Hart v. Sandy

English, Judge : This was a suit in equity brought by C. M. and J. B. Hart in the Circuit Court of Roane county against G. W. Sandy, Samuel Noe, Letitia Noe, William E. Swiger, trus — 646 — tee, B. F. Lowe, John Nay and G. T. Harrison. The plaintiffs say in their bill that on the 15th of October, 1889, they sold to the defendant, G. W. Sandy, a boiler for use in a steam-mill, a sawmill rig and fixtures, a bill of pulleys, small shafting, boxing, piping, belts, and an inspirator and fixtures for use in connection with said sawmill at the price of eight hundred and eighty dollars, of which sum said Sandy paid three hundred dollars and executed to plaintiffs his two promissory notes for two hundred and ninety dollars, each bearing date the 15th day of October, 1889, and falling due respectively at nine and eighteen months with interest from date at six per cent, per annum for the residue of said purchase-money ; — that at the time of said sale to said Sandy and the execution of said notes by him it was expressly understood and agreed by and between the plaintiffs and said Sandy, that he should execute a deed of trust upon said property so purchased to secure said two promissory notes, and that said notes recite on their face, that they are secured by deed of trust, but the said deed of trust was not then prepared, for the reason that said Sandy was in a hurry to get his said mill and fixtures removed to the place, where he expected to set the same up, and the plaintiffs then agreed to have said deed of trust drawn up and sent to said Sandy for his signature and acknowledgment at an early day; — that plaintiffs did afterwards have said trust deed prepared, and about the 1st of February sent the same to said Sandy for his signature and acknowledgment, but he failed and refused to sign or acknowledge said trust-deed and has not as yet signed the same; — that at the time of the purchase of said property from plaintiffs said defendant was the owner of a steam-engine and fixtures for a gristmill, which he had purchased from the defendants B. F. Lowe, John Nay and G. T. Harrison, and which was then located in the county of Harrison ; — that after said purchase from plaintiffs he moved the property purchased from plaintiffs and the property purchased from Lowe, Nay and Harrison to the county of lloano in this state; — that, after said Sandy had run said sawmill for several months, he, by and with the advice of the defendant Samuel Noe made a voluntary and fraudulent transfer of said sawmill — 647 — and fixtures and said gristmill and fixtures and also of a horse, saddle and bridle, which he then owned, to the defendant Letitia Noe, who was then and still is the wife of said Samuel Noe; — that the said Samuel Noe pretended to be acting as the ageut of his wife in the purchase of said property from the defendant Sandy ; — that said transfer was made by written instrument in the form of a deed which was brought to the town of Spencer by said Noe and filed in the clerk’s office for record, and is now of record in said clerk’s office, a certified copy of which is filed as Exhibit A; —that the said transfer of said property was made by said Sandy with intent to hinder, delay and defraud his creditors of and from what they are entitled to, and especially to hinder, delay and defraud the plaintiffs in the collection of their said debt against him, and to screen said property so that it could not be reached by legal process in any proceeding which plaintiff's might institute for the recovery of their said claim ; — that said Letitia Noe and Samuel Noe had full notice and knowledge of the fraudulent intent of said G-. W. Sandy in making said transfer, and full notice, that Sandy was largely indebted to the plaintiffs and to other persons and had contracted to give plaintiff's said deed of trust to secure said debt to them ; — that said Samuel Noe was the confidential adviser of said Sandy in said transaction and participated with him in said scheme for the purpose of aiding him in carrying out his fraudulent designs against the plaintiff's and colluded with the said Sandy and procured him to make said conveyance to the said Letitia for the further purpose of profiting himself thereby; — that said transfer to said Letitia was voluntary and not upon a consideration deemed valuable in law;— that, if any money or other thing of value passed from said Letitia to Sandy as a consideration for said transfer, it was again returned to her by said Sandy; — that, if any payment of money was made, the said Sandy furnished the same and caused it to be paid for the purpose of giving color and semblance of fairness to said transaction ; — that soon after said fraudulent transfer of said property said Samuel Noe, pretending to be acting as the ageut of