Lamb. v. Kelley.

• Decision Date: 21 October 1924
• Docket Number: No. 5085.,5085.
• Citation: 97 W.Va. 409
• Parties: C. R. Lamb et al. v. W. S. Kelley et al. V.83-600-798
• Court: West Virginia Supreme Court

97 W.Va. 409

C. R. Lamb et al.

v. W. S. Kelley et al.V.83-600-798

No. 5085.

Supreme Court of Appeals of West Virginia.

Submitted October 7, 1924.

Decided October 21, 1924.

1. Bankruptcy To Invalidate Lien, Challenging Party Must Prove Debtor Insolvent When Lien Obtained

To invalidate a lien under section 67-f of the federal bankruptcy act, the party challenging it must allege and prove that the debtor was insolvent when the lien was obtained, (p. 413).

2. Same Bankruptcy Jurisdiction in no Way Determines Debtor's Insolvency When Lien Obtained.

An adjudication in bankruptcy in no way determines whether the debtor was inisolvent when a lien was obtained, there being no presumption arising from the adjudication that he was insolvent for any period before the petition in bankruptcy was filed. (p. 413).

3. Same Adjudication Does not Bind Strangers as to Facts or 'Subsidiary Law Questions on Which Based.

Although an adjudication in bankruptcy concludes all the world as to the status of the debtor qua bankrupt, it does not bind strangers as to the facts or subsidiary questions of law upon which it was based. (p. 415).

4. Same Unless Creditor Exercises Right to Intervene, He Remains Stranger to Proceeding.

The provisions of the federal bankruptcy act allowing creditors to intervene, are permissive only, and unless a creditor exercises the right, he remains a stranger to the proceedings, (p. 415).

5. Judicial Sales Gross Inadequacy of Price Alone Sufficient to

Withhold Confirmation.

Gross inadequacy of price alone is sufficient ground for withholding confirmation of a judicial sale. (p. 416).

Appeal from Circuit Court, Calhoun County.

Suit by C. R. Lamb and, others against W. S. Kelley, in which James Reed and others filed petition. From a decree for plaintiffs, James Reed and others appeal.

Reversed and remanded.

A. G. Mathews and Eakle & Alderson, for appellants.

Miller, Judge:

This suit was instituted at March rules, 1922, by C. R. Lamb and C. E. Cooper against the defendant, W. S. Kelley, and on March 6, 1922, an attachment was sued out and levied upon certain real estate and mineral rights owned by defendant Kelley in Calhoun County. At the same time two similar suits were instituted against the same defendant, one by plaintiff Lamb, and the other by Scott Duffield. Attachments in these two suits were, on March 6th, levied on the same property attached by plaintiffs.

The bill in the case here on appeal alleges that defendant Kelley was indebted to plaintiffs in the sum of $601.12; "that the said Kelley is a non-resident of the State of West Virginia; that he has left said state with intent to defraud his creditors; that he so conceals himself that a summons can not be served upon him; that the said W. S. Kelley has assigned and disposed of a material part of his property with intent to defraud his creditors; and that he has converted a material part of his property into securities and money with intent to defraud his creditors." It is further alleged that in November 1921, defendant Kelley had executed a deed of trust on a parcel of 53 3/4 acres, a part of the land sought to be subjected to plaintiffs' claims, to L. L. Ferrell, Trustee, to secure defendant's indebtedness to the Calhoun County Bank.

Plaintiffs pray that they may have a decree of recovery against the defendant Kelley for the amount of their claims against him; that their claims be decreed to be liens on the real estate attached; and that the said property be sold in satisfaction of their claims.

By an order entered in the cause, the date of which does not appear on the record, the circuit court found that plaintiffs were entitled to the relief prayed for; that the three attachment liens were of equal priority; but that the Calhoun County Bank was entitled to priority over the other claims as to the 56 3/4 acres of land, by reason of its deed of trust. And one Lorentz C. Hamilton was appointed special commissioner to sell the property attached.

