Virginia Carolina Chemical Corporation v. Satsuma Orange & Pecan Groves Co., 1 Div. 769.

• Decision Date: 11 May 1933
• Docket Number: 1 Div. 769.
• Court: Alabama Supreme Court
• Parties: VIRGINIA CAROLINA CHEMICAL CORPORATION et al. v. SATSUMA ORANGE & PECAN GROVES CO. et al.

148 So. 853

227 Ala. 55

VIRGINIA CAROLINA CHEMICAL CORPORATION et al. v. SATSUMA ORANGE & PECAN GROVES CO. et al.

1 Div. 769.

Supreme Court of Alabama

May 11, 1933

Rehearing Denied June 8, 1933.

Appeal from Circuit Court, Mobile County; Joel W. Goldsby, Judge.

Creditor's bill by the Virginia-Carolina Chemical Corporation and others against Satsuma Orange & Pecan Groves Company and T. B Daves. From a decree sustaining a demurrer to the bill complainants appeal.

Reversed and remanded.

As against right of existing creditors, one who voluntarily enmeshes himself in deal affected with fraud cannot assert that he parted with full value in defense of his own wrong.

The bill alleges that the Satsuma Company was, at the time of execution of the contract and conveyance sought to be canceled, indebted to complainants in the manner and in the sums stated; that in April, 1932, the Satsuma Company owned and possessed a valuable tract, upon which there was then and still is, extensive and valuable satsuma and pecan orchards and other improvements, all worth many thousands of dollars; that it was financially embarrassed, and unable to pay its obligations; that at that time the property of the Satsuma Company, or a large part of it, was subject to a mortgage to secure an indebtedness to Daniel P. Bestor, Jr., as trustee, who would have proceeded to foreclose had not the said indebtedness been purchased from him or paid, and was otherwise indebted in the sum of approximately $13,000; that the Satsuma Company was desirous of avoiding the necessity of having its properties subjected to sale for the payment of its debts by delaying its creditors in the collection of their debts until it could obtain the time to exhaust its efforts to procure money for their payment out of crops to be raised in the future, thus saving to itself the corpus of its properties; that, in order to dispose of its properties in such manner as to hinder its creditors and so that the operation of its orchards could be continued unmolested, and for the purpose of putting its properties beyond the reach of its creditors, on April 21, 1932, it did execute a contract with respondent Daves which both parties knew to be and which was intended to accomplish said purpose. A copy of this contract is exhibited with and made a part of the bill. It is further alleged that, by the terms of the contract, it was stipulated that it should be subject to ratification and approval by the board of directors of the Satsuma Company, but, as soon as such ratification and approval could be obtained, it would convey its entire properties to Daves; that on May 4, 1932, the board of directors having ratified and approved the contract, the Satsuma Company executed and delivered to Daves a deed of conveyance, a copy of which is exhibited with and made a part of the bill. It is further alleged that by the terms of the contract and conveyance Daves was to purchase the mortgage debt from Bestor and make certain advances in the operation of the properties; that he was to operate such properties for the benefit of himself and the Satsuma Company, with the right, after paying taxes and superior liens and reimbursing himself, of investing the proceeds in new property and equipment; that, in event the amount advanced by Daves should be repaid from proceeds of operations or by the Satsuma Company otherwise, Daves should reconvey to the Satsuma Company two-thirds interest in the properties, including any additional property and equipment which he might have purchased; that it was provided that Daves should continue to so operate the properties for a period of seven years, during which period the properties could not be reached by the creditors of the Satsuma Company. It is further alleged that the properties, the orchards, are perishable in their nature, and subject to be greatly depreciated by want of attention; that, if Daves is permitted to gather the crops now standing, the effect will be to place the same beyond the reach of process for collection of complainant's debts; that, if the crops are not gathered, they will be lost; and that, if the orchards are not properly cultivated and cared for, they will depreciate greatly in value. It is prayed that a receiver be appointed to take charge of and preserve the properties; that the contract and conveyance be declared void as to complainants; that the properties be condemned to the satisfaction of complainant's debts; and that Daves be required to account.

Harry T. Smith & Caffey, of Mobile, for appellants.

Inge, Stallworth & Inge and Stevens, McCorvey, McLeod, Goode & Turner, all of Mobile, for appellees.

BROWN Justice.

This bill is by simple contract creditors against the debtor and its grantee to set aside, as void, under the provisions of section 8038 of the Code, a contract and conveyance of its property, alleged to have been made by the debtor and received by its grantee "for the purpose of hindering, delaying or defrauding" complainants in the collection of their debts.

The defendants' separate demurrers to the bill for want of equity, and on specific grounds that the averments of the bill were not sufficient to show that said contract and conveyance were made by said debtor with intent to hinder, delay, or defraud its creditors, and that the same was accepted by the grantee with like intent, were sustained; hence this appeal.

While the general rule is that a fraudulent intent on the part of the grantor is necessary to bring a conveyance within the terms of the statute, it is well settled that fraud may arise as an inference of law, and that, where a conveyance is made under such circumstances that the result must necessarily be to hinder and delay existing creditors, it will be presumed that such was the intent of the grantor in making it. Gazzam v. Poyntz, 4 Ala. 374, 37 Am. Dec. 745; Huggins v. Perrine, 30 Ala. 396, 68 Am. Dec. 131; Crawford v. Kirksey, 55 Ala. 282, 28 Am. Rep. 704; Reynolds v. Welch et al., 47 Ala. 200.

"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." Skinner et al. v. Southern Grocery Co., 174 Ala. 359, 365, 56 So. 916, 918.

Circumstances of undue publicity and particularity, as well as secrecy in the reservation of benefits to the grantor, are regarded as indicia of fraud. Crawford v. Kirksey, supra.

The bill alleges the circumstances in detail under which the contract and conveyance were made, and the averments, when considered in connection with the provisions in the conveyance and contract reserving to the grantor benefits and limited control over the disposition of the property, were sufficient to sustain the general averment in the seventh paragraph of the bill, that "the said contract and conveyance were executed by the Satsuma Company and received by the said...