Case ID: ala_215/html/0307-01.html
Source: Caselaw Access Project
Author: {"author": "SAXRE, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(110 So. 468)
    McGREGOR v. ALABAMA BANK.
    (6 Div. 528.)
    (Supreme Court of Alabama.
    Nov. 26, 1926.)
    1. Fraudulent conveyances &wkey;»225 — Creditor may attack debtor’s' transfer to another of claim against insolvent corporation, though failing to object to allowance of claim at hearing before register.
    Creditor of insolvent corporation, which did not object to allowance of claim of another creditor at hearing before register or on hearing of register’s report before court, held not es-topped from subsequently attacking allowance, on ground that it had been fraudulently transferred to claimant, since all decisions were in fieri until decree making final disposition of cause.
    2. Corporations <&wkey;>565(l) — Ciaim against insolvent corporation for profit claimant would .have made if minority stockholders had not prevented sale to him held properly disallowed (Code 1923, § 7036).
    Claim against fund for distribution to creditors of insolvent corporation, for amount of profit claimant would have made if minority stockholders had not prevented sale to him by virtue of Code 1923, § 7036, held properly disallowed, being without consideration.
    3. Appeal and error <í&wkey;l 119 — Supreme Court cannot adjudicate claim against one not party, to appeal.
    Supreme Court is without authority to adjudicate claim against one not party to appeal.
    4. Fraudulent conveyances <&wkey;300(l) — Transferee of claim against insolvent corporation held not to have sustained burden of showing that he paid adequate consideration therefor.
    Transferee of claim against fund for distribution to creditors of insolvent corporation held not to have sustained burden of showing that he paid adequate consideration for transfer of claim.
    5. Fraudulent conveyances Solvent debt- or may be guilty of fraudulent intent in disposing of property of which creditors may avail themselves.
    Debtor, though possessed of ample means to settle all demands against him, may be guilty of fraudulent intent in disposing of property ot which creditors may avail themselves.
    6. Fraudulent conveyances <&wkey;277(I) — Transferee of claim against insolvent corporation held to have burden to show valuable consideration for transfer.
    Transferee of claim against insolvent corporation held to have burden to show valuable consideration for transfer, in view of debt of trans-feror and corporation which antedated transfer.
    Appeal from Circuit Court, Jefferson County ; W. M. Walker, Judge.
    Petition of the Alabama Bank for payment to it of funds allowed to A. S. McGregor in a cause in equity between Stephen Allsopp and others against the Edgewood Amusement Company, McGregor, and others. Prom a decree for the petitioner, defendant McGregor appeals.
    Affirmed.
    Stokely, Scrivner, Dominick & Smith, of Birmingham, for appellant.
    The mere fact that a grantor is indebted does not preclude him from conveying his property for a valuable consideration. 27 G. J. 497. Fraud, when alleged, must be clearly and satisfactorily proved. Southern R. Co. v. Arnold, 162 Ala. 570, 50 So. 293. A sale is not in fraud of creditors, where there is no secrecy and purchaser has no knowledge that the seller is insolvent nor information to put him on inquiry. Simmons v. Shelton, 112 Ala. 284, 21 So. 309, 57 Am. St. Rep. 39; Allen v. Riddle, 141 Ala. 621, 37 So. 680. The burden of proof is on him who attacks a conveyance for fraud, and the fact of relationship between grantor and grantee does not shift the burden. 2 Pomeroy’s Eq. Jur. § 858. Guil-martin v. Urquhart, 82 Ala. 570, 1 So. 897; London v. Anderson Brass Wks., 197 Ala. 16, 72 So. 359. If the proof is uncertain in any material respect, it will be held insufficient. Hertzler v. Stevens, 119 Ala. 333, 24 So. 521; 7 Mayñeld’s Dig. 189; Wooddy v. Matthews, 194 Ala. 390, 69 So. 607; Berry v. Sowell, 72 Ala. 17; Alexander v. Caldwell, 55 Ala. 517.
    Black & Fort and J. C. Burton, all of Birmingham, for appellee.
    A debtor, although able to satisfy all demands against him, may be guilty of fraudulent intent in the sale of his property; and his vendee, who purchases with knowledge or notice to put him on inquiry, will not be protected. Carter v. O’Bryan, 105 Ala. 305, 16 So. 894; Teague v. Bass, 131 Ala. 422, 31 So. 4; Beall v. Lehman-Durr, 110 Ala. 446, 18 So. 230. Where the attacking creditor shows that his debt antedates the conveyance, the grantee must show that he paid a substantial consideration. London v. Anderson Brass Wits., 197 Ala. 16, 72 So. 359 ;■ Boutwell v. Spúrlin, 203 Ala. 482, 83 So. 482; Smith v. McAdams, 207 Ala. 118, 92 So. 411. A transaction between relatives is a suspicious circumstance, which may color the particular transaction. Moog v. Farley, 79 Ala. 246; Calhoun v. Hannan, 87 Ala. 277, 6 So. 291; Robinson v. Moseley, 93 Ala. 70, 9 So. 372; Pyron v. Lemon, 67 Ala. 458; Harrell v. Mitchell, 61 Ala. 270. Where no exception is made to the register’s report, nor objection raised to confirmation in the court below, the same cannot be raised for the first time on appeal. Gerald v. Miller, 21 Ala. 433 ; Taun-ton v. Mclnnish, 46 Ala. 619; Engle v. Bron-augh, 208 Ala. 162, 93 So. 868.
   SAXRE, J.

