Frye v. Miley

• Court: West Virginia Supreme Court
• Writing for the Court: POFFENBARGER, J.
• Citation: Frye v. Miley, 54 W.Va. 324, 46 S.E. 135 (W. Va. 1903)
• Decision Date: 05 December 1903
• Parties: FRYE v. MILEY et al.

46 S.E. 135

54 W.Va. 324

FRYE v. MILEY et al.

Supreme Court of Appeals of West Virginia.

December 5, 1903

Submitted September 8, 1903.

Syllabus by the Court.

1. A suit to set aside a fraudulent conveyance under section 2 of chapter 133 of the Code of 1899, instituted for a legal demand by a creditor at large before the debt on which it is predicated becomes due and payable, cannot be sustained. Inadvertent rulings to the contrary in Chrislip v Teter, 27 S.E. 288, 43 W.Va. 356, and Bank v Prager, 41 S.E. 363, 50 W.Va. 660, are disapproved.

2. In such case, though the bill may be sufficient under section 1 of chapter 106 of the Code of 1899, it is proper to dismiss it on demurrer if an attachment has not been sued out under it before such dismissal.

3. But it is error to so dismiss such a bill without inserting in the decree a clause saving to the plaintiff the right to prosecute any other proper suit in respect to the matters complained of in the bill, or showing that the cause had not been decided on its merits, as such decree, without such clause, would be a bar to a subsequent suit predicated upon the same facts.

4. Where a party brings a suit in equity which cannot be entertained for want of jurisdiction, and permits such a decree to be entered, without objection, as would bar another suit for the same matter, he is not entitled to costs in the appellate court upon a reversal of the decree. In such case he is not the party substantially prevailing in the true sense of the terms.

Appeal from Circuit Court, Hardy County; R. W. Dailey, Jr., Judge.

Bill by William H. Frye against John R. Miley and others. Decree for defendants, and plaintiff appeals. Modified.

Miller and Brannon, JJ., dissenting in part.

W. M Gamble, for appellant.

Benjamin Dailey and H. B. Gilkeson, for appellees.

POFFENBARGER J.

William H. Frye complains of the dissolution of an injunction and dismissal of his bill by a decree of the circuit court of Hardy county. It appears from the bill that on the 18th day of February, 1902, John R. Miley executed his negotiable note for the sum of $1,517.75, payable to the order of Annie L Miley nine months after date, with interest from date, at the Shenandoah Valley Bank of Winchester, Va., and indorsed by the said Annie L. Miley, G. W. Miley, and P.J. J. Walker, and then delivered to said Frye. The note was given for the purchase money of property purchased by said John R. Miley at a sale made by Frye. On the 22d day of September, 1902, about seven months after the date of the note, two months before its maturity Frye instituted this suit, and, at October rules following, filed his bill, setting forth in detail conveyances by John R. Miley, Annie L. Miley, George W. Miley, and P.J. J. Walker of all the real estate, and practically all the personal property, owned by each and every one of them, made between the 17th day of July, 1902, and the date of the institution of the suit; alleging all of said conveyances to have been made for the purpose of hindering, delaying, and defrauding the plaintiff in the collection of his said debt, and praying that each and all of them be set aside, and the real estate subjected to the payment of the debt, and that Annie L. Miley, George W. Miley, and P.J. J. Walker be restrained by injunction from transferring or assigning certain purchase -money notes given in consideration of the conveyances, and Fannie V. Pease, J. W. Miley, and William M. Snyder from paying certain notes to the parties alleged to be holders of them. The injunction was awarded on the 11th day of September, 1902, and on the 29th day of May, 1903, the bill was held insufficient on demurrer, the injunction dissolved, and the bill dismissed.

This decree is based upon the theory that a suit to set aside conveyances on the ground of fraud cannot be instituted by a creditor whose debt is not due, and on the further ground that if an attachment would in such case be maintainable, and give equity jurisdiction to charge the land with a lien in favor of the creditor, the bill does not pray an attachment, and the record does not show any affidavit therefor, nor any application to the court for an order of attachment.

