Tenn. Nat'l Bank v. Ebbert & Co.

• Citation: 56 Tenn. 153
• Parties: TENNESSEE NATIONAL BANK v. EBBERT & CO. et al.
• Decision Date: 30 April 1872
• Court: Supreme Court of Tennessee

56 Tenn. 153

TENNESSEE NATIONAL BANK

v.EBBERT & CO. et al.

Supreme Court of Tennessee.

April Term, 1872.

FROM SHELBY.

Appeal from the decree of the Chancery Court, April Term, 1868. WILLIAM M. SMITH, Ch.

FINLEY & KELLAR for appellant.

PIERCE & RICHARDS for appellee.

FREEMAN, J., delivered the opinion of the Court.

The question presented in this case is, Whether the deed of trust, by C. H. Ebbert & Co. to Pritchard, is fraudulent and void, as to creditors, by reason of the stipulations on its face?

The conveyance was of a stock belonging to said firm as liquor dealers in the city of Memphis, and conveys “all our stock in trade, appurtenances and fixtures thereunto belonging, embracing all liquors of every kind and description, with all goods, wares, and merchandise, with store fixtures, appurtenances and conveniences thereunto belonging, including all our book accounts of every kind, which were then in control of said firm, and such as are now contained in stores 342 and 344, Second street, Memphis, Tennessee, either therein or wherever to be found in said old place of business, or any new place, and the old stock or any new stock of the original firm of C. H. Ebbert & Co. (giving names of members of firm), composed of said present parties, with any new member or members, together with their lease or leases, stock, fixtures, etc., aforesaid, with their custom and good name, and each and every and all the aforesaid, etc.”

This conveyance was made to secure the sum of $10,500, evidenced by seven promissory notes, the first three for $2,000 each, due respectively at thirty days, sixty days, and three months; the other three for $1,000 each, due respectively at four, five, and six months after date, and the seventh note due at seven months for $1,500, all bearing interest from date. It was agreed if these notes were paid at maturity the deed was satisfied, and the trustee to reconvey the property to Ebbert & Co. If they failed to pay the notes, or any one of them, at maturity, then the trustee was empowered to take the property conveyed, or any part of it, or all of it, into his possession and control, and sell it at thirty days' notice, for cash, and appropriate proceeds, first, to the expenses of trust; second, to the satisfaction of the debts, or so much as remained unpaid, whether due or not, and the balance of said debts, if not paid by proceeds of sale, be subject to immediate suit; thirdly, the balance, if any, to be paid to Ebbert & Co. The parties also waive the necessity of giving a bond on part of trustee, or filing an inventory of sale.

It was further provided in said deed “that C. H. Ebbert, now conducting and managing the liquor business aforesaid, and carrying on and having possession of the property under the firm name of C. H. Ebbert & Co., may keep possession of the same, carry on and continue the business, with the express understanding that none of the fixtures, appurtenances, appendages and conveniences, and lease and license necessary for carrying on the business, are to be disposed of, unless subject to the stipulations hereinbefore mentioned.

It was further agreed that C. H. Ebbert & Co. might collect the accounts due the firm, and make such expenditures as should be necessary to carry on the business, and those only. It was further agreed that should any new member be taken into the firm, the lien and trust was to remain in force, and be over the new firm and stock as aforesaid until discharged. “It was especially agreed that C. H. Ebbert & Co. might replenish their stock from time to time as may be necessary to the proper and successful management and carrying on the business, subject to all the provisions of the trust, however, and subject to the further provision, that if they failed to make proper application of the proceeds of sales or collections of accounts, to the satisfaction of the said notes, or any matter in good faith, the trustee, Pritchard, was authorized immediately to take possession and enforce the trust on failure to pay the notes.

It may be assumed that there was no fraud in fact on part of the beneficiaries in this trust, in its inception. The question then is, Can such a conveyance be held valid by the rules and policy of the law, as being fraudulent in law, or more properly, as in violation of sound policy, and the spirit of our statute of frauds, as well as the general principles of law against fraud, or conveyances that reserve a benefit either directly or indirectly to the vendor or conveyor, as against or to the prejudice of the rights of creditors?

The statute of 13th Elizabeth, against fraudulent conveyances, enacts in substance that “for avoiding and abolishing of feigned, covinous, and fraudulent feoffments, etc., which are devised and contrived of malice, fraud, covin, collusion, or guile, to the end, purpose, and intent to delay, hinder, or defraud creditors and others of their just and lawful actions, etc., not only to the let or hinderance of the due course of law and justice, but also to the overthrow of all plain dealing, bargaining, etc., between man and man. Be it therefore declared, etc., that all and every feoffment, etc., made to or for any intent or purpose before declared and expressed, shall be from henceforth deemed and taken only against the person, etc., whose actions shall or might be in any wise disturbed, etc., to be clearly and utterly void.”

Our own statute of frauds of 1801, ch. 25, sec. 2, is, in substance, the same as that of 13th Elizabeth, and as given in the Code, sec. 1759, is as follows: “Every gift, grant, conveyance of lands, tenements, hereditaments, goods or chattels, or any rent, common or profit, out of the same, by writing or otherwise; and every bond, suit, judgment, or execution, had, made and contrived of malice, fraud, covin, collusion, or guile, to the intent or purpose to delay, hinder, or defraud creditors of their just and lawful actions, suits, debts, etc., shall be deemed and taken only as against the person, his heirs, successors, executors, etc., whose debts, etc., by such guileful and covinous practices as aforesaid, shall or might be in any wise disturbed, hindered, delayed, or defrauded, to be clearly and utterly void.”

In “Twyne's case,” the leading case under the statute of Elizabeth, it was said, “And because fraud and deceit abound in these days more than in former times, it was resolved in this case by the whole court that all statutes against fraud should be liberally and beneficially expounded to suppress the fraud.” And as quoted by Chief Justice Gibson, in case Dorrick v. Reichemback, 10 Searg. and R., 90: “These statutes of Elizabeth produce the most beneficial effects by placing parties under a disability to commit fraud, in requiring for the characteristics of an honest act such circumstances as none but an honest intention can assume; and they seem to have been expressed in general terms purposely to leave room for a large interpretation by the judges, who, in accordance with the spirit rather than the words, have engrafted on them such artificial presumptions and legal intendments as are ordinarily subjects of judicial construction. See McKibben v. Martin, Am. Repts, vol. 3, 590, and such has been the course of decision in the courts of England and this country up to the present period.

We do not deem it proper to go into a review of the numerous cases cited by counsel on the question presented. In the case of Doyle v. Robert L. Smith, 1 Col., 20--a case having much resemblance to the present one--the court says: “It is a settled rule of decision in...