Gardner v. Cole

Dillon, J.

i. fraud: nnceU’ EU¿ 1. The statute of 13 Elizabeth intended to protect creditors against fraudulent transfers of property by debtors, and the statute of 27 EUzabeth, designed to protect subsequent good faith purchasers of real estate against fraudulent or *210 feigned and collusive transfers, have never been legislatively re-enacted in this State. But antedating as these statutes do the settlement of this country, and being mainly, if not wholly, declaratory of the common law, which set a face of flint against frauds in every shape, they constitute.the basis of American jurisprudence on these subjects, and are, in this State, part of the unwritten law. 4 Kent Com., 463; 1 Story Eq., §§ 352, 353 j 1 Am. Lead. Cas., 4th ed., 36.

In the case at bar, the plaintiff is not entitled to be relieved against the father’s conveyance to his son on the ground of being a creditor of the father. He was, it is true, at one time a creditor, but was paid at the time of his purchase from the father, of the lot in question. The act of 13 Elizabeth has, therefore, no application to the case.

2_con etuC270n: BUz' The case falls under 27 Elizabeth, designed to protect subsequent purchasers against prior fraudulent alienations of the same property. This latter statute, in its construction in England, gave rise to much diversity of opinion, mainly upon this question, one side holding that the statute made all voluntary conveyances void against subsequent purchasers for value with or without notice of the voluntary conveyance; the other side maintaining that it made void prior voluntary conveyances against purchasers only when the prior voluntary conveyance was fraudulent, — that is, if the first conveyance, though voluntary, was bona fide, and the subsequent purchaser bought with notice, he could not avoid it. This question was not definitely settled in England at the time of our separation from that country. After that event, the Common law, Chancery and Exchequer courts concurred in deciding that, under 27 Elizabeth, a subsequent purchaser, for value, might set aside a prior voluntary conveyance, though bona fide made to a son or *211 wife, even though such purchaser had notice at the time of his purchase of such voluntary conveyance. Doe v. Manning, 9 East., 59; Evelyn v. Templar, 2 Bro., 148, 149; Doe v. Martin, 4 Bos. & Pul., 332; Doe v. Hopkins, cited 9 East., 70; Palverloft v. Same, 18 Ves., 84; and see also recent case of Tarlton v. Liddell, 7 Eng. L. & Eq., 360, 375, 1851.

The statute of 27 Elizabeth in substance declares void every conveyance, &c., of lands made and to be made for the intent and, purpose to defraud, and deceive such person as shall purchase la/nd so before conveyed.

Now, the ground upon which the English decisions above referred to have gone is, that the subsequent sale by the grantor is considered as proving conclusively that the voluntary deed was executed with the fraudulent intent to deceive subsequent purchasers. Per Marshall, Ch. J., in Cathcart v. Robinson, 5 Pet., 265 , 279; 1 Am. Lead. Cas., 47 .

The English doctrine when applied against bona fide voluntary alienees, in favor of subsequent purchaser with notice, was manifestly a source of fraud and injustice. Why should one, with full knowledge that a man not indebted had fairly made a reasonable provision for a wife or child by a voluntary conveyance, be permitted to purchase of them the same property and hold it as against the wife and child?

The subsequent purchaser in such case is not, in the language of the statute, defrauded cmd deceived, for he buys with actual knowledge. And how can a man be defrauded or deceived by a transaction of which he has notice when he buys ? This construction, instead of preventing frauds, worked them, by enabling a party “ intentionally to defeat the fair claims and expectations of a prior grantee.” (4 Kent Com., 463;)

*212 ■ Influenced by these considerations, the courts in this country (while their decisions are not on many points harmonious) have very generally concurred in holding, that, as they were not bound to do -so, they would not follow the English courts, in so far as those courts held that a subsequent purchaser with notice might avoid a prior voluntary conveyance made in good faith; as, for example, in favor of wife or children, and under circumstances repelling any idea or imagination of fraud.

