Opinion
07-19-1876
JOHNSTON & als. v. GILL & als.
Johnson, Williams, and Boulware and Steger, for the appellant. Lyon & Stern and Guy & Gilliam, for the appellee.
1. Husband and wife agree in consideration that the husband convey a house and lot to a trustee for her and her children, she will unite in the conveyance of his other real estate when he shall sell it; and this she does. HELD:
1. To the extent of her dower interest in the husband's real estate, the husband's conveyance to the trustee is on valuable consideration, and to that extent the wife is entitled to satisfaction out of the proceeds of the sale of the house and lot, as against creditors of the husband, for debts contracted at the time of the deed.
2. For debts contracted before the execution of the deed, the proceeds of the sale of the house and lot, above the value of the wife's dower interest in the husband's real estate in the conveyance of which she joined, are liable; but not to debts contracted after the conveyance by the husband to the trustee. Code of 1860, ch. 118, § 2.
3. The agreement between the husband and wife may be proved by parol evidence.
II. The § 7 of the act of March 3d, 1866, known as the stay law, suspended the statute of limitations as to suits to set aside fraudulent conveyances.
III. A deed is made in January 1859, and a bill is filed in January 1871 by creditors of the grantor to set aside the deed, on the ground that it was fraudulent as to them. The several acts of the de facto government of Virginia passed during the war, suspending the statutes of limitation, were valid to prevent the running of these statutes; and therefore the suit by the creditors was not barred by the statute on the 3d of March 1866, when the 7th section of the stay law of March 3d, 1866, was passed.
IV. In a suit by legatees against the executor for an account of his administration, there are several reports by a commissioner, and at length a decree against the executor for a large amount. In a suit by these legatees against the executor and his grantees, in a deed executed after his qualification, to set aside the deed on the ground of fraud, the decree against the executor, and the report on which it was founded, are prima facie evidence against said grantees of the indebtedness of the executor; but are liable to be surcharged and falsified by them.
This case was heard in Richmond, and was decided at the term of the court at Wytheville. It was a suit in equity in the chancery court of the city of Richmond, brought in January 1871, by J. W. Gill and Louisa, his wife, James S. Scott and Virginia, his wife, and James Lyons, their trustee, claiming to be creditors of Peyton Johnston by decree, against said Peyton Johnston and Ann M., his wife, and their children and trustee, to set aside a conveyance made by Peyton Johnston, by which he conveyed to Andrew Johnston, a house and lot in the city of Richmond, in trust, for the separate use of Mrs. Johnston for her life, remainder to the children. This deed bore date the 8th of January 1859, and was duly recorded on the 31st of the same month. The material facts of the case are as follows:
In July 1846, Peyton Johnston qualified in the county court of Spottsylvania, as the executor of James McIldoe, deceased. He seems to have settled his accounts before the court of probate for some years; but the two daughters of McIldoe having married James S. Scott and J. W. Gill, they instituted their suit in equity in the circuit court of Richmond against the executor, to have an account of his administration. There were several reports made in this cause; from which it appeared that in January 1859, when he conveyed the house and lot aforesaid, he was indebted to the estate, and in January 1870 a decree was made against him for $20,791.11.
When Peyton Johnston made the deed in question he owned other real estate in the city of Richmond and a tract of land near Richmond in the county of Henrico, he was carrying on an apothecary store in the city, and his circumstances seem to have been flourishing until the great fire in Richmond in April 1865, when his store and all his books, papers and notes due him were burned. Since that time he has probably been insolvent, and he has taken the benefit of the bankrupt act.
The conveyance in trust for Mrs. Johnston and her children was not, on consideration, purely voluntary. Though there was nothing in writing to show the agreement, it was clearly proved by parol testimony, that it was expressly agreed between Peyton Johnston and Mrs. Johnston, that in consideration of the conveyance of the house and lot, upon trust for the benefit of herself and her children, she would join in the conveyance of his other real estate; and that she had carried out the agreement on her part. But it also appeared that the house and lot was much more valuable than her contingent dower interest in his other real estate.
