Dent v. Ferguson - 132 U.S. 50 (1889)
U.S. Supreme Court
Dent v. Ferguson, 132 U.S. 50 (1889)
Dent v. Ferguson
Argued April 23-24, 1889
Decided October 28, 1889
132 U.S. 50
The petition of a bankrupt in bankruptcy, in which he states under oath that he owns no real estate and holds no interest in real property, is evidence of the execution and validity of a prior deed of his real estate in a suit in which he contests such execution and validity.
The proof in this case fails to show imbecility, dotage, or loss of mental capacity on the part of the appellee at the time when the contract in dispute was made.
An executed agreement by one party to cause the debts of the other to be cancelled by his creditors, valid in its inception, is not invalidated as to the debtor by reason of the settlements' being effected for a small percentage, or even by the employment of improper means to effect them.
A conveyance by a debtor, deeply indebted and in anticipation of decree, and judgments which, added to existing encumbrances, will amount to the value of the property conveyed, will lead a court of equity to presume that the instrument was executed in fraud of the creditors.
If a person conveys his property for the purpose of hindering, delaying, or defrauding his creditors, and for many years acquiesces and concurs in devices, collusive suits, and impositions upon the court in furtherance of that purpose, without taking any step to annul such conveyance or stop such proceedings, a court of equity will not aid him or his heirs to recover the property from the grantee or his heirs after the fraud is accomplished.
The maxim in pari delicto, potior est conditio defendentis is decisive of this case.
This is a suit in equity, originally brought in the Chancery Court of Shelby County, Tennessee on the 10th of December,
1881, by the appellees, heirs at law of Alexander M. Ferguson, deceased, against the appellants, heirs at law and legal representatives of Henry G. Dent, deceased. Upon application of the complainants, the case was removed into the United States Circuit Court for the Western District of Tennessee on the ground of the diverse citizenship of the parties.
The object of the original and the two amended and supplemental bills is to recover from the defendants a large amount of real property alleged to have belonged to A. M. Ferguson, deceased, and to have been fraudulently obtained from him by Henry G. Dent, deceased, and also to have set aside and annulled the agreement, deeds, and judicial proceedings by which such fraudulent acquisition was effected.
The instrument which the complainants most especially seek to have delivered up and cancelled purports to be an absolute agreement for the conveyance of a large amount of real property situated in Memphis, Tennessee, executed by Ferguson to Dent, and is as follows:
"This agreement, made this 14th day of May, 1869, by and between A. M. Ferguson, of the first part, and H. G. Dent, of the second part, all of the City of Memphis and State of Tennessee, witnesseth that the said Ferguson, for the purposes and considerations hereinafter set forth, has this day bargained and sold to the said Dent all his property hereby agreed to be conveyed is lots or parcels of land situated, lying, and being in the City of Memphis and State of Tennessee, as per schedule thereof hereto annexed, and for identification signed by the parties hereto; that for said considerations he binds himself to make conveyance by quitclaim to said Dent, or to whomsoever he may direct, of said several pieces of property on demand, excepting, however, one piece of property, contained in the schedule hereto annexed, situated on the southeast corner of Beale and Hernando Streets, to which he agrees to make a warranty deed to James E. Dillard, to whom said Dent has bargained the same for $8,000, subject to certain judgment liens which will be expressed on the face of said deed when it shall be executed. The
consideration of this agreement is that the property hereby agreed to be conveyed is much encumbered by judgments, decrees, and deeds of trust, taxes, and assessments for grading and paving, to nearly, if not quite, its full value, as also shown in said schedule, and the only interest remaining to said Ferguson in the same is his equity of redemption. For this equity he is willing to take the sum of $10,000, and allow the purchaser to make the best use he can of the property in paying off said encumbrances and making what he can out of the surplus. The further consideration of this agreement is therefore that the said H. G. Dent will pay the said A. M. Ferguson the sum of $4,000 in cash in hand, and by the conveyance to be made to James E. Dillard will secure the payment of the further sum of $6,000 to said Ferguson, making an aggregate of $10,000, as agreed upon, and will dispose of the balance of said property to the best advantage, to discharge the liens thereon, or otherwise discharge the same, and will have no recourse on said Ferguson, in law or equity, for any encumbrance or defect of title whatsoever on any of said pieces or parcels of land, but take the same at his own risk; and inasmuch as the terms, conditions, and considerations of this agreement cannot be properly expressed in the several conveyances desired and contemplated by the parties, this instrument, and the schedule hereto annexed, are made for a more thorough and complete explanation and exposition of the same."
"In testimony whereof the said A. M. Ferguson and H. G. Dent have hereunto set their hands the day and date first above written."
