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Opinion of the Court.
of the transaction with his principal within the scope of his agency.
If the contract was valid as to the creditors of Ferguson, the consideration therein expressed was sufficient to satisfy this burden.
The evidence shows that for many years Dent was an agent of Ferguson for the renting of his property, with more intimate relations than with his other patrons. But the record does not show that he was ever employed to buy or sell real estate for Ferguson. On the contrary, there is positive testimony that his (Ferguson's) traffic in that business was carried on by himself alone.
We have considered this case, so far, upon the assumpticn of the circuit justice, that the agreement was executed and delivered by Ferguson to Dent in good faith as to Ferguson's creditors. We do not concur in this assumption. If the voluminous record before us discloses a single fact tending to sustain that assumption, except a general expression of opinion by some of the witnesses that he was an honest man, it has escaped our search. The instrument itself was executed under circumstances which would lead a court to presume fraud upon creditors. It was a conveyance by a person deeply indebted, in anticipation of decrees and judgments, which, added to the existing encumbrances, amounted to the value of his property. We, therefore, agree with the district judge on this point, that the real contract was one between Ferguson and Dent to defraud the creditors out of the property conveyed, and to so conceal and cloud the title that they could be circumvented, hindered and delayed, and coerced into settlements and compromises. We think the evidence shows beyond doubt that Ferguson willingly participated for ten years in carrying out this plot. Both parties knew that $10,000 could not be saved for Ferguson, or any residuum out of the property for Dent, unless creditors could be wrought upon by some means to accept less than their claims. Neither party to such a contract could have been deceived or imposed upon about that result. Both knew the record fact, that the encumbrances perfected, and the encumbrances rapidly perfecting, exceeded in amount the value of the property.
Opinion of the Court.
That Ferguson had that fraudulent design when he signed his name to the instrument and turned over the property to Dent, as its owner, was directly sworn to by witnesses introduced by the complainants and examined by them — of course for a very different purpose. Mrs. A. G. Morrison, a witness produced to show that Dent had fraudulently abstracted certain papers from Ferguson deemed by him to be important and valuable, deposes as follows in reply to the question “What was it Mr. Ferguson told you about the sale of the property?” (referring to the sale now under consideration] : “He told me he went on Mr. Dent's bond, as near as I can remember. Mr. Dent went into business and broke, and the property was covered up some way in Mr. Dent's name to keep it from being sold. I couldn't tell you how long Mr. Ferguson told me, but I am positive he told me it was covered up in Dent's name, and he says: “There is wherein Dent has robbed me; he would not give me those papers back.'” In reply to another question, which the witness said did not repeat her previous answer accurately, she replied: "He didn't say it in those words.
He says he turned the property over to Dent, put it in his name," etc. Again, “He said something about a receiver being appointed, and he says: 'I turned the property over to Dent to keep it from being sold; I don't want it sold, because the rent of my property will pay the debt,”” etc. Another witness for the complainants, Robert McWilliams, testifies as follows concerning a conversation had with Ferguson in 1878: "If I remember correctly, he said that he had made over his property to Dent, with the tacit understanding that he should have sufficient to live on until his discharge in bankruptcy, and then Dent would return or turn over the property to him again." In reply to the question “What, if anything, do you know concerning the arrangement of A. M. Ferguson and Henry G. Dent concerning the Ferguson property on Beale, Hernando and De Soto streets and elsewhere?” he said: “I know of nothing except that Ferguson told me that he had conveyed this property to Dent with the tacit understanding that he (Ferguson) should have enough out of the rents of the property
Opinion of the Court.
to live on until he had got through bankruptcy, when the property should be returned to him again.”
The question arises — if a person conveys his property for the purpose of hindering, delaying or defrauding his creditors, and for eleven years acquiesces and concurs in the devices, collusive suits and impositions upon the court in furtherance of this purpose, without taking a single legal step to annul said conveyance or to stop such proceedings, will a court of equity aid him or his heirs to recover the property from the grantee or his heirs after the fraud is accomplished? This court has answered that question in the negative in Randall v. Howard, 2 Black, 585. In that case the complainants and defendant had made an agreement to defeat the claims of third persons to certain lands which the complainants had mortgaged to the defendant to secure a debt, so as to cloak the ownership by means of a foreclosure sale at which the defendant should purchase and hold the nominal title. After obtaining the title, he fraudulently dispossessed the complainants and asserted the right of ownership in himself. The prayer of the bill was to restrain the defendant from disposing of the land, and to restore it, or so much of it as remained after paying the debt, to complainants. The court, Mr. Justice Davis delivering the opinion, held that the agreement was a fraudulent one, to defeat a claim set up by other parties for a portion of the mortgaged lands by the covering up, through the aid of the court, the real ownership of the property, and said (p. 588): “A fraudulent agreement was entered into to defeat, as is charged, 'a fraud attempted against the complainants.
