Stuart's Ex'or v. Peyton , 97 Va. 796 ( 1899 )

Wellford, J.,

delivered the opinion of the court.

The record in this case brings under review a decree of the Circuit Court of Wythe county, rendered September 27, 1897, in a general creditor’s suit against the appellant as executor and himself and others as heirs and devisees of William A. Stuart. The appellee, claiming to be the assignee of George L. Peyton, presented his claim to the commissioner acting under the usual order of reference for the ascertainment of assets and liabilities of the estate of W. A. Stuart. In support thereof he filed four extracts from the records of the Circuit Court of Augusta county, each reciting a judgment or decree rendered “ September 20, 1891, by order of the Supreme Court of Appeals of Virginia” in favor of George L. Peyton against William A. Stuart, and this endorsement by George L. Peyton on the execution in each case: “ This judgment (or decree) and execution is assigned to E. O. Peyton on the 8th day of November, 1892, and is now for his use.” The claim being disputed, the commissioner, without expressing any opinion, referred the controversy to the court for adjudication, and the court decreed that the judgment and decrees were valid and subsisting claims against the estate of William A. Stuart, deceased, and valid and subsisting liens upon his real estate.

There is no evidence in the record of any valuable consideration for the assignment to the appellee, and it does not appear that in the progress of the case there has been or is now any claim on his behalf to occupy a more favorable position in the determination of the controversy than George L. Peyton would have done if he were before the court asserting the claim for himself.

The appellant assigns two causes of error.

The first assignment of error in the petition for appeal is: “The judgment at law and the decree for costs in two of the chancery suits pronounced by the Court of Appeals are absolute nullities.”

The contention here is that the suit at law and two of the chancery causes were not before the Court of Appeals by writ of error or appeal when the ease of Peyton v. Stuart was heard by that court in June, 1891; that the court had no jurisdiction as to these cases, and that therefore the mandate of its decree of June 18, 1891, conferred no authority upon the Circuit Court of Augusta county to pronounce the judgment and decrees complained of.

This contention was fully considered by the Court of Appeals on the hearing of the case, as shown in the published report of Peyton v. Stuart, 88 Va. 50, and imposingly presented in the dissent and protest of two of the judges, one of them the president of the court. A timely petition for a rehearing, reiterated all the objections theretofore made to them and now submitted to us, and afforded full opportunity to review the opinion and modify the decree before it became final.. It was not, therefore, 'by inadvertence, but as the deliberate and fully considered judgment of the Court of Appeals, that the decree of June 18, 1891, became final.' The question of jurisdiction laid necessarily in limine, and that question, as well as all other matters of controversy, became, by the finality of the decree, res adjudícala. Whether that cause was rightfully or wrongfully decided in the subsequent opinion of the same judges, in the judgment of this or of any other court, it passed, when the term of court closed, beyond the power of amendment or revision.

An unbroken line of decisions in Yirginia, in perfect harmony, we believe, with those of all her sister States establishes, in the language of Judge Baldwin, in Reid’s Adm’r v. Strider’s Adm’r, 1 Gratt. 81, that “ the finality and irreversibility of the judgments and decrees of the Court of Appeals after the close of the term in which they are rendered is inherent in the very nature and constitution of the tribunal, and cannot be disturbed ■without deranging the administration of justice, and the introduction of intolerable evils in practice.” Bank Virginia v. Craig, 6 Leigh 400; Griffin v. Cunningham, 20 Gratt. 31; Campbell v. Campbell, 22 Gratt. 667; Stuart & Palmer v. Heiskell, 86 Va. 191; Roanoke St. Rwy. v. Hicks, 32 S. E. Pep. 790.

This court is of opinion, therefore, that there is no merit in the appellant’s first assignment of error.

The second assignment of error is that, admitting the validity of the judgment and decrees in favor of George L. Peyton against W. A. Stuart, Stuart’s estate has the right to set off against them the interest of W. A. Stuart in a decree of United States Court for West Virginia against George L. Peyton.

The commissioner’s report to the court states the matter thus:

“ Upon the part of the executor it is set up that in the Circuit Court of the United States for the District of West Virginia, in the three several suits in chancery of Wm. A. Stuart et als v. The Greenbrier White Sulphur Springs Co. & Others; Knabe & Co. & Others v. The Same; and The Greenbrier White Sulphur Springs Co. v. Wm. A. Stuart & Others, which were heard together, a decree was passed on the 11th day of Eebruary, 1888, in favor of said Sulphur Springs Co. for the benefit of its creditors against George L. Peyton for the sum of $18,937, with interest thereon from the 30th day of December, 1880.

