1. Unless existing claims of creditors are thereby impaired, a
voluntary settlement of property made by a husband upon his wife is
not invalid.
2. The technical reasons of the common law arising from the
unity of husband and wife, which would prevent his conveying the
property directly to her for a valuable consideration, as upon a
contract or purchase, have long since ceased to operate in the case
of his voluntary transfer of it as a settlement upon her.
3. The intervention of trustees in order that the property may
be held as her separate estate beyond his control or interference,
though formerly held to be indispensable, is no longer
required.
4. His reservation of a power of revocation or appointment to
other uses does not impair the validity or efficiency of the
conveyance in transferring the property to her to hold until such
power shall be executed; nor does it tend to create an imputation
upon his good faith and honesty in the transaction.
5. Such a power does not, in the event of his bankruptcy, pass
to his assignee.
The facts are stated in the opinion of the Court.
MR. JUSTICE FIELD delivered the opinion of the Court.
This is a suit by Stephen E. Jones, assignee in bankruptcy of
Charles H. Clifton, to set aside two deeds executed by the latter
to his wife, and to compel a transfer of the property embraced in
them to the complainant. Clifton married in 1870, and was possessed
at the time of a large estate. Previously to
Page 101 U. S. 226
his marriage, he had taken out three policies of insurance on
his life, each for $10,000. Soon after his marriage, he took out
two additional policies on his life, each for the same amount as
the previous ones. In October, 1872, by his deed poll, he conveyed
to his wife, in consideration of the love and affection he bore
her, to hold as her separate estate, free from his control, use,
and benefit, a small parcel of land in the City of Louisville, in
the State of Kentucky, and by the same instrument, upon the like
consideration, and to be held for the same separate use of his
wife, he assigned to her the five policies of insurance on his
life. The deed contained a clause reserving to himself the power to
revoke the grant and assignment in whole or in part and to transfer
the property to any uses he might appoint, and to such person or
persons as he might designate, and to cause such uses to spring or
shift as he might declare.
In April, 1873, by another deed poll, he conveyed to his wife,
upon like consideration of love and affection, to hold as her
separate estate, free from his control, use, or benefit, two other
parcels of land, one consisting of a lot in the City of Louisville,
Kentucky, and the other his country place in the County of
Jefferson, in that state, comprising thirty-eight acres. The
instrument contained a reservation of a power of revocation and
appointment to other uses similar to that of the first deed, the
power of appointment, however, being somewhat fuller in providing
for its execution either by deed or writing, to take effect as a
devise under the statute of wills in Kentucky.
These deeds were properly acknowledged and recorded in the
counties where the real property was situated. At the time of their
execution, the grantor was not in any business, and did not intend
engaging in any; was worth about $250,000, and owed only a few
inconsiderable debts, which were soon afterwards paid. The deeds
were made at the urgent solicitation of his wife, who perceived
that his habits were those of an indiscreet young man, somewhat
inclined to dissipation, and she was naturally desirous of
providing against a possible waste of his property.
In 1873, a general financial panic passed over the country; the
values of all kinds of property greatly depreciated in the
Page 101 U. S. 227
market, and land in the country could scarcely be disposed of at
any price. By the shrinkage in values and losses in the subsequent
years of 1874 and 1875, by his being surety for others, and by bad
management, his estate was wasted, and he became hopelessly
insolvent. In December, 1875, upon his petition, he was adjudged a
bankrupt by the District Court of Kentucky. The complainant was
subsequently appointed assignee of his effects, and received an
assignment of his property. The proved debts against him amounted
to $13,000, and his estate in the hands of the assignee was of
little value.
The assignee seeks to set aside the deeds upon various grounds,
which, however, may be embraced in the following: 1st, that they
are void because made directly to his wife without the intervention
of a trustee, and so passed no interest to her; 2d, that by the
reservation to the grantor of a power of revocation and appointment
to other uses, they were designed to hinder and defraud his future
creditors whilst he retained the control and enjoyment of the
property, and 3d, that the power of revocation and appointment were
assets which passed to the assignee in bankruptcy, and can be
executed by him for the benefit of creditors.
The questions thus presented, though interesting, are not
difficult of solution. The right of a husband to settle a portion
of his property upon his wife and thus provide against the
vicissitudes of fortune when this can be done without impairing
existing claims of creditors, is indisputable. Its exercise is
upheld by the courts as tending not only to the future comfort and
support of the wife, but also, through her, to the support and
education of any children of the marriage. It arises, as said by
Chief Justice Marshall in
Sexton v. Wheaton, as a
consequence of that absolute power which a man possesses over his
own property, by which he can make any disposition of it which does
not interfere with the existing rights of others. In that case, the
husband had purchased a house and lot within the District of
Columbia, and taken the conveyance in the name of his wife, and
afterwards made improvements upon the property. Subsequently he
became involved in debt, and his creditors, having obtained a
judgment against him, filed a bill to subject this property to its
payment, contending that the conveyance
Page 101 U. S. 228
to the wife was fraudulent and void as to them and praying that
if the conveyance were upheld the wife might be compelled to
account for the value of the improvements. But the court held,
after an extended consideration of the authorities, that as the
husband was at the time free from debt, the conveyance was to be
deemed a voluntary settlement upon her, and as it was not made with
any fraudulent intent, it was valid against subsequent creditors,
and that the improvements upon the property stood upon the same
footing as the conveyance, it appearing that they had been made
before the debts were contracted.