A court of equity will not intervene to give relief to either party from the consequences of such an agreement. The maxim, in pari delicto potior est conditio defendentis, must prevail. It is against the policy of the law to enable either party, in controversies between themselves, to enforce an agreement in fraud of the law, or which was made to injure another;" citing 1 Story's Equity, § 298; Bolt v. Rogers, 3 Paige, 154, 156; and Wilson v. Watts, 9 Gill, 356.
The same principle was applied in Wheeler v. Sage, 1 Wall.
Opinion of the Court.
518. In that case an agreement was entered into between complainants and defendant to secure the title to valuable real estate of an insolvent debtor, at the expense and sacrifice of his creditors, which the defendant violated, and, in conjunction with another person, secured an interest in the property to himself. The bill prayed that he be declared a trustee for the complainants, and required to convey to them that portion of the land to which, under the agreement, they were entitled. The court, Mr. Justice Davis delivering the opinion, said (p. 529): “Generally, when a party obtains an advantage by fraud, he is to be regarded as the trustee of the party defrauded, and compelled to account. But, if a party seeks relief in equity, he must be able to show that on his part there has been honesty and fair dealing. If he has been engaged in an illegal business and been cheated, equity will not help him.” And then, after a review of the evidence in that case, the opinion concluded in these words: “A proceeding like this is against good conscience and good morals, and cannot receive the sanction of a court of equity. The principle is too plain to need a citation of authorities to confirm it. It is against the policy of the law to help either party in such controversies. The maxim, in pari delicto, etc., must prevail” (p. 530).
We cannot assent to the opinion of the district judge that this maxim has no application to the case at bar. In the views prepared by him at the request of Mr. Justice Matthews, and which were adopted by the latter, he says, in speaking of the contract of May 14, 1869, that it is only “in form a contract for the sale of property;” and proceeds: “The real contract was one to defraud the creditors of Ferguson and Dent out of this property, and it was calculated that this could be done on a basis of $10,000 to Ferguson, to be realized out of the property itself, and all the balance to Dent, whatever that might be. But this was an unequal, unconscionable, and unfair division, particularly in view of actual results, in the accomplishment of which Dent has risked nothing but his time and labor. Ferguson has agreed to give too much for Dent's services in that behalf.
Opinion of the Court.
One of the objects of the bill is to prevent the defendants from reaping the lion's share of the benefits of this confessed fraud, and the maxim, in pari delicto potior est conditio defendentis,
has no application whatever to a case like this."
From this view we dissent. We find no authority for the idea that it is the province of a court of equity to make a fraudulent debtor the special object of its favor because he has not received a large enough consideration for his "confessed fraud." That court is not a divider of the inheritance of iniquity between the respective heirs of two confederates in fraud. Mr. Justice Baldwin, delivering the opinion of the court, in Bartle v. Coleman, 4 Pet. 184, 189, uses the following language: “The law leaves the parties to such a contract as it found them. If either has sustained a loss by the bad faith of a particeps criminis, it is but a just infliction for premeditated and deeply practised fraud; which, when detected, deprives him of anticipated profits, or subjects him to unexpected losses. He must not expect that a judicial tribunal will degrade itself by an exertion of its powers, by shifting the loss from the one to the other; or to equalize the benefits or burthens which may have resulted by the violation of every principle of morals and of laws.” Or, as Chancellor Walworth states it: “Wherever two or more persons are engaged in a fraudulent transaction to injure another, neither law nor equity will interfere to relieve either of those persons, as against the other, from the consequences of their own misconduct.” Bolt v. Rogers, 3 Paige, 154, 157.
The cases relied upon by the court below to sustain its position do not shake the authorities we have cited to show that courts of equity refuse to annul and also to enforce contracts in fraud of the rights of others, when called to act as between the parties. For there is a distinct class of decisions affecting subsequent and collateral contracts not partaking of the fraud which infects the main transaction.
The principles established by those decisions in diversified forms, according to the varying cases, is that a new contract, founded on a new and independent consideration, although in