Clemens v. Clemens

28 Wis. 637 | Wis. | 1871

Dixon, C. J.

The court below found as a fact that the issue in the former action by the plaintiff against the defendants, which was dismissed at the June term, 1869, of the circuit court for Waukesha county, on the ground that the statute of limitation had run against the claim of the plaintiff, was not the same as in this action, nor were the questions or matters therein adjudicated the same as presented„here. This finding was correct, as appears from the pleadings and judgment in the former action. No issue or question of fraud or mistake in inserting a description of the east or homestead forty acres in the deed, was made in that action; and therefore the judgment is not, in the legal or technical sense, a bar to this action. The record, and especially the complaint, is only evidence to be considered upon the question of fraud or mistake presented in this suit; and it certainly, as claimed by counsel for the defendants, has a very strong tendency against the plaintiff. It tends not only to show that there was no fraud or mistake in including the east forty in the deed, but also, if there was, that the plaintiff had knowledge of it at or about the time the deed was executed. This inference, we say, is very strong, both from the facts stated in the former complaint, and from the omission of the plaintiff to allege or complain at that time that the east forty was wrongfully or fraudulently inserted in the deed. Yet the court below has found that those circumstances were sufficiently explained by the testimony of the plaintiff given on the trial of this action, and that he had no knowledge of the fraud or mistake until some time in the year 1866. The former suit was commenced in March of that year. Without expressing our entire satisfaction upon these points, we are nevertheless inclined to agree with the learned judge before whom the cause was tried. The plaintiff is an illiterate person, unable either to read or write, ignorant of the forms and modes of transacting business, and one very easy to Rave been misled, or to Rave fallen into error, botR at tRe time tRe deed was executed and wRen tRe former suit was commenced. We think it a safe and reasonably well sustained conclusion from tRe evidence, tRatRe was mistaken; and as tkis conclusion favors tRe obvious justice and equity of tRe case between tRe parties, we are tRe more inclined to adopt it.

TRe plaintiff is not, tRerefore, estopped, by tRe judgment in tRe former suit, nor bound by tRe statute of limitation upon tRe question of fraud or mistake presented in this; and it only remains for us to examine tRe latter question, wRetRer tRe fraud or mistake is established by evidence, and tire further proposition urged in defense, that, as the plaintiff conveyed the land or a portion of it, the west forty, for the purpose of delaying or defrauding Ris creditors, equity will not interfere to aid Rim in recovering back the title to any part of it, not even that part not intended to be conveyed, but wlricR, by mistake on Ris part, or fraud on the part of the defendant Bilas Clemens, the grantee, was improperly included in the deed of conveyance. TRe first is a question of fact, the last a proposition of law.

Upon the fact we Rave little doubt that the finding of the court below was correct. That there was, so far as the plaintiff was concerned, at least a mistake on Ris part, is very clearly shown in proof. He did not intend to convey the east forty, and Rad no motive for doing so. It was Ris homestead, and exempt, and so entirely beyond the reach of Ris creditors. And the same proof affords no slight ground for saying that it was inserted in the deed, not only without the knowledge or consent of the plaintiff, but by the grossly fraudulent act or procurement of the defendant.

' Is the plaintiff, then, precluded from claiming the assistance of equity to correct the mistake, considering it such on Ris part, or from obtaining relief against the fraud, so regarding it, on the part of the defendant, upon the maxim, ex dolo malo non oritur actio ? In other words, can the defendant set up and rely upon the dependent principle, grown also into a maxim, in pari delicto potior est conditio defendentis, and tbns be permitted to take advantage of bis own wrong? These are tbe questions: Was tbe transaction, tbe conveyance by tbe plaintiff to tbe defendant of tbe west forty with intent to binder or defraud tbe creditors of tbe plaintiff, twrpis causa between these parties, rendering tbe contract totally void, and subjecting it and tbe parties, as between themselves, to tbe operation of tbe principles expressed by tbe above maxims ? and, Are these parties in pari delicto as respects each other, so that neither can invoke tbe aid or protection of tbe courts against tbe other in regard to any matter of mistake or fraud arising ou.t of or connected with tbe transaction as between them, or in regard to tbe non-performance or breach by either of bis contract or promise entered into with tbe other?

