money and received the proceeds of the sales of the property, and gave them credit upon their books in a running account as from time to time he received it, and made charges therein as from time to time be advanced it, without applying the receipt in payment of any particular item of the account, the law says that the first money which he received shall be applied to the payment of the first debt which existed. And if these payments applied in that way equal the debt which existed on the fourteenth day of April, the corporation in this case has no right, upon the fact that it was in violation of the rights of the creditor, to maintain this action. The question, whether he did receive sufficient payments to do so, is for you to determine from the evidence. Verdict for defendants.
LEE, Assignee, v. HOLLISTER and others.(DiBtriot Oourt, D. Kentucky. December, 1880.)
Where A. and B. executed a note on January 10,1873, at fOUf months, for $5,000, which was discounted by the Oovington National Bank, and at its maturity A., the principal, gave his check upon that bank for the amount of the note and took it up, and A. and B. gave a new note, which was discounted by the bank, and the proceeds placed to A.'s credit to pay the maturing note, and this transaction was repeated at intervals of four months until February 23, 1878, when the note in suit was executed, held, that the debt created in January, 1873, had not been paid, and that these new notes were merely renewals.
BUIT TO BET ASIDE CONVEYANCES-KENTUCKY- WIFE'S MONEY, SLAVES, AND LAND-FUNDS FuRNISHED TO HUSBAND- VALUABLE CoNSIDERATION-KENTUCKY STATUTE AGAINST FRAUDULENT OONVEY" ANCES-CONSTRUCTION-PRIOR AND SUBSEQUENT OREDITORS.
In a suit by an assignee in bankruptcy of H. to set aside two conveyances made to H.'s wife in 1874, it appeared that in 1850, when they were married, she was possessed of Ii large property, consisting of money, slaves, and land, inherited from her father. There was no .Reported by Messrs. Florien Giauque and J. O. Harper, of the Cincinnati bar.
LEE V. HOLLISTER.
antenuptial agreement. Before H. received any part of her estate, he promised to invest an amount equal to what he· received in real estate for her use, and place the title in her name, and this promise was frequently repeated and recognized up to the time the conveyances were made. At different times before 1856 the husband received various SUmB of money from his wife's guardian and her father's executor, and from the sale of her slaves and land. At-the time of his marriage he was in a good business, and continued to improve his fortune until after the conveyances were made. In 1874 he sold out his interest in business to his partners, and received as part of the consideration the two lots in controversy, which he had conveyed directly to his wife. He was not then embarrassed, and did not become so until SUbsequently; and there was no evidence of actual fraud. At the tinie said conveyances were made,H. was surety on a note for $5,000 to the Covington National Bank. The Kentucky statute against fraudulent conveyances (Gen. St. c. 44, t 2, p. 488) provides that every" conveyance .. .. made by a debtor, of" .. .. his estate, without valuable consideration therefor, shall be void as to all of his then-existing liabilities, but shall not, on that account alone, be void as to others creditors whose debts or demands are thereafter contracted; .. .. .. and though it be adjudged to be wid as to a prior ereditor, it shall not, therefore, be deemed to be wid as to8uch 8ubBeguem ereditors."
JURISDICTION OF COURT OF EQUITY.
Held, (1) that a court of equity has jurisdiction of such a suit.
HUSBAND'S MARITAL RIGHTS-WIFE'S MONEy-VALUABLE CoNSIDERATION.
(2) As the husband was entitled by virtue of his marriage -to his wife's personal estate, that her- consent to collect her money was not a valuable consideration for such conveyance.
WIFE'S REAL ESTATE AND SLAVES-VALUABLE CONSIDERATION.
(3) As by the Kentucky statutes the wife's slaves, like her land, could be disposed of only by her uniting in the conveyance, thai, to the extent of the money which he received from the sale of her land and slaves, the conveyances were supported by a valuable consideration.
VALUABLE CONSIDERATION-ONE DEED SUSTAINED.
(4) As the proceeds received from the land and slaves, with interest, amounted to about the sum recited in each deed as its consideration, and from the acknowledgment of one it appeared to have been executed first, that such conveyance was supported bya valuable con. sideration, and would not be set aside. Pryor, A88ignee, v. Smith, 4 Bush, 379; Darnaby v. Darnaby, 14 Bush,485,distinguished.
