Turbeville v. Gibson

52 Tenn. 565 | Tenn. | 1871

Lead Opinion

Freeman, J.,

delivered the opinion of the Court.

This bill is filed by various creditors of Robert Adams, to set aside several deeds of conveyance made to defendant Gibson of tracts of land in Henry county, besides a conveyance of personalty made to a son of said Adams.

The allegations of the bill are, that the deeds were made to hinder and delay the creditors of said Adams, and that they were fraudulent and void. After this allegation, the bill states that if the deeds are not in fact fraudulent, they were made to secure some small debts due by Adams to said Gibson.

The bill prays that the deeds be declared fradulent and void, and property conveyed be subjected to payment of complainant’s debts; and further, that “if said conveyances are not fraudulent and void, but executed in good faith to secure the said Gibson in various sums of money claimed to be due him from Adams, that said conveyances be held as mortgages and be foreclosed, Gibson’s debts be satisfied, and surplus proceeds of sale be appropriated to payment of debts in the bill mentioned.” .

The answer of Gibson “ denies that any of the conveyances were without consideration, or that they were made for the purpose of hindering, delaying or defrauding any of the creditors of said Adams; but were made in good faith for the purposes thereinafter stated.” He then states that Adams was indebted to him in various sums, and he was security for Adams in several cases, amounting in all to the sum of $443; that Adams conveyed the land in executed deed to him, it being a conveyance of one hundred acres, made June 7th, 1861, the consideration stated on the tace of tbe deed being 12,000. He states that the deed made by Brown to him of the other tract of one hundred and two acres, for the consideration of $1,000, expressed on' face of the deed of same date, was made by the direction of Adams, the land being Adams’, but legal title being in Brown. As to the other tract of fifty acres, conveyed by Brockwell, Adams had bought it, paid part of the purchase money, and Gibson paid balance and took deed of this third tract to himself, expressing the consideration to be $500. The fourth deed made by Adams to Gibson of fifty acres of land, is not contested. It is for consideration of $5,000, which was paid and is not denied.

These deeds were all of same date except the last, which was made 22d May, 1860 — the others June 7th, 1861.

The answer claims that these three deeds were made to secure the amount due from Adams to Gibson, and to indemnify him as security on the other debts, for which he was bound, amounting in all to about $443, “with the further understanding that Gibson should afterward stand as security, or pay any debt that might be owing by said Adams, provided the amount should not exceed the value of the land. It was also understood, he says, that he should re-convey said lands to said Adams whenever he should be paid the amount due him; should be released as ¡security, and repaid any amount he might advance in payment of the debts of said Adams.

The conveyances, he says, though absolute on their face, were, in fact, mortgages intended to secure defendant in amount due him, the amount for which he might be held liable as security, and any amount that he might afterwards pay for said Adams.

He then goes on to state a considerable amount of indebtedness of Adams to him incurred after the making of these deeds, making, including the amount existing at that date, the sum of about $1,159,- subject to a credit of $175 for a mule, leaving as debts claimed to be fastened on these, lands, about $984.

The first question which we propose to consider is admitting the deeds were not fraudulent in fact, but were intended as mortgages, though absolute on their face, and the transaction was bona fide, can Gibson, as against creditors, hold the land subject to any debts in his favor except those in existence at the time of the contract, to-wit, the sum of about $443. In other words, can a mortgage, existing alone as such in parol, be held good as against creditors for future advances and liabilities contracted to be incurred by a secret parol agreement of the parties.

The question is alluded to incidentally in case of Peacock v. Tompkins, Meigs’ Reports, 328, as to whether, where the deed on its face stipulates for future advances, it would be fraudulent as to creditors. As to this question, Judge Reese says, without deeming it necessary to assent to or repudiate the proposition, “that such a, stipulation would be valid, it is sufficient to remark that such is not the stipulation in the deed upon this record.” He then goes on to decide the real question presented by the facts in that case. The facts ryere that 'William Turner, being in debt to various parties, in sums amounting in all to $1,198.45, conveyed an amount of property, estimated to be worth about $1,600, to a trustee, to secure their payment. To cover the difference between the debts actually due and value of the property, and probably to secure future advances or further credit, Turner executed two notes at same date of the deed — one to Tompkins for $300, the other to McAuly for $200 — which were intended to be secured, and were covered by this deed of trust. In the bill filed to declare this deed fraudulent, it was charged that the deed was fraudulent, especially as to these two notes. It appeared that these two notes were not given for money due by Turner, but in language of the opinion, “were executed at the time of making the deed of assignment, not to secure any debt then due or advances then made, but upon a verbal agreement and understanding between the parties that credit should be given to Turner, and advances made to him, for the joint object of enabling him to support his family and manufacture the materials assigned for the benefit of the assignor and assignees.” The Court say, “was this fraudulent in fact or by operation of law, as being calculated to embarrass and postpone other creditors in the collection of their debts?”

The Court held this deed fraudulent by operation of law, and set it aside as void, “constituting no valid security for the debt.” The reasons given are, “that the deed announces to other creditors an existing debt of $500, which did not exist in fact, and for which there was no consideration, other than the secret agreement of the parties.” If this can be done, say the Court, and the deed remain a valid security for the debt really due, is it not obvious that it would furnish to fraudulent and embarrassed debtors, and their friendly assignees, a mode of protecting property against executions of other creditors, as simple and easy as it would be safe? A small amount of' actual indebtedness as a nucleus, might in this manner be enlarged to such magnitude as to cover considerable property, and so as to alarm and repel other creditors, depriving them of legal remedies, constraining them to seek discovery and relief, and investigate the question of extent of indebtedness in a Court of Chancery. It may be added, the Court distinctly hold, that no actual or intentional fraud in fact existed in the case.

This case certainly decides the very question before us, that a contract at the time for future advances can not be sustained, and goes further, and makes the fact, that such future advances so contracted for are placed in the amount secured by the deed, while the contract for such advances was verbal, and not shown on face of the deed, have the effect to render the deed of trust absolutely void, as to creditors, even as to the- debts actually secured. '

On the first point the. decision is clear, distinct, and unequivocal.