It will be found, on examination, that these questions have been and are tbe subject of tbe most direct and positive conflict of opinion and decision among tbe courts of tbe different states of this union, and sometimes among tbe courts of tbe same state. Tbe provisions of tbe statutes of this state, like those of most of tbe states, respecting conveyances, assignments, bonds or other contracts, fraudulent as against creditors, purchasers, or other persons having lawful demands, are derived from tbe statute 13 Eliz., cb. 5, and declare such conveyances, assignments, bonds and other contracts or evidences of debt, void only as against tbe creditors, purchasers and other persons thereby hindered, delayed or defrauded. R. S., cb. 108, § 1; id., cb. 106, §1, and cb. 107, § 1. Tbe supreme court of Massachusetts, pursuing tbe language of tbe statute, and understanding it to signify just what its words bidicate, long ago held that such conveyances and contracts were void only as against creditors, purchasers and other persons named in tbe statute, and were in all respects valid and obligatory upon tbe parties themselves to tbe conveyance or contract, and upon all those claiming under or in privity with either and each of them, not being creditors, purchasers or others entitled'under the statute to avoid the contract or conveyance by reason of their relation to the grantor, vendor or other1 principal party named in it, and who executed, or caused or procured it to be executed. That court holds that the transaction is not turpis causa as between the parties to it, and consequently, as respects them and those claiming under pr in privity vfath them, that the contract, whether executed or executory, is not void but valid, and will be upheld and enforced both at law and in equity, the same as any other contract, and upon the same principles.

In that state, therefore, a conveyance or sale of property, made with intent to hinder or defraud the creditors of the grantor or seller, if executed in due form of law, is good and effectual to pass the title to the grantee or vendee, because, as between the parties to it, it was fairly, deliberately and intentionally executed and delivered. The grantor or seller may not claim relief, or the right to .rescind or set aside the conveyance or transfer, on the ground that no consideration was paid or agreed to be. He may be concluded from doing this by reason of his fraud, but more likely for other sufficient reasons. All other remedies, however, are open to him as against the grantee or purchaser, subject of course to such defenses as may have arisen in favor of the latter by the action of creditors or purchasers, who may at any time avoid the conveyance or transfer. If the grantee or vendee has given his promissory note in consideration of the conveyance or transfer, or entered into any other promise or obligation, in other respects sufficient to pay for the property, the grantor or seller may enforce the same, or recover damages for the breach by his appropriate action at law; or, if the nature of the complaint or cause of action be such as is remediable only in equity, he may file his bill in that court, and relief will be granted in the same manner and to the same extent as between other parties to contracts or agreements not affected by the element of fraud or delay . with respect to the claims of creditors or others. 1 The doctrine of par delictum bas no^application between tbe contracting parties, tbe conveyance or contract being considered illegal and void only so far as it is declared so by tbe statute. These principles are firmly settled in that state, as will be seen by tbe Cases of Dyer v. Homer, 22 Pick., 453, and Harvey v. Varney and others, 98 Mass., 118.

Tbe former was an action at law in tbe name of tbe vendor upon a non-negotiable promissory note given by tbe vendee at tbe time of taking a bill of sale of certain personal property left in possession of tbe vendor, wbicb bill of sale tbe vendee then knew was made by tbe vendor for the purpose of putting tbe property beyond tbe reach of bis (tbe vendor’s) creditors. ‘ Tbe latter was a bill in equity by one member of a partnership against tbe four other members, for a settlement of tbe affairs of tbe firm and an account and distribution of tbe assets among tbe partners according to their several interests; wbicb partnership was formed, and tbe business carried on and transacted, in tbe name of two of its members, for tbe purpose of enabling two other members to transfer to it their property in order to binder, delay and defraud their creditors, and to keep tbe property so transferred, concealed and covered up from attachment, and likewise to keep tbe interest of said two other members in tbe partnership a secret, with tbe same fraudulent view and design. All this was done, as tbe court found, with tbe knowledge and participation of tbe plaintiff. In each case there was judgment for tbe plaintiff. In tbe first, tbe court held, that although tbe sale was invalid as against tbe creditors of tbe vendor, yet as between tbe vendor aud vendee it was binding, and constituted a valid consideration for tbe npte, and consequently an action on tbe note in tbe name of tbe promisee might be maintained; In tbe last tbe decision was, that a contract, whether executed or executory, for tbe conveyance of either real or personal property to conceal it from attachment by tbe grantor’s creditors, although voidable by them, is good between tbe parties,’ even if tbe grantee shared in tbe fraudulent intent, and that tbe fraudulent character of the purpose of a partnership as to creditors is no defense to a bill in equity by one of its members against the others for a settlement of the affairs of the firm. The court say: “ Because the plaintiff’s interest was that of a silent partner, and was kept concealed in order that it might not be attached by his creditors, the defendants, who participated in this purpose, cannot be allowed to disclose the common fraud of both parties, and thereupon appropriate to themselves his share of the capital and profits of the partnership. Except so far as creditors intervene to assert their rights, the interests of the several partners must be adjusted as if no such fraudulent purpose existed. To hold otherwise, and apply to this case the maxim, in pari delicto potior est conditio defen-dentis, would be to exercise a rigor beyond the limits of wholesome severity.”

