Ex parte Spragins, Buck & Co.

21 S.E. 543, 44 S.C. 65, 1895 S.C. LEXIS 58

• Court: Supreme Court of South Carolina
• Decided: April 15, 1895
• Status: Published

Opinion

The opinion of the court was delivered by

Mu. Chief Justice MoIveji.

The action in the case of Mann v. Poole was commenced on the 21st of June, 1892, by the plaintiffs on behalf of themselves and of all others, creditors of the defendant, J. T. Poole, who should thereafter come in and seek relief under said action, and contribute to the expenses thereof, for the purpose of having a deed of assignment made by said Poole to N. B. Dial, Esq., together with certain mortgages previously made by said Poole to his wife and to his grand-children, set aside as null and void under the assignment law. The facts of that case will be found fully stated in the case as reported in 40 S. C., 1, and, therefore, need not be repeated here, except that said deed of assignment was executed on the 18th of May, 1892, and the mortgages about ninety days before that date. While this action was pending, and before it came to a hearing on the merits, to wit: on the 23d of July, 1892, an order was granted by his honor, Judge Aldrich, enjoining and restraining the said assignee Dial “from paying out any of the funds realized, or which may be realized, from the assigned estate of the said J. T. Poole to any claims against said estate, except the necessary expenses which may be incurred in the collection of said assets, the payment of taxes, &c., until the further order of the court.” On the 23d November, 1892, the foregoing order was modified by an order of his honor, Judge Izlar, consented to by all the parties, so as to. authorize Mr. Dial, as assignee as aforesaid, “to pay from the proceeds of the real estate covered by the mortgage of Shattuck & Hoffman, the same being the property of the assigned estate of the said J. T. Poole, the sum of $2,700 to the said Shattuck & Hoffman, in satisfaction of the mortgage held by them on said land.”

The case came on for hearing on its merits before his honor, Judge Norton, who, on the 3d of May, 1893, filed a decree, the nature and scope of which may be seen by reference to the case of Mann v. JPoole, reported in 40 S. O., 1. Sufficient to say here, that, amongst other things, the deed of assignment was set aside, and Mr. Dial, named therein as assignee, was ordered to turn over to the receiver, then appointed, all the property embraced in said so-called deed of assignment, and if any of it had been sold, to pay over the proceeds of such sale to the receiver, reserving the question whether Mr. Dial should be entitled to any compensation, and if so, how much, for his services while acting as assignee, until the further order of the court. It seems that though the receiver was appointed by this decree, filed, as above stated, on the 3d of May, 1893, he did not qualify until the 4th of January, 1894, and the assets were turned over to him on the 15th day of that month. This delay was probably owing to the fact that an appeal was taken from the decree of Judge Norton, which was not finally disposed of until the 6th of December, 1893.

After the appeal was finally disposed of, an order was granted by his honor, Judge Townsend, consented to in writing by all parties, the date of which is not appended to said order, but it is stated in the “Case” that it was passed on the 12th of February, 1894, directing “that the defendant, N. B. Dial, heretofore acting in the supposed capacity of assignee of the defendant, J. T. Poole, under a purported deed of assignment, executed by the said Poole to the said N. B. Dial on May 18th, 1892, do, and he is hereby directed to, turn over to H. W. Anderson, as receiver, appointed in the above stated action, all the funds received by the said N. B. Dial from the sale and collections made by him under said supposed deed, excepting such pay- • ments and disbursements as were made by the said N. B. Dial while acting in his supposed capacity as said assignee, including the fee of $500 allowed and paid to F. P. McGowan, and the sum of $1,800 paid to Shattuck & Hoffman.” The order further directed that the receiver “do, out of the funds arising from the sale of the stock of goods,” pay certain sums of monéy, amongst which are “the fees of the plaintiff’s attorneys for services rendered in behalf of creditors, the said fees to be hereafter determined, and to N. B. Dial, Esq., such compensation, if any, as may be allowed him, to be hereafter determined.”