We are not aware that this case has ever been overruled by this Court.

If, however, a stipulation in the deed of trust, securing debts having no existence, but assumed to exist, and that deed registered, shall render the deed void, witb much more force may it be held, that a stipulation secretly made, to secure debts to be created" in tbe future, having no existence at the time, would not. be valid against the claims of creditors. The principle of this case is, that the statement oí a false consideration in such case, tends necessarily to hinder, embarrass, and delay creditors, by giving notice of a state of indebtedness not in existence, yet equally operative to deter creditors from enforcing their claims against the property, as if real, and hindering and delaying them, by compelling a bill in Chancery to develop the facts of the case.

"We may here remark, that by the policy of our registration laws, as has been repeatedly held, all secret liens are discouraged; in fact, as we understand them, as against creditors are absolutely forbidden.

In case of McGavock and Wife v. Deery et als., 1 Col., 368, 369, the direct question was presented to the Court, of the validity of a deed, that on its face secures future advances, or liabilities to be incurred.

The Court hold most correctly, after citing a number of authorities, that such a deed is valid, and “that the only question in such cases is, the bona fides of the transaction.”

The Court refer in the above case to the cases of Peacock v. Tompkins, and Neuffer v. Pardue, 3 Sneed, 193, with approval, and say, “that in both cases it was held that an assignment will not be held good to secure future advances or subsequent debts, where there is no stipulation to that effect in the deed; that it can not be done by a parol agreement or understanding.”

In 3 Sneed ease, the Court say the deed sets forth a false and fictitious consideration, calculated to deceive creditors. It purports to be for $2,500, when only about $300 were in fact due. “It does not provide for future advances in goods or money, and purport on its face to be a security for such prospective debts. If this could be permitted at all, that is, to provide for future debts, it could only be by spreading the contract upon the deed, so that all having an interest in the matter could be informed as to the extent of the incumbrance. One creditor is not allowed to provide security for himself as to future debts and dealings by parol, to the hindrance and delay of other honest creditors.”

The Court go on to say: “ It is well settled that a subsequent debt under a parol agreement at the time, or by distinct contract, can not be looked to or embraced by a mortgage or assignment which is silent in relation thereto, and this last case is the case before n^” Now the Court in this case decided, or understood they were deciding, the precise question, in principle, now before us, that is, whether a mortgage can be made to cover debts not included in it, to be created in the future. If such mortgage registered as a security for money, on its face showing this fact, can not cover future advances, surely it would be doing violence to this principle to hold, that a deed absolute on its face, not purporting to be a security for a debt, either present or future, may first be turned into a mortgage by parol, and then, as a second' step, the debt which it secures be proven by parol to have been secured by tbe deed, and that debt, one created long after making the conveyance. This, it seems to us, would be to do away with our registration laws entirely, and to make secret parol, unregistered liens, more effective than written ones, for in case of written mortgage in due form, the rights of a creditor would override the rights of the mortgagee, though he had advanced his money on the faith of the mortgage, if he fails to have his security duly registered, and that in proper county.

We would seriously ask, if any Court ought to overrule all this weight of judicial opinion and well-considered reasoning, to maintain what may be deemed a simple logical consequence of the doctrine that a deed absolute on its face may be shown to be a mortgage by parol. We can not clearly see that the .deduction is fairly drawn, that because a deed absolute on its face, may, as between the maker of it and the party to whom it is made, or even as against a purchaser with notice of the deed from the maker, be shown to be a mortgage, and sustained as such, that it follows that it can also, under our law, be equally effective against a creditor. The difference between the rights of a creditor with or without notice and a purchaser with notice of a conveyance, is broad and well defined. The purchaser with notice of a preexisting deed by his vendor conveying the land, would but stand in the shoes of his vendor, and take subject to the deed. * A creditor with an execution, on filing a bill to enforce his debt, though he has notice of the fact that his debtor has sold the land, received the purchase money, made and delivered a deed in fee simple for it, can by virtue of his judgment and execution override all this, levy on the land, sell it for his debt, and nothing can interfere with him in the assertion of his rights. He can only be defeated of his claims upon his debtor’s property by a bona fide, transfer of the property, or contract to do so, as in case of title bond, and that duly registered as the law directs.

If this presents truly the rights of a creditor, much more may he override a verbal agreement for a mortgage, that can not by its very nature be registered.

The case of Ruggles v. Williams, 1 Head, 141, is cited as showing that a deed absolute on its face, may be shown to be a mortgage, and maintained as a valid security, as against a subsequent mortgagee, and that when a parol defeasance is shown, it only has the effect to reduce the title to that which was intended by the parties — a security for debts, instead of a sale of the property. "We admit it was so held in that case, and feel no disposition to disturb its authority. As an original question, however, we would hold differently perhaps, but cheerfully yield to the authority of a well considered decision on such a question as this.

It will be seen, however, that in this case the contest was between two conveyances, both made to secure debts.

The Court say, the great object of the registration laws is to give notice of the position and change of titles to property, as well as incumbrances on it. This is necessary for protection of purchasers, and the information of creditors. Certainly, the Court adds, a subsequent purchaser can not object, because he has notice that the whole estate has passed, instead of the imposition of an incumbrance upon it. The reasoning of the Judge who delivered the opinion we admit includes the case of a creditor. Yet the case in hand presents the question of the right of a creditor with a judgment, or filing a bill to enforce his debt, and the generality of the reasoning must be limited and restrained by the facts of the case; the question raised on these facts, or such as are assumed to exist, alone being decided by the Court and authoritative. In fact, on looking closely into the reasoning, the use of the word, creditor, by the learned Judge, was- probably intended to apply to a creditor taking a subsequent mortgage, as that was the only case before him, and has no reference to the case of one seeking to enforce his rights by process of law, and not by contract. It is seen on page 142 of case, that one of the parties to the original proceeding in this case was a judgment creditor; but that he had obtained relief, and, in language of the Court, no further question was made as to him — his case was not before the Court.

