Taylor v. Dwyer , 131 Ala. 91 ( 1901 )

McCLELLAN, o. j.

The bill in this case was filed by Henrietta Dwyer, a creditor by judgment in tort of Prank G. Taylor, against said Taylor, his son, J. H. Taylor, and the Merchants and Planters National Bank. J. P. Bullock was afterwards made a party defendant by amendment. Tbe purpose of tlte bill is to subject to tbe satisfaction of complainants said judgment certain chattels which belonged to Frank Gf. Taylor and which he sold or mortgaged to J. H. Taylor in alleged payment or security of a debt which said Taylor and his said son claim the former owed the latter. The bill is intended to attack this transaction on the grounds, first, that the consideration set up for said transfer, said alleged indebtedness, was wholly simulated, and nonexistent, second, that, if mistaken as to simulation, the .amount of said debt was grossly inadequate as a consideration for the property transferred, third, that said transaction between F. Q-. and J. -H. Taylor was in .form of a sale by the former to the latter in payment of an antecedent debt and was .evidenced by a bill of sale, jet it was intended thereby merely to secure said debt, and said bill of sale was intended to operate as a mortgage only; and, fourth, that the transaction was a conveyance by F. G-. to J. H. Taylor in trust for the grantor.

The bill in its first aspect is not attacked by the demurrers (except in so far as the whole hill is assailed for failing to offer to do equity and because it states no case for equitable relief in its other alternatives), and it needs only to be said here that the averments in this alternative clearly present a case of a conveyance of property by a debtor on a simulated consideration to hinder, delay and defraud his creditors.

The averments intended to support the third alternative basis of the relief prayed are, in our opinion, quite sufficient to that end. Tliey are to the effect that there was no real sale of the. property, but the mere pretense of a sale to cover a transaction which in truth and in fact involved a mortgage to secure a pre-existing debt, the bill of sale operating by secret agreement of the parties to it as a mortgage only. On these averments there was a secret benefit reserved to the insolvent debtor which opens the transaction to the successful assault of creditors. — Hill v. Rutledge, 83 Ala 162; Steiner v. Scholze, 114 Ala. 88.

Tbe fourth alternative presents a case for relief against a transfer of property by an insolvent debtor to another in secret trust for himself.

