Anderson v. Pilgram

19 S.E. 1002, 41 S.C. 423, 1894 S.C. LEXIS 138

• Court: Supreme Court of South Carolina
• Decided: July 27, 1894
• Status: Published

Opinion

The opinion of the court was delivered by

Mr. Chief Justice McIveb.

The plaintiffs, as judgment creditors of the defendant, S. M. Pilgram, bring this action on behalf of themselves, as well as all other judgment creditors of the said Pilgram, who shall come in and seek relief thereby, and contribute to the expenses thereof, for the purpose of setting aside as fraudulent a compromise of a certain debt held by said Pilgram against his codefendants, E. S. Darwin and S. A. Darwin, as well as the transfer of certain notes originally held by Pilgram, one against both of the said Darwins and the other against S. A. Darwin, to his wife, Lula A. Pilgram, with a view to subject said debts to the payment of their said judgments. It is stated in the decree of the Circuit Judge, though the order of reference is not set out in the “Case,” that, by the consent of all parties, it was referred to a special referee “to take testimony, hear and determine all issues arising herein, and make his report to this court, with leave to report any special matter,” &c. The referee made his report, to which exceptions were filed by the defendants, “same as their grounds of appeal,” and the case came before his honor, Judge Wallace, for a hearing on said report and exceptions. His honor, in his decree, without entering into any discussion of the questions presented, simply affirmed the conclusions, both of fact and law, reached by the referee, and rendered his decree confirming said report., and adding certain details as to the manner in which the conclusions reached should be carried into effect.

From this decree, the defendants, E. S. Darwin, S. A. Darwin, and S. M. Pilgram, appeal upon the several grounds set out in the record, which need not be repeated here, as some of the grounds have been abandoned, and others not pressed, while others still have been acquiesced in by the respondents, who have consented that the decree be modified as therein suggested. We propose, therefore, to consider and determine the several questions which we understand to be raised by the grounds of appeal; and for this purpose it is necessary that the report of the referee should be incorporated in the report of the case, as it is too long for insertion here. Inasmuch as there is no appeal from so much of the decree as adjudges that the transfer of the notes referred to above, by Pilgram to his wife, should be set aside, it is unnecessary to consider that portion of the .decree, especially as we agree with the master and the Circuit Judge upon that point. The main controversy is, whether the compromise with the Darwins by Pilgram, to which reference has been made, should be set aside, together with certain questions incidental thereto, which will hereafter be referred to; whether there was any error in failing to provide for the exemption claimed by S. M. Pilgram under the homestead laws; and whether the Circuit Judge erred in respect to the costs adjudged by him to be paid.

First as to the compromise. It seems that on the 29th of September, 1883, Pilgram sold to E. S. Darwin and S. A. Darwin a tract of land containing 371 acres, taking their note, secured by a mortgage of the premises, for $5,500, claimed to be an extravagant price for the property — a claim which the evidence seems to justify. On the 13th March, 1885, Pilgram commenced an action to foreclose this mortgage, and obtained judgment by default for the sum of $6,100. Soon after this judgment was recovered, the Darwins employed counsel for the purpose of enjoining the sale of the mortgaged premises, but before any steps were taken, a settlement was agreed upon, the terms of which were embodied in a paper signed by Pilgram, under seal, and dated 6th March, 1886, a copy of which is set out in the “Case.” In this paper, Pilgram acknowledges the receipt of $6,400 from the Darwins, in full of all judgments against them, and states that the amount received consisted “of money, cotton, mortgage, order for rent, and deed for two acres of land;” and although no notes are mentioned, it seems that several notes, aggregating the sum of $5,400, were given, which, we presume, were secured by the mortgage mentioned. And Pilgram binds himself to look alone to the land mortgaged for the payment of all the notes held by him, except the note of S. A. Darwin for $800. In the meantime, to wit: on the 9th of September, 1885, Pilgram bought a house and lot in the town of Woodruff from the plaintiffs, W. A. and L. S. Anderson, for the sum of $1,400, giving his notes, secured by a mortgage of the house and lot, one of which notes was afterwards transferred to the plaintiff Woodruff. On the 28th of January, 1887, an action was commenced to foreclose this mortgage, and judgment was recovered, some time in 1889 (this is the date as stated alfolio 232 of the “Case,” but the probability is that this is a mistake, and the true date is 5th of April, 1888), of foreclosure and sale; and when the property was sold, it brought only $505, leaving a large deficiency, for which judgment was entered against Pilgram. And the claim is, that it was to defeat this judgment that the compromise hereinafter referred to was made.

