#### *Clough &c. v. Thompson.

April Term, 1850,

Richmond.

(Absent, Cabbll, P.)

i. Oath of Insolvency—Property Vests in Sheriff-Right of Sheriff.* Upon taking the oath of insolvency all the property and rights of the insolvent debtor are vested in the sheriff, who, as representing the creditor, is entitled to assert the legal and equitable rights of the creditor, and to set aside fraudulent conveyances of the insolvent, and recover the property for the benefit of the creditor.

a. Same—Property in Possession of Third Person.—The law does not permit a sale of the goods, chattels or estates of an insolvent debtor in the possession of a third person, until the same shall have been recovered in the mode prescribed by the statute.

3. Same —Sala of Property *by*Sheriff—Incumbrances.— The sheriff, who is a trustee for all who are interested in the estate of an insolvent debtor, is not justified in selling the interest of the debtor in the estate surrendered by the schedule or vested by law in the sheriff, when, owing to alleged incumbrances, the validity of which is controverted, or the extent thereof is unascertained and uncertain, the property is not in a condition to be disposed of for its fair value.

4. Same —Real Estate — In Whom Title Vests.—The real estate of an insolvent debtor vests in the sheriff oi the counties in which it lies; and a sale thereof by the sheriff of the county in which the oath of insolvency is taken by tile debtor, is without authority and void.

g. Same -Property Not in Possession of Sheriff—SoSe- - Purchaser.—Debts due to the insolvent debtor, and slaves and other personal property not in the possession of the sheriff, or which is in such a condition that he cannot take possession without any process, cannot be sold by him so as to vest the legal title in the purchaser.

*6.*Same—Sale of Property in Schednie—Effect upon Purchaser.†—Where a variety of property is embraced in a schedule, a sale, not of the property specifically, but of the schedule itself, is a violation of duty on the part of the sheriff; and the purchaser at such a sale, if he acquired the legal title, wouia, in a Court of equity, be treated as a trustee for the benefit of those interested.

7. Fraudulent Conveyances—Bill to Set Aside—Parties.‡ -To a bill to set aside fraudulent conveyances made by an insolvent debtor, the trustees and *cestuis que trust*in the deeds, the sheriffs of the counties in which the lands lie, and the execution creditors interested in the property, should be parties.

*24*By deed bearing date the 7th day of November 1842, John C. Dickinson and Martha A. H. his wife, reciting that Dickinson was indebted to George N. Clough in the sum of 10,175 dollars 25 cents, by single bill of that date, payable on demand, which he was desirous to secure, conveyed to William T. Dickinson, Burwell B. Dickinson, and Beorí ard J. Clough, a tract of land in the county of Hanover, a tract lying partly in Caroline and partly in Spotsylvania, a moiety of a tract in the county of Caroline, a number of slaves by name, with their future increase; horses, mules, cattle, sheep, hogs, wagons, carts, all his plantation utensils of every description; all his household and kitchen furniture, including a clock; his whole crop of tobacco, corn, fodder, shucks, straw and hay; also five shares of Bouisa railroad stock; blacksmith tools, two stills, a carriage, his interest in the life estate of Mrs. Sarah Ashley in a tract of land called Ashley’s, and all debts then due, or which might thereafter become due to him, either by bond, bill, note or account, in trust that said Dickinson and wife should be permitted to remain in possession of the property until default should be made in the payment of the said sum of 10,175 dollars 25 cents, with the interest thereon accruing, in whole or in part; and then upon the further trust that the trustees, or either of them, should, whenever they or either of them might think best for the interest of the parties, or the said George N. Clough, his heirs or assigns, might direct, proceed to sell the said property, or so much thereof as might be necessary to pay off the said sum of 10,175 dollars 25 cents, and interest, for cash, upon thirty days notice in one of the newspapers in Richmond and in the neighbourhood of such sale; and out of the proceeds of such sale should, after paying the expenses thereof, pay to the said George N. Clough the aforesaid sum of 10,175 dollars 25 cents, with the interest thereon accruing; and the balanee, if any, ^should pay to the said Dickinson, his heirs or assigns. This deed was signed by Dickinson and wife and the trustees, and was duly admitted to record in the clerk’s office of the County court of Hanover, as to Dickinson and wife, on the 15th of November 1842. On a part of the property embraced in this deed a previous deed of trust had been executed to secure a debt due to William Hancock.

