borrows money thereon to improve it, without using any of his own funds, and afterwards voluntarily, and without other consideration, transfers it to his wife, his. creditors cannot have such conveyance set aside as fraudulent.

2. SAME-PROPERTY EXEMPT FROM EXECUTION.

A conveyance by a debtor, voluntarily and without consideration, of property exempt from execution, is not fraudulent as against creditors.1

3. WITNESS SUIT BY ADMINISTRATOR-SECTION 498, REV. ST. IND. 1881.

In a suit by an administrator to set aside a conveyance by a husband to his wife for alleged fraud, the husband and wife are competent witnesses in their own behalf to show that the purchase money for the property was originally furnished by the wife, and the title taken in the name of the husband without her consent, the deceased being a stranger to such transacion; and section 498, Rev. St. Ind. 1881, does not apply to such a case.2

Appeal from circuit court, Knox county.

Cauthorn & Boyle, for appellant. Cullop, Shaw & Kessinger, for appellee.

MITCHELL, J. This suit was commenced by Duesterberg, as administrator of the estate of Peter Burway, deceased, to set aside conveyances by which it is alleged Leroy S. Taylor made a fraudulent transfer of his real estate to his wife, Louisa Taylor. The complaint alleges that, at a date prior to the commencement of this action, Duesterberg, as such administrator, had recovered a judgment, in favor of the Burway estate, against James Baker and Leroy S. Taylor, on a note executed by Baker and Taylor to Burway in his life-time, and that, for the purpose of hindering and delaying the collection of such judgment, the defendant, Leroy S. Taylor, had, before the rendition of such judgment, transferred all his property subject to execution, consisting of a certain lot in the city of Vincennes, to his wife, Louisa, without any consideration. The prayer of the complaint is that the conveyance may be set aside, and that the lot be subjected to the lien of the judgment previously obtained. Upon request, the court found the facts specially, and stated conclusions of law thereon favorable to the appellee, Duesterberg.

Mrs. Taylor brings the record here on appeal. It is contended, on her behalf, that the special finding of the court is not sustained by the evidence. The plaintiff's case, as presented in his complaint, proceeds upon the theory that, in accepting the conveyance for the lot which he was seeking to subject to the payment of the judgment, Mrs. Taylor was a mere volunteer. The complaint charges, moreover, that she had notice, at the time the conveyance was accepted, that her husband's purpose in transferring the property was to hinder and delay his creditors. Upon the evidence admitted, we are constrained to the conclusion that the finding of the court that Mrs. Taylor received the conveyance without any consideration, and that such conveyance was a fraud upon the creditors of her husband, is not sustained. That the title to the lot was originally taken in the husband's name is not controverted; and that no consideration was paid by Mrs. Taylor for the conveyance at the time the title was transferred from her husband to her is equally beyond dispute.

There was uncontradicted evidence, however, which established the following facts: The lot was purchased from Charles Graeter in July, 1881, for the consideration of $100. The purchase money was all paid out of money belonging to Mrs. Taylor and her children by a former marriage. The money was all derived from the sale of wheat which had been harvested from a small farm owned by Mrs. Taylor and her children as tenants in common. Leroy S. Taylor did not pay one farthing of the original purchase price. No one,

1See Faurote v. Carr, ante, 350, and note; Airey v. Buchanan, (Miss.) 1 South. Rep. :101, and note.

