1. As the provision of the English Statute of Frauds touching
promises made in consideration of marriage is in force in Georgia,
a promise there made, but not in writing, to settle property upon
an intended wife, is void. Such promise after marriage is also void
for want of consideration.
Page 91 U. S. 480
2. The indebtedness of a husband at the time of his execution of
a conveyance by way of settling property in trust for the sole and
separate use of his wife and children is only a presumptive proof
of fraud which may be explained and rebutted, and this being the
established doctrine in Georgia, where the property in question is
situate, such a conveyance was upheld against existing creditors
where the debtor reserved property greater in value than two and a
half times the amount of his debts, and where the transaction
rested upon a basis of good faith, and was free from the taint of
any dishonest purpose.
Fulton, the appellee, having by his marriage acquired large
means, which he had verbally agreed before and after his marriage
should be held for the sole and separate use of his wife, executed
the following indenture:
"STATE OF GEORGIA,
Columbia County"
"This indenture, made this, the fourteenth day of September,
1864, between Montroville C. Fulton, of the county and state
aforesaid, of the first part, and James S. Hamilton, of the same
county and state, of the second part, witnesseth that said party of
the first part, for and in consideration of the natural love and
affection which he has and bears towards his wife, Virginia C.
Fulton, as well as in consideration of the sum of ten dollars to
him in hand paid by said party of the second part at and before the
sealing and delivery of these presents, the receipt whereof is
hereby acknowledged, hath given, granted, bargained, sold,
delivered, released, conveyed, and confirmed, and by these presents
doth give, grant, bargain, sell, deliver, release, convey, and
confirm, unto the said party of the second part, and to his
successors and assigns, subject to the uses and trusts hereinafter
expressed, the following described real and personal property,
to-wit [
the description of the property is omitted]."
"In trust, nevertheless, to and for the sole and separate use,
benefit, and behoof of Virginia F. Fulton, wife of the said party
of the first part, for and during the term of her natural life,
free from the debts, liabilities, or contracts of the said party of
the first part, or any future husband, with remainder at her death
to her children then in life, or who have issue alive at that time
(the issue of any deceased child taking the parent's proportionate
share); but should she die leaving no child, or issue of a child,
surviving her, then with remainder to her heirs at law.
Provided
Page 91 U. S. 481
always, and it is distinctly understood, that said Virginia F.
Fulton, at any time after the execution of these presents, during
coverture or widowhood, may, by her last will and testament, give,
demise, or bequeath the entire trust estate, with income and
increase thereof, to such person or persons as she may see fit, as
if she were sole and unmarried; but in case of her death without
leaving any will, or of any legal disability to make a will, then
the trust estate shall, after her death, vest as aforesaid in her
children or other heirs in law. And provided further that the said
Virginia F. Fulton shall be authorized at any time, upon the death,
resignation, or removal of the party of the second part, or any of
his successors, by instrument in writing, under her hand and seal,
to appoint the said party of the first part, or any other fit and
proper person, trustee in the place and stead of the previous
trustee; and the person so appointed shall immediately and
ipso
facto become entitled to all the right and authority
hereinafter granted, unless restrained in the deed of appointment,
which said Virginia F. shall be authorized to do. And provided also
that the said party of the second part, or the party of the first
part in the event of becoming trustee under this instrument, shall
be authorized at any time to sell, mortgage, lease, exchange, or
otherwise dispose of at discretion, the trust estate, or its
increase, or any portion thereof, reinvesting the proceeds in such
other property, real, personal, or mixed, as may be deemed best by
him; and shall also be authorized, for the purpose of supporting,
maintaining, and educating the said Virginia F. and her children,
to encroach upon the corpus of the estate without authority from
any court. That all subsequent trustee or trustees shall only be
authorized to sell, lease, or exchange, and to reinvest, upon the
written consent of said Virginia F., and for the purpose of
support, maintenance, and education shall only be allowed to
encroach upon the corpus during the existing war, and upon the
written direction of said Virginia F. so to do."