"A. M. FERGUSON [Seal] ~ H. G. DENT [Seal]"
"Attest: W. L. VAN DYKE"
"C. W. FRAZER"
The complainants aver in their bills that this instrument was drawn up and signed only as a plan proposed, but never adopted, was never understood by the parties to it to be of any force as between themselves, and was never in fact delivered to Dent, but was retained by Ferguson as his private property, and placed with his other papers in the possession
and custody of his attorney, one W. L. Van Dyke, where it remained until the death of the latter, when Dent, by fraudulent representations to a woman in charge of Van Dyke's room and effects, succeeded in abstracting it from the papers of Ferguson, and that Dent then, after Ferguson died, set up a claim to the ownership of the property under said pretended contract. They further aver that even if said instrument was really delivered, it was void because of the fraudulent means and undue influence by which Dent imposed upon Ferguson to make a conveyance of his property at a grossly inadequate price, which was never paid. It is further alleged that Dent was at the date of said agreement, and had been for many years prior thereto, the agent of Ferguson in the management of his property, and had so gained his confidence, and had acquired such an ascendency over Ferguson's mind and will, especially during the latter part of his life, when he was in his dotage, and incapacitated to attend to his interests, that all his financial transactions were subject to Dent's supervision and direction; that among these transactions was an endorsement by Ferguson on the 12th of April, 1867, of four notes of Dent of $12,500 each, aggregating in amount $50,000, which he (Dent) gave in part payment of a purchase by him of a stock of goods from Lockwood & Co. in Memphis; that this sale by Lockwood & Co. to Dent was soon afterwards attacked by the creditors of the former as fraudulent, and four successive attachments were sued out and levied upon the stock of goods, and that four replevin bonds were given by Dent, and signed by Ferguson -- one as surety, and the other three as a principal -- he having purchased from Dent one-half interest in the stock.
It is alleged that the amount of the judgment rendered on these bonds against Dent and Ferguson was about $65,000, and that, of the Lockwood notes for $50,000, one was claimed to have been paid off and taken up by Dent, the other three having been compromised by Dent and Ferguson giving their notes for $18,000, secured by a deed of trust upon a large part of the Ferguson property in dispute, and one lot belonging to Dent, executed to one Carmack, trustee for certain
creditors into whose hands the notes had fallen. It is further alleged that Ferguson, harassed by this sudden and largely increased indebtedness (already great), desired and proposed to make an assignment for the benefit of his creditors, but was overruled in this purpose by the controlling influence of Dent, who, by imposition and fraud, prevailed upon him to sign the pretended contract of May 14, 1869, which the said Dent got up to serve his purpose of fraudulently possessing himself of Ferguson's estate.
The bill further sets forth with great minuteness of detail the various subterfuges and contrivances to which, it is alleged, Dent resorted to cover up and conceal from the creditors the ownership of the property, and the trust deeds and judicial proceedings by which the baffled creditors were inveigled into compromises at enormous sacrifices, and that various persons, mostly Dent's attorneys and relations, or persons having an understanding with him, purchased all of the property under these trust deeds and at said judicial sales with money furnished by Dent, which he raised from the rents and profits or Ferguson's estate, and now hold their titles in trust for said Dent.
It was then alleged that all the liabilities of Ferguson have been settled, and all the encumbrances upon his property removed, for the most part, out of the rents and profits of said property. The prayer of the bill is that the contract of May 14, 1869, be declared void, and that the defendants be declared trustees of the property for the complainants, and required to turn it over to their possession, and account for its rents and profits.
The answer, after a general denial of all the allegations of the bill, especially denies those relating to the undue influence charged to have been exercised by Dent over Ferguson, those relating to Dent's agency, and those relating to Ferguson's dotage, weakness of mind, and incapacity for business. It admits that Dent's heirs have in their possession a deed or contract, properly executed, attested, and delivered, dated May 14, 1869, but unregistered, under which they claim title to the property referred to in the bill, and avers the fairness and justice of the contract, its delivery to Dent by Ferguson, and
also the delivery into his actual possession of all the property conveyed by it. It also sets forth the hopeless condition of Ferguson's affairs; that Dent had extinguished the debts, and removed from the property all the encumbrances, and paid the $10,000, or its equivalent, which was the consideration mentioned in the deed, and that $10,000 and the discharge of the debts -- quite as great in amount as that of the value of the property conveyed -- constituted a full and sufficient price therefor. It sets up as a defense the acquiescence of Ferguson, as long as he lived (a period of eleven years), in the contract, and in Dent's acts under it, and also the fact that Ferguson had filed his petition in bankruptcy, stating under oath that he did not own any real estate, which proceeding it relies on as an estoppel, and as proof of an outstanding title.
The defendants Frazer, Trezevant, and the De Soto Building and Loan Association each filed a separate answer in which they each stated that the titles held by them, respectively, to the property with which the bill had connected their names were held by them as trustees for Dent, or as a security for fees, advances, and loans to him. Dillard, in his deposition, answered, alleging that the titles held by him to any of the property claimed by complainants were held for the benefit of Dent. Hooper and wife answered, denying the averments of the bill that Susan R. Hooper purchased the Shelby claim which she is prosecuting against the estate of Ferguson, as the agent of Dent, but averring that such purchase by her was bona fide, and for her own use and benefit, and that said claim is now her own property.
The answers of the other defendants aver that, before the filing of the bill, they had parted with whatever right or title they ever had to any of the property in controversy.
Proofs were taken and a hearing was had before the circuit justice, the district judge sitting with him, and a decree was rendered in accordance with the prayer of the bill. 24 F. 412.