his said wife called in a witness and turned over to the — 648 — said Sandy four hundred and eighty dollars, claiming the same was the last payment on said mills, which he pretended to be paying for his wife, Lettia Noe, and took from the said Sandy a written receipt for said money, all of which plaintiffs charge was done for the purpose of giving color to said alleged sale and for no other purpose, and which money was either furnished by the said Sandy for said purpose or was returned by him to the said Samuel and Letitia Noe ; — that said Sandy left the state soon after said transfer without having provided for the payment of the plainlifis’ demand, or securing the same in any way, and that the property so transferred was the only property owned by said Sandy at that time and was worth at least two thousand dollars; — that said Sandy had taken said Samuel Noe in as a partner in said milling business a short time before said transfer, and that said Letitia was prior to her marriage to said Samuel Noe the widow of a deceased brother of said Sandy; — that said Sandy was an unmarried man and boarded in the family of said Samuel Noe for some time previous to said transfer; — that the said sawmill, boiler and fixtures, etc., are now located on the lands of Samuel Noe in Roane county and were so located prior to said transfer; — that about the 1st day of October, 1889, said G. W. Sandy executed to the defendant VV. E. Swiger, trustee, a deed of trust upon said engine and gristmill and fixtures to secure to the defendants B. E. Lowe, John Nay and G. T. Harrison the sum of five hundred dollars therein mentioned, but plaintiffs are not informed, whether the same has been paid or not, which deed of trust was duly admitted'to record, and the plaintiffs call on said Lowe! Kay and Harrison to answer and say how much, if anything, has been paid on said trust-debt, and what amount remains unpaid thereon; — and they pray that said fraudulent transfer of said property to said Letitia Noe may be set aside and declared fraudulent and void as to the plain--tifts’ demand, that they may have a decree for their claim against said Sandy, and that said sawmill and fixtures etc., may be sold to satisfy the plaintiffs’ demand efe. B. E. Lowe, John Nay, G. T. Harrison, and W. E. Swi-ger, trustee, answered said bill denying that anything had — 649 — ever been paid on their trust-deed. Samuel bToe also answered said bill stating that G. W. Sandy owed him six hundred dollars in April, 1890, and that Letitia LToe, his wife, had something over five hundred dollar’s in cash, which she had received as a sum in gross in lieu of dower in her former husband’s estate; and that to enable him to save said six hundred 'dollars she agreed to purchase the mill property, fixtures etc., of said Sandy, if respondent would pay as much as five hundred dollars on said property and wait on her until a sale of said property could be made to enable her to repay him, which proposition was agreed upou, and she made the purchase; and he proceeds to put in issue every material allegation of the plaintiffs’ bill. Letitia ifoe also filed her answer putting in issue the allegations of the bill as to her connection with the transaction. The plaintiffs also filed an amended bill, in which they alleged,that the agreement made and entered into between said G. W. Sandy and the plain tills at the time of the sale of said sawmill and fixtures, that the said Sandy would give a deed of trust on the said property as security to the plaintiffs for the said two promissory notes of two hundred and ninety dollars each, was a part of the consideration of said sale to said Sand}’ and created an equitable lien upon said property in favor of the plaintiffs, of which the said Samuel Eoe and Letitia N"oe had notice, at the time the defendant Letitia Eoo purchased the said property from said Sandy through the said SamuelLToe as her agent; and they pray, that in the event the court should be Of opinion, that the transfer of the entire property from said Sandy to said Letitia is not fraudulent or voluntary, then the plaintiffs’ equitable lien created by said agreement may bo enforced against the said property, and the same be sold to satisfy the plaintiffs’ debt and costs. G. W. Sandy demurred to said amended bill, and Samuel IsToo and Letitia ISToe answered the same, and the cause was heard upon the bill, amended bill, answers to each and replications thereto and upon the demurrer to said amended bill, which demurrer upon consideration was overruled by the court and disallowed; and the court held that the plaintiffs were not entitled to the relief prayed for and — 650 — dismissed their original and amended bills with costs but without prejudice as to any suit, which the plaintiffs might thereafter institute