Younger v. Massey

• Decision Date: 18 April 1893
• Citation: 17 S.E. 711,39 S.C. 115
• Parties: YOUNGER v. MASSEY et al.
• Court: South Carolina Supreme Court

17 S.E. 711

39 S.C. 115

YOUNGER v. MASSEY et al.

Supreme Court of South Carolina

April 18, 1893

Appeal from common pleas circuit court of York county; James F Izlar, Judge.

Action by L. C. Younger against Henry Massey and others to set aside certain conveyances alleged to have been made in fraud of creditors. There was judgment for plaintiff, and defendants appeal. Affirmed.

Opinion of Izlar, J., of the court of common pleas:

"This action was commenced on the 25th day of May, 1892, by the plaintiff, a judgment creditor of the defendant Henry Massey lately a merchant doing business at Tirzah, in said county and state, under the name and style of H. Massey & Co., to set aside as fraudulent and void certain deeds executed by the said Henry Massey; for the appointment of a receiver; to call in the creditors of Henry Massey, and to allow them to establish their several and respective demands in this cause to require the defendant Frank H. Brown to account for all moneys received by him from sales of parts of the stock of merchandise of Henry Massey between the 17th day of November 1891, and the 16th day of February, 1892; and also for all goods taken out of said stock for his own use; and for general relief. The defendants, by their answers, deny the material allegations of the complaint. The case was heard before me at the July term, 1892, of the court of common pleas for said county. The testimony was taken in open court at the hearing, and was afterwards written out by the stenographer. The principal questions for consideration are in relation to the bona fides of the deeds executed by Henry Massey to his father-in-law, Frank H. Brown, and to Joseph F Wallace, assignee. Were these deeds executed in good faith or were they executed with intent to hinder, delay, defeat, and defraud the plaintiff and other creditors of Henry Massey, and to give to the said Frank H. Brown an unlawful preference over Massey's other creditors? It seems to me, after a careful study of the transactions between Henry Massey and Frank H. Brown, (keeping in view the fact that these transactions were had between sonin-law- "law and father-in-law,) impossible to arrive at the conclusion that these transactions were had in good faith, and were not entered into to give Frank H. Brown an unlawful advantage over the other creditors of the defendant Henry Massey. No matter how fair these transactions may appear on their face, the manner in which they were carried out, and all the circumstances surrounding the parties at the time, impress me with the belief that the whole was a carefully devised scheme to defeat the other creditors of Henry Massey, and to save to himself that property which rightly and justly belonged to them, by transferring the same to his father-in-law through a conveyance apparently bona fide and for valuable consideration. This view is, I think, fully sustained by the evidence. The proof shows that Henry Massey was largely indebted at the time; that his entire property and assets were insufficient to pay his debts; that his creditors were pressing for payment, demanding security and threatening suit; and that he was embarrassed in his business and straitened in his finances. Under these circumstances, he conveys away his stock of goods, wares, and merchandise, and the bulk of his real estate, to his father-in-law, who was certainly cognizant of his failing circumstances, of the confused state of his affairs, and of his inability to meet his business engagements, and to pay his debts. This transfer was made with unusual haste and with comparative secrecy. His immediate neighbors, much less the general public, were not aware of the change in his business. Everything went on and was conducted the same as before the transfer. Pending the proceedings by which he was endeavoring to put his property beyond the reach of his creditors, the plaintiff and other creditors were lulled into security by vain promises, and quieted with the fallacious assurance that he would make no disposition of his property; and it was not until after the plaintiff had gone into court, obtained judgment, and was proceeding to enforce the same by execution, that he is made aware of the transfer of the 17th of November, 1891, and confronted with the serious and startling fact that his debtor has no property out of which the amount due and owing to him can be realized. How is this proof met by the defendants Henry Massey and Frank H. Brown? An attempt is made to show that the defendant Henry Massey was justly owing his father-in-law for moneys theretofore advanced and paid out for him; that the sum so advanced and paid constituted the consideration of the said deed of conveyance, and that this sum exceeded the value of the property conveyed; that the deed was withheld from record for the purpose of obtaining the dower of Mrs. Massey, and not with a view of concealing its existence; and that the property transferred thereby constituted only a portion of the property, real and personal, of the defendant Henry Massey. Now, the fact that Henry Massey did not consider the debt to his father-in-law a liability which he would be called upon to pay is fully sustained by the evidence. That Frank H. Brown never expected to call upon his son-in-law for the payment of this debt is clearly shown by his conduct and manner of dealing with him. The debt arose in February, 1887. From that time to November, 1891, these parties had dealings with each other involving large sums of money. Settlements were made annually. Yet the said Frank H. Brown makes no mention of this debt, asks no security, and demands no settlement. Notwithstanding all this, it is now sought to impress the court with the idea that Frank H. Brown, in obtaining a conveyance of the bulk of the property of his son-in-law, was only doing what a prudent and honest creditor would have done to save his debt. It does not strike me that the saving of his debt was the sole object which Frank H. Brown had in view in these transactions with his son-in-law. I am impressed with the belief that there was behind all these transfers the ulterior object of saving the property of the son-in-law, by throwing between it and the process of the courts the shield of an apparent bona fide conveyance; and that this object was carefully concealed, not only from the creditors of the son-in-law, but also from the able and distinguished counsel who prepared the conveyance and advised with the parties.