1 It is stated in the referee’s report, that in February, 1889, Pilgram commenced his action for the foreclosure of his mortgage to secure the notes of the Darwins, aggregating $5,400, but this must be another mistake, for we find in another part of the “Case” that the complaint in this action was verified on the 10th of February, 1888; so that we presume the action was really commenced in February, 1888, and notin 1889, as stated in the referee’s report. These mistakes, and other discrepancies found in the “Case,” prompts us to call the attention of counsel to the importance of seeing to it that all errors, arising from misprint or otherwise, in the “Case” are corrected; for, to say nothing of the additional and unnecessary labor imposed upon the court, by a neglect to observe this precaution, it may sometimes lead to serious injury to the parties, as the court is bound to take the facts as they appear in the “Case” as prepared for argument here. We throw out this admonition with less reluctance, because, we are pleased to be able to say, that the counsel engaged in this cause are usually noted for their diligence and accuracy in the preparation of their papers.

This action brought by Pilgram against the Darwins, in February, 1888 (as we assume), was compromised on the 10th of April, 1888, by the Darwins assuming the payment of three debts due by Pilgram — one to Port Royal and Western Carolina Railway Company, one to Mr. Nichols, and the other to E. S. Allen — and giving to Pilgram two notes, without security, of $300 each, making, as the referee finds, the consideration for the surrender of notes, amounting at their face value to something over $5,000, about$l,700. The testimony shows that both the Nichols and Allen debts have been paid, as well as one of the $300 notes to Pilgram, and that the Darwins had offered to pay the debt to the railway company, which offer was declined by counsel representing that company, probably for the reason that its acceptance might be regarded as a recognition of the compromise sought to be set aside by these proceedings, to which, as we understand it, the railway company has become a party. So that, passing by, for the present, the two notes for $800, previously transferred to Mrs. Pilgram, all that would remain for the Darwins to pay, if the compromise is allowed to stand, would be the debt to the railway company and the outstanding note for $300 to Pilgram, of which we find no account in the testimony.

2 We fully concur in the view taken both by the referee and the Circuit Judge that, so far as Pilgram is concerned, his purpose being to defeat the payment of a valid, legal obligation, the compromise was, in the eye of the law, a fraud. For even taking the most charitable view of his conduct, that he did not think he was morally bound to pay the judgment for the deficiency in the proceeds of the sale of the house and lot in the town of Woodruff to meet the mortgage debt, because, as he claimed, the plaintiffs had agreed to look alone to the proceeds of the sale of the mortgaged premises for the payment of their debt, yet that questiou having been adjudged agaiust him, he must be regarded as just as liable to pay such deficiency as he would be to pay any other legal and valid obligation, and. the law will not countenance any effort ou his part to evade its payment.

3 But the fact that his act in making the compromise was fraudulent so far as he was concerned, does not necessarily affect the Darwins. Unless they participated in the fraudulent intent of Pilgram, or having knowledge or notice of such intent, availed themselves of such knowledge for the purpose of obtaining a personal advantage to themselves, at the expense of Pilgram’s creditors, they cannot be held liable; for they are not volunteers, but stand in the position of purchasers for a valuable consideration. This proposition of law is in accord with the authorities cited by the referee and by respondent’s counsel, and is also conformable to reason and the plainest dictates of justice.

