A deed by which a husband, on articles of separation between him
and his wife, binds himself to pay, in trust for her, a certain
amount of money (capital) and interest on it till paid becomes a
voluntary settlement if, before payment is made, the parties are
reconciled, make null all the covenants of the articles of
separation, and cohabit again with an agreement that the settlement
shall stand as agreed on except that the husband shall not pay
interest while he and his wife live together.
A voluntary settlement of $7,000 cannot be sustained against
creditors where the person owes $3,306 and has, of all sorts of
property, the same being not cash, not more than $16,132.
Smith, assignee of Martin Meyer, a bankrupt, brought a bill in
equity in the District Court for the Eastern District of Missouri
to set aside as fraudulent a deed of trust given by the bankrupt in
August, 1867, to one Kehr on a house and lot where he lived, and
owned by him, to secure two promissory notes, of even date with the
deed, for $2,500 each, payable respectively in one and two years
from date, with interest, which the bankrupt executed to a certain
Schaeffer, as trustee of Clara Meyer, his wife.
The case was thus:
In August, 1867, Meyer, a trader in St. Louis, and his wife
agreed to separate, and entered into an agreement for this purpose.
They were to live separate from each other without molestation, and
the rights given to one in the articles of separation were secured
to the other. In order that the wife might have sufficient means
for her support, the husband covenanted with a person named that he
would pay to him, as trustee for the wife, the sum of $7,000 on the
execution of the instrument. In consideration of these and other
agreements, the trustee and the wife covenanted with the husband to
accept the stipulated sum in full satisfaction of any claim for
maintenance or support, and also for any claim for alimony or dower
in case of the husband's death. The trustee also covenanted to save
the husband harmless from any debts the wife might contract
Page 87 U. S. 32
on his account. No fault was imputed by one to the other, but
each was left at liberty, if so disposed, to prosecute an action
for divorce. Two thousand dollars of the seven was paid in money to
the trustee, and the balance was secured to be paid by the deed of
trust, which was the subject matter of this controversy.
At the time of this settlement by Meyer, his pecuniary
condition, as assumed by the district court, a report of whose
opinion in full is given in the reports for the Eighth Circuit,
[
Footnote 1] was thus:
He owed . . . . . . . . . . . . . . . . . . . . . . . . .
$9,306
He had property as follows:
The property charged in favor of his wife, about the
value of which witnesses differed, one valuing it at
$10,500, a sum which, free from all encumbrances,
it brought at public sale . . . . . . . . . . . $10,500
Other real property, at most. . . . . . . . . . . 632
Personalty. . . . . . . . . . . . . . . . . . . . 5,000
-------
$16,132
Deduct amount settled on his wife . . . . . . . . 7,000
-------
Leaving to pay all his debts. . . . . . . . . . . . . . .
$9,132
The circuit court estimated the real estate charged at about
$2,000 more than did the district court, noting, however, that
being the party's homestead, the homestead right (in Missouri
$1,000) was chargeable on it. The result was, of course, not much
different.
After the execution of the deed of separation, the parties
separated, but within two and a half months became reconciled, and,
with the trustee, entered into articles of reconciliation,
rescinding the whole of the previous agreement except in the matter
of the separate estate created by it; agreed to forget past
differences and to live together as husband and wife, it being
further agreed that the husband was not to pay any interest on the
notes during their reconciliation. The covenants in the first
articles, except in the particular named, were declared to be void,
and each party
Page 87 U. S. 33
released the other from any breach of them. A "complete
condonation" was also declared by the new arrangement.
The husband and wife lived together for some four years, when
the husband left the country, and soon after this, he was declared
a bankrupt. After the filing of the bill in this case, the property
on which the notes to Mrs. Meyer were secured was, with the assent
of the parties litigant, sold by the order of the court, and the
right reserved to the parties to proceed against the fund. The
question for decision was whether Mrs. Meyer should have these
notes paid to her out of the proceeds of this property to the
exclusion of the creditors of her husband.
There was some effort to prove that Mrs. Meyer had received from
a first husband's estate a considerable amount of money, which
Meyer, who was her second, had received and used for his own
purposes, and that this use of it by him was the equitable basis of
the settlement of $7,000. The deed of settlement, however, did not
allude to this as a consideration, nor allude to it otherwise, and
there was no sufficient proof of the fact that when she married
Meyer, she had any property, or that afterwards she ever got any
from any source independently of Meyer himself.
The district court decreed in favor of the assignee, and, the
circuit court having affirmed that decree, the wife and her trustee
took this appeal.
MR. JUSTICE DAVIS delivered the opinion of the Court.
