Case ID: va_106/html/0039-01.html
Source: Caselaw Access Project
Author: {"author": "Keith, P.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Staunton
    Breeden and Wife v. Peale.
    September 24, 1906.
    Absent, Cardwell and Buchanan, JJ.
    1. Attachment—In What Actions Authorised—Motion for Judgment.— Section 2959 of the Code of 1887, which provides for the issuing of an attachment at the time or after the' institution of any action at law for the recovery of any specific personal property, or a debt, or damages for the breach of a contract, applies to a motion for a judgment by notice.
    2. Attachment—Lis Pendens—Notice—Subsequent Purchaser.—A lis pendens in attachment proceedings filed in the clerk’s office of the proper county, as provided by section 3566 of the Code of 1887, operates to give constructive notice of the lien of the attachment to a subsequent grantee of the defendant, and such grantee stands upon no better footing as to the attaching creditor than his grantor.
    3. Feattoulent Conveyances—Purchaser With Notice—Attachment.— However difficult the proof may he, even against a purchaser for full value, and although a debtor has a right to sell his property, and the creditor the right to resort to the substituted property, if it can be made to appear that a conveyance by a debtor was made by him with an intent to hinder, delay, and defraud his creditors, and this intent was participated in by the grantee, the transaction comes within the purview of section 2959 of the Code of 1887 relating to attachments, and is void as to creditors.
    4. Insolvent Debtoe—Preferring Creditors■—Fraud.—It is lawful in this state for a debtor, though insolvent, to prefer certain of his creditors in a deed of assignment, and such preference is neither fraudulent, per se, nor a badge of fraud.
    5. Conveyance by Debtoe—Delaying Creditors—Attachment.—Every assignment by a, debtor of his property must of necessity work some delay as to other creditors in the collection of their claims; but this is not such delay as is meant by the statute which gives the right of attachment when the debtor is about to convey, assign, conceal, or dispose of his property without intent to hinder, delay and defraud his creditors.
    6. Fbaudttlent Conveyances—Proof—Case at Bar.—This Court will not undertake to say by what proof an intent to defraud creditors may be shown until a case arises for decision. The same considerations which have restrained courts from giving a definition of fraud will deter them from any effort to prescribe the proof by which fraud shall be ascertained; but they will wait until a case comes up for judgment, and will then determine whether or not fraud has been established. In the case at bar, the facts established by the evidence fail to make out the case stated in the affidavit for the attachment, that the defendant had disposed of or was about to dispose of his estate or some part thereof with intent to hinder, delay, or defraud his creditors.
    Error to a judgment of the Circuit Court of Bockingham county in a proceeding by motion for a judgment. Judgment for the plaintiff. Defendants assign error.
    
      Reversed.
    
    The opinion states the case.
    
      Sipe & Harris and Harnsberger & Harnsberger, for plaintiffs in error.
    
      Conrad & Conrad and J. B. Stephenson, for defendant in error.
   Keith, P.,

delivered the opinion of the Court.

John B. Peale gave notice to J. W. Churchill that he would, on the 21st day of March, 1904, move the Circuit Court of Bockingham county for judgment against him for the sum of $631.92, with interest, and filed an account with the notice, setting ont the items of his demand. On the 15th of March, Peale made an affidavit in which he states that the defendant, Churchill, “is converting, or is about to convert, a certain house and lot situate in Elkton, in Bockingham county, Va., belonging to and now occupied by him, into money, with intent to hinder, delay and defrand his creditors, and particularly affiant.” Upon this affidavit an attachment was issued, and was levied upon the house and lot named in the affidavit, and a lis pendens was filed in the clerk’s office of Rockingham county "upon the same day.

There is no question raised in this court as to the indebtedness on the part of Churchill to Peale, and it appears that the .affidavit, the attachment, the levy and the lis pendens are all in ■conformity with law.

On the 16th of March, 1904, Churchill and wife conveyed the property levied on to Luther BT. and Annie E. Breeden, by deed duly acknowledged, which was on the following day, March 17, also admitted* to record.

Breeden, on behalf of himself and wife, filed their petition in the cause in the Circuit Court, in which they state that sometime in December, 1903, one William H. Marshall, by verbal contract, purchased of Churchill the house and lot described in the attachment proceedings; that in Eebruary, 1904, Marshall sold this property to the petitioners, and that in order to avoid the expense of several conveyances a deed was made from Churchill directly to the petitioners at the suggestion of Marshall; that after receiving the conveyance of the Churchill property petitioners were informed that an attachment had been sued out by John B. Peale and levied upon it, upon the ground that Churchill was converting, or about to convert, said house and lot into money, with intent to hinder, delay and defraud his •creditors, and particularly the said John B. Peale; “that Churchill had lived in Elkton for many years, and maintained a high character for honesty and integrity; and petitioners •charge that the attachment was sued out upon false suggestion, and that the allegation of fraúdulent intent on the part of Churchill is unfounded and untrue; that abundant proof will be offered to show that of the consideration of $2,000 more than $1,900 was actually applied by Churchill to the discharge of his debts.”