As to the second alternative upon which relief is sought the averments of the bill having express reference to that aspect are the following: “Oratrix further avers that the consideration, to-wit, thirteen hundred and ninety-one dollars, even, if it passed between said Taylor and his son, is grossly inadequate; that there must have been, according to said bank mortgage, some fifty-four head of mules and a sufficient number of wagons and drays and harness to employ that number of mules, and besides the said conveyance transfers all the dray business, which, as oratrix has averred, was well established and paid well. There was on the mules at the time of the transfer a debt secured by mortgage of twenty-five hundred dollars. Oratrix is informed and believes and therefore states that said mules, drays, harness, and dray business were worth from eight to ten thousand dollars; therefore oratrix avers that the said thirteen hundred and ninety-one dollars of debts made the consideration for the sale of such valuable property was a grossly inadequate price for the same. The said Prank Gf. Taylor was insolvent at the time he sold said mules, drays, wagons, harness, plows, tools, etc., by said bill of sale of April 20th, 1898.” The refreence here made to the bank’s mortgage will be understood when it is stated that in February, 1898, F. Gf. Taylor executed a mortgage to the Merchants and Planters National Bank bn forty-eight mules, drays, wagons, harness, etc., to secure a debt of twenty-five hundred dollars, that Taylor therein agreed to purchase six other mules with a part of the twenty-five hundred dollars borrowed from the bank, and that said additional mules should also be covered by the mortgage, and that in the bill of sale which is here attacked the mules sold by F. Gf. Taylor to J. H. Taylor are described as “my mules that is now embraced in mortgage to Merchants and Planters National Bank.” It is to be observed in this connection that the paragraph quoted does not aver what property was embraced in the bill of sale and passed by it in point of fact to J. H. Taylor. It merely sets forth arguendo that fifty-four mules and a sufficient number of wagons, drays and harness to employ them must have been embraced in the transaction because that amount of property was embraced in the mortgage to the bank and the bill of sale describes its subject matter as “all my drays, wagons and harness, plow's and other tools; also my mules that is now' embraced in the mortgage to Merchants and Planters National Bank.” Even the inference otf the 'Complainant is not supported by the bill of sale except as to the mules; the other property is not described therein as being embraced in the mortgage to the bank. Yet the conclusion of the pleader that the property transferred v/as of the value of eight or ten thousand dollars is (as to every item set down in the bill of sale except the dray business, as to which no separate valuation is stated and no facts are stated upon which a value could be arrived at) based upon the assumption that a certain number of mules, wagons, drays, etc., are. covered and conveyed by the bill of sale which the pleader does not know to have been so embraced, and does not aver Avere embraced, but which she argues must’ have been embraced because some of the items, the mules, are described as being those embraced in the mortgage, and it appears that forty-eight mules Avere embraced, and six others were to be purchased and to pass Avhen purchased under the mortgage. These argumentative averments taken at their face value are insufficient to support the general averment of the pleader that the property transferred was worth eight or ten thousand dollars, or her more general conclusion that the debt Avhich the bill of sale purported to pay Avas grossly inadequate as a consideration for the property. But Ave are prevented taking these averments at their face value even by other positive averments of fact set forth in the bill. For it appears from affirmative allegations in other parts of the bill that at the time of the execution of the bill of sale Frank G. Taylor had only eleven, or at the most thirteen, mules, that only this number passed under it, that there Avere at that time only a few drays and sets of harness of inconsiderable value, all other mules and drays, etc., having been otherwise disposed of by him prior to the transfer to his son, and that the mules which were transferred were not worth over one thousand dollars at the-time of the transfer. It is also shown, as we have seen, that J. H. Taylor took this property subject to, the-bank’s mortgage for twenty-five hundred dollars. Tt- is clear, therefore, that the bill in the alternative under consideration utterly fails to present a case for equitable interposition. The facts averred not only do not support the patently argumentative -conclusion of the pleader as to -the disparity in value between the property conveyed and the debt paid, but they affirmatively show that the property - was not worth greatly or even materially more than the- debt, or we might say, even as- much as the amount- of the debt. In this alternative of the bill, the debt is conceded to be bona fide, and it is also conceded? that the property -was transferred by F. G. Taylor-and-received by J. H. Taylor in payment and satisfaction or the debt. If the-property was not substantially all the property belonging to F. G. Taylor the transaction-is unobjectionable from any point of view and is not open to attack by the complainant or any other creditor, or all the creditors combined of said Taylor, and this wholly regardless of the intent beyond the payment of the debt which may have actuated the par-ties to the bill of sale. But it is further averred in the bill that the property thus transferred constituted substantially all the property owned by Frank G. Taylor, and that he is insolvent. On this state of the case the transfer to J. IT. Taylor by force of the statute is converted into a general assignment for the equal benefit of all F. G. Taylor’s creditors, including complainant and J. T-I. Taylor, and it would be none the less so for that it was made, with intent to hinder, delay and defraud other creditors than J. H. Taylor. But the fact that the creditors generally, or that this complainant for herself and the other creditors, have the right to- come into chancery and have the transfer to J. H. Taylor declared a general assignment cannot possibly give any equitable footing- to this complainant on the averments in the aspect we are discussing of her present bill: she does not seek at all to have the transfer declared a general assignment for the benefit of all creditors, but to have it declared' fraudulent and void to the end that she may subject the whole property to the satisfaction ofdier own' debt to the exclusion of the' claim of all other' creditors; and the presentation of "a case of statutory general assignment by the averments of her bill is not1 in co'hsdnanee with hut directly contrary to her intent and purpose. ' ■

