Green & Gay v. Wright, Williams & Wadley

• Decision Date: 15 April 1909
• Citation: 49 So. 320,160 Ala. 476
• Parties: GREEN & GAY ET AL. v. WRIGHT, WILLIAMS & WADLEY ET AL.
• Court: Alabama Supreme Court

49 So. 320

160 Ala. 476

GREEN & GAY ET AL. v. WRIGHT, WILLIAMS & WADLEY ET AL.

Supreme Court of Alabama

April 15, 1909

Appeal from Clay County Court; W. J. Pearce, Judge.

Suit by Wright, Williams & Wadley and others, creditors of W. J Skinner, against Green & Gay and others. From a decree overruling a demurrer to the bill, defendants appeal. Reversed and remanded.

Whatley & Cornelius, for appellants.

Walter S. Smith, for appellees.

MAYFIELD J.

The bill in this case was confessedly filed under two sections of the Code of 1907, namely, sections 3739 and 4295. The one authorizes a creditor, without a lien or judgment, to file his bill to discover and to subject property fraudulently conveyed or transferred by the debtor, in the same manner as a creditor with a judgment or lien could do, without the statute. The other statute was intended merely to blot out or prevent intended preferences or privities between creditors by contracts of sale, and contracts of securities between the debtor and a part of his creditors, to the exclusion of the others.

To be within the latter, it must be a sale or security of practically all the debtor's property which is subject to execution or to the claims of his creditors, and must be in payment or security of a pre-existing debt. A sale or security of a small part only of the property of the debtor to one or more of his creditors, is not within the statute nor is a sale or security of all of it for "a new and present consideration" within the statute. It is likewise true that a fraudulent sale--that is, one fraudulent to the extent of rendering the transaction void--is not within this statute. The statute upholds the sale or security and does not strike it down, but declares it a trust fund for the benefit of all the creditors, and not merely of those intended or named in the contract. Contracts, within the statute, are treated as if the statute were written into the contract of sale or security. The vendee, mortgagee, or lienee, or pledgee, is treated as a trustee for all the creditors, instead of for only those named in the contract. He must account to each for his pro rata part of the trust funds, after paying the legitimate expenses of administering the trust. If the trust is declared and enforced by a bill in and through the chancery courts, the trust estate, of course, must pay the legitimate costs and expenses thereof, as if it were in fact as well as in law a general assignment; and this may include reasonable attorney's fees necessary to declare and enforce the trust. It is not paid by the debtor or trustee except out of the trust estate. Consequently bill...