The Court, however, in this case, distinctly recognize the doctrine as we maintain in this opinion, as to rights of creditors or subsequent incumbrancers against debts and liabilities not in existence, which it was claimed the deed was designed to secure. The Court say, page 145, “that an account was ordered as to that matter, and how it may turn out upon investigation, we can not now tell. We have not that aspect of the case before us; it may bring up very different questions and entirely change the result.” The Court in conclusion say: We decide nothing more now than that, all other things being right, a party is not deprived of the benefit of his security because the instrument registered is in the form of a deed. This may well stand consistent with other decisions of our State, as to subsequent purchasers or incumbrancers, the case before the Court, but can not fairly be applied to the case of a judgment creditor.

It will be seen, however, that even the reasoning of Judge Caruthers does not go as far as is now proposed ; for, he says (p. 144): “ So in this case, though the paper is not good to carry the absolute estate, yet it is valid as an incumbrance to the extent of the debts secured. It is enough for a subsequent incum-brancer, that the title registered against him is reduced in his favor, and he has the same advantage as if the actual transaction were in writing.” This' shows that he only refers to creditors by subsequent incumbrances, who would stand on the same ground as purchasers.

The case of Jones v. Jones, 1 Head, 105, is referred to; but it will be seen in that case, that the rights of creditors were not involved nor alluded to in the opinion.

It will be observed, that in the case (1 Head) the conveyance was only allowed as security for the actual amount due as against a subsequent mortgage, and no question was made as to future advances. On the contrary, it was clearly indicated by the Court, that if, on inquiry, it should be shown that the debts it was designed to secure were not in fact in existence, it would present quite a different question, and entirely change the result.

A number of cases are cited from New York, supposed to sustain the position that subsequent advances may be good as a charge on property conveyed by absolute deed. Two specially are cited from Abbott’s Digest, vol. 4, p. 50.

One of these cases is Townsend v. Empire Stone Dressing Company, 6 Duer, 208. We have not the case itself before us, so as to see on what facts it was decided. From the digest of the case we learn only that it holds that “ a mortgage for a definite sum may stand for the advances subsequently made up to the specified amount; but it can not be held to secure that sirm fully, and be extended by a parol agreement to a further additional sum.” We can not see that this statement aids the position assumed, for it is the case of a mortgage, not an absolute deed, and only holds that such mortgage is good for the sum specified on its face, even though subsequently advanced.

We do not know, from the statement, how the question was raised, but nothing is said with reference to the rights of creditors, or whether, as against creditors, the claim would have been allowed. As between the parties themselves to the mortgage, there can be no objection to the principle; but we think it fails entirely to reach the question in this case, and has no application or bearing on it.

The other case is Craig v. Tappan, 2 Sand, 78; which simply lays down the principle, that a “mortgage, to secure future advances, is valid, and need not express that it is so intended; but it must exhibit the extent.of the lien intended to be created.” It also holds, that “a subsequent mortgage for a debt will take precedence over it as to the advances thereafter made, but only from the time of the execution of such last mortgage, and not from the time it was agreed upon, though the first mortgagee knew of the intention.” We can not see that this case sustains the view contended for. It is a case of an actual mortgage for a specified sum, and has no bearing on the question of first turning an absolute deed into a mortgage, or making the mortgage by parol proof, and then. by parol showing an agreement for future advances; thus by parol raising the lien of a mortgage, and by parol showing the extent of the lien, and that against a creditor seeking to enforce an honest claim against his debtor.

We may remark that, if these cases did support the view contended for, they are but decisions of inferior Courts, and not of Courts of the last resort, and, while they are of respectable authority, we would not feel bound by any means to follow them, much less to be controlled by the meagre statement of them given in the Digest.

Mr. Willard, a law writer of that State, whose work is one of considerable merit, lays it down, that “it is the duty of the incumbrancer to see that his mortgage is correctly recorded; and a subsequent mortgagee or purchaser in good faith, is not to be charged with notice of the contents of the mortgage any further than they may be contained in the mortgage as recorded or registered; as where a mortgage for $3,000 was by mistake registered as being only to secure the payment of $300, it was held to be notice to subsequent bona fide purchasers to the extent only of the latter sum: ” p. 254. See also 1 J. Ch. R., 288.

The case in 2 J. Ch. R., 308, 309, simply states the rule that a mortgage may be sustained for future advances, and is not for that reason fraudulent. The case of James v. Johnson, 6 J. Ch. R., 428, 429, holds “that a mortgage for a debt may be held’ as security for further loans if there be no intervening right, and though the first deed is absolute in terms, and the defeasance is by parol, it is valid and effective between the parties themselves.” It will be seen that none of the cases touch the real question in the one under discussion, except on examination of the case in 6 J. Ch. R., 430, Chancellor Kent, while holding as above stated, says: “It is only where the rights of third persons are prejudiced by want of notice that the extension of the security is prevented.” In this case, the rights of third parties, and whether they can be interfered with, is the very question, and, in such case, Chancellor Kent holds it can not be allowed. So far as the case reaches the question, it is an authority against the position for which it is cited.

We may remark that in all these eases, as well as the case in 1 Head, the question was between the mortgage, either under a regular mortgage or an absolute deed, with a parol defeasance, where the doctrine of notice has legitimate application, as mortgagees are purchasers under the Registration Act of 1831, 3 Hum., 619. But the case of a creditor with a judgment, or one filing a bill seeking to enforce his debt, stands on entirely different grounds. With him the question of notice has nothing to do, further than that an instrument properly registered will defeat his rights, if bona fide made, to the extent of the contract as shown on its face. In other words, he has no. rights that will override what is bona fide, and placed on the record as such. But he is not to be affected by what does not appear, and of which the registration contains no evidence.

