Humes v. Scruggs

Decision Date01 October 1876
PartiesHUMES v. SCRUGGS
CourtU.S. Supreme Court

APPEAL from the District Court of the United States for the Northern District of Alabama.

This is a suit by the assignee in bankruptcy of John W. Scruggs to set aside a conveyance of certain real estate made by the latter to his wife, as being in fraud of the rights of creditors. The court below dismissed the bill; whereupon the assignee appealed here.

The facts upon which the decision of the court is based are set forth in its opinion.

Mr. Thomas C. Fullerton and Mr. F. P. Ward for the appellant.

No counsel appeared for the appellee.

MR. JUSTICE HUNT delivered the opinion of the court.

It is not entirely certain what the court is called upon to review in the present case. By the decree of the court below it is recited that upon the hearing of the cause upon the pleadings it is adjudged that the bill be dismissed. The record, however, comes to us with voluminous evidence upon the merits, and we have not the advantage either of an opinion of the court or of a brief by the party obtaining the decree. It will be necessary, therefore, to give attention to the case in both of its aspects.

The bill was filed by the assignee in bankruptcy of John W. Scruggs against the bankrupt's wife, alleging the adjudication of bankruptcy made upon a voluntary petition filed in June, 1868, and the fraudulent conveyance, in January, 1866, of property of the value of $50,000; that this covered all the property of the bankrupt, and that he was then insolvent. The defendant answered, admitting the conveyance, denying the fraud, alleging that the property conveyed to her was purchased and paid for with her money and for her, and that she believed for several years that the title was taken in her name; that it was improved by her husband at an expense not exceeding $18,000, of which $4,400 belonged to her separate estate, and $2,400 was realized from the sale of a portion of the land. She denied that the deed to her conveyed all the property that her husband possessed, but did not state how much remained, or what it was, and she denied knowledge of his insolvency, if it existed.

As a distinct defence in bar of the recovery sought, she further alleges that on the eleventh day of November, 1867, by her next friend, she filed a bill in the State court against her husband, to which he answered on the same day, in which proofs were taken; and that in December of that same year a decree was rendered, in which the said deed of Jan. 14, 1866, was in all things ratified and confirmed. A copy of the decree is annexed to her answer. To this answer the plaintiff, the assignee, filed a general replication. It is supposed that this suit and this decree, forming a part of the answer of Mrs. Scruggs, furnished the support to the decree dismissing the bill in the present suit on the pleadings.

To this result there are two valid objections:——

1. By the interposition of a general replication, every allegation in the answer of Mrs. Scruggs not responsive to the bill was denied. No such allegation could be taken as true, but must be proved before it could be used by the party making it. The allegation of a former suit and of the decree therein came under this rule. It was denied that there was such a former suit, and that a decree was rendered therein affirming the transaction of May 14, 1866. How, then, can it be said with accuracy, upon the pleadings, when the answer was not responsive, and when a replication was filed, that there was a former suit and decree, and that by reason thereof the present bill must be dismissed? Jacks v. Nichols, 5 N. Y. 178.

2. Let it be assumed that the former suit and the decree therein are proved in a legal manner, still we cannot assent to the theory of its conclusiveness here. There would be little difficulty in making and sustaining fraudulent transfers of property, if the parties thereto could by a subsequent suit between themselves so fortify the deed that no others could attack it. Mrs. Scruggs files her bill on the 11th November against her husband, to obtain a confirmation of the former proceeding. Her husband, nothing loth, files his answer on the same day. Twenty-one days thereafter, viz., Dec. 2, the term of the court opens. The papers are presented, proofs are filed, the counsel appear, and a decree of confirmation is adjudged. Certainly no one can complain in this instance of the delays of justice.

But without reference to these indications of collusion, we are of the opinion that a decree between these parties alone, cannot bind the assignee in bankruptcy. The principle is well settled that a judgment binds only the parties to it and their privies. Bank v. Hodges, 12 Ala. 118, was a decision upon a case very similar to the one before us.

In Mutual Benefit Life Ins. Co. v. Tisdale, 91 U. S. 244, the principle is thus laid down: 'The books abound in cases which show that a judgment upon the precise point in controversy cannot be given in evidence in another suit against one not a party or privy to the record. This rule is applied not only to civil cases, but to criminal cases, and to public judicial proceedings which are of the nature of judgments in rem.' Many cases are cited in illustration of the principle.

This decree no doubt concluded Mr. Scruggs on the question of fraud. But he was already concluded by his deed, and we do not see that the estoppel by the decree is any more conclusive than that by the deed. Neither of them affect the assignee in bankruptcy, who is expressly authorized by the Bankrupt Act to attack any transfer made by the bankrupt in fraud of his creditors. Sect. 14.

If we look at the case upon the merits, we also find the result to be in favor of the assignee.

On the 14th of May, 1866, the husband conveys to his wife certain real estate in Huntsville, Ala., called the race-course property. The value of this property is estimated by the witnesses on the one side as high as $25,000, and by one of those on the other as low as $10,000. Others put it at $15,000 and $20,000. He conveyed to her at the same time the interest of one-third of the profits of a...

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