Opinion
04-28-1851
WILSON v. BUCHANAN.
Robinson and G. N. Johnson, for the appellant. Stanard and Bouldin, for the appellee.
(Absent Cabell, P.)
W being largely indebted in proportion to his property, made a gift of slaves to his married daughter; and her husband remained in possession of them for eight years. Judgment having been recovered on some of these debts, and also on other debts contracted since the gift, B became the surety of W in the forthcoming bonds; and was compelled to pay the money. He then recovered judgment against W for the amount so paid by him, and all the property of W having been then sold, by the directions of B, his executions were levied on the slaves given by W to his daughter and their increase. HELD: The slaves were liable to satisfy the debt of B.
This was a suit in equity in the Circuit court of Halifax county, instituted in February 1844 by William Wilson against John Buchanan and the sheriff of Halifax. The bill alleged that some eighteen months or two years before the filing thereof, John Buchanan became the surety of William Webb in a forthcoming bond. That the bond had been forfeited, and by this means Buchanan had obtained a judgment against Webb for the amount of the bond and costs, and had levied his execution on six slaves the property of the plaintiff. That the said slaves were the absolute property of the plaintiff, were born his and on his plantation, with the exception of one of them, and that one he had held as his own for nine or ten years. The prayer of the bill was for an injunction to the sale of the slaves, and for general relief.
Buchanan in his answer, stated that he had been compelled to pay money for Webb as his surety in two forthcoming bonds, in both of which Easely & Co. for the benefit of Bruce's executor, were plaintiffs. That for the money so paid he had recovered a judgment against Webb; and the execution which had issued thereon had been levied on the property mentioned in the bill by the direction of the defendant. That defendant believed the property was liable to satisfy his execution, as the debts out of which it originated had been contracted by Webb long before the plaintiff had become possessed of the property, for which he never had paid a cent. That after the defendant had become the surety of Webb, the latter had by three several conveyances conveyed all his property to secure other debts which he owed, except the property he had loaned or fraudulently given to the plaintiff. That previous to giving the property in the bill mentioned to the plaintiff, Webb, who was the plaintiff's father-in-law, was largely indebted for a man of his property; and had failed to pay many of the debts he then owed, and among them the debts for which the forthcoming bonds in which defendant was surety were given. That the three oldest of the slaves on which the execution was levied were the property of Webb, and went from his possession to that of the plaintiff; the others were born since.
The evidence shewed that one of the slaves named Martha, who was the mother of the others, and her oldest child then a few weeks old, were given by Webb to his daughter Mrs. Wilson, in April or May 1834, and had been in the possession of Wilson from that time until the execution was levied upon them; and the other slaves had been born in his possession. That at the time Webb gave the woman and child to Mrs. Wilson he owed about 3519 dollars 7 cents, some of which had been due as early as 1825. That his debts had been for some years gradually increasing, up to that time, and continued to increase until 1842, when it amounted, as far as ascertained in this cause, to 5717 dollars 88 cents. That in 1837 and 1838 he executed deeds upon the most of his property to secure debts which he owed. That in 1842 he executed two other deeds for the like purpose; and in November of that year his whole property was sold for the payment of his debts, when the sales amounted upon six months credit, to the sum of 4393 dollars 45 cents: Though some of the witnesses thought that if it had been sold some three or four years earlier it would have produced more money; and Webb thought that if it had been sold in the spring of 1834, after he gave the woman and child to Mrs. Wilson, it would have paid all his debts and left him 1200 dollars. It appeared further that a part of the debts for which Buchanan was the surety of Webb was due at the time of the gift of the slaves.
It seemed probable from the papers in the record that the judgment which Buchanan had recovered against Webb was for more than he had paid for him; but that was a question not noticed in the pleadings or in any way put in issue.
The cause came on to be heard in September 1845, when the Chancellor--LEIGH-- pronounced the following opinion:
Two questions are presented in this case:
First. Was the gift of the slaves by Webb to the plaintiff fraudulent as to the defendant's debt? And if it was, then, secondly, whether the length of time during which the plaintiff has held the slaves, bars the defendant of the right to levy his execution on them?