It is insisted, however, that no good reason exists why future advances may not as well be provided for by a parol contract as by one in writing and recorded, if they are stipulated for at the time of making the absolute deed. This might be so, if in the first place our registration laws had not been passed, in order that all liens as against creditors should be known, and required to be found on the Register’s books. If not there, as to such creditors they have no existence. It is admitted in this connection, that if this were an open question, “in view of our registration laws and their policy, it would be the sounder doctrine to hold that one of the best methods of suppressing frauds would be to hold such deeds, absolute on their face, though mortgages by parol, fraudulent and void as to creditors.” Then, we ask, upon what principle can we insist on extending the operation of such deeds, so as to cover not only the sum actually secured, but all •that may be contracted to be advanced, or all liabilities to be incurred in all future time; for in this oase there is no limitation as to time, only that Gibson was not bound to advance more than the land was worth. The language of the answer being, that the deed was to secure the existing debt, and liability as security then incurred, “with the further understanding that this defendant should afterward stand as his security, or pay any debt that might be owing by said Adams, provided the amount should not exceed the value of the land.” “If this may be done,” in the language of Judge Eeese, in Peacock v. Tompkins, “and the deed remain a valid security for the debt really due, is it not obvious that it would furnish to fraudulent and embarrassed debtors, and their friendly assignees, a mode of protecting property against the executions of other creditors, as simple and easy as it would be safe? A small amount of actual indebtedness, to serve as a nucleus, might in this manner be enlarged to cover a considerable amount of property, so as to alarm and repel other creditors.” And we ask, can a party be thus permitted to so cover up his property, that a creditor with a judgment and execution at law, can be defied, and be compelled to have another suit in Chancery before he can make good his claim or ascertain its situation, the debtor remaining in possession for five or six years, as in this case, and till he dies, enjoying its rents and profits, and it not be said that the effect of such conveyance is to hinder and delay the creditor in collection of his debt, and to benefit tbe debtor? We think not. And shall not the parties be fairly held to intend that which is the natural and inevitable' result of their conduct, as in other cases? We confess we can see no reason why it should not be so held. In truth, we think the real question in this case is not whether we shall follow B the principle of allowing a deed, absolute on its face, H to be turned into a mortgage by parol, but is, whether I we shall overrule and set aside the three well-consid- | ered cases decided by our own Court, to-wit, the case of Peacock v. Tompkins, Meigs’ R., the case in 3 Sneed, 193, and McGavock and wife v. Deery, 1 Col., 368, 369, and that in favor of a principle of most doubtful propriety, to say the least of it, in all its aspects.

Under our registration - laws, a deed registered, and defectively probated — as where it is proven by witnesses, instead of acknowledged by bargainor, and Clerk fails to state that “the witnesses were personally acquainted with bargainor” — is void as to judgment creditors: 3 Col., 508, 509. And it is too well settled to need authority, that knowledge even of a deed of conveyance made on valuable consideration interposes no bar to creditor, the creditor not being chargeable with notice, as is a subsequent purchaser: 4 Hum., 484.

It seems to us, that the terms and requirements, as well as the sound policy of our registration laws, would be conclusive of this question. After providing what instruments shall be registered, the Code, sec. 2075, is, that “any of said instruments not so proved or acknowledged and registered, or noted for registration, shall be null and void as to existing or subsequent creditors of, or bona fide purchasers from, the makers without notice.” Does the registration of a deed, absolute on its face, convey any notice, or means of knowledge to a creditor of a secret parol agreement for future advances, or we may add, of advances already made? Most assuredly not; and on principle, both ought to be held alike void as to such creditors. Chancellor Kent, in 1 J. C. R.., 300, well remarks, “the act providing that all persons might have recourse to the registry, intended that as the correct, and sufficient source of information; and it would be a doctrine productive of immense mischief to oblige a purchaser to look, at his peril, to the contents of every mortgage, and to be bound by them, when different from the contents as declared in the registry. The registry might thus prove only a snare to the purchaser, and no person could be safe in his purchase, without hunting out, and inspecting the original mortgage.” This was the case of mortgage for $3,000 — that had been registered as for $300 by mistake. He says, further, “the statute did not intend to put the party upon further inquiry. The registry was. intended to contain in itself all the knowledge of the mortgage requisite for the purchaser’s safety.”

If this be the sound principle — and we think it can not be gainsaid — then much more ought deeds, that absolutely mislead by reciting considerations amounting to $3,500, when in fact, at their making, there was only $443, be held void as to a creditor. In fact,, the case stands as if no deed had been made or registered, as to such creditors; for what is sought to be set up against them is not in the deed, not registered, but exists either in verbal contract, secret, known only perhaps to the parties themselves, or if reduced to-writing, and not registered, stands, and should stand as any other unregistered paper, of no effect as against the rights of a creditor.

In a word, in order to hold that the secret verbal contract shall defeat or postpone the creditor, we must hold in principle that there is no difference whatever, as against a creditor, between an instrument registered and a contract existing only in verbal agreement; that one is as effective as the other. As we have shown, the agreement sought to be interposed to defeat or postpone the creditor in this case is a verbal one, existing in parol alone.

The Code, sec. 2030, provides that “all deeds for the absolute conveyance of lands, tenements or hereditaments, or any estate therein,” shall be registered, and all “mortgages and deeds of trust, of either real or personal property,” shall be registered.

Does not this fairly mean that the deed absolute shall be what it imports to be for all purposes of notice; and that the mortgage and deed of trust shall each alike be what they purport to be, and shall give notice truly of their terms? Or, may we say that it shall be registered, and appear to be absolute on its face, and yet shall' be notice of something different from what it recites, or appearing to be a mortgage on its face, may as well give notice of an absolute conveyance to a creditor? This would be to make notice by registration not only a snare to mislead, a false light to deceive, but to reduce our registration laws, by construction, to a solemn unmeaning trick, only adapted to deception, or rather far better adapted to deceive and mislead than to give information of the truth. In fact, on this principle, registration amounts to nothing, as it may as well be false as true, the facts having to be sought by information to be derived from a different source.

We have gone into this question at much greater length than was desirable, because of the fact of difference in opinion entertained, and most ably and vigorously maintained by other members of the Court, who feel bound to, and do, dissent from the views herein presented.

