Eastman et al. vs. McAlpin.

No. 22.-MOSES EASTMAN and SAMUEL PHILBRICK, plaintiffs in error vs. HENRY MCALPIN, defendant in error.

The answer of a defendant is evidence for him, so far as it is responsive to the case made by the bill, or connected necessarily with the responsive matter, or expla natory of it. As where it is charged in the bill that the defendant in execution is in possession of the property conveyed by him to his co-defendant in the bill, as being prima facie evidence of fraud-the answer admitting the possession, and showing, by way of explanation, that the defendant in execution holds as tenant of the vendee, paying him rent and hire therefor, is responsive to the bill, and therefore evidence in his favor.

In the construction of a statute, when the words of the enacting clause are clear and positive, recourse must not be had to the title or the preamble. They serve to assist in removing ambiguities, where the intent is not plain and manifest. The title of an act and the preamble, are, strictly speaking, no parts of it.

A bona fide and absolute conveyance of any part, or the whole of his estate, by a person unable to pay his debts, (even to a creditor in satisfaction of a pre-existing debt, whereby another creditor is excluded from any share or portion of the estate so conveyed,) if the same be free from any trust for the benefit of the seller, or any person appointed by him, is a valid conveyance as against such excluded creditor, and all other persons. Such a conveyance is not obnoxious to the statute of 1818. (a)

This was a Bill in Equity, filed to set aside a conveyance of an insolvent debtor, under the act of 1818, and was tried before Judge Fleming, in Chatham Superior Court, January Term, 1846. The following are the facts of the case: Henry McAlpin, the defendant in error, under a contract for that purpose, furnished bricks to Samuel Philbrick, one of the plaintiffs in error, for the building of a dwelling-house and outbuildings on two lots in Brown Ward, city of Savannah. The bill for the bricks was partially paid, when Philbrick suspended payment, generally. After his suspension, he paid about six hundred dollars on the account for bricks, leaving a balance then due of some two thousand dollars, or up

(a) “An Act to prevent assignments, or transfers of property, to a portion of creditors, to the exclusion and injury of the other creditors, of persons who fail in trade, or who are indebted at the time of such assignment or transfer." Assented to Dec. 19, 1818.

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Whereas a practice of selecting particular creditors by assignments and transfers of property, made by persons indebted, and thereby excluding or defrauding other bona fide creditors of their just claims, on the estate of insolvent debtors, is contrary to the first principles of equity and justice; to prevent the mischief thereof,

"Be it enacted, &c., That any person or persons, unable to pay his, her, or their debts, who shall at any time hereafter make any assignment or transfer of real or personal property, stock in trade, debts, dues, or demands, in trust, to any person or persons, in satisfaction or payment of any debt or demand, or in part thereof, for the use and benefit of his, her, or their creditor or creditors, or for the use and benefit of any other person or persons, by which any creditor of the said debtor shall or may be excluded from an equal share or portion of the estate so assigned or transferred, such assignment, transfer, deed, or conveyance, shall be null and void, and considered in law and equity as fraudulent against creditors :-Provided, nevertheless, that nothing contained in this act, shall prevent any persons in debt, from bona fide and absolutely selling and disposing of any part, or the whole of his, her, or their estate, 30 the same be free from any trust for the benefit of the seller, or any person or persons appointed by him, her, or them."

Eastman et al. vs. McAlpin.

wards. McAlpin brought his action for the balance against Philbrick, and recovered a judgment. Previously to the recovery of this judgment, Philbrick being indebted to the minor children of J. Stone, deceased, of whom Eastman, the other plaintiff in error, was guardian, on a note endorsed by J. W. Morrell, of Savannah, and being also indebted to the estate of Wesley Abbott, who had been for many years a workman in the jewelry store of Eastman, and in the welfare of whose family Eastman felt an interest, was pressed by Eastman for a settlement of those debts. Under the pressure, as the only means of meeting the demands, Philbrick resolved to sell the said property in Brown Ward, a house and lot in Hicks Tything, Savannah, three slaves, his house servants, and his furniture, and to remove his family to the North to reside, until he was relieved from his difficulties.

