22 F. 258 | W.D. Pa. | 1884
For many years prior to tile transactions out of which this litigation arose, William M. Lloyd was a banker of good financial repute. He individually carried on the banking business under the style of Wm. M. Lloyd & Co., at Altoona, Pennsylvania, .his place of residence, and in the name Lloyd & Go., at Ebensburg, Pennsylvania; and he was also a partner in the banking firms of Lloyd, Caldwell & Co., at Tyrone, Pennsylvania; of Lloyd, Huff & Co., at Latrobe and Greensburg, Pennsylvania; and of Lloyd, Hamilton & Co., at New York city. His credit stood very high, and was undoubted until after the financial crisis which came upon the country in the fall of 1873.
On the thirtieth of October of that year he was compelled to suspend; his financial difficulties, it would seem, having their origin in the New York house. He soon submitted a statement of his affairs to his creditors, who, at a general meeting, granted him an extension for one, two, three, and four years. Such was the confidence felt in his ability to pay under the extension that his neighbors in large numbers became his guarantors in different sums, the aggregate amount being $425,000. He resumed1 business on February 2, 1874.
The third paragraph, in substance, charges that William M. Lloyd, being insolvent, on November 11, 1871, made a fraudulent gift of said land, by deed of conveyance, to his son John Lloyd, one of the defendants, with intent to defraud his creditors, which gift John accepted, with the like fraudulent intent; and that the secret purpose of both was that John should hold the land for the benefit of William M. Lloyd aud his family, or for the joint benefit of the father and son. The substance of the charge in the fourth paragraph is that William M. Lloyd, being insolvent, and acting in collusion with his son John, with intent to defraud his creditors, and in pursuance of a fraudulent agreement between him and John, erected a stone dwelling, with other improvements, upon said land, at a cost of from $40,000 to $50,000, “and that said conveyance was made, and the said large and valuable improvements put thereon, in order to prevent the just creditors of the said William M. Lloyd from having the benefit of the money expended in the purchase of the said land, and expended upon the buildings and in making the improvements put upon the said land.” The specific prayers of the hill are that the deed of conveyance may be adjudged null and void, and John Lloyd be decreed to convey to the plaintiffs the land “and improvements thereon,” and for an account of rents.
The answer traverses all the allegations of fraud; admits a conveyance on November If, 1871, but denies that it was voluntary; alleges it was made in execution and performance of a contract between William M. Lloyd and John Lloyd, made in 1866, and sets up, in substance, the facts about to he stated.
In the year I860 John Lloyd, then aged 24 years, who previously was a clerk in the banking-house of William M. Lloyd & Co., removed from Altoona to the state of Tennessee, where ho settled and engaged in the business of farming and fruit culture, near the city of Nashville, upon a farm which he had bought with moans given
The testimony of the Lloyds, father and son, in respect to the contract between them, is corroborated by that of S. G. Baker. The land in controversy is part of the Beal farm, which William M. Lloyd, Thomas McCauley, and Mr. Baker jointly acquired in April, 1866; and these three were the grantors to John Lloyd in the deed of November 11, 1871, conveying him the land. Now, referring to that conveyance, Mr. Baker testifies: “Years before, there was an understanding between the three of us that William M. Lloyd was to have that property for his son John, who was then in the south.” It is here worthy of mention that Thomas McCauley had died before the testimony in this case was taken. It is shown that as soon as John Lloyd could get ready to leave Tennessee he did so, and he returned to Altoona in the spring of 1867. He was immediately thereafter elected to the cashiership of the said bank, accepted the position, and entered upon the discharge of his duties, and has ever since continued in the cashiership.
