Goodman v. Henry

• Decision Date: 02 December 1896
• Citation: 42 W.Va. 526,26 S.E. 528
• Court: West Virginia Supreme Court
• Parties: GOODMAN et al. v. HENRY et al.

26 S.E. 528

42 W.Va. 526

GOODMAN et al.

v.HENRY et al.

Supreme Court of Appeals of West Virginia.

Dec. 2, 1896.

Assignment for Creditors — Preference — Attachment—Grounds—Affidavit—Sufficiency—Amendment.

1. In a deed of trust for the benefit of all creditors, any preference must be plainly expressed.

2. The nonresidence of one partner will not be ground for attachment against the firm, to the prejudice of social creditors.

3. The material facts stated in an affidavit must be such as to show the ground of attachment to which they relate. A mere statement that a debtor has conveyed or attempted to convey his property with intent to defraud is not enough. There must be facts and circumstances given to sustain the charge of fraud.

4. A statement of material facts in an affidavit for attachment must be certain and definite, in a legal point of view, so as to inform those entitled to defend the attachment what particular facts they must repel.

5. The provision in section 1, c. 106, Code, allowing time to file supplemental affidavit of other material facts to show ground of attachment, is remedial, and should be liberally construed. It should be applied with the same liberality as the law of amendment of pleadings.

6. Can such amendment be made to the prejudice of a second lien by deed of trust or attachment? Court equally divided on this question.

(Syllabus by the Court.)

Error to circuit court, Mercer county.

Action by Goodman Bros. & Co. against Henry & Linkous, aided by attachment. Meyer, Reinhard & Co. and others were admitted to defend. The affidavit and the attachment were quashed, and plaintiffs bring error. Affirmed.

A. W. Reynolds, for plaintiffs in error.

Douglass & McNutt, for defendants in error.

BRANNON, J. Goodman Bros. & Co. brought an action in the circuit court of Mercer county against Henry & Linkous, and issued an attachment, which was levied on a stock of store goods; and, on the next day after the levy, Henry & Linkous conveyed the goods by deed of trust for the benefit ofall their creditors. Afterwards Henry & Linkous confessed judgment in said action, and the goods were sold under the court's order, as perishable, and, while the fund from their sale was yet in the sheriff's hands, Meyer, Reinhard & Co. and several other firms filed their petition, stating themselves to be creditors of Henry & Linkous, entitled to participate under said trust in the assets by it conveyed; alleging that the affidavit on which the attachment issued was insufficient, and the attachment also; and praying that they be admitted to defend the attachment, as provided in section 23, c. 106, of the Code, and that the affidavit and attachment be quashed. The court refused leave to file statements of supplemental facts. They were quashed, and Goodman Bros. & Co. sued out this writ of error.

Plaintiffs say that their demurrer to the petition asking leave to defend the attachment ought to have been sustained, and that the creditors filing it ought not to have been allowed to contest the attachment. They say the trustee, not the creditors, ought to have filed the contest, as he would make distribution if the attachment were quashed, and the court, without his presence, could not distribute the fund. This is not a question of legal title, to call for the trustee to file the petition, as holding legal title under the trust The statute says that "any one interested" in the property levied upon may file a petition stating "a claim thereto, or an interest in or lien on the same under any other attachment or otherwise." Surely the real beneficiaries under a deed of trust— those interested more than the trustee having only naked legal title—are embraced by the very letter and the spirit and object of this statutory provision, so broad in its language. And the position contended for would make this a chancery suit to marshal and administer, whereas it only sought to quash the attachment, free the property from Its lien, and then the deed of trust would operate with full sway, and the property would be disposed of under it according to law. The court could, if the attachment failed, direct the fund to go to the trustee, though not a party.

Plaintiffs next say that these creditors could not unite in one petition. This is but a technical objection, at most, and this being an informal statutory proceeding, not a formal pleading in a formal suit, we must treat it as remedial, and not overthrow it on technical grounds; but, indeed, I see no objection to the union of these creditors in this attacking petition, because they all united in a common attack on one ground common to all, and all derived rights under one and the same deed of trust. Is it not preferable they should unite, under such circumstances?