He, accordingly, proposed to Eastman to become the purchaser of the whole property, in which event, after paying certain mortgages upon the property in Brown Ward and Hicks Tything, he would allow as much of the purchase-money as was necessary to satisfy the aforesaid debts to Stone's children and Abbott's estate to be so applied. The purchase was made, at an adequate price. Eastman assumed the payment of the mortgages, which he took up, and advanced the balance of the purchase-money in cash, and took up and delivered to Philbrick the notes of J. Stone's children and Abbott's estate, and paid him the surplus in cash.

Eastman subsequently sold the Hicks Tything property, at an advance of $500 on the original purchase by him. He went on to complete the building in Brown Ward, which, at the time of the sale, was in an unfinished condition; and after expending upon it about $3,000, had some of the rooms sufficiently finished to be occupied.

The sale took place in April, and in July following Philbrick stopped payment. The conveyances were absolute, and the purchase-money prored to have been paid. The bill alleged that Philbrick remained in the possession of the slaves and furniture after the sale, and exercised ownership over them and it, and subsequently, and as soon as the said dwelling-house and appurtenances in Brown Ward were completed, proceeded to occupy the same, and still continued to do so. The possession being so alleged, the questions were asked in the interrogatory part of the bill," In whose possession the said estate, real and personal, then was?" and, "What had become of said slaves and furniture ?" To which the said Eastman answered, admitting the possession of Philbrick, and stated, by way of explanation thereof, that Philbrick, having changed his mind as to sending his family to the North to live, hired the furniture and two of the slaves, he (Eastman) having sold the other; and in December of the same year he rented the house in Brown Ward, at $300 per annum, for one year, which renting and hiring to Philbrick had been continued. The answers of both the said Eastman and Philbrick, positively denied all trust of any kind, and averred that the said sale was absolute and bona fide. And no trust was proved.

The cause proceeded to trial in the court below; and the evidence having closed, the Circuit Judge charged the jury that possession of the vendor, after the sale, was prima facie evidence of fraud, and, unless explained, ame conclusive; and that the explanation of that possession contained e answers was no evidence, because not responsive to the allegations

Eastman et al. vs. McAlpin.

or interrogatories in the bill. Whereupon the solicitors for the plaintiffs in error, who were the defendants in the bill, excepted to the said charge, because the answers in that regard were directly responsive, both to the allegations and interrogatories in the bill; and because the transaction being an absolute sale for a valuable consideration, as proved by the evidence in the case, the purchaser had a right to do with the property as he pleased; to place whomsoever he would in possession; and that, under those circumstances, no inference of fraud or trust ought to have been left to the jury, as deducible from the vendor's possession, in this case.

And the court below further instructed the jury that the terms bona fide in the said act of 1818 didn ot only mean an absolute sale for a valuable cash consideration paid at the time, but superadded the idea, that any condition or agreement in the original contract of sale from an insolvent man that the purchase-money should be applied to the payment of certain creditors, whereby others became excluded, the money having in fact been so applied, would not be bona fide within the meaning of the act of 1818. To which the solicitors for the plaintiffs in error excepted.

The solicitors for the plaintiffs in error then requested the court to instruct the jury that the deed being absolute, if there was no evidence of a secret trust, the case was not within the statute of 1818, which instruction the court refused to give; but, on the contrary, charged the jury that the deed, although absolute, and for a cash consideration paid at the time, was within the statute, if the property was purchased under a condition and agreement entering into the original contract of sale between Philbrick and Eastman that the purchase-money should be applied to the payment of certain creditors whereby others became excluded, Philbrick being insolvent at the time. Also, that if the consideration-money, or any part thereof, was applied under such contract to the payment of a pre-existing debt, the case was within the statute. To which the plaintiffs' solicitor excepted.

The solicitors for the plaintiffs in error asked the court, further, to instruct the jury that the plaintiff in error, Eastman, having purchased for a cash consideration, paid by him at the time, the consent of Philbrick that the cash purchase-money should be applied to the payment of the debts of Philbrick to the minor children of J. Stone, of whom Eastman was the guardian, and to Abbott's estate, and the actual application of the purchasemoney to those objects, did not bring the case within the act of 1818: which instructions the court refused to give; but, on the contrary, charged that the condition and agreement in the original contract of sale between Philbrick and Eastman that the purchase-money should be applied to the payment of the said debts, Philbrick being insolvent, created a trust for the payment of said creditors of Philbrick, to the exclusion of other creditors, which brought the case within the act of 1818. To which the plaintiffs' solicitors excepted.