It further appears that certain of the creditors of J. T. Poole recovered judgments against him before the 21st of June, 1892, when the action of Mann v. Poole was commenced; certain others of the creditors of said Poole, amongst whom are the parties named as appellants in the title of this case, recovered their judgments after the commencement of said action, but before the decree of Judge Norton appointing a receiver; while the plaintiffs, Mann & Go., recovered their judgment by the same decree by which the receiver was appointed. Under the decree of Judge Norton, all of the creditors of J. T. Poole were required to prove their demands before the clerk of the court by a day certain, or be “barred of all benefit to be derived from the further decree of the court, to be rendered herein in reference to the assigned estate of said debtor.” Under this order, the several judgment creditor’s, as well as sundry simple contract creditors, came in and established their claims; and one of the main questions in this appeal is as to the order in which such claims should be paid.

The clerk made his report on the claims presented, together with the testimony, and upon such report the case was heard by his honor, Judge Watts, who rendered his decree, a copy of which should be incorporated in the report of this case, and from this decree several of the parties have appealed upon the several grounds set out in the record, which need not be stated here, as several of them are but repetitions of others; and we, therefore, propose to consider the several questions which we understand to be presented by these grounds rather than to take up the grounds seriatim. These questions are: 1st. What compensation, if any, should be allowed N. B. Dial, Esq., for his services while acting as assignee under the deed of assignment which has been set aside? 2d. What fees, if any, shall be allowed plaintiff’s attorneys, and out of what fund paid? 3d. In what order are the creditors who have established their demands against Poole entitled to be paid?

1 As to the first question, there can be no doubt that the deed of assignment, as between the immediate parties to it, was good and valid, and under the provisions of that deed, and the law relating thereto, the assignee assumed certain duties which he was bound to perform promptly; and what is more to the point, there is as little doubt that Mr. Dial was recoguized and treated as assignee by the court in this very case up to the time the receiver was appointed, and hence we do not think it admits of question, that he is entitled to compensation as assignee. The fact that the deed of assignment was after-wards set aside for fraud, in which it is not even intimated that Mr. Dial participated, and for which he was in no wise responsible, cannot affect the question. As we have said, the deed as between himself and the assignor was good, and under it he assumed the performance of certain duties, which the evidence shows he did perform, not only promptly, but intelligently, and in such a manner as enured to the benefit of the creditors; and the only effect of the decree setting aside the assignment, so far as he was concerned, was to sever his connection with the assigned estate from that time forward.

2 The next inquiry is, what is the amount of compensation to which Mr. Dial is entitled? Regarding him as, at least, a de facto assignee, that question is answered by the express terms of the statute (section 2145 of Revised Statutes), and we are unable to see by what authority a court can go beyond this express statutory provision. It will be observed that there is no provision in the assignment law which provides for any extra compensation to an assignee for any extraordinary trouble in the management of the assigned estate, as there is in case of executors and administrators, under section 2070 of the Revised Statutes. It seems to us, therefore, that there was error in allowing the assignee anything more than the amount fixed by statute, to wit: five per cent, on all money actually collected by him from the assets, and two and one-half percent, on all money paid out by him, not including, however, the amount turned over to the receiver under the order of the court, for to include that would be to subject that fund to double commissions. See Floyd v. Priester, 8 Rich. Eq., 248, which, though not actually in point, is somewhat analogous.