On the dissolution of an insolvent corporation, the Edgewood Amusement. Company, and the distribution of its assets' among creditors in tbe circuit court, in equity, it was decreed tbat a dividend to tbe amount of $1,426.01 claimed by appellant A. S. McGregor out of tbe insolvent estate, and previously allowed by tbe court in confirmation of tbe register’s report, bad been transferred to said A. S. McGregor by G. M. Mc-Gregor in fraud of tbe Alabama Bant, a creditor of G. M. McGregor and tbe corporation, and tbat tbe dividend due on tbe claim be paid to tbe bank. A. S. McGregor appeals.

Appellant insists for one thing tbat the bank was not properly allowed to raise tbe issue of fraud in "the transfer of the claim in question, for tbe reason tbat it made no-objection to appellant’s claim at tbe bearing before tbe register or when tbe register’s report came on to be heard before tbe court. We discover no element of estoppel, and all decisions were in fieri until tbe decree making a final disposition of tbe cause. It was within tbe power of tbe court to allow tbe filing of tbe petition in which tbe bank contested tbe transfer to appellant. Tbe effect of tbe decree subsequently rendered was to set aside tbe decree by which appellant’s claim bad been allowed, to declare tbe invalidity of the transfer as against creditors, and to direct payment of tbe disputed dividend to tbe bank in payment, or part payment, of its claim against tbe estate of tbe insolvent corporation.

On October 7, 1924, the bill in this cause was filed. At tbat time, it is conceded by tbe parties, tbe corporation was indebted to R. R. Rochell in tbe sum of $7,-134.34, G. M. McGregor and R. R. Rochell owned a majority of tbe stock of tbe corporation and had been in control of its affairs. They bad agreed to a sale of their stock and all tbe corporate property to appellant A. S. McGregor for tbe sum of $16,000. This sale was conditioned upon its ratification by tbe directors and stockholders “in tbe manner provided by law,” meaning, as we infer, tbat tbe sale should be authorized by two-thirds of tbe directors and by four-fifths in value of the stockholders. Code, § 7036. Appellant had a purchaser in waiting who bad promised to pay him $21,000 for tbe property. This proposed sale failed of consummation because minority stockholders would not agree and filed tbe present bill, among other things, to enjoin the sale. Thereupon, the day after tbe bill was filed, Rochell and G. M. Mc-Gregor executed to appellant McGregor their joint note for $5,000 to make good tbe profit of $5,000 which bad been lost to him by tbe failure of tbe agreement of sale. Appellant’s claim against tbe corporate property to tbat amount was disallowed, and we are of tbe opinion tbat a statement of tbe facts is enough to show tbat bis claim to tbat amount as against tbe fund for distribution was without consideration and was properly disallowed as a claim in competition with tbe bona fide creditors of tbe corporation; i. e., of tbe fund for distribution.

It appears tbat appellant also claimed tbat tbe dividend on $5,000 should have been decreed to him instead of to R. R. Rochell, to whom it was decreed. It will be observed tbat tbe corporation, or the fund held by tbe court for distribution among its creditors and stockholders, bad no interest in this controversy as to tbe dividend on $5,000 mentioned above. Tbe real controversy as to tbat was between appellant and Rochell; but Rochell has not been made a party to this appeal, and tbe court is without authority to adjudicate tbe claim as against him.

As for tbe item of $1,426.01, mentioned in the outset, tbe proposition of tbe appeal is tbat there is no proof of tbe transferor’s insolvency or of bis intent to defraud, and hence tbat bis transfer of tbe claims on which tbe disputed dividends were declared cannot be set aside as made in fraud of creditors of tbe corporation or of G. M. McGregor.

Tbe amusement company was indebted to tbe bank in tbe sum of $7,000. Rochell and G.. M. McGregor were indorsers and sureties on tbe company’s note to tbe bank, G. M. Mc-Gregor transferred bis claims against tbe corporation to appellant, and this transfer is tbe subject of attack in this cause. Out of it arises tbe contest as to tbe ownership of tbe item of $1,426.01.

Tbe evidence has bad due consideration. It leaves appellant’s case under gravest suspicion in every respect. A debtor, though possessed of ample means to settle all demands against him, may be guilty of a fraudulent intent in disposing of bis property of which creditors and others in tbe situation of -the stockholders in this cause may avail themselves. Teague v. Bass, 131 Ala. 427, 31 So. 4; Sutterer v. Morris Fertilizer Co., 208 Ala. 688, 95 So. 166. In this connection it is proper to note tbe fact tbat tbe transaction by which appellant came into tbe ostensible ownership of tbe items of claim in controversy was between near relatives, brothers, and tbat so much of it as put appellant in possession of bis claim ^f $5,000 against tbe corporate property was wholly lacking in valuable consideration moving to tbe corporation, as of course appellant knew — a circumstance to be considered. But, apart from tbat, tbe bank’s debt antedated tbe transfer by G. M. McGregor to appellant. This put upon appellant tbe burden of showing tbat be paid a valuable and adequate consideration for the transfer now immediately in question, viz. tbe transfer of tbe claim for $1,-426.01. Moog v. Farley, 79 Ala. 252; Zelnieker v. Brigham, 74 Ala. 598; Merchant’s Bank v. Parrish, 214 Ala. 96, 106 So. 504; London v. Anderson Brass Works, 197 Ala. 16, 72 So. 359. This burden tbe appellant failed to sustain, with result that decree went against him.

The decree is affirmed.

ANDERSON, O. J., and GARDNER and MILLER, JJ., concur. 
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