James Supply Co. v. Frost

Citation214 Ala. 226,107 So. 57
Decision Date05 November 1925
Docket Number8 Div. 752
PartiesJAMES SUPPLY CO. et al. v. FROST et al.
CourtSupreme Court of Alabama

Rehearing Denied Jan. 21, 1926

Appeal from Circuit Court, Limestone County; 0. Kyle, Judge.

Bill in equity by the James Supply Company and the American Bank of Commerce & Trust Company against Thomas H. Frost, Rebecca C Frost, Mollie M. Hoffman, and R.N. Cartwright. From a decree denying relief, complainants appeal. Affirmed.

Complainants held not entitled to have mortgage declared fraudulent and void, or, in alternative, a general assignment for benefit of creditors.

The opinion of the circuit judge is as follows:

"This is a creditor's bill, filed by complainants as judgment creditors of defendant Thomas H. Frost, seeking to have a certain note and mortgage executed by him to defendant C.N. Cartwright to be declared fraudulent and void, and, in the alternative, to have it declared a general assignment for the benefit of creditors under the statute, as being a conveyance of substantially all of said debtor's property subject to execution. The bill, while filed on behalf of complainants alone, prays that, in the event the note and mortgage be found to be a general assignment for the benefit of creditors, it be so declared 'for the benefit of all the creditors' of Frost. After the bill was amended, C.N Cartwright filed an answer thereto, in which he sets up that he was not then, nor was he at the time the bill was filed the owner of the note and mortgage mentioned in the bill, but that on January 16, 1923, he had transferred them to L.P Cartwright, G.H. Wood, and R.N. Cartwright, Jr., for value and that they were the owners in due course, and without notice of the indebtedness owing by Frost to complainants thereupon complainants amended their bill by making said parties defendants to said bill and praying process against them, but without changing the averments as originally made in the bill as first amended.
"Thereupon these new-made defendants filed an answer to the bill as amended, setting up that they were bona fide purchasers of the note and mortgage on January 16, 1923, holders in due course, for value, and without notice, etc. It is averred that complainant James Supply Company obtained its judgment against Frost on March 21, 1922, and that complainant American Bank of Commerce & Trust Company obtained its judgment on March 22, 1922. While complainants aver that they are judgment creditors, the bill is not filed under section 7338 of Code of 1923, as they do not aver that execution has been issued and returned "no property found"; so it must be held as having been filed under section 8038 of Code of 1923, as simple contract creditors, with a lien only from the date their respective judgments were recorded in the office of the judge of probate. Code, § 7875.
"The facts are these: The Fulton Cotton Mill Company was indebted to defendant R.N. Cartwright for cotton sold by him to it in the sum of $5,918.69; this indebtedness was evidenced by the note of said company of date December 15, 1920. The defendant Frost was an officer of the Fulton Cotton Mill Company; and, some of the creditors of said company insisting that it reduce some of its home indebtedness, Frost, on May 31, 1921, went to R.N. Cartwright and proposed that, if Cartwright would enter a credit on his note against the Fulton Cotton Mill Company of $2,500 he, Frost, would make him a note and mortgage covering Frost's homestead, being a house and lot. This was agreed to by both Frost and R.N. Cartwright verbally. Cartwright entered the credit of $2,500 on the Fulton Cotton Mill note, and said company took credit for it on its own books. In other words, Cartwright's debt against the Fulton Cotton Mill Company was reduced $2,500. Frost did not carry out the verbal agreement made on May 31, 1921, until December 24, 1921, when he executed to R.N. Cartwright his note for $2,500, payable January 1, 1925, and a mortgage on his homestead to secure it. In other words, Frost carried out his verbal agreement made with R.N. Cartwright, but did not do so until December 24, 1921,
"On January 16, 1922, in consideration of their assuming his liability on what is called the 'McClellan property,' R.N. Cartwright transferred and assigned, without recourse on him, the said note and mortgage to L.P. Cartwright, G.H. Wood, and R.N. Cartwright, Jr. It will be noted that this was before complainants obtained their several judgments against Frost.

"While it was once held that a bill of this character could not be filed in a double aspect (Green v. Wright, 160 Ala. 476, 49 So. 320), after the adoption of section 3095, Code 1907, it is now uniformly held that seeking to have a conveyance declared fraudulent and void, or, in the alternative, as a general assignment for the benefit of creditors, does not render a bill multifarious. Smith v. Young, 173 Ala. 197, 55 So. 425; Wilson v. First National Bank, 209 Ala. 70, 95 So. 340; Killian v. Trigg, 209 Ala. 352, 96 So. 409; Hard v. American Bank, 200 Ala. 264, 76 So. 30; Burnwell Coal Co. v. Setzer, 203 Ala. 395, 83 So. 139.

"The first question that I see proper to consider is this: Are these new defendants (L.P. Cartwright, G.H. Wood, and R.N. Cartwright, Jr.), under the allegations of the bill as amended and the proof, liable in this case? The bill makes no charge of fraud against them; the suits of complainants against Frost were not notice to them (Acts 1915, p. 122); the doctrine of lis pendens does not apply (2 Pom. Eq. [3d Ed.] §§ 636, 635, 640; Hailey v. Ano, 136 N.Y. 569, 32 N.E. 1068, 32 Am.St.Rep. 764); they are not shown to have had actual notice; they paid a consideration by releasing R.N. Cartwright from liability on the McClellan property; they bought commercial paper before maturity. As said in Burnwell Coal Co. v. Setzer, 203 Ala. 396, 83 So. 139, so far as these defendants are concerned: "This case must therefore be considered under the rule relating to fraudulent grantees for a new or subsequent consideration, as distinguished from those who purchased as creditors, or for an antecedent debt."

