Winn v. Barnett

1. Fraudulent assignment : by whom avoided. — As a general rule, a conveyance of his property, made by the debtor with the intent to hinder, delay, and defraud his creditors, can be avoided only by those whose debts existed at the time the assignment was made; subsequent creditors cannot set aside such a conveyance unless the property was in such a situation that the debtor gained credit upon the faith of it, or unless the fraudulent grantee held it in secret trust for the benefit of the grantor; and this rule was applied by this court to a case where the assignment was made by the husband to the wife. 2. Fraudulent assignment : cannot be set aside by administrator. — An administrator cannot maintain a bill to annul a fraudulent assignment made by his intestate, although the estate has been declared insolvent. 3. Same : where insolvent estate may be rendered liable to creditors without a judgment at law. — A creditor of a deceased person whose estate ha3 been declared insolvent, if he regularly establish his debt in the Probate Court, and before the commissioner “of insolvency, may maintain a bill to set aside a fraudulent conveyance made by the decedent, without having first obtained a judgment at law, and a return of nulla bona thereon.

Appeal from the Vice-chancery Court at Yazoo city. Hon. Selden S. Wright, vice-chancellor. The substance of the bill is set out in the opinion of the court. For appellant it is contended that the court below erred in overruling the demurrer to the bill, because an administrator cannot maintain a bill to set aside a deed made by his intestate in fraud of the rights of creditors. Eubanks v. Dobbs, 4 Pike, (Ark.) R. 173, cited in 4 U. S. Dig. ¡306; Kipp v. Hanna, 2 Bland. R. 26; Atherley on Marriage. Settlements, 116, 117; Roberts on Fraudulent Conveyances; and it makes no difference that the administrator is himself a creditor; he is estopped by the fact that he is administrator. Moody v. Fry, 3 Humphrey, R. 567. The deed is valid as to all persons except creditors, and they may assent and make it valid as to them. Whitney v. Freeland S? Murdock, 4 Cushman, R. 486. This case is, in principle, precisely in point. The first question which arises in this case, is upon the demurrer to the bill which was overruled by the court below-. It was contended by counsel for defendant below, that an administrator could not (though the estate was declared insolvent) file a bill to impeach a fraudulent conveyance. It is very true, as a general principle, that an administrator is, by virtue of his office, subrogated to the rights of the intestate; and so far as they represent the distributees of an estate, they could not be heard to impeach a voluntary conveyance. But we insist, when an estate becomes hopelessly insolvent, and is so declared by the court in which such administration is pending, the administrators no longer represent distributees — all legal privity between them and the distributees cease. They are not acting as trustees for the distributees, but they are exclusively the trustees for creditors, and as such, it is their duty to take the proper steps to reduce into their possession any property of their intestate fraudulently held by another, and which equitably, should be applied to the satisfaction of his debts; and that more especially is this the case, from the fact that legislation has made it so, and has deprived the creditor of all remedy, except through the administrator. The Supreme Court of Tennessee, in the case'of Simpson v. Simpson, 7 Humphreys, held, that though a creditor might file a bill against a fraudulent vendee and the administrator (that is, when fraud in the administrator was charged) yet an administrator might do it; and in that State there are no statutes disabling the creditor in his remedies. We can see no difference as to their relation to creditors and a fraudulent vendee, between an assignee in bankruptcy and an administrator of an insolvent estate; yet it is settled in England that an assignee may impeach'a voluntary conveyance, (Eonb. Eq. 205-209,) and there, neither in the Bankrupt Acts, nor any other act, is the creditor limited in his direct remedy. But the decisions of our high court, and the acts of our legislature, leave the creditor no remedy except through the administrator. We think the legislature very clearly indicate it as a duty to be performed by the administrator to administer upon assets fraudulently held as well as any other assets. The 79th section (Hutch. Code, 661,) makes it his duty to return “ an inventory of personal property of any kind, or assets,” &c. Our Statute of Frauds (Hutch. Code, 637,) makes such a transaction “ clearly and utterly void;” and if so, the property is certainly assets, and it is their duty to return it as such to the Probate Court, and apply it to the partial payment of the claims of the defrauded creditors. We have said the creditors could not file this bill. Section 103 (Hutch. Code, 667,) declares that the creditor shall not institute suit after an estate is declared insolvent. The administrator would be, of course, an indispensable party if such a bill was filed; and if it was filed, and should state the insolvency of the estate, (which they would be bound to do, because a voluntary conveyance could not otherwise be impeached by any body,) it would surely be demurrable and the reading of the statute alluded to would be sufficient to dispose of the point. In addition to that, this court has settled the point that a general creditor cannot go into a court of equity to reach equitable assets, he must have a judgment at law, and exhaust his legal remedies first. The exhibits show that the creditors, for thousands over and above the assets, have no judgments. There is no way in which a creditor can be recognized as competent by a bill to impeach a fraudulent conveyance by an insolvent intestate, unless, perhaps, he could charge fraudulent neglect of duty upon the administrator, as he might, in other cases, when a trustee refused to discharge his office. What attitude does an administrator occupy whose intestate’s estate has been declared insolvent? His whole office consists of a trusteeship for creditors, and for creditors alone. The Supreme Court of New York, say, (12 Wend. 543,) “They are not now the mere representatives of their testator or intestate. They are constituted trustees, and the property in their hands, is a fund to be disposed of in the best manner for the benefit of creditors.” The court here spoke in reference to the effect of the act which abolished priority of judgments against administrators. Our act, depriving the creditor of the right to sue at all, makes this case stronger, and our act further provides for a pro rata distribution of the assets, and the law commits that duty to the Probate Court, and it is exclusively the province of that court, through its officer (the administrator,) to make this appropriation. The Supreme Court of New York, say, (2 Hill, 186,) “Whatever difficulty there might be in allowing an administrator to set up the fraud, when considered as the mere representative of the intestate, there can be none when he is regarded in the further capacity of a trustee for creditors, and is necessarily acting for their benefit.” Both these New York cases were actions at law; but this bill has the additional fact to sustain the jurisdiction of a court of equity, that it is filed quia timet, and seeking discovery. But if the failure to state in the bill that complainants are creditors, was a defect, it was cured by the amended bill proposed to be filed, the filing of which was resisted, and it is not an error of which defendant could complain. But the court did not err in overruling this demurrer, for another reason. The bill charges fraud specifically, and no answer accompanies the demurrer denying the fraud. If indebtedness to complainants was a material fact, upon which to base the jurisdiction, it could not avail defendant on final hearing, because the proofs in the cause establish the fact that they are creditors of the estate for a large amount. 2. The bill charges, and the proof shows, that at the time the assignment was made, Winn was greatly embarrassed, and that to defeat these debts, he made the fraudulent arrangement complained of. This is sufficient to avoid the deed to the wife. Fonbl. Eq. 205; 5 Conn. R.' 427, 450; Learie v. Livingston, 3 Johns. Ch. R. 481; Hind’s Lessee v. Longworth, 11 Wheat. 199; Roberts on Fr. Con. 17, 24; 12 S. & R. 448. If there was one creditor, at the time of the purchase, who is not yet satisfied, it is a fraud as to him, and fraudulent as to all subsequent creditors. 1 Peters, C. C. R. 460;, 4 Yerger, 164; Trimble v. Turner, 13 S. & M. 348; Henry v. Luir lerton, lb. 631; 11 Paige, 589; 6 Hump. 215, and the- cases already cited. See also Bogará v. (xartley, 4 S. & M. 302.