Redd v. Wallace , 145 Ala. 209 ( 1906 )

ANDERSON, J.

We concur with the chancellor in holding that the sale of the car load of oats was not fraudulent and void- under the laws of Alabama. — Pol-lack v. Meyer, 96 Ala. 172, 11 South. 385 ; Meyer v. Sulzbacher, 76 Ala. 120 ; Hodges v. Coleman, 76 Ala. 103 ; Crawford v. Kirksey, 55 Ala. 282, 27 Am. Rep. 704. It is true this court has held that if the creditor goes beyond the collection of his debt and thereby secures a reservation or benefit to the debtor, the conveyance will not stand. And conveyances of this character have been condemned where property has been conveyed partly in payment of an antecedent debt and for a new or subsequent consideration, upon the idea that when the creditor goes beyond the collection of his debt, and obtains property from an insolvent debtor, he is assisting him in getting his property beyond the reach of his other creditors. — Levy & Co. v. Williams, 79 Ala. 171. It is true, also, that in the case at bar the respondent went beyond the collection of his debt, and agreed to pay the debtors, Estes & Brown, the difference between the price of the car load of oats and what Avas owing them, Avhich was $34. While this may be tr'ue, the debt OAving them was not materially less than the Aralue of the oats, and we do not think that the assumption of the respondent to pay to the debtor the balance, being only $34, would be such a fraud on the other creditors as would violate the transaction. In other Avords, if the sale had been for the sole purpose of paying Avhat Avas due the respondent, an amount almost equal to the highest market value of the oats, Avould any court declare it void because of said small difference between the market value of the oats aud the amount of the debt? We think not. Then, if the com'eyance Avould stand without the assumption of the respondent to pay Estes & IiroAvn this small balance, the fact that they did agree to pay said balance Avould not be an act of Avliich the other creditors could complain and by which they could have been injured or defrauded.

The chancellor held that, Avhile the conveyance Avas not fraudulent, it Avas such a preference as is prohibited bAr section 60 of the bankrupt act of 1898. — Act July 1, 1898, c. 541. 30 Stat. 562 [U. S. Comp. St. 1901; p. 3445]. Conceding that the facts supported his conclusion, we become confronted by a qusetion of jurisdiction. Has a trustee in bankruptcy the right to subject, in the chancery court, property not fraudulently conveyed, but merely conveyed by Avay of preference under said section 60 of the bankrupt act of 1898? Independent of the statute a creditor could not resort to the chancery court to set aside a fraudulent conveyance or subject property so conveyed to the payment of his claim, unless he had a lien or had obtained a judgment at Iuav Avhich could not be enforced without the aid of this court, — Reese v. Bradford, 13 Ala. 838 ; Sanders v. Watson, 14 Ala. 198 ; Marble City v. Golden, 110 Ala. 376, 17 South. 935 ; Dickinson v. Nat. Bank, 98 Ala. 546, 14 South. 550. The rule requiring a lien and exhaustion of legal remedies was enlarged by a statute, iioav contained in section 818 of the Code of 1896, and which reads as follows: “A creditor without a lien may file a bill in chancery to discover or to subject to the payment of his debt any property which has been fraudulently transferred or conveyed or attempted to be fraudulently transferred or conveyed by his debtor.” It will be observed that the statute gives the right to file the, hill to subject property fraudulently transferred or conveyed, or attempted to be fraudulently conveyed or transferred, and has no application to a conveyance which would operate only as a preference under the federal statute, and which would not, under our laws, amount to a fraudulent conveyance or an attempted fraudulent conveyance', or transfer. A conveyance could be such a preference as is prohibited by the federal statute, and yet not be fraudulent under the laws of this state, and when such is the case our statute giving' the right to file a bill has no application. It is true the bankrupt act gives the trustee the right to pursue property conveyed under such conditions as would operate as a preference, and which is thereby prohibited in “any state court which would have had jurisdiction if bankruptcy had not intervened.” We do not think that the chancery court has jurisdiction to grant relief as against a conveyance which is a mere preference and which is not pronounced fraudulent by the laws of our state.' — O'Conner Mining Co. v. Coosa Co., 95 Ala. 614, 10 South. 290, 36 Am. St Rep. 251. In other words, we think the remedy given by the statute is intended to afford relief only against that class of conveyances which would be invalid under our laws, not those which would be valid in this state, but are simply made voidable by the federal statute

We do not mean to hold that a trustee cannot avoid a preference, and that the state court is not open to him for á recovery of the property or its value, as is provided by the act of bankruptcy, but simply to hold that such a conveyance, is not one which can be avoided by a bill in chancery, unless there is an averment and proof of fraud. — Turrentine v. Koopman, 124 Ala. 211, 27 South. 522. What we hold in the case at bar does not conflict with the principles declared in the case of Andrews v. Mather, 134 Ala. 358, 32 South. 738. There we held that the trustee in banukruptcy could maintain a bill under section 818 of the Code of 1896 to set aside a fraudulent conveyance. Here we hold that he cannot resort to the chancery court.to avoid a. conveyance which is not fraudulent, but which might be a preference under the bankrupt act. Pretermitting the other questions presented by this appeal, we hold that the chancellor properly held that the sale was not fraudulent, but that, after so holding, he erred in granting relief upon the theory that it was a preference, which involved a question not within the jurisdiction of the chancery court.

The decree of the chancellor is reversed, and a decree is here rendered dismissing the bill, but without prejudice to complainant’s right to treat the sale as a preference under the act of bankruptcy and to proceed further in the proper forum.

Haralson, Dowdell & Denson, JJ., concur.