“ By decree in the same cause it was ascertained that W. A. Stuart, who was then living, was entitled to three-fourths of the unsecured debts of the White Sulphur Springs Co., and that the sum decreed against Peyton is applicable to the payment of those debts; that George L. Peyton is notoriously insolvent, and the Greenbrier White Sulphur Springs Co. is also insolvent, and if Mr. Stuart’s estate is not permitted to set off its interest in the decree against Peyton against the $5,000., and the judgments for costs which Peyton now seeks to enforce against the said estate, the debt to the estate will be wholly lost.

“ On the part of counsel representing Dr. E. O. Peyton, assignee, it is claimed that this decree in favor of the White Sulphur Springs Co-. is not available either in law or in equity as a set-off in favor of the estate of W. A. Stuart.

“And, secondly, that by the terms of the contract of sale of November 4, 1882, between Peyton and Stuart, the former was relieved of all liability for the debts of the company as endorser or otherwise, and that this has been settled beyond all controversy by the decision of the Supreme Court- of Appeals of Virginia in the case of Peyton, v. Stuart, 88 Va. 50.”

A third ground of objection to this claim of appellant is thus stated in the brief submitted in the case by learned counsel for the appellee:

“ But even if Stuart ever had the right of set off now claimed, he forever put it out of his power to exercise it by the agreement' dated February 18, 1890, signed by the said Stuart, by J. S. Lemmon, solicitor for H. G-. Dulaney, Jr., and by Alex. F. Mathews, of counsel, filed among the papers of the Greenbrier White Sulphur Springs Co. case in the United States Court at Parkersburg, W. Va., a certified copy of which, fully proven as to the signatures of Stuart, is filed in this proceeding. By that paper Stuart agrees that ‘ should said Stuart be ultimately liable under said decree in part or whole, the money coming to him in this cause from his co-stockholders or others shall be applied to the full and complete settlement of so much of the liability of said Stuart as may inure to the benefit of parties to said cause other than himself.’ ”

This controversy arises out of a general creditor’s suit, in which the bill alleges the entire insufficiency of the personal estate of W. A. Stuart to pay his liabilities; and the commissioner’s report, approved and confirmed by the court-, found that the liabilities of the estate were so great, and so much in excess of the assets, real and personal, that not more than 25 per cent, of the indebtedness could be paid. It is apparent, therefore, that the objections of the appellant to the claim of the appellee, if suecessful, can inure only to the benefit of the creditors. The validity of the claim must, therefore, be considered in view, not only of the equities of William A. Stuart, if living, but of the creditors of his insolvent estate.

The first objection to the set off claimed by appellant, as stated in the commissioner’s report above quoted, is in the nature of a demurrer—conceding all the facts and denying their availability in this case as a defence. The facts thus conceded are briefly these:

George L. Peyton is the adjudicated debtor, for the sum of $18,937 and interest from December 30, 1880, to a trust fund under administration by the United States Circuit Court of West Virginia for benefit of creditors of the White Sulphur Springs Co. William A. Stuart is the ascertained beneficiary of 75 per cent, of that trust fund. George L. Peyton is notoriously insolvent, and nothing can be realized out of him for that trust fund. If, therefore, he can, by reason of this claim, be allowed any recovery from the estate of William A. Stuart, such recovery will redound not at all to the interest of the trust fund, or any one of its beneficiaries, but it will impose, for its payment, upon the insolvent estate of the chief beneficiary, the loss of several thousand dollars, cumulated upon the conceded loss, by reason of Peyton’s insolvency, of' Stuart’s beneficiary interest in the trust fund, to which Peyton is so largely indebted.

In Feazle v. Dillard, 5 Leigh 30, the Court of Appeals had under consideration the principle controlling a court of equity in an application for injunction to stay the collection of a matured obligation by setting off an unmatured liability of the debtor for an insolvent obligor. If the principle announced by Judge Tucker in that case (p. 36), upon which the court should proceed, “of protecting the party from a payment of money to one to whom in justice and equity he owes nothing,” be applied to this agreed state of facts, it would seem very clear that Stuart if he, and not Peyton, were seeking equitable aid, would be entitled to relief.