3 As to the second question — whether any fees shall be allowed the plaintiff’s attornéys — it seems to us that that branch of the question is concluded by the order of Judge Townsend, which was not only not excepted to nor appealed from, but also actually consented to in writing, and has, therefore, become the law of this case. ’ This differs from the case of Tillinghast v. Boston Company, 39 S. C., 484, cited by one of the counsel; for there the question was whether a client would be bound by a private agreement made outside of the court, whereby his attorney undertook to obligate his client to pay the fees of an attorney for the other parties, while here the question is as to the effect of an order of the court made upon the written consent of the attorneys representing the several parties before the court. The other branch of this question— the amount of the fees to be allowed the plaintiff’s attorneys— is more embarrassing. We must confess that the amount as fixed by the Circuit decree does seem to be quite large — perhaps too large. But this is a question of fact, and under the well settled rule, we do not see how we can disturb the finding of the Circuit Court, for there certainly was some testimony to sustain it, and; indeed, we are bound to say that the weight of the testimony seems to be in favor of the view taken by the Circuit Judge. As to the fund out of which such fees are to be paid, no real controversy seems to be made. At all events, we concur with the Circuit Judge as to this point.

The third question is as to the order in which the judgment creditors are entitled to be paid out of the assets of the assigned estate in the hands of the receiver.. These judgment creditors may be divided into three classes: 1st. Those who obtained their judgments prior to the commencement of the action of Mann v. Poole. 2d. Those who obtained their judgments after the commencement of that action, but before the decree appointing a receiver to take charge of the assets of the estate of Poole, and administer the same under the order and direction of the court. 3d. The plaintiff’s judgment obtained at the same time as the decree appointing the receiver was made, and in the same case.

4 As to the first class, we understand it to be conceded that these creditors are entitled to be first paid out of such assets as their judgments bad alien upon — that is, the real estate; but whether conceded or not, these judgments unquestionably are entitled to such preference, for it is well settled, that when a deed is set aside, it is, as to creditors, as if it never had existed (Gracey v. Davis, 3 Strob. Eq., 55, Claflin v. Iseman, 23 S. C., 416, and Younger v. Massey, 41 Id., 50); for when these judgments were obtained, they at once became a legal lien upon all of the real property of the judgment debtor, except the homestead, situate in the county where the judgments were entered, or in a county where transcripts thereof were filed, from the time of such filing, notwithstanding the fact that the judgment debtor had made what proved to be an abortive attempt to convey away his real estate previous to the recovery of such judgments.

5 The next inquiry is as to the status of the judgments in the second class. It will be observed, that the action of Mann v. Poole, while purporting to be a creditors’ bill, lacked one of the features of such a bill; for, while the plaintiffs say in the complaint that the action is brought “on behalf of themselves and of all others, the creditors of the defendant, J. T. Poole, who shall in due time come in and seek relief by, and contribute to the expense of this action,” yet no injunction was ever asked for or obtained, restraining the other creditors from seeing or prosecuting their actions already commenced; and they further say that it is desirable to have a receiver appointed to take charge of the assets, and to make, under the orders of the court, an equitable distribution of the proceeds of such assets — not amongst all creditors, but amongst those “who shall, in due time, come in and seek relief by this action, and contribute to the expense thereof;” and, so far as appears by the record before us, none of the other creditors ever did so come in, and were only brought in by the order of Judge Horton, requiring them to prove their demands before the clerk, which order or decree was not made uutil after the creditors belonging to-this class had otained their judgments. It is obvious, therefore, that these creditors were offered the option, either to come in on the terms proposed or to stay out and pursue their legal rights in the ordinary way, from which there was nothing to forbid them; and having adopted the latter alternative, it is difficult to conceive of any good reason why they should be deprived of any advantage which they may have legally obtained.

