Court Opinion

ID: 6591705
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:58:11.503271+00
Date Added: 2024-06-11T15:57:00.853001
License: Public Domain

Johnson, Judge,
delivered the opinion of the Court:
This is an appeal from the several decrees of the circuit court of Greenbrier county, rendered in this cause by Mrs. Bebecca A. Hunter, who assigned the following errors therein:
First. The failure of the court to pass upon the valid*342ity of tbe deed made by U. N. Warren. to her and her children, in 1870: 7
Second. That the court set aside the deed made to her and her children, by U. N. Warren, in the year 1866.
Third. The refusal of the court to assign her dower in the whole of her husband’s lands.
As to the first ei'ror assigned: There is no mention made, either in the petition of D. M. Erwin and others, the answer of any of the defendants, or any of the several decrees of the court oí the said deed of 11th of April, 1870. The deed attacked as fraudulent by the petition, and the land it purports to convey are therein described in these words, “the brick house and small lot in the town of Lewisburg, adjoining the store of J. E. Bell, conveyed to said Mrs. R. A. Hunter and her children, on the 1st of May, 1866, a copy of which deed, recorded on the 11th day of April, 1874, is herewith exhibited as part of this petition.” . This is the deed, and the only deed referred to embracing'that property, cither in the petition or answer of Mrs. Hunter, both deeds are referred to by U. N. Warren in his deposition, and it is not deemed material which side exhibited the copies there; the material facts proved by Warren’s depositions are, that John A. Hunter bought and paid for the property, and, that at his request the conveyance was made to Mrs. Hunter and her children. This Court will not undertake to decide as to the validity of the deed of 1870, as it was not proper for the circuit court to do so under the pleadings in this cause. It is well settled that matters not charged in the bill, or averred in the answer, are not proper to be considered upon the hearing of the cause. James v. McKernon, 6 Johns., 543; Morehead et al. v. DeFord et al., 6 W. Va., 316.
Therefore, it was not error in the court to fail to pass upon the validity of that deed, when the record does' not show that it was called upon to do so by the pleadings in the cause.
*343As to the second error assigned there is much more difficulty.
It has been very ably argued for Mrs. Hunter, that there was no fraud in fact, in the execution of the deed of 1866, and notwithstanding the fact that John A. Hunter was indebted at the time the conveyance was made, and by the express provision of sec. 2, of chap. 118 of the Code of 1860, the deed would have been void as to such existing creditors, yet, by the fourteenth section of chapter 104 of the Code, which provides that:
“No gift conveyance, transfer or charge, which is not on consideration deemed valuable in law, shall be avoided either in whole or in part, for that cause only, unless within five years after it was made, suit be brought for that purpose,” &c., the suit to set aside said deed is barred. That unless fraud in fact be shown, the petitioner’s right to impeach the deed is barred by the statute. And it is insisted by the' counsel that the statute commences to run, from the date of the deed, or when the deed was in fact . made. We think there is no doubt of the truth of this last position, as the language is express, that it cannot be avoided, &c., “ unless within five years after it was made, suit be brought for the purpose.” It is settled that, even in those states where the statute of limitation runs against actual fraud, that it will not commence to run until the fraud is discovered; but in that case the pleading that put the fact in issue would have to show when the fraud was discovered. In our own State we have no statute of limitation against fraud in fact. Snoddy v. Haskins, 12 Gratt., 363. So the question is, was the deed of the 1st of May, 1866, executed by John A. Hunter with the actual fraudulent intent to hinder, delay or defraud his creditors ? If it was, then the petitioner’s right to impeach it for such fraud is unaffected by the statute interposing the bar of five years. If it was not, the statute does bar their right to impeach the deed, as being void against them, as the creditors of she said John A. Hunter.
