Knight v. Kidder
| Decision Date | 04 June 1885 |
| Citation | 1 A. 142 |
| Parties | KNIGHT v. KIDDER. |
| Court | Maine Supreme Court |
Bill in equity to set aside conveyances to wife as fraudulent.
Frye, Cotton & White and S. C. Andrews, for plaintiff.
M. T. Ludden and S. C. Andrews, for defendant.
A judgment creditor seeks to recover from his debtor and wife real estate conveyed to the latter, but paid for by the debtor, upon the ground that the conveyance was in fraud of creditors, both prior and subsequent to the conveyance. The bill calls for answer upon oath. The respondents upon oath answer that the conveyances were made prior to the time when the debt of the judgment creditor was contracted and without fraud. The burden is upon the orator to overcome the answer by proof of the fraud charged. This he has failed to do. A decree should be entered at nisi prius. Bill dismissed, with costs.
NOTE.
Fraudulent Transfer.
1. FRAUD. The statute of 13 Eliz. c. 5, which was made perpetual by 29 Eliz. c. 5, is the law which furnishes the basis of all remedies for fraudulent conveyances, (Bump, Fraud. Conv. 58,) and all our statutes on the subject are merely declaratory of the common law, or the statute of 13 Eliz. Farr v. Sims, Rich. Eq. Cas. (S. C.) 122; S. C. 24 Amer. Dec. 396
A fraud which will vitiate a sale must be mutual; that is, must be intended by both parties, or by one with a knowledge of such purpose on the part of the other, and thus acquiesced in and furthered. Horbach v. Hill, 5 Sup. Ct. Rep. 81; Mehlhop v. Petti-bone, 11 N. W. Rep. 553.
It has been held that, to make a conveyance fraudulent, the fraudulent intent must be shown to have been shared by the grantor and grantee alike. Splawn v. Martin, 17 Ark. 146; Partelo v. Harris, 26 Conn. 480; Ewing v. Runkle, 20 Ill. 448; Meixsell v. Williamson, 35 Ill. 529; Hessing v. McCloskey, 37 Ill. 341, Fifield v. Gaston, 12 Iowa, 218; Steele v. Ward, 25 Iowa, 535; Violett v. Violett, 2 Dana, (Ky.) 323; Brown v. Foree, 7 B. Mon. 357; Brown v. Smith, Id. 361; Harrison v. Phillips Academy, 12 Mass. 456; Bridge v. Eggleston, 14 Mass. 245-250; Foster v. Hall, 12 Pick. 89; Kittredge v. Sumner, 11 Pick. 50; Byrne v. Becker, 42 Mo. 264; Bancroft v. Blizzard, 13 Ohio 30; Union Bank v. Toomer, 2 Hill, (S. C.) Ch. 27; Weisiger v. Chisholm, 28 Tex. 780; Leach v. Francis, 41 Vt. 670; Governor v. Campbell, 17 Ala. 566; Magniac v. Thompson, Baldw. 344. Yet it has been held by our courts that a conveyance made to hinder, delay, or defraud creditors is void as to them, although founded on a full and valuable consideration, ) and that a deed fraudulent on the part of the grantor may be set aside, though the purchaser be a bona fide purchaser for value and ignorant of the fraud. Hildreth v. Sands, 2 Johns. Ch. 35; Gamble v. Johnson. 9 Mo. 605; Miller v. Tollison, 1 Harp. (S. C.) Eq. 145; Lee v. Figg, 37 Cal. 328. But this cannot be regarded either as the better doctrine or the prevailing law of the land.
Where a vendee participates in the fraud of the vendor to delay, hinder, or defraud the creditors of such vendor, even though a full consideration has been paid for the property, the conveyance will be set aside. Gardinier v. Otis, 13 Wis. 460; Briscoe v. Clarke, 1 Rand. 213; Tootle v. Dunn, 6 Neb. 93. This is a well-recognized principle of law, and courts have held that the purchaser is to be charged with notice of the character of the transaction when he is acquainted with the circumstances sufficiently to convince a court or jury that he knew the facts, (Green v. Tantum, 19 N. J. Eq. 105;) or, if he has a knowledge of such facts as would excite the suspicions of an ordinarily prudent man, and fails to make inquiry, and purchases from a fraudulent vendor, he is not a bona fide purchaser, or a purchaser in good faith, and will be charged with notice of any fraud upon creditors effected by the sale and transfer. State v. Estel, 6 Mo. App. 6.
The transfer, though fraudulent, cannot be complained of by a creditor who has not been injured thereby. Barnett v. Knight, 3 Pac. Rep. 747. And, in an action to set aside a fraudulent conveyance, the petition must set out and the proof show that the grantor had not sufficient property subject to the payment of his debts left for that purpose. Sherman v. Hogland, 54 Ind. 578; Zimmerman v. Fitch, 28 La. Ann. 454; Wiley v. Bradley, 67 Ind. 560.
Equity will not set aside a deed which complainant made to hinder, delay, and defraud creditors. Wier v. Day, 10 N. W. Rep. 304.
(1) Definition. In this connection fraud is unlawful conduct operating prejudicially to creditors' rights, (Bunn v. Ahl, 29 Pa. St. 387,) and consists in withdrawing from another that which is justly due him, or depriving him of his rights by deception and artitice. Burdick v. Post, 12 Barb. 168; S. C. 6 N. Y. 522. A fraud upon creditors is any act which, by intention, withdraws the property of the debtor from their reach. McKibbin v. Martin, 64 Pa. St. 352; Alabama Ins. Co. v. Pettway, 24 Ala. 544.
