Waddle v. Great Southern Phosphate Co.

• Decision Date: 20 November 1913
• Citation: 184 Ala. 346,63 So. 462
• Court: Alabama Supreme Court
• Parties: WADDLE v. GREAT SOUTHERN PHOSPHATE CO.

63 So. 462

184 Ala. 346

WADDLE v. GREAT SOUTHERN PHOSPHATE CO.

Supreme Court of Alabama

November 20, 1913

Appeal from Chancery Court, Lauderdale County; W.H. Simpson Chancellor.

Suit by the Great Southern Phosphate Company against M.J. Waddle and wife. From a decree in favor of complainant, the defendant named appeals. Affirmed.

Paul Hodges and A.A. Williams, both of Florence, for appellant.

Mitchell & Hughston, of Florence, for appellee.

DE GRAFFENRIED, J.

In the case of Brunson et al. v. Rosenheim & Son, 149 Ala 112, 43 So. 31, this court said: "Proof of the existence of complainant's debt before and at the time of the alleged conveyances and the complainant's judgment, and the issue of execution thereon with the return of 'no property found,' and the insolvency of the respondent debtor, was without conflict. The facts being shown, the bill, among other allegations as to the mala fides of the transaction assailed, charging that the consideration of the conveyances was fictitious and simulated, the burden of proof was upon the respondent's vendees to show that the sales to them by the respondent Brunson were fair and made in good faith, and also upon them to show that the consideration was a valuable one, and the price paid for the lands was not less than their fair value."

In the above-quoted rule the court said in the above case that the burden was upon the vendee, under the facts hypothesized, to show that "the price paid for the lands was not less than their fair value," meaning by the quoted and italicized words that "the price paid for the lands was not materially less than their fair value." G. Ober & Sons Co. v. Phillips-Buttoff Mfg. Co., 145 Ala. 625 40 So. 278.

2. In the case of Wimberly et al. v. Montgomery Fertilizer Co., 132 Ala. 107, 31 So. 524, this court said "Where the contract is between near relations, as between husband and wife, father and son, and the like, it will be subjected to a closer scrutiny *** than if the parties to it were strangers." The same rule was announced in Seitz v. Mitchell, 94 U.S. 580, 24 L.Ed. 179, in the following language: "Such is the community of interest between husband and wife. Such purchases are so often made a cover for a debtor's property, are so frequently resorted to for the purpose of withdrawing his property from the reach of his creditors and preserving it for his own use, and they hold forth such temptations for fraud, that they require close scrutiny. In a contest between the creditors and the wife there is, and there should be, a presumption against her which she must overcome by affirmative proof."

3. The two well-known rules which we have above quoted apply in all cases where a conveyance is attacked for fraud as between the grantor and the grantee, whether the alleged consideration moving from the grantee to the grantor is a present or a past consideration; i.e., whether the alleged consideration is a cash consideration paid by the grantee to the grantor, or whether the alleged consideration is the payment of a debt alleged to be due by the grantor to the grantee.

In the instant case the alleged consideration of the conveyance here attacked for fraud is the payment of an alleged debt which it is claimed was due by the husband, the grantor, to the wife, who is the grantee. The two above-quoted rules, therefore, apply in this case in their full force.

4. When an insolvent debtor, with the intent to hinder, delay, or defraud his creditors, makes a conveyance of property upon a present consideration, and the purchaser knows of such intent, or is in possession of such facts as would, upon proper inquiry, lead a person of ordinary intelligence and prudence to a knowledge of such intent, then such a conveyance is fraudulent and void as to creditors without regard to whether the price paid was or was not inadequate. 3 Mayf.Dig. p. 853, subd. 44, and authorities cited.

The above well-known rule has no applicability to this case because the alleged consideration of the conveyance here attacked is a past, and not a present, consideration.

5. When a sale of property is made by an insolvent debtor to a creditor, in payment of an antecedent debt, if the agreed price of the property is not greatly less than the value of the property, and no benefit is reserved by the grantor in the property conveyed, if the sale is absolute and unconditional, then such a sale is not fraudulent; such an act, when attacked for fraud, is considered by the law as legal, and the law will not inquire into the intent of parties who do that which they have the legal right to do. Hodges Bros. v. Coleman & Carroll, 76 Ala. 103.

6. When, however, a conveyance of property is made in payment of an antecedent debt, and the consideration is inadequate, then such a conveyance should, if attacked by an existing creditor as being void for fraud, be allowed to stand as security for the consideration actually paid, unless there was, on the part of the grantor when he made the conveyance, a fraudulent purpose, and unless such fraudulent purpose of the grantor was known to the grantee when he accepted the conveyance, or unless the grantee had possession of such facts as would, upon a proper inquiry, have led a reasonably prudent and intelligent man to the discovery of such fraudulent intent of the grantor. 3 Mayf.Dig. p. 851,§ 29, and authorities cited. This last rule applies in cases where the consideration is a present, valuable consideration, as well as where it is in payment of an antecedent debt. Caldwell v. King, 76 Ala. 149.

7. The bill of complaint in this case was filed by the Great Southern Phosphate Company, a creditor of R.P. Waddle, against the said R.P. Waddle and his wife, M.J. Waddle. The bill alleges that on the 25th day of March, 1910, the said R.P. Waddle was indebted unto said phosphate company, which is a corporation, in sums aggregating about $1,300, and that said indebtedness was by said phosphate company reduced to judgment against the said Waddle on or about March 25, 1912; the judgment amounting to $1,568.57 and the costs. The bill further alleges that when said debt was contracted the said Waddle owned 105 acres of land which was all of his property except that which was exempt to him by law. The bill further alleges in substance that on the 18th day of February, 1911, the said Waddle, who was then insolvent, with the purpose of hindering, delaying, or defrauding the complainant, executed and delivered to his said wife, M.J. Waddle, a conveyance to said property, and that said M.J. Waddle accepted the said conveyance with a knowledge of the fraudulent intent of her said husband and for the purpose of aiding him in defrauding complainant. The bill prays that said conveyance be declared fraudulent and void as to complainant, and that the said lands be subjected to the payment of its said debt. The bill, of course, contains equity.

8. The theory of the respondent was and is that R.P. Waddle did not make the conveyance for the purpose of hindering, delaying or defrauding the complainant, and that if he...