In conclusion, it is proper to say, that in the opinion of the writer of this opinion, the deeds in question are not only fraudulent in law but in fact. He concludes thus, because of the fact of the possession remaining unchanged for over five years, the meagre sum, $443, actually secured; the fact that only a small sum, seven hundred and odd dollars, was advanced by Gibson, or liability contracted in five years; the fact that Adams, while in possession, with the assent of Gibson, is proven to have said the conveyance was made to keep off certain security debts; that he had in two other instances tried to get parties to accept a conveyance of his lands, after finding that such parties were not in debt themselves; and the further fact, that the title to three tracts of land is placed in the hands of his friend and neighbor in one day, with a false consideration, stated at $3,500, when in fact the smallest tract. was enough to amply secure the $443 due £¡¡nd contingent liability already incurred. Taking all these and other facts shown in the record, I can not persuade myself that Gibson was not informed of the purpose for which the deed was made by his friend, aad participated in that purpose. The answer of Gibson, denying in general terms that the deeds were fraudulent, goes for but little with me, as I can very well see that he would not probably consider it fraudulent to shield the property of his friend from a security debt. At any l’ate, he clearly understood and knew the terms of the deeds, the effect of which was to hinder and delay creditors, and I think is responsible for the legitimate consequences of his acts.

However, a majority of the Court hold there was no fraud in fact, but that, under the case of Alley v. Connell et als., 3 Head, 578, it must stand as a security for the amount actually due, or for which Gibson was liable at the time of making the deeds — as being only fraudulent in law, and obtained under suspicious circumstances, and such will be the decree of the Court.

The result is, that the land will be decreed to be sold, except as to the tract mentioned as not contested; and Gibson’s debt due at time of making deed, and-liability existing then, and afterward paid, amounting to about $443, will first be satisfied, and then the balance of proceeds will be appropriated to the payment of debts of complainants.

The deeds being held, under this view, as mortgages for this sum, Mrs. Adams will be entitled to dower in these lands, and the same will be sold subject to her dower.

As to deed to personalty to Adams, the son, it will be held void and set aside, and the property conveyed therein may be appropriated to payment of complainant's debts.

The costs of this Court will be paid by Gibson, and also of the Court below.

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Dissenting Opinion

NelsoN, J.,

dissented, and said:

Various persons, who were creditors of Robert T. Adams in his lifetime, are associated as complainants in the bill first named, against Gibson and the administrator and the heirs at law of said Adams; the objects of which are to effect the collection of their claims by the sale of certain lands conveyed by said Adams, and by others at his instance, to said Gibson, and also of certain personal property for which a bill of sale was executed by said Adams to his son, F. M. Adams. The prayer of the bill is, in the alternative, to set aside the deeds, all of which are absolute, as fraudulent, or that they may be declared mortgages, if they are not fraudulent. Mary A. Adams is the widow of Robert T. Adams, and the objects of her bill and amended bill are, also, to show that the conveyances of the land, though absolute, were in truth and in fact mortgages merely, and to obtain an assignment. of dower therein.

In the bill filed by Turbeville and others, the defendants are required “to answer, upon their corporal oaths, according to the strict rules of your Honor’s Court;” and the said Gibson is required to answer particularly as to the said conveyance of said real property — how much he paid upon each conveyance; whether the same was made to secure him in sums of money, and if so, how much.” ■ As to the deed executed to him by R. T. Adams for one hundred acres, purporting to be in consideration of $2,000, dated and registered 7th June, 1861, he admits that he conveyed the land to W. L. Pryor, and that Pryor re-conveyed it to him on the 10th August, 1866, by a quit claim deed, the consideration of which was $461.70, due by said Adams to said Pryor. As to the deed executed and registered on the said 7th June, 1861, from J. A. Brown to Gibson, purporting to be in consideration of - $1,000, and conveying a tract of one hundred and one acres, he says he does not know that it had been previously mortgaged to Brown, but that the deed was made with the consent of Adams, in connection with other lands, to secure Gibson, as hereinafter stated. In regard to the deed for fifty acres, executed by May Brockwell to said Gibson, bearing date and registered on the said 7th June, 1861, and purporting to be for the consideration of $500, Gibson states that Adams held a title bond for the land and had paid part of the purchase money, but that he, Gibson, paid the residue and held the land as a security. In reference to the deed for fifty acres, bearing date 21st May, 1860, and registered 23d January, 1866, executed by said Adams to said Gibson, and purporting to be in consideration of $510, he states that said tract was sold for a division among tbe heirs of George Gibson, clec’cl, and bought by Adams; that he purchased the same from said Adams at the time and for the consideration stated in the deed, of which he paid $100 to Adams and $410 to Nay, the commissioner. He expressly denies that any of said conveyances were without consideration, or executed for the purpose of hindering and delaying creditors, and makes further and fuller explanations as to some of said debts, not material to be here noticed. He specifies, in his answer, certain debts which were due to him from Adams and others, for which he was liable as the surety of Adams, amoünting in the aggregate and without interest to $443.63, and states that said deeds, with the exception of the deed bearing date 21st May, 1860, which was absolute, were severally executed to secure the amount due him, and the sums for which he was bound as surety, and with the understanding that he, Gibson, should afterward stand as his security, or pay any debt that might be owing by said Nobert T., provided the amount should not exceed the value of the land,. and reconvey -the lands to the said Nobert T. whenever the said Gibson should be released as surety and repaid the amount of his advances. It is admitted in the answer, that the said Nobert T. continued in possession of the lands until his death, and that the conveyances, though absolute on their face, were in fact mortgages. Including the amount due' him, personally, and various other debts paid by him for said Adams, which are particularly specified, said Gibson shows that the amount for which said lands are liable, exclusive of interest, is $1,159.64, less the price of a mule credited at $175, and that the balance due on the foot of the mortgage is about $994.64, as ascertained by a calculation of the sums stated in his answer. He states that none of said indebtedness has been paid, except the said sum of $175.

