Laughton v. Harden

• Decision Date: 27 May 1878
• Citation: 68 Me. 208
• Parties: FREDERIC M. LAUGHTON v. CUSHMAN E. HARDEN.
• Court: Maine Supreme Court

68 Me. 208

FREDERIC M. LAUGHTON v. CUSHMAN E. HARDEN.

Supreme Judicial Court of Maine.

May 27, 1878

ON DEMURRER to a bill in equity.

E Hale & L. A. Emery, for the defendant.

F. M Laughton, pro se.

PETERS J.

The bill alleges that Eben Harden, owning certain parcels of land, conveyed them to his son, Cushman E. Harden, to defraud his creditors; that the complainant obtained an execution against the grantor, and levied it upon a portion of the land so conveyed; and the complainant prays that the title to the land levied upon shall be released to him by the grantee. The bill is met by a general demurrer.

The first point taken on the demurrer is, that Eben Harden, the grantor, should have been made a defendant to the bill. He is no party to it. This objection must be overruled. Eben Harden no longer has any interest in the land taken from him by the levy. His grantee is the legal and the complainant is the equitable owner thereof. He is in the position of an assignor whose assignment is absolute and unconditional. This is well settled. Haskell v. Hilton, 30 Me. 419. Miller v. Whittier, 32 Me. 203. Moor v Veazie, Id. 343. Brown v. Johnson, 53 Me. 246. The following cases by their force and effect, completely cover this point raised in the case at bar. Smith v. Orton, 21 How. 241. Whitmore v. Woodward, 28 Me. 392. Dockray v. Mason, 48 Me. 178. Richards v. Pierce, 52 Me. 560. The same cases decide that the grantor could properly have been joined, but that it was not necessary to join him. If joined, the bill would not have been dismissed on that account. To this portion of the bill, therefore, demurrer does not lie for want of parties. To another part of the bill, standing alone, demurrer would lie. Besides the relief prayed for, as already named, the complainant asks relief also in respect to the portion of the land not levied upon, claiming certain rights thereto as merely an attaching creditor. As to this portion of the bill, Eben Harden, the grantor, would be a necessary and indispensable party. He is interested in the result. He is the equitable owner of the land not levied upon. This is clearly shown by the cases cited and many others. Lawrence v. Bank of the Republic, 35 N.Y. 320. Beardsley Scythe Co. v. Foster, 36 N.Y. 561.

The complainant contends that the demurrer would reach no part of the bill, because it is general and not special, insisting that a demurrer is not good unless it specify the parties omitted and the names of such parties. This depends upon whether the want of parties is merely a formal defect or not. To all mere formal defects the demurrer must be special. It is true, the authors on equitable proceedings say that the demurrer should supply the names of the persons omitted, and such would be the better practice. But where the parties left out are so inseparably connected with the subject of the suit that a decree could not be made without directly affecting their interests, the objection to the bill may be taken upon general as well as special demurrer, or at the hearing of the arguments, or even when the decree is to be made; and the objection may be started by the court itself, in its caution, whenever the necessities of the case seem to require an objection to be interposed. Haughton v. Davis, 23 Me. 28, 34. Brown v. Johnson, ubi, supra. Sears v. Hardy, 120 Mass. 524. Story Eq. Pl. §§ 26, 153, 236, and notes.

It is a well nigh universal rule in equity, that, if any part of a bill is good and entitles the complainant to relief, a demurrer to the whole bill cannot be sustained. The proper part of the bill can be acted upon independently of that which is faulty. The bill therefore may be maintained, notwithstanding this objection.

Another objection by the respondent is, that the bill is defective because it is no where alleged therein that he (the grantee) participated in the fraudulent intent of the grantor in conveying the land. No doubt, it should in some sufficient form be alleged if it must be proved. We feel sure that the fact need be neither alleged nor proved in the case of a voluntary conveyance, as this is. The bill alleges that the conveyance was made without valuable consideration; that the grantor, at the time of the conveyance, was in debt and insolvent; that he has been in debt ever since; that he has exercised acts of ownership over the property since the conveyance; that his object in making the conveyance was to delay, hinder and defraud his creditors; that the complainant became a creditor after the conveyance, and that the conveyance is void as to the claim of the complainant. This is allegation enough, if the facts alleged be proved.

The exact question presented is this: Is a voluntary conveyance from father to son, made by the grantor with an intent to defraud subsequent creditors, void as to such creditors, when there is no proof that the grantee participated in that intent when he received or accepted the deed? The statute of Elizabeth, c. 5, answers the question in the affirmative. It pronounces every conveyance, made to hinder, delay or defraud creditors, utterly void as against such creditors, unless the estate shall be " upon good consideration, and bona fide, lawfully, conveyed to such person," not having at the time " any manner of notice" of such fraud. Can it be said that this estate was bona fide, " " lawfully" conveyed, or that a grantee who pays no consideration for land fraudulently conveyed to him has " no manner of notice" of the fraud? But this is not all of the statute. It threatens a penalty against a party to such a conveyance who, being privy and knowing thereto, " shall wittingly and willingly put in use, avow, maintain, justify and defend the same" as true and bona fide and upon good consideration." When a grantee in such a deed becomes informed of the grantor's intent, does he not assist in executing that intent by an endeavor to uphold and maintain the deed? Is he not in the eye of the law presumed to be a participator in the fraud? Should not an honest grantee repudiate the deed? The grantee by the fraudulent act of his grantor becomes the trustee or depositary of property which belongs to the grantor's creditors. By attempting to withhold it from the creditors, does not the grantee himself commit a fraud? If innocent in the beginning, does he not become guilty in the end? The governing and acting intent was the grantor's. Does not the grantee endeavor to avail himself of it and adopt it when he holds on to the deed? No other conclusion can be reached. Of course, it will not at this day be questioned that any conveyance may be avoided by subsequent as well as by prior creditors, if fraud was by such conveyance meditated against subsequent creditors. Wyman v. Brown, 50 Me. 139. Bailey v. Bailey, 61 Me. 361.

Any other view of this question than the one taken by us would permit and encourage most iniquitous frauds upon the part of badly disposed debtors. A man might convey all his property to his wife or minor children upon the eve of an expected bankruptcy, and, on account of his undoubted credit and apparent possession of means and property, be enabled to create a very great amount of subsequent indebtedness. How could a creditor show that the wife, and a fortiori that the young minor children knew of the grantor's fraud, unless the knowledge can be imputed to them under such circumstances as a necessary implication of law? It would be unnatural for a debtor's wife and children to believe him to be a dishonest man, and uncommon for them to know much of his business affairs.

It is said sometimes, that a voluntary conveyancy may be good against subsequent and not good against existing creditors. Why? Merely because the conveyance may operate, or be intended, to defraud the one kind of creditors and not the other. It is void only according as it is fraudulent. If it is fraudulent as against a particular creditor, then as against that creditor it is void. The statute of Elizabeth, referred to, makes no mention of voluntary conveyances nor distinguishes between classes of creditors. Its penalties are aimed against any and all fraudulent conveyances. There is no distinction between a conveyance that is fraudulent in law and one that is fraudulent in fact, so far as their operation in civil suits is concerned. No doubt, a voluntary conveyance is more likely to be fraudulent as against prior creditors, but not always so. See Bailey v. Bailey, supra. A conveyance, whether fraudulent in law or in fact, is after all no more nor less than a fraudulent conveyance. The only difference is in the mode and extent of proof required to substantiate the one or the other. Certain facts may be sufficient to prove the one and not the other. A voluntary conveyance is not per se evidence of fraud against even a prior creditor, but prima facie only. French v. Holmes, 67 Me. 186. As...