2 See Conklin v. Snider, ante. 880, and note.

so far as we can discover, claims that he did. At the time the lot was purchased it was unimproved. Subsequently, in September, 1881, a loan of $300 was made from Graeter. This was secured by the note of Leroy S. Taylor, and a mortgage on the lot, in which Taylor and his wife joined. The money. borrowed was all used in procuring material and paying for labor employed in the erection of a house on the lot. This incumbrance has not been discharged. William Richardville, a son of Mrs. Taylor, paid for a part of the material used in the improvement of the lot. It does not appear, from any evidence in the record, that Leroy S. Taylor ever furnished any money to make improvements on the lot. The most that is claimed is that he contributed some of his own labor towards the improvement of the property. We have, however, been unable to find any evidence in the record which sustains even this claim. The evidence shows, and the court found, that the lot and improvements were worth $750. The evidence in the record shows that all of Leroy S. Taylor's property, exclusive of that in controversy, was worth $296. Upon the facts disclosed, it cannot, with propriety, be said that the conveyance to Mrs. Taylor was without consideration, and therefore voluntary, nor was such conveyance a fraud upon the creditors of Leroy S. Taylor. He had no interest in the property, except that he held the bare legal title, while the equity of his wife and her children, they having paid the en-. tire purchase price of the lot, was complete. Having taken the title in his own name, without the consent of those who furnished the money, and paid the purchase price, an enforceable trust resulted in their favor against Taylor. He held the title in trust for them from the beginning. The equitable owners were those whose money had been used in paying for the lot. This ownership is the subject of protection in a court of equity. Heberd v. Wines, 105 Ind. 237; S. C. 4 N. E. Rep. 457; Mitchell v. Colglazier, 106 Ind. 464; S. C. 7 N. E. Rep. 199, and cases cited; Hileman v. Hileman, 85 Ind. 1.

That Taylor subsequently borrowed money on the security of the trust property, with which to make improvements upon it, did not defeat or impair the rights of the equitable owners, as respects his general creditors. He paid no part of this incumbrance, so far as appears. That he signed the note for the money borrowed, and secured it by a mortgage on the lot, did not extend or enlarge his right to or interest in the property. Mrs. Taylor's children may have had some cause to complain because the conveyance was made to their mother alone, instead of to her and them jointly, their money having been used with that of their mother's to pay for the lot, but this furnishes no ground upon which the creditors of Leroy S. Taylor can assail the transaction. Their right is to be confined to the actual interest which their debtor had in the property. Prior equitable interests could not be subjected to the claims of creditors. Hays v. Regar, 102 Ind. 524; S. C. 1 N. E. Rep. 386; Wright v. Jones, 105 Ind. 17; S. C. 4 N. E. Rep. 281; Heberd v. Wines, supra; Foltz v. Wert, 103 Ind. 404; S. C. 2 N. E. Rep. 950.

Creditors cannot invoke the aid of the law to prevent a husband from restoring to his wife and her children that which in equity and good conscience he has no right to withhold. Proctor v. Cole, 104 Ind. 373, 383; S. C. 3 N. E. Rep. 106, and 4 N. E. Rep. 303; Lord v. Bishop, 101 Ind. 334. A conveyance will not be set aside, nor the property subjected to the payment of the debts of a grantor who has transferred the title to one who has an equitable right thereto, where it appears that none of the money or property of such grantor has gone into the property so conveyed. McLean v. Hess, 106 Ind. 555; S. C. 7 Ñ. E. Rep. 567. Even if such grantor has some interest in the property, a conveyance by him to one having a prior equitable right cannot be defeated without protecting the equity on account of which the conveyance was made. One who holds a legal title which is supported by a prior subsisting equity cannot be postponed by, or put upon a level with, mere general creditors.

Moreover, upon the facts as they appear, any judgment which could properly have been rendered would have been wholly fruitless of any ultimate benefit to the creditor. The property in dispute is worth $750. It is incumbered by a mortgage of $300. The debtor is and was at the time of the conveyance a resident householder of Knox county. The law secured to him an exemption of property of the value of $600. The total value of his property other than that in dispute was $296. He was therefore entitled to claim, in addition to his personal property, $304 out of the real estate. Section 710, Rev. St. 1881.

Under the act of 1875, § 2508, Rev. St. 1881, a purchaser at an execution sale can acquire, as against the debtor's wife, only an individual two-thirds interest in the land sold. It requires, therefore, only a moment's consideration to make it apparent that, without regard to the equitable right of Mrs. Taylor in the property, a judgment setting aside the conveyance would only result in harassing the debtor, without any corresponding benefit to the creditor. Even if Leroy S. Taylor had been the owner of the property in controversy in his own right, since it appears that, at the time the conveyance was made, his pecuniary condition, and the value of his property subject to execution, were such that his right of exemption protected the entire interest therein from sale, the deed should not have been declared fraudulent and set aside. Where property alleged to have been fraudulently conveyed is, by force of the law, as effectually beyond the reach of creditors before as it is after such conveyance, a deed made with the intention of vesting the title irreclaimably in another, even though it be voluntary, is not fraudulent as to creditors. What a debtor does with his property while it is by law exempt from execution is a matter in which his creditors have no concern. Fraud cannot be predicated upon the alienation of such property. Burdge v. Bolin, 106 Ind. 175; S. C. 6 N. E. Rep. 140; Faurote v. Carr, ante, 350, (present term.)