Prior to the enactment in 1849 of what is now section 2 of chapter 133 of the Code of 1899 of this state, a creditor could not resort to a court of equity to impeach a conveyance for fraud without having first reduced his demand to judgment. This made it a lien upon the debtor's real estate, and, the fraudulent conveyance being an obstruction to the enforcement of the lien, equity interposed for the removal of the obstruction. When the property fraudulently conveyed and sought to be subjected was personal property, the creditor was required not only to obtain a judgment, but also to take out execution, and have it levied or returned, so as to show that he had exhausted all legal remedies. Chamberlayne v. Temple, 2 Rand. 384, 14 Am.Dec. 786; Tate v. Liggat, 2 Leigh, 84; Kelso v. Blackburn, 3 Leigh, 300; Rhodes v. Cousins, 6 Rand. 189, 18 Am.Dec. 715; Wallace's Adm'r v. Treakle, 27 Grat. 479. In the absence of statutes conferring jurisdiction in equity at the instance of creditors at large, the general rule is that there is no such jurisdiction. There are exceptions to the rule, it is true, but this case does not fall within any of them. "Occasional exceptions may be found in some states to the rule that equity will not interfere at the instance of a simple-contract creditor. But the exceptions prove the force of the rule." Wait, Fraud. Conv. § 53. This author, in the same section, analyzes the cases which are supposed to establish these exceptions, and substantially denies their soundness. He concludes by saying, "Creditors will, as a rule, find these exceptional cases not easy to support." To the same effect, see Bump on Fraud. Conv. § 535, where it is said: "Equity has jurisdiction of fraud, but it does not collect debts. A creditor must establish his demand at law, and obtain a lien upon the property, before the transfer interferes with his rights, or he has any title to claim relief in equity. No creditor can be said to be delayed, hindered, or defrauded by any conveyance until some property out of which he has a specific right to be satisfied is withdrawn from his reach by a fraudulent conveyance." Adler v. Fenton, 24 How. (U. S.) 407, 16 L.Ed. 696; Williams v. Tipton, 5 Humph. (Tenn.) 66, 42 Am.Dec. 420; 5 Enc. Pl. & Pr. 468. The reasons assigned for this rule are that a court of law is the proper forum in which to establish debts; that the aid of a court of equity is given for the enforcement of a lien and the removal of obstructions in the way of execution at law; that equity will not aid any person until it is made certain that he has a claim upon the debtor; and that a creditor at large has no right to interfere with the debtor in the disposition of his property. 5 Enc. Pl. & Pr. pp. 470-473.

Section 2 of chapter 133 of the Code of 1899 does away with this rule by providing that a creditor, before obtaining a judgment or decree for his claim, may institute a suit in equity to set aside a fraudulent conveyance, and in such suit have all the relief which he would be entitled to after obtaining a judgment or decree for his claim. This statute gives such creditor a lien upon the property fraudulently conveyed from the time of the commencement of the suit in equity. Wallace's Adm'r v. Treakle, 27 Grat. 479; Clarke v. Figgins, 27 W.Va. 663; Foley v Ruley, 50 W.Va. 158, 40 S.E. 382, 55 L.R.A. 916; Sweeny v. Sugar Co., 30 W.Va. 443, 4 S.E. 431, 8 Am.St.Rep. 88; Geiser Mfg. Co. v. Chewning, 52 W.Va. 523, 44 S.E. 193. But for this statute, it is plain that no such suit could be brought. It is an enabling statute, doing away with the rule which prevented relief under certain conditions. It does away with that rule only to the extent of the right given by the statute, namely, to sue in equity to annul a fraudulent conveyance before reducing the claim to judgment. Whether such suit can be brought before the debt is due is an entirely different matter. This last question came before the Virginia Court of Appeals in Devries v. Johnston, 27 Grat. 805, and the court divided evenly upon it; Judges Moncure and Anderson standing for the affirmative of the proposition, and Christian and Staples for the negative. It is therefore no precedent, and Judge Anderson, who wrote the only opinion filed, cites no authority whatever for his position. A later Virginia case (Simon v. Ellison, 22 S.E. 860) holds that "suit attacking a conveyance as in fraud of creditors cannot be maintained by creditors whose claims are not due." It is said that this court, in Chrislip v. Teter, 43 W.Va. 356, 27 S.E. 288, has held that such suit may be maintained for a debt not due. It appears from the statement of the case that the debt was not due, and that the suit was maintained; but the point cannot be regarded as having been adjudicated in that case, for it seems never to have been brought to the attention of the court. Not a word of comment on that phase of the case is found in the opinion, and there is nothing in it to suggest that counsel relied upon it or brought it to the attention of the court. Even if it be considered as an adjudication, it is clearly the result of inadvertence, rather than consideration. Miller v. Zeigler, 44 W.Va. 484, 29 S.E. 981, 67 Am.St.Rep. 777, and Bank v. Prager & Son, 50 W.Va. 660, 41 S.E. 363, are urged and relied upon as supporting the position taken by counsel for the appellant. What has been said of the case of Chrislip v. Teter applies to that of Bank v. Prager & Son. Neither in the opinion nor in the briefs, so far as a hasty examination of the latter reveals, is there any mention of...