Matney v. Combs

198 S.E. 469, 171 Va. 244, 1938 Va. LEXIS 277
CourtSupreme Court of Virginia
DecidedSeptember 9, 1938
StatusPublished
Cited by15 cases

This text of 198 S.E. 469 (Matney v. Combs) is published on Counsel Stack Legal Research, covering Supreme Court of Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Matney v. Combs, 198 S.E. 469, 171 Va. 244, 1938 Va. LEXIS 277 (Va. 1938).

Opinion

Spratley, J.,

delivered the opinion of the court.

The Bank of Grundy, Incorporated, on November 18, 1930, recovered in the Circuit Court of Buchanan county, Virginia, a judgment against A. L. Rife, A. G. Matney, Arlin Matney, Alex E. Matney and W. M. Matney, for the sum of $3,000, with interest from December 21, 1929, together with costs and a ten per cent attorney’s fee for collection. This judgment was duly docketed on December 12, 1930.

On May 18, 1931, a receiver was duly appointed for the said bank.

Alex E. Matney filed a petition in bankruptcy in June, 1933. The schedules filed with his petition listed the above [248]*248judgment debt. The Bank of Grundy was his principal creditor, the total sum to other creditors amounting to a few hundred dollars only. The assets of the bankrupt, as scheduled, were negligible. The 164 acres of land hereinafter referred to were not listed as the property of the bankrupt. The bank did not file any proof of its claim in the proceedings. A discharge in bankruptcy was procured by Matney in December, 1933.

In November, 1934, the receiver of the bank filed a bill in chancery against the plaintiffs in error and others, in which it was sought to have set aside and vacated two deeds alleged in the bill to have been made for the purpose of hindering, delaying and defrauding the creditors of Alex E. Matney, and to subject the lands therein described, as the property of Alex' E. Matney, to a lien for the aforementioned judgment.

The two deeds cover successive conveyances of a tract or parcel of land containing 164 acres, located on Dismal creek, in Buchanan county, owned by Alex E. Matney at a time when he was indebted to the bank for the $3,000 debt. The first deed dated August 22, 1930, and recorded August 23, 1930, conveyed the 164 acres from Alex E. Matney and Nearvy Matney, his wife, to T. R. Davis, for the expressed consideration of $1,000, cash in hand paid. By the second deed dated September 18, 1931, and recorded March 29, 1932, T. R. Davis and his wife, for the same stated consideration, conveyed the same land to Nearvy Matney.

The bill of complaint further alleged that the creditor bank had no knowledge of the existence of the said deeds until a short time before the institution of the suit, and not until some months after Alex E. Matney had procured a discharge in bankruptcy, and the bankruptcy proceedings ended.

Alex E. Matney filed a plea of his discharge in bankruptcy, and alleged that by virtue thereof, he was released from the payment of all his “provable” debts, which existed prior to his bankruptcy, including the asserted lien of the judgment against his alleged real estate.

[249]*249Alex E. Matney and Nearvy Matney also filed an answer, in which they denied all allegations of fraud, and again averred that the discharge in bankruptcy of Alex E. Matney was a bar to the proceeding.

The trial court, by its decree, struck out the plea of bankruptcy, but directed and adjudged that the striking out of .such plea, should not be held, or construed to deprive Alex E. Matney “of any personal benefits of his discharge in bankruptcy, but is only meant and intended to decide and adjudicate that said plea of bankruptcy does not deprive the complainant of the lien of the judgment asserted by him against the land now owned by Nearvy Matney and proceeded against in this suit.” The decree further directed that the cause be continued “to allow petition to be filed before the judge of the United States District Court for the Western District of Virginia, asking that the bankruptcy case of Alex E. Matney be reopened, and an order entered by the referee therein to file his petition, asking that he be allowed to become a party complainant in this suit.”

By a stipulation filed in the record, it is shown that a petition was accordingly filed in the said United States District Court, and that on May 18, 1937, an order was entered therein by the referee in bankruptcy, refusing to reopen the bankruptcy case, or to appoint a new trustee, or authorize the former trustee to intervene in the cause pending in the State court.

The plaintiffs in error contend that the trial court should have sustained the plea that the discharge in bankruptcy relieved the bankrupt of all claims and demands, against him personally and against his estate, and that this suit should have been accordingly dismissed. They further contend that it is only through the trustee in bankruptcy that creditors can recover, and subject to the payment of their lien claims, property which a bankrupt may have fraudulently transferred prior to his bankruptcy.

It is admitted that the discharge released the bankrupt from personal liability for the debt. It seems to be well settled that a creditor of a bankrupt without a lien is [250]*250not entitled, where the trustee is not made a party to the suit, to maintain proceedings to set aside a fraudulent transfer of property made prior to the adjudication in bankruptcy. Ruhl-Koblegard Company v. Gillespie et al., 61 W. Va. 584, 56 S. E. 898, 10 L. R. A. (N. S.) 305, 11 Ann. Cas. 929, editor’s note and cases cited.

The receiver, on the other hand, contends that since the debt was reduced to a judgment, four months prior to the bankruptcy proceedings, and had become a lien on all of the real estate of or to which the judgment debtor was then possessed or entitled, its validity as a lien was not affected by bankruptcy. He further contends that he may enforce such lien either in the State or Federal courts against property fraudulently transferred by a bankrupt, and that his right of enforcement cannot be prejudiced by the failure or refusal of the trustee to take action either singly, as trustee, or jointly with him, as lien creditor, to set aside a fraudulent transfer, and subject the property to his lien.

If it be established that the alleged judgment has been duly rendered and docketed, it is a lien both upon the real estate then held by the judgment debtor and also upon any real estate, which he may have conveyed in fraud of such judgment creditor, after the debt was contracted and before judgment was rendered. Virginia Code 1936, sections 5184 and 6470; Tucker v. Foster, 154 Va. 182, 152 S. E. 376, 69 A. L. R. 220; Reilly v. Sabin, et al. (1935), 65 App. D. C. 125, 81 F. (2d) 259.

A discharge in bankruptcy operates to release the bankrupt and his after-acquired property from all of his provable debts, demands and claims, except those expressly exempted by section 17 of the Bankruptcy Act (Act of July 1, 1898, and amendments, 11 U. S. C. A., section 35). It thus bars debts, but does not bar the enforcement of liens against property. The ownership of property, the condition of its title, the liens thereon, and the extent of the interest therein, are not affected thereby. A discharge is purely personal to the bankrupt debtor. It neither pays nor extin[251]*251.guishes debts. It is a bar to enforcement against the bankrupt, but not a bar to enforcement against his property.

To the above effect, the courts, textbook writers, and the authorities are generally in complete accord. Remington on Bankruptcy, section 3443; 3 R. C. L. pages 320, 323; 8 C. J. Secundum, Bankruptcy, section 582, page 1567; 6 Am. Jur., pages 709-804, 805; John Leslie Paper Company v. Wheeler, 23 N. D. 477, 137 N. W. 412, 42 L. R. A., N. S., 292, 294; Reilly v. Sabin et al., supra.

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Bluebook (online)
198 S.E. 469, 171 Va. 244, 1938 Va. LEXIS 277, Counsel Stack Legal Research, https://law.counselstack.com/opinion/matney-v-combs-va-1938.