McCrory v. Donald

• Decision Date: 22 April 1915
• Docket Number: 589
• Citation: 68 So. 306,192 Ala. 312
• Parties: McCRORY et ux. v. DONALD.
• Court: Alabama Supreme Court

68 So. 306

192 Ala. 312

McCRORY et ux. v. DONALD.

No. 589

Supreme Court of Alabama

April 22, 1915

Appeal from Chancery Court, Choctaw County Thomas H. Smith Chancellor.

Action by B.H. Donald, trustee in bankruptcy, against R.M. McCrory and wife. Judgment for plaintiff, and defendants appeal. Affirmed in part; reversed and rendered in part.

Elmore & Herbert, of Demopolis, and R.L. Bullard and Gavin & Garner all of Laurel, Miss., for appellants.

O.L Gray, of Butler, S.H. Terral, of Quitman, Miss., and McBeath & Miller and Neville & Stone, all of Meridian, Miss., for appellee.

THOMAS J.

This is a general creditor's bill by the trustee in bankruptcy seeking to have set aside certain described conveyances of R.M. McCrory to his wife, Bessie McCrory, as having been made in fraud of the rights of creditors of appellant. As to one of the conveyances questioned, it is the insistence of the trustee in bankruptcy that appellant purchased lands conveyed therein from one Kemp, and had the deed made to his wife when the full consideration therefor was paid from moneys subject to the payment of the creditors' debts.

The evidence discloses the facts that at the time of the first conveyance R.M. McCrory was without education; that he was about 50 years old, and his wife was about 25 years old; that he was engaged in farming and dealing in cattle until the year 1907, when he moved to Pachuta, Miss., and undertook to do a mercantile business at this point, placing in charge of this business a nephew, John McCrory. It further appears from the evidence that when R.M. McCrory undertook the mercantile business at Pachuta he had moneys, unincumbered personal property and land, and owed no debts. On October 16, 1908, he executed a voluntary conveyance to his wife, Bessie McCrory, of his lands in Choctaw county, Ala., which deed was recorded in that county on October 22, 1908, and the same was delivered by R.M. McCrory to his wife, as they explained in their testimony to protect her in event of his death. The evidence further shows that at the time of this conveyance of his Choctaw county lands to his wife, he was solvent, and did not owe any of his present creditors one cent, and was not then doing business with them. A reference to the two itemized accounts set out in the record shows that their initial transactions with him were of date December 2, 1908, and March 5, 1909, respectively, and so far as the record discloses he did not owe any debts on October 16, 1908, the date of the conveyance.

Before the appellee can have this deed of date of October 16, 1908, set aside as fraudulent and void as against creditors, the evidence must show that on the date of this execution and delivery R.M. McCrory, with the intention to defraud his subsequent creditors, made this voluntary conveyance to his wife, and that his wife accepted it for the purpose of assisting her husband in defrauding his creditors.

A subsequent creditor cannot complain of such conveyance, or have same set aside on the ground that it was made with the intent to hinder, delay, or defraud creditors, unless it is alleged in the bill, and the evidence sustains the allegation, that a fraud was committed by the parties to the conveyance and that the creditors suffered thereby. And in charging fraud the rule is that "mere conclusions, as that a conveyance is fraudulent, or that it was made with fraudulent intent, will not suffice against a proper demurrer." The bill must aver particular facts showing in what the fraud complained of consists. Little v. Sterne, 125 Ala. 609, 27 So. 972; Tyson et al. v. So. C.O. Co., 181 Ala. 256, 61 So. 278; Lehman et al. v. Gunn et al., 154 Ala. 369, 45 So. 620; Wilson v. Stevens, 129 Ala. 630, 29 So. 678, 87 Am.St.Rep. 86; Yeend, Adm'r, v. Weeks et al., 104 Ala. 331, 339, 16 So. 165, 53 Am.St.Rep. 50.