against said G. W. Sandy ; and from this decree the plaintiffs appealed. The first error assigned and relied upon by the appellants is, that the court erred in holding said transfer of said property'to Letitia Noe valid as against appellants’ debt, claiming that the proofs show clearly, that there was fraud in the transfer, and that defendants Samuel and Letitia Noe had notice of G. W. Sandy’s fraudulent intent and participated therein. In determining a question of this character this Court has frequently held, that the surrounding circumstances may be taken into consideration, and from the fact, that fraud seeks concealment, circumstantial evidence is frequently the only evidence that can be obtained. The question then presented for our determination is: Did G. W. Sandy convey the property in the bill mentioned to Letitia Noe with intent to hinder, delay and defraud the plaintiffs in the collection of their debt, and did said Letitia Noe have notice of said fraudulent intent? When we go to the date of the purchase of the mill and machinery by G. W. Sandy from the plaintiffs, we find that said Sandy shortly before purchasing said machinery had sold his land for two thousand one hundred dollars in cash and a horse valued at seventy five dollars, and that out of this he paid the plaintiffs the cash payment of three hundred dollars on said sawmill and fixtures on the 15th day of October, ,1889, and executed to the plaintiffs his two notes for two hundred and ninety dollars each payable respectively in nine and eighteen months with interest from date for the residue, which notes were to be secured by deed of trust upon said sawmill and fixtures, when said machinery was delivered to him. O. W. Gould states in his testimony that the reason said deed of trust was not executed at the time the sale was made was that it was the middle of the afternoon before the trade was consummated, and G. W. Sandy did not want to wait until the deed could be prepared, as he wished to get to Jane Lew in Lewis county that evening; but he — 651 — mude arrangements with the plaintiffs to prepare same and send it to him in Roane county (Sandy’s home) and then he would execute said deed and have it put on record in Roane county at the plaintiff’s expense. Said witness also states that the plaintiffs prepared said deed of trust and sent it to said Sandy by him, and that he communicated the .facts concerning the agreement between plaintiffs and said Sandy to execute said deed of trust to said Samuel Noe, the defendant, by reading to him a letter from C. M. Hart to ■witness setting forth said agreement prior to the 1st of April, 1890 ; that he was trying to induce Noe to influence said Sandy to execute the deed of trust, which he had at the time, as he, Sandy, was liable to have trouble unless he did so ; that at the time witness read the letter to said Noe from Hart, before referred to, which was prior to April 1, 1890, he (Samuel Noe) remarked to witness that he had no interest in the controversy of Sandy with Hart, and that Sandy would have to settle that, but he (Noe) had already bought a one third interest in said mill and machinery, and had paid Sandy for same in cattle and lands, which conversation took place at the Taylor schoolhouse. The witness further says that he presented said deed'of trust to said Sandy twice in the month of February, 1890, and he refused to execute it each time, but did not deny his agreement with plaintiffs to execute the same. Now, it appears that Letitia Noe, to whom this property was conveyed on the 26th day of April, 1890, before she became the wife of Samuel Noe, was the widow of G. W. Sandy’s brother. She was sick in bed at the time this property was conveyed to her. It also appears that on the 22d day of February, 1890, she had received from W." S. Hay-mond the sum of five hundred and forty four dollars and fifty cents as a gross sum in lieu of her dower in certain lands of which her first husband died seised and possessed, and that in order to save about six hundred dollars, which G-. W. Sandy owed her husband, Samuel Noe, she agreed to purchase said mill-property andfixtures from said Sandy, her said husband acting as her agent in the transaction. This statement, however, does not comport well with the statement made by said Samuel Noe to the witness Gould, — 652 — that he had already bought one third of said mill and machinery from said Sandy and paid him in land and cattle. The question naturally suggests itself: If said G-. W. Sandy owed said Samuel Hoe six hundred dollars, why did ho pay him in lands and cattle for said one third interest, and why the necessity of said Letitia Noe advancing her five hundred dollars to aid in purchasing said property to save a debt of six hundred dollai-s due her husband, when said