Case Name: Wallace's Adm'r & als. v. Treakle &. als.
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1876-03
Citations: 27 Gratt. 479
Docket Number: 
Parties: *Wallace’s Adm’r & als. v. Treakle &. als.
Judges: 
Reporter: Virginia Reports
Volume: 68
Pages: 566–569

Head Matter:
*Wallace’s Adm’r & als. v. Treakle &. als.
March Term, 1876,
Richmond.
1. Suits to Avoid Fraudulent Conveyances — When Creditor’s Lien Begins. — Creditors at large who file a hill to set aside a deed of their debtor conveying land as fraudulent, and succeed, have a lien on the land for their debts from the filing of their bill.
2. Same — Priority of Creditors. — The deed of H for land is set aside as fraudulent at the suit of some of his creditors, and there is a decree after the death of H for the sale of the land, and for account of the debts of H, and their priorities. The report shows that there was one judgment against H before the deed was made. Some of the plaintiffs in the bill were creditors by judgment, one a creditor at large; a number came in by petition before the decree; and a number came in before the commissioner, and by petition after the decree. In distributing the fund, it is to be applied, 1st. To pay the judgment recovered before the deed was made. 2d. To the judgments recovered before the bill was filed. 3d. To the creditors at large who joined in the bill. 4th. To the creditors by petition before the death of Henderson, in the order in which their .petitions were filed. 5th. To all the other creditors pro rata.
3. Sale of Lands under Decree — Setting Aside. — Though in this case there was a decree for the sale of the land, and a sale before an account of the debts was taken, the sale of the land will not be set aside upon the objection of some of the creditors who came in after the decree, made years after the sale, when it is obvious the land would not sell for as much as it had sold for before, and which was more than some of these creditors had expressed their willingness to take forit.
By deed bearing- date the 20th of April 1866, William Henderson, Sr., of Lancaster county, conveyed to his son, William Henderson, Jr., five hundred acres of land and one-half of his stock of horses, cattle, sheep, &c. In consideration of which, William Henderson, *Jr., executed to him ten bonds of $300 each, payable with interest in one, two, &c., to ten years, and conveyed the property purchased in trust to secure the payment of the bonds. And by a deed of the same date, William Henderson, Sr., conveyed to his son, Charles E. Henderson, three hundred acres of land, including the dwelling house, &c., and one-half of his stock of horses, cattle, sheep, &c., for the same price, to be paid and secured in the same way.
-By deed of the same date, William Henderson, Sr., conveyed to Warner Eubank three or four other tracts of land, and all the bonds of his two sons, except the first due of each, in trust to pay all his debts in which he was principal debtor, placing them all on the same footing. All these deeds were admitted to record on the 23d of April 1866.
On the 18th of September 1866, John S. Treakle, who sued for himself and four others, filed his bill in the circuit court of Eancaster county, in which he alleged that they were creditors of William Henderson, Sr.; himself and three of the other parties, by judgments recovered on the 25th of August 1866, and the fourth by bond. He charged that the deeds to William Henderson, Jr., and Charles E. Henderson, were fraudulent, intended to hinder and delay the creditors of the grantor; and he prayed that they might be set aside, and the property conveyed in them might be sold and applied to the payment of the plaintiffs’ debts.
On the 7th of November 1866 the death of William Henderson, Sr., was suggested, and the suit was revived against his administrator.
In November 1867, William Henderson, Jr., and Charles E. Henderson, filed their answer denying the fraud, insisting the price they were to pay was the full *value of the property. A number of depositions were taken by the defendants, which went to sustain the deeds; but the cause coming on. to be heard on the 18th of April 1868, the court being of opinion that the deeds from William Henderson, Sr., to his sons, having been executed on the same day with the deed of trust to Eubank for the benefit of his creditors, the said deeds constituted one and the same transaction, and that the deeds to the sons were fraudulent, it was decreed that they be set aside, and that William and Charles E. Henderson should surrender the personal property conveyed to them by said deeds to commissioners named, who were directed to sell the property, real and personal, in the bill mentioned, upon a credit of one, two and three years, except enough to pay the costs of the suit and the expenses of sale. And a commissioner was directed to take, among others, an account of all outstanding debts of William Henderson, Sr., secured by the deed to Eubank, with the priorities, if any, of the said debts growing out of liens upon the real estate conveyed to the sons.