*344The great contest between Judges Baldwin and Stan-ard, and only ending with the death of the latter, and which is reported in Hutchinson v. Kelly, 1 Rob., 123; Bank of Alexandria v. Patton, Ibid., 499, and Hunters v. Waite, 3 Gratt., 26, was, whether the two great classes of creditors stood upon the same ground as to a voluntary conveyance, or whether they occupied different positions ; and whether the fact of indebtedness at the time rendered a voluntary conveyance void as to existing creditors, or whether the mere fact of such indebtedness raised- a presumption of fraud which might be rebutted by circumstances; Judge Baldwin contending that the mere fact that a man was indebted to some extent when he made a voluntary settlement, was not sufficient to stamp the deed as fraudulent, but raised a presumption of fraud which might be rebutted by showing that the settlement was a reasonable one, &c., and he also contended that if the deed was declared to be fraudulent as to existing creditors, it was necessarily fraudulent as to subsequent creditors. Judge Stanard, on the other hand, took the position of Chancellor Kent, in Read v. Livingston, 3 Johns. Ch., 481, that the two classes of creditors, prior and subsequent, occupied entirely different grounds. That while the voluntary conveyance might be fraudulent as to a prior creditor, that it was not necessarily so as to a subsequent creditor, and that as to a prior creditor the mere fact of the party being indebted to any extent at the time he executed such voluntary conveyance, stamped it as void, and he could not be permitted to escape the consequences by showing what other circumstances surrounded the execution of the conveyance. Thus matters stood when the Code of 1849 was adopted, some three years after the decision in Hunters v. Waite. The only change then made in the statute was the addition of what is known as the second section (which is the second section of chapter 74 of the Code of West Virginia). It is as follows :
*345“ Every gift, conveyance, assignment, transfer, or charge which is not upon consideration deemed valuable in law shall be void, as to creditors whose debts shall have been contracted at the time it was made, but shall not on that account merely be void, as to creditors whose debts have been contracted, or as to purchasers who shall have purchased after it was made; and though it be decreed to be void as to a prior creditor because voluntary it shall not for that cause, be decreed to be void as to subsequent creditors and purchasers.” While it is true the Legislature adopted Judge Stanard’s position as to prior creditors, it does not disturb the law as to subsequent creditors, and the same rule exists as to them as did before the Code of 1849. Neither does it in case of actual fraud either as to existing or prior creditors disturb the law as it existed before that time. But section thirteen of chapter one hundred and forty-nine, of the Code of 1849, which was also incorporated into the Code of 1860, and also the Code of West Virginia, chapter one hundred and four section fourteen provides that, “No 'gift, conveyance, assignment, transfer or charge, which is not on consideration deemed valuable in .law, shall be avoided either in whole or in part for that cause only, unless within five years after it is made suit be brought for that purpose or the subject thereof, or some part of it be distrained or levied upon by or at the suit of a creditor as to whom such gift, conveyance, assignment, transfer or charge, is declared to be void by the second section of the one hundred and eighteenth chapter.” This is section thirteen of chapter one hundred and forty-nine, in the Code of 1860, and the latter part thereof refers to the second section of chapter one hundred and eighteen, and in the Code of West Virginia, is the fourteenth section of chapter one hundred and four, and the conclusion thereof refers to section two of the seventy-fourth chapter.
Theu by the express language of this section, the suit to impeach the conveyance is only barred in five years, *346^ there was no other reason to declare it void than the fact that the conveyance was voluntary, if there existed other reasons and the conveyance was executed under such circumstances as to show that at the time it was made there existed in the grantor, or the party who had purchased the property and at whose instance the conveyance was made, an actual fraudulent intent to hinder, delay or defraud his creditors, whether that fraud was directed against existing or subsequent creditors, the conveyance is void as to either class.
See Lockhard & Ireland v. Beckley et al., decided at the present term of the Court.
Judge Baldwin, in Hutchinson v. Kelly, 1 Rob. 123, says: “ The true principle, I conceive to be this, that a fraudulent intent against one or more creditors is fraudulent against all; and the statute justifies no other distinction between prior and subsequent creditors than that which arises from the necessity of showing a fraudulent intent against some creditor.” Since the statute interposing the limitation of five years, in certain cases, and since the second section of chapter 74 of the Code of West Virginia has been a part of the law against fraudulent conveyancing, when more than five years have elapsed since the deed was made ; the same rule applies to such'an existing creditor and a subsequent creditor; in both cases fraud in fact must be shown.
Although fraud in fact must be shown to impeach the conveyance, it is not required that the actual, or express fraudulent intent, appear by direct and positive proof; circumstantial evidence is not only sufficient, but in most cases it- is the only evidence that can be adduced. Lockhard & Ireland v. Beckly, et al., infra; Rea v. Missouri, 17 Wall., 532.
