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11th and October 15th, 1913, by Susan C. Woods, mother of said George M. Woods, to whom said George M. Woods gave his note for $7,500.00 on account of said payment. The renewals of the notes for $1,500.00, $3,000.00, $2,500.00 and $1,500.00, aggregating $8,500.00, were paid, part on December 16, 1913, and part on January 3, 1914, by said T. Scott Woods with money furnished by said Susan C. Woods, who has since died, leaving a will directing said indebtedness to be charged against the share of said George M. Woods, in her estate; and said stock become discharged of the indebtedness for which it was pledged as collateral.

Fifth: That the said T. Scott Woods has now in his possession fifty shares of said preferred stock and fifty shares of said common stock, standing in the name of David C. Woods; and one hundred shares of said preferred and two hundred and fifty shares of said common stock standing in his own name; the remaining one hundred and fifty shares of said preferred stock being in the possession of the said Phoenix Water Power Company, the officers of said company having seized and retained said stock when the same was sent to them to be transferred to said T. Scott Woods, on the ground that said stock had never been paid for.

Sixth: That at the time said George M. Woods gave said stock to his children as aforesaid he was largely indebted and insolvent or about to become insolvent, and engaged or about to engage in hazardous business; and the said gifts are a fraud upon creditors and null and void.

Seventh That said T. Scott Woods is about to apply said stock towards the payment of the indebtedness of said George M. Woods for which it was pledged as collateral as aforesaid, and to assign said stock or the equities therein to the said children of said George M. Woods.

And he prayed for relief, as follows: 1. That said gifts of stock by George M. Woods to his children as aforesaid be declared null and void.

2. That T. Scott Woods be enjoined from using said stock for the payment of the indebtedness for which it was pledged

as collateral as aforesaid, or from transferring the same to the children of said George M. Woods.

3. That the said T. Scott Woods be ordered and directed to transfer and deliver said one hundred and fifty shares of preferred stock and said two hundred and fifty shares of common stock of the Phoenix Water Power Company held by him as aforesaid to your orator for the benefit of the assigned estate of said George M. Woods.

4. General relief.

Thereupon the defendants filed their answer, as follows:

The answer of T. Scott Woods, Jeanne Woods, Esther Woods, and Katharine Woods and John B. Woods, George B. Woods, and David C. Woods by T. Scott Woods, their guardian ad litem, to the Bill of Complaint of the above plaintiff, respectfully showeth :

Deponents, now and at all times hereafter saving and reserving to ourselves and each one of us, all benefit and advantage of exception which can or may be had or taken to the said Bill of Complaint and the many and manifest errors, uncertainties, and imperfections therein set forth or contained, for answer thereto, or to so much and such parts thereof as we are advised is, or are, material or necessary for us to make answer to, for answer thereto, say:

First. We admit that the said John A. Nauman is assignee for the benefit of creditors of the said George M. Woods, of the said County of Lancaster, by virtue of a general deed of assignment dated December 17, 1913, and duly recorded at Lancaster, Pa., in Deed in Trust Book 6, page 554, and is duly qualified to act as such assignee, but we deny that he is qualified to maintain this action. The said assignee stands in place of his assignor and has no power or authority to question in law or in equity the validity of the gift from said George M. Woods to his children as set forth in said Bill of Complaint and the transactions complained of in said Bill of Complaint.

Second. We neither affirm or deny the second paragraph of plaintiff's Bill of Complaint, for we have no knowledge of the matters therein contained nor any in

formation of the same other than as set forth by the allegations of said plaintiff's Bill of Complaint.

Third. We admit the allegations of the third pararaph of plaintiff's Bill of Complaint.

Fourth. We admit the allegations of the fourth paragraph of plaintiff's Bill of Complaint, with this qualification, that the notes secured by said collateral aggregated $19,500, instead of $16,000 as alleged in plaintiff's Bill of Complaint, and we deny that said stock in question became discharged of the indebtedness for which it was pledged as collateral. The stock was given as collateral security for the payment of the indebtedness of said George M. Woods upon certain notes, and their renewals aggregating $19,500 instead of the sum of $16,000 as alleged in plaintiff's Bill of Complaint. These notes were as follows: Note dated December 20, 1912, owned by Lancaster Trust Co., for. Note dated October 21, 1912, owned by Lancaster Trust Co., for Note dated November 18, 1912, owned by Lancaster Trust Co., for Note dated November 25, 1912, owned by Lancaster Trust Co., for Note dated December 20, 1912, owned by Lancaster Trust Co., for Note dated November 12, 1912, owned by Coatesville Trust Co., for Note dated November 18, 1912, owned by Peoples Trust Co., for

