Court Opinion

ID: 4007133
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:07:53.637996+00
Date Added: 2024-06-11T12:07:07.259636
License: Public Domain

The Hesper Coal and Coke Company was engaged in the business of mining coal in Upshur County. It owned in fee two small tracts and held under lease from the West Virginia Coal and Coke Company another large one. It borrowed $16,500.00 in 1922 from the Bellaire Realty Mortgage Company, to secure which it attempted to execute a deed of trust on its property. On Oct. 31, 1923, it purported to convey all of its property both real and personal to the Mansfield Coal Corporation for $240,000.00, which corporation on the same day conveyed the property to O. L. McDonald, Trustee, to secure to the Hesper Co. the payment of the purchase price. It appears that the Mansfield Corp. and the Hesper Co. were owned by the same stockholders, and that the conveyance was simply a scheme to finance the Hesper Co. About the date of the conveyance the Hesper Co. ceased operation without paying its employes. On Dec. 3, 1923, the plaintiffs, who had been in the employment of the Hesper Co., instituted this suit in the circuit court of said county, against the Hesper Co. and the Mansfield Corp., to recover their unpaid wages. Representation having been made to the *Page 424 
court that the Hesper Co. had abandoned its plant, with no one in charge, a special receiver was appointed by the court on Feb. 8, 1924, to care for the property. An amended bill was filed at March Rules, 1924, which changed the action into a general creditors suit. For some unexplained reason G. K. Crites, one of the original plaintiffs, was omitted from the amended bill. R. A. Tenney and Ray Light were added as plaintiffs, although the bill contained no allegation in regard to them. Additional defendants were named in the amended bill who were alleged to have liens on the property of the Hesper Co. It was also alleged that the Mansfield Corp. was insolvent except for the property conveyed to it by the Hesper Co. and some other companies, as part of the general scheme to finance all the companies. Upon process regularly had on all the defendants, and upon the bill and the amended bill taken for confessed, a decree was entered April 25, 1924, referring the cause to a commissioner, who was directed to convene the creditors and state the usual account taken in a creditors suit. The commissioner filed his report on Aug. 30, 1924, to which several exceptions were taken by the West Virginia Supply Company and their claimants. A petition was filed by the Supply Co. sometime pending the proceedings before the commissioner, setting up a claim against the Hesper Co. and praying that the property of the coal company be sold and the proceeds applied to its debts, etc. The Hesper Co. filed an answer on Sept. 30, 1924, making a general denial of practically all the material allegations in both of the bills.
Some of the exceptions taken to the commissioner's report were sustained by the circuit court and a decree was entered Oct. 11, 1924, confirming the report as corrected. This decree found that at the time of the conveyance from the Hesper Co. to the Mansfield Corp. the former was insolvent and the latter was without assets; that the conveyance was a fraud on the creditors of the Hesper Co. and that it (the conveyance) was accordingly set aside. The decree also annuled the deed of trust of the Mansfield Corp. to O. L. McDonald, Trustee. In the decree many of the creditors of the Hesper Co. and the priorities of their claims were set forth, and it was *Page 425 
adjudged that unless the debts therein decreed were paid within thirty days, the property should be sold, etc.
The West Virginia Supply Co. is the sole appellant from this decree. Thirty-one points of error are assigned in a brief filed on behalf of the appellant and the Hesper Co. Points 1, 16, 17, 18, 20, 21, 22, 23, 24, 25, 28 and 29 relate to errors of which the Hesper Co. and the Mansfield Corp. could complain were they before this court, but which are no affair of the appellant. The interests of the appellant are antagonistic to those of the Hesper Co. and the Mansfield Corp. and we can consider on this appeal only such errors as affect the former. 4 C. J. 692, par. 2594, City of Roanoke v. Blair, 107 Va. 639. Several of the assignments of error are general, several need not be considered in view of our disposition of the case, and the others may be grouped in two general classes. One of these classes attacks the proof of the claims allowed, and the other attacks their priority as fixed by the court.
Proof.
In Armstrong v. Painter, 75 W. Va. 393, it was held that lien creditors must appear and prove their claims, unless such claims had been established upon pleadings taken for confessed, and that the report of the commissioner should show such appearance and proof. The opinion in that case denied the authority of a commissioner or the court to allow as against creditors, any lien not presented and proved, "however well satisfied of its existence they may be." It condemned as loose
and dangerous the practice of reporting all liens disclosed by the records of the clerk's office, whether presented or claimed. In Blumberg v. King, 98 W. Va. 275 it was specifically held that transcripts of judgments, without further evidence do not constitute sufficient proof of the amounts remaining due thereon. The record here discloses a compliance with the above rules in regard to only a few of the claims allowed. The plaintiffs and other employes of the Hesper Co. filed notices of their claims with the several amounts thereof properly sworn to. J. M. N. Downes testified before the commissioner that the Hesper Co. had made no payments to its employes since July 1923. This evidence was *Page 426 
sufficient to establish the several amounts due on the claims of the laborers. Both W. L. Rohrbough and the appellant appeared before the commissioner and proved their respective claims. We find no appearance of, or proof by, any other claimants before the commissioner. The record is full of copies of judgments, abstracts of judgments, and executions, but, as pointed out by Judge MILLER in the Blumberg case, further evidence was necessary to show the amounts remaining due on such claims at the time of their presentment to the commissioner.