In the case of Gracey v. Davis, supra, which was stated to be a creditors’ bill, although the pleadings are not set out in the report of the case, and recognized as such by the provision for the payment of the fees of the solicitor “who brought the general bill on behalf of the creditors,” the rule was laid dowm by Dunkin, Ch., in delivering the opinion of the court, in the following language: "The effect of setting aside the deeds is to leave the creditors to enforce their claims, and obtain satisfaction according to their legal priorities; or if the court takes charge of the fund, to direct them to be paid according to their legal rank.” The same principle was recognized in Claflin v. Iseman, supra, and Curlee v. Rembert, 37 S. C., 214, though the two cases last cited are not cited as exactly in point in the present case. The case of Wiswall v. Sampson, 14 How., 52, which seems to be relied upon by the Circuit Judge, is not in point, for the only point decided in that case, so far as the question we are considering is concerned, was that a judgment creditor having a lien upon the land of an insolvent debtor, which is in the possession of a receiver, appointed by the Court of Chancery, under a bill by a creditor against the debtor and a third person, to set aside a conveyance to the latter for fraud, cannot levy his execution upon such land, if he have notice of the fact that the property is in the custody of the law, but his remedy is to apply to the Court of Chancery, which will take care to protect his interest in making a sale or in distributing the proceeds. This is exactly in accordance with the principle laid down in Gracey v. Davis, supra, to wit: that if the court takes charge of the fund, lit will direct that it be paid out to the creditors according to their legal priorities. So that if the judgment creditors standing in the second class had undertaken to levy their executions upon the land of Poole, after the court had taken charge of his assets and placed them in the hands of a receiver, then the ease of. Wiswall v. Sampson would have been precisely in point. But these creditors have not undertaken to do anything of the kind. On the contrary, they are pursuing the same course indicated as the proper course in the case of Wiswall v. Sampson — that is, asking the court to respect and provide for their legal priorities.

It is true that Mr. Justice Nelson, in delivering the opinion of the"court in Wiswall v. Sampson, does say: “That where the subject-matter of the suit in equity is real estate, and which is taken into the possession of the court pending the litigation by the appointment of a receiver, or by sequestration, the title is bound from the filing of the bill, and any purchaser pendente lite, even if for a valuable consideration, comes- in at his peril.” But, in the first place, this remark is manifestly a mere dictum, as no such question was presented in that case. And, in the second place, the distinguished justice, immediately preceding the remarks just quoted, makes a quotation from Chancellor .Kent, who, in delivering the opinion of the court as Chief Justice in Codwise v. Gelston, 10 Johns., 522, uses this language: “That if a fund for the payment of debts be created under an order or decree in chancery, and the creditors come in to avail themselves of it, the rule of equity then is, that they shall be paid in paripassu, or upon a footing of equality. But when the law gives a priority, equity will not destroy it, and especially where the legal assets are created by statute, as in case of a judgment lien, they remain so, though the creditors be obliged to go into equity for assistance. The legal priority will be protected and preserved in chancery.” It will be observed that the dictum of Mr. Justice Nelson, above quoted, applies only to a case where property, which is the subject-matter of a suit, is purchased pendentelite, and nothing is said as totheeffect of liens legally obtained upon such property after the commencement of the suit, but before the court has taken possession of the same and placed it in the hands of a receiver, and the remarks quoted from Chancellor Kent seem to indicate that such liens would be respected.

