Cox v. Wilder et al.

plete merger of that interest in the fee? Is that not necessarily so? First, from the absence of ownership in the grantor, and secondly, from absence of his use of the premises for a homestead? The grantee might purchase in order to obtain a homestead for himself, and having become owner and occupier, his own right of homestead would spring therefrom. There could not be an outstanding homestead in another person and an actual homestead in himself at the same time. Hence the deed of the debtor merged, so far as he was concerned, his whole interest in the grantee, and there was from the instant the deed was executed no such interest as the grantor's homestead remaining. The title passed just as free from a homestead interest as if none had ever existed. The debtor having thus fraudulently conveyed to the grantee and extinguished his homestead interest, whatever passed to the grantee remains subject to the creditors' demands. The grantee cannot hold against the adjudged fraud; the grantor cannot reclaim against his grant. The merger of the homestead interest by the grant enures to the benefit of the creditors whom it was sought to defraud, because the abandonment of use and ownership by the deed was an annihilation of the homestead, thereby leaving the premises like any other realty owned by the grantor, to which no pretence of a homestead interest ever obtained.

The same course of reasoning must necessarily mark a like result as to the inchoate dower-it was extinguished.

These views are not in accord with the opinions of many able judges; but no other conclusion seems defensible on a well-considered analysis of the many legal principles involved, if the owners of a homestead or of a dower interest can lawfully part therewith by a voluntary conveyance, and if, when they so part with such interest, they are so merged in the fee as to be extinguished-to no longer exist as separate or severable interests-why should they, when their fraud avoids their conveyance as to creditors, recover against

Cox v. Wilder et al.

their own deeds or estoppels what they have absolutely and solemnly parted with?

And why should the fraudulent grantor be permitted to sever from the fraudulent grant or recreate therefrom interests already merged and extinguished in order to save from the consequences of his fraud some portion of what he sought fraudulently to acquire. The consequences of such merger he must suffer; just as others do in fraudulent confusion of goods or interests. The law will not revive extinguished or merged interests to unravel for his benefit the tangled web of fraud he has woven. He had a right to abandon his homestead and thus subject it to execution and he has done so. The demurrer under the views thus expressed will have to be overruled notwithstanding the court holds that there is no interest remaining in Sauer or his wife, if the allegations of the bill be true. They, it is charged, claim respectively homestead and dower interests, though the deed was fraudulent as to creditors, and therefore they are proper parties. The title which the plaintiff seeks involves their demands and also their acts, and a judgment would not meet the exigencies of the case unless they were concluded thereby. The demurrers are overruled.

As to dower: 1 Scribner on Dower, 610 et seq.; Robinson v. Bates, 3 Met. 40; 1 Washburne R. P. 203; Sumners v. Rabb, 13 Ill. 483; Richards v. Talbird, Rice Eq. Rep. 158; Stinson v. Sumner, 9 Mass. 143; Blair v. Harrison, 11 Ill. 384; Woodworth v. Page, 5 Ohio, 70; Manhattan Co. v. Evartson, 6 Paige Ch. 457; Malony v. Horan, 52 Barb. 29; Meyer v. Moher, 1 Robinson S. C. Rep. 333; Stewart v. Johnson, 3 Har. N. J. 87. As to homestead: Castle v. Palmer, 6 Allen, 401; Getzler v. Saroni, 18 Ill. 518; Caswell v. Williams. 12 Ill. 390; Hershpetdt v. George, 6 Mich. 496; Sears v. Hanks, 14 Ohio, 298; Riper v. Johnson, 12 Minn. 60; Gardner v. Baker, 25 Iowa, 347; Rev. Code of Mo. 1865, 449, sec. 1, et seq.

Case v. Phelps.

NEW YORK COURT CF APPEALS.

A person about to engage in a new business, may not, with a view thereto and for the purpose of securing his property for the benefit of himself and his family, in the event of losses occurring in such new business, convey such property to his wife, voluntarily, without consideration. Such a conveyance is fraudulent and void as to subsequent creditors.

It must be so declared, notwithstanding it be distinctly found that the conveyance was made without any intent to defraud creditors then existing.

CASE v. PHELPS et al.

Appeal from an order of the supreme court in general term in the sixth district, reversing a judgment entered upon the report of a referee and ordering a new trial.