On the 10th of December 1842 Dickinson confessed judgments in six several actions at law depending against him in the Circuit court of Hanover county, and being prayed in custody he took the benefit of the act for the relief of insolvent debtors, and was discharged. His schedule then delivered referred to his interest in two deeds of trust from John Clough, sr., dated in November 1819 and September 1822; and also all the property mentioned in two deeds of trust from himself and wife, one for the benefit of William Hancock and the other for the benefit of George N. Clough, subject to any liens created by said deeds; and he | said that he had no other property, real or personal.

In February 1843 the sheriff of Hanover offered the said schedule at public auction for cash, when it was purchased by Charles Thompson for 300 dollars; and the sheriff executed a paper bearing date the 28th of February, which was intended to be a deed, and was acknowledged and admitted to record as a deed, conveying the said schedule to Thompson: the paper was, however, without a seal.

About the time of the sale of the schedule by the sheriff, the trustees in the deed of the 7th of November 1842, advertised the property thereby conveyed to them for sale; and then Charles Thompson filed a bill in the Circuit court of Hanover to enjoin the sale. In his bill, after stating the foregoing facts, he charged that the deed executed to secure the sum of 10,175 *dollars 25 cents to George N. Clough was fraudulent and void, and intended exclusively to cheat the creditors of Dickinson, by putting his property beyond their reach, as he supposed, until he could first take the oath of insolvency, and then obtain the benefit of the bankrupt law, for which he was, at the time of the filing of the plaintiff’s bill, an applicant. That the plaintiff would be able to prove from the admissions of Clough, that Dickinson owed him nothing, and that in fact Clough never did lend, and never was able to lend, to Dickinson, or otherwise fairly become his creditor for, ten thousand dollars. That Dickinson, who was the brother-in-law of Clough, had been permitted to use and consume the perishable property conveyed in the deed, and to remove the tobacco to Richmond, and sell it as his own and for his own use and benefit.

Clough, Dickinson and the trustees were made defendants, and Clough and Dickinson were called upon to disclose how, when and where the pretended debt of 10,175 dollars 25 cents was contracted; whether it was by a loan of money, or for the purchase of properiy; if a loan of money, whether it was lent at one time or at different times; if at one time when and where, and in what kind of money and in whose presence; if at different times to exhibit the account of it; and that Clough should be required to exhibit the evidence, if he had any, of the said debt, and especially the single bill recited in the conveyance.

The prayer of the bill was, that the trustees should be enjoined from selling the property, or any part thereof, without the order of the Court; and that the sheriff should be directed to take possession of the. personal property conveyed by the deed and in the possession of Dickinson, and to sell the perishable part thereof, unless the defendants, or one of them, would enter into bond in an adequate sum, to be fixed by the Court, with ample security, with condition to have *the property forthcoming to answer the decree of the Court, and to account for the hires and increase thereof. That the conveyance of the *257th of November 1842, might be declared mill and void, and the property thereby' conveyed delivered tip to the plaintiff; and for general relief.

The injunction was granted; and it was ordered that unless the defendants, or some one or more of them, should execute a bond with sufficient security payable to the plaintiff, in the penalty of 4000 dollars, with condition to have all the personal property, or the proceeds thereof, forthcoming to answer the future order of the Court, the officer who might execute the process was directed to take all said personal property' into his possession, to hire out the slaves for the balance of the year, and to make sale of the residue of said personal property on a credit of nine months, taking from the purchasers bonds, with good security' ; and to make report of his proceedings under the order. If the defendants should execute the bond required of them, they' were to be at liberty' to sell the said personal property, and the officer was authorized to take and to judge of the sufficiency of the security.

Under this order, the defendants having declined to execute the bond thereby required, the sheriff took possession of the personal property as directed, and hired out the slaves and sold the remainder.