The testimony of William M. Lloyd and John Lloyd is strongly confirmed by what occurred immediately after John’s return to Al-toona, and subsequently; the facts about to be stated being shown by indubitable evidence. About the first of April, 1867, John entered into exclusive possession of the land in question. The Beal mansion stood on the land, and John occupied it until the fall of 1867, when, finding the house uncomfortable on account of its dilapidated condition, he moved out. He then leased it to a tenant, and it was leased by him to successive tenants, who occupied it until some time in 1872. In 1868 he put a fence around the land, except on the side next his father’s homestead property. Besides fencing, he ditched the land, and planted trees on it. His improvements, down to the date of his deed, (November 11,-1871,) had cost him from $1,700 to $2,000, while the rent he received was trifling. The land was assessed to John Lloyd in 1868 and thereafter, and the taxes paid by him, except that, by some mistake, it was omitted from the trien
The theory of the bill is that the conveyance of November 11, 1871, was not only a voluntary one, but covinous also; not constructively fraudulent merely, but actually so, — the intent of both father and son being thereby to cheat and defraud the creditors of the former. I am unable to accept this theory. The hypothesis is not only disproved by the direct evidence touching the transaction, but is entirely inconsistent with the surrounding circumstances. The credit of William M. Lloyd was then good and unquestioned. At no time did it stand higher. He was in no pecuniary trouble and apprehended none. His business was, at least apparently, prosperous. Of his actual financial condition I shall soon have occasion to speak. At present I content myself with saying that, whatever that condition really was, he undoubtedly believed himself to be a man of very groat wealth; which was likewise John’s belief. I am altogether convinced that the transaction of November II, 1871, was thoroughly honest in intent. And had it been, as claimed, a mere gift of the land, it could not, at any rate, be successfully assailed for meditated bad faith. But it was not a gift. The conveyance was not a voluntary one, but was executed on the footing and in performance of the contract between William M. Lloyd and John Lloyd, the terms of which have been stated. That the consideration moving from John was a valuable one, and sufficient to sustain the contract, is too plain for argument. And whether the contract is referable to the letters which passed between the father and son in 1866, or is to be treated as resting in parol strictly, John’s title dates back at least to the spring
We might, therefore, dispense altogether with any inquiry into the then financial status of William M. Lloyd, were it not for what occurred so soon afterwards, and which is shortly to be mentioned. Looking back after this lapse of time, it is very difficult, if not impossible, to determine with certainty what the actual financial condition of William M. Lloyd was on November 11,1871. He himself testifies: “I was worth a half a million of dollars over all liabilities. It was not uncertain at that. I was fully informed of the facts;” and he fixes his then yearly income at $550,000. But Mr. Lloyd, enters into no details, and his figures are in the nature of an estimate. A vast amount of testimony was taken to show the state of his affairs on November 11,1871, and the ease is loaded down with complex and contradictory financial exhibits having relation to that particular date. The expert witnesses — the accountants, representing the respective sides, who speak from a mere examination of the books of the several banking houses which Mr. Lloyd conducted or in which he had an interest — widely differ in their views. And when real estate is touched, there is a great diversity of opinion as to values among the witnesses, as might be expeete^.. The aggregate of his debts, which in the main were to depositors and holders of certificates,- was large,— in the neighborhood of $2,000,000. But the assets of the several banking concerns, as shown by the books, were also large; and upon the best judgment I can form from a study of the exhibits were in clear excess of all his debts, although not very largely so. But in addition to those assets Mr. Lloyd had other more strictly personal assets, such as real estate, stocks, bonds, etc., to a large amount. According to the defendants’ evidence these personal assets greajily exceeded $500,000. No doubt the values placed by the defendants’ witnesses on the real estate are extravagant; but, after all reasonable, abatement, these personal assets were very large. And the evidence
In the spring of 1872 William M. Lloyd began the erection of a dwelling-house upon John’s land, the 26-acre tract. His original purpose was to build at a cost not exceeding $10,000; but his son-in-law, Mr. Hutchison, persuaded him to change his purpose and employ an architect, who prepared a plan. The limit of cost which Mr. Lloyd then fixed was $15,000. Mr. Hutchison took charge of the erection of the building, and Mr. Lloyd gave little personal attention to the matter. The house proved to be a much more costly affair than ho anticipated. It is described in the bill as “a large stone house, constructed in the most elegant and expensive architectural style, and finished in the most elegant, rich, extravagant, and expensive manner throughout the inner part of the building.” The cost, including a stable, ran up to the sum of $49,770.59. When Mr. Lloyd’s suspension occurred, in October, 1873, the house was well on towards completion. The materials necessary to complete it, although' paid for afterwards, had already been contracted for, and were delivered, or ready for delivery, and the wood worked out. Mr. Lloyd got himself released from contracts for expensive gas-fixtures, and, so far as he could, from contracts for mantels. Upon his suspension the work was stopped, but was resumed in about two months; and in the middle of February, 1874, Maxwell Kinkoad, Mr. Lloyd’s son-in-law, moved into tlie house; and in the spring of 1874 William M. Lloyd and his wife went there to board with Mr. Kinkoad.