husband had been paviug said Sandy in lands and cattle for a portion of the property ? And again, the witness Gould says that said Samuel Hoe asked him “if he did not think that Sandy (or we) had set that job up nicely on Hart.” Samuel Hoe states in his deposition that he acted as the agent of his wife, Letitia Hoe, in the purchase of the mill property, and that he had heard from one Gould that said Sandy was to give a deed of trust to plaintiffs to secure their debt, hut that Sandy denied it. The evidence, then, clearly shows that Samuel Hoc had notice of the existence of the debt from said Sandy to plaintiffs, and the fact that he had agreed to secure the same by trust-deed. When we consider the intiinato relations between husband and wife and the relationship existing between said Sandy and Letitia Hoc and the further fact, that said G. W. Sandy had been doing business in partnership with Samuel Hoe, and that said Letitia was called upon to pay out her own money, which she had received from her deceased husband’s estate, there can he no doubt, that this transaction had been thoroughly discussed between said G. W. Sandy and Samuel Hoe and his wife. Said Samuel Hoe in his deposition states that said Sandy told him that he owed plaintiffs about five hundred 'dollars, and, when asked the question ; “ Lid you not agree with G. W. Sandy to pay plaintiff’s claim against him ?” — replied, “ I did not; Sandy told me that he would leave a payment for Ilarf at Charleston.” Again, it appears in evidence that when G. W. Sandy conveyed to said Letitia Hoe said mill property he parted with all the visible property he owned, except a horse, saddle and bridle, which.the defendant Samuel Hoe says he afterwards purchased from him, paying him therefor one hundred dollars. — 653 — Another circumstance, which should be given some importance in this case, is that the witness, Geary, states that on the 20th day of May, 1890, twenty four days after the date of said conveyance to said Letitia Hoe and twenty one days after said conveyance was acknowledged and. admitted to record, Samuel Hoe paid G. "W. Sandy four hundred and eighty dollars for the defendant Letitia Hoe, which witness counted, and Mr. Hoe took a written receipt for the money, which lie witnessed at their request. Why was this particularity and formality observed, if there was not some apprehension? and that there was not only notice, but also apprehension of some difficulty in making the purchase is apparent from the testimony of Edmund Hug-ill, who states that he asked Mr. and Mrs. Hoe, if there -was any arrangement' to pay the notes given by Sandy to Hart for the mill. Their auswer was that there was no arrangement made, and that they would not pay the notes. Ho then informed them that he -would sell the mill, if they did not pay said notes. Mr. Hoe said he would be with us or something to that effect. Witness then asked Hoe, if he did not know, that the trade with Sandy was not to be- closed until the deed of trust was executed as agreed by Sandy, lie answered in the presence of Letitia Hoe, that ho know about the deed of trust, or that he had heard of the deed of trust, but that he had taken counsel of an attorney, and that he had told him (Hoe) that there was nothing on record against said property, and that ho would be safe in buying it. How, while it is true this conversation occurred after said Sandy had sold said property to Letitia Hoe, yet it shows an admission on the part of said Samuel Hoe, that he knew about the deed of trust or had heard about the deed of trust and had taken counsel of an attorney in regard to the matter, who advised him that there was nothing on the record against said property*, and he would be safe in buying it. The circumstances shown by the evidence iu this cause can lead to no other conclusion than that G. W. Sandy made this conveyance to his relative Letitia Hoe with the intention of hindering, delaying and defrauding the plaintiffs. Shortly before purchasing this mill and machinery — 654 — from the plaintiffs he had sold his land for two thousand and one hundred dollars cash and a horse valued at seventy five dollars. At the time of the purchase of said machinery he was in so much of a hurry to leave Shinuston and reach Jane Lew, that he had not time to execute the deed of trust to secure the notes given by him for the deferred payments, and when the trust-deed was prepared and sent to him for execution in Roane county, and although the same was presented to him twice in the month of February 1890 with a request, that he should execute it, ho positively refused. His scheme was to sell said mill aud fixtures to his relatives in such a way, that it could not be reached by plain tiffs, pocket the proceeds and go to the Western states. At least that was