Cowan, McClung & Co. v. Gill.

others, in large amounts in which he was in part indebted, and for other parts some of the beneficiaries were his security, made a deed in trust to a tract of land belonging to himself, to W. S. Shields as trustee, the deed to run twelve months to maturity.

At the making of the deed Samuel Gill was, and had been for some years, a member of the mercantile firm of W. T. Gill & Co. The deed was registered on the 18th of February, 1882. On the same day (February 18), a general assignment was made by Gill under the provisions of the act of the General Assembly of April, 1881, and which was registered on the same day, but subsequently to the deed to Shields.

The first deed was delivered to the trustee, a son of James T. Shields, and by him placed in the safe of Shields & Son, and was unknown, so far as the record shows, to the world except the maker, trustee, beneficiaries and witnesses, until about the time of its registration.

The original bill is filed to avoid the first deed for fraud in fact and law, and because never having been registered until within three months of and in contemplation of general assignment, it and general assignment must be construed as one instrument and as giving preferences, and to that extent void under the act of 1881, forbidding preferences.

After the pleadings were made up and proof being taken, complainants conceived the idea that Samuel Gill owed the firm of W. T. Gill & Co. over $20,000 at the date of the deed in trust, and on the day of the general assignment about $17,000, funds drawn

Cowan, McClung & Co. v. Gill.

out of the concern with the consent of his partner, and charged on the books of the firm by the partner; and that while making, and in contemplation of general assignment, and after the death of W. T. Gill, Samuel Gill paid James T. Shields and James S. Gill other sums.

Thereupon an agreement, in lieu of a formal amended bill was entered into, by which complainants allege the facts and claim that in the event the court shall marshal assets as between individual and firm creditors, that they have the right to compel the collection of this sum for the benefit of partnership creditors out of individual assets, and also that the payments to Shields and Gill were void, as giving preferences. Answers are filed denying the indebtedness of Gill and the legal conclusions of complainants.

The Commission of Referees report that the trust deed of December, 1880, was entirely free from fraud in fact, in its inception, and was executed in good faith to secure just debts. This is admitted by com

plainants in argument.

It is further reported: "The existence of this deed. was not made known to a single individual so far as the proof shows, beyond those before mentioned connected with its execution. Samuel Gill says that his son and partner, W. T. Gill, did not know it. This concealment enabled Samuel Gill to continue business with unimpaired credit. A knowledge of its existence would have entirely destroyed his credit. This is conclusively shown by the proof. He continued, however, the ostensible owner of a large and very valua

Cowan, McClung & Co. v. Gill.

ble farm as well as some other property, all in his possession and apparently unencumbered, and was conducting in connection with his son, for a while and after that son's death by himself, a seemingly prosperous business, maintaining to its fullest extent the high character for. business integrity and solvency which he had sustained for many years. His son, James S., one of the beneficiaries in said deed, endorsed for him to others, as did also another of said beneficiaries, and for about fourteen months, this man who was hopelessly involved when said deed was executed, was enabled, because of this concealment and non-registration, to increase his liabilities to a considerable extent over and above all his payments, also to engage in business ventures, as a retail merchant in disposing of the goods purchased of complainants and others, on credit, by which he lost, according to his own statement, $12,000. If the deed had been made public or had been promptly registered, these things could not have happened. It is said for the defendants, that the non-registration of this deed was because of their sympathy for the old man, and to save his feelings, and we do not doubt the truth of this statement, yet we must, under what we understand to be law, conclusively hold them as intending that to which their acts naturally led. They acted deliberately and with a purpose. They knew, or should have known, being near relatives and most of them neighbors, more or less familiar with his business, that he was buying goods on credit. The non-registration was

not the result of oversight or accident.

By their

Cowan, McClung & Co. v. Gill.

course this wrong was inflicted upon

innocent parties

They had the

who were guilty of no negligence. right to expect the records of the county to show where the title rested of this valuable tract of land, upon the faith of which this man. was purchasing their goods on credit, while the mere fact of nonregistration might not of itself render the deed void, yet taking all these circumstances into consideration, and we are constrained to hold that as against creditors, said deed is inoperative and void."

We have made this copious literal extract from the report that the first and main question in the case may be distinctly presented.

Do the facts reported constitute such fraud as will avoid the deed? Do they make a case of fraud at all? Before proceeding to the consideration of the question, we deem it due to Samuel Gill to say that we do not understand the facts as showing that after he made the deed in trust "he increased his liabilities to a considerable extent over and above all his

payments." On the contrary, we think the proof

shows a material reduction, and that he was earnestly and faithfully laboring to pay all, and for a considerable time thought he would be able to do so. He at first positively refused to make the deed, and answered those of the beneficiaries who were urging him to it, that he had ample means to and would pay their debts within the twelve months. Subsequent reverses changed his mind as to his capacity to pay, and brought about his general assignment.

The only grounds upon which it can be insisted

Cowan, McClung & Co. v. Gill.

that the beneficiaries have been guilty of bad faith, is their silence upon the fact that the deed had been made for their benefit and a failure to register. By our law no time is fixed within which registration must be made, and deeds are good as between the parties without registration, but not as to existing or subsequent creditors, bona fide purchasers, without notice, or valid liens acquired by contract or legal proceedings.

In Chester v. Greer, 5 Hum., 34, it is decided that creditor means a judgment creditor, Judge Turley saying: "On the part of J. M. & J. C. Greenway, who file their bill in behalf of themselves and other creditors of Samuel G. Chester, it is contended that the deed of trust is void as to them for want of registration in proper time, these debts having been contracted before the registration of the deed."

"To this it is answered that though by the provisions of the 12th section of the act of 1831, ch. 90, all deeds and other instruments mentioned in the 1st section of the act and not registered as therein provided, are void as to existing or subsequent creditors, yet by this is meant judgment creditors and not creditors in pais."

In Bridewell v. Cain, 1 Cold., 303, Judge Wright says: "A purchase if made or trust taken before the judgment existed, does not by reason of the non-registration of the deed become infected with turpitude; and if it be afterwards registered before other creditors acquired liens upon the property embraced in the deed, as to them it takes effect from its date and they cannot call in question its validity."