I am satisfied from the evidence that William M. Lloyd entertained no purpose of building on John’s land when the deed of November 11, 1871, was executed. The project was of a later conception. I am also convinced by the proofs that he put those improvements on John’s land without his request and without consulting him. There was no agreement, arrangement, or understanding between the father and son in respect to them. It was a purely voluntary act on the part of William M. Lloyd. He himself entertained the purpose of making an exchange with John, and of giving him for his land the old homestead property, consisting of 19 acres of land; and, while the stone building was in progress, John was told by members of the family that his father entertained such purpose. In his testimony John says: “I suppose I would have exchanged if he had wanted mo to.” While these improvements were going on, — until his suspension, in October, 1873, — William M. Lloyd’s credit continued unimpaired, and he was entirely free from financial embarrassment. I have no doubt both lie and John speak the truth when they respectively testify that they then believed he was worth a half a million of dollars. The belief thus entertained by them must be taken into account in passing judgment on their conduct. It must be remembered, too, that the father and son had the utmost confidence in each other, and were not dealing as strangers would. The father assumed that tlie son would
Without further elaboration, I content myself with saying that the conclusion to which the evidence has brought me is that in the matter of the improvements put upon John’s land there-was no fraudulent conspiracy between him and his father, as charged in the bill, nor any collusion or understanding whatever between them; and that these improvements were made by William M. Lloyd of his own will, without fraudulent intent towards his creditors, or any wrongful purpose, but innocently, under the belief that he was possessed of great wealth, and in the expectation that upon his request John would rh'ake an exchange of properties.
The object sought by the plaintiffs throughout this litigation has been the overthrow of the deed of November 11,1871, as a voluntary and fraudulent conveyance. The specific prayer of the bill is for such relief, and to that end the evidence was directed, as was the argument of counsel. It was, however, suggested at the hearing that should John’s title to the land prevail, still the plaintiff should have a decree for the value of the improvements put thereon by William M. Lloyd; and this is repeated in the brief of counsel, and some authorities cited to support that view. This subject has received from me the most serious consideration, with a result unfavorable to the plaintiffs.
In the first place, it is plain that the bill was not framed with a view to any such relief. The case which it presents rests exclusively upon the frahdulent character of the deed and the consequent nullity of John’s title. It has no other basis. The specific prayers of the bill are for a decree declaring the invalidity of the deed, decreeing a conveyance, and for an account of rents. True, there is the prayer for gener,al relief. But the special relief prayed at the bar must essentially depend upon the proper frame and structure of the bill. Story, Eq. PI. § 42. “In order to entitle a plaintiff to a decree under the general prayer different from that specifically prayed, the allegations relied upon must not only be such as to afford a ground for the relief sought, but they must have been introduced into the bill
Again, upon the proofs, no just decree for the value of the improvements could bo made. Their cost would by no means be the true standard. There can be no doubt that these large expenditures added no corresponding increase to the value of the land, but in a great degree were sunk. It is probable that a modest mansion, costing f8,000 or S10,000, would have added more value to the land than this pretentious structure.
