Gilbert v. Peppers
| Decision Date | 23 March 1909 |
| Parties | GILBERT et al. v. PEPPERS et al. |
| Court | West Virginia Supreme Court |
Submitted September 23, 1908.
Syllabus by the Court.
A general creditor who first attacks a fraudulent conveyance obtains a lien on the property by the institution of his suit; and preferences among all of such creditors are determined by the dates of the commencements of their suits if separate suits are brought, or of the commencement of the suit and the filing of petitions, if all assert their rights in the same suit.
[Ed Note.-For other cases, see Fraudulent Conveyances, Cent. Dig §§ 985, 986; Dec. Dig. § 321. [*]]
Judgment creditors of the fraudulent debtor have liens on his real estate from the dates of their respective judgments, and on his personal property from the dates of the acquisitions thereof by execution, attachment, or otherwise, whether they be acquired before or after the conveyance, if they are preserved by compliance with registration and other laws provided for the purpose.
[Ed Note.-For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 985-988; Dec. Dig. § 321. [*]]
A deed of trust on a stock of merchandise, disclosing on its face intention to permit the debtor to remain in possession and sell and dispose of the property, replenishing the sold goods by new purchases, is fraudulent per se, and void as to creditors, subsequent as well as existing.
[Ed. Note.-For other cases, see Chattel Mortgages, Cent. Dig. § 367; Dec. Dig. § 185. [*]]
Principles announced in Conaway's Adm'r v. Stealey, 44 W.Va. 163, 28 S.E. 793, and Horner-Gaylord Co. v. Fawcett, 50 W.Va. 487, 40 S.E. 564, 57 L.R.A. 869, re-examined and disapproved.
An honest debt may be so used as to hinder, delay, and defraud creditors, no matter how it originated, nor that the creditor is a subsequent one.
[Ed. Note.-For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 402, 631; Dec. Dig. §§ 126, 208. [*]]
The proviso in section 2, c. 74, of the Code of 1906, protecting a preference, given to secure purchase money, has no application to fraudulent conveyances.
[Ed. Note.-For other cases, see Fraudulent Conveyances, Cent. Dig. § 402; Dec. Dig. § 126. [*]]
Section 5, c. 74, Code 1906, relates to title to, and incumbrances upon, property, and the creditors contemplated therein are lien creditors only.
[Ed. Note.-For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 697-713; Dec. Dig. § 241. [*]]
Appeal from Circuit Court, Tucker County.
Bill by John J. Gilbert and others against Walter C. Peppers, James T. Darkey, and others. Decree for complainants, and James T. Darkey appeals. Reversed and remanded.
C. O. Strieby, for appellant.
Geo. P. Shirley and Cunningham & Stallings, for appellees.
James T. Darkey, engaged in the mercantile business in the town of Davis, Tucker county, and owner of a stock of goods and property used in connection therewith, sold the same to Walter C. Peppers, on the 2d day of May, 1904, for the sum of $2,000, of which sum $200 was paid in cash. For the balance Peppers executed his 36 promissory notes for the sum of $50 each, dated May 2, 1904, payable one each month thereafter, and a deed of trust to secure the payment thereof, by which he conveyed the property to C. O. Strieby for that purpose. Peppers took charge of the business, and carried it on for about a year, paying 9 of the notes, and incurring a good deal of other indebtedness, from $1,200 to $1,500. Though dated May 2, 1904, the deed of trust was not acknowledged until June 14, 1904. Darkey neglected to record it until the 21st day of February, 1905. About the 1st day of May, 1905, Strieby took possession of the property and closed the store. He advertised it for sale on the 15th day of May, 1905, and adjourned the sale until May 30th. An application for the appointment of a receiver was made by Gilbert Bros. & Co. on May 24th, and on the next day A. L. Helmick was appointed special receiver and took charge of the property. Under a subsequent order of the court he sold it, keeping the proceeds of the sale of the goods that were in the store at the time Peppers bought it separate from the proceeds of those subsequently bought, and put into it by him. The bill set up indebtedness due the plaintiffs, amounting to $201.59, consisting of a note executed by Peppers for the sum of $118.73 and an open account amounting to $82.86. It charged the existence of indebtedness to various other persons. The grounds of relief are (1) that the deed of trust is fraudulent on its face; (2) that it is fraudulent in fact; (3) that the sale to Peppers was fraudulent; (4) that the provision in the deed of trust, purporting to give a lien in favor of Darkey on after-acquired goods does not constitute a lien thereon; (5) that the trustee was about to mingle the new stock with the old and sell it all for the satisfaction of Darkey's claim, to the detriment and injury of other creditors; (6) that the deed of trust constitutes an unlawful preference in favor of Darkey; and (7) that Peppers had been permitted to retain all the accounts, claims, and demands due him, and was collecting the same. The cause was referred to a commissioner to ascertain and report the debts due from Peppers to the plaintiffs, and other creditors who had come into the suit by petition, and was submitted on his report, the pleadings and the depositions taken, and a decree pronounced holding the deed of trust fraudulent as to the creditors of Peppers, and ordering a pro rata distribution of the proceeds of the property among them, including Darkey. From this decree Darkey has appealed. The creditors are also dissatisfied, and have cross-assigned errors; their contention being that the other creditors should have been given preference over Darkey in the distribution. As the entire proceeds of the sale amounted to only $709.25, of which $230 arose from the sale of the after-acquired goods, the position taken by the general creditors would exclude Darkey entirely.
