3 Ohio 527 | Ohio | 1828
Opinion of the court, by
The complainant set up an equitable title to a house and lot, in the city of Cincinnati, for which the defendant, Jerusha Hatch, heretofore recovered a judgment, in ejectment, against him.in this court (1 Ohio, 390), and seeks a conveyance of the legal title, and a perpetual injunction of that judgment. The questions, which have been made, necessarily lead to an examination of the facts of the case. The Miami Exporting Company, on June 18,1821, were indebted to the complainant, then a resident of Baltimore, about fifteen thousand dollars, for the notes of the company before that
At the time the order to execute a deed was made by the board of directors, they authorized their president to execute a bond to complainant, that if he should reconvey the property within one year, they would place the amount of the consideration money to his credit upon their books.
In July, 1823, the defendant, J. Hatch, commenced an action of ejectment for the house and lot in question, against the complainant, and recovered judgment, in consequence of the defective ex
It is shown that a fear that the property might be sacrificed, by sale upon execution, under the judgment about to be obtained by the state, was a moving cause with the company, for entering into the arrangement for the sale to Barr.
*The general principle that courts of chancery may supply any defect in the .execution of a power, whether that defect arises from mistake, accident, or ignorance, is not questioned. Whenever the intention to execute a power is sufficiently manifest, but the execution is defective, or it has not been executed according to the terms, or in the form prescribed, equity will correct the mistake or supply the defect. When nothing has been done, or attempted to be done, toward the execution of a power, equity, in general, will not interfere, unless the instrument creating the power shall have vested, or recognized, in third persons, rights to secure which the execution of the power is necessary. If the attorney or agent has attempted to execute the power, but has done it defectively, the party claiming under it can not avail himself of it, at law; equity interposes its aid, upon the broad principle •of relieving against accident or mistake.
It is also a well-settled rule, that when an instrument, intended as a deed to convey lands, has not been so executed as to pass the estate, or vest a legal title, equity has considered it a contract for .a deed, and decreed, if the consideration has been paid, the title to be perfected.
Upon either of these grounds the complainant would be entitled, as against the Miami Exporting Company, to the relief sought. Nor do they resist it, as they have neglected to answer, and permitted the bill to be taken as confessed against them. The defendant, J. Hatch (the only defendant who has answered the bill), however, contends, that the sale to Barr, by the Miami Exporting ‘Company, was fraudulent and void as against their creditors, and that her equity is equal to Barr’s, and a court of chancery will not deprive her of any legal advantage she may have fairly obtained.
There can be no doubt that the defendant, J. Hatch, under the judgment in favor of the state, can protect herself in the same .mannei*, and to the same extent, that the judgment creditor could, had he purchased. If the sale to Barr was fraudulent and void,
It is contended that the circumstances attendant upon, and connected with the sale to Barr, show that it was fraudulent as to the creditors of the Miami Exporting Company, and the defendant insists that the proofs establish the following facts, upon which she relies either as badges of fraud, or as amounting to fraud in law :
First. That it was in the intention of the parties to hinder or delay the state in the collection of its debts.
Second. That the grantor was largely indebted in a suit pending, and judgment about to be obtained at the time of the conveyance.
Third. The conveyance was of all the estate of the debtor liable to execution.
Fourth. The grantor remained in possession after the deed,
As the question of fraud must, in a great degree, depend upon a minute and careful examination and comparison of the proofs and exhibits in the cause, and upon giving to *eaeh circumstance its due weight, it can scarcely be expected that the court should detail each particular fact that may have influenced their judgment, especially when there is no probability that a case attended with /the same circumstances will again occur. Such a. detail would be tedious as well as useless. It will be sufficient to notice the prominent facts and circumstances.