At the trial, Mrs. Taylor and her husband were called as witnesses in their own behalf, respectively. It was proposed to prove by them severally, in substance, that the property in dispute had been purchased and paid for with the money of Mrs. Taylor, and that the title had been taken in the name of her husband without her knowledge. Without setting out, at length, the testimony proposed to be given in that connection, it is sufficient to say the evidence offered related exclusively to business transactions between Mrs. Taylor and her husband concerning the purchase and improvement of the lot in question. The evidence was excluded by the court on the ground that the witnesses were incompetent to testify in respect to matters which occurred during the life-time of the deceased. This ruling was based upon the court's construction of section 498, Rev. St. 1881. This section provides that, "in suits or proceedings in which an executor or administrator is a party, involving matters which occurred during the life-time of the decedent, where a judgment or allowance may be rendered for or against the estate, any person who is a necessary party to the record, whose interest is adverse to such estate, shall not be a competent witness as to such matters against such estate." Under that section the test of competency depends, not so much upon the fact to which the adverse party is called upon to testify, as upon the contract or matter involved in the issue in the case. Where the contract or matter involved in the suit or proceeding is such that one of the parties to the contract or transaction is, by death, denied the privilege of testifying in relation to such matter, the policy of the statute is to close the lips of the other also in respect to such matter. Where, however, an administrator assails the title of another, such title having been acquired through a third party, in a transaction to which the decedent was a stranger, the parties to the transaction cannot be prevented from speaking in reference to such matters, even though they occurred during the life-time of the decedent. A contract or matter in

which the decedent in his life-time never had any concern or interest, cannot be so involved in a suit by his personal representative as to preclude the parties interested in the transaction, although it may come collaterally in question, from upholding it by their own testimony. If it were otherwise, the death of a stranger, who presumably could not have testified concerning the matter if living, would close the mouths of the only persons interested in the contract when it was made. The true spirit of the statute seems to be that when a party to a subject-matter or contract in action is dead, and his rights in the thing or contract have passed to another, who represents him in the action or proceeding which involves such contract or subject-matter to which the deceased was a party, the surviving party to that subject shall not testify to matters occurring during the life-time of the decedent. Warren v. Steer, 112 Pa. St. 634; S. Č. 5 Atl. Rep. 4; Granger v. Bassett, 98 Mass. 462; Downs v. Belden, 46 Vt. 674; Sanborn v. Lang, 41 Md. 107; Amonett v. Montague, 63 Mo. 201; Pattison v. Armstrong, 74 Pa. St. 476; 1 Whart. Ev. §§ 468-470.

The contract or transaction between Mrs. Taylor and her husband was not the subject-matter of the action. It arose on the evidence merely, and was and could have been only brought collaterally in question. It was therefore error to exclude their testimony.

It was error to overrule appellant's motion for a new trial. Judgment reversed, with costs, and new trial ordered.

(109 Ind. 248)

REDPATH and others v. TUTEWILER and others.

(Supreme Court of Indiana. January 14, 1887.)

ASSIGNMENT FOR BENEFIT OF CREDITORS-PREFERENCES-INDIANA STATUTE.

Where a debtor makes an assignment in good faith, under the statute governing voluntary assignments, and the deed recites that it is intended to be governed thereby, a preference of certain creditors will not render the assignment void in toto, but the provision for a preference will be controlled and annulled by the statute.

Appeal from circuit court, Marion county.

W. W. Herod, Morris & Newberger, and Florea & Wishard, for appellants. J. P. Dunn, A. W. Hatch, and Ralph Hill, for appellees.