what he attempted to do, and that was the reason' that Samuel Hoe consulted counsel, as shown by the deposition of the witness Ilugill, to ascertain whether he would be safe in buying the property. Did Letitia Hoc have notice of the fraudulent intent of G. W. Sandy in selling and conveying said property to her (for a written conveyance was executed and acknowledged and recorded when the property would have passed by delivery, being personal property) ? It. appears from the testimony of Samuel Hoe and from the answer of himself and wife, that ho acted as the agent of his wife in making the purchase of this machinery. Upon the question of notice, we find the law stated thus in 1 Am. & Eng. Ency. Law, p. 419 : “In the relation of the principal to a third party, the undisputed rule exists that notice to the agent is notice to the principal, if the agent comes to the knowledge of facts while he is acting for the principal. But notice to the agent, to bind the principal, must be within the scope of the agent’s employment.” In the case of Jackson v. Sharp, 9 Johns. 163, it was held that, “if a subsequent purchaser have notice at tli.e time of his purchase of a prior unregistered deed, it is the same to him as if such deed had been registered; and if the agent of such subsequent purchaser, at the time of making the purchase, knows of the prior or unregistered deed, it is the same as notice to his principal.” — 655 — 1 Pars. Cont. (8tb Ed.) p. 75, states the law upon this point as follows : “A principal is affected by notice to his agent respecting any matter distinctly within the scope of his agency, when the notice is given before the transaction begins, or before it is so far completed as to render the notice nugatory. The notice to an agent may be implied as well as expressed ; knowledge obtained by the agent in the course of that very transaction is notice.” And in the-note it is said: “The reason generally given for charging the principal with notice is that it is the duty of the agent to communicate to his principal the knowledge he has of the subject-matter of the agency ; and in the latter class of cases (that is, where it was recently acquired) it is said that he is bound to do so irrespective of when the information was acquired, and that he is presumed to discharge this duty.” Upon this point we find it stated in Story, Ag. § 140 : “Notice of facts to an agent is constructive notice thereof to the principal himself, where it arises from or is at the time connected with the subject-matter of his agency; for, upon general principles of public policy, it is presumed that the agent has communicated such facts to the principal, and, if he does not, still, the principal having intrusted the agent with the particular business, the other party has the right to deem his acts and knowledge obligatory upon the principal; otherwise the neglect of the agent might operate most injuriously to the rights and intercsts'of such party.” Bump, on Fraudulent Conveyances, on page 494, says: “The notice of the fraud need only be sufficient to put a man of ordinary prudence and experience in business transactions upon the inquiry. * * * Whatever is sufficient to direct his attention to the prior rights and equities of creditors, and to enable him to ascertain their nature by inquiry, will operate as notice. "When a purchaser has knowledge of any fact sufficient to put him upon inquiry, he is presumed either to have made the inquiry and ascertained the extent of the right that he may possibly prejudice or to have been guilty of a degree of negligence fatal to the claim to be considered a bona fide purchaser. This — 656 — notice maybe derived from its statement of creditors.’or other parties. * * * The purchaser is chargeable with notice of all the matters which appear to be within the knowledge and memory of his agent.” Again, on page 204, the same author says : “It is not necessary that the grantee shall bo one of the originators of the fraudulent scheme. * * * There is no difference between those who form the design and those who afterwards enter into it with a knowledge of its character, and aid in carrying it out. The grantee is also bound, by the acts of his agent which ho adopts and confirms, and, if they are fraudulent, his own innocence will not suffice to protect the transfer.” Other authorities might be cited showing that notice to the agent while acting in the scope of his authority must be regarded as notice to the principal, but these are regarded as sufficient. I will, however, call attention to a portion of the opinion of Cabell, J., in the case of French v. Loyal Co., 5 Leigh 658. He says: “But although the law in many cases imputes notice to a man on evidence far short of that which, if its weight only were considered, would be necessary