First. It is said that it was the intention of the parties to hinder and delay the state in the collection of its debt. If the proofs of the case clearly made out the fact that the sale to Barr was a contrivance to delay or obstruct the state in the collection of its debt, it would be difficult to avoid the conclusion that it was fraudulent. But we are not satisfied that such was the intent of the parties. Spencer, the president of the company, states in-his testimony that a fear that the property might be sacrificed by a forced sale, under the judgment about to be obtained by the state, was one moving cause for the bank to make the sale to the complainant. It appears that his agents knew of the pendency of the suit, and one of them was-then a director of the company. On the other hand, it is clearly shown that the company were .then, and had been for a long time, largely indebted to Barr, who was anxious to obtain payment, which they were unable to make in cash ; that his agents offered to take the property at its full cash value, and did, in fact, allow about eight thousand dollars for the house and lot- now in dispute. The. agents of Barr endeavored to secure the debt due him, but there is no circumstance warranting the belief that they were influenced by the wish to hinder or delay the state. The Miami Exporting Company were then in such a situation that they could not reasonably expect to retain the property, and if it should be exposed to sale, for what it would command in cash, as it necessarily must have been upon the judgment in favor gf the-state, there was a moral certainty, considering the situation of the country at that time, that it would bring but a small portion of its actual value. That the company should fear a sacrifice of a groat part of the value of the property, if sold upon execution, is probable, and that they should be influenced by that fear to accept.
It is also contended that the grantor, being largely indebted, and a suit pending ready for judgment at the time of the conveyance to Barr, furnishes strong evidence of fraud. It was said in Twyne’s case, 3 Coke, 80, and has since been repeatedly recognized that the pendency of suit, at the time of making sale of goods, was a badge of fraud. This, like every other badge or indicium of fraud, while it remains unexplained, is a circumstance from which courts are warranted in presuming there is some concealed or secret trust in favor of the vendor, or that it is a mere
Third. The same observations are applicable to the objection that the conveyance was of all the estate of the debtor liable to execution. This is also, as is said in Twyne’s case, a mark or sign of fraud, a circumstance from which, if unexplained, courts are warranted in presuming that the sale was made for the use of the vendor, and to conceal the property from creditors; but when all the circumstances attending the sale show that the intent of the parties was legal and honest-, that the property sold was not of greater value than the debt discharged, all presumption of fraud, arising from the fact that the conveyance embraced all the estate of the debtor liable to execution, is repelled. There is a class of cases in the English reports where their courts have held that an assignment, by a person subject to their bankrupt laws, in contemplation of bankruptcy, of all or nearly all of his effects, is a fraud upon those laws, as a contrivance to avoid their effect. These decisions go upon the ground that creditors trust to those-laws for an equal distribution in ease of the misfortune of the debtor; that the whole object of those laws is to secure the management of the property of an insolvent debtor, by third persons, and to insure a pro rata distribution, and that both of these objects would be defeated, by permitting a debtor, on the eve and in contemplation of bankruptcy, to give priority to one or more creditors, by assigning his effects. Yet there an assignment is held valid, if made at the solicitation of a creditor, to pay or secure ajust debt, although a debtor was at the time insolvent, and contemplated *an act of bankruptcy, and the effect is to prevent an equal distribution of the property of the insolvent debtor,
It is contended that the conveyance of the house and lot in question, by the company, and remaining in possession after the deed contrary to its terms, and upon no obligatory or definite lease, is a fraud per se against the creditors, and as to them the estate did not pass by the deed. It is unnecessary, in this case, to inquire, whether retaining possession of chattels after sale by a debtor, is as to creditors a fraud per se, or merely evidence of fraud, to be considered in connection with all the other circumstances, to ascertain whether there was fraud in fact. There are numerous highly respectable ^authorities on this question, directly conflicting with each other, but I have not been able to find a case, where it has been judicially determined-that a sale and conveyance of lands was to be deemed absolutely fraudulent
*In this case, however, the testimony shows that the legal possession was changed. The company, who were still engaged in banking business, rented by parol a part of the house containing their vault and other accommodations necessary to the transaction of their business, and thereby'became the tenants of Barr,