... $1,700

Note dated March 31, 1913, owned by Lancaster Trust Co., for

Total

1,500

3.000

2,500

1,500

1,300

4,500

3,500

. $19,500

It is true that the renewals of the notes for $1,700, $1,300, and $4,500, aggregating $7,500, were paid respectively on October 15, November 11 and October 15, 1913, by Susan C. Woods, mother of said George M. Woods, to whom said George M. Woods gave his note for $7,500 on account of said payment. The remaining notes and their renewals, aggregating $12,000 (and owned by the Lancaster Trust Company as above set forth), have never been paid by the said George M. Woods, or his assignee, and they constitute an outstanding and unpaid indebtedness against the said George M. Woods for which said stock was pledged as collateral as aforesaid; and said stock is held

as collateral for the payment of said notes or indebtedness and said T. Scott Woods has the right and it is his duty to apply the said stock, or the proceeds thereof, towards the payment of the said indebtedness. We admit that said notes aggregating $12,000 were paid by said T. Scott Woods with money furnished by said Susan C. Woods, who has since died, leaving a will directing said indebtedness to be charged against the share in her estate which she bequeathed to the wife and children and said George M. Woods, but we deny that said' stock thereby became discharged of the indebtedness for which it was pledged as collateral, and we further allege that said George M. Woods took no share in the estate of said Susan C. Woods under her will.

Fifth. We admit the allegations of the fifth paragraph of said plaintiff's Bill of Complaint.

Sixth. We deny the allegations of the sixth paragraph of plaintiff's Bill of Complaint. At the time said George M. Woods gave said stock to his children he was not largely indebted and insolvent or about to become insolvent, and engaged or about to engage in hazardous business; and the said gifts are not a fraud upon his creditors and null and void. At the time said gifts were made as stated in plaintiff's Bill of Complaint, said George M. Woods was possessed of more than sufficient estate to meet his obligations, and the obligations which he owed at that time have nearly all been paid or provided for, and his estate was far more than sufficient to pay such of these claims as have not been paid, and none of his said creditors or any other creditors that he had at that time allege or contend that said gifts of stock to his children were made for the purpose of defrauding them, and said John A. Nauman, assignee for the benefit of creditors of the said George M. Woods, the said plaintiff, cannot make or sustain such allegation or contention in their behalf.

And we further answer as matter of defense that the debts which said George M. Woods owed when he became insolvent were incurred subsequently to the time when he made such gifts to his

children and said gifts were not made in contemplation of such insolvency and were not made for the purpose of defrauding said creditors, and said John A. Nauman, assignee for the benefit of creditors of the said George M. Woods, plaintiff in this Bill of Complaint, cannot make or sustain such allegation or contention in their behalf. At the time said gifts were made as complained of, said George M. Woods was not engaged or about to engage in hazardous business; on the contrary, he was a farmer, engaged in farming his land, and subsequently thereto became interested financially and as a manager in a large farming operation in Chester County, Pennsylvania, which gave promise of being a very profitable business, but was not hazardous business and the said gifts were not made in contemplation of insolvency arising from the carrying on or being interested in said farming business; and said gifts were not a fraud upon creditors and null and void.

|ment was made to him by the assignor on December 17, 1913. The assets of the assigned estate, as per the schedules and list of creditors afterwards filed, amounted to $52,000.00, and the liabilities to $171.245.95.

On or about January 6, 1912, the said George M. Woods purchased 300 shares of preferred and 300 shares of common stock of the Phoenix Water Power Company, a corporation located at Phoenixville, in this state. The par value of the preferred stock was $10.00 a share, and the purchase price was $3.000.00. The common stock was given as a bonus to the purchaser. Of this stock, he transferred and had issued to each of his six children, to wit: Jeanne Woods, Esther Woods, Katharine Woods, John S. Woods, George B. Woods, and David C. Woods, 50 shares of the preferred and 50 shares of the said common stock. At that time, and at the time of the filing of this bill, Jeanne Woods and Esther Woods were of lawful age, and the rest of the said children were minors. On or about January 7, 1913, at the request of George M. Woods, and as collateral security for the payment of certain notes made by him, aggregating $19,500.00, all of the said children, except David C. Woods, made

Seventh. We admit the allegations of the seventh paragraph of plaintiff's Bill of Complaint, and aver that said stock was transferred to said T. Scott Woods as collateral security for the payment of the indebtedness of the said George M. Woods as hereinabove set forth, and by applying said stock towards the pay-a ment of the indebtedness of said George M. Woods for which it was pledged as collateral as aforesaid, the said T. Scott Woods is putting said stock to the use for which it was pledged, and to the use which in law and equity it should be applied.