It is unnecessary to discuss the question whether the settlement
made, in view of actual separation, could be upheld or not in the
condition of the husband's affairs, because this case must turn on
what occurred afterwards. All the elements of value which entered
into the composition of the first agreement ceased to exist when
the parties became reconciled. The marital relations were resumed
on the basis of mutual forgiveness for past misconduct, and the
Page 87 U. S. 34
wife became entitled to support from her husband and to dower in
his estate. These rights of the wife had been relinquished in the
first contract, and this relinquishment was the only consideration
to support it. The withdrawal of the consideration left the notes
without any element of value in them, and the execution of the new
contract, followed by cohabitation, placed the parties exactly
where they would have been if there had been no separation. The
notes thus became a voluntary gift, and it can make no difference
in their character that they are reserved as a separate estate to
the wife. It is not a question in the case whether, as between the
parties, they could not be enforced. The question is whether a
husband, at the time largely indebted, can make a voluntary
donation or even voluntary conveyance to his wife to the prejudice
of his creditors. An attempt is made to show that Meyer received
from his wife a considerable amount of money obtained by her from
her first husband's estate, and that this formed part of the
consideration of the settlement when they separated; but there is
no evidence of any value to prove such a state of things. Besides,
the articles of separation decide this point against the wife, as
no notice is taken of it, and it is hardly possible, if the fact
were as claimed, that on such an occasion it would not have been
mentioned.
In this controversy, therefore, with creditors, the gift must be
treated as purely voluntary -- a gift being nothing more than the
transfer of property without consideration.
We could not profitably add anything to what has been so well
said by the district judge in his opinion in this case on the
subject of the indebtedness and property of Meyer at the time of
the settlement upon his wife. On a careful consideration of the
whole evidence, we are satisfied that the value of the property was
not materially different from the estimate he put upon it. If he
erred at all in this estimate, it was within a very narrow limit.
The homestead on which the notes were secured was the only piece of
real estate of any consequence owned Meyer, and witnesses differed
as to its value, but the opinion of one was sustained by what
Page 87 U. S. 35
it brought at the sale, which was the criterion of value adopted
by the district court. In this he may have been mistaken, but if so
the mistake was within the limits of $2,000, which the circuit
court thought was about the worth of the property. Outside of the
homestead, the assets of Meyer were uncertain, but they did not
exceed, if they equaled, the estimate of the district court. The
conclusion reached by that court, after going into particulars, was
that the estate of Meyer could not have exceeded the sum of
$16,132. Deducting from this the sum of $7,000 paid and agreed to
be paid to the wife would leave $9,132 to meet debts confessedly
due, amounting to $9,306.
Surely the voluntary provision for the wife in such a condition
of things is not sustainable against existing creditors. Nor can it
be supported on the theory that the whole estate was worth a few
thousand dollars more. Suppose it was, there would still be that
extent of embarrassment, which would have a direct tendency to
impair the rights of creditors. In such a case, a presumption of
constructive fraud is created no matter what the motive which
prompted the settlement. Meyer was not only largely indebted for a
person in his situation, but it is easy to see it would have been
close work for his creditors to have made their debts, if they had
tried to enforce their collection by judicial process, a surer way
of ascertaining the real worth of the property than by the opinions
of indifferent persons, as experience has proved that this kind of
testimony is often unreliable on such a subject. The ancient rule
that a voluntary post-nuptial settlement can be avoided if there
was some indebtedness existing has been relaxed, and the rule
generally adopted in this country at the present time will uphold
it if it be reasonable, not disproportionate to the husband's
means, taking into view his debts and situation, and clear of any
intent, actual or constructive, to defraud creditors. [
Footnote 2]
Testing this settlement by this rule, it must be taken to
Page 87 U. S. 36
be in bad faith towards existing creditors, as clearl, it was
out of all proportion to the means of the husband, considering his
state and condition, and seriously impairs his ability to respond
to the demands of his creditors.
It is well settled, where a deed is set aside as void as to
existing creditors, that all the creditors, prior and subsequent,
share in the fund
pro rata. [
Footnote 3]
We have considered the contract in this case as if it were
executed, because no point is made by the respondents that it is
executory, and the case has been argued by both sides on the theory
that the law applicable to an executed contract of this sort
applied to the one in controversy. It may well be doubted whether
in any case a mere promise by the husband, without consideration,
to pay money to the wife at a future time can be enforced against
the claims of creditors.
Decree affirmed.
[
Footnote 1]
2 Dillon 51.
[
Footnote 2]
See the note to
Sexton v. Wheaton, 1 American
Leading Cases, 5th edition, page 37, where the law on this subject
is fully considered.
[
Footnote 3]
Magawley's Trust, 5 De Gex & Smales 1;
Richardson v. Smallwood, Jacob 552-558;
Savage v.
Murphy, 34 N.Y. 508;
Hey v. Niswanger, Harper's
Equity 295;
Robinson v. Stewart, 10 N.Y. (6 Selden) 189;
Thompson v. Dougherty, 12 Sergeant & Rawle 448, 455,
458;
Hoke v. Henderson, 3 Devereux 12-14;
Kissam v.
Edmundson, 1 Iredell's Equity 180;
Sexton v. Wheaton,
1 American Leading Cases 45;
Norton v. Norton, 5 Cushing
529;
O'Daniel v. Crawford, 4 Devereux 197-204; Reade v.
Livingston 3 Johnson's Chancery 481-499;
Townshend v.
Windham, 2 Vesey 10;
Jenkyn v. Vaughan, 3 Drewry
419-424.