"And provided finally that the separate receipt of the said
Virginia F., notwithstanding coverture, shall be a sufficient and
legal discharge to the party of the second part or party of the
first part (in the event of his appointment as trustee) for the
yearly income of the trust estate, or any portion of the corpus
consumed, and maintenance and education, and that they shall not be
required to make annual or other returns to the court of ordinary
or other court. That in the event of the death of the said Virginia
F. without making a will, and leaving children, or issue of
children, the party of the second part or the party of the first
part, if the
Page 91 U. S. 482
trustee, shall be authorized to keep the estate together,
exercising the same power hereinbefore granted until such time as
he shall deem it advisable to distribute the estate among the
remaindermen; but in the event of the death of the said Virginia F.
intestate, and leaving no child, or issue of a child, surviving
her, then the trustee for the time being is to distribute the
estate among the heirs at law immediately."
"In witness whereof, the said party of the first part hath
hereunto set his hand and seal, the day and year first above
written in duplicate."
"MONTROVILLE C. FULTON [L.S.]"
"Signed, sealed, and delivered in presence of us,"
"ROBERT MARTIN"
"B. B. WILKERSON"
"J. E. SMITH"
"E. J. SHORT, J.I.C."
The property conveyed, exclusive of slaves, was of less value
than that reserved, and the latter was, at the date of the
indenture, worth more than double the amount of all his
indebtedness.
The original trustee having resigned his office, the appellee
was appointed in his stead. He had given his two promissory notes
bearing date May 16, 1861, one payable Sept. 1 then next ensuing,
and the other Sept. 1, 1862, each for the sum of $5,000, to James
Lloyd. Suit having been brought upon these notes, judgment was
rendered against him, May 15, 1871, and an execution levied upon
the trust property. He, as trustee, thereupon sued out an
injunction restraining a sale. The circuit court having decreed in
his favor, the case comes here on appeal.
The facts are further stated in the opinion of the Court.
Sec. 1954 of the Code of Georgia, in force Sept. 14, 1864, reads
as follows:
"
Acts Void against Creditors -- The following acts by
debtors shall be fraudulent in law against creditors, and as to
them null and void,
viz.:"
"1. Every assignment or transfer by a debtor, insolvent at the
time, of real or personal property of any description, to any
person, either in trust or for the benefit of himself or anyone or
more of
Page 91 U. S. 483
his creditors, or any person appointed by him, to the exclusion
of any other creditor in the equal participation of such property,
unless such assignment or transfer is a
bona fide sale, in
extinction, in whole or in part, of the debt of the purchaser, and
without any trust or benefit reserved to the seller or any person
appointed by him."
"2. Every conveyance of real or personal estate by writing or
otherwise, and every bond, suit, judgment, and execution, or
contract of any description, had or made with intention to delay or
defraud creditors, and such intention known to the party taking; a
bona fide transaction on a valuable consideration, without
notice or ground for reasonable suspicion, shall be valid."
"Every voluntary deed or conveyance, not for a valuable
consideration, made by a debtor insolvent at the time of such
conveyance."
MR. JUSTICE SWAYNE delivered the opinion of the Court.
All the testimony in this case was taken by the appellee. He was
complainant in the suit. Only two witnesses were examined --
himself, and his brother-in-law James S. Hamilton. There is no
discrepancy in their statements. The facts lie within narrow
limits.