„ „ veyance°u" invalid. The result of the American decisions on this subject is thus given by Mr. Wallace, one of the learned editors of the American Leading Cases (vol. 1, p. 47, 4th ed.) : “A conveyance actually fraudulent v(qq against a subsequent purchaser for a valuable consideration, even with notice; and a voluntary conveyance is presumptively fraudulent against a subsequent bona fide purchaser without notice ; that is, a subsequent sale to a bona fide purchaser without notice, is evidence that a prior voluntary conveyance was fraudulent ; but a voluntary conveyance [if not fraudulent in fact] is (at least according to the decisions in some of the States) not void against a subsequent purchaser with notice. In others, however, the general rule is stated, that a voluntary conveyance, as against a subsequent bona fide purchaser for a valuable consideration, with or without notice, is fraudulent.” (We omit the eases referred to, which, upon examination, we find fully to* sustain the text.)

In view of the course of decision in this country, and the reasons for it, it is our opinion that the rights of the plaintiff are, under the facts of this case, superior to those óf Jerome Cole. What are these facts ? They are:

1. That the conveyance by the father to Jerome was, as shown by the evidence, acbually fraudulent, and did not originate in an honest desire and purpose to make a settlement upon or provision for him. This is shown by *213 the uncontradicted testimony of Templin. If not true, why was not the evidence of Anthony Cole, who was alive, taken to contradict him? Anthony was in debt, had criminal prosecutions pending against him, showing a motive to make a fraudulent transfer, and making Templin’s evidence extremely probable. Then, the nature of the interest conveyed, and the age of the son, tend to show the father’s purpose to be to protect himself, and not to benefit the child. Then, again, the conveyance to the son, as against a bona fide purchaser, is held to be at least presumptively fraudulent, and no evidence was offered by the son to repel this presumption. Therefore we conclude that the conveyance was actually 'fraudulent.

2. This conveyance was purely and confessedly voluntary.

3. The father, after this conveyance to the son, remained in possession, claiming the property as his own, using it as his own, and, finally, about a year and a half afterward, selling it as his own, giving no notice of Ms son’s right.

4. The plaintiff was a bona fide purchaser for full value, without anj-actual notice of the son’s right, or of the prior voluntary conveyance to him.

Under these circumstances, this court has recently decided, that a subsequent creditor of the father could have avoided this conveyance to the son. Hook v. Mowre, 17 Iowa, 195, 201 , and cases cited, and 202, proposition third.

And all courts hold that a subsequent purchaser has rights as high, and some hold that he has even higher rights than a subsequent creditor. Salmon v. Bennett, 1 Conn., 557 ; S. C., 1 Am. Lead. Cas. supra, and notes; Willard’s Eq., 234, 235; Verplank v. St erry, 12 Johns., 638 , per Spencer, J.; Lewis v. Love’s Heirs, 2 B. Mon., 345, 347 ; Rob. Fraud. Con., 473, and cases.

*214 Upon a pretty extensive examination of the cases we have found none, no, not one, which would sustain the conveyance in question under the circumstances stated.

“All the cases admit,” says Wilde, J. (Clapp v. Leatherbee, 18 Pick., 131 , 137), “ that if there is any fraud in a voluntary conveyance, or if it is merely colorable, it can never be set up against a subsequent purchaser for value.”

So in a prior case in the same State, the court, in relation to a voluntary conveyance which was held to be intentionally fraudulent, remarked, “ That deed conveyed his (the grantor’s) title to the plaintiff as against the grantor and every other person, unless it was fraudulent at the time of its execution, in which case it was void against creditors and subsequent purchasers. Ricker v. Ham, 14 Mass., 139 .

What we do decide is, that where the first conveyance originates in a fraudulent purpose, and is without any consideration of value, and the grantor remains in possession, and claiming ownership, sells the property as his own to a party who buys without actual notice of the prior deed, and pays value, the latter purchaser may avoid the prior voluntary and fraudulent conveyance. See on this point Hooke v. Mowre, 17 Iowa, 202 . This is for the plain reason, that in such case, the prior conveyance is not only fraudulent, but would, in fact, be the means of working an actual fraud upon others should it be sustained as against the subsequent purchaser.

*. beoohdlent aeea. It Is proper that we should briefly allude to the effect of the recording of the deed under the son claims.

Under the circumstances of this case (the son’s deed being actually fraudulent, the'father being in possession, claiming and selling the property as his own, to a purchaser, for value, without actual notice), we are of opinion, and so decide, that the constructive notice arising from the *215 record of tbe son’s deed does not defeat the right of the subsequent purchaser to avoid an instrument that would otherwise work a fraud upon him..

