Wallace v. Penfield/Opinion of the Court

by by John Marshall Harlan

United States Supreme Court

106 U.S. 260

Wallace  v.  Penfield

A very careful scrutiny of the record has brought our minds to the conclusion that the decree cannot be sustained. That the land described in the conveyances to Mrs. Williams was purchased and paid for by her husband, with his means exclusively, and that the purchase was made with the intention of immediately improving the land and making it the permanent residence of himself and family, are facts clearly established by the evidence. Indeed, they are substantially admitted in the answer of both Williams and his wife. But the evidence falls far short of establishing fraud upon the part of Williams, either in causing the conveyance to be made to his wife, or in using his means, to the extent that he did, in improving the land. The facts are entirely consistent with an honest purpose to deal fairly with any creditors he then had or might thereafter have in the ordinary course of his business. It is true that Williams was somewhat indebted at the time of this voluntary settlement upon his wife, but his indebtedness was not such in amount or character as, taking into consideration the value of his other property interests, rendered it unjust to creditors, existing or future, that he should, out of his income or estate, provide a home for his family by improving the land in question. When the conveyance was made to the wife, as well as during all the period when the land was being improved by the erection of a dwelling and other houses thereon, he had, according to weight of evidence, property which creditors could reach exceeding in value all his existing indebtedness by several thousand dollars. He was engaged in active business, with fair prospects, good credit, and, as we may infer from the record, of an unsullied reputation. His indebtedness existing at the time of the settlement upon the wife, as well as that which arose during the period of the improvements, was subsequently, and without unreasonable delay, fully discharged by him. The improvements were commenced in 1868, and were all, with trifling exceptions, completed and paid for before the close of the summer of 1869. So far as the record discloses, no creditor, who was such when the settlement was made, or while the improvements were going on, was hindered materially, by the withdrawal by Williams from his means or business, of the sums necessary to pay for the land and the improvements. Those who seek, in this suit, to impeach the original settlement, or to reach the means invested by the husband in improving the wife's land, became creditors of the former some time after the improvements (with slight exceptions not worth mentioning) had been made and paid for. If they trusted the husband in the belief that he owned the land, it was negligent in them so to do, for the conveyance of February 11, 1868, duly acknowledged, was filed for record within a few days after its execution. The circumstance that the original deed did not give an accurate description of the land intended to be conveyed ought not to be permitted to defeat the original settlement upon the wife; this, because the description was such as to leave no one in serious doubt that the land intended to be conveyed was the identical land now in dispute. There is no intimation in the pleadings that the banks supposed, when contracting with Williams, or when accepting from others commercial paper upon which his name appeared, that the deed of February 11, 1868, described land other than that upon which Williams, after that date, resided. On the contrary, the amended bill proceeds, in part, upon the ground, distinctly stated, that the land intended to be conveyed by that deed was the land now in dispute, and that the only purpose of the deed of December 13, 1871, was to correct the erroneous description in the deed of 1868.

An effort in made to show that some of the debts, evidenced by the notes, upon which the banks obtained judgment, existed when the conveyance of 1868 was executed or when the improvements in question were made. But the evidence furnishes no basis for such a contention, except as to the note for $1,635.25, executed August 14, 1871, by G. H. Simpson, W. Y. Williams, and R. N. Blackwood, and held by the La Grange Savings Bank. As to that note, the president of the bank states that in it was merged a prior note for $800 or $1,000, given by the parties last named in 1866 or 1867. But his evidence shows that he is not at all clear or positive in his recollections upon the subject; and, according to the decided preponderance of testimony, Williams was not a party to the note, which, it is claimed, was merged in that of August 14, 1871. The proof upon this point renders it quite certain that no part of the debt evidenced by that note existed against Williams, until, as surety for Simpson, he signed that note.

The principles of law which must determine the rights of the parties are well established by the decisions of the supreme court of Missouri. In Pepper v. Carter, 11 Mo. 543, that court, after remarking that the question as to what would render a voluntary conveyance void as to creditors under the statute of Elizabeth, from which the Missouri statute was borrowed, had undergone much discussion, and been the subject of contradictory opinions, said:

'Some would make an indebtedness per se evidence of fraud against existing creditors; others would leave every conveyance of the kind to be judged by its own circumstances, and from them infer the existence or non-existence of fraud in each particular transaction. Without determining the question as to existing creditors, we may safely affirm that all the cases will warrant the opinion that a voluntary conveyance as to subsequent creditors, although the party be embarrassed at the time of its execution, is not fraudulent per se as to them; but the fact, whether it is fraudulent or not, is to be determined from all the circumstances. I do not say that the fact of indebtedness is not to weigh in the consideration of the question of fraud in such cases, but that it is not conclusive.'

In the latter case of Payne v. Stanton, 59 Mo. 159, the same court, while quoting approvingly the language just cited from Pepper v. Carter, said that the 'doctrine is well settled that a voluntary conveyance by a person in debt is not, as to subsequent creditors, fraudulent per se. To make it fraudulent, as to subsequent creditors, there must be proof of actual or intentional fraud. As to creditors existing at the time, if the effect and operation of the conveyance are to hinder or defraud them, it may, as to them, be justly regarded as invalid, but no such reason can be urged in behalf of those who become creditors afterwards.'

These decisions control the present case. Neither the conveyance to the wife nor the withdrawal of the husband's means from his business for the purpose of improving the land settled upon the wife, had the effect and operation to hinder or defraud his then existing creditors. Nor does the evidence justify the conclusion that the conveyance was executed, or the improvements made, with an intent to hinder or defraud either existing or subsequent creditors. Giving full weight to all the circumstances, there is no reason to impute fraud to the husband.

The decree is reversed, with directions to dismiss the bill.

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