The solicitors for the plaintiffs in error then asked the court below to instruct the jury that whilst it might be true that if Philbrick had assigned the property to Eastman to pay the debts out of what the same might realize, it might have been within the act, yet that Eastman having made an absolute purchase, for cash advanced, the direction of Philbrick to apply that cash, when paid, in a particular way, even to the payment of particular debts, did not bring the case within the act of 1818: which instructio

Eastman et al. vs. McAlpin.

the court refused to give; but, on the contrary, charged the jury that the instruction asked was substantially answered in the charge given on the previous instructions prayed. Whereupon the solicitors for the plaintiffs in error excepted.

The jury, under the charge and decision of the presiding judge, rendered a verdict setting aside said conveyances, and decreeing the said property to be subject to the debts of Philbrick, &c.

Upon all which exceptions to the decisions of the court below the plaintiffs assigned error.

WM. LAW for the plaintiffs in error.

The plaintiffs in error will maintain, that the court erred in charging the jury, that the explanation in the answers as to the possession by Philbrick after the sale, was not responsive to the bill and not evidence in the cause.

They contend that such passages of an answer as are explanatory of other passages responsive to the bill must be read.-5 Ham. Rep. 284, 255; 1 Russ. and Mylne, 64; 5 Sim. 225; 3 Russ. 149; 3 Phillips on Ev. by Cow. Notes, 927.

Affirmative facts in the answer responsive to the bill, either to the charging, stating, or interrogatory part, are conclusive as testimony, unless repelled by proof.-2 John. Ch. Rep. 85; 1 Cowen's Rep. 744, by Woodworth, J. 711, 742; 1 Paige 239; 3 Wend. 643; 5 John. Ch. Rep. 534, 542, 543; 2 McCord's Ch. Rep. 90, 101, 102, 344, 350; Cooper's Ch. Cas. 161; 4 Paige, 368.

2d. They maintain further, that the court erred, because possession in the vendor, after sale, is no evidence of fraud in the sale of real estate, to the same extent as in the case of personal property.-Newland on Con. 371 et Seq.; Roberts on Fraud, Con. 549, 550.

3d. They maintain also, that the court erred, because an adequate cash consideration having been proved to have been paid, and the transaction a bona fide sale, possession was no evidence of fraud. The bona fide purchaser, who had paid his money, had taken absolute conveyance, could place whom he pleased in possession, without invalidating his title.

4th. They will maintain, that in a case, in which a full, fair and adequate consideration was paid in cash, or its equivalent, the conveyance absolute on its face, and no secret trust proved, the sale is bona fide within the meaning of those terms in the act of 1818, notwithstanding the purchase-money, was applied to the payment of antecedent debts, under an agreement, as the condition of the purchase, that it should be so applied; because the statute embraces only tangible property, and not money. Under the statute, an insolvent may pay his debts with his money; and such money cannot be followed.-See Ch. Harper's Decision in Schultz's case-pamph. p. 45. A valuable consideration implies the bona fides of the transaction, unless it is shown to be merely colorable.-New. on Con. 381; 5 Tm. Rep. 238; 4 East. 1.

As the whole case turns upon the act of 1818, the construction of that act becomes the prominent inquiry of the cause.

The plaintiffs in error maintain, that the existing evils intended to be remedied by the act, ought to be carefully weighed in its construction. The old law, and the construction of the statutes in pari materia are to be considered.-3 Dall. 233, 253, 267; 4 East. 438; 1 Kent's Com. 460, et seq.

The evil to be remedied was the practice, by insolvents, on the eve of winding up, of making assignments in trust, giving a preference and securing an advantage to the debtor.

