Traders' Nat. Bank v. Steere

• Citation: 43 N.E. 187,165 Mass. 389
• Parties: TRADERS' NAT. BANK v. STEERE et al.
• Decision Date: 29 February 1896
• Court: United States State Supreme Judicial Court of Massachusetts

165 Mass. 389

43 N.E. 187

TRADERS' NAT. BANK v. STEERE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

February 29, 1896

COUNSEL

W.E. Russell and W.R. Bigelow, for appellant.

Frank E. Fitz, for appellee Blackstone National Bank of Boston.

William A. Sargent, for appellees Carl E. Steere, James H. Wheeler Jr., National Bank of Republic, National Hide & Leather Bank National Bank of Redemption, and Hamilton Nat. Bank.

OPINION

KNOWLTON J.

Under Pub.St. c. 151, § 3, this court has jurisdiction in equity to reach and apply in payment of a debt any property of a debtor liable to be attached or taken on execution in a suit at law against him, and fraudulently conveyed by him with intent to defeat, delay, or defraud his creditors. Under clause 11 of section 2 of the same chapter, and under Acts 1884, c. 285 it has jurisdiction to reach and apply in payment of a debt "any property, right, title or interest, legal or equitable, which cannot be come at to be attached or taken on execution in a suit at law against such debtor." If the property alleged to be in the hands of the defendants other than Phillips and Steere & Wheeler were property which the plaintiff had a right to take from them and apply in payment of its claims against Phillips, this court would have jurisdiction to give the plaintiff relief. Upon the allegations of the bill, the contract whereby Phillips transferred his property to the other defendants was illegal, in that it provided for the suppression and concealment of evidence of a crime, and included an agreement not to prosecute him. Such a contract is against the policy of our law, and cannot be enforced in a court of justice. Atwood v. Fisk, 101 Mass. 363; Bryant v. Peck, 154 Mass. 460, 28 N.E. 678. But, when it is fully executed, neither party to it can maintain an action to set it aside, or to recover back anything that has passed under it. Myers v. Meinrath, 101 Mass. 366; Faxon v. Folvey, 110 Mass. 392; Atwood v. Fisk, ubi supra.

It becomes necessary to inquire whether there are allegations in the bill to show that the plaintiff has any better right than Phillips to maintain an action. The mere fact that the contract was illegal gives no such right. The conveyance of property by a contract which is void as being against public policy in a particular which has no reference to creditors does not necessarily give creditors a right to pursue the property after the contract has been fully executed. Such a contract may or may not be fraudulent as against creditors. If it is, they may set it aside; if it is not they cannot. We may assume, in accordance with the decisions in Weeks v Hill, 38 N.H. 199, and in Clark v. Gibson, 12 N.H. 386, that, if an insolvent person appropriates a considerable portion of his property for his own benefit in a way forbidden by law, such an appropriation is ipso facto a fraud upon his creditors. Money taken by an insolvent person from his estate, and paid to compound a felony, is disposed of fraudulently as against creditors, and may be treated by them as still applicable to the payment of their debts. But the payment of one or more creditors in full by way of preference is not fraudulent at common law. It is not a misappropriation of the debtor's property. Sawyer v. Levy, 162 Mass. 190, 38 N.E. 365. Such a payment does not become fraudulent as against creditors merely because the creditor, when he receives payment and gives up the evidence of his debt, illegally promises, as a part of the transaction, to compound a felony of which the debtor is guilty. The added illegal element in the contract is condemned by the law, because it is against public policy, but it does other creditors no harm. The money paid is no more than is due for the debt, and nothing is taken from the other creditors for an illegal use. See Bank v. Haskins, 3 Metc. (Mass.) 332-340; Harvey v. Varney, 98 Mass. 118-120. They are affected as all other members of the community are affected, and not otherwise. If it were possible to do so, they would have no right to use the debtor's liability to punishment for his crime as a means of obtaining an advantage to themselves. Taylor v. Jaques, 106 Mass. 291; Morse v. Woodworth, 155 Mass. 233, 27 N.E. 1010, 29 N.E. 525. In the present case the plaintiff corporation does not allege that the conveyance of Phillips to other defendants was made "with intent to defeat, delay, or defraud...