Clough and Dickinson filed their separate answers to the bill. They both deny that the deed was fraudulent; and allege that it was executed to secure a bona fide debt due from Dickinson to Clough. Clough said that the debt secured by the deed was for money lent by Clough to Dickinson, not at one time but at various times, commencing as far back as 1822; that when such loans were made acknowledgments thereof were taken, in which the interest reserved was added. That these loans were repeated from time to time, *down to the date of the deed of trust and single bill therein mentioned. That the evidences of the dealings between the parties, except the single bill, were not in his possession, but were surrendered from time to time to Dickinson. That he kept no account of the several sums lent, and of the interest thereon, and could exhibit none. He denied that he had ever admitted since 1822, that Dickinson was not indebted to him, or that Dickinson had been suffered to waste any of the property conveyed by said deed, and said that some wheat and tobacco sold by Dickinson after the trust was made, was sold on account of Clough, and for which he was ready to account.

Dickinson’s answer was substantially the same.

The testimony in the cause related to the admission by Clough that Dickinson was not indebted to him; to the declarations by Dickinson after the making of the deed, and in the absence of Clough, that he was not indebted to Clough; but especially to the ability of Clough to make advances as to Dickinson to the amount of 10,000 dollars. On this point several witnesses expressed the opinion that he could not have made the advances unless he was possessed of resources of which they had not heard. To the evidence of the declarations of Dickinson, and to the opinions of the other witnesses, Clough excepted, and introduced testimony to shew his ability to make the advances.

When the cause came on to be heard, the Court below overruled the exceptions to the depositions, and made a decree wholly setting aside the deed of the 7th of November 1842, as fraudulent and void, and confirming the plaintiff’s title to the property' thereby conveyed, under his purchase of the schedule and conveyance to him by the sheriff, subject, however, to Mrs. Dickinson’s right of dower in the land; and the sheriff was directed to transfer to him the personal property in his possession, and account with him for the proceeds xbf such as had been sold, and for the net hires of the slaves. Erom this decree Clough and Dickinson applied to this Court for an appeal, which was allowed.

R. T. Daniel and Patton, for the appellants.

Lyons and Scott, for the appellee.

*

Oath of Insolvency -Property Vests in Sheriff-Right of Sheriff to Sue for.—For the proposition that, upon taking the oath of insolvency all the property and rights of the insolvent debtor are vested in the sheriff, who, as representing the creditor, is entitled to assert the legal and equitable rights ot the creditor, and to set aside fraudulent conveyances of the insolvent, and recover the property for the benefit of the creditor, the principal case is cited and approved in Staton v. Pittman, 11 Gratt. 103; Billingsley v. Clelland, *41 W.*Va. 258, 23 S. Ill. Rep. 821, where the doctrine is extended to any assignee. See also, 2 Minor’s Inst. (4th Ed) 690. See, in accord, Shirley *v.*Long, 6 Rand. 735. See monographic *note*on “Fraudulent and Voluntary Conveyances” appended to Cochran v. Paris, 11 Gratt. 348.

†

Same—Sale of Property in Schedule—Liability of Purchaser.—For the proposition that where the sheriff sells the property of the Insolvent embraced in the schedule and not specifically, the purchaser will he liable as trustee for the benefit of those interested, the principal case is cited and followed in Penn v. Spencer. 17 Gratt. 94.

‡

FrauduIent Conveyances—Biil to Set Aside—Parties. —For the proposition that, in a bill to set aside a fraudulent conveyance the trustee in the deed is a necessary party, the principal case is cited and approved in Fisher v. Dickenson, 84 Va. 329, 4 S. E. Rep. 737*\ foot-note*to Norton v. Bond, 28 Gratt. 815. See monographic *note*on "Fraudulent and Voluntary Conveyances" appended to Cochran v. Paris, 11 Gratt. 348.

ALLEN, J.,

delivered the opinion of the Court.

The Court is of opinion, that the deed of trust executed by John C. Dickinson and Martha his wife, on the 7th day of November 1842, to William T. Dickinson, Bnrwell B. Dickinson and Leonard J. Clough, for the benefit of George N. Clough, was made with intent to defraud the creditors of said John C. Dickinson, and as against such creditors is fraudulent and void; but ihat the same was good as between the parties thereto; and therefore, the decree of the Circuit court was erroneous in wholly setting aside and vacating the said deed. The Court is further of opinion, that under the act of assembly concerning executions, and for the relief of insolvent debtors, 1 Rev. Code, p. 524, all the property and rights of the insolvent debtor are vested in the sheriff, who as representing the creditor, is entitled to assert the legal and equitable rights of the creditor, and to set aside fraudulent conveyances of the insolvent, and recover the property for the benefit of the creditor.