To this effect are all the authorities, many of the cases going much further. 1 Am. Lead. Cas., 4th ed., pp. 46,47, and authorities cited; per Kent, Ch. J., in Sterry v. Arden, 1 Johns. Ch., 261, 270, 271 ; S. C., 12 Johns., 536 , and note, Judge Spencer’s remarks, pp. 557, 559; Story Eq., § 425 et seq.; Hooke v. Mowre, 17 Iowa, 195 ; Gooch's case, 5 Co., 60 a; Buckle v. Mitchell, 18 Ves., 111, per Sir William Grant. The reason being, that notice to a purchaser of a fraudulent conveyance is simply notice of a nullity, for the statute makes such conveyance absolutely void. If he knew of it, he at the same time knew it was a nullity.

It might be a very different case if the first deed, though .voluntary, was fair and meritorious, intended to be and being nothing more than a reasonable provision for wife or children. In such a case our registry laws afford an additional reason for not following the staid and severe doctrine of the English courts, allowing purchasers with notice to avoid a prior voluntary conveyance, though bona fide made.

At the time when the statutes of Elizabeth were enacted there were no laws in England requiring the registry of deeds and conveyances, and hence there were greater opportunities for making secret transfers. Previous to the time of Queen Anne, there were no registry laws in England, and to this day, unless enacted recently, there are no such laws applicable to every part of the realm. Sugd. on Vend., 966: and seet his subject discussed by Gibson, J., in Lancaster v. Dolan, Rawle, 231, 245.

Our statute provides (Kev., § 2220) that “No instrument affecting real estate is of any validity against a subsequent purchaser for a valuable consideration without *216 notice, unless recorded,” and when recorded (§ 2223), “ shall furnish constructive notice to all the world of the right of the grantee conferred by such instrument.”

If the instrument is without validity before recorded, it is equally so after it is recorded; in other words, its registration gives it no additional efficacy, does not free it from the taint of fraud.

If the first deed, though voluntary, is free from fraud, and is duly registered, then it might well be (especially if the grantee has not allowed the grantor to remain in possession exercising the right of ownership) that the after purchaser would be bound to take notice of “the right of the grantee conferred by such instrument.” Upon this subject, see Lewis v. Love's Heirs, 2 B. Mon. 345, 347 ; Bank v. Patton, 1 Rob. (Va.), 499, 544; Lancaster v. Dolan (leading case in Pa.), 1 Rawle, 231, 235 ; Cain v. Jones, 5 Yerg., 249 ; 1 Id., 13; Bell v. Blaney, 2 Murph. (N. C.), 171; Ricker v. Ham, 14 Mass., 137 ; 18 Pick., 131 ; Sterry v. Arden, 12 Johns., 261 ; S. C., Id., 559.

We need not decide what would have been the effect if the plaintiff, at the time of his purchase, had had actual notice of the conveyance to the son; nor what would have been the effect under our recording act, if the deed to the son had been bona fide, and the plaintiff had purchased without actual, but with constructive notice of it.

As there is independent proof of actual fraud in the first conveyance, we need not discuss how tar, if at all, such fraud may be presumed from the mere .-fact, without more, of a subsequent sale for value.

s. pawtibs: conveyance, II. Templin, the warrantee of the plaintiff, having given the plaintiff notice to defend the action of the son, based upon the conveyance to him by his father, this would bind the plaintiff by any verdict *217 which the son might recover in that action. Chicago v. Robbins, 2 Am. Law Reg. (N. S.), 529 ; S. C., Wallace, U. S. and cases, cited; Rawle on Covenants, 242, and authorities there referred to.

The plaintiff would be liable on the covenants in his deed; and this action of the son against Templin, as it binds the plaintiff, is in effect the same as if it were against the plaintiff in person;' Besides, the plaintiff is liable, for the time he occupied, to have a similar action brought against him by the son. We therefore think he is entitled to bring this bill to enjoin that action and have the validity of the son’s right determined.

We have given the ease, as the question is a new one in this State, a very thoughtful consideration, and are brought to the conclusion that the decree below dismissing the bill was erroneous. That decree is accordingly reversed, and the cause remanded, with directions to the District Court to enter a decree as prayed in the petition.

Reversed.