Agricultural Bank v. Dorsey

1 Free. Ch. 338 | Miss. Chanc. Ct. | 1844

The Chancellor,

The facts of this case, so far as they are connected with the consideration of the motion to dissolve the injunction, are these: On the 13th of November, 1839, Samuel Dorsey conveyed all his estate, both real and personal, to his son, Edward Dorsey, who, on the same day, reconveyed the same property to the father, by way of mortgage, in consideration of an alleged indebtedness to him to the amount of forty-six thousand dollars, twenty-six thousand of which were to be paid to different creditors of the father, and the remainder to be paid to his other different children. There are in the mortgage different and various stipulations and reservations in favor of the father, as to the property conveyed. A full satisfaction of this mortgage was afterwards entered upon the record by the father, Samuel Dorsey. On the ISth of February, 1840, Samuel Dorsey, being indebted to Blakey, Wright & Co. and to C. Rhodes, for which debts E. Dorsey, the son, was liable as in-dorser, the said E. Dorsey, to secure said claims, executed a mortgage on a part of the property so conveyed to him by his father; upon which said latter mortgage the said Blakey, Wright & Co. and the said C. Rhodes, filed their bills and obtained a decree for foreclosure, by confession, at the May term, 1841, of the circuit court for Claiborne county. On the 26th of November, 1840, the complainants obtained judgments against Samuel Dorsey, the father, for about ten thousand dollars, upon which this bill was filed, enjoining the enforcement of the decrees of foreclosure in favor of the defendants, Blakey, Wright &. Co. and C. Rhodes, and insisting that the deed of S. Dorsey to E. Dorsey is fraudulent and void as against creditors, and that the property mortgaged to B. W. & Co. is first liable to said judgments.

It is not necessary, in deciding the present motion, that I should at all anticipate the general merits of the case. The simple question now is, whether the complainant shows any priority over the claims of Blakey, Wright & Co. and C. Rhodes, against the property mortgaged to them, or any equity in favor of setting aside the decrees of foreclosure in their favor. The complainant and these defendants are all equally meritorious creditors of Samuel Dorsey, each seeking to enforce their claims against the property of a common debtor. The right, therefore, of either to an exclusive satisfaction must depend upon whether either one has obtained a legal priority over the other, giving him a preference against the property sought to be subjected; for, although it is the policy of a court of equity to distribute the assets of a debtor equally among his creditors, yet, if one of them has obtained a legal preference, that preference must be preserved. Taking the allegations of the bill as true, that the conveyance from Samuel Dorsey to Edward Dorsey was fraudulent and void as against creditors, I am still unable to perceive how that fact can prejudice the rights of these defendants — -because the deed must be equally void as to all creditors. It is true that the mortgages were made by Edward Dorsey, who held at least the legal title under the deed from the father; but the mortgages were made to secure debts for which both the father and son were legally and equally liable. The mortgagees were therefore the creditors of both the fraudulent grantor and grantee; and, although they derive title through the grantee, yet the consideration of the conveyance was a debt due them from the grantor, for which the grantee had become liable.

Although the original conveyance may be voidable for fraud, as against creditors, yet if by agreement' between a creditor and the fraudulent grantee, a portion of the property is applied to pay the debt of such creditor; it seems to me that the conveyance should be held good to that extent, because the property would then have received the same direction and application which the law would give to it upon declaring the deed void. If the grantee does that which the law would compel him to do, I can see no reason for disturbing the act. A conveyance which is voidable only, as being contrary to the statute against fraudulent conveyances, may be confirmed by matter ex post facto. Murray v. Riggs, 15 John. Rep. 571. Verplank v. Sterry, 12 idem, 536. I think that the mortgages by E. Dorsey to these defendants, on account of the previous debts of the grantor, were such confirmation, and that the conveyance was thus, to the extent of the property mortgaged, rendered valid ande ffectual. But if the mortgagees are to be considered as deriving title exclusively under E. Dorsey, it is by no means clear that the general creditors of the grantor could disturb it.

It is now well settled that a bona fide purchaser, from a fraudulent grantee, for valuable consideration and without notice of the fraud, is protected against the general creditors of the grantor. Coleman v. Cocke, 6 Rand. 618; Bean v. Smith, 2 Mason Rep. 252; Anderson v. Roberts, 18 John. Rep. 516; 6 Cranch, 133. Whether a mortgagee from the fraudulent, grantee would receive the same protection, does not appear to have been decided by any case to which I have referred. It has been decided in England that a mortgagee is a purchaser within the meaning of the statute of the 27 Elizabeth, ch. 4. See 1 Powell on Mortgages, 210, 211, and authorities there cited. But a purchaser who takes a convey-anee in payment of a pre-existing debt from the grantee, is not entitled to protection against the prior creditors of the grantor; for there the conveyance places him in no worse situation than he was before, and the creditors would have the stronger equity. The purchaser must have advanced a new consideration upon the faith of the estate conveyed, or have relinquished some security, for a debt previously due him. Dickerson v. Tillinghast, 4 Paige Ch. Rep. 215; Coddington v. Bay, 20 John. Rep. 637.

It seems to me that the same doctrine, under the same qualifications, should by analogy be extended to a mortgagee. Here, although the mortgage was made to secure a pre-existing debt, the mortgagee, in consideration of getting the mortgage, relinquished the security which he had, by giving up the old note, which was indorsed by third persons, and taking a new note from the mortgagor. I do not wish, however, to be understood as pronouncing any definite opinion upon this point. I place my decision upon the ground that the complainant and these defendants are all creditors of Samuel Dorsey, equally meritorious in their claims, and that the mortgage to the defendants must, under the circumstances, be regarded virtually as a mortgage from Samuel Dorsey himself, and as that mortgage is older in date than the judgment in favor of the complainant, it must be first satisfied, according to the maxim that between equal equities, qui prior est in tempore potior est injure.

Let the motion to dissolve be sustained.