Turbeville v. Gibson

• Decision Date: 30 April 1871
• Citation: 52 Tenn. 565
• Parties: Benjamin Turbeville v. Archibald Gibson et als.
• Court: Tennessee Supreme Court

52 Tenn. 565

Benjamin Turbeville

v.Archibald Gibson et als.

Supreme Court of Tennessee.

April Term, 1871.

FROM HENRY.

Appeal from Chancery Court at Paris. JOHN SOMERS, Ch.

ISHAM G. HARRIS, COCHRAN and ENLOE for Complainant.

ALEX. W. CAMPBELL for Defendants.

FREEMAN, J., delivered the opinion of the Court.

This bill is filed by various creditors of Robert Adams, to set aside several deeds of conveyance made to defendant Gibson of tracts of land in Henry county, besides a conveyance of personalty made to a son of said Adams.

The allegations of the bill are, that the deeds were made to hinder and delay the creditors of said Adams, and that they were fraudulent and void. After this allegation, the bill states that if the deeds are not in fact fraudulent, they were made to secure some small debts due by Adams to said Gibson.

The bill prays that the deeds be declared fraudulent and void, and property conveyed be subjected to payment of complainant's debts; and further, that “if said conveyances are not fraudulent and void, but executed in good faith to secure the said Gibson in various sums of money claimed to be due him from Adams, that said conveyances be held as mortgages and be foreclosed, Gibson's debts be satisfied, and surplus proceeds of sale be appropriated to payment of debts in the bill mentioned.”

The answer of Gibson “denies that any of the conveyances were without consideration, or that they were made for the purpose of hindering, delaying or defrauding any of the creditors of said Adams; but were made in good faith for the purposes thereinafter stated.” He then states that Adams was indebted to him in various sums, and he was security for Adams in several cases, amounting in all to the sum of $443; that Adams conveyed the land in executed deed to him, it being a conveyance of one hundred acres, made June 7th, 1861, the consideration stated on the face of the deed being $2,000. He states that the deed made by Brown to him of the other tract of one hundred and two acres, for the consideration of $1,000, expressed on face of the deed of same date, was made by the direction of Adams, the land being Adams', but legal title being in Brown. As to the other tract of fifty acres, conveyed by Brockwell, Adams had bought it, paid part of the purchase money, and Gibson paid balance and took deed of this third tract to himself, expressing the consideration to be $500. The fourth deed made by Adams to Gibson of fifty acres of land, is not contested. It is for consideration of $5,000, which was paid and is not denied.

These deeds were all of same date except the last, which was made 22d May, 1860--the others June 7th, 1861.

The answer claims that these three deeds were made to secure the amount due from Adams to Gibson, and to indemnify him as security on the other debts, for which he was bound, amounting in all to about $443, “with the further understanding that Gibson should afterward stand as security, or pay any debt that might be owing by said Adams, provided the amount should not exceed the value of the land. It was also understood, he says, that he should reconvey said lands to said Adams whenever he should be paid the amount due him; should be released as security, and repaid any amount he might advance in payment of the debts of said Adams.

The conveyances, he says, though absolute on their face, were, in fact, mortgages intended to secure defendant in amount due him, the amount for which he might be held liable as security, and any amount that he might afterwards pay for said Adams.

He then goes on to state a considerable amount of indebtedness of Adams to him incurred after the making of these deeds, making, including the amount existing at that date, the sum of about $1,159, subject to a credit of $175 for a mule, leaving as debts claimed to be fastened on these lands, about $984.

The first question which we propose to consider is admitting the deeds were not fraudulent in fact, but were intended as mortgages, though absolute on their face, and the transaction was bona fide, can Gibson, as against creditors, hold the land subject to any debts in his favor except those in existence at the time of the contract, to-wit, the sum of about $443. In other words, can a mortgage, existing alone as such in parol, be held good as against creditors for future advances and liabilities contracted to be incurred by a secret parol agreement of the parties.

