Parish v. Murphree

Where a person made a settlement upon his wife and children, owing at that time a large sum of money, for which he was soon afterwards sued, and became insolvent, these circumstances, with other similar ones, are sufficient to set aside the deed as being fraudulent within the statute.

THIS was an appeal from the District Court of the United States for the Northern District of Alabama.

It was a bill filed by the appellants, as creditors, to set aside a deed of settlement made by George Goffe upon his wife and daughter, under circumstances which are detailed in the opinion of the court.

The District Court sustained the deed upon the following ground.

'The true practical rule which I think is fully authorized by the case of Hinds's Lessee v. Longworth, is laid down by the Supreme Court of New York, in the case of Jackson v. Town. That rule is, that 'neither a creditor nor a purchaser can impeach a conveyance bon a fide made, founded on natural love and affection, free from the imputation of fraud, and when the grantor had, independent of the property granted, an ample fund to satisfy his creditors.'

'Testing the case under consideration by this rule, we must look to the evidence to ascertain the amount and value of the property owned by George Goffe, as well as by the firm of G. & J. M. Goffe, at the period of the sale to Williams, and the conveyance of his notes for the benefit of Mrs. Goffe and her daughters, independent of the Blount Springs tract; and also to determine whether these deeds are made bon a fide, and free from the imputation of fraud.'

The District Court considered that the facts of the case brought it within the operation of this rule, and therefore upheld the deed.

The complainants appealed to this court.

It was argued by Mr. Volney E. Howard, for the appellants, for whom also a printed brief was filed by Mr. J. A. Campbell, and submitted by Mr. Wilcox, for the defendants, on a printed brief.

The following sketch will present the views of the respective counsel upon the questions of fact and of law.

The counsel for the appellants stated that the defendants rely upon the following facts: 1st. The Goffe was fully able to pay his debts with the property that remained to him, and that his insolvency, which was declared and notorious in the early part of 1839, arose from the improvident dealings of 1837 and 1838, as a country merchant. 2d. That Goffe had been advanced by the father of his wife, and this settlement was a return for his kindness. 3d. That Mrs. Goffe relinquished dower in the lands, and that her relinquishment was the consideration of the settlement.

Much evidence was taken on the first issue, none on the second, and Williams was examined as to the third, and proved that after the arrangements for a sale had been concluded by Goffe to him of the Blount Springs, Goffe proposed the settlement of four notes on his children, amounting to $40,000. That he (Williams) insisted upon the settlement embracing the wife of Goffe, and threatened to interrupt the contract if his wishes were not fulfilled. That Goffe settled the last note due (due in 1848) for $14,000 upon his wife, making the whole settlement $54,000. Record, 158, 159, 160.

Much evidence was taken upon the first part of the case. The result of it was that Goffe in 1836 and 1837 carried on the business of selling merchandise. That he failed to meet his payments in the fall of 1837, in New York, and in the early part of 1838, a very large amount of his paper lay over, including the large debt of the plaintiffs. That suits were instantly commenced against him by a large number of creditors; and early in 1839, he was sold out. That in that year he 'run off' with about $10,000 worth of property, to Texas, and died in a year or two after.

The fact is shown that Goffe was largely indebted, and had sent to the north for a larger credit at the date of his contract with Williams, and had obtained it. That he did not disclose the transaction.

In the record, a statement of twenty-seven judgments will be found. Of these, four were rendered on notes dated in February, 1837, and four in the months of September and October, 1837, independent of the judgments recovered by the plaintiff.

The record also shows that Goffe sought and obtained credit in New York without any disclosure of the disposition of the notes of Williams, and the deed of trust on the Springs, to his wife and children.

The principal seat of the business of Goffe was at Tuscaloosa, then the capital of Alabama, and the Blount Springs are situate in a secluded spot in a poor and mountainous country, having but little intercourse with commercial cities.

The judge of the District Court assumed that the fact that Goffe was able to pay his debts in September, 1837, was proven, and upheld the settlement.

The record shows that he (Goffe) sought and obtained credit for these plaintiffs at that time.

The evidence simply indicates insolvency at the date of the sale apart from the property of the Blount Springs.

Covington, his clerk, exaggerates the value of his property. The Tuscaloosa store was sold for $1,000, and is put down at $10,000.

The wild lands in Blount and Walker counties were unsalable at the government price.

In Alabama, the statute of 13 and 27 Elizabeth, have been substantially re enacted. Clay's Dig. tit. Frauds. The construction of that statute by the Supreme Court is, that all voluntary conveyances as to existing creditors are in law fraudulent, and that the creditor is not required to prove circumstances of fraud. 2 Stewart's Rep. 336; 9 Ala. 937, 945; 16 Ala. 233; 3 Porter's Rep. 196; 6 Ala. R. 506; 10 Ala. 432; 14 Ala. 350.