The Court is therefore of opinion, that although the said John C. Dickinson, in the schedule subscribed and delivered by him, surrendered his equity of redemption only', in the real and personal estate described in the deeds of trust in the schedule referred to, subject to any lien created by said deeds, the sheriff claiming under the law, which for the benefit of the creditor vested in him all the property of the insolvent, had the right in a proper proceeding, to impeach said deeds or either of them, and set them aside as against the creditor, if made with intent to defraud the creditor.

*The Court is further of opinion, that as the law does not permit a sale of the goods, chattels or estates belonging *26to the debtor, and in the possession of any other person, until the same shall have been recpvered in the mode prescribed; so neither is the sheriff, who is a trustee for all interested in the estate, justified in selling the interest of the debtor in the estate surrendered by the schedule or vested by law in the sheriff, when owing to alleged incumbrances, the validity of which is controverted, or the extent thereof unascertained and uncertain, the property is not in a condition to be disposed of for its fair value. The Court is further of opinion, that as by the deed of trust of the 7th November 1842, for the benefit of said George N. Clough, portions of the property thereby conveyed, are described as being situated in the counties of Caroline and Spotsylvania, the interest of the debtor in such property vested in the shériffs of those counties respectively; and a sale made thereof by the sheriff of Hanover, was without authority and void; and as by the said deed all the personal estate of said debtor was conveyed, including amongst other things, all debts then due, or which might become due to him, such choses in action were not the proper subjects of sale; and as it does not appear that the sheriff was in possession of the slaves or other personal property, or that the same was in such a condition that he could have taken possession thereof, without any process, it would not have been competent for the sheriff to have made a valid sale thereof so as to vest in the purchaser the legal title.

The Court is further of opinion, that where, as in this case, a variety of property was embraced in the schedule; a sale, not of the property specifically, but of the schedule itself, would be a violation of duty on the part of the sheriff; and the purchaser at such a sale, if he acquired the legal title, would, in a Court of equity, **be treated as a trustee for the benefit of those interested.

But it appearing in this case, that no regular conveyance has been made by the sheriff, the paper executed by him dated the 28th February 1843, not being under seal, no title to the real estate contained in the schedule has passed to the purchaser, and the title of the insolvent is still yested in the sheriffs of the counties where such property shall lie or be found. The Court is therefore of opinion, that the decree of the Circuit court was also erroneous in holding that all the title of the said John C. Dickinson to the property conveyed .by the deed of trust of the 7th of November 1842, passed to the appellee, Charles Thompson, and in directing his title to be quieted, and declaring the same to be complete; and in decreeing that the sheriff should deliver over to him, the slaves and other personal property, and pay over to him. the net amount of all hires of the slaves, and all money rising from the sale of the perishable property.

The Court is further of opinion, that said Circuit court, instead of proceeding to render any decree, should have required the appellee to amend his bill and make, as defendants to the suit, the sheriffs of Hanover, Caroline and Spotsylvania counties, the creditors of said John C. Dickinson and the persons interested in the deeds of trust in the schedule referred to. And the parties being regularly before the .Court, there should have been a decree for the sale of the property belonging to the debtor, and vested in the sheriffs aforesaid; and from the proceeds arising from the sale of the property embraced in the deed for the. benefit of William Hancock, the amount of his debt should have been discharged; the validity of the deed for his benefit not being impeached; and the balance, if any, arising from the sale of the property in said deed described, together with the proceeds arising from the sale of the property ^described in the deed for the benefit of said George N. Clough, or arising from the hires, rents or profits thereof, should have been applied to the repayment of the sum of 300 dollars paid by the appellee to the sheriff at the sale of the schedule, with interest from the time of such payment, in the first place, then payment of the creditors of the said John C. Dickinson according to their legal priorities; and after satisfying the claims aforesaid, the residue, if any, should have been decreed to be paid over to the said George N. Clough.

It is therefore ordered and adjudged, that said decree be wholly reversed and annulled —that the injunction be reinstated, with costs to the appellants, and the cause remanded, with instructions to direct new parties to be made, and for further proceedings, according to the principles above declared, in order to a final decree.