Next, the plaintiffs say that these creditors are estopped by the deed of trust itself from contesting the attachment, since, as they claim under it, they must obey it, and that it recognized the attachment lien by the provision securing all creditors "according to the respective rights and priorities of said creditors, giving hereby no priority or preference to any." The pontiffs' lien is not by name, preserved. I do not think it was intended to prevent the creditors from resistance to an invalid lien, though prima facie good and colorable. Preferences in assignments for creditors must be distinctly declared, as they are disfavored in law. 1 Am. & Eng. Enc. Law, 862; Burrill, Assignm. § 116. And observe that the close of the clause above quoted shows that it was not intended by the deed in itself to originate or create a preference, as it says so; thus leaving us impressed with the belief that it did not design to enforce any, but to leave any preference which might be claimed to stand on its own strength in law. It was not intended to bar a creditor under it from contesting a preference set up by another.

Plaintiffs complain that the court quashed the affidavit on which the attachment issued. The affidavit specified two grounds of attachment, —First, the nonresidence of one of the two members of the debtor firm. His nonresidence would not sustain the attachment against social assets, to the prejudice of social creditors. Andrews v. Mundy, 36 W. Va. 22, 14 S. E. 414. The other ground of attachment is that Henry & Linkous were about to convert their property into money or securities with intent to defraud their creditors; and, as material facts to sustain this ground of attachment, the affidavit states that "the defendant Moses Henry has already sold his real estate in Mercer county, and said defendants Henry & Linkous have made an effort to sell and convert their personal property In said county into money or securities with intent to defraud their creditors." I am forced to the conclusion that this affidavit in the statement of the material facts is bad. In the first place, an attachment is a harsh proceeding, governed by strict tests, and not treated with liberality. The material facts required to be stated in the affidavit by section 1, c. 106, of the Code, are the evidence to prove the ground of attachment. They must, regarded as evidence, be sufficient to prove the proposition asserted as a ground of attachment; here, —the fact that defendants were about to convert their property into money or securities with intent to defraud their creditors; and, failing to show that fact, the attachment must be quashed, from the face of the affidavit alone, by the letter of section 19. Take those facts as true; do they show such fraudulent conversion? It would not be sufficient for even a bill in equity based on a fraudulent conveyance, for it is not sufficient merely to allege a conveyance, and that it was made with intent to defraud; for the assertion of fraudulent intent may be only the expression of opinion, and facts to reflect that intent ought tobe given. Shoe Co. v. Haught, 41 W. Va. 275, 23 S. E. 553; 8 Am. & Eng. Enc. Law, 776, 243. This affidavit falls under that rule, as it simply charges a sale by one partner, and an attempted sale by the firm, with fraudulent intent. This rule has been, in terms, applied to attachments, in the holding by this court that an affidavit must state facts showing the ground of attachment to exist, and that when it states acts, such as conveyances or sales, which are not necessarily fraudulent, though it allege that they were made with intent to defraud creditors, without more, it is bad. Hale v. Dona-hoe, 25 W. Va. 414. Again, the affidavit has no legal certainty in the facts it attempts to state, wanting "time, place, and circumstance, " which ordinary rules of pleading would condemn in a declaration. What particular real estate did Henry sell? To whom? Where? What property did Henry & Linkous attempt to sell? To whom and when? What was the act showing the fruitless attempt to convert? The affidavit does not say. Those entitled to contest the attachment have the right to know what they have to meet, —what they must direct their evidence to in order to disprove the basis of fraud. In Sandheger v. Hosey, 26 W. Va. 221, Judge Snyder said that the material facts stated in the affidavit "must produce in the mind of the court the conclusion that the ground for the attachment exists. This requirement is intended to protect the debtor against an abuse of the attachment law. The facts must be capable of denial and disproof, and must, of themselves, show an improper, illegal, or fraudulent act; and they must exclude every reasonable conclusion that the act was proper and innocent. If they leave it doubtful whether the act alleged was fraudulent or innocent, the affidavit will be insufficient. An affidavit that the defendant did an act which, of itself, does not show a fraudulent intent, cannot certainly establish such intent. It is the fraudulent act and intent of the defendant to withdraw his effects from the reach of the creditors that give the right to attachment; and, consequently, unless both such act and...