The distinction, as to the burden of proof, between the existing and subsequent creditors was discussed by Chief Justice Brickell in Seals v. Robinson, 75 Ala. 363, as follows:

"It is settled by a long line of decisions in this court that a voluntary conveyance, a conveyance not resting upon a valuable consideration, is void per se, without any regard to the intention of the parties, however free from covin or guile they may have been, as to the existing creditors of the donor, without regard to his circumstances, or the amount of his indebtedness, or of the kind, value, or extent of the property conveyed, if it be not exempt from liability for the payment of debts. As to subsequent creditors, if it be not shown that there was a mala fides, or fraud in fact in the transaction, the conveyance is valid and operative. But, if actual fraud is shown, it is not of importance whether it was directed against existing or subsequent creditors; either can successfully impeach and defeat the conveyance, so far as it breaks in upon the right to satisfaction of their debts. The distinction between existing and subsequent creditors is that, as to the former, the conveyance is void per se, for the want of a valuable consideration; as to the latter, because it is infected with actual fraud. Miller v. Thompson, 3 Port. 196; Cato v. Easley, 2 Stew. 214; Moore v. Spence, 6 Ala. 506; Costillo v. Thompson, 9 Ala. 937; Thomas v. De Graffenreid, 17 Ala. 602; Foote v. Cobb, 18 Ala. 585; Stokes v. Jones, 18 Ala. 734; s.c., 21 Ala. 731; Gannard v. Eslava, 20 Ala. 732; Randall v. Lang, 23 Ala. 751; Stiles v. Lightfoot, 26 Ala. 443; Huggins v. Perrine, 30 Ala. 396, 68 Am.Dec. 131; Cole v. Varner, 31 Ala. 244; Pinkston v. McLemore, 31 Ala. 308; Williams v. Avery, 38 Ala. 115. The right of the subsequent creditor depends upon the existence of actual fraud in the transaction; the burden of proving it rests upon him. Bump on Fraud. Con. 308. The general rule applies that fraud must be proved; it will not be presumed, if the facts and circumstances shown in evidence may consist with honesty and purity of intention."

This was the rule declared by Mr. Justice Stone in Huggins v. Perrine, 30 Ala. 396, 68 Am.Dec. 131, and restated by Mr. Justice Anderson in Allen et al. v. Caldwell, Ward, et al., 149 Ala. 293, 298, 42 So. 855, and it has never been departed from in this state. The right of the subsequent creditor, then, to have conveyances made by the debtor set aside, depends upon the existence of actual fraud in the conveyance; and the burden of proving it rests upon the complainant.

In Cartwright et al. v. West, 155 Ala. 623, 47 So. 94, the Chief Justice said:

"It is true that the adjudication of bankruptcy is in the nature of a decree in rem, and is conclusive, if rendered by a court having jurisdiction, of the fact of the

bankrupt's insolvency, and therefore of existing creditors at the date of its rendition; but the probative force of that adjudication cannot be extended, so as to make it proof of the fact that such creditors existed a year or more prior to the date of its rendition. And in order to avoid the necessity of alleging and proving a fraudulent intent it would be necessary to aver that the respective debts of the several creditors arose or accrued prior to the making of the several conveyances attacked."

In Allen v. Caldwell, 149 Ala. 299, 42 So. 858, Mr. Justice Anderson, discussing the facts of that case, says that, in order to condemn the deed, the evidence must show that when it was executed the grantor anticipated his dealings in cotton, and losses therefrom; and that the property was conveyed for the purpose of defeating debts thus incurred, as the old debts were secured, and no subsequent ones, other than those growing out of a speculation in cotton, were proved; that the evidence failed to show that the deed was designedly withheld from the record for the purpose of obtaining credit, which the recording of the instrument would impair; that the mere failure to record was not in itself evidence of a vicious intent; and where a failure to record is "consistent with good intentions the law will attribute no bad motive to the grantee."

In Claflin v. Mess, 30 N.J.Eq. 211, the court well said that:

"In order to establish a good title to relief" by a subsequent creditor, "he must show that at the time of the commencement of his suit there were debts still outstanding which the grantor owed at the time he made the deed, otherwise no foundation is laid for avoiding it as fraud upon antecedent creditors; for, if the grantor has paid all his debts incurred prior to the conveyance, that fact fully repels all idea of fraud as to them."

In Pinkston v. McLemore, 31 Ala. 308, Mr. Justice Walker declared that a contract between husband and wife, by which a separate estate is created in the wife in the earnings of herself and her domestic servants, will not be declared void at the insistence of subsequent creditors of the husband, on proof that he was greatly embarrassed with debts and contingent liability at the time the contract was made, when it also appears that he then possessed a large estate of unincumbered real and personal property, which is not shown to have been insufficient for the payment of his debts.

In Schreyer v. Scott, 134 U.S. 405, 416, 10 Sup.Ct. 579, 583 (33 L.Ed. 955), Mr. Justice Brewer writes of conveyances by husband to wife that:

"The very confusion and carelessness in the dealings between husband and wife make against, rather than in favor of, the claim of fraud. There is no evidence that he was in debt at the time of these conveyances, at least beyond a trifling amount, which was

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