Priority.
Preference in the payment of the claims in this case should be extended as follows:
1.  Claims due the State.
  2.  Valid liens, subsisting before the labor liens attached, (in the order obtained).
3.  Claims of the plaintiffs, (pro rata).
  4.  Claims of the laborers who were not plaintiffs' (pro rata).
  5.  Valid liens secured between the time the labor liens attached and the date of the reference to the commissioner, (in the order obtained).
6.  All other claims, (pro rata).
Code, Ch. 74, Sec. 2, and Ch. 75, Sec. 19; Foley v. Ruley,50 W. Va. 158; Clark v. Figgins, 31 W. Va. 156; Wallis v.Treakle, 27 Gratt. 479.
Ordinarily no liens may be recovered after the appointment of a receiver in a creditors suit. In this case the authority of the receiver was no greater than that of a caretaker. The bill did not allege, and the decree appointing the receiver did not find, that the Hesper Co. was insolvent. The decree made no provision for the payment of the debts of the Hesper Co., it did not state that the ultimate purpose of the court was to make an equitable distribution of the property of the company, and it imposed no restriction on the prosecution of claims by the creditors. As was held in W. Va. Utilities v. *Page 427 Dura Glass Co., 99 W. Va. 193, 128 S.E. 86 (Advance sheets), the appointment of a receiver under such conditions did not preclude the creditors from prosecuting actions against the company in independent suits. (See cases cited in the opinion.) The decree of reference, entered on April 25, 1924, operated, however, as a suspension of all other pending suits. While the decree did not restrain the prosecution of other suits, yet if liens were obtained against the Hesper Co. after that date, they would be accorded no priority.
      "After the entry of that order calling the creditors before the master to whom the cause had been referred, any attempt to enforce payment out of the funds in the hands of the receiver, of any judgment or decree subsequently obtained, would have been deemed an unwarrantable interference with the jurisdiction the court had assumed to exercise, and the priority insisted upon under any such pretended lien would have been rejected." Jackson et al v.  Lahee, 114 Ill. 287, (300); Laidley v. Kline,  23 W. Va. 565; Bilmyer v. Sherman, 23 W. Va. 656; Hogg's Eq. Pro., par. 655.
Many of the judgments obtained by the creditors are invalid because no legal service of process was had on the Hesper Co. Some of the judgments show that process was served on "Mrs. Dixon, at her home in Upshur County, the superintendant's wife, of said coal company, the said Dixon not being found."
      "Process against a company cannot be executed by service on the wife of an agent."  Waterfront Coal Co. v. Transportation Co.,  114 Va. 482.
Service on Dixon in person after the Hesper Co. had abandoned its plant would have been equally ineffective. Not only had Dixon ceased to be an agent of the company, but after Dec. 3, 1923, was actively antagonistic to it in the prosecution of this suit. Service of process upon an agent who has ceased to work for a corporation is inoperative. 14A C. J. p. 808, par. 2912. In other judgments we find simply the statement that the summons was served on the Hesper Co. *Page 428 
without any details of the manner in which it was served. Return of a service on a corporation must show how and uponwhom it was served, otherwise it is invalid and no jurisdiction is obtained by the court issuing the process. Frazier v. K. M. Ry. Co., 40 W. Va. 224. The jurisdiction of the court, whether over the person or the subject matter, must affirmatively appear from the record. Fulton v. Ramsey, 67 W. Va. 321, (326). The priority given to such judgments as were based on invalid service of process was erroneous.
The lease held by the Hesper Co. is not in the record, but it was evidently exhibited to the commissioner, as he found that the lessee was obligated thereby to pay the taxes on the leased property. He reported that the lessee had failed to pay taxes, which with interest amounted to $1997.52, and which had been paid by the landlord. The court adjudged the claim of the landlord for the payment of the taxes "a lien first in order of priority". This was error. It was the duty of the landlord to pay the taxes on its own land. The land was charged to it and the state looked to it for the taxes. The obligation of the lessee to pay the taxes was a mere matter of contract between it and the lessor. The failure of the lessee to do so was simply a breach of its contract. The claim of the landlord for repayment of the taxes will be classed with other contract debts, and its dignity will be determined by the terms of the lease.
Our attention is also directed by counsel to the priority given by the decree to the claims of the Bellaire Co. The deed of trust executed by the Hesper Co. to secure the Bellaire Co. was made to H. L. Maurey, Trustee, and acknowledged by the Hesper Co. before the same H. L. Maurey, as notary. Such an acknowledgment is invalid, and the recordation of the deed does not entitle the claim of the Bellaire Co. to the priority accorded it by the court. Tavenner v. Barrett, 21 W. Va. 656, (pt. 11 Syl.); Hunton, Com. v. Wood, 101 Va. 54, 43 S.E. 186;Clarksburg Casket Co. v. Valley Undertaking Co. 81 W. Va. 212.
For the reasons given the decree of the circuit court will be reversed and remanded.
Reversed and remanded. *Page 429