In examining the first question, it may be well to enquire whether the debt due to the defendant is to be regarded as a debt existing at the date of the gift, or as a subsequent one? It is clear that the defendant became the surety of Webb on the forthcoming bonds, long subsequent to the gift; but it is equally clear that by far the greater part of the debts, to satisfy which the forthcoming bonds were executed, was due at the time of the gift. And to the amount of this part of the debts, my opinion is that the debt due to the defendant must be regarded as an existing debt at the time of the gift. A forthcoming bond forfeited is no actual payment of the judgment; Randolph v. Randolph, 3 Rand. 490; and if the forthcoming bonds had proved unproductive, it surely would not be contended that the obligees ought to be regarded as subsequent creditors. The debt has in truth been paid by the defendant; and in some sense, he is a creditor of Webb subsequent to the gift. But Webb has never paid the pre-existing debt; and his donee cannot be in a better situation, because he has by his management compelled the defendant to pay this pre-existing debt. I do not, however, consider it as of much importance whether the debt be a pre-existing or a subsequent one. For in Richardson v. Smallwood, 4 Cond. Eng. Ch. R. 262, it is settled, that if a gift be fraudulent as to previous creditors, it is also fraudulent as to subsequent creditors. Some of the remarks of the Master of the Rolls are so apposite and conclusive, that I will extract a part of them. He says: " Suppose a person to execute a conveyance, such that if those who were creditors at the time complained, it would be void as to them; then if they are paid off, and a new set of creditors stand in their places, does that make any difference? Does it not delay and hinder these creditors, and is it not void as to them? If it be not so, it would be easy to evade the statute: the party may pay off those to whom he is then indebted by borrowing of others, and then he may say to them, I did not make the settlement to defraud you, but to defraud the other persons who were my creditors."
These remarks are made upon a supposed case by no means as strong to shew the unreasonableness of the position he was opposing, as the case actually before me. For the debt due to the defendant is for money which Webb compelled him to pay in discharge of a previous debt. I need hardly add, that this view of the Master of the Rolls is sustained by Judge Baldwin's opinion in Hutchison v. Kelly, 1 Rob. R. 128, and by Atherly, in his treatise on marriage settlements, p. 313. It seems that it was formerly considered by some high authorities to be the law, that every voluntary conveyance was fraudulent in respect to existing creditors. Reade v. Livingston, 3 John. Ch. R. 481, and the cases there cited; Atherly on Mar. Sett. 212-217; 1 Mad. Ch. 218: and Stanard, J. in two recent cases, Huston v. Cantril, 11 Leigh 168, and Hutchison v. Kelly, 1 Rob. R. 128, has expressed the opinion that this is still the correct doctrine. And I have read most of the English cases, and I have no doubt the remark of Chancellor Kent is correct, namely, that there is no English case in which a voluntary gift has been held valid against a pre-existing debt. But notwithstanding this weight of authority, the modern cases seem opposed to this doctrine; and according to them, the question always is, was the gift made with the intent to defraud creditors? Still, if the grantor was so greatly indebted and embarrassed as that the gift put in hazard the debts due to his creditors, it is the presumption of law that the gift was made with intent to defraud creditors. What degree of indebtedness (short of insolvency) will conclusively raise the presumption of the fraudulent intent has never been, and never can be, settled; and this want of some certain rule, will probably give rise to much troublesome litigation, and will result in different decisions on nearly the same state of facts, according to the varying deductions which different Judges may draw from them. It is, however, settled, that a voluntary gift is not to be sustained merely by proving that the donor was not insolvent at the time of the gift. Indeed, there is but one case which seems to countenance the doctrine that the insolvency of the grantor must be proved in order to invalidate a voluntary gift. That case is Lush v. Wilkerson, 5 Ves. R. 384, in which a subsequent creditor filed his bill to set aside a voluntary settlement; and having failed to prove any antecedent debt, asked for an account to ascertain whether the settler was indebted at the time of the settlement. This Lord Alvanley refused, remarking that the plaintiff had not proved a single antecedent debt; and then added, " a single debt will not do: it must depend on this--whether he was in insolvent circumstances at the time." Such a remark, unsupported by any authority, on such a subject, is surely not entitled to much consideration. It seems to be opposed by the constant course of the Court; for if such was the law, the Court ought, in all doubtful cases, to direct an enquiry to ascertain whether the grantor was in insolvent circumstances. Yet such an enquiry is never directed, unless under very peculiar circumstances. But, in truth, the correctness of the remark is disproved by subsequent cases. Thus, in Richardson v. Smallwood, before cited, the Master of the Rolls said--" I do not conceive it necessary to shew that the party was insolvent." And in Chamberlayne v. Temple, 2 Rand. 384, Green, J. delivering the opinion of the Court, said--" The deeds in question are clearly fraudulent and void as to the creditors of the donor. All except that to Everlyn Beverly, in 1793, were executed when the donor was indebted to a degree of embarrassment, and when the very debt, the satisfaction of which is now