An issue was made up and tried before a jury to determine-this controversy, and a verdict was returned for the plaintiff, John B. Peale. A motion to set aside this verdict was overruled, judgment rendered in favor of Peale, and the case is-before us upon a writ of error to that judgment.

We have no doubt that section 2959 of the Code, which provides for the issuing of an attachment at the time or after the-institution of any action at law for the recovery of any specific-personal property, or a debt, or damages for the breach of a contract, applies to a motion for judgment by notice. We are-further of opinion that the proceeding upon the attachment in-this case, being in conformity with the law, the lis pendensoperated to give constructive notice of the lien of the attachr ment to Breeden and wife, it having been left with the clerk of Bockingham county as provided by section 3566 of the Code, and the deed from Churchill to Breeden, conveying the same-tract of land, not having been recorded until two days thereafter, on the 17th of March, 1904; the result being that as to> the creditor’, Peale, Breeden stands upon no better footing than his grantors.

We come now to consider whether or not, as between Peale- and Churchill, the attachment was properly sued out.

It is provided by section 2959 of the Code, as one of the-grounds for attachment, “That the defendant has assigned or disposed of, or is about to assign or dispose of, his estate, or some part thereof, with intent to hinder, delay, or defraud his-creditors.”

Before discussing the evidence it may be well to see- how the language used in the statute is to be construed.

In Bigelow on Prauds, Volume II, page 85, in discussing the-statute of Elizabeth which deals with conveyances made “withmtent to hinder, delay and defraud creditors,” it is said: “When we come to conveyances made for valuablé consideration, a different question, applicable alike to existing and to future creditors, arises. Such conveyances, if made in good faith, are expressly excepted from the operation of the statute. When is a. conveyance not made in good faith? Is it necessary that it should he made with actual intent to defraud to take it out of the exception? So it appears to have been laid down. ‘There-is one class of cases, no doubt,’ it has been said by way of concession, ‘in which an actual and express intent is necessary to be proved—that is, . . . where the instruments sought to-be set aside were founded on valuable consideration.’ ” And on page 86 of the same volume it is said to be “a difficult matter-to make a case against a purchaser for value, especially for full value; and it well should be, for the debtor has still the right to sell his property, and the creditor has still his resort to the-substituted property. It is no delay in law that he cannot reach the property sold.”

There is no doubt, however difficult the proof may be, that,, even against a purchaser for value, and for full value, and although the debtor has a right to sell his property and the creditor the right to resort to the substituted property, if it can be made to appear that the transaction was entered into by the-grantor with an intent to hinder, delay and defraud his creditors, and that intent was shared and participated in by the-grantee, it comes within the purview of the statute, and is void as to creditors. By what proof this may be shown this court' will not undertake to determine until a case arises for decision. The same considerations which have withheld courts from giving a definition of fraud will deter them from any effort to-prescribe the proof by which fraud shall be ascertained; but they will wait until a ease comes up for judgment, and will then determine whether it has or has not been established.

“An intent to defraud cannot be inferred from preference-given to certain creditors over others in a general assignment where such preference is not inhibited.” Waples on Attachments, section 12. But we need not cite authority to shotv that in this state it is lawful for a debtor, though insolvent, to-prefer certain of his creditors in a deed of assignment, and that such preference is neither fraudulent, per se, nor a badge of fraud.

Every assignment by a debtor of his property must, of necessity, work some delay as to other creditors in the collection of their claims; but this is not such delay as is meant by the statute which gives the right of attachment when the debtor is about to convey, assign, conceal or dispose of his property to •delay and defraud his creditors. Waples on Attachments, section 66.

Examining the evidence in the light of these principles of law, it appears that Peale and Churchill had been partners, and that Churchill had become indebted to him upon partnership account. He owed other debts, and being urged by Peale for a settlement, promised to secure him by a deed of trust upon his property. This he ultimately failed tp do, but in the latter part of December, 1903, entered into a verbal contract with Marshall for the sale of his house and lot, and Marshall in turn sold this property to Breeden and wife, and, for motives of convenience and economy, a deed was made directly from Churchill to Breeden and wife. Churchill made no secret of the fact that he was endeavoring to sell this property. He conversed with Peale upon the subject more than once; there was no concealment; and his explanation of his devoting the joroceeds of the sale to the payment of other creditors and of his failure to comply with his promises to secure Peale was that, in his judgment, Peale had sufficient security for his debt in the partnership property, which was under his control, while his other creditors could get nothing except from the sale of the property in dispute. However reprehensible it may have been from a moral standpoint for Churchill to make a promise and break it, it does not constitute fraud in the sense in which that term is used in the statute.

All that can be said is that Churchill owed a debt to Peale which he was unable to pay; that he promised to secure it, and violated his promise; that he appropriated the proceeds of the property, sold at a fair price, to the satisfaction of claims of other creditors; and his purpose to make that sale was not only not concealed, hut was discussed between the debtor and his-creditor. These facts do not, in our judgment, make out the-case stated in the affidavit for an attachment—that the defendant had disposed of, or was about to dispose of, his estate, or some part thereof, with intent to hinder, delay or defraud his creditors.

We are of opinion that the judgment of the Circuit Court should be reversed, and the case remanded for further proceedings to be had therein.

Reversed.