21 U. S. 8 Wheat.
229. That case does not differ in principle from the one before us.
The husband in this, as in that one, was free from debt when he
made the deeds, which were voluntary settlements upon his wife. It
cannot make any substantial difference that in the case cited, the
money of the husband was expended in the purchase of the property
and the conveyance was taken in the name of the wife, and that in
the present case, the property was owned at the time by the
husband, and was transferred directly by him to her. The
transaction, in its essential features, would have been the same as
now, if the husband had sold his lands and invested the proceeds in
other property and taken a conveyance in her name. The circuity of
the proceeding would not have altered its character nor affected
its validity. In all cases where a husband makes a voluntary
settlement of any portion of his property for the benefit of others
who stand in such a relation to him as to create an obligation,
legal or moral, to provide for them, as in the case of a wife, or
children, or parents, the only question that can properly be asked
is does such a disposition of the property deprive others of any
existing claim to it? If it does not, no one can complain if the
transfer be made matter of public record, and not be designed as a
scheme to defraud future creditors. And it cannot make any
difference through what channels the property passes to the party
to be benefited, or to his or her trustee -- whether it be by
direct conveyance from the husband or through the intervention of
others. The technical reasons of the common law arising from the
unity of husband and wife, which would prevent a direct conveyance
of the property from him to her for a valuable consideration, as
upon a
Page 101 U. S. 229
contract or purchase, have long since ceased to operate in the
case of a voluntary transfer of property as a settlement upon her.
The intervention of trustees in order that the property conveyed
may be held as her separate estate beyond the control or
interference of her husband, though formerly held to be
indispensable, is no longer required. This has been established in
courts of equity, says Story, for more than a century, so
"that whenever real or personal property is given or devised or
settled upon a married woman, either before or after marriage, for
her separate and exclusive use, without the intervention of
trustees, the intention of the parties shall be effectuated in
equity, and the wife's interest protected against the marital
rights and claims of her husband, and of his creditors also."
Eq.Jur., sec. 1380. And he adds to this observation that
"it will make no difference whether the separate estate be
derived from her husband himself or a mere stranger, for, as to
such separate estate, when obtained in either way, her husband will
be treated as a mere trustee, and prohibited from disposing of it
to her prejudice."
There is nothing in the circumstances attending the execution of
the deeds in this case which should prevent the full application of
the doctrine stated for the protection of the wife's interest
against the claim of the assignee for the benefit of the creditors
of the husband.
Lloyd v. Fulton, 91 U.
S. 485.
The powers of revocation and appointment to other uses reserved
to the husband in the deeds in question do not impair their
validity or their efficiency in transferring the estate to the
wife, to be held by her until such revocation or appointment be
made. Indeed, such reservations are usual in family settlements,
and are intended "to meet the ever-varying interests of family
connections."
Riggs v. Murray, 2 Johns. (N.Y.) Ch. 565. So
frequent is the necessity of a change in the uses of property thus
settled, arising from the altered condition of the family, the
addition or death of members, new occupations or positions in life,
and a variety of other causes which will readily occur to everyone,
that the absence of a power of revocation and of appointment to
other uses in a deed of family settlement has often been considered
a badge of fraud, and, except when made solely to guard against the
extravagance and
Page 101 U. S. 230
imprudence of the settler, such settlements have in many
instances been annulled on that ground. Several of them are cited
in the very able and learned opinion of the district judge who
presided in the circuit court when this case was there heard. The
law in England, by which property can be kept in the same families
for many years, has perhaps caused greater importance to be given
in that country than in this to the insertion in deeds of
settlement of a power of revocation and appointment to other uses.
Here, the absence of the reservation is only a fact to be
explained, and is to have more or less weight, according to the
circumstances of each case. In the case before us, the husband does
not appear to have had his attention drawn to the reservation. He
desired to have the property settled upon his wife, and he
entrusted the preparation of the deed to his counsel. There was
clearly no fraudulent intent on his part; no proof of any such
intent was produced or stated to be in existence. The only fraud
asserted in argument to exist is constructive fraud arising from
the reservation in question. But its presence in the deed, as is
clear from all the authorities, does not tend to create an
imputation upon his good faith and honesty in the transaction.
Huguenin v. Baseley, 14 Ves. 273;
Coutts v.
Acworth, Law Rep. 8 Eq. 558;
Wollaston v. Tribe, 9
id. 44;
Everitt v. Everitt, 10
id. 405;
Hall v. Hall, 14
id. 365;
Phillips v.
Mullings, Law Rep. 7 Ch. 244;
Hall v. Hall, 8
id. 430;
Toker v. Toker, 3 De G., J. & S.
486.
As is very justly observed in the opinion of the court below,
the insertion of the power of revocation and new appointment, so
far from proving that the grantor contemplated a fraud upon his
future creditors, tends to show the contrary. Should he revoke the
settlements, the property would revert to him, and, of course, be
liable for his debts, and should he exercise the power of
appointment for the benefit of others, the estate appointed would
be liable in equity for his debts.
The title to the land and policies passed by the deeds; a power
only was reserved. That power is not an interest in the property
which can be transferred to another, or sold on execution, or
devised by will. The grantor could indeed exercise the power either
by deed or will, but he could not vest the
Page 101 U. S. 231
power in any other person to be thus executed. Nor is the power
a chose in action. It did not therefore, in our judgment,
constitute assets of the bankrupt which passed to his assignee.
Decree affirmed.