Opinion
06-29-1872
PRATT & al. v. COX & als.
B. R. Johnston, Richardson, and Gilmore, for the appellants. J. W. & J. P. Sheffey, for the appellees.
1. A conveys to U a tract of land, with the intent to defraud his creditors; and U, to carry out the purpose of A, conveys the land without consideration, to C and others, infant children of A. The land is liable to satisfy the creditor of A, whether such at the date of A's deed, or becoming such subsequently.
2. S, a creditor of A, files a bill to set aside said deeds, and subject the land to the payment of his debt. The evidence in that case establishes the fraud, and the deeds are declared fraudulent and void as to the creditors of A, and the land is rented out to B to pay the debt. B rents it to A on the same terms, and A conveys the land in trust to secure the amount of the rent to B. The trustee sells a part of the land to P. HELD:
1. B is a bona fide creditor of A, entitled to subject the land to the payment of the debt.
2. P is a bona fide purchaser, and has a valid title to the land.
3. After the decree in the case of S v. A and others, C & c., the children of A, file a bill setting out the deeds, the said suit and the deed from A to secure B; insisting that the last deed is invalid, and that P acquired no title to the land by his purchase. They say there are other creditors of A who are seeking to subject the land, and they ask that it may be sold under a decree of the court; that an account may be taken of the debts of the creditors entitled to subject the land; that these may be paid; and the balance of the purchase money paid to them. The court holding that the sale to P is valid, should not have decreed that A should convey the residue of the land to C & c. subject to the debts of A; but should direct an account of the debts; that the land be sold, the debt paid, and the surplus paid to C & c.
4. The record in the case of S v. A and others is referred to in the bill of C & c., and is made an exhibit with the answer of B. It is not excepted to, nor is it objected to as evidence in the Circuit court, and the decree is obviously founded upon the evidence filed in that case. This court will, therefore, regard it as evidence in the cause for all purposes.
In April 1856, Philip D. Cox and six others, children of A. H. Cox, two of whom were infants, filed their bill in the Circuit court of Smyth county, in which they state that A. H. Cox, on the 10th of May 1843, conveyed to Philip Umbarger, two tracts of land containing two hundred and fifty acres, in the Rich Valley on the north fork of Holston river, where said A. H. Cox resided, upon a trust expressed in an article of agreement between them dated the 1st of February 1843, that said Umbarger and his wife would make to the plaintiffs a right in fee simple to said land, on condition that said Cox pays to Umbarger all he owed him. That Cox having paid Umbarger all he owed, by deed dated the 17th of March 1852, Umbarger conveyed to the plaintiffs all the lands conveyed by Cox to him, except some small parcels which had been conveyed to other parties. That when these deeds were made the plaintiffs were of tender years, and all was fair on their part, and they knew of no unfair intent or purpose on the part of the parties who thus invested them with the legal title.
They further say, that in January 1856, David Sexton filed his bill in this court against A. H. Cox and others, charging that said deed was voluntary, and that said land was liable to the payment of a judgment lien claimed by him against said A. H. Cox for $266.65, with interest from the 22d of October 1853, and costs; and by a decree in said cause at the September term 1858, the said deeds were set aside as fraudulent and void, as to said Sexton; and the court being of opinion, that the rents of the land would pay the debt within five years, ordered that V. S. Morgan, as commissioner, should rent out said lands to the highest bidder, on a credit of six and twelve months, taking bond with good security. That the commissioner, on the 18th of November 1858, rented said lands to Patrick C. Buchanan, Jr., for $418.34, upon the terms of the decree, and took the notes of said Buchanan with James Cox and James H. Buchanan as his sureties. All of which will appear by the proceedings in that case.
That A. H. Cox retained the property under some contract with said Patrick C. Buchanan, and, without authority from the plaintiffs, executed a deed of trust upon the land to P. Campbell Buchanan, to secure the said parties for the amount of said rent. That the trustee has advertised the land for sale for the payment of said rent, and will proceed to sell unless restrained by the court.
