyed is subject to their payment. We do not deem it necessary to define insolvency. We all know what actual insolvency is, but we may differ as to what is the evidence of insolvency. We do not adopt the meaning of the word given it by the English courts in construing the bankrupt laws. There it is said that a man is in insolvent circumstances “ when he is not in a condition to pay his debts in the ordinary course, as persons carrying on trade usually do.” (Showe v. Lucas, 3 Dow. & Ry. 218.) Judge Cowen said that if all a man’s debts can not be collected by legal process out of his own means, he is insolvent. (Herrick v. Borst, 4 Hill, 652.) This comes more nearly to our idea of insolvency. Under our statute concerning the assignment of bonds, the return of nulla bona to a fi. fa. was always regarded as sufficient evidence of the insolvency of the maker, so as to give the assignee a recourse against the assignor. We do not mean to say that this is the only legal mode of proving that a man is insolvent. Whenever it is shown that a suit against an individual for a demand would be unavailing, he is insolvent. But we have said that we did [not] deem it necessary to define insolvency, as it was not necessary to show that one is insolvent, at the time of making a voluntary conveyance, in order to render it void as to existing creditors.

We do not see any legal objection to the question put to Stevens by the defendant: “ If he purchased his sister’s interest in the farm and house in good faith. ” Stevens was introduced by the plaintiff, and was a competent witness. Interest by our law did not disqualify him. No doubt the party asking the question expected a favorable answer, and he received it. But jurors, we imagine, understand such matters, and would not suppose that a man would do an act and afterwards say that it was prompted by corrupt motives. No doubt Stevens believed what he said. But it would be strange, if one man’s right depended upon another’s moral sense. The moral sense is much stronger in some men than in others. Whatever a man’s opinion of his own acts may be, yet there are certain rules founded in experience and established by law for determining the validiiy of deeds under the statute concerning fraudulent conveyances; and if those rules arc transgressed in making a deed, courts and juries will pronounce it void without regard to the opinions of the parties to it. Indeed we think that evidence of such a character would have so little weight with a jury, that it would scarcely bo worth the trouble to make a point about it.

A witness was asked, “ what was said by McDowell when he (the witness) made (wrote) the deeds?” This was objected to by the plaintiffs ; the objection was overruled, and an exception was taken. Ordinarily the declarations accompanying an act are admissible as explanatory of the character and motives of the act. They in this way become a part of the res gestae. As the plaintiff gave the deed in evidence, they could not object that the defendant was making his own declarations evidence for himself. If the deed was evidence for the plaintiffs, the defendant had a right to the declarations o£ the grantor showing the motives to the act. If the declarations, however, are a part of the res gestee, either party, that would have a right to introduce the deed, would be entitled to give them in evidence as a part of the transaction. (Cowen & Edwards’ Notes, p. 188.) The jury will determine the weight of such declarations, by ascertaining whether they were sincere, or were made to withdraw attention from the real nature of the act, or to hide the real purpose of it.

The instructions given for the plaintiffs were not excepted to, and therefore will not be reviewed. A purchaser may buy property from a debtor and pay its value for it; yet, if the purchase is made with a fraudulent intent to defeat a creditor’s execution, the sale will be void. But a debtor may prefer one creditor to another, and may lawfully assign property sufficient to satisfy the preferred debt. But, under pretence of paying a debt, he is not permitted to assign more property than is reasonably sufficient for that purpose, to the prejudice of other creditors. It is no objection to an assignment made to pay a bona fide debt that the intent of the parties was to postpone or hinder other creditors. Such is the necessary effect of such an assignment; and to hold that such an intent would defeat it, would be to take away the right to give a preference. (Kuykendall v. Perry & Co. 15 Mo. 420.)

All the instructions given for the defendant in relation to his intent in making the conveyances should have been accompanied with the explanation set forth in this opinion.

Reversed and remanded.

The other judges concur.