The bill thén is to be taken as alleging that -with intent to' 'hinder, delay of defraud oratrix and- his creditors generally F. G-. Taylor transferred the property to J. II: Taylor upon a -simulated and non-existent consideration, or that in the form -of an absolute sale- F. (,t. mortgaged the jpropérty to J. H. to secure a bona ficlc debt, or that the former sold it to the latter in payment of a bona fide and' commensurate debt, or that he conveyed the property 'to J. H. in secret trust for his, the grantor’s, own use and benefit. The third alternative as here' stated presents no case for1 relief, and, of necessary- consequence, the bill failing in one disjunctive aspect fails as a whole to-make a case of equitable cognizance; and the demurrer going to this point should have been sustained'.' '

The bill is, however, obviously capable -of amendment, by striking out the defective disjunctive averment or otherwise; and, therefore, tlie'.motion to -dismiss" it for want of equity cannot he rested upon that infirmity.

The bill considered as one for the appointment of a receiver is further objectionable because of its-failure to offer to do equity in respect of the debt due the Merchants and Planters National Bank secured by a mortgage on the property proposed to be subjected to'complainant’s judgment. It is ■ true ■ that mortgagees now held by Bullock and that the bill alleges that he holds it fraudulently for the Taylors, who, it is further averred, paid it off and had it transferred to him to hinder, delay and defraud the complainant, but it should notwithstanding these averments, which are made on information and belief, offer to pay Bullock the balance due on the mortgage debt in the event it should be determined that he is a bona fide holder of it. But this defect being curable by amendment, furnish.es no ground for dismissing the bill for the want of equity.

The pleas of both Frank G. Taylor and of J. H. Taylor were properly held insufficient by the chancellor. Frank G. Taylor never had any right of exemption against the claim in tort of the complainant which she has reduced to judgment in trover. That- her claim was in tort is concluded for nil the purposes of this case by the judgment she recovered. That it was in existence at the time of the transfer of his property by Frank G. to J. H. Taylor is alleged by the bill and not controverted. The covinous conveyance by him of property which was exempted to him from levy and sale for the payment of debts was as much a fraud on complainant in respect of her claim against which no property is exempt as if there were no exemption laws.

There is no merit in the contention that the bill is without equity for that it discloses that complainant had an adequate and complete remedy at law by having her execution levied on the property transferred by F. G. to J. H. Taylor. The transfer was an impediment to the efficacious pursuit of her legal remedy, especially in view of the fact that it would have been necessary for her to indemnify the sheriff before he would or was in duty bound to levy the execution, and if it was a fraudulent transfer, as alleged, she had a right to come into Chancery to remove the obstacle, thus erected by the Taylors to a proper and satisfactory subjection of the property to the payment of her judgment. And having this standing in a court of equity her remedies there are the same as if she had no semblance of a legal remedy, and it is no objection to the appointment of a receiver that she had it in her power to take the property on .execution by giving indemnity to the sheriff.

For the reason that the bill did not make a case for equitable interposition in one of the disjunctive sets of averments relied on for relief, the receiver should not have been appointed by the register in the first instance and the appointment should not have been confirmed by the chancellor on the appeal to him. — Strickland v. Gay, Hardie & Co., 104 Ala. 375; Lehman, Durr & Co. v. Griel Bros., 119 Ala. 262.

Tlie decree of the chancellor overruling the motion to dismiss the bill for want of equity will be affirmed. The decree overruling the demurrer is reversed and a decree will be here entered sustaining the demurrr and dismissing the bill unless it be amended by allowance' of the register within ten days. The order of the chancellor confirming the register’s appointment of the receiver is reversed, and as to that the cause is remanded so that it stands before the chancellor on appeal from the register as it did before the order of confirmation was made by the chancellor.

Affirmed in part, reversed and rendered in part, and reversed and remanded in part.