The Supreme Court of the United States, in Sexton v. Wheaton, 8 Wheat. 229, notice this construction of the act. In construing this statute, the courts have considered every conveyance not made on consideration deemed valuable in law, as void against previous creditors. 1 Iredell, Eq. 180; 4 Wash. C. C. R. 129, 137; 4 S. & M. 303; 1 Brock. 501, 511; 3 Johns. Ch. R. 481; 12 Pet. 179, 198; 1 Robinson, Va. R. 125; 8 Metcalf, 411; 7 How. S.C.. R. 220.

The utmost relaxation of this rule is, that when the gift is reasonable in amount, where an ample estate is left to the debtor for the payment of existing creditors without hazard to their rights, or any material diminution of their prospects of payment, his settlement will not be held invalid.

Under their relaxed rule, the case of the defendants cannot be maintained.

The debts due by the donor were large, covering quite the whole of the property that remained to him, upon a favorable calculation. The settlement was enormous, and greatly impaired the prospects of payment of the creditors.

Insolvency for such an amount is proven, that the indebtedness of Goffe, in 1837, cannot have been fully ascertained in this case. 1 American Leading Cases, by Hare & Wallace, 60.

The evidence of Williams to show a different consideration for the settlement than the one apparent on the deed of trust, has not succeeded. Goffe had already concluded to settle $40,000, when Williams first conversed with Goffe, on the children. At the suggestion of Williams, he adds the last note due ten years after, to the settlement, in favor of the wife. The fraudulent motive was already in operation when Williams spoke, and we nowhere understood that the wife demanded the settlement, or that it was a consideration for the transfer itself. It seems rather to have been done to pacify Williams.

The deed of trust expresses no consideration of the kind now set up. It is a purely voluntary settlement on the face of the deed. It is not competent to the defendants to change its character. 4 Phil. Ev. (Hill & Cowen's notes,) note 287, p. 583; 16 Ohio, R. 438; 7 Johns. R. 341; 11 Wheat. 213.

Mr. Wilcox, for the appellees, made the following points:--

But two questions are presented by the record; one of fact, and one of law.

1. Was George Goffe indebted to insolvency, apart from the Blount Spring property, at the time he made the settlement on his wife and daughters? The deposition of Elam Covington, who was well acquainted with Goffe's affairs, settles this question. He states that Goffe owned at the time of the settlement, independent of the Blount Spring property, real estate to the amount of $12,000 negroes worth $13,000. There were debts due him from other persons to the amount of $10,000; making in all $35,000 of his individual means. The assets of the firm of G. & J. M. Goffe, at the same time, consisted of $10,000 worth of merchandise, and $10,000 in debts due them. In addition to this, Goffe still held the two first notes given by Williams, amounting to $10,000; making an aggregate of $65,000 worth of property (partnership and individual,) liable to the individual and firm debts. The debts of Goffe (both individual and partnership) according to the testimony of the complainants' own witnesses, only amounted to about $25,000. The first question, then, is fully answered; for there is no conflict of testimony. The allegation of the bill, that the settlement was made to hinder and delay creditors, is fully denied by the answers, and a good reason shown for its being made, to wit, that Goffe, when a poor young man, had married his wife, and obtained by her a considerable amount of property, a portion of which he wished, while in prosperous circumstances, to settle on his children. Mrs. Goffe also had relinquished her right of dower to the Blount Spring tract of land; and, in consideration of this, the settlement was made on her. Goffe at first refused to make it, and only consented, finally, at the urgent solicitation of his friends. This conclusively shows that he was actuated by no fraudulent design. See deposition of Colonel Williams. It is also shown that Goffe paid his debts until the fall of 1839, two years after the settlement was made.

2. Will an indebtedness not amounting to insolvency, existing at the time of a voluntary settlement, invalidate it? or, is such indebtedness per se evidence of fraud?

Whatever may have been the conflict of authorities (English and American) on this point, it can no longer be considered open, since the decision by this court, in the case of Hinds's Lessee v. Longworth, 11 Wheat. 199. The doctrine of per se fraud is here expressly repudiated, and each case made to depend on the circumstances attendant on it. Indeed, common sense will dictate that a man who makes a settlement of this sort under ordinary circumstances, and at the same time retains a sufficiency of property to pay all the debts that may be existing against him, cannot intend a fraud. A fraud, or a desire to avoid the payment of his debts, would lead him to cover up, or secrete all. See also Van Wyck v. Seward, 6 Paige, 62; 1 Edwards, 497; 2 Bland, 26; 3 Dessaus. 1.

The decree of the court below dismissing the bill of complaint was therefore correct, and an affirmance is respectfully asked.

Mr. Justice McLEAN delivered the opinion of the court.