They say further, that one David Graham, claiming to be a creditor of A. H. Cox, has filed his bill to have the said land sold for the satisfaction of a judgment recovered in the County court of Smyth county, against said Cox and two others, for $264.99, with interest from February 1853, and costs; and that there are other claims asserted by other persons claiming to be creditors of A. H. Cox, to subject said land to their claims.
They further say, that to sell the land as it now stands, under said deed of trust, would result in a ruinous sacrifice. That the plaintiffs have the legal title, and all that the creditors of A. H. Cox can claim is to subject the land or its rents to the payment of their debts. The plaintiffs therefore desire to arrest the sale under the deed of trust, and have the sale made by decree of the court in this case, and have the proceeds applied to the payment of the bona fide debts of the said A. H. Cox, which may be proved in the case; and to have the surplus secured to the plaintiffs. And they submit to the court whether on the supposition that the deeds were voluntary, the debts chargeable on the land are the debts due from him at the date of his conveyance to Umbarger, or include his debts to the present date; and whether the claim of P. C. Buchanan and others is equitably chargeable on said land or its proceeds.
And making A. H. Cox, P. C. Buchanan, James Cox, James H. Buchanan and David Graham parties defendants, they pray that the trustee may be enjoined from selling the land under his deed, and Graham be enjoined from selling under his judgment, until he exhaust the property of the other parties to his judgment, and that he be required to prove his debt as other creditors shall be required to prove theirs in order to participate in said fund. That if necessary, an account be directed to ascertain the amount of the debts or liens chargeable on said land, and that so far as they are so chargeable they may be paid by the sale of the land by a commissioner, and that the balance of the proceeds of the sale may be secured to the plaintiffs, and they ask for general relief.
The injunction was granted, but too late to arrest the sale under the deed of trust, though the trustee had notice of the application; and the plaintiffs filed an amended bill, in which they say that the trustee sold a part of the land, describing it, containing twenty-six acres, at which sale Nicholas Pratt and Jordan Furguson became the purchasers at the price of $600, and they have taken possession of it. They insist that the sale is invalid, on the grounds stated in the original bill, and for others stated, among them the notice to the trustee, and that the price was grossly inadequate. And making Pratt and Furguson parties, they adopt the prayer of the original bill, and ask that the sale may be set aside.
Patrick C. Buchanan answered the original, and also the amended bill. He insisted that by the decree in the case of Sexton v. Cox, the deeds of Cox to Umbarger, and of Umbarger to the plaintiffs, were declared fraudulent and void, and on that account absolutely set aside; thus revesting in A. H. Cox the legal title to the land as fully and completely as before the execution of his deed to Umbarger. That the plaintiffs, therefore, had no interest in the land, and had no right to institute a suit for its sale, or to remove incumbrances that are upon it. He says that he and James Cox rented the land, and that A. H. Cox desired to rent it, and they agreed to let him have it on the same terms, Cox to execute a deed of trust to P. Campbell Buchanan to secure the payment of the money; and this was done. He filed the record in the case of Sexton v. Cox and others, and made it a part of his answer.
In his answer to the amended bill he says: The land sold by the trustee was sold as it was and with its boundaries, at the express request of A. H. Cox, and in the presence of P. D. Cox, one of the plaintiffs.
Pratt and Furguson answered, saying that they know nothing of the circumstances under which the land was rented, nor do they know anything in relation to the deed of trust, except that such deed was executed and recorded. That they attended the sale for the purpose of purchasing the ground mentioned in the amended bill; but when the sale was commenced, fearing that some difficulty would arise in relation to said sale, they declined to bid the amount they had agreed upon for the property before they went to the place of sale; and it was crying for only $200, when A. H. Cox stepped up to them and requested them to bid for the property. That Pratt said to him, that he and Furguson did not want to buy a law suit. Cox then remarked to them to bid up; that there was no danger of a law suit. After this was said, respondents did bid for the property, and became the purchasers at $600 cash, which was a full and fair price for it. That P. D. Cox was present and heard his father's remarks to the respondents, and did not say a word. That they were put into possession of the property, and had held it ever since.