SECOND CONVEYANCE-WITHOUT VALUABLE CONSIDERATION, VOID AS TO ExISTING DEBTS.
(5) That the second conveyance was without valuable consideration, and that under the Kentuckr statute against fraudulent con-
veyances it was void as to the then existing debt to the Covington National Bank, and would be set aside and the lot sold.
DISTRlBU'l.'ION-SUBSEQUENT CREDITORS NOT· ENTITLED TO SHARE IN.
(6) That subsequent creditors are not entitled to share in the proceeds of such sale, but they will be distributed to pay costs, the bank's claim without interest, and the balance, if any, to the wife. Kehr v. Smith, 20 Wall. 36, and statute 13 Elizabeth, c. 5, distinguished.
Benton &: Benton, for assignee. a. Eginton, for Mrs. Hollister. BARR, D. J. This is a suit brought by the assignee in bankruptcy of Hudson Hollister to set aside two conveyances made to his wife, Mary H. Hollister, in January, 1874. The facts proven in the record are briefly these: Mary McConnell married Hudson Hollister on the tenth of June, 1850. Her father was then dead, and she had inherited one-fifth of his estate, consisting of land, negroes, and s0Ill:e money, estim8lted to be worth $50,000. There was no antenuptial agreement; but it is clearly proven that Hudson Hollister, before he received any part of his wife's estate, promised her ihat if she would allow him to -collect and use her money he would invest an equal amount in real estate for her use and benefit, and place the title in her name. This promise was frequently repeated and recognized by the bankrupt until the conveyances were made in 1874. Hudson Hollister received of his wife's guardian :$2,202.08, and from the executor of her father's8state some more money, but the amount is not proven. Mrs. Hollister was allotted, in tho division of her father's estate, six negroes, and had an interest in the homestead of her father and some lands in Carter. county. Two of the negroes were sold, and the proceeds collected 'by Hollister and used by him under the promise which he had made his wife. They brought $1,100, of which Rum $500 was collected probably in 1852 <or 185,3, and $600 in 1855 or 1856. Her interest in the homestead was sold in or 1853 for $1,000, and was pl'obably collected and used by her husband under the prom.. :ise mentioned. There is some difference in the testimony whether this .land w.as paid for in money or nagrees. It. is,
LEE V. HOLLISTER.,
however, not material, as Hollister took and used the' negroes as his own property. 'Hudson Hollister was, at the time of his marriage and the time he his wife as sta.ted above, in a good business, with a fa.ir capital, and he continueq to improve his fortune until some time after the conveyance of January, 1874. He sold out his interest in his business to his partners in January, 1874, for $25,000. He received as part of the ,purchase money the two lots in controversy, which he had conveyed directly to his wife. These conveyances are dated January 26, 1874, and each recites a cash consideration of $5,000 pai,d by Mary H. Hollister. Thef;irm from which Hollister retired was prosperous, and was abundantly able to and did pay all of its debts. Hollister himself was not embarrassed or largely indebted. He became embarrassed, subsequently, and on the sixteenth day of April, 1878, filed his petition to be declared ll-' bankrupt,and he was so adjudgeci, and complainant, appointed his ai:isignee. :'i'he City National Bank of Covington has prOVen a debt against the bankrupt for This is a joint Hollister and his brother-in-law, W. W.Leathers, payable to the bank, dated February 23, 1878, at four months. It appears that a similar note was executed by these partieadated January 10, 1873, which was discounted by that bank, and has been renewed from time to time, at intervals of four 'months, until the note of FeJ?ruary 23, 1878, was executed. These notes were joint, and were in fact for the benefit of Leathers, who obtained all the money from the bank.. The assignee, Lee, has brought. this suit Jar the purpose of setting aside ,these conveyances by the bankrupt to his wife, as vOhmtary and without consideration, and as such void as to this debt of $5,000, which is claimed iohavebeeI,l sub-, sisting one at the time of the conveyances. His original bin asked that these conveyances be declared fraudulent and void as,ta the debt of the bank, and that the property 1>:e subjected to the' payment of the bank's debt and interest. He subsequently filedl1namended bill alleging that these I;onveyances as to all of the bankrupt's were
