Chatterton v. Mason

Boyd, J., delivered the opinion of the Court. The bill was originally filed in this case by William H. Castle, C. O. Baxter and Company, and Glanton and Cotton, against John H. Chatterton and Robert M. Chatterton. It alleges that the firm of Newkirk and Roth on the ioth day of January, 1894, issued an attachment against John PI. Chatterton, which was levied on certain goods and chattels ; that John H. Chatterton, by deed of January 11th, 1894, conveyed to his father, Robert M. Chatterton, for the alleged consideration of one thousand dollars, two lots of ground in Baltimore City and transferred to him by a bill of sale, certain goods and chattels, for an alleged consideration of eight thousand dollars ; that on the 8th day of May, 1894, the plaintiffs issued executions on judgments obtained by them, respectively, on the 25th day of April, 1894 ; that said William H. Castle had filed, or was about to file, a motion to quash the attachment; that by reason of said judgments and executions they had acquired liens on all the property mentioned in the deed and bill of sale, subject to the decision of said motion to quash, and to the result of this bill.

They then charge that the deed and bill of sale were made by John H. Chatterton and received by Robert M. Chatterton “ for the purpose of hindering, delaying and defrauding the plaintiffs and others who are creditors of the said John H. Chatterton, and who were so at the time of the making of said deed,” and require the defendants “ to answer fully and particularly and discover and show upon ²³⁹ what considerations the said deeds were made, and for what reasons, purposes, trusts, confidences and whether there was any agreement or understanding between the said defendants in regard to the payment of said creditors or in regard to the reconveyance of said property to said John H. Chatterton,” etc. The prayers are that “ (a), defendants may answer this bill; (¿), that they may discover and show the matters and things hereinbefore required of them ; (c), that said two deeds may be declared void as against the plaintiffs and other creditors of said John H. Chatterton, who may come into the case; (d), and that the plaintiffs may have such other and further relief as the case may require.” With the bill were filed certified copies of the deed and bill of sale and short copies of the three judgments. The defendants filed separate answers, but they are practically the same. They admit the execution of the deed and bill of sale, but deny that they were executed to hinder, delay and defraud the creditors of John H. Chatterton, and allege that they were bona fide and for the considerations named in them. They say they were not made upon any trusts or confidences and that there is no agreement or understanding between them in regard to the payment of the creditors or the reconveyance of said property to John H. Chatterton.

They neither admit nor deny that the judgments were obtained and executions issued as alleged, but call for full proof of the same and deny that any lien had been acquired by them on said property. On April 30th, 1895, four other creditors obtained permission to be made parties. Two of them filed short copies of judgments, another filed a copy of a note and the other copies of three notes. The plaintiffs commenced to take testimony by calling John H. Chatterton and afterwards called Robert M. Chatterton.

On September 26, 1896, the examiner, at the request of the solicitors of the respective parties, closed the depositions and returned them to the Court—only the two Chattertons having been examined. In October of that year fourteen other parties filed a petition, alleging that they were creditors, and ²⁴⁰ asking to be made parties, which was done, and several others were admitted as parties on other orders. The case was finally set down for hearing and after argument the Court passed an order remanding the cause to the examiner “ to the end that the respective parties complainant in the said cause shall offer before him lawful proof of their respective claims against the firm of John H. Chatterton and Company, and for no other purpose.” The next day the examiner returned the testimony, which consisted of certified copies of the judgments of such creditors as had judgments, including those of the original plaintiffs, the promissory notes and open accounts of others who had been made-parties, and the deposition of one witness who testified that he believed that all the notes filed were signed by J. H. Chatterton, with the exception of one ; that all the claims-had been admitted by J. H. Chatterton to be proper claims-against the firm of J. H. Chatterton and Company. J. H. Chatterton traded in that name but had no partner.

The-same day the Court passed a final decree, declaring the deed and bill of sale fraudulent and void as against the creditors of John H. Chatterton, who were such on the I ith day of January, 1894, and appointing receivers to take charge of the real and leasehold estate, and to collect from Robert M. Chatterton the sum of $9,490.00, being the sum of $8,000.00, thé value of the chattels as found by the-Court, with interest from January 11, 1894. The decree-recited that it appeared that personal property of the value-of $8,000.00 had been delivered to Robert M. Chatterton and by him disposed of, and directed him to pay the said, sum of $9,490.00 to the receivers. Assuming that there was sufficient evidence to show that, the several debts due the plaintiffs had been contracted prior to the making of the deed and bill of sale, the facts justified the Court below in setting them aside. The bona fides of’ the transfer of property is as much a subject of inquiry in a case of this character as the consideration.