"Again the property not covered by the said conveyance, after taking out the homestead and personal property exemption, amounts to a very small and insignificant sum; so that practically the transfer was of all the property, real and personal, of Henry Massey which could be reached by execution at law, and was doubtless so intended to be. As evidence of good faith, and to show change of possession, a paper bearing even date with the conveyance, signed by the said Frank H. Brown, appointing Henry Massey his agent and clerk in the shore at Tirzah, was introduced. But there is no proof that this paper was ever exhibited to any person prior to the 25th day of November, 1891. A clerk formerly in the employ of Henry Massey testifies that he was told of the transfer to Frank H. Brown, but that he kept this information to himself. With all the proof before me, I cannot regard this paper as conclusive of the fact or facts sought to be established by it. It appears upon the face of the conveyance that the property was transferred in consideration and satisfaction of a precedent debt. Chancellor Harper, in Smith v. Henry, 1 Hill, (S. C.) 25, says: 'The true view seems to me to be this: The law allows a debtor to give a preference to one creditor over another, and this is giving latitude enough, but it will not allow him to secure an advantage to himself at the expense of creditors as the price of such preference.' In this case a distinction is made between a case where a person buys goods of an insolvent and advances money at the time, and leaves them in the possession of the vendor, and a case whether the goods are given in satisfaction of a previous debt, and left in the possession of the vendor. In the former case Chancellor Harper was then of the opinion that the circumstance that the goods are left in possession of the vendor might be explained; in the latter case that that of itself would be conclusive evidence of fraud. And this, says the learned chancellor, is founded upon the most obvious reason, because the vendee gains a most important advantage. 'He is secured at the expense of other creditors.' In Jones v. Blake, 2 Hill, Eq. 636, the same distinguished chancellor, in discussing the case of Smith v. Henry, supra, says: 'The principle of that decision, as it is expressed in very terms, is that the law allows a debtor to give a preference to one creditor over another, but it will not allow him to secure an advantage to himself at the expense of creditors, as the price of such preference;' that is, an 'advantage in relation to property, profit, or pecuniary advantage.' In this case, notwithstanding the slaves were delivered in satisfaction of a precedent debt, yet it was held that the retention of possession by the vendor might be explained by satisfactory evidence. The distinction laid down as a conclusion in Smith v. Henry does not seem to have been observed and followed. I conclude, therefore, that the distinction above referred to, as laid down by Chancellor Harper in Smith v. Henry, no longer prevails, and that now the rule may be stated as held in Nelson v. Good, 20 S.C. 223. It is there held that insolvency of the vendor of personal property, pending of suits against him, the sale of his property and retention of the goods sold to all...