to prove actual notice, yet, if wo attend to the nature and character of the facts which the evidence in such cases does establish, we shall see that the law in imputing notice acts with its usual justice and equity. Thus on proof of notice to an agent, the law at once imputes notice to the principal, not because notice to the agent is proof that the principal actually had notice also, but because it is a fact of such a character that the principal ought to be as much bound by it as if he had notice.” See, also, Newlin v. Beard 6 W. Va. 111, and Fidelity Ins. T. & D. S. Co. v. Shenandoah Val. R. Co., 32 W. Va. 244 (9 S. E. Rep. 180) where this Court held that notice to a trustee was notice to a cestui qae trust, etc. How, all these authorities, when applied to the facts and circumstances of this case, preclude the defendant Letitia Hoe from denying, that she had notice of the fact, that Gr. "W. Sandy was indebted to the plaintiffs in the sum of five hundred and eighty dollars, and that ho had agreed to execute a deed of trust upon the property she purchased from him to secure the payment of said sum, and, although .said — 657 — deed of trust had been prepared and presented to said Sandy for execution, lie had refused to execute and acknowledge the same. In the case of McVeagh v. Baxter, 82 Mo. 518, it was held that “a creditor can not purchase the goods of his debtor at a price in excess of liis debt, when he knows that the excess so paid such debtor is by the latter to be placed beyond the reach of his other creditors; such purchaser is a participant in the fraud of his debtor, whether his purpose be to aid him or not.” The intimate relations between the parties to this transaction were such, that we must conclude, that Samuel Hoe was aware of the fact, that G-. W. Sandy was arranging his business with the intention of leaving the state, which he did shortly after the sale of his property; and he must have known from his refusal to execute the deed of trust to secure plaintiffs, that he did not intend to pay the plaintiffs’debt. The first note would fall due in July, and he left the state in June without complying with his agreement to secure the plaintiffs’ notes. Hot only so, he had sold the property on which he agreed to secure them. How, again, as to the particularity observed in counting the money and executing the conveyance for the transfer of this property, we find in 8 Am. & Eng. Ency. Law, p. 788, the law is stated thus: “Whenever there appear to be connected with the transaction circumstances indicating-excessive effort to give it the appearance of fairness or regularity, and which are not usual attendants of such business, the court and juries are often influenced in favor of the creditor. If parties not usually very exact in their negotiations carry out a transaction with great precision, accurate calculations, and the claim of the grantee made to overbalance the valuation, these, with other facts, will lead the court to believe the transaction is not bona fide. Generally, bona fide transactions do not need to be clothed with extraordinary pretenses of prompt payment.” So in the case of Comstock v. Rayford, 12 Smedes & M. 370, it was held that “ where it is not necessary to record a bill of sale of slaves, and yet the record of it is made, it looks as though it might have been done for effect,” etc. — 658 — In view, then, of the circumstances detailed by the evidence in this case there can be no question as to the fact, that the sale of this mill and fixtures by the defendant G. W. Sandy to Letitia Hoe was made with intent to hinder, delay and defraud the plaintiffs out of their just debt; and it is equally evident, that the defendant Samuel Hoe, while acting as the agent of said Letitia Hoe, aided said Sandy in carrying out his fraudulent intent and had full notice thereof; and that notice to him under the circumstances was notice to the said Letitia, and said sale and conveyance must be held void as to the plaintiffs’ claim. The appellants assign as an additional ground of error, that “ the court should have held, that the express agreement made by Sandy at the time of his purchase of said property to give a trust-deed upon the same to secure them is enforceable in equity against Samuel and Letitia Hoe, they having had notice of said agreement at the time of their purchase.” But as I have already arrived at the conclusion that said conveyance and sale of said property was made with intent to hinder, delay and defraud the plaintiffs, and that said Letitia Hoe had notice of such intent, and said sale was therefore void as to plaintiffs’ claim, it is unnecessary to discuss or pass upon the other assignment of error in this case. The decree complained of is reversed, and the cause remanded, with costs of appellants.