The answer is fully and directly responsive to the bill. An effort was made to disprove it by various witnesses, but not successfully. Two of the heirs of Adams state that, on the day of their father’s funeral, Gibson, in reply to a question propounded to him when the three were riding together on their way to the grave, stated that their father owed him about $150. Another of the heirs states that, when he returned from the Federal army in 1865, his father desired to borrow $300, which he was unable to loan, and that his father said he owed Gibson that amount and had conveyed his land to him to keep it from being taken for security debts, and that if he could get the money it would release the land. F. M. Adams, another of the heirs, deposes, in substance, that there was an obligation between his father and Gibson, in regard to the land, which Gibson got from him twice and lost; that the obligation recited that Gibson held the land as collateral security for the payment of certain debts, not specified, and was to reconvey when they were paid; that his father was anxious to get the land back, and procured witness to see and converse with Gibson, and that Gibson, said, if the Neese and Williams debts were adjusted, that the matters between them could be arranged at any time between themselves; that the parties afterward met in Paris, in January, 1866, with a view to the execution of a title bond by Gibson to the witness and his brother Joe, and that his father said it was not done, because Gibson said there was so large a crowd in town that it could be done at some other time.

It may be remarked in regard to this evidence, that the casual conversation on the day of the funeral and vdiile parties were on their way to the grave, is of but little importance, as it is not probable that on such an occasion Gibson would enter into detail as to the condition of the business, and it is most probable that if he had conversed at all, he would naturally speak of the debt due him personally. The statement of R. T. Adams, that there was due only about $300, does not contradict the answer. It is said to have been made in 1865, but at what time in that year is not shown, and the answer states that the two judgments in favor of Neese were rendered 19th August, 1865, for $243.45, which must have been in addition to the $300 admitted by Adams. The answer states further, that Gibson paid Pryor $471.63 on the 9th August, 1866, which was after the death of R. T. Adams in March, 1866. These sums substantially correspond with the amounts stated in Gibson's answer, and his other payments and liabilities are established by the evidence of Moore, Williams, Porter, Erazier, and Pryor. The evidence of F. M. Adams, as to the condition of the business in January, 1866, is not in material conflict either with the answer :or the statements of the other witnesses, and so far as it proves the contents of the lost obligation or defeasance, accords with the statements of Gibson as to the terms upon which he held the titles to the lands. So far •from. the answer being disproved, it is, in its most important statements, abundantly corroborated and fortified by the evidence in the record.

But it is insisted, that the various conveyances to Gibson are so covered by badges of fraud that they can not be held valid, for any purpose, as against complainants. To sustain this view, it is alleged that the vendor was largely indebted; that the consideration actually existing was inadequate; that it was falsely stated in the deeds, and that the deeds can not, lawfully, embrace advances made subsequent to their execution, upon a secret parol agreement for future advances.

It is somewhat difficult to define with precision the shadowy boundary that lies between instruments fraudulent in law and fraudulent in fact; and it is not necessary to review the numerous decisions heretofore made by this Court, cited by counsel on both sides in argument. For the purposes of this case, it is sufficient to extract the following observations made by Judge Green, and to re-affirm, with such changes of words as are necessary to adapt them to this case, the positions stated by him. He says: “ The doctrine that if the property sold remained in the- possession of the vendor, the sale is, per se, fraudulent, was overruled by this Court in the case of Callen v. Thompson, 3 Yerg., 475, where it is laid down that such possession is only prima facie evidence of fraud, and that tbe bona Jides of the transaction may be shown by proof. We think that any presumption of fraud, from this circumstance, is sufficiently explained and repelled by the proof of fairness as to the real existence of the debts intended to be secured. Besides, that the deeds to Gibson, though absolute on their face, were intended by the parties to constitute one mortgage only. And the possession of the property mortgaged, by the mortgagor, is no evidence of fraud, because it is consistent with the contract. Whenever, therefore, it shall be made to appear that a deed, absolute on its face, was intended by the parties as a mortgage only, the presumption of fraud, that may have existed by reason of the possession of the property by the bargainor, instantly disappears. ***** A debtor is not prevented from preferring a creditor and securing his debt in preference to the claims of other creditors, and a conveyance of his property, bona fide made .for such purpose, is valid. It is not made to hinder and delay creditors, but for the honest purpose of securing the debt of a favorite creditor Wiley v. Lashlee, 8 Hum., 720. See also Hefner v. Metcalf 1 Head, 580; Mitchell v. Beal, 8 Yerg., 142.

Whatever may have been the object of Robert T. Adams in making, or causing to be made, the deeds of conveyance to Gibson, there is no sufficient evidence in the record to disprove Gibson’s denial of any fraudulent purpose; and it should have been shown that both participated in the intent to hinder and delay creditors. - It does not appear that Gibson, at any time, claimed the absolute ownership of the lands, and be seems to have been willing at all times to recon-vey them whenever the debts were satisfied. Although the recital of a fictitious consideration, as the ground of a deed, is evidence of an intention to hinder and delay creditors, it is not conclusive; but the rule in equity, above declared, as to constructive mortgages, will, in its application to the facts of the case, be more fully considered and expounded.

If the question as to whether a deed, absolute on its face, may, under any circumstances, be declared a mortgage, was now for the first time before this Court, we would, in view of the policy of our registration laws, be strongly inclined to hold that it should not be so declared, and that one of the best methods of suppressing fraud would be to consider such a deed fraudulent as to creditors, because of the false assertions contained in it, and good between the parties, without any relief to the bargainor, because .the nature of such a transaction is to deceive and mislead. Such an instrument, when registered, displays false colors to the world, and enables a debtor to secure all the benefits which he usually expects to derive from the most fraudulent conveyance. But, as the question relates to property and titles, and a different rule has been established by this and other tribunals, it would be a public injury to disturb it; and we feel constrained to follow the decisions to their legitimate results. In the language of Judge Caruthers, “such, certainly, has been the uniform holding of our Courts. To change it now would be to shake the rights of property,- and lead to great mischief and confusion Ruggles v. Williams, 1 Head, 143. And in Willard’s Eq. J., 429, it is said — and numerous authorities are referred to in support of the position — that, “it is well settled, that parol evidence is admissable in a Court of Equity to show that a conveyance, absolute in its terms, was intended as a security for a debt;” and, it is added, that “as between the parties themselves, or purchasers with notice or .without consideration, the true character of the transaction may be shown, notwithstanding the statute of frauds.” See also 2 Story’s Eq., s. 1019; 3 Lead. Ca. in Eq., 3d Am. Ed., 608, 625, 626, 630; Jones v. Jones, 1 Head, 105.