All of which matters and things we. the said defendants, are ready and willing to aver, maintain and prove, as this Honorable Court shall direct, and we pray to be hence dismissed with our reasonable costs and charges in this behalf most wrongfully sustained.

On October 6, 1914, the case was heard before the Court, and the following facts are now found from the testimony there produced:

FINDINGS OF FACT.-The plaintiff is assignee for the benefit of creditors of George M. Woods, of Leacock Township, this county. The deed of assign

transfer of their respective shares of said stock to T. Scott Woods. The notes which made up the above sum of $19,500.00 were as follows:

1,500.00

3,000.00

Note dated December 20, 1912, owned
by Lancaster Trust Company, for. $1,700.00
Note dated October 21, 1912, owned
by Lancaster Trust Company, for .
Note dated November 18, 1912, owned
by Lancaster Trust Company, for .
Note dated November 25, 1912, owned
by Lancaster Trust Company, for 2,500.00
Note dated December 20, 1912, owned
by Lancaster Trust Company, for .
Note dated November 12, 1912, owned
by Coatesville Trust Company, for 1,300.00
Note dated November 18, 1912, owned
by Peoples Trust Company, for ..
Note dated March 31, 1913, owned by
Lancaster Trust Company, for ....

Total...

1,500.00

4,500.00

3.500.00

. $19,500.00

Of these notes, the $1,700.00 note of December 20, 1912, was paid on October 15, 1913; the $1,300.00 note of November 12, 1912, was paid on November 11,

are in the possession of the Phoenix Water Power Company, and they have been reserved and retained by it, because, it asserts, George M. Woods never paid for the said stock. T. Scott Woods is about to apply the stock which he holds to the indebtedness of said George M. Woods for which it is pledged as collateral. It is difficult to see, if the stock belongs to the four minor children of George M. Woods, how their transfer, during minority, could give him a marketable title to the stock respectively held by them; but that question is not involved in the present controversy. If they have a good title, they may, perhaps, when they become of age, ratify the transfer, or they may disavow it and recover the same. The only question which here arises is, whether George M. Woods had a right, as against his creditors, to transfer this stock, without consideration, to his children, at the time he made such transfer to them.

1913; and the $4,500.00 note, dated No- | David C. Woods, but the certificate itself vember 18, 1912, was paid on October is in the possession of T. Scott Woods, 15, 1913. All of these notes were paid and 100 shares of preferred and 250 by Susan C. Woods, the mother of shares of common stock now stand in George M. Woods, and George M. the name of T. Scott Woods, and he Woods then gave to her his note for $7,- holds the same. Certificates for the re500.00. The remaining notes, aggregat-maining 150 shares of preferred stock ing $12,000.00, were paid by T. Scott Woods, with money furnished by the said Susan C. Woods. The said Susan C. Woods has since died, leaving a last will and testament. In a codicil to the same, dated December 11, 1913, she provided, inter alia, as follows: "I order and direct that whatever moneys, at the time of my death, I shall have advanced or paid to my son, George M. Woods, or to any person, bank or trust company, for him or on his account, directly or indirectly, including money used to lift two notes at The Lancaster Trust Company, amounting to Twelve Thousand Dollars, or any other notes or obligations, or moneys due or to become due thereon, shall be charged up against and deducted from the share of my said son, George M. Woods, in my estate." By a subsequent codicil, dated January 16, 1914, she revoked all provision made in her will for George M. Woods, and directed as follows: "I give and bequeath the said one-sixth interest or share of my estate so given to him, unto the wife and children of my said son, George M. Woods, share and share alike, and to their heirs and assigns, subject, however to the charges and advancements made to and charged against my said son, George M. Woods, which shall be accounted for and deducted from said onesixth share or interest in the settlement of my estate, my intention being that my son, George M. Woods, shall have no interest or charge whatever in my estate, but the said one-sixth share which he otherwise would have taken shall go to his wife and children, subject to the charges and advances as aforesaid. I appoint my son, T. Scott Woods, Testamentary Guardian of the said children, until they respectively become of age.'

