Douglass Cotton Oil Co. v. Alabama Machinery & Supply Co.

• Decision Date: 25 November 1920
• Docket Number: 4 Div. 864
• Citation: 87 So. 342,205 Ala. 51
• Court: Alabama Supreme Court
• Parties: DOUGLASS COTTON OIL CO. et al. v. ALABAMA MACHINERY & SUPPLY CO. et al.

87 So. 342

205 Ala. 51

DOUGLASS COTTON OIL CO. et al. v. ALABAMA MACHINERY & SUPPLY CO. et al.

4 Div. 864

Supreme Court of Alabama

November 25, 1920

Appeal from Circuit Court, Geneva County; H.A. Pearce, Judge.

Suit by the Alabama Machinery & Supply Company and others against the Douglass Cotton Oil Company and others. Decree for complainants, and defendants appeal. Affirmed.

W.O Mulkey, of Geneva, for appellants.

Ball &amp Beckwith, of Montgomery, and Farmer, Merrill & Farmer, of Dothan, for appellees.

BROWN J.

This bill is filed by the complainants [appellees here], as contract creditors of the Samson Cotton Oil, Gin & Fertilizer Company, against the appellant Douglass Cotton Oil Company to avoid an alleged sale and conveyance of property by the debtor to the appellant on the ground that it was in fraud of their rights, and to subject the property to sale under decree of the court for the payment of their claim, and for relief in other respects which will be hereafter noticed.

After several amendments were made to the bill, the appellants interposed demurrers to the bill in its several aspects, and to certain parts thereof, questioning the sufficiency of the averments to bring the case within the influence of Code of 1907, § 3739. The demurrers were overruled, and this ruling presents the only question brought here for review.

One of the questions presented, and the one most strenuously urged in argument, is that to bring the case within the influence of this statute there must be shown an actual intent on the part of the debtor, participated in by the purchaser or grantee, to hinder, delay, and defraud creditors; and that the mere showing that the conveyance was voluntary and without consideration, or the equivalent, that the conveyance was made on a "fictitious and simulated" consideration, is not sufficient to sustain a bill filed under this statute.

The rulings here seem to be uniform that the purpose of section 3739 was to give to simple contract creditors the same remedy in a court of equity that is afforded judgment creditors with a lien by section 3735. Morris v. Fid. Mtg. Bond Co., 187 Ala. 262, 65 So. 810; Hall & Farley v. Ala. Co, 143 Ala. 480, 39 So. 285, 2 L.R.A. (N.S.) 130, 5 Ann.Cas. 363.

That constructive fraud, or fraud arising as a presumption of law from the fact that an insolvent or embarrassed debtor has made a voluntary conveyance of his property, is as effective to avoid a transfer thereof at the instance of an existing judgment creditor as fraud in fact cannot now be doubted. Seals v. Robinson, 75 Ala. 363. And if the purpose of section 3739 is, as declared in the repeated rulings of this court, to afford to simple contract creditors the same right and remedy as is secured to judgment creditors by section 3735 of the Code, it necessarily follows as a logical consequence that a voluntary conveyance of property by an insolvent or embarrassed debtor may be successfully assailed and avoided by simple contract creditors by a bill for that purpose filed under this statute.

We find nothing in Jones v. Massey, 79 Ala. 370, that opposes this view. In that case there seems to have been no averment that the conveyance there assailed was voluntary, or that it was made on a fictitious consideration, and no other facts were averred from which the law would raise the presumption of fraud. The holding in that case was that the mere averment of a conclusion that the conveyance was made with intent to hinder, delay, and defraud, was not sufficient in the absence of averments of facts to sustain this conclusion. In Marble City Land & F. Co. v. Golden, 110 Ala. 377, 17 So. 935, the court merely held that the complainant had failed to prove the averments of the bill. So these cases in no sense conflict with the conclusion above stated.

One alternative of the bill in short alleges that respondent Samson Cotton Oil, Gin & Fertilizer Company, subsequent to the time it contracted the debts due the complainants, which were due and unpaid at the time of the filing of the bill, conveyed to the appellant all its property, both real and personal, of the value of $75,000 in payment of debts claimed to be due to appellant, but which were in fact "simulated and fictitious"--the effect of which was to render it insolvent and without property out of which complainants could coerce the payment of the debts due them. We hold that these averments were ample to sustain the conclusion drawn by the pleader that the conveyance was fraudulent and void as to complainants. Matthews v. J.F. Carroll Merc. Co., 195 Ala. 501, 70 So. 143.

By the other alternative the pleader concedes that the debts due the appellant were bona fide and justly due, and were secured by a valid mortgage on all the property, but insists that the property conveyed in payment of the debts exceeded...