State v. Wallace
| Decision Date | 26 September 1885 |
| Parties | STATE v. WALLACE AND OTHERS. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from Buchanan district court.
In 1872, judgment for a fine and costs was rendered against the defendant Alex. McK. Wallace in the district court of Buchanan county. This action is brought to subject to the payment of the judgment certain land conveyed in 1870 to Wallace's wife, the defendant Annie E. Wallace. There was a decree for the plaintiff. The defendants appeal.John J. Ney, for appellants. A. McK. Wallace and others.
E. E. Hasner, for the State.
In 1870, the defendant, A. McK. Wallace, holding certain promissory notes against his brother, William Wallace, to the amount of $800, gave the notes to his wife, the defendant Annie E. Wallace, and she surrendered the notes to William in consideration of the conveyance to her by him of the land in question. At that time A. McK. Wallace had been in business as a partner with one Locke, under the firm name of Locke & Wallace. The firm had become somewhat indebted for goods purchased, and a judgment for about $1,600 had been rendered against them.
The plaintiff contends that Annie E. Wallace received the notes against William Wallace as a gift from her husband, and at a time when he was insolvent, or contemplated insolvency; that she accordingly received the notes in fraud of her husband's creditors, and now holds the land which was conveyed to her by William Wallace, in consideration of her surrender of the notes, in trust for her husband's creditors, including the plaintiff. It is not contended that the transfer was made with an intention to defraud the plaintiff. It is impossible that there could have been such intention. The plaintiff was not then a creditor. Not only had its judgment for the fine not then been rendered, but the crime had not then been committed. The plaintiff's reliance is based upon the alleged fact that the transfer was made to defraud others who were at that time creditors.
Whether, if actual fraud in the transfer were proven, the plaintiff would be entitled to the relief claimed, we need not determine, because, in our opinion, it is not proven. The evidence upon the point is confused, meager, and unsatisfactory. A. McK. Wallace seems to have owed very little, if any, unsecured indebtedness except as a member of the firm of Locke & Wallace, and he testifies that that firm was solvent during the time that he was a member of it, and his testimony in this respect does not appear to be overcome.
The plaintiff relies mainly, as we understand, upon certain prior acts of A. McK. Wallace having the appearance of an attempt to conceal property. But these acts were done before the Locke & Wallace indebtedness was incurred, and without more evidence as to his financial condition then and afterwards we cannot say that they were fraudulent, still less that the transfer of the notes was fraudulent. In our opinion, the judgment of the district court must be reversed.
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. Pettibone, 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 artifice. 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. Fick v. Mulholland, 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. 418. 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 of 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, 6 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;)...
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State v. Malecky
...collected in 27 Corpus Juris, 473. The nearest approach this court has ever made to the question here presented was in State v. Wallace, 67 Iowa, 77, 24 N. W. 609. The dictum of that case is that the relation of creditor and debtor arises in cases of this character only after judgment. This......
- State v. Wallace