" " , . ,
asking that the property be subjected to the payment of the debts of the bankrupt pro rata. The bank was made a party, and in a cross-bill insists that these conveyances were voluntary, and a.re fraudulent and void. as to its debt, and insists that it should be paid its entire debt out of the proceeds of the prop'erty, when subjected and sold. Mrs. Hollister and her husband have answered the bill and cross-bill. They deny that the bank debt was a subsisting one when the conveyances were made, January, 1874, and insist that Hollister was in fact the surety of Leathers in the original debt, and that it was paid at its maturity by Leathers, with the proceeds in part of another note discounted for the same amount. They insist that the execution of the last note was the creation of a new debt, and not the continuance of an old one. They deny that the conveyances were voluntary and without consideration, and allege they were executed for a valuable consideration. This consideration is alleged to be the estate which the bankrupt received from his wife, and the promise made before he received it to invest an equal amount for her benefit in real estate, placing the title in her. They allege in an amended answer that there was an antenuptial agreement, but as there is no proof of this, it may be dismissed from the case. There are four questions arising, and which have been argued by counsel: First, has a court of equity jurisdiction? Second, is the debt proven by the Covington National Bank the same debt existing at the time of the conveyances? Third, if so, were they made for a valuable consideration, or were they merely voluntary? Fourth, if these conveyances, or either of them, are voluntary, and hence fraudulent and void, shall the proceeds of a sale be divided pro rata between all of the bankrupt's debts, or shall the bank's debt have prefer,ence? . We shall consider these questions in their order. Mrs. Hollister has the legal title, and the suit is to set aside the conveyances to her because they are fraudulent and void. The remedy at law is not, we think, adequate or plain. The
jurisdiction of a court of equity has been frequently sustained in such a case, or in very analogous ones. Hume.s v. Scruggs, 94 U. S. 28; Shelton v. Tiffin, 6 How. 168; Massey v. Allen, 7 N. B. Reg. 401; Shackleford v. Collier, 6 Bush, 149;" Pratt v. Curtis, 6 N. B. Reg. 189. It is proven that the original note of Leathers and Hollis· ter was discounted at the request of Leathers, who was a director in the bank, and that the proceeds were placed to his credit. The proceeds of each note, as discounted, were placed to the credit of Leathers, who gave his check for the amount of the matured note and took it up. The cashier testified that the proceeds of the renewals were always placed to Leathers' credit, upon the express understanding that they ware to be used to pay the maturing note. The question, whether or not the giving of these checks for the amounts of. the matured notes as they fell due and their surrender to him is a payment, is one about which there is some conflict of authority. Mr. Parsons thinks such facts make a payment. 2 Parsons, Bills and Notes, 208; see, also, Bank Commonwealth v. Letcher, 3 J. J. Mars. 195; 1 Dana, 83, I am, however, of the opinion that the debt created in Jan· uary, 1878, has never been paid, and that these notes were renewals which merely changed the evidence ofthe debt. The entering of the credits to Leathers when each note was discounted, and his giving his check for the amount of the matured note, was simply a mode by which the evidence of the debt was changed. 2 Daniells, Neg. lnst. 260; McLaughlin v. Bank Potomac,7 How. 228; Lowrey v. Fisher, 2 Bush, 74; Bank of America v. McNeil, 10 Bush, 55. The next inquiry is whether or not these conveyances were made without valuable considerations; and this brings us to consider the effect of the post-nuptial parol agreement. When Mr. Hollister married in 1850 he became, by virtue of his marriage,entitled to collect and reduce into possession all of his wife's personal estate. This was subject to the wife's equitable right of settlement, but as the evidence shows there was no such right in the wife in this case, we shall
