Constantine v. Twelves , 29 Ala. 607 ( 1857 )

RICE, C. J.

The complainants seek by their bill to enjoin certain creditors of Y. L. West, and of Y. L. and Penelope West, from selling a certain stock of goods levied on at the instance of those creditors ; and to obtain a decree for the sale of those goods, and the application of the proceeds to the payment of the debts mentioned in the deed executed by said Y. L. and Penelope West to the complainants, on the 6th day of January, 1854, a copy of which is set forth in “ Exhibit A” to the bill, and forms part of the bill. That deed is the foundation upon which the complainants base their right to the relief they seek ; and if it be fraudulent as to the creditors of the Wests, who are not provided for in it, tfie complainants have no right to relief.

"We cannot pronounce the deed fraudulent upon its face, because it does not distinctly appear from it that there were other creditors of the Wests at the time it was executed,— that Y. L. West was at the time wholly insolvent; that the deed embraced all the unencumbered property owned by Penelope West, and that its inevitable tendency was to delay and hinder those other creditors. But its terms are unusual, and cannot fail to awaken suspicion and induce scrutiny.

It is a sound principle, that when a debtor engaged in the mercantile business, in contemplation of insolvency, executes a deed as a security to a creditor, conveying his entire stock of goods, but reserves the possession of the goods, and the right to continue to .carry on the business as he had carried it on before, and to sell the goods in an undefined way, accounting only for the proceeds of such sales; and the creditor is aware of the contemplated insolvency, — this reservation creates the presumption of fraud, which, if not rebutted by other facts and circumstances, is sufficient, in law, to render the deed fraudulent and void as to the other creditors of the grantor. — Ticknor v. Wiswall, 9 Ala. 305. That reservation is contained in the deed now under consideration ; and we find nothing in the record to repel the presumption of fraud arising from it, but much to sustain that presumption.

It appears from the statements of the bill, and the evidence in the cause, that the complainants are “ late partners in trade” ; that in June, 1853, the said D. F. having previously purchased the interest of said F, L. in a certain stock of goods in the town of Eutaw, sold and delivered the same to Y. L. West and Penelope West, his wife, for about $7,069 23-100, for which they executed seven promissory notes; that about $2,132 65-100 of that sum was paid not very long after the sale ; that at and before the sale, Y. L. West was wholly insolvent, and still continues^to be so ; that the said D. F. refused to sell to him alone ; that the said Penelope had a separate estate, which consisted of “ the north-east quarter, and the east half of the north-west quarter, of section thirty-one, township twenty-one, range two east, — it being the land held by her in right of dower in the estate of her formar husband; also the following slaves, viz. : Frank, Hannah, Tom, Sam, Alfred, Richard, Susan, Moses, Solomon, and Sarah and her child” ; that in June, 1853, the said D. F. took a mortgage, executed by Y. L. and Penelope West, upon all of her aforesaid separate estate, to secure the payment of the price at which he had sold them the stock of goods as aforesaid ; that thereupon the said Y. L. and Penelope “ commenced and carried on the mercantile business in the town of Eutaw, under the name, style and firm of P. West” ; that complainants were under no legal obligation to become boiind as their endorsers or sureties to enable them to purchase a new and additional stock of goods, but consented to become so bound for them, with a knowledge that they were “ somewhat embarrassed” and unable to replenish their stock of goods on their own credit, upon the agreement of said Y. L. and Penelope to “ secure them against all responsibility and loss on account of the said purchase. and also to secure the said debt to the said D. F. for the purchase of the said original stock of goods” ; and that accordingly the said Y. L. and-Penelope executed the deed on which the complainants found their right in this case.

It-further appears that, in consideration of the said agreement and the execution of said deed, complainants became bound as the sureties of the said Y. L. and Penelope West, and liable for the purchase of additional stock of new goods, as follows : to Catlin, Leavitt & Co., for abont $1249 25-100 ; to Oliver, Jones & Granger, for about $111 96-100 ; to George C. Dunbar, for about $360 25-100, and to Webb & Smith for about $70, — all of which, at the filing of the bill, were unpaid, and some of which were not then due ; that about May, 1854, the said Y. L. and Penelope, by the consent of complainants, packed up the goods then on hand, for the purpose of removing them to Macon, Mississippi; that after the goods were thus packed up and about to be removed, they were levied upon at the instance of certain creditors of Y. L. West, and of Y. L. & Penelope West, who are made defendants to the bill; and that the debt of one of those creditors, Stephen Twelves, had been reduced to judgment, and execution thereon put in the hands of the sheriff, before the execution of the deed to complainants. It does not appear that the said Y. L. and Penelope West, or either of them,'had any property not exempt by statute from levy and sale under legal process, except that embraced by their mortgage to D. F. Constantine and their deed to the complainants ; nor does it appear that the separate estate embraced by the mortgage was inadequate to secure the payment of the debt to D. F. Constantine, or that there was any necessity for procuring furthersecurity for that debt, or for procuring or accepting the deed to complainants, except the necessity they created by their voluntary agreement to become bound as endorsers or securities for Y. L. and P. West as aforesaid — an agreement which, from its uncertainty, imposed no legal obligation upon them. — Erwin v. Erwin, 25 Ala. 236.