The only apparent difficulty in recognizing the set off is the absence from the record of the receiver of the United States Court. This technical difficulty would be very embarrassing, and perhaps fatal, in a court of law. Bis presence before the court may have been contemplated in the decree of Pebraary 19, 1896, requiring Stuart to file a cross-bill “ making E. O. Peyton and George L. Peyton and any others that he may think proper defendants to said cross-bill.” This decree, however, was agreed to be set aside in the agreement of counsel filed in the record, on which agreement the cause was heard and final decree entered September 27, 1897. "Whether this agreement could or could not be regarded as a waiver of the objection to the absence of the receiver, we think, is not material. If, therefore, the absence of the receiver as a party to the record must preclude us from any consideration of the equity of Stuart as a creditor in the West Yirginia suit, the final decree in this case will present the anomaly in a court of equity of the creditors of an insolvent debtor being required to contribute, out of their proven debts, to the payment of a claim, manifestly without equity, against the estate of a solvent debtor. If the receiver were a party to the cause, the only beneficial interest he could represent would be that of Peyton to secure a credit upon the decree against him of the United States Circuit Court, and that of the creditors of the White Sulphur Springs .Co. to protect them in any future dividends from excessive payments. The difficulties suggested as consequent upon a decree in this causé rejecting Peyton’s contention are much more fanciful than real. If they were real, Peyton could not complain of them as the necessary incident of his own voluntary appeal to the court t'o allow an inequitable claim. The agreement of Stuart with his co-creditors, filed in the record of the United States Court, assures to them payment in foil out of the trust fund before Stuart can receive one cent. But the decree in this case, if Peyton’s claim be rejected, should, in accordance with the opinion expressed hereinbefore, adjudge the validity of Stuart’s debt to Peyton established by the judgment and decrees of the Circuit Court of Augusta, and the disallowance of his participation in the assets of W. A. Stuart’s estate solely because of his larger indebtedness to Stuart in the United States Court. "We apprehend that a copy of this decree filed in the papers of that suit will be accepted by the United States Court as abundantly sufficient to concede to Peyton the benefit of the credit, and to abate to a corresponding extent the claim of Stuart upon the fund.

The second objection to the allowance of the set-off is based upon the terms of the contract between Peyton and Stuart of November é, 1882, under which Stuart became the purchaser of Peyton’s stock in the White Sulphur Springs Co. The United States Court decreed that this stock, though treated by both Peyton and Stuart as paid up and non-assessable, was liable to assessment for unpaid subscription, and the decree against Peyton was for the payment of such assessment. The contention of Peyton in this second objection is that Stuart, in his contract of purchase, assumed all liability for this assessment, and that this construction of the contract was settled beyond controversy in the case of Peyton v. Stuart, 88 Va. 50. This contract, and a full history of all the circumstances, is set out in the report of that case, and need not be here repeated.

We axe of opinion that this is not a just construction of the contract between Peyton and Stuart of November i, 1882, and that this construction was not established by the judgment of the Court of Appeals in the four several cases of Peyton v. Stuart, reported in 88 Va.

In overruling the first assignment of error in this ease we have recognized the finality and binding obligation of that judgment of the Court of Appeals as concluding all controversy as to any questions involved in either one or more of the four causes in which it was rendered. But the matter now before us was not before the Court of Appeals in any of those causes. It does not appear upon the record, and does not appear to have been suggested in argument, it is not alluded to in the opinion of the court, and there is not the most distant reference to it in the judgment of the court. The language of the judge who pronounced the opinion of the majority of the court, in speaking of the exemption of Peyton from all liability for the debts of the White Sulphur Springs Co. must be regarded as applicable to the liabilities asserted by Peyton in those foxu’ causes, which embrace, so far as this record shows, all then matured or accruing obligations incurred by him while one of the owners of stock which he sold and transferred to Stuart as paid up and non-assessable shares. The transfer of these shares was the consideration for the debt represented by the judgment and decrees of the Circuit Court of Augusta county, and for the additional heavy pecuniary burdens imposed upon Stuart by the decision of the Court of-Appeals. Throughout that litigation the stock ■was treated as paid up stock, and its transfer under the contract of sale was spoken of by the judge who spoke for the court as securing to Stuart “ one-fourth interest in the stock and the Springs property.” The opinion of the court certainly cannot be claimed to have given a construction of the contract more liberal to Peyton than he asserted for himself. That claim is thus set out on page 64 of the reported case in 88 Va., in his own language:

“ I accepted the contract as a clear acquittal, believing that it would, as it was intended to do, protect me from all liability for the debts of the company and to Mr. Stuart.”