Holding, as already announced, that the deeds to Gibson were not fraudulent, and that he held the lands in mortgage, the questions still recur, were the absolute deeds good only for the amount dire from Gibson, or for which he was liable at the dates of the conveyances? or were they good to cover the future advances mentioned in his answer?

The question, as to how far and under what circumstances an actual mortgage or deed of trust will be held as a security for future advances, has been, on several occasions, before this Court, but has never been fully determined. It was partially considered in Peacock v. Tompkins, Meigs R., 328, 329, Bennet v. Union Bank, 5 Hum., 617; Neiffer v. Pardue, 3 Sneed, 192, 193; Doyle v. Smith, 1 Col., 19; and McGavock and Wife v. Deery, 1 Col., 268, 269. Reference is made in the latter case, to Peacock v. Tompkins, and Neiffer v. Pardue, and the observation is made that “all that is. decided in either case (and that is done in both) is that an assignment will not be held to secure future advances, or subsequent debts, where there is no stipulation to that effect in the deed; that it can not be done by a parol agreement or understanding.” But as the deed in McGavock and Wife v. Deery provided for future advances, it was expressly held in that case, that “ mortgages may as well be given to secure future advances and contingent debts, as those which already exist and are certain and due.” This position is not only sustained by the authorities cited in the opinion, but accords with the doctrine stated in 4 Kent, 175; Hendricks v. Robinson, 2 Johns. Ch. R., 308, 309; Brinkerhoff v. Marvin, 5 J. Ch. R., 326, 327; and James v. Johnson, 6 J. Ch.. R., 429; see also, Willard’s Eq. J., 436, 437. And in the case above cited of Doyle v. Smith, 1 Col., 19, it is said that “a provision in a deed to secure future responsibilities is not necessarily fraudulent. It depends on the bona jides of the transaction. It can not, therefore, be absolutely asserted of such a provision in a deed, that it is fraudulent in law. This is a matter ■of proof and can not be determined on the face of the deed.” Chancellor Kent observes, in James v. Johnson, that it was a rule of the civil law, that if the debtor pledged property to secure a debt, and afterward another debt was contracted, the creditor might retain for both debts, provided there was nothing to negative the presumption of an implied contract that the pledge should be so applied; and he said that the deed, in the case before him, “ being absolute in terms, and the defeasance, by agreement, resting in parol, as a security for future responsibilities, of whatever kind, becomes more easy and flexible; and, as between the parties, it is perfectly plain that it ought to be so held. It is only when the rights of third persons are prejudiced by want of notice, that the extension of the security is prevented:” 6 J. Gh. R,., 429. He had previously said in Brinkerhoff v. Marvin, that “ the limititation to this doctrine, I should think, would be that when a subsequent judgment or mortgage intervened, further advances, after that period, could not be covered”: 5 J. Ch. R., 327.

The conclusions to be deduced from the New York cases as well as our own, are, that where there is a mortgage deed, parol proof will not be heard to establish other debts than those named in it; that" the deed will be good for future advances, if the purpose to secure them is therein expressed, although their amount may not be specified; and that if the deed is absolute on its face, a parol defeasance may be established either as to existing debts or as to future advances, but that this defeasance, while good between the parties, is not valid as to any advances not expressly provided for, made after a subequent judgment or mortgage.

The question still remains, is the parol defeasance to an absolute deed good as to existing creditors at large? If a debtor in failing circumstances may prefer one creditor to another, and if a mortgage is valid as to future advances, why shall not the parol defeasance agreed upon in good faith and without a fraudulent purpose, be as effectual against existing creditors as a mortgage in fact? Can it be urged, with propriety, that the true nature of the transaction is not disclosed to the world? Such is the fact with every absolute deed to which there is a secret written or parol de-feasance. Can it be said that it is good as to debts existing at the time, but not good as to future advances? If this is the case, then the unwritten and unregistered defeasance, which is relied upon to convert the deed into a mortgage, defeats the very purpose for which proof of its existence is admitted. The inevitable result of the doctrine that an absolute deed may be shown by parol to be a mortgage, is to place the mortgage on the same footing precisely as if the verbal conditions had been inserted in the deed; and if future advances may be provided for by a mortgage in fact, no good reason exists why they may not be provided for in a mortgage by equitable construction. These advances must be stipulated for at the time the mortgage is created, just as much in the one case as in the other; and when made in good faith, the conditions are as obligatory in the one case as in the other. In either case, the conditions would be void as to creditors having a judgment lien, but in both they are, as to creditors at large, obligatory and not fraudulent. A mortgage which contains a stipulation for future advances upon its face is declared valid because it- gives notice of the purpose for which the property is held; and in McGavock and wife v. Deery, it was not required that the amount of such advances should be stated in the deed. In the case of an absolute deed, converted by parol proof into a mortgage, the parol evidence supplies the place of the conditions written in the mortgage. It can not be taken in part and rejected in part any more than in the case of a mortgage in fact; and if it shows, as it does in this case, that the property was to be held bound for future advances to the extent of its value, the contract is just as good in the one instance as in the other, and binds the property at least to the amount of the consideration stated in the deed, if the advances are so much. It has been well said, that when the deed is registered, “a subsequent purchaser can not object, because he has notice that the whole estate has passed instead of the imposition of an incumbrance upon it. So, one about to deal with the owner has a stronger warning against extending credit:” Ruggles v. Williams, 1 Head, 144.