Fulton, the appellee, married Virginia F. Hamilton, the daughter
of Thomas N. Hamilton, in the year 1851. Her father was a man of
very large fortune. Fulton received by her, before and after her
father's death, more than $100,000. He had himself, at the time of
his marriage, substantially nothing. His father-in-law died
intestate in 1859. Before and after his marriage, Fulton promised
his father-in-law to settle his wife's fortune upon her. After his
father-in-law's death, he made the same promise to her brother,
James S. Hamilton,
Page 91 U. S. 484
who administered upon his father's estate. Nothing in
fulfillment of these promises was done by Fulton until the 14th of
September, 1864. On that day, he executed to James S. Hamilton the
deed made a part of the bill. It conveyed the premises in
controversy in trust for the sole and separate use of the wife of
the appellee and her children. The deed contained, among other
things, a provision, that, if Hamilton should die, resign, or be
removed from the trusteeship, she might appoint her husband, or any
other fit person, as trustee in his place. On the same day Hamilton
resigned, and Fulton was appointed. On the 16th of May, 1861,
Fulton executed to James Lloyd two notes of $5,000 each, one
payable on the 1st of September following, the other on the 1st of
September, 1862. There was due on these notes, at the date of the
trust deed, $11,780. Fulton then owed to other persons not
exceeding $2,000. This was the extent of his indebtedness. The
aggregate of his liabilities was less than $14,000. He retained in
his hands property worth $36,000, besides nonenumerated articles
worth $20,000 in Confederate currency. The point of depreciation
which that currency had then reached is not shown. The property
reserved was of greater value than that conveyed. After the
execution of the deed, he was able to pay the notes. In 1862, he
offered to pay them in Confederate currency, which was then but
little depreciated. Payment in that medium was refused. His ability
to pay continued until 1866. In that year he embarked in the
enterprise of raising cotton in Arkansas. The result wrecked his
fortune, and ruined him. He has since been unable to pay the notes.
Suit was commenced against him upon the notes in February, 1868;
and in May, 1871, judgment was recovered for $10,000 with interest,
amounting to $6,447.81 and costs. Execution was issued and levied
upon the trust property described in the bill. This suit was
brought to enjoin the sale, and the circuit court decreed in favor
of the complainant.
The provision of the English Statute of Frauds, touching
promises made in consideration of marriage, is in force in
Georgia.
The promise of Fulton to Thomas N. Hamilton before the marriage
was therefore void. Browne's Stat. Frauds 220, 514.
Page 91 U. S. 485
His promise after the marriage was without consideration, and
therefore of no validity. The same remark applies to the like
promise to James S. Hamilton, the administrator.
The principle of the wife's equity has no application to this
case.
Wicks v. Clarke, 3 Ed. Ch. 63. The trust deed was
clearly a voluntary conveyance. Lloyd was a prior creditor.
Was the deed good against him?
This question is the core of the controversy between the
parties.
Formerly, according to the rule of English jurisprudence, such
deeds, as against such creditors, were void.
Townsend v.
Windham, 2 Ves. 10. The same principle was applied in such
cases in this country.
Read v. Livingston, 3 J.C.R. 481.
It has been overruled in the English courts.
Lush v.
Wilkinson, 5 Ves. 384;
Townsend v. Westocot, 2 Beav.
345;
Gale v. Williamson, 8 M. & W. 410;
Shares v.
Rogers, 3 B. & A. 96;
Freeman v. Pope, 5 Ch.App.
Cases Eq. 544, 545. It has been also overruled by this Court,
Hinde's Lessee v.
Longworth, 11 Wheat. 213;
Kehr v.
Smith, 20 Wall. 35, and in most of the states of
our Union. The state adjudications to this effect are too numerous
to be cited. We shall refer to a few of them.
How v. Ward,
4 Me. 195;
Moritz v. Hoffman, 35 Ill. 553;
Leroy v.
Wilmarth, 9 Allen 382;
Miller v. Wilson, 15 Ohio,
108;
Young v. White, 25 Miss. 146;
Taylor v.
Ewbank, 3 Marsh. 329;
Salmon v. Bennett, 1 Conn. 525;
Worthington v. Shipley, 5 Gill 449;
Townsend v.
Maynard, 45 Penn. 199.
Such is also the law of the state whence this case came to this
Court.
Weed v. Davis, 25 Ga. 686. It is a rule of property
there, and this Court is therefore bound to apply it, in the case
in hand, as if we were sitting as a local court in that state.
Jud.Act of 1789, sec. 34;
Olcott v.
Bynum, 17 Wall. 44.