The doctrine of the foregoing cases is sustained by the earlier decisions in the same state, and especially by Fairbanks v. Blackington, 9 Pick., 93, 96. See also Drinkwater v. Drinkwater, 4 Mass., 354; Oriental Bank v. Hoskins, 3 Met., 322; and Crowninshield v. Kittridge, 7 Met., 520.

And the same is also sustained by the following cases in Maine, New York, Indiana, Texas, Illinois, and California: Nichols v. Patten, 18 Maine, 231; Andrews v. Marshall, 43 Maine, 272; Same v. Same, 48 Maine, 26; Osborne v. Moss, 7 Johns., 161; Jackson v. Garnsey, 16 Johns., 189; Findley v. Cooley, 1 Blackford, 262; Scott v. Purcell, 7 Blackford, 66, 68; Moore v. Meek, 20 Ind., 484; Springer v. Drosch, 32 Ind., 486 (2 American R., 356); Horser v. Kraeka, 29 Texas, 450; Davis v. Ransom, 26 Ill., 105; Lawton v. Gordon, 84 Cal., 36. See also Randall v. Phillips, 3 Mason, 388. We observe that Findley v. Cooley, like Dyer v. Homer, was an action by the fraudulent grantor against his grantee, upon promissory notes given by the latter with knowledge of the fraud, in consideration of the conveyance. The defendant plead the fraud, insisting that payment of the notes could not be enforced; but the plaintiff bad judgment. Moore v. Meek was much, tbe same kind of an action, tbougb there tbe note was made payable to a third person, by whom the action was brought. Osborne v. Moss, Jackson v. Garnsey, Horser v. Kraeka, and some others, were actions by the fraudulent grantee or purchaser against the grantor, or vendor, or their representatives, to recover possession of the property conveyed or sold, or the value of it; and the same were maintained. In the last named case, the vendor, after having given a bill of sale of his personal property in fraud of creditors, kept possession, and subsequently disposed of the property to others; and it was held he was liable for the value thereof in an action by the vendee. It is obvious that there can be no distinction in principle between allowing the fraudulent vendee to sue for and recover the possession of the property sold or its value, and permitting the vendor to sue for and recover the price to be paid. Both parties are equally in the wrong, and chargeable alike with a violation of the law, so far as that may be supposed to enter into or affect their mutual rights and obligations; and the law cannot, with any consistency, give a remedy to the one, and at the same time withhold a corresponding remedy from the other. If it gives the purchaser a remedy to obtain the property or its value from the vendor, it must, upon a like principle, give the vendor a remedy to obtain the consideration or price agreed to be paid by the purchaser for the property.

And the principles adopted by the court of Massachusetts are likewise very clearly and fully sanctioned by the supreme court of the United States, in Brooks v. Martin, 2 Wallace, 72. This case, as observed by the court in Harvey v. Varney and others, lays down principles far more extensive than is necessary to affirm, the Massachusetts rule and the decisions made under it.

Opposed to the above decisions are two later ones in New York, and one in Indiana (since overruled in Springer v. Drosch, ubi supra); and those of the courts in some other states. Nellis v. Clark, 20 Wend., 24; S. C., 4 Hill, 424; Moseley v. Moseley, 15 N. Y., 335; Welby v. Armstrong, 21 Ind., 489; Murphey v. Hubert, 16 Pa. St., 50; Eyre v. Eyre, 19 N. J. Eq. R. (4 C. E. Green), 42; Stephens v. Heirs of Harrow, 26 Iowa, 458; Stewart v. Ackley, 52 Barb., 283; Sweet v. Tinslar, id., 271. These cases proceed upon a distinction between executed conveyances and execu-tory agreements entered into in fraud of creditors and others, holding the former valid, upon the principle that the law will not relieve the grantor or his heirs or representatives from the consequences of his own fraudulent act, and the latter invalid, upon the principle that the parties are in pari delicto, and the law will afford no aid to either as against the other by way of enforcing the agreement. The court of Maine, in some of the cases above referred to, intimates a similar distinction; and no doubt many cases -may be found where the same view has been entertained. DeNTO, C. J., delivering the opinion of the court in Moseley v. Moseley, freely admits that such was not formerly understood to be the law, but “ that contracts and conveyances made with a view to delay, hinder or defraud creditors were, nevertheless, valid and binding between the parties to such contracts and conveyances.” He cites some of the earlier decisions in New York, Massachusetts and Indiana to show this, and then refers to Nellis v. Clark as, having changed the rule, or introduced the distinction, in New York. Welby v. Armstrong merely follows the New York decisions, without comment upon them, or examination of principle, or reference to the opposing authorities. Aside from the discussion in Nellis v. Clark, where Mr. Justice NelsoN dissented, the reasons in support of this class of decisions are as well stated in Murphy v. Hubert as in any case which has fallen under our observation.

