1. By the interposition of a general replication, every allegation in an answer not responsive to the bill, is denied. 2. A judgment binds only the parties to it and their privies.

3. If the money which a married woman might have had secured to her own use, is allowed to go into the business of her husband, and be mixed with his property, and is applied to the purchase of real estate for his advantage, or for the purpose of giving him credit in his business, and is thus used for a series of years, there being no specific agreement when the same is purchased that such real estate shall be the property of the wife, the same becomes the property of the husband for the purpose of paying his debts.

husband.

4. He cannot retain it until bankruptcy occurs and then convey it to his wife; such conveyance is in fraud of the just claims of the creditors of the 5. If the husband, in a state of absolute bankruptcy, conveys to his wife property fairly worth $15,000 to $20,000, with no present consideration passing, but with a recital of past indebtedness to her to less than a fifth of its value, the transaction is fraudulent and void as to creditors.

PPEAL from the District Court of the Unit ed States for the Northern District of Alabama.

The case, which arose in the court below, is fully stated by the court.

Messrs. T. P. Ward and Thos. C. Fullerton, for appellant.

Mr. B. F. Butler, for appellees.

Mr. Justice Hunt delivered the opinion of the court:

that same year a decree was rendered, in which the said deed of January 14, 1866, was in all things ratified and confirmed. A copy of the decree is annexed to her answer. To this answer the plaintiff, the assignee, filed a general replication. It is supposed that this suit and this decree, forming a part of the answer of Mrs. Scruggs, furnished the support to the decree dismissing the bill in the present suit on the pleadings.

To this result there are two valid objections: 1. By the interposition of a general replication, every allegation in the answer of Mrs. Scruggs not responsive to the bill was denied. No such allegation could be taken as true, but must be proved before it could be used by the party making it. The allegation of a former suit and of the decree therein came under this rule. It was denied that there was such a former suit, and that a decree was rendered therein affirming the transaction of May 14, 1866. How, then, can it be said with accuracy, upon the pleadings, when the answer was not responsive, and when a replication was filed, that there was a former suit and decree, and that by reason thereof the present bill must be dismissed. Jacks v. Nichols, 5 N. Y.. 178.

Mrs.

2. Let it be assumed that the former suit and the decree therein are proved in a legal manner, still we cannot assent to the theory of its conclusiveness here. There would be little difficulty in making and sustaining fraudulent transfers of property, if the parties thereto could by a subsequent suit between themselves so fortify It is not entirely certain what the court is the deed that no others could attack it. called upon to review in the present case. By Scruggs files her bill on the 11th November the decree of the court below it is recited that against her husband, to obtain a confirmation upon the hearing of the cause upon the plead of the former proceeding, Her husband, nothings it is adjudged that the bill be dismissed. ingloth, files his answer on the same day. TwenThe record, however, comes to us with voluty-one days thereafter, viz.: December 2, the minous evidence upon the merits, and we have not the advantage either of an opinion of the court or of a brief by the party obtaining the decree. It will be necessary, therefore, to give attention to the case in both of its aspects.

Term of the court opens. The papers are presented, proofs are filed, the counsel appear, and a decree of confirmation is adjudged. Certainly no one can complain in this instance of the delays of justice.

But without reference to these indications of collusion, we are of the opinion that a decree between these parties alone, cannot bind the assignee in bankruptcy. The principle is well settled that a judgment binds only the parties to it and their privies. Bk. v. Hodges, 12 Ala., 118, was a decision upon a case very similar to the one before us.

The bill was filed by the assignee in bank ruptcy of John W. Scruggs against the bankrupt's wife, alleging the adjudication of bankruptcy made upon a voluntary petition filed in June, 1868, and the fraudulent conveyance, in January, 1866, of property of the value of $50,000; that this covered all the property of the bankrupt, and that he was then insolvent. The defendant answered, admitting the conveyance, In Ins. Co. v. Tisdale, 91 U. S., 241 [XXIII., denying the fraud, alleging that the property 316], the principle is thus laid down: "The conveyed to her was purchased and paid for books abound in cases which show that a judgwith her money and for her, and that she be- ment upon the precise point in controversy canlieved for several years that the title was taken not be given in evidence in another suit agaiust in her name; that it was improved by her hus- one not a party or privy to the record. This band at an expense not exceeding $18,000, of rule is applied not only to civil cases, but to which $4,400 belonged to her separate estate, criminal cases, and to public judicial proceedand $2,400 was realized from the sale of a por-ings which are of the nature of judgments in tion of the land. She denied that the deed to rem." Many cases are cited in illustration of her conveyed all the property that her husband the principle. possessed, but did not state how much remained, or what it was, and she denied knowledge of his insolvency, if it existed.

