Moore & Paine v. Tarlton and Paine, 3 Ala. 444

COLLIER, C. J. By the second

section of the act “ to prevent frauds and perjuries” it is enacted that every gift, grant, or conveyance of lands, tenements, &c. made and contrived of malice, fraud, covin, collusion or guile, to the intent, or purpose to delay, hinder, or defraud creditors of their just and lawful actions, suits, debts, &c. shall be henceforth taken as against the person or persous, &c. whose debts, suits, &c. by such guileful and covinous devices and practices as is aforesaid, shall or might be any wise disturbed, hindered delayed, or defrauded, to be clearly and utterly void. Aik. Dig. 207.

This enactment is substantially a transcript of the statutes of the 13th and 27th Eliz. so far as the rights of creditors and purchasers are concerned, and like the former, avoids in toto, all conveyances made to defraud creditors, without reimbursing the fraudulent grantee to the prejudice of the creditor, the consideration he may have paid. In Sands, et al. v. Codwise, et al. 4 Johns. Ch. Rep. 436, it was held that conveyances made to defeat creditors are void, not only by statute, but by the common law ; and if void» on the ground of a positive fraud they are void, db initio. And in Wadworth v. Marsh, 9, Conn.

Rep. 481, it was said that the validity of a conveyance does not depend entirely upon the consideration received, but upon the intent of the parties. Where the intent appears to have been to defraud, the conveyance is not merely, voidable, but utterly void, as against the creditors of the grantor. Hence, it is frequently declared that it is not sufficient that a conveyance be upon valuable consideration, or bona fide.

It must be both, and therefore if a conveyance be defective in either particular, though operative between the parties and their representatives, it is utterly void as to creditors. 1 Story’s Eq. 346, 363;Twine’s case, 3 Co. Rep. 81. In the case j^pfore us, the plaintiffs do not explicitely admit that the deed from Wm. S.

Paine is fraudulent within the meaning of the statute, but their application to equity for relief proceeds upon the idea, that their deed cannot be sustained at law, because it is absolute in its terms, while it is intended merely to stand as a security for a debt not greater in amount than one-fifth of the consideration expressed on its face. In this view of the case, is it competent for chancery to subject the property conveyed to the payment of the plaintiffs demand, against one who occupies the position of both creditor and purchaser?

It is not pretended that there was a mistake in the drawing of the deed, or that it is in any manner different in its terms from the intention of the parties, but it is impliedly conceded that upon a trial at law, the plaintiffs could not recover. The transaction itself, showing the absence of that bona fides, which is essential to the validity of conveyances, intended to operate against creditors. No case has ever come under our notice, in which relief has been afforded to a grantee under similar circumstances.

Equity, instead of being more tolerant in cases of bad faith, will look with a more searching eye, and will act upon all badges of fraud and presumptions of ill faith which are recognised at law, and even goes farther in denouncing fraud. Mr. Justice Story says “it is by no means to be deemed a logical conclusion, that because a transaction could not be reached at law as fraudulent, therefore it would be equally safe against the scrutiny of a Court of Equity; for a Court of Equity recognises a scrupulous good faith in transactions, which the law might not repudiate.

It acts upon conscience, and does not content itself with the narrow views of legal remedial justice,” 1 vol. of Eq, 366. Without extending this course of remark further, wo think it may be safely assumed that a Court of Chancery will not lend its aid to a grantee, so as to give him the benefit of a deed, which a Court of Law would consider fraudulent in fact, ■The case of Boyd & Suydam v. Dunlap, et al, 1 Johns. Ch. Rep. 478, is entirely unlike the present.

In that case, a bill was filed by the creditors, to set aside a conveyance of real and personal property, upon the allegation that it was voluntary and without consideration, and made fraudulently to defeat the creditors of the grantor.

The conveyance was made from a father to a son, to whom the father was indebte^n a sum equal to about two-thii’ds of the value of the property conveyed ; it also appeared, that the father told the son, on his coming of age, about five years before the conveyance was made, that he should have the whole of his property if he would stay with him and take care of his parents in their old age.

The Chancellor said he did not discover such traces of actual and direct fraud as warranted him in directing the conveyance of the real estate to be delivered up and cancelled, as absolutely null and void. “ There is a marked difference between an interference actively to compel a party to re-convey or surrender a deed, and á refusal to aid a party who seeks a specific pei’formance of a Contract.

If actual fraud be not clearly and satisfactorily made out, the Court may refuse its aid, but will not take so decisive a step as setting aside, in toto, the assumed title, but will make it subservient to the equity of the case, or leave the party complaining, to his remedy at law against a contract founded on inadequacy of price, or other suspicious circumstances Again: “A deed, fraudulent in fact, is absolutely void, and is not permitted to stand as a security for any purpose ofre-imbursement or indemnity; but it is otherwise, with a deed obtained under suspicious or inequitable circumstances, or which is only constructively fraudulent.” Here was a proceeding by creditors, to set aside a deed upon the allegation of fraud, but in the Case ’ at bar, the bill is filed by the grantee against creditors to set up and sustain a deed to the extent of the grantee’s demand, upon the implied admission, that it would be regarded at law, as fraudulent, and defeated in toto.

While the case cited rests upon familiar principles of equity, the case we are considering has no warrant, either in principle or authority, so far as our researches extend. But it is insisted that the plaintiffs should be relieved in chancery, because a court of law, would regard the deed as either good for the whole, or entirely void, and that if they failed in an action to recover possession, they would loose the entire- benefit of their security. This argument has already been answered.

If the deed is fraudulent in fact, no Court can aid them; if it is founded upon a valuable consideration and bonafide, it would be evidence in an ejectment or trespass, to try titles, and until its validity has been affirmed by the verdict of a jury, the plaintiffs cannot recover on it in equity; for it is a well settled principle in that Court, that a party who seeks the specific performance of a contract, must present a case free from suspicion or unfairness. This principle will apply with all force, where a deed is sought to be made effectual against creditors, by suit in chancery.

We have not thought it necessary to notice the answer and proofs, as the cause in our opinion might have been dismissed for want of equity in the bill; and without adding any thing further, we have only to say, that the decree must be affirmed..