If it be established that the deed was made by the grantor and accepted ²⁴¹ by the grantee, with intent to hinder, delay and defraud the creditors of the former, it matters not that full consideration has been paid. A consideration may for the time being hide a fraud, but it will not protect the participants in a fraudulent transaction when once discovered. The difficulty oftentimes is to determine the intent with which an act is done, but, in reaching a conclusion as to that, Courts must be governed by all the facts and surrounding circumstances. When a result is reached which an ordinarily intelligent person must have foreseen, he will generally be presumed to have intended that such result would follow his act.

In this case the purchase of the property of John H. Chatterton, by his father, Robert M. Chatterton, and the payment or the purchase money, must, under the circumstances, necessarily have resulted in interfering with the creditors of the former in securing their claims, or such part thereof as his property would meet. No surer means could have been adopted than by converting tangible property, that could be reached by process of law, into cash that could be stored away in boxes of safe deposit companies, rented in fictitious names, as was done in this case, or otherwise concealed. The fact was that John H. Chatterton owed over forty thousand dollars and had according to the valuation fixed by his father and himself nine thousand dollars worth of property. That he was seeking to place his property beyond the reach of his creditors is too clear for controversy.

He cannot excuse himself by alleging that the claims on which the attachments were issued were not due. If that was true, and if they had no right to attach by reason of some fraudulent act of his, the attachments could have been defeated. If his object was to protect his creditors, he could have made an assignment for their benefit. But he not only did not do that, but according to his statement he used a considerable part of the money he received from his father in settling the attachments, although he claims they were illegally issued.

By converting his property into cash, he was enabled to pay-only such creditors as he chose to pay and if we look at the ²⁴² petition of the defendants filed after the decree, he seems to have chosen to pay only such as had attached the property or were endeavoring to throw him into insolvency. The father, however, denied that he knew the amount of the indebtedness of his son or that he was a party to any fraud. An attachment had been issued against the son and levied on the stock of goods, or a part of it, and the father was present when the levy was made. He said he was in the habit of going to his son’s place very often, “ perhaps once or twice or three times a week, when I happened to be in town.” In answer to the question, “ At whose instance did you make this alleged purchase ?” he said, “ I can’t say that it was made at any one’s instance.

It was a natural result of the circumstances.” The attachment issued before his purchase was for over two thousand dollars, and he was apparently indifferent as to the result of it. It was issued January ioth, 1894, and the deed and bill of sale were executed the next day and filed for record at 9.40 A. M. of that day. Was such haste to be expected of a father dealing with a son if he was not seeking to record these instruments before other creditors proceeded ? When we see how far he trusted his son to protect the property for which he had paid the $9,000.00 we can reach no other conclusion as to the cause of the haste in recording the instruments, than that he was anticipating proceedings by other creditors.

His own testimony shows he knew that other claims against his son would soon mature. He said a calendar was kept on the desk with the payments of each day marked on it, and he looked over it and found that every payment had been marked out or paid up to that date. He was asked, “ You say that you looked at the calendar. Did you examine it for the payments noted there for the balance of the current month?” To which he replied, “ Yes.” He was then asked, " What did you see ?” He replied, " I saw that there was payment to be made for the balance of the month.” And in answer to the question, “ Did you make any provision for the payment of these maturing claims in the deal which ²⁴³ you had with your son,” he replied, “No further than that the money he had would meet them, the amount of money I paid him.” He also said that he did not remember that he had made any inquiry of his son as to his indebtedness before he made the purchase.

The subsequent conduct of both defendants throws considerable light on the transaction. In June, 1894, the Chatterton Manufacturing Company was incorporated with an authorized capital of $20,000.00. Robert M. Chatterton was made president, John H. Chatterton, secretary and general manager, and his brother treasurer. Only $9,300.00 of the capital was paid, which was done with cash and stock according to the evidence of John H. Chatterton on cross-examination, although he had previously sworn it was paid for in money.

He was asked the question, “ Was not $9,000.00 paid in the same stock of goods that you have turned over to your father and the remaining $300 in cash?” To which he replied, “ Won’t answer that question.” He had, however, admitted that the company did use a good many of the goods that he had when he made the deeds to his father. Robeit M. Chatterton was asked what became of the stock of goods purchased from his son, and he declined to answer. He was also asked how much of that stock of goods was transferred to the Chatterton Manufacturing Company, but he declined to answer that and also the question as to how he paid for his stock in that company. We thus find that at least a part, and we might well conclude from the refusal of these parties to answer that the greater part, of the' goods and chattels purchased by the father, in the course of a few months returned to the