In their defence in this case, the defendants pleaded that the statute of limitations was a bar to this suit; and Mrs. Johnston and her children and the trustee insisted that they, not having been parties to the suit against the executor, the decree in that case was not evidence against them; and they all insisted that the decree was for a much larger amount than was justly due from the executor.
The cause came on to be heard on the 17th of October 1872, when the court held, First. That the statute of limitations was no bar to the suit. Second. That the deed of January 8th, 1859, was not wholly a voluntary conveyance; that the relinquishment of dower by the wife was a consideration deemed valuable in law; and to the extent of the value of the interest relinquished, the settlement must be supported against the claims of all creditors, whether their debts were contracted before the making of the deed or not. Third. That beyond the value of the interest relinquished by the wife, the said deed was void as to the claims of all creditors whose debts were contracted at the time the deed was made. Fourth. That the said settlement was valid, and must be supported against the claims of all creditors whose debts were contracted after the deed was made. And fifth. That inasmuch as the trustee, and Mrs. Ann M. Johnston and her children were not parties to the suit of Scott & c. v. McKildoe's ex'or, in which the decree sought to be set up in this cause was rendered, neither that decree nor the account of the commissioner upon which it was based, was conclusive against them. It was therefore referred to one of the commissioners of the court to ascertain and report: First. In what property the wife relinquished her right of dower under the agreement in the proceedings mentioned, and the value of the interest so relinquished. Second. Whether the claim of the plaintiffs, in the bill and proceeding mentioned, was for a debt contracted in whole or in part at the time when the said deed of January 1859 was made; and if only a part thereof was then contracted, how much was so contracted. And in ascertaining such amount, the said trustee and the beneficiaries under the said deed should be at liberty to surcharge and falsify the decree against the executor and the account of the commissioner upon which it is based, and to make any lawful defense against the same, which they may be advised their rights and interests in the premises may require. And the commissioner was directed to report any other matters, & c.
In November 1872 the defendants presented a petition for a rehearing in the case, upon the question of the application of the statute of limitations; but by a decree made on the 6th of February 1873, the petition for a rehearing was overruled; and the commissioner was directed to proceed to execute the decree of October 17th, 1862. And thereupon Peyton Johnston and Ann M. his wife, applied to this court for an appeal; which was allowed.
Johnson, Williams, and Boulware and Steger, for the appellant.
Lyon & Stern and Guy & Gilliam, for the appellee.
OPINION
STAPLES, J.
It is conceded that the settlement made by Peyton Johnston upon his family, to the extent of the dower interest relinquished by Mrs. Johnston, is valid, and cannot be disturbed.
It is not denied that that settlement was considerably in excess of such dower interest; and the question is, whether it is to be permitted to stand as to such excess against the claims of the then existing creditors of the grantor. The deed as to such excess being voluntary, the ground upon which it is sought to sustain it is, that Peyton Johnston was at the time in prosperous and unembarrassed circumstances; and the provision made for his family was a reasonable one according to his state and condition in life, leaving property amply sufficient for the payment of all his debts, and this property would have been available for all the demands of creditors but for the great fire of 1865 in the city of Richmond.
At this day it is unnecessary to consider the question, so long and so ably discussed by former judges of this court, how far a voluntary conveyance without actual fraud is valid against the claims of existing creditors. That question, it is believed, was finally put at rest by the provision incorporated in the revisal of 1849-'50; which declares that every gift, conveyance, & c., 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. See section 2, chapter 118, page 565, Code of 1860. This provision excludes all inquiry into the motives and circumstances of the grantor; it adopts the views of Judge Stanard in Hutchinson v. Kelly, 1 Rob. R. 31, and of Chancellor Kent in Reade v. Livingston, 3 John. Ch. R. 481, 500, that if the grantor be indebted at the time of the voluntary settlement, it is presumed to be fraudulent in respect to such debts; and no circumstances will permit those debts to be affected by the settlement, or repel the legal presumption of fraud. The effect of the statute is to disable the debtor from making any voluntary settlement of his estate to stand in the way of his creditors whose debts were contracted at the time. The mischief and inconvenience so much apprehended from the adoption of this rule, even if well-founded, will be to a considerable extent avoided by the statute requiring the creditor to institute proceedings within five years from the date of the conveyance. See section 13, chapter 149, page 639, Code of 1860.
