First Nat. Bank of Birmingham v. Smith

• Decision Date: 23 June 1891
• Citation: 9 So. 548,93 Ala. 97
• Parties: FIRST NAT. BANK OF BIRMINGHAM v. SMITH ET AL.
• Court: Alabama Supreme Court

9 So. 548

93 Ala. 97

FIRST NAT. BANK OF BIRMINGHAM v. SMITH ET AL.

Supreme Court of Alabama

June 23, 1891

Appeal from city court of Birmingham; H. A. SHARPE, Judge.

Bill by the First National Bank of Birmingham against W. A. Smith and Fannie W. Smith, his wife, to set aside a fraudulent conveyance. Decree for defendants. Plaintiff appeals. Affirmed.

The bill alleges that W. A. Smith was indebted to the bank on the 25th day of November, 1887; that the conveyance by Smith to his wife was simulated and fraudulent, and made for the purpose of hindering, delaying, and defrauding his creditors that he was not indebted to his wife in any amount, and, if indebted at all, the amount was greatly less than the recited consideration of said conveyance; and that the value of the property conveyed by him to his wife was greatly in excess of the amount of his alleged indebtedness to his said wife. Each of the defendants in their answer set up as a defense that W A. Smith was justly indebted to his wife at the time of said conveyance in the sum of $21,109; that the debt was justly due; that the market value of the property conveyed was not equal to the amount of the said indebtedness; and that the property was conveyed by Smith and accepted by his wife as payment in full of the debt so due her, and was made and accepted in good faith, without a reservation of any interest therein to W. A. Smith, and without any intent to hinder delay, or defraud his creditors. The testimony for the complainant only went to show the indebtedness of the defendant W. A. Smith to it at the time of the conveyance. It was proved by the defendants, as is shown by the account attached as exhibit to the answer of Mrs. F. W. Smith, that W. A. Smith was indebted to her for cash received as a gift to her from her father, at different times, in the amount of $10,000; and also for the purchase money of a lot sold by him for her in the sum of $10,000. These amounts, together with the interest thereon, which was computed and charged against W. A. Smith in the said account, made his gross debt $24,634.74. This account, as shown by said statement, was entitled to a credit of $3,525.03. This left a balance due Mrs. F. W. Smith of $21.109.71, which was recited as the consideration in the deed of conveyance to her of the said several lots, which conveyance is sought to be set aside by this bill.

Gillespie & Smyer, for appellants.

Webb & Tillman and R. H. Pearson, for appellee.

STONE C.J.

The principles of law material to be considered and declared in this case have been so often decided in this court that we consider it unnecessary to do more than state them. They grow necessarily out of our legislation, which permits an insolvent debtor-one who is not able to pay all his debts in full-to prefer and pay one or more creditors to the utter neglect and detriment of the others. Perhaps our system is an unwise one, but, if so, the legislature alone can remedy it. We must administer it as it is. The principles applicable to this case may be thus summarized: An insolvent debtor may select which of his creditors, one or more, he will pay and pay them in full, and thus disable himself to pay the others anything; and it makes no difference if the one or more preferred creditors know the effect of the transaction will be to deprive the debtor of all means with which to pay his other debts. Nor is the wish, motive, or intention of the debtor a material inquiry, if the requisite conditions exist. Those conditions, in a case like the present, are- First, the debt must be bona fide and enforceable, not simulated; second, the payment must be absolute, and, if made in property, must not be materially in excess of the debt; third, no pecuniary benefit or consideration of value, other than the liquidation of the debt, must inure or be secured to the debtor; fourth, stricter proof is exacted when the transaction is between near relations. Crawford v. Kirksey, 55 Ala. 282; Hodges v. Coleman, 76 Ala. 103; Dollins v. Pollock, 89 Ala. 351, 7 South. Rep. 904, and authorities on page 362, 89 Ala., and page 907, 7 South. Rep.; Chipman v. Stern, 89 Ala. 207, 7 South. Rep. 409; Bank v....