The rule as now established is that prior indebtedness is only
presumptive and not conclusive proof of fraud, and this presumption
may be explained and rebutted. Fraud is always a question of fact
with reference to the intention of the grantor. Where there is no
fraud, there is no infirmity in the deed. Every case depends upon
its circumstances, and is to be carefully scrutinized. But the
vital question is always the good faith of the transaction. There
is no other test.
Page 91 U. S. 486
Perhaps no more striking illustration can be found of the
application of this principle, and of the opposition its
establishment encountered, than is presented in the several cases
of
Van Wick v. Seward. On the 6th of November, 1817,
Seward assigned a judgment to Van Wick, and gave him a guaranty
that it was collectible. The judgment was a lien upon lands fairly
to be presumed more than sufficient to satisfy it. On the 16th of
April, 1818, Seward conveyed all his real estate, consisting of a
farm of two hundred acres, to his son. The consideration of the
deed was the payment of a specified sum to each of two daughters of
the grantor, and an annuity for life of $500 to the grantor
himself, who was then aged and infirm. The lands bound by the lien
of the judgment were sold under execution, and bought in by Van
Wick for a nominal sum. He thereupon sued Seward upon his guaranty,
and recovered a judgment, which was docketed on the 13th of
September, 1820.
Van Wick thereupon sold under execution and bought in the farm
which Seward had conveyed to his son, and brought an action of
ejectment to recover possession. The jury found that there was no
actual fraud. The Supreme Court, nevertheless, upon the ground that
the liability was prior to the deed, following the ruling of
Chancellor Kent in
Reed v. Livingston, gave judgment for
the plaintiff's lessor.
Jackson v. Seward, 5 Cow. 67. This
judgment, upon grounds chiefly technical, was reversed by the Court
of Errors of New York.
Seward v. Jackson, 8 Cow. 423. Van
Wick thereupon filed a bill in equity to avoid the deed. Chancellor
Walworth concurred with the jury in the prior case as to the
absence of fraud; and upon that ground, and the further ground of
the circumstances of the sale of the property covered by the lien
of the judgment, dismissed the bill.
Van Wick v. Seward, 6
Paige 63. The Court of Errors, upon appeal, affirmed this decree by
a majority of one. The vote was fourteen to fifteen.
Van Wick
v. Seward, 18 Wend. 375. So ended the litigation. Perhaps in
no case was the subject more elaborately examined. This case was
fatal to the old rule. We think the new one more consonant to right
and justice, and founded in the better reason.
In
Miller v. Wilson, 15 Ohio, 108, the doctrine of this
case
Page 91 U. S. 487
was expressly affirmed by the Supreme Court of Ohio, though the
result upon the facts was in favor of the creditors. The facts of
the case in hand are more favorable for the support of the deed
than those in
Van Wick v. Seward. Here the debtor reserved
property worth more than twice and a half the amount of his debts.
He expected and intended to pay all he owed. He continued able to
do so until he lost his means by the hazards of business. The
creditor rested supine for a long time. He did not take his
judgment until more than eight years after the second note matured,
and more than six years after the execution of the trust deed. More
than seven years had elapsed when the levy was made. The validity
of the deed was then challenged for the first time. The creditor
quietly looked on until after misfortune had deprived the debtor of
the ample means of payment which he had reserved, and now seeks to
wrest from the wife the small remnant of property which her husband
acquired by means derived wholly from her estate, and which, in
part fulfillment of his promise repeatedly made both before and
after his marriage, he endeavored to secure to her and her
children.
The evidence, as it stands in the record, satisfies us of the
honesty of the transaction on his part. The nonpayment and the
inability to pay are the results not of fraud, but of accident and
misfortune. When Fulton executed the deed, he did what he then had
the right to do, and was morally, though not legally, bound to
do.
The proofs would not warrant us in holding that the settlement
does not rest upon a basis of good faith or that it is not free
from the taint of any dishonest purpose.
The decree of the circuit court is affirmed.