assume that his right to collect' his wife's money was absolute, whether she consented or not. Hence, a parol promise based upon such a consent would not be' for a valuable con-sideration. But Mr. Hollister's marital rights in his wife's land and shives were very different from that which he had in her money or personalty. Under the act of 1846 the slaves of a wife were, in effect, held in the same manner as her real estate, and neither her land nor slaves could be sold without her consent. It is true that the act of 1846 was somewhat. changed by the Revised Statutes which became the law July 1, 1852, but that part of the law which required the wife's· consent to the sale of her slaves remained unchanged.. The proceeds of the wife'-s slaves sold after July I, 1852, would he the husband's, "unless otherwise expressly provided in the conveyances or the obligation of the purchaser;" but ·the husband could only sell the wife's slaves in the same mode as her land, which could only be done by her uniting in the con- . veyance. 2 Rev. St. c. 47, § 2, p. 9. . When Mr. Hollister made his parol promise in consideration of Mrs. Hollister's consent to the sale of two ,of her slaves, and her interest in the homestead of her father, it was made l1pon a valuable consideration,-to the extent, at least, of the proceeds of the slaves which Mr. Hollister was emibledto collect. Mrs. Hollister was giving and Mr. Hollister receiving more than his marital rights entitled him to, and to that extent this parol agreement is based upon a valuable consideration. 1 Bishop on Married Women, §§ 721-2. The purchase money received by the bankrupt for the two slaves was $1,100, and for her interest in the homestead was $1,000. The interest on this from say Janaury 1, 1854, to January 1,1874, would be $2,520. This, added to the principal debt, would make $4,620. The time of these sales was, at least as to one of them, sometime before January 1,1854, so that the proceeds of these sales, with interest, would not be far from $5,000. This would be a valuable consideration to sustain one of these conveyances. "The record does not disclose any,difference in the value of
the lots conveyed to Mrs. Hollister. The consideration cited in the deeds is the same amount, and the deeds are of the same date. The conveyance made by Thomas G. Ran· dall seems to have been acknowledged first. I shall therefore decide that conveyance is sustained by a valuable considera. tion, and refuse to set it aside. Miller v. Edward8, 7 Bush, 393; Latimer v. Glenn, 2 Bush, 535. In coming to this conclusion, I have not overlooked the lapse of time between the receipt of the proceeds ot these sales by the bankrupt and the execution of his parol agree·, ment. But this agreement was executed by the bankrupt at a time and under circumstances which made it quite proper he should do so. He was abundantly able to have paid all of his debts, and have a handsome estate left. The cases of Pryor, Assignee, v. Smith, 4 Bush, 379, and Darnaby v. Darn· aby, 14 Bush, 485, are unlike these cases. In those cases the parol agreement had not been executed, and its execution was sought by the wife against the creditors of an insolvent husband. There)s nothing in this record tending to prove actual fraud upon the part of the bankrupt or his wife either in the making of this parol agreement or its execution. The only claim the assignee or the bank can have to set aside the conveyances of either of these lots is under the provisions of the second section of the Kentucky statute against fraudulent conveyances, which provides that "every gift, conveyance, assignment, transfer, or charge made by a debtor of or upon any of his estate, without valuable consideration thete· for, shall be void as to all of his then existing liabilities, but shall not on that account alone be void as to creditors whose debts or demands are thereafter contracted; · · · and, though it be adjudged to be void as to a prior creditor, it shall not therefore be deemed to be void as to such subsequent creditors:" Gen. St.c. 44, § 2, p. 488. This section is peremptory, The, only inqu.iry is whether the conveyance wa,s without a valuable consideration, and are there and were there existing liabilities ofthegrantol'? Ifthe conveyance is without a valuable consideration, it is .void as to existing lia.