There was no parol evidence in the cause, and the only exhibits were the deed of trust from A. H. Cox to P. Campbell Buchanan, and the record in the case of Sexton v. Cox. The parol evidence making a part of this record proved, beyond question, that the deeds from A. H. Cox to Umbarger and from Umbarger to the plaintiffs were not only without any consideration deemed valuable in law, but were fraudulent in fact, and intended to shield the property of Cox from his creditors. To this record as evidence there was no exception, and it was obviously the basis of the decree of the court.
The cause came on to be heard on the 5th of April 1861, when the court held that Pratt and Furguson were purchasers for value without notice, and entitled to hold the land purchased by them; and that the plaintiffs were entitled to hold the residue of said land, subject to any valid claims upon the same by the creditors of A. H. Cox. And it was decreed that A. H. Cox should convey the same with special warranty to the plaintiffs, subject to any valid liens against the said lands prior to the decree rendered in the case of Sexton v. Cox and others, setting aside the deeds as hereinbefore stated, & c., & c. From this decree the plaintiffs obtained an appeal to the District court of Appeals at Abingdon.
The cause came on to be heard in the District court of Appeals in April 1861, when that court held: That though the deeds from A. H. Cox to Umbarger and from Umbarger to P. D. Cox & c., may have been designed to hinder and delay the creditors of A. H. Cox, and though the latter deed was wholly voluntary as to the grantees therein, yet that as between the parties it must be held that both were valid, and that the deed from Umbarger to P. D. Cox & c. vested in them the legal title to, and absolute property in the lands therein mentioned, subject only to the claims of the prior creditors of A. H. Cox; and that the effect of the decree in the case of Sexton v. A. H. Cox and others, was simply to set aside said deeds as against the plaintiff in that suit, and to subject the land thereby conveyed to the satisfaction of his judgment; and that it did not reinvest the title thereto in A. H. Cox, nor divest the title of P. D. Cox & c., nor in any manner interfere with the rights which they had acquired to said lands under said deeds. That, therefore, at the time of the execution by A. H. Cox, of the deed of trust of the 10th of February 1859, as purchasers under which Pratt and Furguson claim, the said A. H. Cox had no title to or interest in said lands which he could convey, but the legal title thereto and the ownership thereof, were in P. D. Cox & c., subject to the leasehold interest of four years and five months, which Patrick C. Buchanan had acquired by his purchase at the commissioner's sale, made under the decree aforesaid on the 18th of November 1858. That Pratt and Furguson in purchasing under the deed of trust aforesaid, were purchasers with notice of the title of P. D. Cox & c., and acquired no rights paramount to those of said P. D. Cox & c.; and, therefore, that the Circuit court in its decree in this cause of the 5th of April 1861, instead of directing that Pratt and Furguson should hold the land purchased by them, as aforesaid, free from the claim of P. D. Cox & c., should have required them to surrender the same to P. D. Cox & c. at the expiration of the term for which Patrick C. Buchanan had purchased them, viz: on the 18th of April 1863, from which time they were entitled to hold them in absolute property, subject only to the just claims of the creditors of A. H. Cox, who were such prior to the 5th of January 1843, the date of the recordation of the deed from A. H. Cox to Umbarger.
It was, therefore, ordered that the decree of the Circuit court be reversed with costs; that the deed from A. H. Cox to P. Campbell Buchanan, and the sale thereunder to Pratt and Furguson, be set aside, and the time of the lease having long since expired, that they forthwith surrender to P. D. Cox & c. the lands purchased by them as aforesaid.
From this decree Pratt and Furguson applied to this court for an appeal; which was allowed.
B. R. Johnston, Richardson, and Gilmore, for the appellants.
J. W. & J. P. Sheffey, for the appellees.
OPINION
BOULDIN, J.