Again, on page 65, he says: “ The trade was intended to be a complete settlement of all matters between us, and left me without any interest in or liability for the company, or responsibility to him.”

Accepting, therefore, Peyton’s own version of the contract, it does not sustain this second objection to the set off claimed in the suit by Stuart’s Ex’or. The decree of the United States Court against Peyton and the other delinquent stockholders is not for a debt or liability of the company, but a debt and liability to the company. The creditors had no claim upon the defaulting stockholders as sureties of the company; but the decree of the United States Court adjudged that these stockholders owed debts to the company which were corporate assets, and as such available to pay the debts of the company. The decree was properly against Peyton for' his partial default in the non-payment of subscription for his shares of stock. The creditors of the company, doubtless regarding a decree against Peyton as less available than a decree against Stuart, excepted to the report of the commissioner fixing this liability on Peyton, and claimed that it should have been imposed upon Stuart; but the court overruled the exception.

It is alleged that the stock sold by Peyton to Stuart had not been transferred upon the books of the company, and that under the laws of West Virginia the origipal holder was liable until such transfer. But if the court had accepted this'construction of Stuart’s assumption, under his contract, of Peyton’s liabilities, we do not see why the decree for his default might not have been made against Stuart either-jointly with Peyton, or against him alternatively in event of failure to collect from Peyton. Be that as it may, the decree establishes an adjudicated indebtedness of Peyton to the Greenbrier White Sulphur Springs Co., which the court had sequestrated for the benefit of creditors, of whom Stuart was one with an ascertained interest of, perhaps, 75 per cent, in the fund.

The third objection to the set off is that Stuart, by an agreement filed in the papers of the suit in the United States Court for West Virginia, has assigned his interest in the decree against Peyton to his co-creditors in that suit. This agreement was made pending an appeal to the Supreme Court of the United States from the decree of the United States Circuit Court of West Virginia. The obligations it contemplated pending that appeal are non-existent now, for that cause has been decided, and the ultimate liability of Stuart contemplated in the agreement has been conclusively established by the affirmance of the decree of the United States Circuit Court of West Virginia by the Supreme Court of the United States in Camden v. Stuart, 144 U. S. 104. That liability having been ascertained, this is the language of the agreement: “The money coming to Stuart in this cause from his co-stockholders shall be applied to the full and complete settlement of so much of the liabilities of said. Stuart as may inure to the benefit of parties to said cause other than himself.”

There is no consideration set out for this agreement, and there is nothing on its face to indicate that Stuart contemplated in that agreement the transfer of any legal right. It was simply a concession that, in the distribution of the fund sequestrated by the court for the benefit of creditors, Stuart’s dividends as creditor \ should be withheld and appropriated to the satisfaction of other creditors until his dividends should be sufficient to extinguish his debt to the fund. We cannot see that this agreement involved the surrender of any legal right of Stuart. It only waived a possible contention on his part, in future decrees of distribution, and conceded, as matter of law, that before he could rightfully claim a dividend out of the fund he should discharge his indebtedness to the fund.

The allowance of Peyton’s claim out of the assets of Stuart will certainly realize no coming in of money to the fund in the United States Court. Its necessary effect is to transfer beyond recall to a voluntary assignee, outside of the reach of the receiver of the court, the only apparent property of an insolvent debtor to the fund, which property can only be made available to any extent to the creditors of the fund by abating the charge of Stuart upon the fund.

On the other hand, -while the allowance of the set off will abate to a material extent one of the fixed charges upon it, the decree will take no money out of the fund, and involves no diminution to any of Stuart’s co-creditors of proximate or remotely future dividends out of the fund.

The operation of this agreement claimed in this objection to the set off is not made on behalf of any of Stuart’s co-creditors. It is obviously adverse to the interest of all parties to that agreement, and, if recognized by the court, will give to a common debtor of all those parties the benefit of a contract in which he was never contemplated, at the expense of all the parties by whom and for whose benefit it was made.

We are, therefore, of opinion that there is no merit in any of these objections to the allowance of the set off, even if the estate of W. A. Stuart was abundantly solvent, and a fortiori none against the only parties in this case in real interest, who are the adjudicated creditors of his insolvent estate.