And this leads us to the consideration of the second ground of error relied upon by the appellant. It is that the present suit was not brought until the year 1871; whereas the deed was executed in 1859. It is insisted that the act of March 3d, 1866, suspending the operation of the statutes of limitation, does not apply to suits against fraudulent donors or their purchasers; but such cases are expressly excepted from the operation of the act in question; that the creditor being free to recover judgment and sue out execution, he was not within the purview and spirit of the suspending statutes.
It is very true that the act of March 3rd, 1866, does in no manner interfere with the rights of creditors againt fraudulent donors and purchasers; and it would seem, therefore, but reasonable that the creditor should be held to the exercise of the statutory diligence in instituting proceedings to vacate the deed. But a little reflection is sufficient to show it could not have been the design of the legislature in the enactment of the statutes to suspend the statute of limitations in one class of cases, and leave it in full force as to others equally meritorious. It was very justly provided by these laws that in certain excepted cases the creditor should not be delayed in the collection of his money. These exceptions are enumerated in the second clause of the first section of the act already mentioned. In these cases the creditor was permitted to bring suit and prosecute it to judgment and execution; but it was not incumbent upon him to do so. This remedy was given him as a privilege--a matter of indulgence--and not imposed as a necessity or duty, to be postponed at the peril of being barred by limitation.
The preamble to the act of March 3rd 1866, in enumerating the reasons for the enactment of the stay law, recites that in consequence of the destruction of the currency, and of all kinds of personal property, stocks and securities, the people were left with but little beside their lands, which, for the want of efficient labor, could not be successfully cultivated in many parts of the country; and in this condition of things forced sales of property would result only in ruinous sacrifice and loss both to creditor and debtor; thus adding to the embarrassment and afflictions under which the country was suffering. Now these considerations were equally applicable to all classes of creditors; to those belonging to the excepted class, as well as to those who did not. And while the fraudulent debtor, or his alienee might not be entitled to any consideration, there was no reason for forcing the creditor to sue if he preferred to wait for the dawn of a more auspicious period. The country was in a condition extremely unfavorable to deliberate investigation; the public mind unsettled and harrassed with grievous apprehensions of the future; the courts disorganized, and with the exception of a brief period, under control of the military authorities, and in many instances filled with incumbents unknown to the people, and unacquainted with our laws and institutions. Surely the legislature under such circumstances, could hardly have intended to give the fraudulent debtor the benefit of the statutes of limitation, if the creditor delayed his action, and at the same time deny it to the honest debtor. The object was not to encourage but to discourage litigation; to preserve the remedy alike to all who were not inclined, or those unable then to embark in litigation; and therefore it was, the comprehensive language of the 7th section, was adopted. " The period during which this act shall remain in force shall be excluded from the computation of the time within which, by operation of any statute or rule of law, it may be necessary to preserve the loss of any right or remedy." The legislature could scarcely have used terms more comprehensive. If they do not embrace the case in hand it will be by depriving the words of their plain and natural signification. The language is too positive and unambiguous to be disregarded by the courts.
