E. L. Martin & Co. v. A. B. Maggard & Son , 206 Ky. 558 ( 1925 )

A. B. Maggard is a farmer living in Leslie county. About November, 1920, Henry Maggard, his son, opened a store near Causey, Ky., about four miles from his father's residence, in the name of A. B. Maggard Son. The stationery used in the store was so printed and the business was so advertised in calendars sent out to the customers. In the spring of 1921 A. B. Maggard Son built a storehouse on A. B. Maggard's land, about 100 yards from his residence, and ran a store there for about three months in addition to the store near Causey. After three months this store was sold to Bige Maggard, a brother of Henry Maggard. The other store was run until October, 1921, when it burned down. At that time a number of bills for goods bought in the name of A. B. Maggard Son were unpaid, and suits were filed by a number of the creditors against A. B. Maggard Son to collect them.

On February 13, 1922, A. B. Maggard, in consideration of $3,000 cash in hand paid, conveyed to Larkin Lewis the farm on which he resided, which was all the property he owned subject to execution. E. L. Martin Co. filed this action October 10, 1920, to recover of A. B. Maggard and Henry Maggard their debt, amounting to $264.14. On May 1, 1922, they filed an amended petition, making Larkin Lewis a defendant, alleging that the conveyance by A. B. Maggard to Larkin Lewis was fraudulent, and made with the intent to cheat, hinder, and delay his creditors. They prayed that the deed be set aside and the land subjected to their debt. A. B. Maggard filed answer, denying that he was a member of the firm. He and Lewis both denied that the deed to Lewis was fraudulent. Proof was taken, and on final hearing the circuit court entered a personal judgment against Henry Maggard, but dismissed the action as to A. B. Maggard and Larkin Lewis. The plaintiffs have filed a transcript of the record, and entered a motion for an appeal; their debt being less than $500.

Henry Maggard swears that his father knew the business was done in the name of A. B. Maggard Son from the beginning and acquiesced in it. A. B. Maggard denies this, but admits that he did learn this in June, 1921, and says he told Henry, when he sold out to Bige, if he bought one more bill of goods in his name he would bring suit against him. But the fact is he did not bring suit, or do anything, until the storehouse was burned and the creditors were suing him for the unpaid bills. In the meantime the store was run as before in the name of A. B. Maggard Son. Both A. B. Maggard and Larkin Lewis testify that the sale of the farm was a good-faith transaction without any intent to hinder or delay the creditors of A. B. Maggard, but they both knew at the time of the transaction of the numerous suits which had been filed against A. B. Maggard as the partner of his son and they both knew that the land was all the property of A. B. Maggard subject to execution.

[1, 2] The rule ordinarily is that a man is held to know what a man of ordinary prudence and judgment would know under the facts known to him. Under this rule it is hard to understand how A. B. Maggard could fail to know the name in which the business of these stores was done, when he dealt in both of them, and one of them was on his land and only 100 yards from his house. But, passing this, it is conceded that he so knew in June, 1921, and it appears that the balance due appellants is for a debt created after this. Knowing how the business was then carried on, it was incumbent upon him, if he was unwilling to be regarded as a partner, at once to give notice to those with whom the firm had been doing business. This he failed to do; he took no action until after the store burned in October, and he is liable to the plaintiffs for the debt, when, knowing how the business was run, he allowed it to be continued as before. Fennell v. Myers, 76 S.W. 136, 25 Ky. Law Rep. 589; 20 Rawle C. L. 1067.

"But undoubtedly, if a person learns that his name is being used as that of a member of a firm, he is under a duty to prohibit such use, and it is the general rule that when one knows that he is held out as a partner in a particular business, he is bound to take such steps as an ordinarily prudent person would take in the circumstances to notify the public, as well as individuals to whom he knows the holding out has been given, that he is not a partner." 30 Cyc. 393.

[3, 4] As to the conveyance of the land to Lewis, made after A. B. Maggard had been sued by the creditors, the rule is that a man is held to intend that which he must know is the necessary consequence of his act. He had then been sued by the creditors. The suits were then pending. By that conveyance he stripped himself of all the property he had subject to execution. The necessary effect of the conveyance was to hinder and delay the creditors, and he must be held to intend the necessary and natural consequences of his act.

[5] It is said, however, that Lewis did not participate in this intention, or have notice of it; but it appears that Lewis knew that A. B. Maggard had been sued for these debts and that the suits were pending. He also knew that the property he was buying was all the property Maggard had subject to execution. He knew that the necessary effect of this conveyance would be to deprive these creditors of the power to make their debts, if they got judgment. Land is not Ordinarily sold for cash. It is unusual that the whole consideration in a sale of a tract of land should be paid down when the deed is delivered. There was enough here to put Lewis on inquiry as to why Maggard was selling all the property he had subject to execution for cash.

"This court has frequently held that what is sufficient to puta purchaser upon inquiry as to the facts is equivalent to full notice of all the facts that such inquiry would have disclosed to him." Lain v. Morton, 63 S.W. 286, 23 Ky. Law Rep. 438; Allen v. Ligon, 175 Ky. 767. 194 S.W. 1050; Cable Piano Co. v. Lewis, 195 Ky, 666, 243 S.W. 924.

The appeal is granted, the judgment is reversed, and the cause is remanded to the circuit court, with directions to enter a judgment in favor of appellants against A. B. Maggard for their debt and costs, and ordering a sale of the land therefor.