Smith v. Denaburg

• Decision Date: 06 February 1969
• Docket Number: 6 Div. 266
• Citation: 283 Ala. 509,218 So.2d 838
• Parties: Evelyn D. SMITH, a/k/a Becky Evelyn Smith v. Charles L. DENABURG, as Trustee.
• Court: Alabama Supreme Court

Page 838

218 So.2d 838

283 Ala. 509

Evelyn D. SMITH, a/k/a Becky Evelyn Smith v. Charles L. DENABURG, as Trustee.

6 Div. 266.

Supreme Court of Alabama.

Feb. 6, 1969.

S. P. Keith, Jr., Birmingham, for appellant.

James, Beavers & Harrison, Birmingham, for appellee.

COLEMAN, Justice.

The respondent appeals from a decree for complainant in a suit to set aside a conveyance of real estate which had been made to respondent as hereinafter described.

Complainant is the trustee of the bankrupt estate of James H. Smith. Respondent is the former wife of Smith. Complainant avers that on and prior to July 9, 1964, Smith was indebted to various creditors and 'that at said time, he was insolvent' and his insolvent condition was known to his wife, the respondent; that on July 9, 1964, Smith conveyed to respondent certain real estate, to wit, Lot 9, Block 2, according to the 2nd Addition to Shades Cahaba Estates as recorded in office of Judge of Probate of Jefferson County in Map Book 30, at page 36; that the conveyance constituted a preference under the Bankruptcy Act and the laws of Alabama, and was executed within four months from the date of adjudication of Smith's bankruptcy which occurred on September 24, 1964, and that said conveyance was in fraud of his creditors.

Complainant further avers that respondent and Smith were divorced by decree of the Circuit Court of the Tenth Judicial Circuit rendered April 3, 1964; that the conveyance was made 'pursuant to a decree of This court as an award of alimony to' (Emphasis Supplied) respondent, being rendered June 4, 1964; that said decree was made and said conveyance was executed within four months of adjudication of Smith's bankruptcy; and that the conveyance to respondent rendered Smith insolvent within the meaning of the laws of Alabama and the United States.

Complainant prays that the court enter a decree setting aside the conveyance to respondent and 'other Same sold for distribution among the creditors of' (Emphasis Supplied) Smith after due allowance for the rights of respondent, and for general relief.

We note here that both the instant suit and the divorce suit are proceedings in the same trial court. We do not have in the record on this appeal any of the proceedings or decrees which were had in the divorce suit. The divorce suit was not appealed to this court and the proceedings therein are not before us.

Respondent filed an answer, wherein, among other things, she denies that Smith was insolvent 'at said time' or that his insolvency was known to Smith and to respondent. She denies that the conveyance constituted a preference to her and says she had no knowledge of Smith's insolvency; that the conveyance was not fraudulently made; that it was made pursuant to the decree of June 4, 1964, as an award of alimony to her; and that Smith bitterly contested said conveyance and did not voluntarily consent thereto.

Respondent avers further that she and Smith, immediately prior to said conveyance, were joint owners of said property, the same being with right of survivorship; that she owned an undivided one-half interest and had an inchoate interest in the other half which Smith owned, subject to a mortgage; and that respondent neither admits or denies that said conveyance rendered Smith insolvent and demands strict proof thereof.

The decree appealed from recites that the cause was submitted on the pleadings and three affidavits made severally by respondent, complainant, and one Cleveland. ¹

It seems apparent that the decree rests upon the provisions of § 67, subd. d of the Bankruptcy Act, which as here material recites:

'. . .

'(2) Every transfer made . . . by a debtor within one year prior to the filing of a petition initiating a proceeding under this Act by or against him is fraudulent (a) as to creditors existing at the time of such transfer . . . if made . . . without fair consideration by a debtor who is or will be thereby rendered insolvent, without regard to his actual intent . . ..

'(3) Every transfer made . . . by a debtor who is or will thereby be rendered insolvent, within four months prior to the filing of a petition initiating a proceeding under this Act by or against him is fraudulent, as to then existing and future creditors: . . ..' Bankruptcy Act, § 67; Title 11, § 107, U.S.C.A.

In paragraph (2) of § 67, sub. d of the Bankruptcy Act quoted above, certain conveyances are declared fraudulent 'if made . . . without fair consideration.' In brief, respondent argues that the conveyance was made 'as an award of alimony to the said Respondent' (as complainant alleges in the bill) and was not made 'without fair consideration.' In Milstid v. Pennington, 5 Cir., 268 F.2d 384, 389, the court said:

'Appellants cite two cases (Dixon Lumber Co. v. Peacock, 217 Cal. 415, 19 P.2d 233; McNally v. Emmetsburg Nat. Bank, 197 Iowa 602, 192 N.W. 925) which hold that a conveyance in lieu of alimony is not voluntary but supported by valuable consideration as to existing creditors. It is our opinion that Alabama follows that view, as indicated in the authorities cited in the margin.'

We incline to the view that the instant conveyance, being made as an award of alimony, was not voluntary but was supported by a fair consideration. See Alabama cases cited in footnote 9 in Milstid v. Pennington, supra.

Homestead.

Respondent says that the one-half interest in the lot, which was conveyed to her by order of the court in the divorce suit, was the homestead of Smith and exempt from levy and sale for the collection of his debts under § 625, Title 7, Code 1940. Appellant argues that, because the lot was Smith's homestead, his creditors have no claim on the lot and suffered no injury by its alienation, and, therefore, the court erred in setting aside the conveyance to appellant; citing Terry v. Schaeffer, 239 Ala. 264, 194 So. 502, which appears to support the rule relied on by respondent.

In Majors v. Killian, 230 Ala. 531, 162 So. 289, cited by appellee, however, complainants brought suit to set aside conveyance for fraud against creditors of the grantor. The respondents sought to raise by demurrer the proposition that the property in suit was the homestead of the debtor and exempt from execution and, therefore, that the conveyance could not be set aside at the suit of the creditors. Among other things, this court said:

'If it be a fact that the land in question was, at the time of its conveyance, the homestead of the grantors, and that its value and area were within statutory limits when aliened to the son, such facts are not disclosed, nor were they required to be negatived by the bill. If the land was such homestead when conveyed, it is secure to the grantee from this attack; or, if it is the homestead in possession of the owner and exempt from levy and sale, as against complainant's claim or judgment, such fact is available by way of answer and proof, or due claim of exemption before sale under execution. (Citations Omitted)' (230 Ala. at page 534, 162 So. at page 292.)

We do not find in appellant's answer to the instant bill, or elsewhere in the pleading, any averment that the lot in suit was Smith's homestead at any time. Neither do we think that there is sufficient evidence to sustain a finding that the lot was Smith's homestead at the time of the conveyance to respondent. In the affidavit made by Cleveland, he refers to Smith's 'house' or 'home,' and says that Smith '. . . also advised us on various occasions that he had been living at this address for his entire lifetime.' This...