As a distinct defense in bar of the recovery sought, she further alleges that on the 11th day of November, 1867, by her next friend, she filed a bill in the state court against her husband, to which he answered on the same day, in which proofs were taken; and that in December of

This decree, no doubt, concluded Mr. Scruggs on the question of fraud. But he was already concluded by his deed, and we do not see that the estoppel by the decree is any more conclusive than that by the deed. Neither of them affect the assignee in bankruptcy, who is expressly authorized by the Bankrupt Act to attack any transfer made by the bankrupt in fraud of his creditors. 14 Stat. at L., 517, sec. 14.

If we look at the case upon the merits, we also find the result to be in favor of the assignee.

On the 14th of May, 1866, the husband conveys to his wife certain real estate in Hunts ville, Ala., called the race course property. The value of this property is estimated by the witnesses on the one side as high as $25,000, and by one of those on the other as low as $10,000. Others put it at $15,000 and $20,000. He conveyed to her at the same time the interest of one third of the profits of a hotel in Corinth for five years, and afterwards conveyed to her the fee of the premises, the consideration for which is recited to be the sum of $25,000. What the actual value of this property was does not distinctly appear. At this time he was hopelessly insolvent. Large debts are proved against him, and in his answer he admits his indebtedness then to have amounted to $300,000. In a deed of the same date, executed by the husband and wife to Francis Sanders, it is recited as follows, viz.:

"Whereas, the undersigned, John W. Scruggs, of the county and State aforesaid, is largely indebted to different persons residing in different localities and States; and whereas, this indebtedness is individual and partnership indebtedness, being the partnership indebtedness of Scruggs, Donegan & Co.; and whereas, he is also largely involved as indorser for others, and likewise as surety, and as a member of the firm of Scruggs, Donegan & Co., as acceptors of bills of exchange; and whereas, owing to the loss or displacement, resulting from the present civil war, of explanatory memoranda, schedules, etc., it is impossible for him at this time to state with accuracy the extent of his liabilities or their character, or to ascertain how much thereof has been remitted by the laches of creditors; and whereas, he is anxious to adjust, settle and discharge, to the extent of his ability, all just claims against him, but is unable at this time, for the reasons above stated, to nominate with accuracy his creditors."

This deed conveyed to Sanders certain lands in Huntsville, and certain lands in Arkansas, among others the plantation called "the Island Place," in trust, to convey the same to such creditors as Scruggs himself should, within twelve months, nominate and appoint.

We may safely assume the total insolvency of the husband at the time of the execution of the deed in question and, if that is important, that the wife was aware of it.

in his business until the year 1866, when his failure occurred. Neither the husband nor the wife testifies that there was any agreement that the husband should hold these sums as and for the estate of his wife, or that when the property in question was purchased it was agreed to be held as her estate. On the contrary, the moneys were held and used by the husband for nearly fifteen years as his own property, and mingled with his personal and partnership affairs. The explanation given by his brother, if true, which is very doubtful, is essentially vicious. He states that it was at his suggestion that the deed was taken to Scruggs instead of his wife. He adds: "At the time referred to, John W. Scruggs was about to open a commission house in Charleston, and was without means or credit, and my reason for giving him this advice was, that the conveyance to himself would give him a credit, whereas then he had none.

But it is probably untrue in fact that this land was bought for her, as she alleges in the answer, or that she believed at any time that the title was taken in her name. As already suggested, the best possible case for the parties would be set forth in the deed which is the subject of the controversy. No such pretense is there set up. The consideration is based upon alleged indebtedness to the wife of a sum of $3,200 received on her account; of another like sum of $1,300, and of her release of dower in certain lands. The pretense that these sums had been agreed to be invested in these lands, and that she supposed it was done, is not suggested. We cannot but suppose this to be an afterthought.

