Flaks, Inc. v. De Berry

• Decision Date: 10 June 1938
• Docket Number: 2055
• Citation: 53 Wyo. 203,79 P.2d 825
• Parties: FLAKS, INC. v. DE BERRY ET AL
• Court: Wyoming Supreme Court

79 P.2d 825

53 Wyo. 203

FLAKS, INC. v. DE BERRY ET AL

No. 2055

Supreme Court of Wyoming

June 10, 1938

APPEAL from the District Court, Albany County; V. J. TIDBALL, Judge.

Action by Flaks, Incorporated, against Charles DeBerry and George DeBerry, doing business under the firm name and style of "Laramie Candy Kitchen," and others to recover the amount of a debt and to set aside an allegedly fraudulent conveyance. From an order discharging an attachment, the plaintiff appeals.

Reversed.

For the plaintiff and appellant, there was a brief and an oral argument by Edward T. Lazear of Cheyenne.

The case was instituted under the provisions of the Uniform Fraudulent Conveyance Act, Article 48, R. S. 1931. At the time the action was commenced, defendants were attempting to foreclose under a mortgage taken without consideration, for the purpose of defrauding creditors of the DeBerrys. The court below dissolved the attachment on the theory that the property attached was in custodia legis. It is true that in the absence of a statute, a creditor cannot attach property in the hands of an administrator for a debt owed by the decedent. A creditor of an heir cannot attach property of the estate prior to distribution. 4 Am. Jur. 811, Sec. 411. Creditors cannot attach decedent's property on the ground that it had been fraudulently conveyed by decedent prior to his death, unless the estate be insolvent, in which case the creditor may demand that the administrator proceed to set aside the fraudulent conveyance. Tilla McCoy v Flynn, 151 N.W. 465; 50 L. R. A. (N. S.) 320 and 59 A L. R. 768 and annotations following each.

The Uniform Fraudulent Conveyance Act was adopted in Wyoming in 1929. It is in effect in sixteen states, but few adjudicated cases are to be found with reference to its provisions. There are many cases involving a deceased fraudulent grantor, but so far we have found none in which a deceased fraudulent grantee is involved. It seems that if the purchaser paid a consideration for the property and was without knowledge of the fraud, then the provision of the statute does not apply. Morse v. Roach (Mich.) 201 N.W. 472; Bank v Wahl (S. D.) 228 N.W. 393; Liebowitz v. Roofing Company (N. Y.) 182 N.E. 60. Under the Act, it is no longer necessary to secure judgment before proceeding to set aside a conveyance, but a creditor may maintain an action before securing a judgment. Surety Company v. Connor, 65 A. L. R. 244; Clothing Company v. O'Brien, 262 N.Y.S. 60; Tom Mason Company v. Poust (Wis.) 227 N.W. 393. The fundamental purpose of the Act is to protect creditors and many of the cases hold that it should be liberally construed. Adams v. Wallace (Okla.) 220 P. 873; 12 R. C. L. 490; Sims v. Sims (Okla.) 300 P. 692. An attachment bond having been filed, all rights are protected. Trust Company v. Bank, 89 A. L. R. 702; Sand v. Godwise, 4 Johns 536, 4 Am. Dec. 305; Beavans v. Groff (Ind.) 5 N.E.2d 514. We believe we were right in disregarding the conveyance from DeBerry to Vassos and in attaching the property as the property of DeBerry.

For the defendants and respondents, there was a brief and an oral argument by G. R. McConnell of Laramie.

The plaintiff brought the action against respondents and others to recover the sum of $ 3,245.25, alleged to be due plaintiff from Charles DeBerry and George DeBerry, as individuals and partners, and joined as defendants the respondents as administrators of the Athon Vassos estate, on the theory that the defendants, DeBerry brothers had fraudulently transferred the property to Vassos to defraud their creditors. A writ of attachment was sued out and all of the property contained in the business known as the "Laramie Candy Kitchen" was attached and levied upon by the Sheriff of Albany County. The attachment was thereafter upon motion and hearing dissolved by the court below. The burden of proving that the attachment was wrongfully issued was upon the appellant. Collins v. Stanley, 15 Wyo. 82; 6 C. J. 438; Bank v. Swan (Wyo.) 23 P. 743; Wearne v. France (Wyo.) 21 P. 703. The above cases were decided upon our present statute. Procedure for dissolution of attachment is described by Secs. 89-3515 and 3516, R. S. The decedent had a right to give the security, even if it constituted a preference over other creditors. Bank v. Company, 5 Wyo. 50; Land and Livestock Company v. George, 45 Wyo. 254; 36 Wyo. 268. Assets in the hands of an administrator are not subject to attachment. 3 Bancroft's Probate Practice, Sec. 1019; Bank v. Ludvigsen, 8 Wyo. 230. If a claim be denied by an administrator, suit may be brought thereon within three months thereafter. Sec. 88-3103, R. S.; Fisher v. Chadwock, 4 Wyo. 379; Raisch v. Warren, 124 P. 95. Appellant concedes the above principles of law to be correct. Property in the hands of an executor or administrator cannot be attached. Brewer v. Hutton (W. Va.) 72 A. S. R. 304; Bank v. Chase, 59 A. L. R. 766. The point has been decided by this court in Bank v. Frantz, 33 Wyo. 329. A similar question arose in Culver v. Graham (Wyo.) 21 P. 694. The Uniform Fraudulent Conveyance Act covers the subject, but there seems to be a division of authority on this subject. The better rule of law is that a sale by a partner of his interest in the partnership to the other partner is not within the preview of the Act. Andrew v. Pfannensteil, 253 P. 567; Company v. Bressie, 264 P. 1077; 27 C. J. 891. A suit against an administrator in his representative capacity and also against him personally is demurrable, as it constitutes a misjoinder of parties defendant. Schlicker v. Hamenway, 32 A. S. R. 116. We believe that the ruling of the lower court quashing the attachment was correct and should be affirmed.

