U.S. Supreme Court Thompson v. Baker, 141 U.S. 648 (1891)
Thompson v. Baker
Submitted November 4, 1891
Decided November 16, 1891
141 U.S. 648
ERROR TO THE CIRCUIT COURT OF THE UNITED
STATES FOR THE NORTHERN DISTRICT OF TEXAS
A conveyance by a debtor in Texas of his real estate there, made with intent to delay, hinder or defraud his creditors, being void as to the latter under the statutes of that state, a judgment sale and transfer of such property, in an action commenced by the levy of an attachment upon it as the property of the debtor, made after the fraudulent sale is upheld in this case as against a bona fide purchaser from the fraudulent grantee, taking title after the levy of the attachment.
This is an action of trespass to try the title to a tract of land in Clay County, Texas, containing 1,729 acres, more or less. The dispute is between Thompson, who was the plaintiff below, and Schuler. Each party claims under Baker. Schuler pleaded not guilty, alleging by way of reconvention that he was the owner in fee and entitled to a judgment for the land, with damages and writ of restitution. The court tried the case, making a special finding of facts in accordance with the agreement of the parties, upon which judgment was entered in favor of Schuler.
The history of the title, as shown by that finding, is as follows: Baker, August 30, 1884, conveyed the land, with general warranty, to one Ledbetter, the deed reciting a consideration of $8,225, evidenced by three promissory notes, each for one-third of that sum, and due respectively on the 1st days of September, 1885, 1886, and 1887. The grantee was a nephew of Baker and a single man, living on the land with his uncle, and having there 40 head of cattle. After the deed, he continued to live with Baker, who had 300 head of cattle on the land. But their value is not stated, nor does it appear to what extent Baker was indebted, or what other property, if any, he had in the state subject to execution.
The deed of August 30, 1884, was made to defraud the creditors of the grantor, particularly Schuler, who at its date,
held the note of Baker and others for $10,000. It was never delivered to Ledbetter, but was put on record by Baker September 29, 1884.
A few days before that deed was recorded -- namely, on the 24th day of September, 1884 -- Schuler instituted suit on his demand of $10,000 against Baker and others in the District Court of Clay county, Texas, and on the same day sued out an attachment which was levied upon the land in controversy as the property of Baker. That suit, on Schuler's application, was removed into the Circuit Court of the United States for the Northern District of Texas, in which court the transcript was filed December 4, 1884. On the next day, December 5, 1884, Schuler sued out in that court another writ of attachment, which was levied the same day on the land in dispute as the property of Baker.
On May 9, 1885, Ledbetter made and delivered to J. N. Israel a general warranty deed conveying the land to the latter and reciting a consideration of $10,000 cash. On the same day, Baker executed a release of his vendor's lien. The deed and release were both acknowledged on the day last named. Two days later, May 11, 1885, Baker executed to Israel a quitclaim deed for the land. No consideration was paid by Israel to Baker or to Ledbetter for their respective conveyances, which were recorded May 14, 1885.
On the 1st day of August, 1885, Thompson loaned to Israel the sum of $5,000, for which the latter executed his note secured by mortgage on this land. Default in performing the stipulations of the mortgage having occurred, Thompson brought suit against Israel in the court below to foreclose it. The finding does not show when that suit was instituted, but it was commenced after Schuler's action was brought.
In Schuler's suit, the court below rendered judgment January 12, 1886, against Baker and others, for the debt sued on, "with foreclosure of the attachment lien." The judgment recites that "the attachment lien, as it existed December 5, 1884, is foreclosed" the writ issued in the state court not being mentioned in it. Upon the above judgment an order of sale was issued. The sale took place June 1, 1886, Schuler
becoming the purchaser, and receiving a deed from the marshal, which was recorded June 4, 1886.
Subsequently, June 16, 1886, Thompson obtained a decree in his suit under which the land was sold on the 3d of August, 1886. He became the purchaser at the sale, receiving from the marshal a deed, which was recorded in September, 1886.
When Thompson made the loan to and took the mortgage from Israel, he had no knowledge of the fact that the latter paid nothing for the conveyances from Baker and Ledbetter, nor of the fraudulent intent with which Baker conveyed to Ledbetter, nor actual notice of any defect or infirmity in the title.
The writs of attachment, in the action of Schuler v. Baker, the court found,
"were properly sued out, issued, and levied, and by proper officers, and the lien on the land in controversy, under the writ of December 5, 1884, was duly and regularly foreclosed."
It was also found that "the foreclosure proceedings under the mortgage from Israel to Thompson were regular."
Neither Thompson, Ledbetter, nor Israel were parties to Schuler's suit, nor was Schuler a party to Thompson's suit.
