Catlett v. Alsop, Mosby & Co.

Buchanan, J., delivered the opinion of the court. This is the sequel to the case of Alsop, Mosby & Co. v. Catlett & Jenkins, reported in 97 Va., 364. That suit was brought to set aside an assignment made by the firm of Catlett <& Jenkins, and to subject the property embraced in it, other property acquired in lieu of the property conveyed, ¡and the profits derived therefrom, to the payment of certain .judgments due the complainants, upon the ground that the as•signment was made for the purpose of hindering, delaying, and ■defrauding the creditors of the grantors. It was decided in that case that the charges of fraud were not made out against the trustee or the only beneficiary in the deed of .assignment, who ■was charged with being a party to. the fraud, and the bill dismissed without prejudice, however, to the right, if any, of the creditors to proceed against Catlett & Jenkins and their wives to subject the property acquired and the profits made by the latter through the services of their husbands. Bor the purpose of subjecting the property and profits alleged to have been thus acquired, this suit was instituted by some of ■the creditors. The bill, after giving a history of the proceedings in the former • case and the amount and character of the eomplain — 682 — ants’ claims, makes the following allegations, briefly stated: That about April, 1893, the trustee in the deed of assignment sold to Mrs. C'oleman, the mother of one of the grantors and'' the aunt of the other, the remnant of a stock of goods for the sum of $1,500, to be credited on her debt of $3,000, preferred in and secured by the assignment; that immediately after this-purchase by Mrs. Coleman she entered into -a contract with the-wives of the- grantors by which she agreed to- let them have the-said stock of goods in consideration of their paying her whole debt of $3,000; that it was provided by this agreement that- the mercantile business was thereafter to be conducted in the name of Catlett & Jenkins, the husbands, for Mrs. Coleman until her debt was paid in full; that this contract was made in April, 1893, but not reduced to writing until a year afterwards; that by February, 1896, there had been paid out of the proceeds of this business, carried on by the husbands, Mrs. Coleman’s debt in full; that during the same period the house in which the-business was conducted was conveyed to the wives for the consideration of $1,725.00, and also another house and lot at the price of $2,000, all of which was paid out of the proceeds of the store conducted by the husbands; that neither of the wives had any separate estate, property, or money when they purchased the stock of goods of Mrs. Coleman, and’ paid nothing thereon or on the price of the said real estate conveyed to them,, but the purchase price of the goods and real estate was paid entirely out of the proceeds and profits of the store conducted by their husbands; that by exhibits -filed by the wives in the-former suit it appears that from about April, 1893, to November, 1897, the aggregate sales of the store were over seventy-nine thousand dollars, upon which they admitted there was a profit of thirty-three and one-third per cent.; that in the year 1898 the husbands established a store in Newport News similar to the one at Pocahontas, which is carried on in the names of the wives, and has been doing a lucrative business, as the com — 683 — plainants axe informed; that these, stores are conducted exclusively by the husbands; that in fact there never has been in reality any change in the actual conduct of the business and ownership of the property from the beginning; that all the proceeds and profits arising therefrom wherever placed or invested, or into whatever they may have been converted, were the result of the labor, skill, and conduct of the husbands, who made all the purchases for the stores; going to northern and eastern markets for that purpose; that the husbands have given their personal attention not only to the purchases, but to the selling of the goods, employed the clerks, kept the books and bank account; that, in short, all the profits and accumulations of property claimed by the wives are due solely to the labor, skill, attention, and management of the husbands; that the-wives not only have no estate whatever upon which to do business, but rendered no personal attention or service in its management; that the real estate and stock of goods thus held was created by the skill and labor of the husbands and belonged to them; that having the real estate conveyed to the wives and conducting the stores in their names was a mere device to hinder,, delay, and defraud the creditors of the husbands from subjecting the property to the payment of their debts; and asked that the whole of said property might be subjected to their debts, or, if that could not be done, a just and proper portion of the profits made by the husbands in conducting the business in the names of the wives be set apart and subjected to the payment of the complainants’ judgments. The facts out of which this controversy grows are sufficiently stated in the opinion of this court in the case of Alsop v. Catlett, 97 Va., 364, to render unnecessary any further statement of' what occurred prior to the date of Mrs. Coleman’s purchase of the said remnant of a stock of‘goods conveyed by Catlett & Jenkins for the benefit of their creditors. It appears from the record that after Mrs. Coleman purchased! — 684 — that stock of goods she continued the business, conducting’ it at the same place, and in the name of Catlett & Jenkins, agents; that she subsequently made an agreement with their wives by which she sold or .agreed to sell them the stock of goods upon ■condition that they would pay -her what their husbands owed her for money loaned them. This agreement, which seeons to have been made some time prior, was reduced to writing in April, 1894. In February, 18.96, Mrs. Coleman acknowledged that she had been fully paid all that she was entitled to under the agreement, and transferred absolutely the stock of goods and all her interest therein to Mrs. Catlett and Mrs. Jenkins, who continued the business under the management of their husbands, but in their own names. There was clearly nothing illegal or improper in the action of Mrs. Oatlett and Mrs. Jenkins in purchasing the stock of goods, and in conducting the business, wholly or in part, through their husbands as their agents, unless it was done with a fraudulent intent. A married woman, under the provisions of section 2281 of the Code, has