In this state the question we are considering has never before been directly presented for adjudication. Except a remark not necessary to the decision, and casually and doubtfully made, in Heath v. VanCott, 9 Wis., 528, the uniform expression of opinion bj tbis court, speaking upon tbe subject generally, bas been decidedly in favor of tbe Massachusetts rule. Tbe principle established by tbe several decisions bas been correctly stated to be, that conveyances of property and agreements between parties, made for tbe purpose of defrauding creditors, though void as to creditors, are nevertheless valid and binding on tbe parties themselves and their personal representatives. Simmons’ Digest, Title, Fraudulent CONVEYANCES, p. 471, § 8, citing Jones v. Lake, 2 Wis., 210; Eaton v. White, id., 292; LaCrosse & M. R. R. Co. v. Seeger, 4 id., 268; Faryo v. Ladd, 6 id., 106; Schettler v. Brunette, 7 id., 197; and Reynolds v. Vilas, 8 id., 471. In Jones v. Lake, tbis court say: “ A sale, however fraudulent as to creditors merely, is good between tbe parties, and all tbe world except creditors.” In Railroad Co. v. Seeger, similar language is used ,* and in Fargo v. Ladd it is said: “ Tbis court is prepared to bold, and does bold, in accordance with numerous and uniform decisions, that conveyances of property, and agreements between parties, to defraud creditors, though void as to creditors, are nevertheless valid and binding on tbe parties themselves and their personal representatives.” Several authorities are cited to tbe proposition, and it is noticeable that they are mostly such as directly sustain tbe principle adopted and acted upon by tbe court of Massachusetts. And in Remington v. Bailey, 13 Wis., 332, it was held, in an action for tbe conversion of property, that tbe defendant could not introduce proof to show that tbe plaintiff acquired tbe property under a sale which was fraudulent as to creditors, unless tbe defendant was himself a creditor of tbe plaintiff’s vendor, or bad succeeded to tbe rights of a creditor.

Under these circumstances it may hardly be said, perhaps, that we are at liberty to adopt any other than tbe Massachusetts rule; but whether we are or not, we are certainly not inclined do to so. That rule, though it may not be said to be founded on tbe most high-sounding notions of individual morality and integrity to be required of suitors, nevertheless appears to us to be far tbe most reasonable and just under all circumstances, and to comport best witb tbe spirit and policy both of tbe common law and of tbe statute. Judge Blackford, witb bis usual great accuracy and sound learning upon all questions of tbe common law, shows, in bis opinion in Findley v. Cooley, that by tbe common law sucb contracts were not void between tbe parties, but valid and actionable, and that so it was by tbe statute of Elizabeth. It clearly seems to us that no different policy is enacted or declared by our statutes, but manifestly tbe same policy; and that to bold otherwise would be, by a bind of judicial legislation, to engraft upon tbe statutes a policy not indicated or authorized by their letter or spirit, nor by tbe spirit of tbe common law. We much prefer adhering to tbe statutes as they plainly read, and to tbe policy thus shown, to attempting tbe establishment of any new policy of our own for which we possess no authority.

We bold, therefore, that tbe conveyance here of tbe west forty which tbe plaintiff intended to make, and for tbe purpose of delaying or defrauding bis creditors, is not to be regarded-as turpis causa between these parties, and that tbe maxim in pari delicto, etc., is inapplicable to actions and controversies between them growing out of or connected witb tbe same transaction; and consequently that tbe plaintiff is entitled to tbe same relief witb respect to tbe east forty, on tbe ground of mistake or fraud in its insertion in tbe deed, as if sucb bad not been tbe character of tbe conveyance.