(2) Evidence. The question of fraud is one of fact, to be determined from all the facts and circumstances bearing upon the good faith of the transaction, (Knowlton v. Mish, 17 Fed. Rep. 198; Morse v. Riblet, 22 Fed. Rep. 501; Hills v. Stockwell & Darragh Furniture Co., 23 Fed. Rep. 432;) and a transfer may be held fraudulent, although no distinct fact proves it. McDaniels v. Perkins, 19 N. W. Rep. 902. But, as a rule, evidence of fraud, upon which a conveyance will be canceled, must be clear. Pick v. Mulhol-land, 4 N. W. Rep. 527; Le Saulnier v. Loew, 10 N. W. Rep. 145.
Insolvency of grantor is not, of itself, sufficient to show fraud. Leffel v. Schermerhorn, 14 N. W. Rep. 413. The acts and declarations of the vendor prior to the sale are not sufficient to show knowledge of the fraudulent intent on the part of the vendee. Bixby v. Carskaddon, 18 N. W. Rep. 875. The rule of evidence excluding the admissions or declarations of a party after he has parted with his interest in the subject-matter is said not to apply to fraudulent sales and conveyances. Carney v. Carney, 7 Baxt. (Tenn.）)））） 284. All admissions or declarations before sale are, of course, admissible in evidence to show intent, (McLane v. Johnson, 43 Vt. 48; Edgell v. Lowell, 4 Vt. 405;) but where such declarations are evidence of fraud on the part of the grantor, participation of the grantee must be shown by separate evidence. Eaton v. Cooper, 29 Vt. 444. Relationship of the parties admissible, but does not invalidate the conveyance, unless proof shows grantee knew to grantor's intent to defraud creditors. Adams v. Ryan, 17 N W. Rep. 159.
(3) Presumption. Fraud will not be presumed where the facts are consistent with honesty of purpose, (Clemens v. Brillhart, 22 N. W. Rep. 779,) but must be established by evidence. Baughman v. Penn, 0 Pac. Rep. 890.
Fraud will be presumed, in courts of equity, from the circumstances of the parties. Ward v. Lamberth, 31 Ga. 150; Kendall v. Hughes, 7 B. Mon. 368; Pope v. Andrews, Smedes & M. Ch. 135; White v. Trotter, 22 Miss. 30; 14 Smedes & M.; King v. Moon, 42 Mo. 551; Gallatian v. Cunningham, 8 Cow. 361; Booth v. Bunce, 33 N. Y. 139; Briscoe v. Bronaugh, 1 Tex. 326; Burch v. Smith, 15 Tex. 219, Chesterfield v. Janssen, 2 Ves. Sr. 155; 1 Story, Eq. §'190. For a fraudulent intent is seldom susceptible of direct proof, but must be established, if at all, by a consideration of all the circumstances of the case. Blackman v. Wheaton, 13 Minn. 326, (Gil. 299;) Hicks v. Stone, 13 Minn. 434, (Gil. 398;) Weisiger v. Chisholm, 28 Tex. 780; Craig v. Fowler, 13 N. W. Rep. 116.
In an action for fraudulent conveyance the grantee's relations to the grantor, and his means of knowing the grantor's circumstances, and all connections with him, are admissible in evidence. Stadtler v. Wood, 21 Tex. 622. But relationship does not invalidate a sale unless the proof shows that the grantee had knowledge, or should have known, of grantor's intent to defraud his creditors. Adams v. Ryan, 17 N. W. Rep. 159. Where evidence tending to show the fraudulent character of the transfer to one claiming to be a bona fide purchaser, and he remains silent, this is presumptive evidence of fraud. Whitney v. Rose, 4 N. W. Rep. 557.
(4) Burden of Proof. Fraud must be proved by party who alleges. Craig v. Fowler, 13 N. W. Rep. 116; Eckert v. Pickel, 13 N. W. Rep. 708; Adams v. Ryan, 17 N. W. Rep. 159; Clemens v. Brillhart, 22 N. W. Rep. 779; Morse v. Riblet, 22 Fed. Rep. 501; Curry v. Lloyd, 22 Fed. Rep. 258. This may be done by facts and circumstances. Craig v. Fowler, 13 N. W. Rep. 116. But, as against creditors, the wife must show by preponderance of evidence that she is a bona fide purchaser for value. Kaiser v. Waggoner, 12 N. W. Rep. 754; Thompson v. Loenig, 14 N. W. Rep. 168. Burden of proof is on grantee when it becomes necessary to establish the bona fides of the transaction. Lane v. Starky, 18 N. W. Rep. 47.
(5) Secret Trust. The reservation of a secret benefit, upon the execution of an absolute conveyance, does not necessarily render such conveyance fraudulent as to creditors. Howe Machine Co. v. Claybourn, 6 Fed. Rep. 438. See Lewin v. Hopping, 8 Pac. Rep. 73. But the land may be charged in equity with the benefit reserved. Id. As a general rule, a conveyance in trust for the benefit of the grantor is fraudulent as against existing creditors. Smith v. Conkwright, 8 N. W. Rep. 876.
(6) Badges of Fraud. It is said that kinship in any relation or any degree, in transactions under suspicious circumstances, is a badge of fraud, (...
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