Swager v. Smith

• Decision Date: 14 March 1912
• Docket Number: 1,050.
• Citation: 194 F. 762
• Parties: SWAGER v. SMITH.
• Court: U.S. Court of Appeals — Fourth Circuit

194 F. 762

SWAGER v. SMITH.

No. 1,050.

United States Court of Appeals, Fourth Circuit.

March 14, 1912

Edward G. Smith, for appellant.

Philip P. Steptoe and Harvey F. Smith, for appellee.

Before PRITCHARD, Circuit Judge, and McDOWELL and CONNOR, District judges.

PRITCHARD Circuit Judge (after stating the facts as above).

The question involved in the case at bar was passed upon by this court in the case of Ritchie County Bank v McFarland, 183 F. 715, 106 C.C.A. 153; the court following in that case the decisions of the Supreme Court of West Virginia. That we are governed by the law of that state in this instance in passing upon the validity of the deed of trust in question is borne out by the following cases Chicago Bank v. Kansas Bank, 136 U.S. 223-235, 10Sup.Ct. 1013, 34 L.Ed. 341; Etheridge v. Sperry, 139 U.S. 266-277, 11 Sup.Ct. 565, 35 L.Ed. 171; Dooley v. Pease, 180 U.S. 126-128, 21 Sup.Ct. 329, 45 L.Ed. 457; Thompson v. Fairbanks, 196 U.S. 516-522, 25 Sup.Ct. 306, 49 L.Ed. 577; Humphrey v. Tatman, 198 U.S. 91-95, 25 Sup.Ct. 567, 49 L.Ed. 956.

Therefore the first inquiry is as to what the courts of West Virginia have had to say in regard to deeds of this character. In the case of Claflin v. Foley, 22 W.Va. 434, the first syllabus is in the following language:

'A deed, conveying a stock of goods and merchandise and notes and accounts of a merchant to a trustee to secure the payment of notes not then due, which provides that said conveyance shall cover 'such goods and merchandise as may be added to said stock, from time to time, by the grantor and brought into the store in course of business or to take the place of such goods as may hereafter be sold,' but does not authorize to take possession or control of said goods until the grantor has made default in the payment of one or more of said notes and has been requested to do so by the holder or holders of such note or notes, is as against the unsecured creditors of the grantor fraudulent and void on its face, although it provides that the 'trustee, by himself or by his agent or attorney, shall at once take possession,' of the notes and accounts transferred by such deed and collect the same for the benefit of the trust creditors.'

The learned judge who tried this case in the court below in disposing of the same filed a memorandum, a part of which is in the following language:

'The exact question involved here has been discussed and determined by me in Re Elletson Co. (D.C.) 174 F. 859. In that case, speaking of Judge Poffenbarger's very cautious and qualified expression, in Gilbert v. Peppers (65 W.Va. 355, 64 S.E. 361), that 'Bartles & Dillon v. Dodd (56 W.Va. 383, 49 S.E. 414) may possibly be sustained on principle, as the property, except a small portion thereof, was not consumable in its use, nor perishable, nor intended to be sold,' I say, at page 866 of 174 Fed.: 'I do not think the decision in Bartles & Dillon v. Dodd can possibly be maintained in principle for the reasons stated. On the contrary, I think it in direct conflict with the true principles established by very many older cases (such as Shattuck v. Knight, 25 W.Va. 590-600; Landeman v. Wilson, 29 W.Va. 702, 2 S.E. 203; Livesay, Ex'r, v. Beard, 22 W.Va. 585; Claflin v. Foley, 22 W.Va. 434-441; Gardner v. Johnston, 9 W.Va. 403) to which the ruling in Gilbert v. Peppers directly takes us back, as also with those directly established by this Gilbert Case itself."

The decision in Bartles & Dillon v. Dodd, 56 W.Va. 383, 49 S.E. 414, while not absolutely overruled by Gilbert v. Peppers, 65 W.Va. 355, 64 S.E. 361, is thereby much weakened in force, and the result is a restoration of the older doctrine, set out in Cochran v. Paris, 52 Va. 348, and quoted as follows in Gardner v. Johnston, 9 W.Va. 408, 409:

'The fact that a deed of trust embraces articles which must perish, or be consumed in the use, before a sale of them can be made according to the terms of the deed, is not one which, of itself, necessarily shows the deed to have been made with a fraudulent design. The amount in number or value of such articles may be so inconsiderable, as compared with the main subjects of the trusts, as to justify the conclusion that they were embraced, through inattention of the parties, to the inconsistency of providing a security out of property which, from its nature, would necessarily perish before it could be made as means of satisfying the trust. Or the deed may embrace other property, to the improvement, support, or substance of which such perishable property is embraced in the deed, so far from being indicative of a fraudulent purpose, might rather serve to show an honest and provident design and an effort to make the main subjects of the trust a more certain and productive security.'