It may be further observed upon the case before ns, that if the deed had been executed for a fraudulent or dishonest purpose, the vendee would have insisted, as is usual in such cases, that it was made in good faith and upon full consideration. But the bar-gainee admits that they were a security merely, and the idea of fraud is repelled by the frankness of the admission. In the language of Judge Caruthers, "it may be a circumstance to excite suspicion that, where the object is only to secure debts, a deed, instead of a mortgage or deed of trust, is made and spread upon the records; yet it is not always done in bad faith. The course of our adjudications has been to hold all these securities good so far as they are for an honest purpose, but no further. Upon this policy we have held that a deed of trust, or mortgage, to secure some debts that are fictitious and others real and bona fide, shall be a valid security for the latter, though fraudulent as to the former:" Ruggles v. Williams, 1 Head, 144. See also Alley v. Connell, 3 Head, 582, 583.

From this view of the case, it results that so much of the Chancellor’s decree as declares that the deeds of conveyance to Gibson were fraudulent, is erroneous. But that part of the decree in which it is declared that the absolute deed, or bill of sale, executed by B. T. Adams to his son, F. M. Adams, on the 18th December, 1865, for personal property, is fraudulent and void, will be affirmed. This is proper, although Adams does not appeal, because the entire causes are brought here by • the appeals on the part of the complainants in the original bill, and of the defendant Gibson, from the entire decree in the orignal suit, and by the appeal of Turbeville and others from the decree in Mrs. Adams’ case. It would be useless to review all the evidence in relation to this deed, which is not admitted to be a mortgage, and purports to have been executed in consideration of six hundred and fifty dollars. Suffice it to observe, that the deed embraces corn, hay, fodder, wheat and other articles consumable in the use; that the consideration is only partially proved; that the property, after the alleged sale, was as much in the possession of the vendor as the vendee; that B. T. Adams was greatly embarrassed in his circumstances at the time; that the deed was executed only some three or four months before, and was not witnessed, or proved and registered, until after bis death; and that the object of said deed, as clearly shown by these and other facts and circumstances, was to hinder and delay creditors.

In the case of Mary A. Adams against Gibson and others, it appears that, on the 11th of July, 1861, an agreement was entered into between her and her husband, R. T. Adams, by which it was stipulated that the parties should separate; that they should “no longer consider or claim each other as companions, and that they mutually absolved each other from all matrimonial ties and obligations.” It was further agreed, that the said R. T. was to furnish the • said Mary A. “a certain amount of money and property, named in a memorandum in the hands of Benjamin Turbeville,” and that she accepted the same “ as a full and satisfactory portion of R. T. Adams’ property, and received it as a full and entire dowry, and should hold no other claims against him.” Said instrument .was duly proved by the acknowledgment of R. T. Adams, and the privy examination of his wife on the 20th, and registered 22nd July, 1861.

This agreement, even if it had been made with a trustee, would not bar the wife’s right to dower: see Watkins v. Watkins, 7 Yerg., 283; Parham v. Parham, 6 Hum., 287. As the wife is ordinarily incompetent under the law to make a contract, it may well be doubted whether it was valid, as to her, or could have been enforced against her, but it is not essential in this case to determine a question which has created so much doubt in the English tribunals: see Shelf, on Mar. and Div., 31; Law Lib., 631, 632, marg. As our statute requires the applicant for a divorce to swear that the application is not made out of levity or by collusion, married persons can not divorce themselves by contract, and the agreement in this case is null and void, as being contrary to public policy. If the power of legislation rested, as it does not, in this Court, we should hesitate long before allowing a divorce, or sanctioning a separation, for any cause other than that prescribed by the Divine Lawgiver himself, and would be disposed to adopt the views of Hume and Lord Stowell in preference to those of Milton and Dr. Symmons, as stated in Shelford, 370-374.

In the Code, the former statute, endowing the wife of equitable estates, is re-enacted; and, by sec. 2399, it is declared, that “ she shall also be entitled to dower in lands mortgaged or conveyed in trust to pay debts, when the husband dies before foreclosure of the mortgage or sale under the deed.” We hold that this section extends as well to an absolute conveyance, with a parol defeasance, which, in the view of a Court of Equity, is a mortgage, as to a mortgage in the usual form, and that the wife is entitled, upon an equitable construction of the statute, as well to dower in the one case as in the other.

Decree, therefore, that the absolute title to the land conveyed to Gibson by the deed of 21st May, 1860, was thereby vested in him; that he' held all the other lands as mortgages merely; that the widow is entitled to dower therein; that, after the assignment of her dower, said last named lands, together with the interest in remainder of the dower tract, shall be sold in the usual mode, to be specified in tbe decree, on a credit of six and twelve months; that an account shall be taken as to the amount due Gibson on the claims and payments specified in his answer, and also of the amounts due complainants; that the proceeds of the sales of the land shall be applied, first, to the payment of one-half the costs of these causes in this Court and the Court below; second, to the extinguishment of the amount due Gibson; and third, toward the satisfaction of the claims of complainants. Decree, further, that if it has not been already done under the Chancellor’s decree, F. M. Adams shall account for the value of the personal property conveyed to him, or that the same be sold, at the election of complainants, and the proceeds of sale be applied pro rata among them. Let F. M. Adams pay such of the costs of these causes as have accrued in reference to him, and let all the other costs, in this Court and the Court below, be paid by the complainants, Turbeville and others.

The Chancellor’s decrees, so far as they are in conflict with this opinion, are reversed, and will be modified and affirmed to the extent above directed, and the cases will be remanded to the Chancery Court at Paris, to the end that all proper steps may be there taken toward the execution of the decree of this Court.

Memorandum, 21 June, 1871. .In the division of labor among the Judges, this case was allotted, among others, to me, and this opinion was prepared and submitted to the Judges in council, some weeks since, for adoption as the opinion of the Court, but was not concurred in by a majority. Judge Freeman prepared an opinion in reply to this, which was this day delivered as the opinion of the majority. I, therefore, file this as my dissenting opinion, and this memorandum will explain why the language employed in it seems to be that of the Court, when it is only my own. NelsoN, Judge.