The case of Meinhard v. Youngblood, 41 S. C., 312, has also been cited by counsel in the argument here in support of the view taken by the Circuit Judge. But an examination of that case will show that it differs widely from the present case. In that, case, certain of the creditors of Youngblood commenced action on their claims, and at the same time sued, out warrants of attachment, which were levied upon the property of Young-blood. Thereupon the plaintiffs, Meinhard Bros. & Co.,-commenced this action against Youngblood and the attaching creditors to set aside the attachments upon the ground of fraud, and soon thereafter obtained an order from his honor, Judge Wallace, enjoining and restraining the attaching creditors from prosecuting their suits and attachment proceedings. The defendants subsequently moved before Judge Wallace to vacate irder of injunction, which motion was refused. Subsetly, the case came before his honor, Judge Witherspoon, hearing upon the merits, when the defendants interposed ■al demurrer, upon the ground that the complaint did not facts sufficient to constitute a cause of action. The de■er was sustained and the complaint dismissed, and from rder to that effect the plaintiffs appealed, and the order idge Witherspoon sustaining the demurrer and dismissing omplaint was reversed, and the case sent back for a hearipon the merits, which resulted in a judgment in favor of )laintiffs. While this appeal was pending, but before it determined, the attaching creditors proceeded with their ns and recovered judgments therein, and when by final 3e the creditors were called to establish their demands, the jhing creditors set up their claims as judgments, and the tion was whether they were entitled to priority as such, court held that they were not entitled to any such priority, tically, for the reason that the injunction originally granted iidge Wallace had never been legally dissolved, for though ye Witherspoon did grant an order sustaining the demnr.nd dismissing the complaint, the practical effect of which ,d have been to dissolve the injunction, if such order had sustained; yet as it was found on appeal to be erroneous was set aside, it was the same as if no such order had ever passed, and hence these judgments recovered in violation ae order of injunction were illegally obtained, and could ie allowed any force or effect as judgments. Butin the snt case there never was any order of injunction restraining, creditors standing in the second class from commencing or ecuting their actions, and nothing whatever to prevent 3 creditors from pursuing their legal rights in the usual and hence nothing to prevent them from obtaining the ments which they now set up. The difference between the cases is, therefore, very obvious and fundamental,

6 is insisted, however, that by the order of Judge Aldrich, ut above, which was passed before the creditors standing in the second class obtained their judgments, the court, in effect, though not in form, took charge of the assets belonging to the assigned estate of Poole, and that no judgment obtained after that time could have any legal lien upon such assets. We do not see how the order of Judge Aldrich can be properly so construed. It certainly does not purport. to take charge of the assets, and there is nothing in the language used which implies any such intention. On the contrary, the express object of the order was simply to restrain N. B. Dial from paying out any of the funds which had or might come into his hands under the alleged deed of assignment, except as therein excepted. Pending the attack upon the validity of such deed, its manifest and sole object was simply to preserve matters in statu quo, while the court was investigating the validity of the deed of assignment. And the idea that the order of Judge Aldrich should be regarded as a recognition of the validity of the assignment, and hence that these judgments, having been obtained after the date of such deed, could have no lien upon the land therein conveyed, seems to us, if anything, still more far-fetched. Such a motion is utterly inconsistent with the declared purpose of the order, for if Judge Aldrich considered the deed valid, what possible reason can be suggested why he should restrain the assignee from performing the duties imposed upon him by the deed. Besides, we would be very slow to believe that any judge would undertake to pass upon the validity of a deed assailed by the pleadings without hearing the case upon its merits.

We are, therefore, of opinion that the judgment creditors standing in the second class above stated, are entitled to priority iu the distribution of the proceeds of the sales of such pro-' perty as their judgments were a lien upon, after the liens of the judgment creditors standing in the first class are satisfied, in the order of the dates of the respective judgments held by the creditors standing in the second class; and we think that the Circuit Judge erred in holding otherwise.

7 It only remains to consider the third question — whether the plaintiffs acquired any priority by instituting this action. It is difficult to conceive of any just ground upon which they can claim any priority. Their costs and counsel fees have been provided for, and why should they be any better provided for than any other creditor? But this question has been so conelusivelv determined by at least two authoritative eases, that we need not pursue the subject further. In Day v. Washburn, 24 How., 352, it was held, that where a simple contract creditor (and such is the rank of the plaintiffs in this case) files a bill against his debtor and his assignee, to set aside the assignment for fraud, the party filing the bill acquires no priority over other creditors who afterwards come in. In the absence of alien by judgment or otherwise, the rule in equity, in such a ease, is equality. The same doctrine is emphatically recognized by this court, in the case of Younger v. Massey, 41 S. C., 50.

The judgment of this court is, that the judgment of the Circuit Court be modified, in accordance with the views herein expressed; and that in all other respects the said judgment be affirmed. Let the case be remanded to the Circuit Court, for the purpose of carrying out the views herein announced.