It appears from an inventory made at the instance of the appellant, on the 7th day of November, 1908 (the date that this property was taken in charge by the trustee), that the contents of the pantry, wineroom, and the bar supplies were estimated to be worth $942.41. It is but fair to say that counsel for appellee insist that this property was not worth more than from $200 to $500. However, there is a covenant in the lease to keep this stock up to $2,500, and it may therefore be assumed that a considerable amount of the stock had been disposed of by the bankrupt before the trustee took possession of the same. It is apparent from the evidence in this case (as shown by the two agreements) that the agreement of the bankrupt to use his influence in obtaining a liquor license, while not controlling, should be taken into consideration in passing upon the question as to whether any considerable portion of the property conveyed was of a transitory nature. It undoubtedly shows that the lessee considered the barroom the most important feature in connection with the business in which he was about to engage.

In the case of Ritchie County Bank v. McFarland, supra, this court, in an opinion by Judge Waddill, said:

'We think it is equally well settled by the decisions of the Supreme Court of Appeals of West Virginia that, where property of the same class as last herein stated is conveyed under like conditions and treated in the same way, along with other property of a permanent nature, as here, and the transitory property forms, as it does in this case, a material part of what is conveyed, the deed, as respects both classes of property, is equally void. Gardner v. Johnston, 9 W.Va. 403; Claflin v. Foley, 22 W.Va. 441; Livesay v. Beard, 22 W.Va. 585; Shattuck v. Knight, 25 W.Va. 590-600; Landeman v. Wilson, 29 W.Va. 703, 2 S.E. 203.'

In the case at bar it may be that the deed of trust is not void per se; but the evidence adduced before the referee shows that the parties intended, and that, in fact, the stock of consumable pantry and saloon supplies did constitute a considerable part of the property conveyed.

We are of opinion that the court below properly held the deed of trust void.

The appellees, asserting in their brief illegality in the contract between Swager and Tompkins & Geary, ask that this court hold that Swager's claim as a common creditor should be rejected. The appellees have not taken a cross-appeal. Mere assertion of error in an appellee's brief does not give this court jurisdiction to review alleged error against an appellee. Canter v. Insurance Co., 3 Pet. 307, 317, 7 L.Ed. 688; Chittenden v. Brewster, 2 Wall. 191-196, 17 L.Ed. 839;The Maria Martin, 12 Wall. 31-40, 20 L.Ed. 251; The Stephen Morgan, 94 U.S. 599, 24 L.Ed. 266; Clark v. Killian, 103 U.S. 766, 769, 26 L.Ed. 607; Loudon v. Taxing District, 104 U.S. 771, 774, 26 L.Ed. 923; Farrar v. Churchill, 135 U.S. 609-612, 10 Sup.Ct. 771, 34 L.Ed. 246;

Cherokee Nation v. Blackfeather, 155 U.S. 218-221, 15 Sup.Ct. 63, 39 L.Ed. 126; Bolles v. Outing Company, 175 U.S. 263-268, 20 Sup.Ct. 94, 44 L.Ed. 156; Ency. of Pl. & Pr. 157, 514; Stand. Proc. 430.

In view of what we have stated, the ruling of the lower court is affirmed.

Affirmed.

CONNOR, District Judge (dissenting).

Eliminating all irrelevant matter, the record, for the purpose of passing upon the assignments of error, presents this case: Truman Swager, prior to April 4, 1908, owned, and personally operated, a hotel and restaurant in the city of Clarksburg W.Va. Desiring to retire from the business, he, on that day entered into a contract with one Davis, evidenced by writings, whereby he agreed to sell the furniture of all kinds in, and being used for the purpose of operating, the hotel, for the sum of $5,000 and to execute to him a lease for the hotel building. The purchase price was to be paid in the following manner: $500 paid cash; $500 on June 1, 1908; and $1,000, 6, 12, 18, and 24 months each, after June 1, 1908, with interest from date. For these amounts Swager agreed to accept the promissory notes of the purchaser, payment whereof was to be secured by a deed of trust on all of the property purchased as well as on all the furniture, bar fixtures, appliances and stock of goods to be placed in said building by the purchaser, the bar fixtures and stock of goods was, at all times, to be of the value of at least $2,500, and kept insured for the benefit of the trustee. The parties, on the same day, and as a part of the said transaction, entered into a contract whereby the said Swager promised to use his influence to secure from the city council a license to said purchaser to operate a retail liquor store and saloon in said building. Upon failure to secure such license the contract of sale was to be null and void. License having been obtained, Davis executed a deed in trust to E. G. Smith to secure the balance of the purchase money in accordance with the terms of the contract. The...