If the money which a married woman might have had secured to her own use is allowed to go into the business of her husband, and be mixed with his property, and is applied to the purchase of real estate for his advantage, or for the purpose of giving him credit in his business, and is thus used for a series of years, there being no specific agreement when the same is purchased that such real estate shall be the property of the wife, the same becomes the property of the husband for the purpose of paying his debts. He cannot retain it until bankruptcy occurs, and then convey it to his wife. Such conveyance is in fraud of the just claims of the creditors of the husband. For v. Moyer, 54 N. Y., 125, 131; Savage v. Murphy. 34 N. Y., 508; Babcock v. Eckler, 24 N. Y.. 623; Robinson v. Stewart, 10 N. Y., 190; Carpenter v. Roe, 10 It is sought to sustain the deed to the wife N. Y., 227; Hinde v. Longworth. 11 Wheat., 199. upon the theory that the land in question was was purchased by her husband for her and with her money, and that she believed for years that the title had been taken in her name. Such is the allegation of her answer. The proof is to the contrary. It is true, according to some of the testimony, that she was entitled to certain sums from her relations, which were received by her husband, viz.: $3,100 in 1852, or thereabouts; $2,300 at about the same time; $1,200 for a carriage in 1853; and $400 from Mr. Coxe. These are the sums as stated by herself in her testimony, amounting to $7,000. In the deed of May, 1866, when we may suppose that both the husband and wife would place the sum at the highest amount that truth would permit, it is given at $4,500. We take it, therefore, at that sum. These sums so received he held and used

Fraud or no frand is generally a question of fact to be determined by all the circumstances of the case. If the husband in a state of absolute bankruptcy conveys to his wife property fairly worth $15,000 to $20,000, with no present consideration passing but with a recital of past indebtedness to her to less than a fifth of its value, the transaction is fraudulent and void as to creditors. Authorities, supra.

We attach no importance to the recited releases of dower as adding a value to the consideration. The lands sold to Derrich, in which it is recited that the wife was dowable, had been conveyed to him in 1860, and the wife had joined in the conveyance and acknowledged the same. Derrich also denies that, in May, 1866, any release of dower was made or was delivered to him.

Contract by telegraph-warranty on sale-mod- thing sold is subsequently discovered to be spu

Flynn v. Allen, 57 Pa.,482; Owenson v. Morse, 2. Upon a sale of bonds, there is an implied war-7T. R., 64; Fogg v. Sawyer, 9 N. H., 365; ranty that the bonds are genuine, and if the bonds prove to be counterfeit, the purchaser may recover back from the seller the money paid for them.

46

on us." On the same day Cashier Nichols showed suspicion of counterfeits until yesterday." On this letter to the defendants, and proposed to the same day, June 13, the defendants replied deliver the bonds without recourse. They re- by dispatch: "We sold without risk. Have fused to receive them on such terms, but offered purchased same day from Commercial Bank, to take them, and pay for them when ascertained and they from Newman & Havens, of Leavento be good; otherwise, to return them. The worth, without risk." The bonds were councashier acceded to this proposition. On the terfeit, and the plaintiffs refunded to Rasmus & same day, May 25, the defendants telegraphed Lissignola the amount they had paid. On the to the plaintiffs, who were brokers in the City 12th of July the plaintiffs telegraphed to the deof New York, Make best bid for fifteen Cen- fendants, The Central Pacifics bought of you tral Pacifics, quick." The plaintiffs answered, in May are declared counterfeit. We shall look that they would buy at 1024. Their dispatch to to you for indemnity." On the same day the this effect reached the defendants about ten A. defendants replied by telegraph, and asked upon M. the same day. The defendants answered by what ground it was proposed to hold them dispatch on that day, "We accept your offer." liable. Some subsequent correspondence took The bonds were delivered by the cashier to the place between the parties, which it is unnecesdefendants on the 25th of May, and were by sary to refer to in detail. The plaintiffs asked them forwarded by express on that day to a a transfer of the claim of the defendants, whatbank in New York, with a draft on the plaint-ever it might be, but without guaranty, against iffs for $15,375, the bonds to be handed over on the bank. This the defendants refused to give. the payment of the draft. On the morning of The money paid to Newman & Havens by the that day the defendants addressed a letter to the bank was not called for by the party from whom plaintiffs, which is the hinge of this contro- they received the bonds for two or three weeks versy. It is as follows: after the money was paid to them.