Fraud is to.be legally inferred from the facts and circumstances of the case, when those facts and circumstances are such as to lead a reasonable man to the conclusion, that' the conveyance was made with intent to hinder, delay or defraud creditors. There is much said *347in tbe cases about “constructive fraud/’ “actual fraud/’ and “ fraud per se.” In tbe case of Davis v. Turner, tbe doctrine of fraud per se, is examined and repudiated. It is true that there was a controversy about tbe sale of personal property, but I apprehend the principles there laid down would be applicable, to a case of real property. In that case tbe possession of tbe property, was left in the vendor,. and the question was, whether that fact made the sale fraudulent per se. Judge Baldwin in that case said : “ Our statute to prevent fraud against creditors (1 Rev. Code, p. 372) taken substantially from the 13 Eliz., chapter 5, is directed, not against an inconsistent possession, but a fraudulent design; not against fair and honest contracts, but gifts, grants, conveyances, bonds, suits, judgments, &c., made and construed of malice, fraud, covin, collusion or guile, to the intent or purpose to. delay, hinder or defraud creditors; and contains an express proviso that it shall not extend to any estate or interest, &e., which shall be upon good consideration, and bona fide lawfully conveyed or assured to any person or persons, bodies politic or corporate. The common sense meaning of such language, is obvious and ought not to be proverted by an artificial interpretation.” He holds that in such a case, the retention of the personal property is prima facie fraudulent, butthat presumption of fraud thus raised, may bo rebutted. In the same case, p. 471, Cabell, J., said: “ Nor do I apprehend any danger to the rights of creditors from the relaxation or abandonment of the rule of fraud per se. Their rights will be abundantly secured by the universally admitted rule, that the mere fact of retention of possession by the vendor is regarded as prima facie evidence of fraud as against creditors of the vendor, and will vacate the transaction as to them, unless the vendor can prove it to be fair and bona fide. Can justice require us to go further.” I think it can fairly be drawn from the cases, that, where the evidence shows such facts and circumstances, as the conveyance being voluntary, and the grantor being in-*348debtecl to a material extent, to the degree of embarrassment, so that the conveyance would probably throw a hazard upon the creditor, and those circumstances are wholly unexplained, it is for the court, or jury, to say from circumstances like these, whether the grantor intended to hinder, delay or- defraud his creditors. And if the circumstances are such, whatever they may be, to make a prima facie case of fraudulent intent in the grantor, they are to be taken as conclusive evidence of the fraudulent intent, unless rebutted by other facts and circumstances in the case.
We have arrived at the conclusion that subsequent creditors, as well as existing creditors who have not brought suit, or in some way acquired a lien, on the property within five years after the voluntary conveyance was made, stand on common ground, and must show fraud in fact, and the same evidence that would show it in the one case would in the other.
In the celebrated case of Reade v. Livingstone, 3 John. Ch. 481, Chancellor Kent, on page 501, says: “I should apprehend that the subsequent creditor would be required to go so far, and only so far in showing debts, as would be sufficient to raise reasonable evidence! of a fraudulent intent. To show any existing debt, however trifling and inevitable (to which every person is more or less subject) would not surely support a presumption of fraud in fact. No voluntary settlement in any possible case could stand upon that construction ; I should rather conclude that the fraud in a voluntary settlement was an inference of law, and ought to be so as far as it concerned existing debts, but that as to subsequent debts, there is no such necessary legal presumption, and there must be proof of fraud in fact, and the indebtedness at the time, though not amounting to insolvency, must be such as to warrant that conclusion.”
Of course the Chancellor does not moan that nothing else but indebtedness is an evidence of fraudulent intent, but, if the only evidence of fraud in fact is the indebt*349edness of tbe party at the time the deed is made, that such indebtedness, though not amounting to insolvency, must be such as would warrant the conclusion that the deed was actually made with intent to defraud creditors. In the case of Kehr v. Smith, 20 Wall., 31, the Supreme Court held, “ that a voluntary settlement of $7,000 cannot be sustained against creditors where the person owes $9,306, and has, of all sorts of property, the same being not cash, not more than $16,132.” Judge Davis on page 35, said “ surely the voluntary provision for the wife in such a condition of things, is not sustainable against existing creditors; nor can it be supported on the theory that the estate was worth a few thousand dollars more. Suppose it was, there would still be that extent of embarrassment which would have a direct tendency to impair the rights of creditors. In such a case a presumption of constructive fraud is created, no matter what the motive that prompted the settlement.” It is true the learned Judge uses the phrase ‘‘constructive fraud,” but he says again, “the ancient rule that a voluntary post-nuptial settlement can be avoided, if there was some indebtedness existing, has been relaxed, and the rule generally adopted in this country at the present time will uphold it, if it be reasonable, not disproportionate to the husband’s means, talcing into view his debts and situation, and clear of any intent, actual or constructive to defraud creditors.. Testing this settlement by this rule, it must be taken to bo in bad faith toward existing creditors, as clearly it was out of all proportion to the means of the husband considering his state and condition, and seriously impairs his ability to respond to the demands of his creditors.”