The right of the plaintiffs, Gilbert Bros., to maintain this suit at all is challenged on the ground that they were not in condition to proceed in the manner in which they did. The note was not then due, and the open account bore date on May 17th, the day before the institution of the suit. We held, in Frye v. Miley, 54 W.Va. 325, 46 S.E. 135, that an ordinary suit in equity to set aside a fraudulent conveyance cannot be maintained by a creditor whose debt is not due, and that such a creditor, in order to obtain relief, must invoke attachment. If the plaintiffs claimed no debt except the one evidenced by the note, the principle declared in Frye v. Miley might require a reversal of the decree and dismissal of the bill. Whether it would or not, in view of the intervention of other creditors, we need not decide, however, since the open account, bearing date one day before the institution of the suit, constitutes a debt for which it could be instituted, and, jurisdiction having been thus conferred, the court could make provision for debts not due and payable, as well as those that were. Although the decree says, by way of recital, the deed of trust is fraudulent because of failure to record it, the fund is disposed of as if it had been regarded as creating an unlawful preference. All the creditors are permitted to share therein ratably. This is not the rule of distribution or priority in cases in which deeds are set aside for fraud. The creditor who first attacks a fraudulent conveyance obtains a lien by the institution of his suit, and preferences among all of them are determined by the dates of the commencements of their suits, if separate suits are brought, or of the commencement of the suit and the filing of petitions, if all assert their rights in the same suit. Foley v. Ruley, 50 W.Va. 158, 40 S.E. 382, 55 L.R.A. 916; Clark v. Figgins, 31 W.Va. 156, 5 S.E. 643, 13 Am.St.Rep. 860.
The decree plainly applies the provisions of section 2, c. 74, of the Code of 1906, determining the basis and mode of relief in cases of transfers and charges made by insolvent debtors attempting to prefer creditors, or to secure some of their creditors to the exclusion and prejudice of others. The provisions of said section, however, are clearly inapplicable, because the suit was not brought within the time prescribed therein. The deed of trust was made on the 2d day of May, 1904. Both grantor and grantee testify to this fact, and the deed of trust itself bears that date. Besides, the record shows the contract of sale of the store bearing the same date, and Peppers then took charge of the business. The failure to have it acknowledged on that day is accounted for in the testimony of Peppers, and nothing to the contrary is disclosed, except the date of the acknowledgment, June 14th. It could do no more than raise a presumption, and it seems not to have even that weight. As between the parties, the deed of trust would be valid without any acknowledgment. The acknowledgment is for the purpose of recordation, and the recordation subserved the purpose of constructive notice to creditors and subsequent purchasers. The presumptions arising from the date of acknowledgment, if any, are not conclusive as to the date of signing and delivery. This conclusion is fully sustained by the principles and reasoning in Colquhoun v. Atkinsons, 6 Munf. 550. Any relevant evidence is admissible to prove the real date of delivery of a deed. Duval v. Bibb, 4 Hen. & M. 113, 4 Am.Dec. 506. The deed of trust was made on the 2d day of May, 1904, and not admitted to record within eight months after the making thereof, nor was the suit brought within one year after it was made, and the statute provides that the suit must be...
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