The action was brought on the fourth of October, eighteen hundred and sixty, by the plaintiff, a creditor of the defendant, Elbridge G. Phelps, by judgment recovered on the fourteenth of June, eighteen hundred and sixty, for moneys paid as his surety upon notes dated in March and April, eighteen hundred and fifty-five, and given by Phelps for money then borrowed. The object of the action is to set aside certain two conveyances claimed by the plaintiff to be fraudulent and void as to creditors of Phelps, one executed by Elbridge G. Phelps and Mary D., his wife, to Willard Phelps, dated December eighteen, eighteen hundred and fifty-four, recorded March fourteen, eighteen hundred and sixty, conveying a piece of land with a hotel thereon, in the village of Ithaca, the other executed by the said Williard Phelps to the said Mary D. Phelps of the same date and recorded June eleven, eighteen hundred and fifty-five, conveying the same premises.

The answer of the defendants denied all fraud; denied that at the date of the conveyances, Phelps was indebted; averred that the premises were conveyed to the said Mary through the said Williard in good faith, subject to certain two mortgages thereon without any intent to defraud creditors or other persons, for the bona fide purpose of giving up the premises and the management of the public house to the

Case v. Phelps.

said Mary, that she might, in conducting the business, discharge the incumbrances and support herself and family, the said Elbridge proposing to travel abroad and engage the business of a public exhibition; that the said Elbridge. has since that time been principally abroad, and the said Mary has managed the said public house in her own name, and therein by her care and attention has supported herself and children and paid off one, and a portion of the other mortgage; that the plaintiff had no claim against the said Elbridge when the conveyances were made, and cannot question them; that the delay in recording the deeds was caused by mere inattention and not by any fraudulent design or purpose, and the plaintiff was in nowise defrauded or misled thereby into signing the notes; that the said Mary is the sole owner of the premises, and they are not subject to any lien in favor of the plaintiff.

The referee reported in favor of the plaintiff, and found as facts:

The signing of the notes by the plaintiff as security for the defendant Elbridge, their payment by him and judgment therefor and execution returned unsatisfied; the ownership of the premises, by such defendant, in eighteen hundred and forty-nine, and the occupation thereof as a hotel, by such defendant and his wife with no apparent change of ownership down to the commencement of this action, except the recording of the deed from Williard Phelps, June eleventh, eighteen hundred and fifty-five.

That the deeds in question were executed in the city of New York on the dates above mentioned, and were recorded as already stated, each of them expressing a consideration of four thousand eight hundred dollars.

That the conveyances were voluntary and without any real consideration, but without any actual intent to defraud the creditors of said Elbridge G. Phelps, then existing.

That he then owed about seven hundred dollars, and that said conveyances were made with a view of said Phelps engaging in a traveling Indian show, and to secure said pro

Case v. Phelps.

perty for the benefit of himself and family against any losses that might occur in said show, and that said Phelps in said show business, did sustain heavy losses and became entirely insolvent.

That the property was then worth five thousand five hundred dollars, and was encumbered by two mortgages amounting to from three thousand two hundred dollars to three thousand five hundred dollars, which (excepting about two hundred and fifty dollars,) has been paid from the proceeds of said hotel, such proceeds being produced by the joint labors of the said Elbridge and Mary, his wife, in carrying on the business thereof. That in eighteen hundred and sixty-one, (pending this suit) the said Mary leased the hotel to James Davison for one year at a rent of seven hundred dollars.

His conclusions of law are that the plaintiff is to be deemed a creditor, as of the time of signing the notes as security. That the deeds are fraudulent and void as against the plaintiff.

That the said Mary is entitled to no subrogation to a priority of the plaintiff, by. reason of the payments made on the mortgages. And he ordered judgment for the plaintiff for the payment of his judgment out of the property; for the appointment of a receiver to collect the rents and apply them in satisfaction of the plaintiff's judgment, with leave, if the rents shall not satisfy the judgment and costs, to apply to the court for an order to sell the premises for that purpose.

Judgment being entered in conformity with the direction of the referee the defendants appealed, and the supreme court reversed the judgment and ordered a new trial in November, eighteen hundred and sixty-two, in the following terms: "Judgment reversed and new trial granted; costs to abide the event."

The opinion of the supreme court pronounced by justice Mason, places the reversal on the sole ground, that the finding of the referee, that the conveyances to the defendant Mary D. were voluntary and without consideration was