Penning Et At v. Reid

• Decision Date: 17 October 1932
• Docket Number: No. 13492.,13492.
• Citation: 166 S.E. 139
• Court: South Carolina Supreme Court
• Parties: PENNING et at. v. REID et al.

166 S.E. 139

PENNING et at.

v.REID et al.

No. 13492.

Supreme Court of South Carolina.

Oct. 17, 1932.

Appeal from Common Pleas Circuit Court of Hampton County; J. Henry Johnson, Judge.

Suit by Gothard E. Penning and Edward T. Penning, copartners trading as Penning-Reed Company, and others, in behalf of themselves and others, against R. W. Reid and another. Judgment for plaintiffs, and defendants appeal.

Affirmed.

decree of Circuit Judge J. Henry Johnson, directed to be reported, follows:

This was an action commenced on or about April 27, 1931, by the named plaintiffs in behalf of themselves and all other creditors in like plight of the defendant R. W. Reid, who will come into, join in, and contribute to the expenses of this action, to set aside a voluntary deed made by the defendant R. W. Reid, to his wife, Katherine Hill Reid, under the Statute of Elizabeth solely on the ground of legal or constructive fraud, the complaint alleging that the said deed had hindered, delayed, and defrauded plaintiffs and other creditors of R. W. Reid of their just and lawful action, suits, debts, claims, and demands, praying for judgment in their respective favor against the defendant R. W. Reid for the amounts alleged to be due; that the deed be set aside as legal fraud upon their rights; that the land be sold and the proceeds distributed to plaintiffs and other creditors of the defendant R. W. Reid; that a receiver be appointed to take charge of the premises; and for such other and further relief as plaintiffs were entitled to.

Prior to this time, to wit, on or about March 17, 1930, some of the same plaintiffs herein had commenced a creditors' action in this court to have the same conveyance set aside under the Statute of Elizabeth on the grounds of actual or moral fraud. The title of this case was Marsh Furniture Company, Incorporated, Demerritt-Fisher Company, Incorporated, in behalf of themselves and all other creditors in like plight of R. W. Reid, who would come into and contribute to the expenses of this action, plaintiffs against R. W. Reid and Katherine Hill Reid, defendants. The plaintiffs In this first suit contended that the allegations of the complaint and proof were sufficient to set aside the deed for legal fraud. This suit was decided against the plaintiffs (Marsh Furniture Company, Incorporated, et al.), in an order signed by me in that case which will be hereinafter referred to.

The instant case of Penning-Reed Company was heard by me on the record and testimony in the first case of Marsh Furniture Company et al., by agreement of counsel for plaintiffs and defendants, together with such additional testimony as each desired to offer. For all practical purposes, the testimony in this case was the testimony taken in the first case of Marsh Furniture Company, Incorporated, et al.

For a complete understanding of this case it will be necessary to refer to the Marsh Furniture Company case.

Marsh Furniture Company, Incorporated, et al., was the first suit brought, and for convenience will hereafter be referred to as the first suit, and the Penning-Reed Com-pany et al. case, the instant case now before me, will be referred to as the second suit.

In the first suit, the complaint of plaintiffs therein alleged the corporate capacity of each plaintiff; that both the defendants were nonresidents of the state of South Carolina and lived and resided in the city of Jacksonville, state of Florida; that the defendant R. W. Reid and E. E. Cleveland were copartners trading as E. E. Cleveland Furniture Company, with its principal place of business in the city of Jacksonville, state of Florida; that in the case of plaintiff Demerritt-Fisher Company, a final judgment for the amount claimed due had been rendered and was of record in the civil court of record for Duval county, Fla., against the defendant R. W. Reid and E. E. Cleveland, but did not allege that an execution had been issued upon said judgment; the complaint further alleged that the copartnership of E. E. Cleveland Furniture Company had been liquidated and a dividend of 13³/₄ per cent. paid to general creditors; that there were no other assets, and that it was necessary to set aside the voluntary deed made by the defendant R. W. Reid to his wife, Katherine Hill Reid, conveying two tracts of land of 200 acres each, situate, lying, and being in Hampton county, S. C.; that the defendant R. W. Reid was totally insolvent at the time of said conveyance; and that said conveyance was a fraud upon the rights of plaintiffs and creditors of R. W. Reid.

