Tryon v. Flournoy , 80 Ala. 321 ( 1885 )

STONE, C. J.

It is not contended for appellants that they have made a case for recovery as to the stock of merchandise sold and conveyed to F. M. Walker, O. E. Walker and John A. Hayes. This conveyance, was made on the eve of E. H. Walker’s insolvency, and was an open confession that the latter had failed in business. There is no material conflict in the testimony as to this transaction. The alleged indebtedness of E. H. Walker is shown, and the conveyance was made in absolute payment of such indebtedness. The testimony is that the goods were sold at their reasonable value, and there is an absence of evidence that any benefit was reserved or secured to E. II. Walker, the seller. These facts the testimony establishes, and there is nothing found in the record to overturn or weaken them. On these facts, it is immaterial what private motive may have influenced E. II. Walker’s act. There is, under our rulings, no room for fraud in such a transaction, and it must stand. The reasons on which this principle rests have been so often stated we need not repeat them. — Hodges v. Coleman, 76 Ala. 103; Crawford v. Kirksey, 55 Ala. 282; Flewellen v. Crane, 58 Ala. 627; Chamberlain v. Dorrance, 69 Ala. 40. The law allows a failing debtor to prefer and provide for one or more creditors at the expense of others. It therefore allows him, by paying one class in full, to disable himself to pay the others. Even if he intends this, it can not impair the validity of the conveyance, unless he thereby secures to himself some benefit he would not otherwise enjoy. — Seaman v. Nolen, 68 Ala. 463.

. What is said above is based on the fact that F. M. & C. E. Walker and Hayes were creditors of R. H. Walker in the amounts claimed, and that they bought the goods by absolute purchase and at their reasonably fair value; and an entire want of proof that any benefit was secured to, or trust reserved for the seller. It would possibly be different if the purchasers were shown to have participated knowingly, and aided R. H. Walker intentionally, in the transaction which proximately preceded his failure in business ; transactions which, unexplained, leave room for unfavorable comment. In 1882, R. H. & F. M. Walker did business in partnership. In December of that year R. H., the son, purchased the interest of F. M., the father, and became sole proprietor of the business. He agreed to take all the assets, assume all the liabilities, cancel the individual debt of F. M. to the firm — amount not stated — and pay him for his interest three thousand dollars. If they were equal partners, this was an admission that the assets of the firm exceeded its liabilities by six thousand dollars. In addition to this R. H. owned the storehouse, warehouses and other real property, valued by no witness at less than ten thousand dollars. On the pledge of this real estate as a security, R. H. borrowed ten thousand dollars from Flournoy & Epping, and with it, supplemented probably with collections, paid off all liabilities accruing and maturing during the season of 1882-3. The record does not inform us of the extent of business done in 1883, farther than that from some day late in August until October 23, the sales aggregated nine thousand and eight hundred dollars. Ascot-ton was then being marketed, it is reasonable to suppose a considerable proportion of these sales were made for cash, or on short credit. Now, between August 29, and October 20 — say, during 53 days — R. Ii. Walker received in cash and cotton from F. M. & O. E. Walker over nineteen thousand dollars, and paid to and for them only some twenty-six hundred dollars; leaving sixteen thousand and six hundred dollars, excess of receipts in money and property convertible into money, overdisbusements made on that, or any other account shown. In this estimate we do not include a payment of thirty-two hundred and sixty dollars made by him to them in wagons and buggies, which purport to have been turned over to them by car load and invoice, as they were received from the manufacturers. Whether those wagons and buggies had been paid for, or their purchase constitutes a part of the claim this suit seeks to enforce, the record furnishes no means of determining.

Without estimating probable receipts from other sources, we have thus traced to him receipts within the two months preceding his failure between sixteen and twenty thousand dollars in money and cotton convertible into money, while his debts maturing November 1,1883, disclosed by the creditors’ bill we have in hand, foots up about ten thousand dollars; and adding to this sum his other paper, as disclosed in the same way, which would mature by January 1, 1884, the whole sum is less than thirteen thousand dollars. Yet, he paid his preferred creditors in merchandise he had bought from others and had not paid for, and we are left to conjecture what became of the large amount of money and cotton we have traced to his hands. It is not mentioned in his assignment.