If “in bad faith” it was then fraudulent in fact. Judge Baldwin in Hunter v. Waite, 3 Gratt., on page 48, speaking of the circumstances of that case says, “But suppose it were established by the evidence that the grantor at the time of the settlementhad ample resources if properly, and judiciously managed and applied, to meet ultimately all the *350demands against him then existing, still it must be borne 'in mind that an enquiry of this kind is not a mere mat-tor of debit and credit. In the grantors’ own apprehension of his affairs, they were greatly embarrassed. And what right had he with the pursuit of his creditors in view, to withdraw therefrom an important part of his estate and require them to look only to the residue, thereby increasing the risk of loss from his wastefulness and mismanagement and imposing upon them the necessity of a more active diligence than that which the law prescribes.”
The case of Lowry v. Fisher, 2 Bush., 70, was a case decided under much such a statute as section two of chapter seventy-four. In that case no statute of limitations was pleaded. That was a cáse where the conveyance was voluntary, and the grantor indebted to a material extent. Judge Hardin said under the circumstances of that case, the statutory provision was fatal to the conveyance so far as pre-existing debts were concerned. The Judge further says, “That although Jaínes H. Lowry, may not at the time have been insolvent, or so much involved at the date of the deed, as to render the residue of his estate then necessarily insufficient to pay his debts, yet if he was involved ‘to a material extent,’ by which we are to understand an extent which might, in view of ordinary contingencies, endanger the rights of his creditors, then the deed was constructively fraudulent as to subsequent as well as pre-existing debts, for in such a case a fraudulent intent is implied; and the deed was void for express fraud, if from the extent of the grantor’s indebtedness, compared with his means of paying, the unreasonableness of the conveyance, as an advancement to the appellant, considering the claims of other right, and other attending circumstances, the inference is justified that the grantor made the conveyance for the purpose of avoiding the payment of his liabilities.”
Or to express the law more briefly, in the language of Judge Baldwin, in Hunters v. Waite:
*351u The intent with which an act is done may be a conclnsion of law from certain facts, against which conclusion all other evidence is unavailing, or it may be a presumption of law from other facts, which is prima facie only, and-liable to be repelled by sufficient evidence.” If it is shown that a man is insolvent at the time he makes a voluntary conveyance, no evidence of honest purpose could be introduced that would convince any one that . the intent was not to hinder, delay and defraud creditors ; but if he was indebted to a considerable extent and harassed by his debts, the presumption would be his intent was fraudulent as to creditors, but that presumption might be by him rebutted by showing, that at the time the settlement was made, it was a reasonable one in proportion to his means, and his creditors were not likely to be injured thereby, &c. Now, what are the circumstances of this case. The decree of 1874 shows that on the 1st day of November, 1874, the indebtedness of John A. Hunter amounted to something over $18,000, and his assets to something over $5,000, leaving a loss to be sustained by his creditors of over $13,000. It is true we have no statement in the record to show what his indebtedness was on the 1st day of May, 1866, when the deed was made, nor the amount of his property on that day, but the abstract of the report of commissioner Withrow shows, from the amount of debts of different classes, and the interest charged on these debts, that his indebtedness then amounted to almost, if not quite, as much as his assets, on the 1st day of November, 1874. From the date of the will and the probate thereof, John A. Hunter must have died between the 17th day of April, 1873, and the month of June of the same year. The report of the commissioner shows what must have been the sad condition of his financial affairs at the time of his death; yet, in his will, he bequeaths to his wife, E,. A. Hunter, all the real and personal estate of which he might die seized and possessed. The only intimation that he gives in his will that he owes one cent in the *352world is this, that “I devise and direct that all 1117 bonds, accounts, and other evidences of debt, be settled and collected by my executor as soon as possible, to meet any demand against my estate, for the use of my wife.” "Where are the bonds, accounts, and other evidences of debt with which to pay the great indebtedness against his estate ? They must have been very inconsiderable, for the decree of 1874 ascertains “ that the entire available assets of said estate, both real and personal, with the exception of some lands of small value, about which there are suits pending, amounted, on the 1st day of November, 1874, to $5,231.97 of principal, and $186.12 of interest.” John A. Hunter does not show in this, that he regarded the claims of creditors as amounting to much.
