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in law. It is a sale with the direct intent of benefit or advantage to the seller, to the injury of the creditors.” In Randall v. Buffington ? the debtor, being insolvent, took money which he had on hand and paid a debt secured by a mortgage upon his homestead. A judgment-creditor instituted an action to have the homestead sold for the satisfaction of his debt. As the action was a direct attack upon that which the law had declared should be exempt, the court declined to follow the principles of the preceding case to their logical sequence, saying: “It is difficult to perceive how the payment of a debt which he justly owed, and which was past due, can be tortured into an act to hinder, delay, and defraud creditors.
But it is urged in apparent confidence, in the conclusive character of the position, that the payment resulted to the benefit of the defendant, as it relieved his homestead of the encumbrance, and, consequently, of liability of being sold for its satisfaction. We confess our inability to see what difference this can make in the transaction. The obligation to pay the debt was none the less binding because it was secured by a mortgage, and, if the lien was removed from the homestead, it was but the consequence of an act lawful in itself.”
A glance is sufficient to show that it is difficult to reconcile these two cases in principle. The last declares the payment of a mortgage on a homestead to be an “ act lawful in itself," while the first holds a sale to be fraudulent which was made for no other purpose but to raise money to do this act which was lawful in itself. How can there be an intent to defraud when there is only an intent to do a lawful act ? Why should not a debtor be permitted to apply his property, as well as his money, to pay a mortgage on his homestead? If it is lawful to pay the debt, is it not equally lawful to sell property to pay the debt ?
In the case of William Henkel 3 the debtor sold his entire personal estate and applied the proceeds to pay a mortgage on his real estate. Afterwards he declared the real estate to
2 10 Cal. 491. 3 2 Saw. 305.
be a homestead, being then insolvent and having no other means to pay his debts. The court held that the declaration of the homestead was not fraudulent, saying: “Whether or not the object intended to be obtained by the homestead laws is of sufficient importance to compensate for the ill effects of the frauds which may be committed under them, is a question for the Legislature, and not the courts, to decide."
In North v. Shearn 4 the debtor, being insolvent, purchased a lot, erected buildings thereon, married, and claimed the lot as a homestead. Several judgment-creditors united in an action to have the lot sold in satisfaction of their claims. The court said: “If none but the fraudulent debtor were interested in the homestead, there would be more force in the argument that he could not claim the exemption. But it is not given or intended for the sole benefit of the husband or head of the family. The wife has at least an equal interest in the exemption of the homestead, and it was not proposed to prove that she had been a participant in any intentional fraud practised upon the plaintiffs. But, if this had been proposed, we are of opinion that the court very properly refused to let in such enquiries. It would have exposed to animadversion the motives with which the defendants contracted marriage, with the view to affect their rights subsequently acquired. The law protects the homestead as well against debts contracted before as after it was acquired. To admit evidence and enquiries of the character proposed would have a manifest tendency to destroy the sanctity and inviolability which the law attaches to the right of homestead; and, indeed, the practical effect would be to deny to an unfortunate debtor, in failing circumstances, the right to provide a house for the shelter and protection of his wife and children. We cannot give our assent to such a principle.”
In Cipperly v. Rhodes 5 the homestead was allowed, even
though it was purchased by the debtor when he was insolvent.
In O'Donnell v. Segaró the debtor disposed of other property and applied the proceeds to purchase a yoke of oxen, which were exempt. The question was whether he could claim the exemption. The court said: “When the statute exempts from execution certain kinds of property to certain amounts, without any exception or qualification, I can see no intelligible ground on which it can be held fraudulent for any man whose property does not, in the aggregate, exceed the aggregate value of all the exemptions, but part of which in its present shape is not exempt, to convert or exchange it into those particular kinds of property which are exempt.
The only fraud claimed to have existed, in reference to the oxen, was that he might fraudulently have acquired them from the proceeds or exchange of other property which was not exempt, and this with the intent to defeat the claims of creditors. This, in my opinion, if true, does not constitute legal fraud so long as he was in fact engaged in one of the occupations mentioned by the statute as his principal occupation, in which the use of the cattle was needed. The statute, in attaching the exemption to the business or employment, must, it seems to me, be held to allow any man to abandon any kind of business in which the exemption was not allowed, and to adopt one to which the exemption is attached, and to take the benefit of the exemption without being chargeable with fraud in so doing, even though he has made the change of employment for the very reason that he will thus be able to retain property which otherwise would not be exempt, if he adopt it in fact and reality as that on which he chiefly relies for a livelihood, and not as a mere pretence or sham. There may be a moral wrong in thus keeping property from creditors, but, if so, it is one which the statute, on grounds of public policy and to prevent distressing families, has sanctioned in allowing the exemption, and, therefore, is not legally a fraud.”