claimed, was due; and although he retained enough to satisfy all his debts, and lost a large portion of his personal estate by a calamitous accident, he had no right to throw upon his creditors the hazard of such an accident, and to provide for his family at their expense." But there can be no necessity to cite particular cases. The whole course of argument upon the cases shews that it is not necessary to prove insolvency in the grantor. If it was, all the laboured reasoning of Chancellors, and Judges, and text-writers, as to the degree of the indebtedness and embarrassment of grantors has been worse than useless; for it has only served to deceive the enquirer. Their labour would have been saved by the single remark, that the insolvency of the grantor must be proved. On the other hand, the modern cases establish that neither a single debt, (unless it be equal, or nearly equal in amount to the value of the donor's estate,) Bank of Alexandria v. Patton, 1 Rob. R. 499, nor indebtedness to a considerable amount, if the grantor be not on the eve of insolvency, Bailey's S. Car. R. 585, as cited in 2 Kent's Com. 441, note, will render void a voluntary gift as to the creditors. What state of indebtedness, then, will authorize the presumption that a voluntary gift was made to defraud creditors? I answer, a state of indebtedness which produces embarrassment, and which approaches to insolvency; a state of indebtedness which, if any calamitous accident should happen to the property, or any fall in the price of it should take place, would probably leave the donor without the means of paying his creditors. For a gift made under such circumstances would prove, that the donor was so unmindful of his obligation to his creditors, as fairly to justify the presumption that he designed to defraud them. This appears to me to be the true doctrine, as deduced from the modern cases. Thus it seems that a voluntary gift, made when the donor is in debt, is prima facie fraudulent. George v. Milbanke, 9 Ves. R. 189; Hutchison v. Kelly, 1 Rob. R. 128, Judge Baldwin's opinion. And it is incumbent upon the donee to repel this presumption, which he may do by proving that the donor was in prosperous and unembarrassed circumstances at the time he made the gift, not considerably indebted, and that the gift was a reasonable provision for the child, according to his state and condition in life, comprehending but a small portion of his estate, and leaving ample unincumbered funds for the payment of his debts. Hinde's lessee v. Longworth, 11 Wheat. R. 199; Salmon v. Bennet, 1 Conn. R. 525; Huston v. Cantril, 11 Leigh 168. But if the donor be loaded with debt, the prima facie presumption of fraud becomes conclusive. Baldwin, J., 1 Rob. R. 128. Such appears to be the now prevailing doctrine: a doctrine which, from the uncertainty as to the degree of indebtedness necessary to authorize the inference of a fraudulent intent, is well calculated to produce litigation; and, what is infinitely worse, to hold out to debtors in doubtful circumstances, the temptation to attempt to provide for their families at the expense of their creditors. And I cannot but think it would have been better to have adhered to the doctrine laid down in Reade v. Livingston, and since so long and so strenuously insisted on and maintained by Chancellor Kent. For either that doctrine or the present uncertain rule must govern, since, I presume, no one will contend that a gift ought to be upheld unless it should be established that it was made with a previous fixed intent to defraud creditors. For if this was established as the true doctrine, the gifts of debtors, not only on the very brink of insolvency, but also lately insolvent, would be maintained; a doctrine which no one who regards a debtor under the least obligation to his creditors, would be willing to sanction.
Let us now examine the case according to the principles deduced from the modern cases.
The Judge then proceeded to examine the evidence in the cause, and held that upon the principles stated in his opinion the gift was clearly fraudulent as to the defendant's debt. He then proceeded to the consideration of the second question.
I regret that I have not the notes of the plaintiff's counsel on the second question, as I do not know whether he considers the plaintiff's right to the slaves protected by some provision of the act of Assembly for the limitation of actions, or merely from some principle adopted by the Courts for the purpose of discountenancing stale demands.
In examining this case, I have been unable to lay my hands on any direct authority. Yet I am pretty sure there is authority to establish that, so long as the creditor has a right to sue out an execution, the execution may be levied on the property of the debtor, either in his own possession, or in the possession of his fraudulent donee. This has always been my opinion; and upon principle, I think it must be so. For the fraudulent gift of property to defeat creditors is utterly void. 1 Rev. Code, ch. 104, § 2, p. 372. And the creditor has always been permitted to regard the fraudulent gift as a nullity, and to prosecute his legal remedies for the recovery of his demand in like manner as if the fraudulent act had never been done. Baldwin, J. in Hutchison v. Kelly, 1 Rob. R. 128. If the property fraudulently given is, as to the creditors, regarded as the property of the debtor, and if the creditor may prosecute his remedies precisely as if the gift had never been made, it follows that the execution, which issues at the suit of the creditor, may be levied on the property of his debtor, whether the property be in his possession or in the possession of his fraudulent donee. Besides, the act against fraudulent gifts was made for the benefit of creditors; not to change their mode of proceeding, either as to the time of bringing their suits, or in any other manner.