The complainants joined in the execution of the deed, with a knowledge of the condition of the Wests as above disclosed, and with a knowledge that there were creditors of the Wests who would inevitably be delayed and defeated by the deed in the collection of their debts, if it could be upheld against such creditors. They do not even pretend to have been ignorant in these respeóts. With this knowledge, it is incredible that the mere security of their debt was their only object in joining in the execution of the deed. Look at its extraordinary provisions. It conveys to them generally all the property of the debtors not exempt by statute from levy and sale under legal process, which had not been conveyed by the previous mortgage to one of the complainants, without any .other description than the following, to-wit: “ all the goods, wares and merchandize which the said P. West and Y. L. West have now on hand, comprising the entire stock of goods, &c., with which they are now canying on the business of merchandizing in the town of Eutaw, including as well those contained in the invoices which • were lately purchased from the foregoing named parties, as those before purchased from the said D. F. Constantine or any other person; together with all the notes and accounts made by the said Wests, for goods sold during the year 1853, and due the first of January, 1854, amounting, to aboutthe sum of twelve hundred dollars.” It provides expressly that “ the said P. ■ West shall continue to carry on the said business in the town of Eutaw as heretofore, to sell the said goods, wares asid merchandize, to good and responsible men, in the usual way, the proceeds of which the said Constantines are to have the entire control of, for the purpose of paying off the debts before specified, in the order mentioned.” It does not define “ the usual way” ; yet it limits the control of the Constantines to “ the proceeds'11 of the sales made in that undefined “ way.” It provides that “ any and all other goods, which may hereafter he purchased through the assistance of the said Constantines, for replenishing the stock and keeping up the business, shall be held liable to all the provisions of this deed.” It then declares, that “ if the said P. West or Y. L. West shall pay and satisfy all the debts herein specified, together with the balance due D. P. Constantine for the original purchase, then this deed to be void ; until then, to remain in full force and effect.” It does not upon its face mention or fix any law-day, but abstains from authorizing the Constan-tines either to take possession of the goods, or to sell them, in case of the failure of the Wests to pay the said debts and the said balance therein mentioned.

Before the expiration of five months after the execution of the deed, we find the debtors, by the consent of the complainants, with the goods boxed up for removal from Eutaw, Alabama, where the deed says the business was to be continued, to Macon, Mississippi; and one of the complainants ready to go to the same place ! And but for the levies made at the instance of the creditors, who are defendants in this case, the goods would then have been removed out of this State. This intended and attempted removal sheds a light on the real nature of the transaction between the Constantines and Wests, and the motives which induced the execution of the deed. For, although a deed which, at the time of its execution, is fair and valid as against creditors, cannot become fraudulent and void by matters occurring afterwards ; yet, in determining as to the intent with which a deed was executed, it is competent, as against the parties to it, to look to the use which they have made of it. The use to which they applied it, is, as against them, evidence of the intent with which they made it. — Worseley, assignee of Slader, v. de Mattos & Slader, 1 Burr. Rep. 484.

Admitting that one of the objects of the complainants, in joining in the execution of the deed and assenting to its provisions, was to secure the payment of their debt; yet the evidence in the case, and the provisions of the deed, impel us to the conclusion, that they made use of their debt' as a col-orable consideration, to enable the debtors to withhold their property from their other creditors,' and .that there was an intent to provide a means for the Wests to carry on their mercantile business, and to put the goods and 'the proceeds of their sale beyond the reach of all creditors not mentioned in the deed; and we must therefore hold the deed to be fraudulent and void as to the creditors of the grantors.— 1 Swift’s Digest, (revised in 1853,) 265-271.

This conclusion renders it unnecessary to examine any other question presented by the assignment of errors by the complainants. They were not entitled to any relief; and the decree has not injured them.

A few words will dispose of -the assignment of errors by Westand wife, the trustee, and Robert West by his guardian.

None of these parties have any right to the fund which the chancellor decreed to be distributed;’as against the creditors to whom the chancellor ordered it to be paid. That fund consists of the proceeds -of the property conveyed to complainants by the deed which we have above declared to be void as to the creditors. But, although it is void as to the creditors, it is valid as between-the parties to it. It therefore deprives West and wife of any right to that fund, as against the creditors provided for in 'it, and -leaves the fund subject to the payment of the debts of the other creditors. The trustee and Robert West never had any right to that fund. Their rights are confined to the property embraced by the mortgage to D. F. Constantine, as to which nothing was decided or decreed by the chancellor, in such manner as to conclude any of the parties. The decree of the chancellor is simply a distribution of the fund above' mentioned ;• and does not, and cannot, deprive West and wife, -the trustee, or Robert West, of any right. The right of West and wife, and the trustee and Robert West, as to the separate estate of Mrs. West, as well as the right of each of them to assail the mortgage to D. F. Constantine, or to defend against it, remains wholly unaffected by any decision of the chancellor, or by any of his decrees in- this cause.

As mono of the parties who have -assigned errors, have any right to a reversal of the decree which has been appealed from, that decree must be affirmed. The complainants must pay the eosts of the appeal taken by them; and West and wife, the trustee, and the guardian of Robert West, must pay the costs of their appeal.