As we understand it, the referee relieves the Darwins of any guilty participation in the fraudulent intent of Pilgram, but he holds, though in somewhat dubious language, that the Darwins had notice of Pilgram’s intent, and took advantage of that purpose of Pilgram’s to obtain a personal advantage to themselves. His language is: “I believe from the testimony that the Darwins effected this compromise rather with a view to obtaining a personal advantage to themselves, but their object was carried out in such a way that it enabled Pilgram to .defraud his creditors.” (Exactly what this means it is somewhat difficult to say.) “They took advantage of this purpose of Pilgram’s to save their land at the expense of his creditors.” It is to be noted, however, that the referee nowhere finds that the Darwins knew of Pilgram’s purpose to evade the payment of his debt to the plaintiffs. If he believed so, it would have been very easy to say so. But he could not have so found, for we have been unable to find anything in the testimony that even tends to show any such knowledge on their part. The undisputed testimony shows, and the referee so finds, that up to the time of this compromise the feeling was very bitter between the Darwins and Pilgram, and it is scarcely possible that he would communicate to his bitter enemies his purpose to commit a fraud. Again the referee says: “The testimony shows the land to have been worth about $3,500, and the court will not allow an insolvent debtor to make his sister a present of some eight (probably another misprint for eighteen) hundred dollars, when its practical effect is to prevent debts being paid. I have not detailed all the facts and circumstances brought out in the testimony which forces me to this conclusion, but an examination of the evidence shows many badges of fraud.” This last quotation, it seems to us, shows that the referee confounded the fraud of Pilgram with the supposed knowledge of the Darwins of the fraudulent purpose of Pilgram. Finally, he concludes this portion of his report with these words: “I reach this conclusion somewhat reluctantly, because it does look as if the Darwins had been somewhat imposed upon by their codefendant, Pilgram.”

Whether this compromise was so glaringly liberal to the Darwins as the referee seems to suppose, admits of grave question, when it is remembered that by the terms of the agreement of 6th of March, 1886, hereinbefore referred to, Pilgram had bound himself to look alone to the proceeds of the sale' of the mortgaged premises for the payment of the notes aggregating $5,400, for even the estimated value of the mortgaged premises falls far short of paying that sum. And when the experience of Pilgram in the sale of his own house and lot under the judgment of foreclosure obtained by the plaintiffs, resulting in such a large deficiency, is recalled, it would not have been unreasonable to apprehend that the sale of the Darwin land, in the same neighborhood, might result in a proportionate deficiency; and, if so, then the amount received by Pilgram under the compromise would not fall short of the amount which he was likely to realize from his claims against the Darwins. The offer of the plaintiffs to give the Darwins $17 an . acre for their land was burdened with the condition that they should receive as a part of the purchase money the claims held by the plaintiffs agaiüst Pilgram, which condition they could not safely accept without the consent of Pilgram, for if they acquired these claims after Pilgram had commenced his action against them, they could not have been set up by way of discount or counter-claim in such action. Again, this compromise does not seem to have been made in the dark, but, on the contrary, was advised and urged by the friends and neighbors, including one of the plaintiffs.

4 As we understand it, this compromise did not include the two notes of $800 each — the one signed by both of the Darwins, • and the other by S. A. Darwin alone; for we do not see how they could have been included in a settlement to which Mrs. Pilgram does not appear to have been a party, and, so far as appears, had no knowledge of at the time, for she was then the lawful owner and holder of these notes, at least so far as Pilgram was concerned. The Darwins, when sued upon these notes, set up defences thereto, alleging waut of consideration, and Mrs. Darwin set up a further defence, under the married woman’s act, to the action on the note signed by her alone. These defences have never been considered, and should not have been passed upon in the present action. But now since it has been adjudged, with the approval of this court, that the transfers of these notes were fraudulent, so far as the creditors of Pilgram are concerned, and since, as we understand it, these notes, together with all other evidences of indebtedness from the Darwins to Pilgram, have been levied upon as the property of Pilgram under the warrant of attachment obtained by the plaintiffs, we see no reason why these notes may not be sued by the sheriff, or if these notes have not been attached, then a receiver may be appointed, as prayed for in the complaint in this action, who may bring suit upon these notes, when the Darwins may set up their defences, and have the same properly adjudicated; and if judgment be recovered, then the proper steps can be taken to set up the claim of E. S. Darwin to exemption under the homestead laws, which claim, it does not seem to us, can well be adjudicated in this action.