MITCHELL, J. This action was brought by the plaintiff below to set aside a deed of assignment by which Henry Tutewiler transferred all his property, real and personal, to William G. Cook, as assignee for the benefit of the assignor's creditors. The complaint alleges that after the assignment was made the plaintiffs recovered a judgment against the assignor in the superior court of Marion county for $306, which remains unpaid. The complaint avers, and the deed, a copy of which is set out in the complaint, shows, that the assignment was intended to be made in conformity to the statute regulating voluntary assignments for the benefit of creditors. The instrument is assailed solely upon the ground that it provides for a preference of two of the assignor's creditors therein named. In all other respects it is conceded that the deed was made, and that the estate assigned is being administered, conformably to the assignment law. In the recent case of Henderson v. Pierce, ante, 449, (present term,) upon consideration of the exact question here involved, it was held that, where no actual fraud was averred or proved, an instrument of assignment made by a debtor in failing circumstances, with the apparent purpose to avail himself of the benefit of the law regulating voluntary assignments, would not be considered as void in toto because the assignor provided therein for preferences to certain of his creditors. In such a case, the provision in the deed that some of the assignor's creditors should be preferred in the distribution of the estate will be controlled and annulled by force of the statute. The estate, having been brought under the jurisdiction and control of

the court by means of the assignment, will be administered and distributed as the law directs, without regard to such provisions. It is only when the deed of assignment contains directions which are actually hostile to, and in disregard of, some express provision of the assignment law, or where it is apparent therefrom that it was not the intent of the assignor to bring his estate under the control of the court, and secure its distribution according to the law regulating voluntary assignments, that the deed will be held fraudulent and void per se, under section 2662, Rev. St. 1881.

There was no error in the rulings of the court. The judgment is affirmed, with costs.

(109 Ind. 447)

CALDWELL and others v. BOYD. 1

(Supreme Court of Indiana. January 15, 1887.)

1. WILL-RIGHT TO ALIENATE INCOME.

Where a beneficiary is, by will, given an unrestricted interest in the income of a fund during his life, he may, in the absence of any statutory prohibition, alienate it, either wholly or in part, before the time fixed for its payment.

2. FRAUD QUESTION OF FACT-SPECIAL FINDING-MUST FIND FACTS AND NOT EVIDENCE. Fraud is a question of fact, and the special finding must, in a case where the question of fraud is in issue, find fraud as a fact, and not mere evidence or badges of fraud.

Appeal from circuit court, Henry county.

Brown & Warner and Brown & Brown, for appellants. J. C. Downey, I. L. Bloomer, D. Turpie, and Mellett & Bundy, for appellee.

Howk, J. In this cause errors are assigned here by appellants, the defendants below, which call in question (1) the correctness of the court's conclusions of law upon its special finding of facts, and (2) the overruling of their motion for a new trial.

After the cause was put at issue, it was tried by the court, and, at the request of all the parties, the court made a special finding of the facts, and thereon stated its conclusions of law. The facts found by the court were substantially as follows:

(1) One Eli Davis, by his last will, which was probated in the year 1871, directed that $20,000 be set apart and held by his administrator, or such trustee or trustees as might be appointed by the court having probate jurisdiction, to be held in trust under the direction and supervision of such court for the use of his son, Clinton Davis, during his natural life; the interest thereon to be paid semi-annually to said Clinton Davis until his death, the principal then to go to his heirs. A copy of such will is then set out, which we omit. (2) The defendant Caldwell was, by the proper court, duly appointed trustee to receive and manage said fund. He accepted such appointment, and qualified as such trustee, on the twenty-fourth day of July, 1872. On the thirtieth day of April, 1873, he filed in the Henry circuit court an inventory of the assets of said trust fund, charging himself with $20,000 of principal and $555.81 interest received by him to that date. He made other reports to the court, from time to time, all of which were examined and approved.

(3) On the sixth day of October, 1875, he filed in said court his written resignation of said trust, and the court appointed one Martin L. Bundy as his successor. On the twenty-sixth day of January, 1876, he filed in said court his final settlement report, and a receipt from his successor, Bundy, for the residue of the trust fund remaining in his hands, which report was approved by the court, and he was finally discharged. Subsequently thereto, and before the bringing of this suit, said Bundy resigned, and the plaintiff in this action was appointed to succeed him.

(4) Among the assets turned over by the defendant Caldwell to his successor, Bundy, were three notes, for $1,200 each, executed to him as such 1 Rehearing denied.