On the 1st of October 1868 the commissioner returned his report. He reported that the outstanding debts and liabilities of William Henderson, deceased, that had qeen exhibited to him, and proved to his satisfaction, amounted to the aggregate sum of 524,862.32, including interest to the date of the report; of which amount 524,128.05 was secured by the deed to Eubank. That there were judgments obtained before the death of William Henderson, deceased, amounting to 53,789.94; and a judgment of 524.45 after his death. One of these judgments was recovered in 1861, and the others, except the last, were recovered in August 1866. There were exceptions to this report, but it is not necessary to state them.
*It appears that a number of petitions were filed by creditors of Henderson, to be admitted parties in the cause, but they are, with one exception, omitted from the record; the time or order of their presentation does not appear. The commissioner states, that creditors, whose debts he states, amounting to 511,161.19, joined in the suit; but this must have been by petition, as the debts of the plaintiffs named in the bill did not amount to more than 56,000.
At the November term 1868, R. A. Clay-brook and three others, whose debts were stated in the report of the commissioner, presented their petition in the cause, in which they insist there was error in the decree of the 18th of April 1868, because three was no enquiry in order to ascertain the outstanding liabilities against the estate of Henderson, and no enquiry to show the order of priority in which the debts should be paid, before the decree directing the sale; and they pray that the said decree be reheard in behalf of the petitioners; and that a majority of Henderson’s creditors may be permitted to adopt, if they prefer, the deeds made by the said Henderson in his lifetime to his sons.
The cause came on to be heard on the 10th of October 1871, and the report of the sales of the real and personal estate having been confirmed by a former decree, the court rejected so much of the petition of Clay brook and others as asked that a majority of the creditors might be allowed to adopt the deeds which had been set aside in the cause, and decreed that the sales of the real estate of Wm. Henderson, deceased, which was conveyed to his sons, to the amount of $3,-789.94, with interest from the 1st of October 1868, paid, or so much thereof as might be then in the hands of Robert A. Mayo the receiver, be applied as *follows, viz: To the payment in full of the judgment recovered in 1861, and the balance remaining in the hands of the receiver rat-ably between the judgments recovered in August 1866. And the commissioner was directed to take a further account of the outstanding debts of the estate of Wm. Henderson, and also an account of the entire amount of assets to be distributed in the cause, and apportion the same among all the debts secured by the deed of trust.
The commissioner reported additional debts to the amount of $1,184.98 in which Henderson was surety. And he says there are difficulties in the way of a distribution of the funds arising from the conflicting claims of the creditors. 1st. The plaintiffs in the suit who are not judgment creditors, claiming that they are entitled to the funds both real and personal, arising from setting aside the deeds to Wm. and Charles E. Henderson as fraudulent, after satisfying the judgments. 2nd. The creditors secured by the deed of trust to Eubank claiming that they are entitled to all the estate of Henderson after satisfying the judgments. 3d. The creditors not provided for in the deed of trust to Eubank claiming that they are entitled to a pro rata distribution of the funds arising from setting aside the deeds to Wm. and Charles E. Henderson after satisfying the judgments.
The cause came og again to be heard on the 11th of April 1872, when the court decreed that the plaintiffs in the suit who made themselves parties thereto either by joining in the original bill or by petition filed prior to the decree of April 18th, 1868, setting aside as fraudulent the deeds made to William and Charles E. Henderson, were entitled to the whole proceeds arising from the sales of the property conveyed by said deeds, including any rents and profits with which *William and Charles E. Henderson might be properly chargeable after the rendition of that decree. Those having judgment liens on the real estate in the lifetime of William Henderson to be paid according to their priorities out of the proceeds of the real estate; and all others who were parties to said suit prior to the rendition of said decree to be paid pro rata out of the balance of said fund; it being apparent to the court, from the record in the cause, that there was not a sufficiency to pay the whole amount of said claims in full. And the court further decreed that all the creditors included in the deed of trust to Eubank were entitled to share in the proceeds of the sale of the trust property, according to the provisions of said deed: the creditors entitled to the fund arising from the sales of the property included in the deeds set aside as fraudulent, who were also beneficiaries tinder the deed of trust, were entitled to their proportion of the trust fund or any balance which might be due them after exhausting the fund arising as aforesaid from the sale of the property included in the deeds declared to be fraudulent.
And the purchasers of the land having failed to pay the purchase money, they were directed to show cause at the next term of the court why the land should not be again sold. From this decree Wallace’s administrator, Claybrook and others, whose debts had been reported by the commissioner, but who had not made themselves parties in the cause until after the decree of April 18th, 1868, applied to this court for an appeal; which was allowed.