But waiving these considerations, and assuming the question as properly arising upon the pleadings and proofs, upon what just principle could a decree be made against John Lloyd or bis land for the value of those improvements ? Cases there are in which the owner of land, standing by and permitting another to expend money in improving it, lias, in equity, been deemed a delinquent, and been compelled to pay for the improvement. “But in these cases there is always some ingredient which would make it a fraud in the owner of the land to insist on his legal right.” Crest v. Jack, 3 Watts, 239. What such ingredient is there here? John did not solicit his father to make these improvements, nor encourage him to do so, nor did William M. Lloyd act in ignorance in respect to the title, nor was he misled. If John had refused to make the exchange of properties which his father had liad in, contemplation, there might possibly be some ground for raising an equity against him. But John was never asked to make the exchange; nor do the plaintiffs propose anything of that kind. Indeed, it would seem such exchange would have secured no advantage to William M. Lloyd, or his estate in bankruptcy, for the plaintiffs’ counsel in their printed brief, at page 28, say: “The old mansion house, with the nineteen acres surrounding it, is nigher the center of the city and quite as valuable as the new stone house and the 26 acres.”
Says Chief Justice Gansos in McClure v. McClure, 1 Pa. St. 378: “Expenditure in improvements without stipulation or request is gratuitous, and, like any other unsought service, not the subject of compensation by bill or action.” And in Rush v. Vought, 55 Pa. St. 438, 444, the court declaro: “Equity will enforce a trust or a contract, but cannot create a title where none exists, * * * Creditors can
Our case is one of gratuitous expenditures innocently made. The cases which the plaintiffs’ counsel cite are very different. In Athey v. Knotts, 6 B. Mon. 29, there was not only an ingredient of bad faith, but the interest which the creditors of the fraudulent insolvent reached, was his own portion of the rents. In Divines. Steele, 10 B. Mon. 323, there was a request to make the improvement, and the insolvent himself had an enforceable claim. In Lynde v. McGregor, 13 Allen, 182, the wife had executed a mortgage of her land for three times the sum loaned, and the improvements were made by collusion between the husband and the mortgagee to defraud the creditors of the former, who, as I apprehend the case, sought to reach the improvements through the mortgage. At any rate, there was the element of actual fraud; and, if the wife was otherwise innocent, she had placed in the hands of the guilty conspirators a mortgage for a false amount.
The English authorities recognize this distinction: if a man, who afterwards becomes bankrupt, has advanced money to his son, in such a shape, or which has been applied to such purposes, that an existing lien in respect to that specific money so advanced can be made out, that lien will pass to the assignee in bankruptcy; but where the money has been advanced and disposed of in such a way as to raise no lien, then it cannot be reclaimed by the assignee. Fryer v. Flood, 1 Brown, Ch. 161; Ex parte Shorland, 7 Ves. 88, note, (Sum. Ed.)
In Campion v. Cotton, 17 Ves. 264, on a creditors’ bill to set aside a settlement of land on a wife, where there had been subsequent voluntary expenditures by the husband in improvement by building and enfranchising copy-holds, the master of the rolls, Sir William Grant, after showing there was no ground to avoid the settlement, said:
“As to the additional value that the land may have received by building, subsequent to the marriage, or by enfranchising copy-holds, I do not see how it is possible to make a mere voluntary expenditure by him upon her estate a ground of charge against her or her estate. ”
No more can I see how it is possible justly to charge John Lloyd or his land for purely voluntary expenditures by his father, innocently made by him, and innocently permitted by the son. The heir, who after descent east takes the accruing rents, is not accountable therefor to the creditors of his insolvent ancestor. McCoy v. Scott, 2 Rawle, 222. And in Fripp v. Talbird, 1 Hill, Eq. (S. C.) 142, where a voluntary deed was set aside as void against creditors, a decree for an account of profits enjoyed was refused; the court well saying: “It would operate as a hardship, approaching a fraud, to make one account for profits which he may have expended in the just confidence of their being his own.” It would be a still harder thing to compel a son to pay for unsought expenditures gratuitously made by his father under the circumstances which existed here.