the right to engage in trade and carry on business on her own account for her separate use and benefit in the same manner as if she were unmarried, except that she cannot become a partner of her husband. She has the right to buy on credit. Williams v. Lord and Robinson, 15 Va., 390, 403. The section further declares that the products and earnings of such trade and business shall be her separate estate, and •governed by the provisions of the two preceding sections. One of these sections, 2285, provides that such separate estate shall not be subject to the use 'and control or disposal of her husband, or to his debts or liabilities. The only limitation which the statute imposes upon her right to engage in trade is that she cannot do so in partnership with her husband. She clearly would have the right to avail herself •of the agency of her husband in such trade or business as if they — 685 — had not been united in marriage. To hold otherwise, would be to engraft upon the statute a limitation upon her rights in addition to that imposed by the Legislature. 2 Bishop on Married Woman, sec. 439. Having the right to employ her husband as her agent in the management of such trade or business, it must follow as a necessary consequence that where the legal title to the capital upon which she is carrying on the trade or business of a merchant is-in the wife, as against the husband, it cannot be subjected to the claims of the husband’s creditors without proof that her title is merely colorable and fraudulent as against them. Voorhees v. Bonesteel, 16 Wall., 16. Where the husband is indebted and insolvent, as was the case here, there is generally more or less reason to suspect that such arrangements are adopted as a cover to disguise the real owner.ship, and to defraud the husband’s creditors. Whether in a given case the arrangement or transaction is bona fide or a colorable device to cheat the husbands’ creditors is a question of fact to be determined upon all the facts and circumstances in point. Knapp v. Smith, 27 N. Y., 277, 280. In purchasing the goods, and in continuing the business in the name of Catlett & Jenkins, agents, Mrs. Coleman, who was the mother of Catlett and the aunt of Jenkins, was doubtless influenced by a desire to furnish them employment, so that they could support their families as well as to save the residue of the debt which they owed her. By making a conditional sale of the business to their wives, she no doubt wished to put them in a position in which they could continue the business and thus aid in supporting their families. The record does not show that Mrs. Coleman in doing this was actuated by any illegal or fraudulent purpose. The husbands were indebted and insolvent. The contention that they broke full-handed is not proved. On the contrary, Jenkins, who was called as a witness by the complainants, testified that they turned over all their assets to the trus — 686 — tee, and the circumstances relied on to show that this was not .true are insufficient to overcome his testimony. The fact that the wives had neither experience in the mercantile business nor separate estates when they entered into the .agreement with Mrs. Coleman for the purchase of the stock of goods are circumstances to be considered in determining the • question of fraud, but are alone or in connection with the other circumstances relied on insufficient to make good the charge that the agreement was merely colorable, that the goods and .business were really the husbands’ and not the wives’, and that-the arrangement was merely a fraudulent device, to defeat the .rights of creditors. "What rights had the creditors? It was the duty of the husbands to make use of their skill and energy to support their families and pay their debts. They could not conduct business, as we have seen, for themselves. They were not only indebted, but insolvent and without credit. If they had worked for strangers, all that their creditors could have reasonably expected from that source would have been their earnings or wages in excess of a reasonable support for themselves and families. .If they worked for their wives, the creditors would be entitled to no more, for surely a wife, who under the law has the right to engage in trade and to employ her husband as an agent, as if she were a feme sole, is under no greater legal obligations to his -creditors, and the latter have no greater legal rights against 'her than if he were some other woman’s husband or not married .at all. It may be that such a construction will increase the temptation ■of the husband and wife to defraud their creditors. But "the legislature has deemed it right and proper to change the legal status of husband and wife from w'hat it was under the1 common law. If their changed relations furnishes increased facilities for the commission of fraud, the remedy is with the legislature. Clearly the courts ought not to disregard the plain — 687 — meaning of the statutes in question and deprive a married woman of her newlv-acquired rights because of the increased facilities which -the statutes may furnish for aiding her husband in defrauding the latter’s creditors. There does not seem to have been an express agreement between the husbands and wives as to the compensation the former should receive for their services. In the absence of such an agreement, the law would imply, as in case of a stranger, that they were to receive a reasonable compensation for the services rendered. This the creditors would have the right to subject to the payment of their claims, less the amount necessary for the reasonable support of the husbands and their families. We are of opinion, therefore, that the Circuit Court erred in holding that the transaction by which the wives acquired the legal title to the stocks of goods and the real estate mentioned in its decree were fraudulent, and that the same was liable to the appellees’ debts. "We are further of opinion that if the services rendered by the husbands for their wives in the management of -their business was more than sufficient to support and maintain their families, including themselves, that excess is a debt due from their wives, .and liable to their husbands’ creditors; that the amount of such indebtedness, if any, may be ascertained in this cause- by proper accounts and proved in the court of bankruptcy as one of the debts due from the estate of their wives. The decree appealed from must be reversed and annulled, and the cause remanded to the Circuit Court for further proceedings not in conflict with the views expressed in this opinion. Reversed.