The question is alluded to incidentally in case of Peacock v. Tompkins, Meigs' Reports, 328, as to whether, where the deed on its face stipulates for future advances, it would be fraudulent as to creditors. As to this question, Judge Reese says, without deeming it necessary to assent to or repudiate the proposition, “that such a stipulation would be valid, it is sufficient to remark that such is not the stipulation in the deed upon this record.” He then goes on to decide the real question presented by the facts in that case. The facts were that William Turner, being in debt to various parties, in sums amounting in all to $1,198.45, conveyed an amount of property, estimated to be worth about $1,600, to a trustee, to secure their payment. To cover the difference between the debts actually due and value of the property, and probably to secure future advances or further credit, Turner executed two notes at same date of the deed--one to Tompkins for $300, the other to McAuly for $200--which were intended to be secured, and were covered by this deed of trust. In the bill filed to declare this deed fraudulent, it was charged that the deed was fraudulent, especially as to these two notes. It appeared that these two notes were not given for money due by Turner, but in language of the opinion, “were executed at the time of making the deed of assignment, not to secure any debt then due or advances then made, but upon a verbal agreement and understanding between the parties that credit should be given to Turner, and advances made to him, for the joint object of enabling him to support his family and manufacture the materials assigned for the benefit of the assignor and assignees.” The Court say, “was this fraudulent in fact or by operation of law, as being calculated to embarrass and postpone other creditors in the collection of their debts?”

The Court held this deed fraudulent by operation of law, and set it aside as void, “constituting no valid security for the debt.” The reasons given are, “that the deed announces to other creditors an existing debt of $500, which did not exist in fact, and for which there was no consideration, other than the secret agreement of the parties.” If this can be done, say the Court, and the deed remain a valid security for the debt really due, is it not obvious that it would furnish to fraudulent and embarrassed debtors, and their friendly assignees, a mode of protecting property against executions of other creditors, as simple and easy as it would be safe? A small amount of actual indebtedness as a nucleus, might in this manner be enlarged to such magnitude as to cover considerable property, and so as to alarm and repel other creditors, depriving them of legal remedies, constraining them to seek discovery and relief, and investigate the question of extent of indebtedness in a Court of Chancery. It may be added, the Court distinctly hold, that no actual or intentional fraud in fact existed in the case.

This case certainly decides the very question before us, that a contract at the time for future advances can not be sustained, and goes further, and makes the fact, that such future advances so contracted for are placed in the amount secured by the deed, while the contract for such advances was verbal, and not shown on face of the deed, have the effect to render the deed of trust absolutely void, as to creditors, even as to the debts actually secured.

On the first point the decision is clear, distinct, and unequivocal.

We are not aware that this case has ever been overruled by this Court.

If, however, a stipulation in the deed of trust, securing debts having no existence, but assumed to exist, and that deed registered, shall render the deed void, with much more force may it be held, that a stipulation secretly made, to secure debts to be created in the future, having no existence at the time, would not be valid against the claims of creditors. The principle of this case is, that the statement of a false consideration in such case, tends necessarily to hinder, embarrass, and delay creditors, by giving notice of a state of indebtedness not in existence, yet equally operative to deter creditors from enforcing their claims against the property, as if real, and hindering and delaying them, by compelling a bill in Chancery to develop the facts of the case.

We may here remark, that by the policy of our registration laws, as has been repeatedly held, all secret liens are discouraged; in fact, as we understand them, as against creditors are absolutely forbidden.

In case of McGavock and Wife v. Deery et als., 1 Col., 368, 369, the direct question was presented to the Court, of the validity of a deed, that on its face secures future advances, or liabilities to be incurred.

The Court hold most correctly, after citing a number of authorities, that such a deed is valid, and “that the only question in such cases is, the bona fides of the transaction.”

The Court refer in the above case to the cases of Peacock v. Tompkins, and Neuffer v. Pardue, 3 Sneed, 193, with approval, and say, “that in both cases it was held that an assignment will not be held good to secure future advances or subsequent debts, where there is no stipulation to that effect in the deed; that it can not be done by a parol agreement or understanding.

In 3 Sneed case, the Court say the deed sets forth a false and fictitious consideration, calculated to deceive creditors. It purports to be for $2,500, when only about $300 were in fact due. “It does not provide for future...