"In accordance with your offer for 15 Central Pac. 1st mort. bonds, 102, we replied, We accept your offer, and have forwarded them by ex. to Bank North America, with draft attached for $15,375. We would further add, that we have purchased the bonds from a party strange to us; and, not having ever handled any of the Pacific Central, we would sell the bonds without recourse as to their being genuine; consequently, please examine them, and, upon being found correct, telegraph immediately (Central all O. K.). We do not doubt the bonds, but, coming to us through strange parties, we use this as a precaution, and not willing to take any risk."

Before examining the case in its strictly legal aspects, it is proper to make several remarks suggested by the facts as found:

(1) The defendants sold the bonds absolutely by their dispatch of the 25th of May. The qualification insisted upon was, by their letter of that date, received by the plaintiffs on the 29th. If the defendants intended to qualify, it should have been done in the dispatch. This would have given the plaintiffs notice in time for reflection before the presentation of the draft, might have prevented their selling the bonds before the letter was received, and would have enabled them to avoid the hurry and confusion incident to the payment of the draft and the delivery of the bonds to their vendees. If the draft had not been paid at sight, it would doubtless have been protested.

(2) The circumstances attending the purchase of the bonds by the defendants are shown in our analysis of the facts of the case. The statement in the letter upon the subject is not accurate.

(3) They refused upon any terms to put the plaintiffs in their place with respect to any claims they might have against the Commercial Bank.

(4) They were notified on the 12th of June that the bonds were counterfeit. If they had thereupon at once caused Newman & Havens to be advised also, it is not improbable that the latter would have retained the funds, and thus have saved from loss all the honest parties through whose hands the bonds had passed. The defendants failed to take any step whatever in this direction.

This letter reached the plaintiffs on the 29th of May, a short time before the draft and bonds were presented. The plaintiffs had sold the bonds "to arrive" to Rasmus & Lissignola. They could not be delivered after two o'clock. It was within a few minutes of that time when the messenger of the bank presented himself. One of the plaintiffs went with the messenger to the office of their vendees, and requested Rasmus to examine the bonds. He did so, said they seemed to be correct, and thereupon gave a check for the amount his firm had agreed to pay for them. This check was duly paid. On the same day the plaintiffs wrote to the defendants, "The Centrals all correct, and we telegraphed you to that effect.' Such a dispatch had been sent. Upon receiving it, the defend ants paid the bank for the bonds, and the money was remitted by the bank to Newman & Havens. On the 12th of June information was received for the first time in New York, or elsewhere, that there were in existence counterfeits of such bonds. On that day the plaintiffs wrote to the defendants, "Look out for counterfeit Central Pacifics; some appeared on market to day." On the next day the plaintiffs telegraphed to the defendants, Central Pacifics sold us probably counterfeit. Bonds shipped to Europe. Can't hear from them for several days." On the same day the plaintiffs wrote to the defendants to the same effect, and said further: "In case your parties are doubt-9 ful, it would be well to act at once as if the bonds were not genuine. There has been no

It cannot be questioned that the dispatches between the parties on the 25th of May constituted a complete contract of sale, upon the condition or with an implied warranty, which it is not material here to consider, that the bonds were genuine. Nor can it be doubted that, if the bonds had been delivered without anything further occurring, the defendants, upon the bonds proving to be counterfeit, would have been liable in this action. Tayloe v. Ins. Co., How., 390; Benj. Sales, 56; Flynn v. Allen, 57 Pa., 482; Webb v. Odell, 49 N. Y., 583. Was this contract changed so that this con

dition or warranty was waived by the plaintiffs? In other words: did the letter of the defendants propose the modification insisted upon, of the pre-existing contract? and if so, did the plaintiffs agree to it, and accept the delivery of the bonds accordingly?

We pass by without remark the plaintiffs' propositions that the alleged modification was within the Statute of Frauds, and could not, therefore, be effectually accepted otherwise than in writing; that there was no consideration for such an agreement; and that, if made, it was contrary to public policy and, therefore, void. The view which we take of the case renders it unnecessary to consider either of these points. The first sentence of the letter relied upon by the defendants recognizes distinctly the contract as made by the dispatches. The defendants say, In accordance with your offer for 15 Central Pac. first mort. bonds, 102 we replied, We accept your offer, and have forwarded them by ex. to Bk. North America, with draft attached for $15,375."

snare." Hoffman v. Ins. Co., 32 N. Y., 405. Upon the whole letter, considering what it docs and what it does not contain, we are unable to come to the conclusion that the defend ants intended to require that the modification since insisted upon should be made, and to make such modification the condition upon which the plaintiffs should take the bonds, if they took them at all. This result leaves the rights of the parties as they were under the original contract, and entitles the plaintiffs to recover.