KIMBALL, Justice. BLUME, Ch. J., and RINER, J., concur.

OPINION

KIMBALL, Justice.

This is an appeal from an order discharging an attachment in an action by a creditor to recover the amount of the debt and to set aside an alleged fraudulent conveyance of the attached property.

The plaintiff is Flaks, Inc., a wholesaler. The defendants are Charles DeBerry, George DeBerry, and the administrators of the estate of Athon Vassos, deceased. The theory of the plaintiff, as shown by the petition, is that Charles and George DeBerry were co-partners, doing business under the name of Laramie Candy Kitchen, and buying merchandise of plaintiff on open running account during a period of several years before December, 1936; that in February, 1937, plaintiff learned that the DeBerrys, on May 29, 1936, had made a bill of sale purporting to transfer their interest in all the property of the Laramie Candy Kitchen to Athon Vassos, and Vassos had given Charles DeBerry a chattel mortgage of the property to secure promissory notes for $ 3500; that when the bill of sale and chattel mortgage were given the DeBerrys were indebted to plaintiff in the sum of $ 1314, and thereafter the DeBerrys continued to buy goods of plaintiff in the same way as before, until December 4, 1936, when there was due plaintiff $ 3245, the amount sued for. It was alleged that the conveyance of the property to Vassos on May 29, 1936, was fraudulent as to plaintiff on several of the grounds mentioned in sections 5 to 8 of the Uniform Fraudulent Conveyance Act, sections 48-105 to 48-108, R. S. 1931.

When the action was commenced, Charles DeBerry was foreclosing his chattel mortgage. Vassos had died, and his administrators were made defendants as parties claiming the property under the alleged fraudulent bills of sale. The prayer of the petition is for judgment for the debt, and for annulment of the bill of sale and chattel mortgage of May 29, 1936, to the extent necessary to satisfy plaintiff's claim.

With its petition plaintiff filed an affidavit for attachment alleging substantially the same grounds as those stated in the petition as grounds for annulling the transfer of the property. A writ of attachment was issued and levied on the property alleged to have been fraudulently conveyed.

Thereafter the defendant administrators filed a motion to discharge the attachment on grounds stated as follows:

"1. Said plaintiff had no legal right to attach said property described in the petition.

"2. That all of the property attached, described in the petition, are the assets of the estate of the deceased, Athon Vassos, and no other person has any interest therein.

"3. That the attachment issued herein is in violation of the laws of the State of Wyoming and if permitted to stand would grant the plaintiff a preference over other creditors, which is prohibited by the laws of the state of Wyoming."

With the motion there was an affidavit of the attorney for the administrators in which it was stated that George DeBerry never was a partner in the business of the Laramie Candy Kitchen; that Charles DeBerry on May 29, 1936, sold and by bill of sale transferred his interest in the business to Vassos and received from Vassos notes secured by chattel mortgage on the property; that the bill of sale and mortgage were recorded in the office of the County Clerk on June 4, 1936; that "plaintiff was paid any and all indebtedness due it on June 9, 1936"; and "that the grounds for attachment alleged by said plaintiff against these defendants are untrue."

This is the only affidavit filed by the administrators in support of their motion. Plaintiff filed no counter affidavit. No oral evidence was introduced.

The motion questions the plaintiff's right to attach property which the administrators assert is in custodia legis. Whether the motion was intended to raise, or was treated as raising, any other question will be discussed later.

The action, as already indicated, was under the Uniform Fraudulent Conveyance Act, which by section 9, sub-section 1 (R. S. § 48-109...