. Claflin & Co. v. Foley et als.

• Decision Date: 10 November 1883
• Citation: 22 W.Va. 434
• Court: West Virginia Supreme Court
• Parties: .Claflin & Co. v. Foley et als.

22 W.Va. 434

Claflin & Co.

v.Foley et als.

Supreme Court of Appeals of West Virginia.

Submitted June 26, 1883

Decided November 10, 1883.

1. A deed, conveying a stock of goods and merchandise and notes and accounts of a merchant to a trustee to secure the payment of notes not then due, which provides that said conveyance shall cover "such goods and merchandise as may be added to said stock, from time to time, by the grantor and brought into the store in course of business or to take the place of such goods as may hereafter be sold," but does not authorize the trustee to take possession or control of said goods until the grantor has made default in the payment of one or more of said notes and has been requested to do so by the holder or holders of such note or notes, is as against the unsecured creditors of the grantor fraudulent and void on its face, although it provides that the "trustee, by himself or by his agent or attorney, shall at once take possession" of the notes and accounts transferred by such deed and collect the same for the benefit of the trust-creditors. (p. 439.)

2. Nor is such deed validated or its character affected by the fact, that subsequent to its execution and on the same day a second trustdeed is made between the same grantor and grantee, conveying the same goods and merchandise, to secure other and different cestuis que trust, which authorizes the trustee to take possession of said goods and merchandise at once, "and manage and control the same for the benefit and advantage of the parties secured and indemnified by the deed." (p. 441.)

3. Three trust-deeds are made between the same grantor and trustee on the same property; the second is declared to be subject to the rights of the creditors secured in the first, and the third expressly refers to the first and mentions the creditors therein secured; and the creditors secured are different in each deed; and the first deed at the suit of unsecured creditors is declared to be fraudulent and void on its face as to the creditors of the grantor. Held:

I. That said second and third deeds convey only the equity of redemption in the property mentioned in the first deed; II. That the plaintiffs by their suit and charge thereby obtained on the trust-property acquired a preference over the creditors secured in said second and third deeds to satisfaction out of the trust-fund to the extent of the debts secured in the said first deed. (p. 442.)

The facts of the case are sufficiently stated in the opinion of the Court.

Van Winkle Ambler lor appellants.

John A. Hutchinson and Cole Miller for appellees.

Snyder, Judge:

On the 6th day of October, 1881, Hugh G. Foley, of the city of Parkersburg, executed to "John B. Specker, of the city of Cincinnati and State of Ohio, trustee," a trust-deed by which, after stating therein that he "is justly indebted to the firm of Specker, Buddeke & Co, of the city of Cincinnati, in the sum of six thousand three hundred and forty-four dollars and thirty-six cents," and "to the firm of Young, Kim-mell & Diggs, of Baltimore, in the sum of one thousand six hundred and twenty-seven dollars and twenty-seven cents," for which he has, as of the elate of said deed, executed to the former firm his four notes of one thousand five hundred and eighty-six dollars and nine cents each, and to the latter his four notes of four hundred and six dollars and eighty-two cents each, due respectively in fifteen, forty-five, seventy-five and one hundred and five days after date, with interest, and negotiable and payable at the First National Bank of Parkersburg, the said Foley sold, assigned and conveyed to the said John B. Specker, trustee, "all of the stock of goods and merchandise of and belonging to the said party of the first part, being and consisting of a stock or lot of dry goods and notions, hats and caps, boots and shoes, jewelry and cloaks, now contained in the store-room occupied by the party of the first part in what is known as the 'Opera House Block, ' on Market street, in the city of Parkersburg, and county of Wood and State of West Virginia, and also such goods and merchandise as may be added to said stock from time to time by the said party of the first part and brought into said store in course of the business or to take the place of such goods as may be hereafter sold; also all and singular the notes, books, accounts and bills receivable of and belonging to the party of the first part, a list or schedule of which is hereto attached and made part of this deed and marked 'Hugh .