But conceding, for the purposes of this opinion, that the letter did contain such a proposition or annunciation as is insisted upon, then the inquiry arises whether it was so understood and agreed to by the plaintiffs.

There can be no contract without the mutual assent of the parties. This is vital to its existence. There can be none where it is wanting. It is as indispensable to the modification of a contract already made as it was to making it originally. Where there is a misunderstanding as to anything material, the requisite mutuality of assent as to such thing is wanting; consequently, the supposed contract does not exist, and neither party is bound. In the view of the law in such case, there has been only a negotiation, resulting in a failure to agree. What has occurred is as if it were not, and the rights of the parties are to be determined accordingly. In Phillips v. Bistolli, 2 Barn. & C., 511, the defendant was a foreigner, and understood the English language imperfectly. Certain jewelry was struck off to him at auction for 88 guineas. He was sued for that amount, and set up as a defense that he thought he had bid 48 guineas. Abbott, Chief Justice, left it to the jury to find whether the mistake had actually occurred, as a test of the existence of the contract." Benj. Sales, 43.

This, standing alone, would have been a mere carrying out of the contract as made, and as it must have been understood by both parties. The stress of the case is upon what follows: The letter proceeds: "We would further add, that we have purchased the bonds from a party strange to us. They had in fact bought them from the Commercial Bank, but were not to take them unless genuine, and were not to pay for them until found to be so. Next: "And not having ever handled any of the Pacific Central, we would sell the bonds without recourse as to their being genuine; consequently, please examine them, and, upon being found correct, telegraph immediately (Central O. K.)." The phrase, we would sell without recourse," considered in the light of the context and the cir-" cumstances, may well be interpreted to mean that the writers would prefer or like so to sell, if it could be done. This view derives support from the succeeding member of the sentence, "please examine," etc. Examine for whom? It is not said, examine for yourselves. The language employed is usual where the thing asked is for the benefit of the asker, but not where it is for the benefit of the party addressed. Lastly, it is said: "We do not doubt the bonds, but, coming through strange hands, we use this precaution, and are not willing to take risk." This is consistent with the construction we have given to the preceding clause. If the examination the plaintiffs were requested to make showed clearly that the bonds were not counterfeit, then there could be no risk, whether the sale was with or without warranty of genuineness. In connection with these views, it is to be observed that while the bonds and draft were sent on pursuant to the original contract, which is dis- In Coles v. Bowne, 10 Paige, 526, a block of tinctly recognized, it is not said in the letter in lots was struck off at auction to the defendant. plain terms, such as would naturally have been The plaintiff insisted and proved that the sale used if such had been the intent of the writers. was of the lots separately. The defendant inWe will sell only at your risk as to genuineness. sisted that his bid was for the entire block as We will not guarantee it; examine for yourselves. one parcel, and that he so understood the premIf the bonds are counterfeit and you take them, ises to be offered and sold. The vendor instithe loss will fall upon you and not upon us. If tuted the suit for specific performance. The this language, or terms equally clear and ex-evidence rendered it doubtful whether the deplicit, had been used, the case would have pre fendant's allegations as to his understanding sented a very different aspect. "Every intend and bid were not true, and upon that ground ment is to be made against the construction of the Chancellor dismissed the bill. If there was a contract under which it would operate as a a misunderstanding on the subject between the

In Baldwin v. Mildeberger, 2 Hall, 176, the defendant bought merchandise of the plaintiff, and it was agreed that it should be paid for by the note of a third person payable to the defendant, to be by him indorsed to the plaintiff. After the goods were delivered the note was tendered, indorsed without recourse. The plaintiff refused to receive it, insisting that the agreement was that the note should be indors. ed without this qualification, and thereupon brought the suit. The court left it to the jury to find whether there was a misunderstanding between the parties as to the manner of the indorsement. The jury so found; and it was held that the plaintiff was entitled to recover as if there had been nothing said about the note, there being no such assent of the two minds as was necessary to make a contract in relation to it.