Harlan v. Maglaughlin

Mr. Justice Gordon

delivered the opinion of the court,

The court below fell into an error which pervades every part of •this case. A single point and answer will serve to develop this , error, and determine the material questions involved in this controversy. The counsel for the defendants below, plaintiffs in error, ■ asked the court to say to the jury that “to render a voluntary conveyance void, as to subsequent creditors, it must appear that it was made in contemplation of future indebtedness, and, until thjs was shown, the plaintiffs could not call upon the defendants to *297 prove the consideration for the conveyance to Isabella Noble ■through whom they claim title.” The court answered: “This would be so, if, at the time of the voluntary conveyance, no debts of the grantor existed, the recovery of which would be thereby delayed, hindered or defeated. Where there are existing debts at the time, and the conveyance has delayed, hindered or defeated their recovery, this circumstance raises a suspicion of fraud from which an intent to defraud subsequent as well as existing creditors may be inferred.”

■ This language is borrowed from the case of Thompson v. Dougherty, 12 S. & R. 448, where it is applied, as in the case in hand, •to debts contracted after the execution of the voluntary grant. It Is, however, mere obiter dicta, not called for by the facts in the 'case, and not true in law. Notwithstanding the many loose declarations in the books to the contrary, the Statute 18 Elizabeth does not make voluntary conveyances void as to future creditors, unless there is some evidence to indicate that the grantor intended to withdraw his property from the reach of such creditors: Snyder v. Christ, 3 Wright 499 . And it is properly said in Williams v. Davis, 19 P. F. Smith 21, that even an expectation of future indebtedness will not render a voluntary conveyance void where there is no frand intended by such conveyance. And so, also, in Thompson v. Dougherty, Mr. Justice Duncan, citing Saxton v. Wheaton, 8 Wheat. 229 , says, “Chief Justice Marshall decided that a post-nuptial settlement on a wife and children by a man who is not indebted at the time, was valid against subsequent creditors, and that the statute does not apply to such creditors if the conveyance be not made with a fraudulent intent.” A similar ruling will be found in Townsend v. Maynard, 9 Wright 198 , and in Greenfield’s Estate, 2 Harris 489. In the latter case, which involved a deed of trust of all the grantor’s property, it was alleged by Mr. Justice Bell, to be a sound rule of law that subsequent indebtedness cannot be invoked to invalidate a voluntary settlement made by •one not indebted at the time, or who reserves sufficient to pay all existing debts, unless there be something to show that the settle•ment was made in anticipation of future indebtedness. It is further said that though some doubt was thrown on this principle by Thompson v. Dougherty, it was afterwards dissipated by Mateer v. Hissim, 3 P. & W. 161. Furthermore, the case of Snyder v. Christ, above mentioned, which is very like the case in hand, settled any doubts that may previously have existed as to the effect of subsequent indebtedness. For though it seems to have been .generally admitted, that the statute is not operative as to such indebtedness, yet the admission has been so beclouded by apparently inconsistent dicta and qualifications, as to render its meaning ■obscure and unintelligible.- The settlement is good against after contracted debts if the settlor is unindébt.ed at the time, or if .he *298 has made provision for existing debts, and so on. But how, if there be existing debts not provided for, and how if the settlement is fraudulent as to such debts? Will the settlement, in such case, be void as to all future indebtedness ? Is there no place for repentance and atonement by the after payment of existing debts, or may after creditors, notwithstanding such payment, avoid the deed ? Justice Duncan answers these questions by saying: “If the jury' find a prior indebtedness and any of that class of creditors is defeated by the settlement, then, my opinion is, that the property conveyed is to be considered as part of the estate of the debtor for the benefit of all his creditors. I know no midway. When a statute declares a matter void it thrusts all to destruction like a tyrant, while the common law, like a nursing father, makes that void where the fault is and preserves the rest.” In this, singularly enough, the fact is overlooked that the statute makes the gift or deed void, only, as to those who may be hindered, delayed or defrauded thereby, and that in this it follows the common law. This oversight, however, would seem to be accounted for by the fact that the opinion of Chief Justice Spencer in Anderson v. Eoberts, 18 Johns. 526 , is adopted, wherein it is said, that the Statute of 13 Elizabeth protects creditors whose debts accrue subsequently to the fraudulent conveyance equally as those whose debts were due when it was made.

