Tpie Carlsbad Mfg. Co. v. Kelley

• Decision Date: 13 May 1919
• Citation: 84 W.Va. 190
• Parties: Tpie Carlsbad Manufacturing Co. v. J. M. Kelley.
• Court: West Virginia Supreme Court

84 W.Va. 190

Tpie Carlsbad Manufacturing Co.

v.J. M. Kelley.

Supreme Court of Appeals of West Virginia.

Submitted May 7, 1919.

Decided May 13, 1919.

1. Fraudulent Conveyances Relationship of Parties Burden of Proof.

Generally the burden of proof rests on him who charges fraud, and not on him whose conduct is charged to be fraudulent. But where the transaction alleged to be fraudulent is between persons whose relationship by blood or marriage is so intimate as fairly to create the presumption of their susceptibility to influences prompting favoritism by the one towards the other, the burden of establishing freedom from fraud as against creditors shifts to him who is charged therewith. (p. 193).

2. Same Husband and Wife Title in Name of Wife Presumptions.

Where property is alleged to have been purchased by a wife during coverture, the burden is upon her to prove distinctly that she paid therefor with means not derived from her husband; and in the absence of clear proof to that effect, the presumption is that it was acquired with his means, and it is liable for his debts. But if she furnish evidence clearly showing that it was not acquired with her husband's means, it will not be liable for his debts, (p. 194).

3. Equity Contracts Between Husband and Wife Employment of Husband.

The marital relation does not prevent the employment of the husband by the wife, upon a reasonable monthly salary, to assist in the management of a store which is her own separate property. But equity does not permit such an agreement or arrangement between them, when fraudulent, to operate to the prejudice of the creditors of either or both of them. (p. 195).

4. Same: Jurisdiction.

Generally where a court of equity has once obtained jurisdiction of a cause, it will retain it for all purposes and administer complete relief. But in order to authorize relief obtainable in an action at law, some substantial ground must exist to confer equitable jurisdiction, and if the pleadings or proof fail to establish a basis for such relief, a court of equity is without jurisdiction to award other relief by way of recovery upon a purely legal demand, unless it appears that the remedy at law is inadequate. (p. 197).

Appeal from Circuit Court, Randolph County.

Bill by the Carlsbad Manufacturing Company and others against J. M. Kelley and others. Decree for defendants, and plaintiffs appeal.

Affirmed.

James A. Bent and E. A. Bowers, for appellants. Samuel T. Spears, for appellees.

Lynch, Judge:

The object sought by plaintiffs' original and amended bills and the petitions filed during the pendency of the cause was to set aside and annul as fraudulent certain transfers by the defendant Clarence Kelley of a stock of merchandise owned by him in 1908 and by him sold in bulk to John E. Crickard November 14 of the same year, and by Crickard to W. L. Snyder about nine months thereafter, and by Snyder to J. M. Kelley, the wife of Clarence, December 4, 1909, and a deed by Anna Swecker and E. E. Simmons conveying to J. M. Kelley a lot located at Valley Head, Randolph County, and one or two other lots or parcels of land sold but not conveyed to her by Mary and Harman Conrad at the same place; and to subject to sale the merchandise and lots and apply the proceeds to the satisfaction of the debts of Clarence Kelley. The right to this relief the decree complained of upon this appeal by plaintiffs denied, and dismissed the bills and with them the petitions.

Logically the first question presented for decision is whether the sale and transfer of the stock of merchandise to Crickard was fraudulent and void as to the creditors of Clarence Kelley. Whatever may have been his purpose and intention does not matter unless Crickard had knowledge or notice of such purpose and intention at the time of the transfer, or notice or knowledge of such facts and circumstances respecting it as would then indicate a wrongful intention on the part of Kelley towards his creditors. Respecting this intention, as later developed and made clear beyond question as regards the object of the sale and its effect upon the creditors, and the competency of Kelley to disregard his legal and moral obligation to them, there is no room to doubt, and hence it is unnecessary to attempt to relate in detail what he subsequently did to protect some of them, and failed to do to protect others whose claims were equally just and meritorious. This conduct on his part is not important or significant unless, as we have said, Crickard knew or wrongfully failed to ascertain the true status of the affairs of Kelley at the date of the transaction as regards the sale and transfer of the merchandise. The Bulk Sales Act of this state had not then been enacted. It was not passed and did not become effective until the year 1909. Section 3a, ch. 74, Code. Nothing concerning or chargeable to these transfers by Crickard to Snyder and Snyder to Mrs. Kelley appears in any manner warranting recourse to its provisions, except the $900 note executed by Snyder to Crickard, and it is involved only indirectly in this controversy. And unless it appears that the transfers were made otherwise than upon the payment of or agreement to pay a valuable consideration, and that the purchaser had notice of the fraudulent intent of his immediate grantor, nothing in that chapter, except the section respecting sales of merchandise in bulk in disregard of its provisions, can affect the title of such purchaser, according to section 1 of that chapter.

This is the second suit involving the same transaction, in each of which the sales and transfers to Crickard, Snyder and Mrs. Kelley were assailed as fraudulent, and to which the purchasers were parties, except that Crickard was brought in not by the original but by the amended bill filed in this suit, and in each of them he filed an elaborate and unequivocal answer specifically and seriatim denying every allegation made therein in any wise affecting the bona fides of his connection with the acquisition of the property, his intent and purpose in acquiring it, and his lack of knowledge of any faudulent design of Clarence Kelley. And in each case the court held valid and unimpeachable Crickard's purchase of the property. Although he did not testify as a witness in his own behalf or at all, notwithstanding the general replication to his answer, it was not necessary that he should do so because no witness called by any other party to the suit spoke or was asked to speak a word tending in any degree to impeach the validity of the transfer to him or in derogation of his business or financial ability, character or integrity. The charges in any wise reflecting on him, and to sustain them no proof of any consequence was offered, are: First, an obscure and virtually meaningless allegation in the pleadings that he had seen the ups and downs of the mercantile business at Valley Head; and, second, an alleged inadequacy of price, evidenced by the payment of $4500 for merchandise said to have been worth between $8000 and $9000, but the original cost of which was not proved to have been more than $6000; and from each of which unsustained charges we are asked to assume his participation in a scheme or design to defraud creditors. But granting the sufficiency and materiality of the charge respecting his previous business failures, Crickard, while confessing the misfortune, attributable, he says, to lack of experience, subsequently, according to the specific declaration of his answer, satisfied and discharged every liability so incurred. And as to the second charge, we cannot assume as inadequate the consideration paid for goodst whose original cost the proof shows not to be in excess of $6000, the difference between them being explained by him as due to an allowance for depreciation and deterioration of the stock.

Generally on him who charges fraud, and not on him whose conduct is charged to be fraudulent, rests the burden of proof. 6 Michie, Enc. Dig., 659. Well recognized exceptions to the general rule exist, it is true, in certain cases, as where the parties to a transaction charged to be fraudulent are susceptible of influence through sinister motives, as in dealings between kindred or persons standing in confidential relations to one another. But no such relationship or connection or sinister motives or invalidity due thereto appear anywhere in this case as regards Crickard. The $4500 paid for the merchandise he delivered to Kelley in money, and Kelley swears he received it and applied it to the liquidation of his debts and liabilities, reserving no part of it for his immediate personal use. What he did with the money did not in the least concern Crickard or tend to the impeachment of the transfer. No fact...