Smith v. Young

• Decision Date: 11 May 1911
• Citation: 173 Ala. 190,55 So. 425
• Parties: SMITH v. YOUNG.
• Court: Alabama Supreme Court

55 So. 425

173 Ala. 190

SMITH v. YOUNG.

Supreme Court of Alabama

May 11, 1911

Appeal from City Court of Anniston; Thomas W. Coleman, Jr., Judge.

Action by C. H. Young against J. F. Smith. Judgment for plaintiff and defendant appeals. Affirmed.

Willett & Willett, for appellant.

Knox Acker, Dixon & Blackmon and Blackwell & Agee, for appellee.

MAYFIELD J.

This appeal presents two questions only for the decision of this court--one, a question of substantive law, and the other, a question of chancery pleading. The one of law is this: Is a conveyance by a debtor of substantially all his property to his surety, in consideration that the surety will pay the debt owing to one creditor for which the grantee is surety, a general assignment within the meaning and operation of section 4295 of the Code of 1907? The question of pleading is this: Is a bill in equity multifarious which seeks in the alternative to declare a given conveyance a general assignment for the benefit of all the grantor's creditors; and, if not, then to declare it fraudulent as to such creditors? Under our existing statutes we are constrained to answer both of these questions as did the chancellor--that is, the first, in the affirmative; the latter, in the negative.

Section 4295 of the Code, which is most material to the first question, is as follows: "Every general assignment made by a debtor, 'or a conveyance by a debtor, of substantially all of his property subject to execution in payment of a prior debt; by which a preference or priority of payment is given to one or more creditors, over the remaining creditors of the grantor, shall be and inure to the benefit of all the creditors of the grantor equally.' * * * A general assignment within the meaning of this section shall include, in addition to the conveyances now defined as such by law, every judgment confessed, attachment procured by a debtor, or other disposition of property by which a debtor conveys all or substantially all of his property subject to execution, in payment of, or as the security for a prior debt, or charges such property with the payment of such debt." This statute first appeared as section 1556 of the Code of 1852. It there read like the first sentence, with the omission of that part above indicated by single quotation marks. It has reappeared in all subsequent Codes, each time with amendments added to it by acts of the Legislature, code commissioners, or code committees. It has been three times if not oftener, amended by special acts of the Legislature--that of February 23, 1883 (page 189), February 21, 1893 (page 1046), and February 16, 1897 (page 1089). Each amendment has evidently been for the purpose, with the effect, to extend the scope and provisions of the act, to include additional conveyances and transactions not heretofore included. This statute in all its stages of evolution has been many times construed, and these constructions are uniform from the first, that of Holt et al. v. Bancroft et al., 30 Ala. 193, to this, the last, to the effect that the statute was to prohibit all discrimination by a debtor, if he made a general assignment of all his property. "It does not aim to deny, and does not deny, to a debtor the power of securing a creditor's debt by a conveyance of a part of his property. The right of preferring creditors by partial assignments is untouched by the section of the Code quoted. It is not the preference of itself, but the preference as a feature of a general assignment, which the statute condemns." "Neither an evasion nor a direct violation of the statute prohibiting preference in general assignments can render absolutely void the deed or deeds by which the preference is attempted to be given, because the statute itself prescribes the effect of its violation. The assignment 'shall be and enure to the benefit of all the creditors of the grantor equally.' Visiting, therefore, the act of evading the statute with the consequences of a direct violation, we can only annul the preference, and place the beneficiary of the first deed on a footing with the other creditors."

In this first case the statute was held to apply to a conveyance of a part only of the debtor's property, on the ground that he contemplated a general assignment at the time he conveyed and did subsequently make the general assignment, and that the first was only a part of the general assignment. This court has uniformly held that a surety is a creditor of his principal from the inception of the contingent liability; that he is a creditor in such sense that he may maintain a creditor's bill against his principal as to fraudulent conveyances of the principal's property with intent to defraud creditors, one of whom is the surety. Smith v. Pitts, 52 So. 403; Keel v. Larkin, 72 Ala. 493, 500. If the surety can file a creditor's bill against his principal and other creditors to set aside a conveyance made by his principal either as fraudulent or as a general assignment, while his liability is only contingent, we can see no reason why other creditors cannot file such a bill against him, when he is the grantee of the fraudulent conveyance, or when it is a general assignment, as in this case, and the one to be held as trustee. In fact, a number of such bills have been filed, and in each case was held to...