The bill charges that John Cramer conveyed by deed four lots of ground in Altoona to William M. Lloyd for the consideration of $8,000, and that afterwards, on June 5,1874, William M. Lloyd, John Lloyd, and John F. Bowman, conspiring together to defraud the creditors of the former, destroyed that deed, and procured a new one to be made from Cramer to John Lloyd, without any new or other consideration being made, and this for the purpose of fraudulently withdrawing the property from the reach of the said creditors. I find the facts to be these: By articles of agreement, dated April 22, 1873, John Cramer sold these lots to William M. Lloyd for $8',000, and on the agreement a payment of $2,667 is indorsed. In the spring of 1874 Cramer tendered a deed to Mr. Lloyd, and demanded payment of the balance of purchase money. He was unable to pay, and so informed Cramer. Mr. Tierney, a member of the bar, who was present at the tender on behalf of Cramer, testifies: “It was understood between Cramer and Mr. Lloyd, at the time, that, owing to his inability to pay, the articles of agreement or bargain was canceled. ” Cramer then sought a purchaser, and, failing to sell to Mr. C. Hauser, he offered the property
The remaining subject-matter of the bill is what is known as “The Unity Township Coal Property,” situated in Westmoreland county, Pennsylvania, an undivided one-third of which William M. Lloyd sold and conveyed to John Lloyd on June 29,1875, at the same time leasing to him another undivided third part. This coal property was purchased in 1872 b^ Lloyd, Huff & Co., a firm composed of William M. Lloyd and George J. Huff, and was paid for with the partnership funds, although the deed was made to Lloyd and Huff as tenants in common. On January 1, 1873, Lloyd, Huff & Watt succeeded the firm of Lloyd, Huff & Co., the only change being that of name and the introduction into the firm of William H. Watt. The new firm took the assets and assumed the debts of the old firm and continued the business. On June 10, 1875, Huff conveyed his interest in this coal property to William M. Lloyd. On June 29,1875, William .M. Lloyd conveyed an undivided one-third interest in the property to Watt, and at the same time made the above-recited conveyance and lease to John Lloyd. Simultaneously, John Lloyd and William H. Watt formed a copartnership, by articles of agreement, for the purpose of opening mines upon and mining coal from said property. William M. Lloyd, by a subjoined agreement under seal, consented to the said articles of copartnership. By the terms thereof, the profits due to the one-third interest of William H. Watt and due to the one-third interest of William M. Lloyd, leased to John Lloyd, were appropriated to the payment of the debts of Lloyd, Huff & Watt, and said two-third parts of the coal property were subjected to the payment of the debts of said firm, and were put into the new partnership impressed with the lien thereof.
For the undivided one-thirá interest conveyed to John Lloyd, he gave his promissory notes, aggregating $10,000: one for $2,500, payable in two years; and the others for $1,250, each payable in four, five, six, seven, and eight years, without interest. These notes William M. Lloyd immediately indorsed over to Lloyd, Huff & Watt, and delivered them to Mr. Watt, who then represented the creditors
The enterprise into which John Lloyd and William II. Watt embarked, involved the opening up of coal mines at a large expenditure of money, and they did tfms expend from $10,000 to $12,000. Before tho conveyance by William M. Lloyd to John Lloyd of the third interest in this property, some of the creditors of Lloyd, Huff & Watt were consulted by Air. Watt, and they approved the sale. The price which John Lloyd gave, as represented by his notes, under the circumstances, was fair, and all the property was worth. The lease to John Lloyd, which was for 12 years, stipulated that no royalty should he payable to William ML Lloyd until the debts of Lloyd, Huff & Whitt were paid. This disposition of the property was in the interest of the creditors of that firm, none of whom have complained of it. Although the title of the property was not conveyed to the partners as such, or for the use of the firm of Lloyd, Huff & Co., it was bought with the money of that firm. And while William 1VL Lloyd was not bound to devote it to the firm debts, still it was a proper and strictly equitable thing to do. Under all tho circumstances, I fail to discover anything fraudulent in the transaction.
Let a decree bo drawn dismissing the bill, with costs.