In his indebtedness is found a large item of $1,938.34 principal, and $1,457.84 of interest thereon, which he owed as a fiduciary, showing that debt, one of the most sacred character, had been standing for- more than twelve years. Over $600 of the debts due the petitioners were in existence at the date of the deed, and evidently from the report, several thousand dollars more, to what extent it is impossible, from the mere abstract of the report to say, was also due at the date of the deed in 1866. It is probable his indebtedness then exceeded the amount of his assets. The house and lot conveyed by the deed of 1866, is called a “ drug store ” in the report of the commissioners to assign dower. It does not appear to have ever been in the possession of Mrs. E. A. Hunter; the deed to the said house and lot, was never recorded until after John A. Hunter’s death, and it does not appear from the record who took it to the office for recordation; neither does it appear from the evidence that Mrs. Hunter knew anything about the deed, unless it can be presumed from the mere fact that it is made to her and appears upon the record. Four years after the first deed was made, while- he was still heavily indebted, he had another valuable property, conveyed to his wife, the house and lot *353where sbe resided, at the institution of this suit. That deed was promptly recorded.
What answer is there to the charge that the said deeds were made to hinder, delay and defraud the creditors of John A. Hunter and all the circumstance that are thrown around the transaction, the deed being voluntary, the heavy indebtedness at the time, no care for his creditors when he made his will, the failure to record the deed for eight years after it was made, and then not until after John A. Hunter’s, death, no possession of the property conveyed and the exercise of no ownership over it ? There is none but a general denial of fraud; no attempt, to show that the gift was a reasonable one; no attempt to show that he had ample property, with which to pay his debts, outside of that conveyed; no attempt to show why the deed was not recorded ; no attempt, in short, to explain a single circumstance in the case. While he was providing for his wife, why did he not provide for his creditors? Situated as he was, the best evidence that he could have paid his debts, would have been to set apart his property for that purpose, and not have the most valuable of it conveyed to his wife, and leave his creditors to suffer. From the circumstances of this case I have no doubt that the conveyance of May 1, 1866 was made by John A. Hunter, with the actual fraudulent intent to hinder, delay and defraud his creditors, and that said deed of May 1, 1866, is void as to his creditors, both prior and subsequent, and that the statute of limitations, of five years, is no bar to the suit of the petitioners.
We do not see any error in the decrees, for the third reason assigned, or for the reason insisted upon by eoun-sel for Mrs. Hunter in the court below, that the liens for purchase money ought not to be deducted from the value of her husband’s lands in assigning dower.'
The report of the commissioners showed that in their estimate they took into consideration all the lands proceeded against in the suit in which the petition was filed; that the other lands in which she claimed the right to *354dower, were lands sold by her husband in his life time, ■ and some wild lands, his title to which was in dispute. There is nothing to prevent her from bringing her suits against the proper parties claiming any of these lands, to have her dower set out in. them, and in any of those suits, it would only be necessary for her to make defendant the party who was the present owner; and in those cases where the title to them is in dispute, the parties who claim to own the land and the heirs oí her late husband. Blair v. Thompson, 11 Gratt., 441.
The amount of the liens for the purchase money in the lands was properly deducted in assigning the dower. In Blair v. Thompson, it ivas held that where, a vendor had given bond and security for the purchase money, the vendors lien was not retained; and the vendor’s widow was entitled to dower in the land. The converse of this proposition is undoubtedly true, that where the vendor’s lien is retained, the widow is not entitled to dower until that is extinguished; and it cannot be extinguished at the expense of creditors out of the personal assets of the vendee.
Why should Mrs. Hunter complain of the dower assigned her? She made no exception to the commissioner’s repoi't, and she received the dower that she asked in her answer. In her answer she says she will claim dower in all her husband’s lands, and prays “that the same may be assigned her in the house and lot conveyed by said deed of April 11, 1870, as it can not be assigned in the lands sold by said Hunter’s executors, and it would not be proper or fair to respondent to assign it in the other lands.” That was the property conveyed by McPherson, and was the mansion house, &c. As her prayer was granted, she ought not to complain.
For these reasons I am of opinion that there is no ei'ror in the said several decrees rendered by the circuit court of Greenbrier county, and that said decrees should be affirmed with $30 damages, and costs.
Decrees Affirmed.