On April 20, 1923, the special commissioner sold the real estate attached, to Lamb, Cooper and Duffield, for the sum of $200.00.

Immediately following the sale, appellants James Reed and others filed their petition in the cause, praying that the special commissioner be restrained from acting further as commissioner and from making further sales, and that the sale be not confirmed, and that the commissioner be restrained from making a deed to plaintiffs or any other person, for the property so sold by him.

The grounds assigned for relief are: that petitioners had purchased the same property at the sale of one Benton C. Boggs, trustee in bankruptcy, acting under an order of the United States District Court for the Southern District of "West Virginia; that when the bankruptcy court took jurisdiction of the estate of the debtor, nt further proceedings should have been taken in the chancery causes; and that the sale made by the special commissioner was for a grossly inadequate sum.

From the appellants' petition filed in the cause, it appears that on May 10, 1922, two months and a few days after the attachments were levied, defendant Kelley was adjudged a bankrupt, upon the petition of creditors, by the district court. Notice was thereupon given to all creditors, including plaintiffs Lamb, Cooper and Duffield, of the pendency of the bankruptcy proceedings. At a meeting of creditors held June 30, 1922, appraisers were appointed and qualified, to appraise the estate of the bankrupt; and upon motion of the creditors present a trustee was named and directed to sell any and all of the bankrupt's estate, free and discharged from all liens. At the trustee's sale the petitioners purchased the property involved in the attachment proceedings, for the sum of 81, 800.00. This sale was approved and confirmed by the bankruptcy court February 7, 1923.

Petitioners further alleged that "all of the plaintiffs in all three of said chancery suits, at the time of their institution, knew of the insolvency of the defendant W. S. Kelley; that they knew of the institution and pendency of said bankruptcy proceedings; that their claims were filed therein, and that they participated with the other creditors of the said W. S. Kelley: that said plaintiffs in said chancery causes, and said purchasers at the sale so made by Lorentz C. Hamilton, Commissioner, under the said decree in the said chancery suit of Dr. C. R. Lamb and C. E. Cooper against W. S. Kelley and others, knew of the sale of said real estate by said trustee in bankruptcy, and of the purchase by these petitioners of said real estate before they purchased the same at the sale of said commissioner under decree of said chancery suit."

With appellants' petition certain orders entered in the bankruptcy court were filed as exhibits, from which it appears that defendant Kelley was duly adjudged a bankrupt by the District Court, on the 10th day of May, 1922, upon a petition filed in that court against him on March 8, 1922, And it further appears that the property in question was sold by the trustee to the petitioners, as alleged, and that said sale was confirmed by the bankruptcy court. However, a list of creditors whose claims had been approved February 7, 1922, the date of the first dividend, does not disclose the names of either of the three plaintiffs in the attachment suits. Whether their claims were ever filed in the bankruptcy proceedings does not appear from the record thereof as exhibited in this cause. The claim of the Calhoun County Bank was held by the referee to be a secured debt and was paid from the proceeds of the trustee's sale.

The circuit court overruled petitioners' motion, and approved and confirmed the sale made by the special commissioner, and directed that the commissioner execute to the purchasers of the property sold by him apt and proper deeds conveying to them the real estate purchased by them; but the commissioner was directed to hold the proceeds of sale until the further order of the court. From this order the petitioners have appealed to this court.

The question presented to us is whether the state court had jurisdiction over the subject matter of the debtor's estate, which would warrant it in proceeding in the chancery cause to sell the property in question and to confirm the sale made by the commissioner, in view of the motion made by petitioners, on their petition and the exhibits filed therewith.

Section 67c of the Federal bankruptcy law provides: "A lien created or obtained in or pursuant to any suit or proceeding at law or in equity, including an attachment upon mesne process or a judgment by confession, which was begun against a person within four months before the filing of a petition in bankruptcy or by or against such person shall be dissolved by the adjudication of such person to be a bankrupt if (1) it appears that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, or (2) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation...