Rose & Co. v. Brown

Johnson, Judge,

deliveredjthe opinion of the Court)

. The first point arising ill this cause is: should the deposition of Jacob B. Brown have been read upon the hearing of the cause. It is settled that at common law it is not competent testimony, Brown being the husband of his co-defendant Emily Brown. This question has been directly before this Court in Hill et ux. v. Proctor, 10 W. Va., 59 , the court citing the common law rule, as laid down in 1 Greenl. Ev., section 334 &e., held that “the 22d and 23d sections of chapter 130of the Code of 1868, make no material change in the common law, as to husband and wife giving evidence for or against each other in a case in which they are parties, except in an action or suit between husband and wife.” The evidence in the cause just cited was given under circumstances very much like those surrounding this case. Hill’s deposition was taken in the cause of Hill et ux v. Proctor , and details statements favorable to himself and wife against the defendants.

It would be in violation of a clear principle of common law, not interfered with by the statute, to read the deposition of Brown upon the hearing of this cause. But it is argued by counsel for plaintiffs, that no exception was made to reading it in the court below, and it is too late to object here. If the objection did not affect the competency of the witness, and had not been made in the court below or passed upon by that court, it ought to be considered as having been waived and could not be noticed by the appellate court; but affecting as it does the competency of the witness to testify at all in the cause, it will be considered here, although the objection be here made for the first time. Hill et ux. v. Proctor, supra. The court, therefore, erred in hearing the 'cause upon that deposition'.

The next question is: Was the conveyance procured to *134 mac¡e by Jacob B. Brown, with the intent to hinder, delay or defraud his creditors ? By the 2d section o,f chapter 74 of the Code, any voluntary conveyance or any gift is void as to creditors, the debts existed at the time. It matters little whether Jacob Bi Brown gave his wife the $3,000.00 and she invested it in the house and lot, or whether he bought the property himself with the money and procured the conveyance to be made to her; in either event it would, as to creditors whose debts existed at the time, be void. But the 2d section of chapter 74 of the Code of West Virginia makes a clear distinction between the rights of existing and subsequent creditors, as to a voluntary conveyance; and such a conveyance cannot be impeached by subsequent creditors, on the mere ground of its being voluntary, and the party making it, or at whose instance it is made, being indebted to some extent, if there be no actual fraudulent view or intent in the party at the time; but if it be shown that there was mala fides, or fraud in fact, in the transaction, whether the actual fraudulent intent relates to existing creditors, or is directed exclusively against subsequent creditors, the effect is precisely the same, and subsequent creditors may upon the strength of such fraud successfully impeach it. Upon the question of fraudulent intent, or whether the conveyance is fraudulent in fact, as to subsequent creditors, it is proper to consider the circumstances of its being voluntary, and the party indebted at the time; and if additional circumstances connected with those two be sufficient to show fraud in fact, it is void as to subsequent creditors. It is not necessary that there should be direct proof to show the fraud; it is to be legally inferred from the facts and circumstances of the case, where those facts and circumstances are of -such a character as to lead a reasonable man to the conclusion, that the conveyance was made with intent to hinder, delay or defraud existing or future creditors. Where the evidence shows such facts and circumstances, as the conveyance being volun *135 tary, the grantor being indebted to a material extent, to the degree of embarrassment, so that .the conveyance would probably throw a hazard upon the creditor, and these 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. Lockhard & Ireland v. Beckley et al., 10 W. Va., 87 ; Hunter’s ex’or v. Hunter, 10 W. Va., 321 .

Applying those principles to this cause : Was the conveyance procured to be made to Mrs. Emily Brown with the actual fraudulent intent to hinder, delay or defraud the creditors of Jacob B. Brown ? Nearly all the debts audited in this cause appear to have been contracted subsequent to the date of said conveyance. At the time the conveyance was made, as the pleadings and, proofs show, the said Brown owed the Kabletown and Bloomery Turnpike Company about $50.00; and by Jacob B. Brown’s admission in his answer he also at that time owed to Massman & Co. a debt of about $168.00, of which he claims to have since paid $100.00, and claims that at the time he filed his answer, he only owed that firm about $68.00. The commissioner’s report shows, that on the 1st day of March, 1876, he owed said firm of Massman & Co. $271.27. Afterwards, beside the $3,000.00 which his wife claims he had given to her, he paid (as we shall hereafter show) upon the property $1,500.00. The pleadings and proofs show, that the most he owed at the time the conveyance was made, was bout $218.00; and also that but little additional indebtedness was incurred by him for nearly a year afterwards, and the major part of it after that. Now- does this state of things throw upon him the necessity of explaining the circumstances further to escape the conclusion that a *136 ^ie time the conveyance was made, he procured it with the actual fraudulent intent to hinder, delay or defraud his creditors? Does it make such a 'prima facie case of fraudulent intent, as is conclusive evidence of such intent, not being explained by other facts and circumstances in the case? We thinlcnot. The defendant Brown was not indebted at that time, as far as the record discloses^ to that degree of embarassment. It must be remembered that the deposition of Jacob B. Brown is not in the cause. The cause stands upon the bill and answers with replication thereto, the agreement filed, and the commissioner’s report. From this state of the cause we cannot say, that enough is shown to prima facie fix upon Brown, at the time said deed was executed, an actual fraudulent intent to hinder, delay or defraud his creditors. But while the conveyance itself, which was a voluntary one, was not fraudulent in fact, did Jacob B. Brown in fraud of his creditors voluntarily divert his means from the payment of his debts, and invest them in said house and lot for the benefit of his wife; and if so, can these creditors charge said house and lot therewith? It is insisted in the argument, that Mrs. Brown from her own separate business paid $1,000.00 of the $1,500.00 that was invested in said house and lot. The only evidence of this fact in the cause is found in the answers of Jacob B. Brown and Emily his wife, and the answers being replied to, and that fact being put in issue, there is no proof thereof in the cause. In case of a purchase by a wife during coverture the burden is upon her prove distinctly, that she paid for the thing purchased with funds that were not furnished by her husband.

Evidence that she purchased amounts to nothing unless it is accompanied by clear and full proof, that she paid for it with her own separate funds. In the absence of such proof, the presumption is that her husband furnished the. means of payment. Bump, on Fraudulent Conveyance, 318 and cases there cited. And another fact in this cause which greatly strengthens *137 this presumption is, that the bill charges specifically that Mrs. Emily Brown had no separate estate, which is denied in the answer; the averment in the answer, that she paid $1,000.00 of the purchase money “ out of the profits of her own business,” not amounting to such denial. The agreement of facts shows that for said purchase the single bills of Jacob B. Brown and Emily his wife were given all dated the 30th day of September, 1872, and that said bills were secured by deed of trust on the property executed by them ; and that the single bills were paid as they severally fell due, or shortly afterwards. ''hen it must be taken as a fact, that Jacob B. Brown r fid upon the property, after the conveyance was made and while the debts audited existed, the sum of $3,000100 and its interest. It is well settled that improver.ents put upon the property, in fraud of creditors, can he followed by the creditors on the premises where th ij are put; and the realty can, in favor of the creditors, oe charged with the value of such improvements. Sexton v. Wheaton, 8 Wheat., 229 ; Lockhard & Ireland v. Beckley, 10 W. Va., 87 . It is very clear from the evidence in this case, that in fraud of his existing creditors Jacob B. Brown without consideration deemed valuable in law diverted more means from their legitimate purpose and placed them in that house and lot, than would have been sufficient to have paid all his debts as audited in the commissioner’s report in this cause. With those means he ought to have paid his debts; and they are in favor of said creditors a charge upon said house and lot • and unless Mrs. Jacob B. Brown, who holds the fee simple in said property, will pay said debts, then the property must be subjected to the payment thereof.

It is also assigned as error, that the court should not have decreed a sale of the property, when it was manifest from the commissioner’s report, that the property "would have in four years rented for sufficient to pay the debts charged upon it. In the case of Tennent’s heirs v. Pattons, 6 Leigh, 196 it was held by the court of ap *138 Peals of Virginia, Judge Carr dissenting, that “upon a bill ky creditors of a decedent against his administrators and heirs to marshal assets, the court may decree a sale of the land descended to the heirs; but it is not bound, and ought not to decree such sale, if the rents and profits of the lands will satisfy the debts within a reasonable time, especially if the heirs be infants.” In that case, Tucker, President, says: “ But though the power of sale has been asserted and exercised in Ihgland on bills to marshal assets, and though it must be confessed that’there is no such case in which a previous inquiry has been directed as to the annual value of the land, and its capacity to discharge the debt in a reasonable time, yet on the other hand I have found none in which a sale has been decreed, where it appeared that the rents and profits would discharge the debt very promptly. Unless such a case can be shown, I must rest upon those obvious principles, that courts of equity cannot give rights to parties which the law does not give them; that they cannot, even in the extension pf the remedies of the creditor, be inattentive to what equity requires toward the debtor; and that in granting a favor to the first they will not wantonly sacrifice the fortunes of the latter. Where indeed it is a matter of right, the ereditor must have it at whatever sacrifice to the debtor. But where he appeals to equity for its aid, he can only expect that aid so far as it will not work injustice and oppression. In assisting him the court will look with impartial eye to what is due to the debtor, and will mold its remedies, as far as is consistent with the creditors’ rights, so as to prevent unnecessary loss to the owners of the inheritance. This is the true spirit of equity; it is the spirit of our statute law, which even in sales under mortgages authorizes a sale upon credit, and a consequent postponement of the recovery, for the purpose of preventing the ruinous sacrifices attendant upon the sales of real estate under the hammer. Of these sacrifices this case is an example. Nearly one half of a tract ot land which *139 would rent for $400.00, has been sold out and out for little more than $800.00. Had such a case presented itself to Lord Hardwicke, I cannot think he would have directed a sale to the ruin of the infant heirs, where within so short a period the debt might be raised from the rents and profits. While, therefore, I defer to the authorities which have decreed a sale of the realty, on a bill to marshal assets, I must presume, that in these cases it did not appear, that the debts-could be promptly raised without any sacrifice on the part of the heirs. Where that does not appear, where the debt cannot be discharged out of the rents and profits within a reasonable time, the precedents must be followed; but where the contrary appears, we are without either reason or precedent to bind us to such a course. It may be objected, however, that the rule is too vague and indefinite, which restricts the sale to cases where the debt cannot be made in a reasonable time. I do not think so. 'What is reasonable time, is matter of discretion of every days’ occurrence in courts of equity.” In the case of Manns v. Flinn’s adm’r, 10 Leigh, 93 it was held, that where “an interlocutory decree directs a sale of lands to satisfy a debt in a case where it might have been proper to decree satisfaction out of the rents and profits, but this was not a point controverted in the court below or in any way brought to the notice of the court, and though the party had ample opportunity to apply to the court to alter the decree in that particular, he did not apply for such alteration, the decree shall not be reversed for such cause, but affirmed, and thé cause remanded with direction to alter the decree, and direct satisfaction out of the rents and profits, if such alteration be asked, and if the debt can be satisfied out of the rents and profits within a reasonable time.” In this case Tennent’s heirs v. Patton’s was cited and approved; and as far as I have been able to learn was never questioned, but regarded ever after7 wards in Virginia as settling the law on the subject. In the two cases we have cited, the lands of decedents *140 were sold, but in the case of Mg Clung v. Beirne, 10 Leigh, 394 the same doctrine was held to apply to the lands of a living defendant, and it seems to us for a stronger reason. In that case the court held that, “if none of the parties ask an inquiry to ascertain whether the rents and profits will pay the debt in a reasonable time, there may be a decree for the sale of the property.” The court in a proper case would undoubtedly, as it had before done, have held the converse of the proposition to be true, “that if an inquiry had been asked to ascertain whether the rents and profits would pay the debts in a reasonable time, and it appeared from the report of the commissioner, or otherwise, that such rents and profits would in a reasonable time discharge the debts, that there should be no decree to sell the realty.” In the last mentioned case Judge Tucker, who pronounced opinions in both the former cases cited, says: “The next error assigned is the failure to ascertain whether the rents and profits would not pay the debt in a reasonable time. To this it may be answered: 1. That the defendant not having asked the inquiry is presumed to have waived it —Manns v. Flinn’s adm’r , reported ante p. 93. 2. That the price of the property ($200.00) is a a sufficient assurance that the rents of half of it would be inadequate even to pay the interest.” It thus appears to have been the well established practice for many years in Virginia, that when a proceeding was pending in a chancery court to enforce a judgment lien upon real estate, if the debtor or others interested asked it, they were entitled to have the fact ascertained, whether the rents and profits of the real estate, against which the proceeding was had, would not discharge the lien in a reasonable time, and if such rents and profits would so discharge the lien, not to decree a sale of the land, but to rent it to pay the debt charged upon it. And this was the established practice in Virginia, when the Code of 1849 was adopted; and for the first time we there find the provision in section 9 of chapter 186, “If *141 it appear to such court, that the rents and profits of the real estate subject to the lien will not satisfy judgment in five years, the court may decree the said estate or any part thereof to be sold, and the proceeds applied to the discharge of the judgment.” The effect of this provision was to take away from the courts the discretion of saying, what would be a reasonable time; and the statute fixed it at five years. Under that statute, if it appeared that the rents and profits of the estate would not discharge the lien in five years, it was made the duty of the court to order a sale of the realty; but if such rents and profits would discharge the lien within five years, then it was the duty of the court to refuse to decree a sale of the realty, and decree that it be rented. This same provision is in the Code of 1860, and was the law of West Virginia until the adoption of .the Code in 1868, when the latter part of the section which we have quoted, was omitted leaving only the first clause of the section. “ The lien of a judgment may always be enforced in a court of equity.”