bilities. Todd v. Hartley, 2 Met. 207; Lowry v. Fisher, 2 Bush, 70; Miller v. Disho, 3 Bush, 215. There is no evidence to prove that the bankrupt obtained the proceeds of any other of his wife's slaves or land. Her other slaves seem not to have been sold, but were emancipated, no doubt, by the thirteenth amendment to the federal constitution. 'l.'hey were not her husband's under this parol agreement, and their emanicipation was her loss and not his. Her land in Carter county remains unsold. When witnesses speak of the bankrupt receiving $10,000 or $12,000, they evidently include these slaves. I therefore conclude that the other conveyance, that from Norwood H. Sinclair to Mrs. Hollister, was without a valuaunder the statutes, void as to existing ble consideration, liabilities of'the bankrupt. This liability is $5,000 due Covington National Bank, less $60 rebate and $988 paid by the est!l.te of Leathers; leaving a balance of $3,952, without interest. The right to bring suit to set aside this deed is in the assignee of the bankrupt alone, and as Hollister's bankruptcy stopped the receiving of interest on all his debts, including that held by Covington National Bank, the conveyance of Sinclair will be set aside, and the property sold to pay the sum of $3,952, without interest. Whether the proceeds of this property, when sold, shall be divided pro rata between all of the creditors of Hollister, or the national bank have priority, is a question of much difficulty. The supreme court says, in Kehr v. Smith, 20 Wall. 86 : "It iswell settled, when a deed is set aside as void as to the existing creditors, that all the creditors, prior and subsequent, share in the same pro rata." If that case is like this one, its authority is conclusive upon this court. It was first decided by Judge Treat, and arose under the Missouri statute. See 7 N. B. Reg. 27. The bill in that case alleged fraud, and the court so held, because, at the time of the conveyance by the bankrupt to the trustee of his wife, there was not sufficient property
remaining, after deducting the property conveyed, to pay his then creditors. The learned judge evidently came to his conclusion in regard to the division of the proceeds of the sale of the property with some reluctanc-e. In the course of an able opinion h:e uses this language; "Were the question to be decided for the first time, there might be somehesitallcy in holding that a deed void as to existing creditors was to be considered void as to all creditors, for practically sucb, is the effect of letting in subsequent creditors, especially to share pro rata. The courts hold, with great uniformity, that the deed will not be set aside at the instance of subsequent creditors; yet they give to the latter the same benefit where the prior creditors cause it to be set aside. Why such discrimination· as to the right to attack the deed, where there is not as to sharing in the results?" The decisions of which the learned judge writes arose under the statute of 13 Eliz. c. 5, or statutes which are substantially copies of that statute. The Missouri statute, § 2, is substantially a copy of 13 Elizabeth. The first of the Kentucky statute is substantially a re-enactment of 13 Elizabeth. The second section of the Kentucky statute gives a legislative construction to the first section as to voluntary conveyances and existing debts, or more properly it is an additional enactment. Under the second section, a gift, conveyance, assignment, transfer, or charge of a debtor's estate, made without valuable consideration, shall be void as to his -existing creditors; "and, though adjudged to be void as to a prior creditor, it shall not, therefore, be deemed to be void as to subsequent creditors." The statute of 13 Eliz. c. 5, was enacted to prevent gifts, conveyances, etc., by a debtor, with the "intent to delay, hinder, or defraud creditors and others of their just and lawful actions," etc. The second section of the Kentucky statute does not require an "intent to hinder, delay, or defraud creditors;" but voluntary conveyances, as to existing debts, are "Void without regard to intent. If such conveyances are void with the intent to binder,
delay, or defraud creditors, then they are fraudulent and void as to all creditors, subsequent as well as prior. In such a case the proceeds of the property, thus conveyed, would and should be divided between creditors pro rata. But when there is no such intent, and the conveyance is void because of the enactment of the second section of the statute; I think the existing creditors should have priority; and, if there is any balance after paying the existing debts, it should go to the wife of the bankrupt. 'l'odd v. Hartley, 2 Met. 207. The right of the wife to this balance shouid be recognized, beMuse of the language of the statute, and because of her equity; The complainant's bill as to the conveyance by Randall to her (Mrs. Hollister) is dismissed without costs, and the conveyance to Mrs. Hollister by Sinclair is set aside, and the property ordered to be sold, and the proceeds applied to the payment of the complainant's costs; the debt due the national bank, $3,952, without interest, and the balance, if any, to be paid over to defendant Mary H. Hollister.
BROOKHAUS and others.
(Oircuit OOU1't, E. D. Wisconsin.
CHANGE OF CITIZENSHIP.
"To effect a change of citzenship from one state to another, there must be an actual removal, an actual change of domicile, with a bona fide intention of abandoning the former place of residence and estaband the acts of the party must correspond with lishing 8 new such purpose."
In such case the 'party may testify to hIS mtention where there has been an actual removal.
In such case a temporary return to the former place of residence, with views and for objects merely tempo;rary, does not revive the former citizenship.