But there are still other grounds, supposing tbe east forty to have been included in tbe deed by the fraud of tbe defendant, as we think it was, or even supposing it to have been included by mistake, upon which tbe same relief must have been granted tbe plaintiff; and this although we bad been of a contrary opinion upon tbe questions above considered. Tbe intention of tbe plaintiff in conveying one forty acres of the land to defraud bis creditors, would by no means, either in law or in morals, justify tbe defendant in practicing a gross fraud upon the plaintiff to procure from bim tbe title of tbe other forty, or in. retaining tbe title to it, if conveyed by mistake. Tbougb engaged in an illegal transaction, and unable to assert or maintain any rights or remedies founded on tbe unlawful thing done or intended to be, still tbe plaintiff forfeited no right or privilege beyond that, or with respect to any other matter or thing not within the purpose of the wrongful act, and not affected by the corrupt intent, or caused or produced in consequence of it. To the extent of his intended wrong he might be without remedy, but in all other respects his rights and remedies are the same as if no such wrong had been done or intended. This is and should be the true measure and extent of all just punishment. Though guilty of a wrong or transgression of the law in one particular, a party does not become an outlaw, or forfeit his right to legal protection in all others, nor lay himself open to the frauds and machinations of others to be practiced and perpetrated against him with impunity. If a man be in the act of wrongfully giving another his coat, it cannot excuse or justify that other at the same time in taldng or stealing his cloak. Even the injunction of Scripture, designed undoubtedly to repress and discourage the spirit of litigiousness and controversy, if broadly and literally taken, does not reach such a case.

The question is like that in Blakesly v. Johnson, 13 Wis., 530, where this court held that the party to a contract made on Sunday, and therefore illegal, could not take advantage of the illegality, or in any manner make use of the contract, void though it was, for the purpose of perpetrating a fraud upon the other party to it. That was an action in equity between the parties themselves to the illegal and void agreement, in which one of them sought and obtained relief against the fraud of the other, practiced by means of and in connection with the contract and the subject to which it related; and the remarks of Mr. Justice PAINE, on pages 582 and 533, are equally applicable here. The defendant cannot escape the consequences or ■reap the fruits of his own wrong done to the plaintiff, by showing that the plaintiff at the same time attempted to and did commit annother wrong against the rights of third persons. He cannot fraudulently obtain and keep from the plaintiff one forty, by showing that the plaintiff fraudulently conveyed the other to defeat the rights of creditors.

Mr. Broom, in his most excellent work' entitled “ Legal Maxims,” page 583, treating of the maxims, a right of action cannot arise out of fraud, and in case of equal fault the condition of the defendant is better, is careful to direct the attention of his readers to the yet more general maxim, no man shall be permitted to talce advantage of his own wrong, and to his observations upon that, in order that all may be weighed and considered together, or each with due reference to the force and application of the other. It clearly seems to us that this is a case where the latter maxim should'govern with respect to the tract of land not intended to be'conveyed, and the title of which the defendant has procured by.fraud. “The objection,” says Lord MaNSField, in Holman v. Johnson, 1 Cowper, 341, “ that a contract is immoral or- illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however", that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to real justice as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act.” The principle or policy of the law, therefore, is to reject the suit of and reprove the plaintiff for his wrong, not to reward the defendant. The plaintiff must be punished, even though it be at the expense of allowing the defendant, an equally guilty party, to obtain most unjust and unfair advantage for himself. This. looks like punishing one party and rewarding the other for the same immoral or illegal act or contract. But fraud and immorality must be rebuked and discouraged, and this object cannot be accomplished in any other way. The suit of the party-compelled to seek the aid of the courts, in order to obtain the fruit's of his own fraud or wroug, must be dismissed, although it may result in unjustly giving to the other equally culpable party the entire benefit of them. The very working of the principle, this one-sided and uneven justice, suggests great caution in 'its application. The. court must clearly see that it is the fruit of his own wrong, or relief from the consequences of his own unlawful act, which the plaintiff seeks, before his action can be dismissed. If it be not these, but something outside and independent of his unlawful act or purpose, and not necessarily resulting from it, nor caused or intended by him, and especially if it be something arising or produced by the fraudulent act or procurement of the defendant alone, not participated in ' or assented to by the plaintiff, then he is entitled to the favorable consideration of the court, and his action should be retained. Such is precisely the nature of the case here; and were it conceded that the real transaction between the parties, namely, the sale and conveyance of the west forty with intent to defraud creditors, was dolus malm between them, so that they were placed in pari delicto, as that principle is generally understood and applied, still we should be required to hold that the plaintiff was entitled to the relief granted by the court below. He could not be punished, nor his action dismissed, beyond the wrong actually done and intended by him; and the defendant could not be permitted to take advantage of his own wrong.

By the Court. — Judgment affirmed.