Of the actual shares of stock issued by the Phoenix Water Power Company, 50 shares of preferred and 50 shares of common stock stand in the name of

He

In December, 1911, George M. Woods went into an extensive farming operation, and purchased, from H. Graham Rambo, 550 acres of land, at Thorndale, Chester County, for $110,000.00. gave a purchase-money mortgage upon the same, with accompanying bond, for $75,000.00. With others, he then organized the Ingleside Farms Company, and this land, subject to the mortgage, was transferred by him to that company. The business of the company was not a success, and, at the end of a year or a year and a half's operation, it was hopelessly insolvent, and a receiver was appointed to take charge of it. This land was subsequently sold at sheriff's sale for $15,000.00, and the bond yet remains outstanding in the hands of the creditor. At the time the stock was transferred to T. Scott Woods, George M. Woods was, directly and indirectly, responsible for about $150,000.00, and his assets had not increased. The only

testimony as to the financial condition of | ed," and "subsequent creditors not in existence or contemplation when a gift is made, may not avoid them :" Goff v. Nuttall and Kirkpatrick, 44 Pa., 78.

George M. Woods, when he transferred the stock to his children, was that of George M. Woods himself. He stated that he figured his indebtedness at that time to be about $37,700.00, and his assets to be about $84,000.00; that he did not consider the Ingleside Farms Company to be a hazardous business, and that he was employed as manager at a salary of $6,000.00 per year. He also stated that, about that time, he spent a good deal of money in erecting new barns and tobacco sheds on his Lancaster County property, and had housed a considerable quantity of tobacco, which afterwards proved a loss. The 86-acre farm, in Leacock Township, on which he lived and which he figured in his assets at $30,000.00, was sold at sheriff's sale for $13,000.00, and the farm stock, which was

estimated at from four to five thousand dollars, was sold for about half that

amount.

Under this uncontradicted state of facts, ought a decree to be entered in favor of the plaintiff?

Outside of the $75,000.00 bond, which appears still to be outstanding, it has not been shown that there were any debts due at the time of the assignment which were in existence when the transfer of this stock was made; but, by his own admissions, George M. Woods was then indebted in a large amount, namely, over $37,000.00, and, while he claims that his assets were then over $80,000.00, it is evident that, upon their liquidation in order to pay his debts, not nearly so much as that amount could have been realized. He states that he did not deem the business which he entered upon hazardous, but that, as a matter of fact, it was, is plainly evidenced by the fact that, when

he secured the transfer of this stock from his children to T. Scott Woods, he was indebted in the sum of $150,000.00, and, therefore, at that time, was hopelessly insolvent. If, then, one who is indebted or is entering upon a hazardous business cannot give away his property to the detriment of his creditors, it seems to us that the transfer of this stock to the Woods children ought not, after all, to be allowed to stand, to the prejudice of the creditors. In Nolan v. Nolan, 218 Pa., 135, Mr. Justice Elkin, in discussing the rights of a settlor under a voluntary deed of trust, among other things, said:

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CONCLUSIONS OF LAW.-If a man is in debt, he may not give away his property until he has paid or provided for such debt. The reason for this is found in the principles of common honesty. If he contemplates future indebtedness, he must, for a like reason, provide for it; but he must not provide for what he does not anticipate-for what may never occur. If, without concealment, a man chooses to give away all his estate, or settle it upon his wife and children, what right has a subsequent creditor to complain? It did him no harm; he is, therefore, neither cheated nor impoverished by the gift. These principles are set forth in Harlan v. Maglaughlin, 90 Pa., 293. In Westmoreland Guarantee Building & Loan Association v. Thomas, 207 Pa., 513, it was held that "a husband who is not in debt and is not contemplating entering into a hazardous business may convey his property to his wife, and subsequent creditors have no grounds for complaining of such convey-under the terms and conditions of the ance." The statute of Elizabeth avoids gifts and voluntary conveyances only in favor of those intended to be defraud

A very different question arises, however, when the rights of creditors intervene. As against existing creditors, such a conveyance would be fraudulent, and in order to make it valid as to subsequent creditors, it must appear that the settlor has divested himself of all rights of ownership in, and control over, the property thus conveyed, reserving only to himself the right to receive the income during life, and it must also appear that no other act on his part is required to be done to complete the title in, or make a transfer of the ownership to, the beneficiaries who are entitled to take the same

conveyance. Even in such a case, the income would be considered assets subject to attachment by a creditor of the settlor.

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