It has also been supposed that the resolution of the board of •directors, authorizing a bond to be given to the complainant to place the amount of the consideration money to his credit, if within one year he reconveyed the property to the company, furnishes a strong presumption of fraud, or of a secret trust in favor of the grantor. This transaction is wholly unexplained by the proofs in the cause. No such bond was executed, nor does it appear that it was required by the agents of Barr, or that they, in fact, had any knowledge of such a resolution of the board of directors. The fair presumption is that it was passed by the directors to be. used by their agent, if necessary, to induce the agent of the complainant to agree to receive the property at the price affixed by the board, and affording him, if desired by his agents, the means of rescinding the contract should he be dissatisfied ^with it. Barr was a merchant residing in the city of Baltimore; and it might not be desirable to him to invest so large an amount as ten thousand dollars in real estate in the western country, especially at a time when real estate was much depressed in value, and it was very difficult to convert it into cash. But whatever might have been the motives of the directors in adopting this resolution, it does not appear, either from the resolution itself, or other testimony, that it was designed to create any secret trust in
The court are satisfied upon a careful examination of all the circumstances connected with the sale to Barr, that it was fair and bona fide free from the taint of fraud, and not upon any secret or concealed trust; that the sale was made to a creditor for a full and fair price actually paid, by discharging so much of the debt due him by the vendor; that the deed was executed in an open public manner, and immediately placed upon record, and that it was owing to a mistake in the execution that it was prevented from having full effect' at law; that the complainant is entitled to the-aid of this court to have this mistake corrected against the defendant, J. Hatch, who purchased with full notice of the sale to Barr, unless her equity, standing in place of the state, is equal to the complainant’s.
*It has already been observed that the defendant, J. Hatch, having purchased under the judgment in favor of the state, can protect her title in the same manner and to the same extent that the state could, had the purchase been made by the state in the character of judgment creditor. She acquired by the sheriff’s deed all the title and interest of the judgment debtor in the lands at the time the judgment lien attached, with all the rights incident to or growing out of that lien. A creditor acquires no interest in, claim to, or lien upon the lands of his debtor, by suing out legal process to enforce the collection o his debt, and until
In Wadsworth v. Wendell, 6 Johns. Ch. 224, Kent, Chancellor, decided that an instrument purporting to be a conveyance by a soldier of his bounty lands, but which, in fact, had no seal affixed, and was executed before the issuing *of the patent, was defective as a legal conveyance, but passed the interest of the grantor in equity, and entitled the grantee to relief against a subsequent purchaser, who was chargeable with constructive notice of such defective conveyance. In this case, the chancellor, after reviewing many of the authorities, states the doctrine as too well established, and too just in itself to admit of any doubt that a defective conveyance binds the lands in equity against the heir of the grantor, any subsequent voluntary grantee, or subsequent pur-, chaser, with notice of the equitable title of the plaintiff. In Sugden on Yendors, 481, it is stated, as the result of all the authorities, that a purchaser, by a defective conveyance, will be assisted
The equity of Barr, on the day the defective deed was executed and delivered to him, was that of a purchaser of the property in ■question for a full and fair price, entitling him to a perfect conveyance, while the equity of the state was that of a general creditor of the grantor, seeking satisfaction of his debt, an equity that attached itself to no particular part of the property of the debtor, or gave the creditor any interest in or lien upon the lands of such debtor; and would not be recognized in this court, unless special circumstances rendered it necessary to resort here to aid in enforcing payment. It can not, therefore, be justly said that the equity ■of the parties was equal, on June 8, 1821, or that the complainant .acquired by his purchase no other equitable rights than those of a general creditor. Anterior to that time both the state and the •complainant were general creditors of the Miami Exporting Company, having no specific lien upon any property, and their equity, if equity *it can be called, was to have payment of their debts; but on that day the complainant became a purchaser, and was, thenceforth, in equity, vested with the rights resulting from this new relation, although the conveyance to him was so defectively executed as not to pass the legal estate.' The defendant, J. Hatch, having purchased at sheriff’s sale, under a judgment, the lien of which commenced subsequent to the conveyance to the complainant, and with a knowledge of that conveyance and its contents, is not entitled, in good conscience, to retain the legal advantage he acquired by the sheriff’s deed, against the elder and superior equity of the complainant.
I have not thought it necessary to consider what would have been the effect of the claim of the complainant, if, instead of beicoming a purchaser, he had taken a mortgage as collateral security,
Decree for complainant, etc.