The learned counsel for the appellants have, however, raised the question of the constitutionality of the various acts suspending the operation of the statutes of limitation. It is very clear that when the bar of the statute has once attached, the legislature cannot remove the bar by retrospective legislation. It is equally clear that until the bar is complete it is competent for the legislature to extend the period for the institution of actions even as applied to rights already accrued. The various suspending acts adopted during the war were passed by a de facto government, and their validity was affirmed by the legislature which assembled after the termination of the war. At the time of the passage of the act of March 3rd, 1866, the plaintiffs' right of action consequently was not barred by any statute then in force. It was therefore entirely competent for the legislature to extend the period within which the complainants might bring their suit. This doctrine has repeatedly received the sanction of this court, and is now placed beyond the reach of controversy. I think, therefore, the chancery court of Richmond was entirely correct in holding that the claim of the plaintiffs was not barred by limitation.
The remaining ground relied upon by the appellant is, that the chancery court erred in receiving as evidence in this case, the record of the suit of Scott v. McKildoe's executor to which the appellants were not parties. That suit was instituted by the plaintiffs in this, against Peyton Johnston, the grantor, to obtain a settlement of his accounts as executor of McKildoe's estate. After a protracted and expensive litigation conducted through a long series of years, every step in the cause being strongly contested, the plaintiffs obtained a decree for a large amount against Peyton Johnston. An appeal was taken to this court, and the decree of the chancery court was reversed in part, and affirmed in part, but still leaving due the plaintiffs a large balance recognized and affirmed by the decree of this court.
The various accounts, settlements, orders and decrees, taken in that case, show that the executor was liable to the complainants for a large amount of money at the time of the execution of the deed, in the year 1859. The record of these proceedings was admitted by the chancellor as prima facie evidence of such liability. The correctness of this decision would seem to be too clear for argument. When the creditor has established his debt by record against the debtor, such record must, in the absence of all fraud or collusion, be regarded at least as prima facie evidence of the existence and validity of the debt in every controversy in which the debt may be the subject of investigation. This rule is universally acted on in suits involving the rights and priorities of conflicting creditors to the estate of the common debtor. In such cases the judgment or decree is often not only the best, but the sole evidence of the debt. When legatees or distributees have sued the personal representative for an account of assets, when settlements have been made under the supervision of the court, its commissioners and the parties, when every claim or demand asserted on either side has been the subject of earnest investigation, it is difficult to conceive of any proof more satisfactory than that furnished by the proceedings and decree in favor of the complainants. Fortunately, we are not without express authority upon this subject. In Hinde's lessee v. Longworth, 11 Wheat. R. 199, a similar question was before the supreme court of the United States. Mr. Justice Thompson, in delivering the opinion of the court, said: " It was certainly competent for the defendant to show that the grantor was indebted at the time he made the conveyance; this was a necessary step towards establishing the fraud; and if these judgments conduced to prove the fact, they could not be shut out as incompetent evidence. If the evidence ought to have been excluded because Doyle (the grantee) was not a party to the judgments, the same objection would have lain against the proof of his being in debt to others in any manner whatever. That would have been equally an inquiry into matters to which the grantee in the deed was not a party. The judgments appear to have been entered some short time after the date of the deed; and it is said that a voluntary deed is void only as to antecedent and not subsequent creditors, unless made with a fraudulent intent. But copies of the accounts upon which the judgments were founded are spread upon the record; by which it appears that the cause of action arose before the date of the deed. * * * * They may be looked to for the purpose of showing that Doyle (the grantor) was in debt at the date of the deed; but whether to an extent which would avoid the deed, must depend on circumstances which are not to be enquired into by this court. There was no error, therefore, in the admission of the evidence." The case of McLaughlin v. Bank of Potomac, 7 How. U. S. R. 220, is to the same effect. See also Birely's ex'ors v. Staley, 5 Gill & John. 433; Alston v. Munford, 1 Brock. R. 279; 2 Rand. 398.
These decisions render any further discussion of the question wholly unnecessary. They conclusively vindicate the decision of the learned judge of the chancery court upon this branch of the case.
Upon the whole my opinion is, that the decree is correct in every respect, and should be affirmed.
DECREE AFFIRMED.