25 Mich. 367.
In Pratt v. Burr? the debtor purchased goods on credit and then sold his entire stock, receiving in part payment the premises which he claimed as a homestead. The creditors filed a bill to have the property sold to satisfy their debts. The court said: “The mere statement of the facts decides the case in the conscience of every
that neither in law nor justice the exemption should be allowed. The defendants cannot expect the court to assist them in consummating the intended fraud. A party cannot turn that which is granted him for the comfort of himself and family into an instrument of fraud."
Brackett v. Watkins 8 bears incidentally on the subject now under discussion. In that case the debtor, being the owner of considerable wool, sold all but thirty runs of yarn, which was taken on execution. The question was whether it was exempt. The court said: “The rule, then, is this: prima facie the fleeces, yarn, cloth, and other things limited to a certain amount by the statute, are protected. But, if the jury believe that it was brought down to the compass of exemption with intent to defraud creditors, they ought to find for the creditor."
There is also another class of cases that may be considered in this connection. Thus, if the statute merely exempts property to a certain amount, at the request of the debtor, made at the time of the levy, a concealment of all other property than that taken in execution will be deemed to be a waiver of his right.
This review of the cases is sufficient to show that, upon the particular point now under discussion, the authorities are conflicting. Riddell v. Shirley, Pratt v. Burr, and Brackett v. Watkins cannot be reconciled with the principle upon which the other cases are decided. In each the court, influenced by moral considerations, has sought to introduce an exception where the statute has made none. The weight
7 5 Biss. 36.
21 Wend. 68. 9 Emerson v. Smith, 51 Penn. 90 ; Smith v. Emerson, 43 Penn. 456; Freeman v. Smith, 30 Penn. 264.
of authority and the better reason appear to be that this cannot be done. If the statute is wrong, the Legislature should correct it.
The next question that will be considered is whether or not a conveyance of exempt property can be fraudulent so as to render it liable to creditors. In examining this question it is necessary to pay attention to the difference between the various statutes allowing exemptions and the various kinds of exemptions. If the property is exempt absolutely and unconditionally, no conveyance of it can injure or defraud the creditors. Such an exemption is a privilege conferred upon him, and does not deprive him of any of the ordinary incidents of ownership; among these is the power to sell or otherwise dispose of it. He may, therefore, transfer it as he deems best for the purpose of bettering his condition, or providing for his home, or furnishing his family, or prosecuting his business, or for any other object, and it will not be liable to execution in the hands of the purchaser; as to it the creditors are not deemed to be creditors so as to make a transfer of it a matter of concern to them. To If the debtor sells his homestead, he may invest the proceeds in another homestead and take the title in the name of his wife." If he continues to occupy the homestead, a conveyance thereof through another to his wife will not render it liable for his debts. It is necessary, however, that the conveyance, even in such a case, shall be real and not merely colorable; as, for instance, if a debtor, being entitled to a homestead, makes
10 Erb v. Cole, 31 Ark. 554 ; Danforth v. Beattie, 43 Vt. 138 ; Smith v. Rumsey, 33 Mich. 183; Bond v. Seymour, i Chand., 40 S. C., 2 Pinney, 105 ; Legro v. Lord, 10 Me. 161; Vaughan v. Thompson, 17 Ill. 78; Wood v. Chambers, 20 Texas, 247 ; Cox v. Shropshire, 25 Texas, 113; Smith v. Allen, 39 Miss. 469; Martel v. Somers, 26 Texas, 551 ; Lishy v. Perry, 6 Bush, 515; Pike v. Miles, 23 Wis. 164; Dreutzler v. Bell, 11 Wis. 114; Anthony v. Wade, i Bush, 110; Morton v. Ragan, 5 Bush, 334; Foster v. McGregor, II Vt. 595; Patten v. Smith, 4 Conn. 450; Crummen v. Bennett, 68 N. C. 494 ; Keyes v. Rines, 37 Vt. 260; Monroe v. May, 9 Kan. 466; Cipperly v. Rhodes, 53 Ill. 346; Goumans v. Boomhower, 3 Thomp. & C. 21; Whiting v. Barrett, 7 Lans. 106; Hibben v. Lozer, 33 Wis. 319.
11 Monroe v. May, 9 Kan. 466.