By the repealing act of the Code, chapter 166 section 1, the latter part of the section as it stood in the Code of 1860 was repealed. What was the effect of such repeal? Was it to declare, that in no case can a court of chancery while enforcing the lien of a j udgment, decree that the real estate shall be rented to pay the judgment? that in every case a sale must be ordered ? By the practice in Virginia, as it existed prior to the Code of 1849, while enforcing judgment liens on laud, the courts uni-formily held that it would be improper to decree the sale of real estate, when the debtor asked that it might be rented, and it appeared that the rents and profits of the estate would pay the lien in a reasonable time; and what was reasonable time was left to the sound legal discretion of the courts, which discretion was of course reviewable by the appellate court. If this was the practice of the chancery courts of Virginia, as we think it undoubtedly was, what was the effect of repealing the provision above referred to ? It was to restore that practice.

*142 When a statute changing the common law is repealed. the common law is restored to its former state. Insurance Company of the Valley of Virginia v. Barley’s adm’r., 16 Gratt., 363 . We then as to the renting of real estate; where the rents and profits will pay the debts in a reasonable time, are govenred by the established practice of Virginia, as it existed prior to the Code of 1849. And the courts in enforcing the lien of a judgment against real estate, when the debtor or others interested ask it, should in some way ascertain, whether the rents and profits of said estate will in a reasonable time discharge the liens upon it; and the judge is clothed with discretion to say whether such rents and profits will in a reasonable time, of which reasonable time he must judge, pay off and discharge the liens on the land; and if it will, it is his duty to direct a rental of the property rather than a sale. And the discretion so to be exercised is not an arbitrary one, but a sound discretion, in the interest of fairness and prudence toward all the parties interested, and is reviewable of course in the appellate court. There is nothing in the statutes of this State to prevent this; and a proper regard for the rights of the debtor, when not to the prejudice of the creditors, requires its exercise. And its proper exercise is as much enforcing the liens of judgments, as if sales of the realty were directed. There has been no decision of this Court since the repeal of the statute upon the effect therof; not regarding the opinion of the court in Handley, et al. v. Sydenstricker adm’r, 4 W. Va., 605 , a decision of the question. A remark was made by the judge who pronounced the opinion of the court in Pecks v. Chambers, 8 W. Va., 210 , which on first impression might considered in opposition to the views herein expressed; but properly understood it cannot be so construed. The question we are here considering was not discussed in that case; thequestionthejudge wasdiscussing was, whether it was necessary to exhaust the legal remedies to collect a debt against the personalty, before-proceeding to enforce the *143 judgment lien against tbe real estate; and it was there, we think most properly, held that it was not. The remark referred to was this: “A court of equity may under the provisions of said eighth section sell lands of the judgment debtor to pay his judgment debts, whether the rents and profits of the lands of the debtor will pay the debt in five years or not.”