Another reflection. Flournoy & Epping, as shown by this record, were factors and commission merchants, and for years had been selling B. H. Walker’s cotton, handled in his business. He was a merchant of ten years standing. Yet this record shows that B. H. Walker received from F. M. & C. E. Walker more than three hundred bales of cotton in excess of the only thirty-two bales which went forward to Flournoy & Epping. It is common knowledge that warehousemen advance to their customers as a means of increasing their business, and the inference is almost irresistible that the loan of ten thousand dollars from Flournoy & Epping to Walker was made chiefly in the interest of their warehouse business. To what uses was this cotton applied ? The record does not inform us.

We have then the case of a merchant who, commencing a new business-year with real estate worth ten thousand dollars or more, merchandise and bills receivable worth six thousand dollars above his liabilities, and an established credit, yet in less than ten months goes into insolvency and makes an assignment of unknown and uncertain value, with no tangible reason given why the disaster fell so suddenly upon him.

We have indulged in these reflections, because they are suggested by the facts shown in the record. It is possible they could be explained, and made to harmonize with honesty of purpose. We will not pronounce unqualified condemnation. But should not the fact of such abhorrent possibilities invite inquiry whether or not a remedy can be provided ? Should there not be some restraints on unlimited power of preference? And should the fraudulent withholding or secretion of goods be left amenable only to the powerless mandate of a fieri facias ¶

The transaction which we are asked to pronounce fraudulent is R. IT. Walker’s conveyance to Flournoy & Epping. This was a conveyance stipulated for in December, 1882, and consummated about January 15, 1883. It was in form an absolute conveyance of real estate, including the store-house in which R. IT. Walker was doing business, and much other property ; the value being ten thousand dollars, or more. This conveyance, although in form absolute, was only intended as security for the repayment of ten .thousand dollars, borrowed by Walker from Flournoy & Epping. They gave him a contemporaneous bond to reconvey to him, when the said loan was repaid. These papers were not recorded, nor was there any change of possession until after Walker’s failure. On October 26, 1883, the deed from Walker to Flournoy & Epping was filed in the proper office for registration; and possession of the property then passed to the latter. The bond to reconvey is not shown to have been recorded. The contention is, that by failure to take possession, or to give notice by the registration of the deed, Flournoy & Epping committed a fraud on the complainants in this suit, who subsequently trusted Walker on the faith that he continued to be the owner of the valuable real estate he had owned, and which they permitted him to continue to occupy, without visible evidences of changed ownership.

There can be no question that if this conveyance was assailed by creditors whose demands existed at the time it was made, the deed would be pronounced fraudulent as against them, no matter what motive influenced its execution. — Sims v. Gaines, 64 Ala. 392; Seals v. Robinson, 75 Ala. 363; Larkins v. Aird, 6 Wall. 78; Eaton v. Avery, 83 N. Y. 31. The present suit, however, is by subsequent creditors. Their demands were the result of purchases made by Walker after he had conveyed to Flournoy & Epping. The Code, §§ 2166, 2167, 2199, 2200, do not in terms apply to this case. To constitute a conveyance fraudulent as against subsequent creditors, there must be an actual intent to defraud. Constructive fraud is not enough. See authorities on the briefs of counsel. Both Flournoy and Epping were examined as witnesses, and each testifies that he did not know registration was necessary. They reside in Georgia, and say they thought they were allowed twelve months within which to have the deed recorded — that being the law of Georgia, as they assert. Now, while ignorance of law is no excuse for failing to perform an act of positive, legal' obligation, it does exculpate, in such a case as this, from all intentional wrong. To constitute intentional fraud, the failure to record must have had its'motive in an intention to uphold Walker’s credit, or to enable him to obtain goods from others on time, which he would not be likely to do, if the registration were made. It is shown that Walker, when he acknowledged the deed, desired to conceal its contents. This is a suspicious circumstance against him; and if knowledge of it could be traced to Flournoy & Epping, or if there was any proof tending to show that the latter were informed he wished to conceal the fact of such conveyance, this would possibly justify us in holding them participants in his fraud. There is no such testimony. Presuming, as we must, that the chancellor properly weighed the testimony, and came to correct conclusions of fact, there is not enough in the record to convince us clearly that he erred ; and in the absence of such conviction, we must affirm his decree. — Rather v. Young, 56 Ala. 90; Nooe v. Garner, 70 Ala. 443.

Affirmed.