Robert & R. M. Mayo, for the appellants.
W. W. Walker, for the appellees.
Sults to Avoid Fraudulent Conveyances — When Creditor’s Lien Begins. — The principal case is cited in Keagy v. Trout, 85 Va. 397, 7 S. E. Rep. 329, and also in Batchelder v. White, 80 Va. 106. In West Virgiriia it is approved in the following deoisions: Guggenheimer v. Lockridge, 39 W. Va. 458, 19 S. E. Rep. 875; Baer v. Wilkinson, 35 W. Va. 423, 14 S. E. Rep. 3; Reynolds v. Gawthrop, 37 W. Va. 4, 16 S. E. Rep. 365; Claflin v. Foley, 22 W. Va. 443; Jackson v. Hull, 21 W. Va. 613; Clark v. Figgins, 31 W. Va. 159, 5 S. E. Rep 645; Sweeney v. Grape Sugar Co., 30 W. Va. 456, 4 S. E. Rep. 438.
In Virginia the statute upon which the decision in the principal case hinged has been amended, so it is no longer authority in this state. See Va. Code, § 2460; Acts 1893-4, p. 614; Acts 1889-90, p. 73. These statutes are construed in Davis v. Bonney, 89 Va. 758, 17 S. E. Rep. 229; 1 Va. Law Reg. 294; 2 Va. Law Reg. 432 ; 3 Va. Law Reg. 743, 825 ; 5 Va. Law Reg. 425; Barton’s Ch. Pr. (2d Ed.) p. 543-4.

Opinion:
^'Christian J.
delivered the opinion of the court.
It is conceded that the deeds executed by William Henderson to his sons are fraudulent and void. At all events there is no controversy here in respect to so much of the decree of the circuit court as declares them vacated. The real matter of contention is in reference to the distribution of the fund arising from the sale of the real estate conveyed by said deeds. The circuit court was of opinion, that the creditors who had obtained' judgments in the lifetime of Henderson, the debtor, were entitled to be first paid, according to their respective priorities; and that the other creditors who were parties to the suit before the decree of sale were entitled to be paid pro rata out of the balance of the fund. The appellants are creditors, but, with one exception, they are not judgment creditors: nor were they parties' to the suit before the rendition of the decree. These debts were, however, proved before the commissioner subsequently to the date of the decree, and at the following term of the court they became parties more formally by petition.
They do not controvert the preference accorded the creditors by judgment; but they claim that any surplus remaining after the satisfaction of their claims shall be applied pro rata to the payment of all the creditors, wthout regard to the time of their becoming parties to the suit. This is the main ground of controversy raised in the appeal here.
Our statute provides that a creditor, before obtaining a judgment or decree for his claim, may institute any suit to avoid a gift, conveyance, transfer, or any charge upon the estate of his debtor which he might institute after obtaining such judgment or decree, and he may in such suit have all the relief in respect to *such estate which he would be entitled to after obtaining a judgment or decree for the claim which he may be entitled to recover. Code 1860, ch. 179, sec. 2.
Previous to this enactment it was the settled rule of the courts, that a creditor at large could not resort to a court of equity, to impeach any conveyance made by his debtor, on the ground of fraud. If real estate was the subject of the conveyance, a judgment. was regarded as sufficient. If goods and chattels or any equitable interest therein, although incapable of being levied on, were embraced in the conveyance, the creditor was required to take out execution and have it levied or returned, so as to show that his remedy at law had failed. Chamberlayne v. Temple, 2 Rand. 384; Kelso v. Blackburn, 3 Leigh 300; Rhodes v. Cousins, 6 Rand. 189; Tate v. Liggat & Mathews, 2 Leigh 84.
Such was the state of the law before the Code of 1849. The enactment. before referred to was for the first time incorporated in that code. It was adopted in consequence of the decisions above referred to, and was intended to afford a remedy in the cases designated in these decisions. For the first time the statute is before this court for its true construction. I think there can be no doubt that it was the intention of the legislature to declare that a party creditor who filed his bill to avoid a fraudulent conveyance, acquired a lien upon the property of the debtor conveyed in such void conveyance, if he obtained a decree setting it aside, and in that event the lien attaches from the day the bill is filed.
The very terms of the act, as well as the necessity of its passage, growing out of the decisions above referred to, conclusively shows this to be the true construction.