Such is the case made by the finding of facts.
The statute of Texas relating to frauds and fraudulent conveyances declares that
"Every gift, conveyance, assignment, or transfer of or charge upon any estate, real or personal, every suit commenced, or decree, judgment, or execution suffered or obtained, and every bond or other writing given, with intent to delay, hinder, or defraud creditors, purchasers, or other persons, of or from what they are or may be lawfully entitled to, shall, as to such creditors, purchasers, or other persons, their representatives or assigns, be void. This article shall not affect the title of a purchaser for valuable consideration unless it appear that he had notice of the fraudulent intent of his immediate grantor, or of the fraud rendering void the title of such grantor;"
"Every gift, conveyance, assignment, transfer, or charge made by a debtor, which is not upon a consideration deemed valuable in law, shall be void as to prior creditors unless it appears that such debtor was then
possessed of property within this state sufficient to pay his existing debts, but such gift, conveyance, assignment, transfer, or charge shall not on that account merely be void as to subsequent creditors, and though it be decreed to be void as to a prior creditor because voluntary, it shall not for that cause be decreed to be void as to subsequent creditors or purchasers."
Sayles' Civil Statutes, vol. 1, Art. 2465, p. 807, Art. 2466, p. 809; Rev.Stats.Texas, 1879, p. 363.
MR. JUSTICE HARLAN, after stating the facts in the foregoing language, delivered the opinion of the Court.
The transaction by which Baker attempted to put the title to the land in his nephew was a mere sham. The deed was never delivered to the pretended grantee and, having been made with the intent to defraud the creditors of the grantor, particularly Schuler, was void under the statute as to such creditors. It did not, therefore, as between Schuler, Baker, and Ledbetter, stand in the way of Schuler's causing, as he did, an attachment to be levied upon the land as the property of his fraudulent debtor. Equally ineffectual as against Schuler was the conveyance by Ledbetter and the quitclaim deed of Baker to Israel. No consideration of any kind passed from Israel to either of the fraudulent grantors, and those deeds were void as to prior creditors.
So that, on the 1st day of August, 1885, when Thompson took a mortgage from Israel, the land was under a lien created
by Schuler's attachment of December 5, 1884, which was levied upon it as the property of Baker. The deed from Baker to Ledbetter and the conveyance from Ledbetter to Israel being void as to Schuler, he had the right to proceed to a decree in his suit without noticing the apparent title which Ledbetter had of record at the time the attachment of December 5th was levied or the title which the latter attempted, after the levy of that attachment and in fraud of Baker's creditors, to convey to Israel. It results that the rights of Thompson under the mortgage from Israel and under the decree, sale, and purchase in the suit brought by him, having been acquired while the land was under a valid levy by Schuler's attachment of December 5, 1884, as the property of Baker, were subject to whatever rights were acquired by Schuler as purchaser under the decree in his suit. Baker being a party to that suit, his interest in the land levied upon by Schuler's attachment could not be conveyed by him so as to defeat the final decree in that suit. And no greater rights could be acquired by a purchaser from Baker after the attachment than Baker himself had. In Tuttle v. Turner, 28 Tex. 759, 773, which involved the title of one who purchased land after a levy thereon of an attachment, the court said:
"If he purchased after the appellees acquired a lien on the lands by levy of the attachment, his rights are subordinate to theirs. The attachment lien being a prior encumbrance, he takes subject to its prior satisfaction. Being a pendente lite purchaser, he is affected with notice of the rights of the appellees,"
etc. So, in Hancock v. Henderson, 45 Tex. 479, 484, where the contest was between the holder of an attachment lien upon land and a person who purchased from the grantees of the defendant in the attachment, who, it was alleged, had conveyed the land to such grantees with the fraudulent intent to hinder his creditors, such purchaser having no actual notice of the issuing of the attachment or of the levy, the court said:
"That a valid levy created a lien on the land attached, and, when properly returned on the writ into the court from which it issued, is notice to third parties are propositions which it is not deemed necessary to discuss. It follows that
Mrs. Louisa Hancock [the purchaser after the levy of the attachment], having bought the land under these circumstances, took it subject to the plaintiff's [attachment] lien."
To the same effect is Paxton v. Meyer, 67 Tex. 96, 98. See also County of Warren v. Marcy, 97 U. S. 96 , 97 U. S. 105 ; Union Trust Co. v. Southern Navigation Co., 130 U. S. 565 , 130 U. S. 570 ; Murray v. Ballou, 1 Johns.Ch. 566, 576.
For the reasons stated, we are of opinion that the title to the land was in Schuler in virtue of his purchase at the sale in the suit brought by him, and of the marshal's deed to him.