1st. At common law an insolvent might prefer any creditor; he might make an assignment, to secure an antecedent debt, of a part or the whole of his property; so there was no fraud or color, and he might do this the very night he absconded.-11 Wheat. 98 ; 7 Peters, 614

2d. He might do the same thing under 13 Eliz: if there was no fraud proved. Because bona fide and upon good consideration. That was all the statute required.— New. on Con. 381, 382.

3d. Under the bankrupt acts, he might secure a particular creditor, unless by deed, or in contemplation of bankruptcy, or it was of all his effects. In either of these ses the law made it an act of bankruptcy.-New. 381, 2; Doug. 92; 7 Peters, 614.

Eastman et al. vs. McAlpin.

Aided by the light derived from this inquiry, we proceed to consider the construction of our own act; what is prohibited by the enacting clause of the act of 1818? An assignment in trust giving a preference. What is saved by the proviso? An absolute conveyance. May an absolute conveyance be embraced? Yes, when it is not bona fide; when it is merely colorable; when the facts and circumstances show a secret trust Is the payment of an antecedent debt such a consideration as will constitute the transaction bona fide?

Yes, if it is absolute, and nothing reserved to the vendor, and free from any trust. The reason is, because the statute is silent on that subject. It does not prescribe whether the consideration shall be a present advance, or the payment of a debt. It contents itself with the exclusion of all trust.

The plaintiffs in error will maintain that in the absence of evidence of a secret trust, this transaction is bona fide within the statute; and that as the sale was not voluntary on the part of Philbrick, was not made with the view to defeat creditors, nor in the immediate contemplation of insolvency; but was extorted and wrung from him by the pressure of Eastman, the case is not within the statute.-Doug. 88, 92; 1 Wash. Cir. Ct. Rep. 34, 35; 1 Amer. Jur. 9, 197.

They further maintain that as no trust attached upon the property sold, nor was the consideration an antecedent debt, the purchaser having paid his money, the application of the money in part to the payment of pre-existing debts cannot create a trust within the meaning of the act. As the vendor could apply the money, when paid to him, without restraint by the statute, it could not violate the statute that the purchaser should stipulate as the condition of his purchase, for such a disposition of the money, as it was lawful for the vendor to make, had the money been placed in his hands.

The plaintiffs in error will also maintain that the decree is unjust and inequitable upon the grounds specified in the last exception.

R. M. CHARLTON, for defendant in error, in reply to the opening argument of counsel for the plaintiffs in error.

1st Exception. This exception is based upon the charge of the court, that possession of the vender after the sale, was prima facie evidence of fraud, and unless explained became conclusive; and that the explanation of that possession stated in the answers was not evidence, because not responsive to the allegations of the bill.

The court below was right on both these points, as we will proceed to show. The doctrine, that the possession of the vendor after the sale, is evidence of fraud, unless such possession be consistent with the deed, is now so well established, that it admits of no doubt. The only difficulty on the point is, is it conclusive, or is it only prima facie evidence of fraud?-See Twyne's case, 3 Coke, 80; also reported in 43 Law Library, p. 1, and cases cited in the English and Ameri

can notes.

Many of the cases hold the presumption to be incapable of being rebutted by any proof, and hold it to be conclusive, especially when the consideration, or a part of it, was an antecedent debt, as we will show this to be.-Smith vs. Henry, 1 Hills, S. C. Rep, 16; Edwards vs. Harben, 2 Term. Rep. 587; and also cases cited in English notes to Twyne's case, 43 Law Library, p. 36.

In Virginia, such possession is, per se, fraudulent, however free in other respects the case may be from any evidence of dishonesty or unfairness.-See 43 Law Library, p. 43.

And so far is the principle there carried, that an immediate re-hiring, bona fide, renders the sale fraudulent in law, as was held in Lewis vs. Adams et al., 6 Leigh, 320; see p. 45 of 43 Law Library. (And this proceeds upon the principle, that this subterfuge of re-hiring would be so often resorted to, that if allowed to prevail, it would defeat the whole object of the law.)

And the Kentucky authorities are to the same strong purport. The possession is conclusive evidence of fraud, not merely prima facie. A re-delivery on loan, or for hire, does not help it.-See 43 Law Library, p. 46; see, particularly, Laughlin vs. Ferguson et al., 6 Dana, 111.

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