The only evidence assailing the validity of the deeds in the proceedings mentioned from A. H. Cox to Umbarger, and from Umbarger to the appellees, P. D. Cox and others, children of A. H. Cox, is the evidence, oral and documentary, contained in the record of the case of David Sexton v. A. H. Cox and others, filed as an exhibit with the answer of P. C. Buchanan, Jr.; but that record was referred to also in the bill, and has been read and relied on as evidence throughout the proceedings by both sides, without exception or objection thereto by any of the parties, either in the court below or in this court. It will be regarded, therefore, as evidence in the cause for all purposes. And the court is of opinion, on the record aforesaid, and the pleadings and other proofs in the cause:
1. That the deed from A. H. Cox to Philip Umbarger of the 10th of May 1842, recorded January 5th, 1843, was not only made without consideration deemed valuable in law, but was fraudulent in fact, having been executed by said Cox with the avowed intent to delay, hinder and defraud his creditors, which intent was known at the time to said Philip Umbarger; and that said deed was and is, therefore, absolutely void as to all the creditors of said Cox, then existing and subsequent.
2. That the deed of the 17th day of March 1852, from Philip Umbarger to Philip D. Cox and others, children of said A. H. Cox, having been made in furtherance of the fraudulent intent aforesaid, and without consideration deemed valuable in law, is in like manner void as to all creditors of said A. H. Cox; but that said deeds from A. H. Cox to Umbarger, and from Umbarger to Philip D. Cox and others, although void as to the creditors of A. H. Cox, are good between the parties; and by the latter deed a valid title to all the property thereby conveyed is vested and still remains (except so far as it may have been divested in favor of the creditors aforesaid, or any of them) in the said Philip D. Cox and others, subject to the claims of the creditors of said A. H. Cox.
3. That P. C. Buchanan and James Cox were bona fide creditors of A. H. Cox, and by the deed of trust of the 10th of February 1859, from said A. H. Cox to P. Campbell Buchanan, trustee for their benefit, they acquired as against the said Philip D. Cox and others a valid lien on the property thereby conveyed, and were entitled as against them, to satisfaction of their lien aforesaid out of said property.
4. That the appellants, Pratt and Furguson, were bona fide purchasers of the twenty-six acres of land sold to them by P. Campbell Buchanan, trustee, at a sale regularly made by him as trustee under the deed of trust last mentioned, and that they acquired thereby, and are entitled to hold and be quieted in, a good title to the same, as against the claims of the appellees, Philip D. Cox and others, children of said A. H. Cox.
But as said Philip D. Cox and others are entitled to the land conveyed to them by the said deed of the 17th of March 1852, subject to the just claims of the creditors of said A. H. Cox, and as they have suggested in their bill that there are or may be other creditors whose claims are unsatisfied, and have prayed that an account be ordered of all such claims against the said A. H. Cox as may be chargeable on said land, and that the same be sold and the proceeds applied to the payment of such claims as may be established as aforesaid, and the surplus, if any, be paid over to them; the court is further of opinion that proper proceedings should have been had in the Circuit court, to convene all such creditors, in order that the amount of their claims might be ascertained and paid as aforesaid--the surplus paid over to the appellees, P. D. Cox and others, children of A. H. Cox, and an end put to the litigation.
The court is of opinion, therefore, that the decree of the District court is erroneous, and that so much of the decree of the Circuit court of the 5th of April 1861, as conflicts with the principles of this opinion is also erroneous; and it is decreed and ordered that the said decree of the District court be reversed and annulled, and that so much of the said decree of the Circuit court as conflicts with the principles above declared be also reversed and annulled; and that the appellees, Philip D. Cox and others, children of A. H. Cox, do pay to the appellants their costs in this court and in the District court. And the cause is remanded to the Circuit court of Smyth county to be further proceeded in according to the principles of this decree.
DECREE OF DISTRICT AND CIRCUIT COURT REVERSED.