APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND.
MR. JUSTICE HARLAN, after stating the case, delivered the opinion of the court.
In the court below it was contended in behalf of the plaintiffs that even if there were no agreement that the property in question should be taken in the name of the wife, there was nothing illegal or inequitable in preferring her to the amount of the husband's debt to her. Upon this point the court said: "The question of the legality of a preference under Rhode Island laws does not arise in this case; for our decision rests upon the principle that Mrs. Graeffe, by her own conduct or acts, by what she permitted to be done, or neglected to do,
is estopped in a court of equity from claiming this estate as against the general creditors of her husband."
We are of opinion, after a careful examination of the evidence, that there was nothing in the conduct or acts of Mrs. Graeffe that precluded the court from granting the relief sought by her. The case made by the bill was in all material particulars sustained by the proof. We do not see how this conclusion can be avoided, except by disregarding altogether the testimony of Mrs. Graeffe and her husband. And that we do not feel at liberty to do. In our judgment what they have said under oath touching the vital issues in the case must be taken as substantially true.
Mrs. Graeffe inherited from her father and uncle property, principally real estate, worth from $100,000 to $125,000. When the estates of the uncle and father were settled up, the moneys and securities belonging to her came into the husband's hands under a power of attorney, which authorized him to receive them for her. There is no claim, as under the evidence there could not be, that the wife made a gift of this property to her husband. On the contrary, it remained in his hands to be controlled for her, although he was allowed a large discretion in its management. The husband informed his wife that she could buy the property in question, stating that it could be purchased cheaply, and that a very fair return could be derived from it if improved and leased to the Mills Company. When it was concluded to make the purchase, the husband told the wife that he "would buy the property for her," and that "the title was to be vested in her." It is beyond question that she relied upon his assurance that the property would be secured to her. She certainly understood at the time, as was quite natural, that it was to be her property. The purchase was made in March, 1880. The husband, without the knowledge of the wife, and in violation of the assurances he had given her, took the title in his own name. The price paid was about $6000. Immediately after the purchase improvements costing about $40,000 were put upon the premises. The moneys paid for the property, and that expended for its improvement, belonged entirely to Mrs. Graeffe.
In August, 1880, the improvements being then in progress, she discovered, in the course of a conversation with her husband, that the property stood in his name. She grew excited about the matter, and insisted upon his making a conveyance to her at once. This he agreed to do. He promised that he would attend to it at once, but neglected to perform his promise. To these facts the husband testified, and we are not at liberty, upon a close scrutiny of the evidence, to doubt the substantial accuracy of his statements. Other testimony by him was to the following effect: "Q. After this interview in August, and before the conveyance, on the first of March following, had you any conversation with Mrs. Graeffe in which she was informed as to where the required title of the property was? A. What do you mean by that? Q. How did she know that it had not been conveyed to her? A. She questioned me from time to time and I was forced to make acknowledgments to her that I had not as yet attended to the transfer. Q. When did she first question you, after the interview of August, 1880? A. In that fall of 1880 and also in the spring. Q. When was it that you first told her that you had not transferred the title to her? A. August, 1880. Q. And then you told her you were going to do it? A. Yes. Q. After that when did you tell her you had not; or, did you tell her anything about it? A. Yes; I told her later, with a promise to do it, and failed to do it. Q. When next, prior to March first, 1881? A. Some time in February; I cannot tell the date, but it was at the moment when I was borrowing money from her to pay some drafts that were maturing. She then again learned that I had not made this transfer. I told her then, and she was very much excited about it."
Mrs. Graeffe testified to the following effect: "Q. At the time he had these conversations with you, was there anything said as to who was to take the property? A. I understood that it was to be my property. Of course, I understood it was to be my property. Q. Did you learn from time to time that purchase had been made of the property? A. Yes, Graeffe told me, and told me the price he could get, but I don't remember the figures at all. Q. What did you say
about purchasing? A. I left it to him. Q. What did you say to him? A. I expected that he would purchase, and talked to that effect. Q. When did you first learn that the title to the property was not in your name? A. About August of that year, I think. I think it was some time during the summer and we were talking about the property, and he gave me to understand it was not in my name. I then insisted upon it, and he said it should be put in my name. I know we had quite a little controversy at the time. He said if that would satisfy me, it should be put in my name. Q. When next did you have any conversation with Mr. Graeffe after this interview in August on the subject of the title to this property? A. I don't think we ever spoke of it again to speak of the title until he was about to fail. About that time I spoke to my brother about it, and that was the first I knew that it had not been put in my name. Q. What did you say to your brother? A. I asked him to look out for my interest, and get my money. He asked if it was mine. I said I thought it was. I then spoke to Graeffe, and he said it had not been put in my name. My brother said immediately it must be done. I think it was he who took charge of the affair. Q. Immediately after this conversation, the transfer was made? A. Yes, I think it was the next day -- just as soon as I could possibly make arrangements."
The brother of Mrs. Graeffe here referred to was William H. Garner, to whom the property was conveyed by Graeffe, and by whom it was immediately conveyed to the wife. He testified: "Some few days before the actual transfer Mrs. Graeffe, my sister, told me of the fact that this property belonging to her had been transferred to her husband, and asked me to insist on its being retransferred to her, and I did so." Under the deed from her brother, Mrs. Graeffe claims the property as against those who obtained sheriff's deeds under attachments issued and levied ...