Skinner v. Southern Grocery Co.

• Decision Date: 19 December 1911
• Citation: 174 Ala. 359,56 So. 916
• Parties: SKINNER ET AL. v. SOUTHERN GROCERY CO.
• Court: Alabama Supreme Court

56 So. 916

174 Ala. 359

SKINNER ET AL. v. SOUTHERN GROCERY CO.

Supreme Court of Alabama

December 19, 1911

Appeal from Chancery Court, Marengo County; Thomas H. Smith Chancellor.

Action by the Southern Grocery Company against W. B. Skinner and others. From a decree for complainant, defendants appeal. Reversed and remanded.

Henry McDaniel and Partridge & Hobbs, for appellants.

B. F Elmore and C. K. Abrahams, for appellee.

MAYFIELD J.

This is a bill by a single judgment creditor to set aside a number of conveyances of its debtors as fraudulent. Demurrers were interposed to the bill for want of equity, and because no sufficient facts were alleged, to show an intent on the part of the grantors to hinder, delay, or defraud creditors within the meaning of the statute against fraudulent conveyances (Code 1907, § 4293) under which the bill is filed. The demurrer was overruled, and from that decree respondents prosecute this appeal.

The property, the subject-matter of the suit, originally belonged to one W. A. Skinner, who died intestate on the 13th day of February, 1907, leaving the respondents as heirs and distributees of his estate, with the exception of R. P Allen, Jr., who is the husband of one of deceased's daughters. These heirs and distributees at the time of or soon after the death of A. B. Skinner composed a partnership under the name of W. A. Skinner Company, and as partners became indebted to complainant, which debt was reduced to judgment in May, 1909, and was thereafter recorded in Marengo county. The partnership was also largely indebted to other creditors, including W. M. Spencer, in the sum of $11,000, and to Mrs. Watkins in the sum of $1,484. These two debts were secured by mortgages upon the lands in question. The partnership continued to do business up to March 5, 1908, upon the lands in question, and so continued to use the property of the estate of W. A. Skinner in connection with the business; but there is no sufficient averment that this property was a part of the assets of the partnership, it rather appearing from all the averments of the bill that it was the individual property of the partners, instead of being that of the partnership proper. But the bill is a little uncertain as to this. On February 27, 1908, prior to the rendition of complainant's judgment and to the acquiring of any lien, but during the continuancy of the partnership, all the heirs except Louise Allen conveyed to her a part of the premises as her share of the estate of W. A. Skinner, and in consideration that she would assume and discharge the debt and mortgage of Mrs. Watkins. On the same date, February 27, 1908, Louise Allen and her husband conveyed to the other heirs, respondents in this suit, the remainder of the property in question and belonging to the estate of W. A. Skinner, or rather their share of such of the estate, in consideration of said conveyance by the others to Louise Allen, and of the assumption, by the others, of all the debts against the property conveyed, except the aforesaid debt of Mrs. Watkins, which had been assumed by Mrs. Allen. On March 5th, seven days after these conveyances, the Skinner Plantation Company, the respondent corporation, was formed; the sole officers and stockholders thereof being the respondents herein. Its authorized capital stock was $25,000, of which $20,100 was paid up, each of the corporators receiving 40 shares, of the par value of $100 each, except Allen, the husband of Louise Allen, who received only one share which was paid for in money, the other subscriptions being paid by the conveyance of the respective interests of the subscribers in the property inherited from W. A. Skinner, deceased. The corporation assumed to pay and discharge the debt and mortgage of W. M. Spencer, which was a charge upon the lands, amounting to $11,036. The lands conveyed to the corporation were valued at $20,000 over and above the debt and mortgage of Spencer. The bill further avers that this was all the property owned by the incorporators, but that the stock, as above stated, was all issued to the grantees and incorporators in the amounts shown. The bill seeks to have these several conveyances of this common property originally belonging to W. A. Skinner set aside as fraudulent, and to have the property subjected to the payment of complainant's debt or demand. The equity of the bill is undoubted if the facts averred are sufficient to withstand the demurrer.

No statute probably has been oftener construed by the courts than the statute under consideration. England and most all the states of the Union have statutes similar to this. St. 13 Eliz. c. 5, is said to be the last of a series of English statutes which has ever since been the foundation of modern laws on the subject of fraudulent conveyances. The various state statutes upon the subject will be found to be largely modeled after it, and, in the main, re-enactments of it. This statute, however, both in England and America, has been held by the courts to be largely declaratory of the common law. Judge Dillon in the case of Gardner v. Cole, 21 Iowa, 205-210, said that the English statute had never been re-enacted in Iowa, but that the English statute was mainly, if not wholly, declaratory of the common law, which at an early date "set a face of flint against fraud in every shape," and so became the basis of American jurisprudence on this subject, and that it was, therefore, in that state a part of the unwritten law.

The intent put into action, and which merely hinders or delays the creditor, is sufficient. It need not defraud him, nor deprive him wholly, or even partially, of his remedy for finally obtaining satisfaction of his debt or demand. The intent to defraud, however, must exist to render the transaction void; but this intent is sometimes a question of fact and sometimes a question of law. If the necessary consequence of a given act, on the part of a debtor, is to hinder, delay, or defraud his creditor, then the law conclusively presumes that it was committed with the intent to defraud, no matter what was the motive that prompted the act. Such would be a voluntary gift by an insolvent debtor of a large part of his property. The motive might be "sweet charity," but the gift would nevertheless be fraudulent as to the donor's creditors. Such acts carry within themselves evidence of fraud against the creditors. The statutes therefore refer to the legal, and not to the moral, intent. The fraud meant to be prevented by the statute is a legal fraud. To invoke it is not necessarily to impute a corrupt or evil motive; on the other hand, an act of the debtor may be a fraud in morals, and dishonorable, but, unless it is a legal fraud upon the creditor, he cannot have it declared void under the statute.

For a bill to be sufficient under this statute, it is not necessary that it should set forth facts showing any formal or premeditated design to accomplish the illegal purpose. It is enough that it allege facts which reasonably show an intent to hinder, delay, or defraud the creditors. If facts are thus alleged which reasonably show the necessary intent, the transaction cannot be sustained by showing that there is open to the creditors some remedy other than the setting aside of the fraudulent transaction. It has been uniformly held however, that creditors' bills for the purpose of setting aside conveyances made by debtors as fraudulent must plainly and succinctly state the facts which constitute the fraud; that mere allegations, in terms, that the conveyance was "fraudulent" or was made with the "intent to hinder, delay or defraud," are not sufficient; that allegations which merely impute motives of fraud are not sufficient; that fraud must be charged, which should be done by setting forth the facts which constitute it. In the case of Ft. Payne Furnace Co. v. Ft. Payne Coal Co., 96 Ala. 476, 11 So. 440, 38 Am. St. Rep. 109, the rule was thus stated by Stone, C.J.: "A mere general averment of fraud as that a conveyance, or a sale or other disposition made or threatened, was or is with fraudulent intent, is not sufficient in pleading. Fraud is a conclusion. The conduct and facts from which the conclusion is deduced must be averred, so that issue can be formed on the averments. We do not mean that all the details must be given, but the substantial facts which constitute the bad faith must be set out. ...