Powell v. Kelly

• Decision Date: 01 March 1889
• Citation: 9 S.E. 278,82 Ga. 1
• Parties: POWELL et al. v. KELLY et al.
• Court: Georgia Supreme Court

9 S.E. 278

82 Ga. 1

POWELL et al. v. KELLY et al.

Supreme Court of Georgia

March 1, 1889

Error from superior court, Walton county; HUTCHINS, Judge.

Code § 1953, provides that "a debtor may prefer one creditor to another, and to that end he may, bona fide, give a lien by mortgage or other legal means, or he may transfer negotiable papers as collateral security, the surplus in such cases not being reserved for his own benefit, or that of any other favored creditor, to the exclusion of other creditors." By Act Feb. 23, 1866, while the above section was in force, it was provided that a debtor might prefer one creditor to another, and no particular manner or form was prescribed for giving such preference. Held, that the latter act impliedly repealed that portion of section 1953 in italics, and it should have been stricken out when the Code was revised.

Powell Brother & Co., by their petition, alleged that they were creditors of Kelly Brothers & Porter, and that Kelly Brothers & Porter, a mercantile firm, were possessed of assets of the value of about $100,000, and about December 14, 1888, being insolvent, said Kelly Brothers & Porter made a pretended sale of all their assets to one S. M. Whitney, and this sale was made to defraud their creditors. No inventory of assets or list of creditors was attached to the conveyance, but it was claimed that the consideration to the conveyance was an indebtedness by them to Whitney, and an assumption by Whitney of debts due by Kelly Brothers & Porter to certain other creditors, many creditors being excluded by this conveyance; that it was understood between the parties that if there should be an excess after the debts thereby intended to be secured were paid, Kelly Brothers and Porter should have the benefit of it; that Whitney knew, or had reasonable grounds to suspect a fraudulent design of Kelly Brothers & Porter; that Whitney has taken charge of the stock and other assets, and is proceeding to dispose of them. It was also alleged that the so-called bill of sale was really an assignment, its nominal consideration being much less than the amount of the assets covered by it; that the indebtedness to Whitney, and the indebtedness assumed by him, were not incurred for any of the stock of goods conveyed, or for any goods of which the notes and accounts conveyed were the proceeds; that there was great secrecy in the execution of the pretended bill of sale. It is further charged that complainants were induced to extend credit to Kelly Brothers & Porter by representations made by the latter that they were perfectly solvent, etc. A large number of other creditors of Kelly Brothers & Porter were made parties complainant to the bill.

The defendants demurred on the following grounds: (1) No equity in the bill. (2) Complainants have no lien. (3) Complainants have a remedy at common law. Kelly Brothers & Porter answered the bill and, so far as material, their answer was, in substance, as follows: Their stock of goods, notes, accounts etc., while nominally of large value, were not really worth more than $40,000. They could not carry on their business and on December 15, 1888, sold said stock, notes, etc., to Whitney for $55,151.92; "the three Kellys" conveying, in addition to the goods, notes, etc., certain lands and mules worth $7,000 to $8,000. The consideration of the conveyance was a certain debt due to Whitney amounting to $28,000 or $34,000, and the assumption by Whitney of other debts, making up the $55,000 mentioned. The sale was fair, absolute, without reservation of any kind, and with no intention to defraud. It was not an assignment, nor intended as such, but was a sale of part of the assets of the firm. Other assets were sold and conveyed on the same day to other parties to whom the firm was indebted. There was no understanding that the defendants were to have the benefit of any excess, or that Whitney should take the assets and pay the surplus to certain favored creditors. Attached as an exhibit to the answer is a copy of the conveyance in question. The conveyance is of all the stock of goods, etc., notes, mortgages, etc., of Kelly Brothers & Porter. The consideration named is $55,151.92, paid by Whitney as follows: "$34,198 is due to him for money advanced to us, and which is hereby settled; and the said Whitney has agreed, and hereby obligates himself, to pay, and now assumes the payment of, the following open cotton bills due by us to the parties named therein, and in the amounts opposite their names which appear in the list marked 'Exhibit A,"' etc., "and also the following amounts due to the parties named;" and then follows a list of names of certain parties, with amounts due them. Included in this list is a debt to Mrs. W. A. Kelly for $22.20, and a debt due to John T. Glenn, "his fees of $2,000, which is due by us to him." The instrument proceeds: "In the amount of $34,198 due to said Whitney by us is included the following debts, [then naming the indebtedness to four different firms, amounting to $2,300,] which the said Whitney agrees to pay, and has assumed the payment of; and the said Whitney also assumes and obligates himself to pay to the employes in our service the amounts which may be due to them, not exceedings $2,701.58;" also a certain other debt of $2,000. "The intention of the contract is that the said W. A. Kelly Brothers & Porter sell and transfer to the said S. M. Whitney the property above described, in consideration that the debt due by them to said Whitney is settled, and that said Whitney pays the debts due by them as described in the contract. The property hereby transferred and conveyed not being sufficient in amount, W. A. Kelly and brother, and the partners composing that firm, [mentioning them] have conveyed to said S. M. Whitney certain lands in other counties to make a sufficient consideration." The instrument bears date December 15, 1888, and is signed by Kelly Brothers & Porter, and by the members of that firm individually, by the members of the firm of W. A. Kelly Brothers individually, and by S. M. Whitney. Attached to it is an exhibit of the cotton bills, and in the list appears the name of Josiah Blassingame, for $86.58, and "Blank, $42.50."

Whitney answered the bill as follows: That the indebtedness of Kelly Brothers & Porter to him was for advances made by him as cotton factor. They were unable to pay him the money, and proposed to sell him their stock of goods, notes, accounts etc., in payment, if he would furnish them money to pay certain other of their creditors. He agreed to take the property in payment, and to assume payment of debts specified in the written contract, if they would sell him said stock, notes, etc., and, in addition, certain lands and mules in Jasper county. The sale was absolute, unconditional, and in good faith, and he fears that he will lose $5,000 thereby. He has already paid about $4,000 on the debts he assumed. He cannot realize over $38,000 from the stock, notes, etc., and not over $8,000 or $9,000 from the lands and personality in Jasper county, while he has assumed the payment of over $25,000 besides his own debt. The sale was not an assignment, nor intended as such; was not made to defraud. There was no understanding that any excess should be for the benefit of Kelly Brothers & Porter, or either of them, or that any surplus should be reserved for certain favored creditors, as charged. The sale was absolute, and no surplus was mentioned or thought of. Kelly Brothers & Porter did not convey all their assets to respondent. They paid on that day, and since, other creditors, with assets with which respondent had no connection, etc. On the hearing for preliminary injunction the testimony, so far as material, was as follows: The complainants put in evidence an affidavit to the effect that since the conveyance Josiah Blassingame had stated that before Kelly Brothers & Porter made their sale to Whitney they paid him (Blassingame) all they owed him. Also that the Mrs. W. A. Kelly named in the conveyance was the wife of W. A. Kelly, one of the firm of Kelly Brothers & Porter. That she is dead, leaving her husband as sole heir. Also, that since the sale to Whitney, W. A. Kelly had stated that the stock of goods transferred was worth from $30,000 to $35,000, and the notes and accounts from $55,000 to $60,000, and, in addition, he and his brothers had conveyed to Whitney some of their real estate. That they owed Whitney about $30,000, and he has assumed the payment of about as much more. That the sale was absolute, but that all Whitney wanted was his money; and that Whitney had gotten all of the assets of Kelly Br...