98 Mass. 118 | Mass. | 1867
The results at which the court have arrived upon the several questions of fact in the present cause may be verv
1. That a copartnership existed between the plaintiff and defendants in equity;
2. That Henry Hunt was admitted as a partner into the firm August 12,1861; ■
3. That the business carried on at Evansville, Indiana, by John Lane and by Thomas J. Hunt was for and on account of said firm ; and that, after the transfer to Peter Semonin, all the interest in - the business carried on by Semonin which was represented either by Thomas J. Hunt or Henry Hunt belongs to said firm. So far as either of the defendants in this suit has received any of the proceeds of said business at Evansville, it must be accounted for under the present bill. Whether any further decree can be made touching this branch of the business is a question reserved till the coming in of the master’s report.
4. That the business at New Orleans carried on by John Lane was for and on account of said firm.
5. We are satisfied that the firm of Varney & Harvey was formed in part at least for the purpose of transferring to it the property of the former firm of Hunt & Lane in order to hinder, delay and defraud its creditors ; that the property sold to it by Hunt & Lane was intended to be concealed and covered up from attachment; and that the interest of Hunt & Lane in the new copartnership of Varney & Harvey was kept secret, and their names were omitted from the books of the new firm as copartners, with the same view and design; and that all this was done with the knowledge and participation of the plaintiff.
These facts being established, it is insisted on behalf of the defendants that the whole business was fraudulent and illegal, and that a court of justice will not interfere, between parties equally guilty, to adjust their controversies and apportion the shares to which they are respectively‘entitled accruing from a fraudulent, illegal and immoral enterprise. The principle invoked is well established, founded upon the highest considerations of
In this Commonwealth a long series of cases has established the rule that a transfer either of real or personal property, made with a view to defraud the creditors of the grantor, although the grantee has participated in this intent, is good between the parties, and void as against creditors only; or, to speak accurately, is voidable by creditors at their election. If no creditors intervene, the conveyance stands; if creditors elect to affirm the transfer and receive the consideration, it is thereby ratified and confirmed. Payment of the grantor’s debts to the full value of the property purges the fraud. Drinkwater v. Drinkwater, 4 Mass. 354. Oriental Bank v. Haskins, 3 Met. 332. Crowninshield v. Kittridge, 7 Met. 520. This doctrine is not restricted to executed contracts; but such as are executory merely are likewise treated as valid between the original parties, although they were entered into for the purpose of keeping the creditors of the vendor from attaching the property. Knapp v. Lee, 3 Pick. 452. In Dyer v. Homer, 22 Pick. 253, this precise point was decided, and it was held that a note given for the price of chattels sold for the express purpose of keeping them from attachment by the creditors of the vendor, who by agreement retained possession of the property after the sale, was valid, and that the sale itself between the parties must be treated as fair and obligatory. This case was twice before the court, the first
So far as opposite views are expressed in Smith v. Hubbs, 1 Fairf. 71, decided in 1833, they must be regarded as overruled by Nichols v. Patten, 18 Maine, 229-238, decided in 1841, in which the same court adopted the rule held in Massachusetts, and supported their conclusion by the decisions in this state.
The decision of Chancellor Kent in St. John v. Benedict, 6 Johns. Ch. 111, that specific performance will not be decreed in equity of an agreement intended to hinder, defeat or defraud the creditors of the plaintiff, proceeds upon the well understood principle that a bill for specific performance is addressed to the sound judicial discretion of the court. By implication this case recognizes the rule that such a contract is not in law absolutely void.
Nellis v. Clark, 20 Wend. 24, was decided in the supreme court of New York in 1838, by Mr. Justice Cowen and Mr. Justice Bronson, and sustains the position which the present defendants maintain. But a dissenting opinion was delivered by the third judge, Chief Justice Nelson, now of the supreme court of the United States, the reasoning and conclusions of which commend themselves to our judgment in preference to the opinion of the majority of that court.
One case in our own reports requires examination. Canton v. Dorchester, 8 Cush. 525. There the controversy was, in
The result is, that the defendants in equity cannot be allowed to prove that the stock taken from the old firm of Hunt & Lane by the new firm of Varney & Harvey was transferred to conceal it from attachment; and the notes given therefor are held to be valid.
The question whether an account between the members of the new partnership should be refused, and each be allowed to retain the share which happens to remain in his hands, without regard to equality, depends upon similar principles.
There was no element of illegality or immorality in the business of the firm. 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 to apply to this case the maxim, in pari delicto potior est conditio defendentis, would be to exercise rigor beyond the limits of wholesome severity.
Brooks v. Martin, 2 Wallace, 72, adopts principles far more extensive than those we have found it necessary to affirm for the decision of the present cause.
A decree may be entered appointing a receiver and referring the cause to a master to state an account.
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