G. Foley Schedule A.' in trust, however, to secure the payment of the said several notes hereinafter (hereinbefore) mentioned and described, and every one thereof as it may tall due, and any and all renewals thereof in case any one or more of them should be renewed, and if default be made by the said Foley in the payment of any one or more of said notes, then it shall be the duty of the said trustee, when requested by the holder or holders of any such note or notes, to take possession of the said stock of goods and make sale thereof at a public auction in all things as is required by law. And it is further stipulated and agreed that the said trustee, by himself or by his agent or attorney, shall at once take possession of the said notes, accounts and bills receivable hereby assigned and conveyed, and collect the same in such manner as in his judgment he may think best for the interest of all parties interested in this trust, and he shall keep a strict and careful account of such collections and hold the same, or so much as may be necessary thereof, to meet the said notes as they may mature, deducting the reasonable charges and expense of this trust, and any surplus of or arising from said collections, if any, he shall pay to the said party of the first part."

This deed, which for convenience I shall call "deed No. 1," and also the schedule therein referred to, was duly recorded in Wood county on the day of its date.

By another deed, which I shall call "deed No. 2," of the same date and recorded in said county on the same day, the said Foley sold and conveyed the same stock of goods and merchandise to the said John B. Specker, trustee, in trust to secure the payment of certain unmatured notes, therein described, clue to the Parkersburg National Bank and to indemnify John O'Brien, Thomas Murphy and Thomas Hughes & Co. as his endorsers on said notes. By this deed "the party of the second part (the trustee) is hereby authorized to take possession at once of the property hereby conveyed, and to manage and control the same for the benefit and advantage of the parties secured and indemnified by the deed, subject to the rights of the creditors secured by a former deed of trust which the parties of the first part have this day executed to the said John B. Specker, trustee, to the end that the said several notes herein mentioned may he paid at the maturity thereof out of the proceeds of the trust property hereby conveyed."

And by a third deed, "No. 3," dated and recorded in said county, on October 7, 1881, the said Foley conveyed to said John B. Specker, trustee, all the goods and merchandise, notes and accounts, conveyed by the said "deed No. 1," in trust to secure the payment of certain other unmatured notes therein mentioned, due to the said Parkersburg National Bank on which said Foley is endorser.

And the said Foley, being indebted to II. B. Claflin & Co. to an amount exceeding two thousand six hundred dollars for goods purchased from them by him before the date of said "deed No. 1," they, on November 5, 1881, brought this suit in the circuit court of Wood county against said Foley, John B. Specker, trustee, the cestuis que trust in said several deeds and others to set aside said "deed No. 1," and to subject the property and choses in action therein mentioned to the payment of their debt. The plaintiffs charge in their bill that the debts due from said Foley to the beneficiaries in said deed were, at the date of its execution, in fact, greatly less than the amounts therein secured to them; that the said deed was made with intent to delay, hinder and defraud the plaintiffs and other unsecured creditors of said Foley, and that the said John B. Specker, trustee, had notice of, and participated in, said intent, and that the said deed is, therefore, fraudulent and void as to them. They pray for an injunction to restrain the grantor, trustee and beneficiaries in said deed from disposing of, transferring or interfering with the property therein mentioned, and for the appointment of a receiver to take charge of said property, &c, and for general relief.

The bill wras sworn to and an injunction awarded as prayed for therein. The defendants, the grantor, trustee and cestuis que trust in said "deed No. 1," appeared and filed their demurrer and several answers to the bill.

The said defendants in their respective: answers aver that the debts mentioned and the amounts secured to them respectively, in said deed, were, at the time of its execution, bona fide and justly due as therein stated, and they, each severally, positively, directly and emphatically deny that said deed was made with intent to delay, hinder and defraud the plaintiffs or any creditor of said Foley; and especially do the trustee and cestuis que trust deny that they or either of them participated in, or had any notice of such intent, if any such existed; and they specifically deny every allegation of fraud or collusion contained in the plaintiffs' bill.

The cause was heard on December 12, 1882, upon the bill, demurrer thereto, answers and replications thereto, depositions and other proofs, and the plaintiffs not insisting then upon the appointment of a receiver, inasmuch as the property and goods had been disposed of and turned into money by the trustee, the court entered a decree overruling the demurrer to the bill and adjudged that the said "deed No. 1" was valid and binding and that the plaintiffs...