The conveyance referred to was a deed made by the defendant R. W. Reid to his wife Katherine Hill Reid, conveying the said two tracts of land consisting of 200 acres each, more or less; that the deed was dated September 1, 1928, and recorded October 12, 1928, in the office of the clerk of court for Hampton county, S. C. The complaint contained the usual allegations of a creditors' bill.

In this first suit several references in the. city of Jacksonville, Fla., were held, and the defendants both appeared in Hampton and testified before the referee, to whom it was referred.

Incidentally, in this first suit, an attachment was issued against both defendants, and the complaint also alleged that the defendant R. W. Reid had a certain interest in a mortgage proceeding involving real estate which was separate property. In the writ of attachment against the defendant R. W. Reid, a one-sixth undivided interest in a separate and distinct tract of land and the land deeded by R. W. Reid to his wife, was attached as the property of R. W. Reid. This property in the first suit was held to be subject to the payment of the debts of R. W. Reid, he being a nonresident of the state of South Carolina. However, all sums realized in the first suit were consumed in the pay ment of the cost of the action; the plaintiffs losing on the main issue.

From the testimony and the record in both the first suit and the second suit, the following facts were proved, and were not contradicted, and I so find and hold.

The E. E. Cleveland Furniture Company was a copartnership consisting of E. E. Cleveland and R. W. Reid, and was one of the oldest furniture businesses in the city of Jacksonville. R. W. Reid is now, and was for many years, a nonresident of the state of South Carolina and a resident of the city of Jacksonville, state of Florida.

As far back as July 9, 1928, claims against the furniture company were being placed in the hands of attorneys in the city of Jacksonville for collection, and up until September 6, 1929, claims were being forwarded and collected and paid through attorneys against the said furniture company.

On September 6, 1929, a letter, signed by David J. Lewis, an attorney representing claims against the furniture business, R. D. Oldham, an experienced furniture man, and the defendant R. W. Reid, was sent out to the creditors of the furniture company saying that the said E. E. Cleveland Furniture Company had reached the stage where there was no possible prospect of its continuing in business; that seven judgments aggregating $2,000 had been entered of record, and executions given to the sheriff with instructions to levy; that the business at that time was in arrears for rent in the sum of $5,350 (the rent being for rent lease of $700 per month); that the business owed for personal taxes, exclusive Of interest and exclusive of 1929 taxes, the sum of approximately $3,500, which with interest would amount to more than $4,000. That at the suggestion of several creditors, and to avoid bankruptcy of the said furniture business, it was thought best that the business be placed in the hands of a liquidating committee consisting of the above-named persons; the defendant R. W. Reid being one. (Some of the taxes in arrears dated back to the year 1923, which were unpaid and in execution.) It was stated that this plan was the best in the interest of creditors. The business was actually liquidated. After compromise of preferred claims, and after all assets of the business were disposed of, it paid a dividend of 13% per cent.

At the time R. W. Reid made the deed to his wife, to-wit, September 1, 1928, there were suits pending against the furniture company. The deed was a voluntary one, being given for love and affection; the purported consideration of $10 not being actually paid.

The record shows, and it is part of the testimony in this second suit, that in the city of Jacksonville, state of Florida, the Statesville Furniture Company, one of the creditors of E. E. Cleveland Furniture Company, commenced a suit to set aside as an alleged fraud the transfer of a mortgage in the sum of $68,000, which the defendant R. W. Reid had transferred to his wife, Katherine Hill Reid. In this proceeding, on or about March 24, 1930, the defendant R. W. Reid testified that outside of his interest in the E. E. Cleveland Furniture Company he had no other assets or property. This testimony on his part as to his having no other assets, except his interest in the furniture business, was part of the testimony in this case.

On trial the defendants introduced audits of certified public accountants for the period from May 1, 1927, to April 30, 1928, and for the period from May 1, 1928, to April 30, 1929, showing that at that time the company owned assets in excess of liabilities of $72,-051.44, and $21,952.47, although the said audits showed that the said furniture company had a net operating loss of $17,103.58, and $18,650.34, respectively.

The plaintiffs, in the testimony in the first suit, introduced in the record, properly authenticated under the acts of Congress, judgment in favor of Marsh Furniture Company against R. W. Reid and E. E. Cleveland, copartners. After the close of the testimony, and after the argument in the first case was made by the attorneys for plaintiffs and for the defendants, plaintiffs moved to reopen the case for the purpose of introducing in the record nulla bona...