Garner v. Second Nat Bank of Providence

• Decision Date: 22 January 1894
• Docket Number: No. 43,43
• Citation: 151 U.S. 420,38 L.Ed. 218,14 S.Ct. 390
• Parties: GARNER v. SECOND NAT. BANK OF PROVIDENCE et al
• Court: U.S. Supreme Court

151 U.S. 420

14 S.Ct. 390

38 L.Ed. 218

GARNER

v SECOND NAT. BANK OF PROVIDENCE et al.

No. 43.

January 22, 1894.

Statement by Mr. Justice HARLAN:

This appeal brings up for review a final decree dismissing a bill filed to obtain an injunction against the appellees, the Second National Bank, a national banking association having its place of business in Providence, R. I., Christopher A. Shippee, and Samuel W. K. Allen, from selling and conveying by deed or otherwise certain real property situated in that state, and from all attempts by actions at law or otherwise to oust Mary J. Garner, formerly Mary J. Graeffe, one of the appellants, from the peaceable and quiet enjoyment and possession of such property.

The case made by the bill is, substantially, as follows: In the winter of 1879 and 1880, Albert J. Graeffe, of New York, conceived the purpose of forming a joint-stock company for manufacturing textile fabrics of wool and cotton. Having heard that there was certain mill property in Warwick, R. I., that could be purchased and utilized at a moderate expense, he proposed to his wife, Mary J. Graeffe, who had considerable estate in her own right, that this mill property, together with other real estate and water rights adjacent and appurtenant thereto, known as the 'American Mills Estate,' be purchased, and equipped for manufacturing purposes. The husband represented to the wife at the time that the property could be rented to a company he proposed to form, and that such an investment of her money would be safe and remunerative. When the investment was proposed, the husband was the agent and trustee of the wife, having the care, custody, and management of her property. The wife, confiding in his representations, as well as in his judgment and good intentions, gave her assent to the proposed investment. But she expressly directed—and it was so understood between herself and her husband that the property when purchased should be conveyed to her in fee, and appear upon record in her individual name. The proposed purchase was made, the amount due for each parcel being paid out of the money of the wife which was in the hands of the husband as her agent and trustee, and was her sole and separate property. Contrary to the understanding with the wife, without her knowledge or consent, and in violation of her express directions, the husband caused the deeds and instruments of writing to be made out in his name, as if the fee was absolutely vested in him. In conformity with the original purpose, the property was equipped for manufacturing purposes, the money expended to that end belonging to the wife. The result was that $48,910.94 of her money, in the hands of the husband, was expended in the purchase and equipping of this property. When the deeds were executed the wife believed that the property had been conveyed to her as her sole and separate estate, in accordance with her directions to, and understanding with, her husband, at the time of the proposed investment. She never heard that this understanding had been violated, until the summer of 1880, when she ascertained from her husband that the property stood in his name. She thereupon requested him to have it conveyed to her, without further delay. This he promised, but neglected, at the time, to do.

On the 16th of October, 1880, the premises, having been put in condition for manufacturing purposes, were leased for the term of four years to the American Mills Company, a New York corporation, of which the husband was a stockholder and the treasurer. In February, 1881, the company became financially embarrassed. Its condition having become known to William H. Garner, a brother of Mrs. Graeffe, he informed her that, in case of its insolvency, the property, standing in her husband's name, was liable to be taken for its debts. The husband was thereupon again requested by the wife to convey the property to her. In accordance with that request, he conveyed to Garner, by warranty deed, dated March 1, 1881, and recorded March 3, 1881. The latter, by deed dated March 1, 1881, and recorded August 13, 1881, conveyed to Mrs. Graeffe. The consideration recited in each of these deeds was $48,910.94, the amount of the wife's money that had been expended by the husband in and about the property.

An execution was issued November 7, 1881, upon a judgment rendered in one of the courts of Rhode Island in favor of the Fourth National Bank of New York against Albert J. Graeffe. This execution was levied November 15, 1881, on all the estate, right, title, interest, and property he had on March 5, 1881, (the date of the attachment in the case,) in and to the property described in the deeds to him, Garner, and Mrs. Graeffe. At a sale at public auction under this execution the interest of Albert J. Graeffe so levied upon was purchased, February 28, 1882, by Christopher H. Shippee, for $499, and he received a deed from the sheriff. Mrs. Graeffe, by her attorney, forbade the sale, and gave notice that the property was her sole and separate estate. Subsequently, Shippee, by quitclaim deed, conveyed an undivided half of the estate purchased by him as above stated to Samuel W. K. Allen, one of the appellees.

On the 7th day of January, 1882, at public sale, under an execution upon a judgment rendered in one of the courts or Rhode Island in favor of the Second National Bank of Providence, that bank became the purchaser, for $525, of all the right, title, and interest of Albert J. Graeffe in the above real estate and premises on the 16th of March, 1881, and received a deed from the sheriff.

The Second National Bank, Shippee, and Allen having threatened to eject Mrs. Graeffe from the possession and enjoyment of the property, this suit was brought against them in the name of Graeffe and wife. A part of the relief sought was a decree canceling the deeds under which they respectively claimed, and thereby removing the cloud created by them upon her title.

The answers controvert all the allegations of the bill that tend to show an equity in favor of Mrs. Graeffe as against the judgment creditors of her husband. The special grounds of defense were sustained by the court below, and are sufficiently indicated in the following extract from the opinion of the circuit judge, made part of the record:

'This is a case, as disclosed by the evidence, where a wife for years allowed her husband to do as he pleased with her property, calling him to no account whatever, and where no action is taken by her until he has become insolvent, and is about to make an assignment. Property is permitted to stand in his name for months after the wife has knowledge of the actual condition of the title, and credit is given the husband on the faith that he is the real owner. Where a wife thus permits her money or property to pass into her husband's hands and possession to manage as he sees fit, without any promise by him to repay it, and persons are, for this reason, induced to give credit to the husband, it neither becomes impressed with a trust in her favor, nor does she become his creditor in respect of it, so as to sustain a conveyance by him to her upon the eve of his insolvency as against his general creditors;' citing Humes v. Scruggs, 94 U. S. 22; Wortman v. Price, 47 Ill. 22; Hockett v. Bailey, 86 Ill. 74; Besson v. Eveland, 26 N. J. Eq. 468.

Shippee and Allen by cross bill asked a decree canceling the deeds made to Garner and Mrs. Graeffe as clouds upon their title. By the final decree the original bill was dismissed, and the relief asked by the cross bill was given.

It is stated in the brief of appellant's counsel that, pending the action below, she obtained a divorce a vinculo from her husband, and by a judgment of the supreme court of New York had resumed her maiden name.

Alexander Thain, for appellant.

J. Langdon Ward, for appellees.

Mr. Justice HARLAN, after stating the facts as above reported, delivered the opinion of the court.

In the court below it was contended in behalf of the plaintiffs that, even if there were no agreement that the property in question should be taken in the name of the wife, there was nothing illegal or inequitable in preferring her to the amount of the husband's debt to her. Upon this point the court said: 'The question of the legality of a preference under Rhode Island laws does not arise in this case, for our decision rests upon the principle that Mrs. Graeffe, by her own conduct or acts, by what she permitted to be done or neglected to do is estopped in a court of equity from claiming this estate as against the general creditors of her husband.'

We are of opinion, after a careful examination of the evidence, that there was nothing in the conduct or acts of Mrs. Graeffe that precluded the court from granting the relief sought by her. The case made by the bill was in all material particulars sustained by the proof. We do not see how this conclusion can be avoided, except by disregarding altogether the testimony of Mrs. Graeffe and her husband; and that we do not feel at liberty to do. In our judgment, what they have said under oath touching the vital issues in the case must be taken as substantially true.

Mrs. Graeffe inherited from her father and uncle property, principally real estate, worth from $100,000 to $125,000. When the estates of the uncle and father were settled up, the moneys and securities belonging to her came into the husband's hands under a power of attorney, which authorized him to receive them for her. There is no claim, as under the evidence there could not be, that the wife made a gift of this property to her husband. On the contrary, it remained in his hands, to be controlled for her, although he was allowed a large discretion in its management. The husband informed his wife that she could buy the property in question, stating that it could be purchased cheaply, and that a very fair return could be derived from it if improved and leased to the mills...