5 It only remains to consider the effect of the supplementary proceedings instituted by the plaintiffs, as well as by Port Royal and Western Carolina Railway Company, and the liability for the costs thereof. It appears from the “Case,” that in April, 1888, the plaintiffs obtained an order for the examination of the Darwins before a referee, appointed for that purpose, on the 13th of April, 1888; but owing to sickness in the family of the Darwins, they did not appear on that day, and it was agreed that some subsequent day should be appointed for the purpose; but no further steps were taken until the 25th of June, 1891, the day before this action seems to have been commenced. On that day the parties appeared by counsel, when a motion to dismiss the proceedings was made and granted. To the report of the referee to this effect, no exceptions were filed, and no further steps appear to have been taken in the matter’. This, it seems to us, was an end of those proceedings, which does not, in our judgment, bar the present action. On the 28th of February, 1888, the railway company instituted similar proceedings, under which Pilgram and E. S. Darwin appear to have been examined. Subsequently, but at what date does not appear, the referee made his report, which, however, was never filed, recommending the appointment of a receiver to take charge of the notes of the Darwins to Pilgram, with authority to bring suit to recover the amounts due thereon. No further steps appear to have been taken under those proceedings, which must be regarded as abandoned. Such proceedings do not, therefore, constitute a bar to the present action.

In the decree, the Circuit Judge directed that, in addition to the debts due to the plaintiffs and the other judgment creditors of Pilgram, whose claims have been proved in this case, the Darwins should pay “the costs and disbursements incurred by his (Pilgram’s) said creditors, and also the costs and disbursements of this action incurred by them.” And in the concluding portion of the decree we find these words: “Costs and disbursements, mentioned above, shall include all costs on judgments against the defendant, S. M. Pilgram, and the costs and disbursements of the supplemental proceedings in the case of the Port Boyal and Western Bailway Company against the defendant, S. M. Pilgram, including the sum of $15 to the plaintiff’s attorney in that case. As to the costs of the supplementary proceedings iu the other eases, they are left open for further order.” Now, while there may be no objection to providing for the costs incurred by the plaintiffs and the other judgment creditors of Pilgram, in recovering their judgments out of any money which may be realized under the attachment, or by a receiver, in accordance with the views hereinbefore announced, we see no reason for requiring the payment of the costs of the supplementary proceedings, for one of them was dismissed and the other seems to have been abandoned, and the costs of such proceedings must, therefore, fall upon the parties who instituted these fruitless proceedings. Indeed, so far as we can discover, the only provision for costs in supplementary proceedings is that found in section 321 of the Code, which reads as follows: “The judge may allow to the judgment creditor, or to any party so examined, whether a party bo the action or not, witness fees and disbursements, and a fixed sum in addition, nob exceeding thirty dollars, as costs.” By this we understand the judge before whom such proceedings are brought for confirmation or reversal of the referee’s report, and as neither of these proceedings proceeded beyond the report of the referee, no such allowance as that contemplated by the section quoted was, or could have been, made.

The judgment of this court is, that the judgment of the Circuit Court, except in so far as it has been approved above, be reversed, and that the case be remanded to that court for the purpose of carrying out the views herein announced.

In this ease plaintiffs filed a petition for rehearing, alleging several errors in the decision of this court. Upon this petition the follo wing order, signed by the Chief Justice and Mr. Justice Pope-(Mr. Justice McGowan’s term of office having expired July 29), was endorsed, dated and filed September 14, 1894:

6 “After a careful consideration of this petition, we are unable to perceive that any material question of fact or principle of law has either been overlooked or disregarged in the decisión heretofore rendered, and hence there is no ground for a rehearing. It is, therefore, ordered, that this petition be dismissed, and that the stay of the remittitur heretofore granted be revoked.”