This is true; there is now no law fixing the time within which the rents and profits of the real estate will pay the debts, before the chancellor is authorized to decree a sale of the property. It is now left to his discretion to say whether it may be done in a reasonable time, of which he must judge ; and if he ascertains that the rents and profits of the real estate will pay the lien charged upon it in such reasonable time, it is his duty to refuse to decree a sale.

Many matters are left to the discretion of the chancellor ; and why not this ? In many cases great hardship may result to the debtor by decreeing a sale rather than a rental of his property, where the rents and profits would discharge the debts in a reasonable time; when no hardship would result to the creditor by renting the property and paying the debts in that way. The chancellor has a discretion in fixing the time upon which the sale may be made, and in some instances it may be almost if not quite as long as it would take to raise the amounts from the rents and profits, in cases where the property is considerable, and the debts small. Why then should he not have the discretion to decree a rental of the property in such cases? We see no reason or authority why he should not. But as this is a privilege accorded to the debtor, or the party whose lands are charged with debts and others interested, it must be exercised by them in the court below; and the decree must show that they asked a rental of the property and it was refused, before the decree for that reason will be reviewed in the appellate court. The decree in this cause does not show that the defendants asked that the property be rented, ‘and there *144 fore the court was not called upon to say, whether in a "reasonable time the rents and profits of the real estate will pay the debts charged upon it. This discretion must first be exercised by the chancellor below, before this Court will review the decree of the court below, and upon such review will not reverse it, unless it appear that the court erred in the exercise of that discretion. But as the decree appealed from is an interlocutory decree, upon the authority of Manns v. Flinn’s adm’r, supra, when the cause goes back to the court below7, the defendants may ask the court to ascertain or pass judgment on the question, whether the rents and profits of the real estate will not pay the debts charged upon it in a reasonable time, and if so ascertained or adjudged that the debts may be so’ discharged, that the property be rented instead of sold.

It is also objected, that the decree should have given a day to the debtor to redeem the property by paying the amounts charged upon it. It was manifest error for the court not to do so, as has been repeatedly held by this Court.

But it is contended in argument, that the day was given by the provision in the decree that the commissioners should not advertise said property for sale before the 1st day of September thereafter. This does not give a day to redeem. There was nothing to prevent the commissioner's from selling, though the defendants had offered to pay the debts in full and tendered the money.

It was improper to confine the sale to the “ brick store ” house without the consent of all the parties to the suit. There would have been nothing wrong in offering that first, if a sale had been proper, but it should not have been confined to that; as if it had failed to bring sufficient to discharge the debts, it would have been necessary to direct more of the real estate to be sold, thus unnecessarily harassing the parties with costs.

For the foregoing reasons, I am of opinion that the decrees of the circuit court of Jefferson county, rendered *145 in this cause on the 21st day of April, 1876 and on the 2oth day of April, 1876 respectively, be reversed with costs to the appellants; and this cause is remanded to the circuit court of Jefterson county for further proceedings to be had therein according to the principles of this opinion and the rules and practice governing courts of equity, with instructions to said court to provide, if it be asked, for the payment of the debts charged on the real estate out of the rents and profits of said property, if adequate thereto in a reasonable time; and if not, then to decree a sale of so much of said real property ás will discharge the liens charged thereon.

Decrees Reversed and cause remanded.