It provides, that "a creditor, before obtaining a ^judgment or decree for his claim, may institute any suit to avoid a gift, conveyance, assignment or transfer of or charge upon the estate of his debtor, which- he might institute after obtaining such judgment or decree; and he may in such suit have all the relief in respect to said estate, which he would be entitled to after obtaining- a judgment or decree for the claim which he may be entitled to recover. ' '
It is plain that by the very terms of this statute the creditor, assailing successfully a fraudulent conveyance, is placed in the same position, and is entitled to the same relief, as if he had already obtained a judgment or decree against his debtor. What is that position, and what is that relief? Plainly a lien upon the property of the debtor, just as if he had, at the filing of his bill, already obtained a judgment or decree. The statute places the creditor, who assails a fraudulent conveyance, if he succeeds in vacating it, in the position of one already having obtained a judgment or decree, and his lien subsists from the time of filing his bill.
It is clear that creditors filing a bill to set aside a fraudulent conveyance acquire a specific lien, and are entitled to priority over other creditors at large.
I am therefore of opinion that the true rule of distribution of the fund in the hands of the circuit court of Lancaster, was to pay first- the judgment creditors of Henderson their judgments obtained in his lifetime, according to their priorities; and second the creditors, who, in his lifetime, filed their bill to set aside the deeds to his sons, and those who came into said suit by petition before his death, regarding their liens as subsisting from the date of the filing of said bill or petitions respectively, and the balance, if any, to be distributed pro rata among his other creditors.
*1 am further of opinion that the said circuit court did not err in refusing to order a re-sale of the land sold by its commissioners upon the ground assigned in the petition of appeal, that it was sold before any account was taken of the debts and liabilities of William Henderson. The theory upon which courts of equity require generally that land shall not be sold until such accounts are taken is, that the creditors are interested in bidding for the land and making it bring its full value, and may not be sacrificed; but in this case it abundantly appears that the land brought its full value, indeed a much larger price than it was sold for by Henderson, and for which two of the petitioners for appeal in this case were willing' it should be sold. After the lapse of ten years, and when the rights of purchasers have intervened, and when the appellants acquiesced in said sale for four years, it would be to the last degree^inequitable to set aside said sale, when a resale would inevitably result in a sacrifice of the property, consequent upon the general depreciation of real estate, especially in that portion of the state where this land is situate.
X am therefore of opinion that there is no error in the decree of the circuit court in refusing to set aside the sale made by its commissioner.
But the said circuit court erred in declaring that the creditors who were parties to the suit assailing the deed of Henderson prior to the rendition of the decree of 18th April 1868, should be paid pro rata, out of the balance of the fund, after satisfying the judgment creditors. Instead of directing a payment pro rata, the circuit court should have held that the creditors who filed the bill had acquired a lien from the date of its being filed, and those who came into said suit by petition, had acquired a lien from the date of the filing *of the same, and treating them as judgment creditors, they should have been paid according to their priorities; and the balance, if any, distributed pro rata among the creditors at large.
For this error the decree of the circuit court must be reversed; and the cause remanded to said circuit court for further proceedings to be had therein according to the principles herein declared.
The decree was as follows:
The court is of opinion, for reasons stated in writing and filed with the record, that the circuit court erred in holding that the creditors who were parties to the suit impeaching the fraudulent deeds of ffm. Henderson, Sr., before the decree of sale, were entitled to be paid pro rata out of the balance of the fund remaining in the hands of the court after paying the judgment creditors: This court being of opinion that the true rule of distribution of the funds in the hands of the court, was to pay, first, the judgment creditors of said Henderson, Sr., the amounts of their judgments obtained in his lifetime, according to their respective priorities. And secondly, the creditors who in his lifetime filed their bill to set aside the said fraudulent deeds, and those who came into said suit by petition before his death, regarding the liens of such creditors as subsisting from the date of filing said bill or petitions respectively; and the balance, if any, to be distributed pro rata among the other general creditors. Therefore it is decreed and ordered that so much of the decrees of the said circuit court as are inconsistent with the foregoing decree, be reversed and annulled, and that in all other respects they be affirmed; and that the appellant Slacum, out of the estate of his intestate, *in his hands to be administered, and the other appellants out of their own estate pay to the appellees their costs by them about their defence in his behalf expended; and that the cause be remanded to the said circuit court, for further proceedings to be had therein to a final decree in accordance with the principles herein declared. Which is ordered to be certified to the said circuit court of Lancaster county.
Staples J. did not concur in so much of the opinion as treats the filing of the bill as giving a lien.
Decree reversed in favor of appellees.