There is no cross-bill in this case requiring or enabling the court to decree as to the exact amount of Stuart’s beneficial interest in the indebtedness of Peyton to the fund in the United States Court. It is claimed to be much larger than his debt to Peyton evidenced by the judgment and decrees of the Circuit Court of Augusta county. If this fact be established by evidence satisfactory to the court, the claim of Peyton is clearly not equitably due out of Stuart’s assets. The court has only to pass affirmatively or negatively upon the validity of this claim, and, if satisfied that it is not an equitable demand, all that the court can or need do is to reject the claim, setting out in its decree-such reasons for its disallowance as will enable Peyton to demand in the United States Court a credit upon the decree against him, and a corresponding abatement of Stuart’s charge upon the fund in that court.

The commissioner did not pass upon the claim of Peyton or the counter-claim of Stuart’s executor. The cause, however, was heard by the court not merely upon his report as above quoted and the evidence before him, but by agreement of counsel on all the records and other evidence which it seems that the parties deemed material for an adjudication of the controversy. Upon this record, so submitted to the court, there does not appear to have been any contention, or any reasonable room for contention as to any of the essential facts. The commissioner’s report and these records and evidence establish the quantum of the appellee’s claim asserted in this cause, the amount of George L. Peyton’s debt to the White Sulphur Springs Co., the sequestration of that debt by the United States Court for the benefit of all the creditors of that company, the insolvency of G. L. Peyton, and the aggregate amount of the debts due by the White Sulphur Springs Co., and of the individual debt due by that company to W. A. Stuart.

The judgment and decrees exhibited by Peyton establish a debt against W. A. Stuart of $5,814.89, with interest on $5,000 from November 4, 1882, and on $814.89 from date of decree, September 29, 1891, amounting now to a fraction over $11,000.

The decree against Peyton in the United States Court is for $18,937.08, with interest from December 30, 1880. An. unpaid debt bearing legal interest doubles itself in sixteen and two-third years, and now after the lapse of nearly nineteen years this debt amounts to more than $40,000.

It thus appears that Peyton’s debt to the United States Court is much more than three times the amount of his claim against Stuart’s estate. If, therefore, Stuart’s interest in this debt of Peyton to the United States Court be more than 33 1-3 per cent., that interest must be abundantly sufficient to counter-balance Peyton’s claim asserted in this cause.

It seems to have been assumed by the appellant as a matter beyond controversy, that Stuart’s interest in the United States Court as an established creditor much exceeded this 33 1-3 per cent., and the contention does not appear to have been controverted by Peyton in any stage of this litigation. However, as it is not upon the record a conceded fact, we are remitted to the evidence for enquiry.

Commissioner Leake’s report, confirmed by the United States Court, establishes an aggregate indebtedness of the White Sulphur Springs Co. of $891,862.16, of which amount William A. Stuart was a creditor to the extent of $326,390, more than 36 per cent.

Of the aggregate indebtedness of the White Sulphur Springs Co. $532,800.74 were debts secured upon the property of the company reported by the commissioner as “ vendor’s liens, including debts paramount thereto.” William A. Stuart is reported as fourth and last in this class of creditors to the extent of $116,052.02. The last decree, p. 224 of printed record of Camden v. Stuart, &c. of date of February 11, 1888, which was the subject of appeal to the United States Supreme Court, and by that court affirmed, seems to have contemplated that all these liens, except Stuart’s, would be satisfied out of the encumbered property, and decreed in his behalf only that, to the extent ■of failure to satisfy the secured debts out of the property, Stuart’s unpaid debt should share with the unsecured creditors.

We have no evidence in this record of the result of the sale of this property, and the extent to which its proceeds reduced the amount of these secured debts, but it must have materially reduced the aggregate indebtedness, as above stated, and correspondingly increased Stuart’s proportionate interest, of more than 36 per cent, in the debts due by Peyton, and the other delinquent stockholders.

It seems to us, therefore, very clearly established by the evidence before the Circuit Court, that Stuart’s beneficial interest in the debt due by Peyton is much in excess of the debt to him shown by the judgment and decrees of the Augusta Circuit Court, and we think the lower court should have so declared, and disallowed Peyton’s claim against the assets of Stuart under its administration.

The decree of the Circuit Court should therefore be reversed, and the cause remanded with instructions to the court, for reasons herein set out, to reject the claim of the appellee, and to distribute all funds retained for its payment among the adjudicated creditors of William A. Stuart.

Reversed.