"No fraud is alleged or proved against these three defendants, and when we consider the case under its alternate allegations--that is, as a general assignment--complainants show no right of recovery against them. For it is said: 'When the relation between grantor and grantee and the form of the transaction do not on their face import an arrangement to which the statute assigns a particular operation and effect, without regard to the intention of the parties, as where it purports to be a sale to a person not a creditor, but the transaction is in truth nevertheless a disposition of all the grantor's property, with intent to pay debts and evade the statute, it becomes necessary to aver its true meaning and intent.' Elliott v. Kyle, 176 Ala. 379, 58 So. 309. (Italics supplied.) There is no such averment in this case. On the averments and proof, I am of opinion, and so hold, that these three defendants are not liable in this case, but that they are innocent purchasers for value of the note and mortgage involved in this suit.

"As the defendant Frost suffered a decree pro confesso to be rendered against him, the only remaining question in the case is: Is R.N. Cartwright liable? In answering this question, the first theory of the bill, that the conveyance was fraudulent and void, will be considered. It is urged by complainants, and so the bill charges, that there was no consideration for the contract between Frost and R.N. Cartwright, but this contention cannot be sustained. 'It is enough that the creditor sustains the detriment, which follows from the extinguishment of his demand against the original debtor. *** A debt may be paid by a stranger, or by the debtor, and as between the debtor and the creditor, the demand is extinguished by the payment, no matter from whom it proceeds.' Underwood v. Lovelace, 61 Ala. 157. The discharge of $2,500 of the debt of the Fulton Cotton Mill to himself is sufficient consideration for the new promise. Perry v. Gallagher, 17 Ala.App. 114, 82 So. 562; Howard v. Rhodes, 17 Ala.App. 26, 81 So. 362.

"There are some badges of fraud in the case, among others, the omission to record the conveyance; but this of itself is not evidence of a fraudulent intent, 'for the mere omission may consist with good intentions.' Mathews v. J.F. Carroll Mer. Co., 195 Ala. 505, 70 So. 144.

"After a consideration of the undisputed evidence, I am of opinion that the averment of the bill that the conveyance was executed for the purpose of hindering, delaying, or defrauding the creditors of Frost has not been proven; especially is this true when the bill only charges that it was fraudulent and void because it is alleged that the conveyance was without consideration, and not because of any fraudulent intent participated in by R.N. Cartwright.
"Did the execution of the note and mortgage by Frost constitute under the statute a general assignment which will inure to the benefit of his creditors? This statute (section 8040, Code 1923), is not intended to declare conveyances fraudulent and void, but simply to blot out intended preferences or priorities. Dadeville Oil Mill v. Hicks, 184 Ala. 371, 63 So. 970. By the very terms of the statute itself it does not apply to 'mortgages or pledges or pawn given to secure a debt contracted contemporaneously with the execution of the mortgage, or pledge or pawn and for the security of which the mortgage, or pledge or pawn was given.' This statute, being in derogation of the common law, must be strictly construed. Smith v. McCadden, 138 Ala. 292, 36 So. 376; 25 R.C.L. 1056.
"If the note and mortgage had been executed by Frost to Cartwright on May 31, 1921, it would have been
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7 cases
  • National Union Life Ins. Co. v. Ingram, 6 Div. 735
    • United States
    • Supreme Court of Alabama
    • 13 Junio 1963
    ...Works v. Ingalls Foundation, 266 Ala. 656, 98 So.2d 30; Mobile Land Improvement Co. v. Gass, 142 Ala. 520, 39 So. 229; James Supply Co. v. Frost, 214 Ala. 226, 107 So. 57; Fletcher, Cyclopedia, Corporations, Permanent Ed., Vol. 3, §§ 922 and 924. The right of a creditor to impeach such a tr......
  • In re Intern. Resorts, Inc., Civ. A. No. 78-A-0911-E.
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • 19 Enero 1984
    ...At 10 So. 292. See also National Union Life Insurance Company v. Ingram, 275 Ala. 310, 154 So.2d 666 (1963); James Supply Company v. Frost, 214 Ala. 266, 107 So. 57 (1925). The master has previously determined that the transaction was fraudulent and due to be set aside, thus, this contentio......
  • Garrett v. First Nat. Bank, 3 Div. 190
    • United States
    • Supreme Court of Alabama
    • 18 Febrero 1937
    ...... and bonds of the approximate value of $50,000, to James M. Garrett, her husband, father of complainant, in trust for the. use of her only son, and heir, ...Green et al. v. First Nat. Bank of. Jacksonville, 224 Ala. 47, 138 So. 550; James Supply. Co. et al. v. Frost et al., 214 Ala. 226, 107 So. 57;. May v. Mathers (Ala.Sup.) 172 So. 907. ......
  • Gains v. Griffin, 7 Div. 117.
    • United States
    • Supreme Court of Alabama
    • 9 Junio 1932
    ...... been held that a mere omission to record a conveyance is not. itself evidence of fraud. James Supply Co. et al. v. Frost et al., 214 Ala. 226, 107 So. 57. However, the. charge made by the ......
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