It would seem to be on this that Justice Duncan founds the assertion, already referred to, that the existence of prior debts creates a suspicion of fraud, which can only be repelled by showing that the subsequent creditors were provided for in the settlement. This, as it stands, is unintelligible; for one cannot provide for what he does not anticipate ; if he has no future debts in contemplation, how is it possible to make provision for them ? It, in fact, simply amounts to saying that the statute is operative upon subsequent, as well' as present, indebtedness. In like manner, it has been said, the settlor must not only retain property enough to satisfy present debts, but also to answer the reasonable probabilities of the future. But this rule is unreasonable in this, that it prevents men of limited means from making any settlement whatever upon their wives and children, a result certainly not contemplated by the statute. Besides this, the attempt to keep men and women in judicial leading strings all their lives, to direct what they shall or shall not do with their own property, is a matter which commends itself neither to sound legal reason nor to common sense. If a man is in debt, he may not give away his property until he has paid or provided for such debt; the reason for this is found in the principles of common honesty. If he contemplates future indebtedness, he must, for a like reason, provide for it, but he must not provide for what he does not anticipate, and for what may never occur. And if, without concealment, a man chooses to give *299 away all his estate, or settle it upon his wife and children, what right has a subsequent creditor to complain ? It did him no harm; he gave the grantor no credit because of such property; he is, therefore, neither cheated nor impoverished by such gift. Furthermore, if A, by a voluntary conveyance, defrauds B this year, how is C, whose debt has no existence until ten years after, defrauded by that same conveyance ? It certainly will not do to say that because B was cheated therefore C is cheated, for between B and C there is no possible connection or privity. But if C has not been defrauded b} the grant, then, if the statute means what it most expressly says, he cannot impeach it..

We turn, therefore, with satisfaction to the case of Snyder v. Christ, where we have the plain and unambiguous declaration, that the subsequent creditor can avail himself only of that fraud which is practised against himself. The doctrine thus announced is made the more positive in that it is said, if the creditor knew of the voluntary conveyance w'hen he gave the credit, he could not be defrauded thereby, and, hence, could not impeach it.

This case, not only from the direct manner in which the principal subject of discussion is treated, but also by reason of the facts upon which it depends, must be regarded as a final determination of the question in hand.

These facts are briefly as follows: John Snyder, being the owner of a ti’act of one hundred acres of land, conveyed, it to one John Reger, in trust for the use of himself and wife for their joint lives and the life of the survivor of them, with remainder to two children of the wife, and to such children as the grantors might have. This was all the real estate Snyder owned, and it was in proof, that at the date of the deed, his debts amounted to some $200, and that his personal property did not exceed in value $150. Furthermore, he had expressed apprehensions of a claim for damages for a breach of promise suit of marriage, and, within a few days after the making of the deed, he had borrowed $200, and had also contracted the debt, on a judgment for which the property in suit was sold.

Here, then, we have every element necessary for a test case. A voluntary deed in trust of all the grantor’s real estate, providing, inter alia, for himself for life; existing debts unprovided for, and as to which this deed was undoubtedly fraudulent; no property reserved for the reasonable' probabilities of the future, an immediate contraction of subsequent debts, and an expressed apprehension of a pending claim for damages. It was, nevertheless, held, that of these facts the subsequent creditor could not avail himself, unless he could further show that a fraud was intended against himself. In other words, these facts standing alone, did not make for him even a prima facie case.

Snyder v. Christ was followed in Monroe v. Smith, 29 P. F. *300 Smith 459, in which it was said that a deed, void as to existing creditors, by reason of the grantor’s fraud, is not necessarily void as to subsequent creditors; that it is bad only as to those it is intended to defraud.

It is scarcely necessary to say that these cases rule the one now under consideration. The deed of John Mell to Isabella Noble was executed on the 31st of March 1859, and was recorded in August.of the same year. The deed of William Blair to Mrs. Noble was made March 20th 1865, and was recorded 28th of March 1868. The judgment of Kindler v. John B.. Noble, upon which the property in dispute was sold, was founded on a note dated March 5th 1869, ten years after the date of the first deed, and nearly three years after the date of the second. When, in addition to this, we reflect that Noble’s debts at no time were large; that the testimony of- Foote relates to declarations made by Noble ten years before Kindler’s debt had an existence; that there is not one particle of evidence, direct or indirect, that a fraud was intended on future creditors, we must certainly conclude that the plaintiffs had no case,. and that the court should so have instructed the jury.

The judgment is reversed, and a venire facias de novo is awarded.