But as to the act of limitations:
I can find no one provision, which has the remotest application to the present question, unless it be the one which limits the time within which creditors are at liberty to sue out executions after judgments have been obtained by them. And fraudulent donees, doubtless, are entitled to the benefit of this provision in all cases where it is applicable. But this provision, it must be observed, takes away the right to sue out an execution, but interferes not at all with the right to levy it after it has been legally sued out. In all the other provisions of our act of limitations, the time begins to run against the creditor only from the time when his cause of action accrued. In this case, however, the defendant never had a cause of action against the plaintiff, either for the debt due to him by Webb, or for the negroes on which his execution has been levied. Indeed, previous to the defendant's placing his execution in the hands of the sheriff, he had no right to institute any proceeding questioning the fairness or legality of the gift to the plaintiff. Tate v. Liggatt, & c. 2 Leigh 84; Rhodes v. Cousins, 6 Rand. 188. So that, from the moment the defendant acquired the right of questioning the plaintiff's right, he has been diligently prosecuting his claim; and it is difficult to conceive how the act of limitations can apply to such a case. Had the defendant, or had Bruce's representative delayed the action against Webb, so that Webb might have relied effectually on the act of limitations, the question would have been of more difficulty; but this is not even pretended to be the case.
I understood the plaintiff's counsel, at the last term, to insist that the eight or nine years possession which the plaintiff had had of the slaves before either Bruce's or the defendant's execution against Webb was sued out, gave the plaintiff a complete title to the slaves. It is true that an adverse possession of five years gives a complete title to slaves against all to whom such possession has been adverse after the accruing of their rights of action. But no possession, however long or adverse, if it be before the accruing of the claimant's action, is a bar, as is proved by the clear right of a remainderman to sue, after the death of the tenant for life. A slave is given to one for life, with remainder to another. No possession of a third person during the life of the tenant for life, no matter how long or how adverse, will bar the action of the remainderman; and for this reason--that the remainderman had no cause of action until the death of the tenant for life.
There is only one other ground, as it seems to me, on which the plaintiff can contend that his possession of the slaves bars the defendant's right to levy his execution on them--namely, the delay in proceeding to subject them. But the delay in nowise barred the right of action of the creditors against Webb; and if I am right, that an execution legally issued against a debtor may be levied on property in the possession of his fraudulent donee, no matter how long such possession may have continued, this delay cannot avail the plaintiff at law. Is there any principle of Courts of equity more favourable to the plaintiff? There may be cases, in which creditors have so long delayed the assertion of their rights, that Courts of equity will refuse to give them any aid to enable them to subject to their demands property in the hands of fraudulent donees; for Courts of equity discountenance all stale demands. But here the defendant is asking no aid of the Court. Besides, the delay has not been great; and even if it had been greater, it would be difficult to maintain, that a Court of equity ever regards a demand as stale, for which a judgment has been obtained at law in an action, to which no legal defence could have been made. And my opinion is, that the possession of the slaves by the plaintiff for eight or nine years previous to the suing out the defendant's execution, does not exempt the slaves from the defendant's execution. On this question, there is a late case in the Court of appeals, which, perhaps, requires some remarks from me. I allude to the case of Huston v. Cantril, 11 Leigh 168. That case was a suit in equity to subject property in the possession of alleged fraudulent donees to the plaintiff's demand; and three of the Judges thought that the action was barred by the act of limitations. But it is clear that the general question, whether the act of limitations will bar the right of the creditor to levy his execution on property in the hands of a fraudulent donee, was not decided. The case as to this point was this: The plaintiff became the security of the grantor in a bond to Mayo. After this, the grantor made the fraudulent gifts, and died in 1798; upon whose death the property came to the possession of the grantees. In 1800, the plaintiff paid the debt for which he was the security of the grantor; and in 1827, filed his bill against the grantees. And three Judges held that this suit was barred by the act of limitations. But this decision no way affects the general question; for the Judges seem to have held that the grantees, by taking possession of the property, after the death of the grantor, became executors de son tort; that a cause of action against them in that character accrued to the plaintiff in 1800; and that this latter cause of action was barred by the act of limitations. That this was the decision, is manifest from the whole report, and from the opinions of the other Judges; and if so, it is obvious that the decision in that case does not touch the question now under consideration.
In accordance with this opinion the Court dissolved the injunction and dismissed the bill, with costs. Whereupon Wilson applied to this Court for an appeal, which was allowed.
Robinson and G. N. Johnson, for the appellant.
Stanard and Bouldin, for the appellee.
OPINION
ALLEN, J.
The Court is of opinion, that upon the issue made by the pleadings, and the evidence applicable thereto, there is no error in the decree; and the same is therefore affirmed, with costs to the appellee. But this affirmance of the decree is to be without prejudice to the right of the appellant to shew in any proper proceeding where that matter may be put in issue, that the judgment in favour of the appellee against said William Webb was rendered for too large a sum; and that the credit endorsed on the execution of 124 dollars 85 cents does not cover the whole excess.