Case ID: ala_101/html/0692-01.html
Source: Caselaw Access Project
Author: {"author": "STONE, O. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Curran & Co. v. Olmstead & Scheuing et al.
    
      Bill in Equity to set aside a Conveyance on the Qronnd of
    
    
      Fraud.
    
    1. Fraudulent conveyance; payment of a pre-existing debt. — A transfer in 1891 by a failing debtor of his stock of goods, at its fair market value, in payment of a valid, pre-existing debt, is not fraudulent, if the debt was absolute, and the property conveyed was received at its reasonably fair market value, and no benefit was secured to the debtor beyond a release from the debt.
    2. Bill in equity to set aside a conveyance as fraudulent; alternative averments. — Where, in a bill filed to set aside a conveyance as fraudulent, the charge of fraud is made disjunctively, each alternative averment of the bill of complaint must state a sufficient cause of action.
    3. Bame; sufficiency of averment. — In a bill filed to set aside as fraudulent a conveyance from a failing debtor to a creditor, a mere averment therein that the conveyance by the debtor to the creditor was for the purpose of hindering, delaying and defrauding his other creditors, and that the preferred creditor participated in such intent, is not sufficient as a statement of the cause of action ; to be sufficient, the facts which constitute the fraud must be averred.
    Appeal from the Chancery Court of Calhoun.
    Heard before the Hon. S. K. McSpaddisn.
    The bill in this case was filed by F. Curran & Co. against Olmstead & Scheuing and the First National Bank of Anniston ; and sought to set aside the sale of a stock of goods from Olmstead & Scheuing to the .First National Bank.
    The ground upon which the complainants sought to set aside the sale of the stock of goods by Olmstead & Scheuing to the First National Bank was, that there was fraud in said sale, and that it was made for the purpose of hindering, delaying and defrauding the creditors of said Olmstead & Scheuing, and that the consideration expressed in the bill of sale as moving from the Bank to said Olmstead & Scheuing was simulated. It is not deemed necessary to set out in detail the various phases of the evidence. The respondents demurred to the bill, among others, upon the following grounds : 1st. There is no equity in said bill; and 4th. No sufficient facts are averred to show that the sale is null and void, and ■was made to defraud the creditors.
    All of the demurrers were overruled; but upon the final submission of the cause, upon the pleadings and proof, the chancellor decreed that the complainants had failed to sustain the allegations of their bill, and therefore ordered the said bill dismissed. ITis decree in this behalf is here assigned as error on the present appeal therefrom by complainants.
    Mountjoy & Tomlinson, for appellants,
    cited Iiodges v. Coleman, 76 Ala. 103 ; Moog v. Farley, 79 Ala. 252; Poliak v. Searcy, 84 Ala. 259, 4 So. Rep. 137; Rosivald v. Robbie, 85 Ala. 73, 4 So. Rep. 177; Morrison v. Morris, 85 Ala. 196, 4 So. Rep. 667 ; Calhoun v. ITannan, 87 Ala. 277, 6 So. Rep. 291; Mobile Savings Bank v. McDonnell, 89 Ala. 435, 8 So. Rep. 137, Lehman, Durr & Co v. Greenhut, 88 Ala. 476, 7 So. Rep. 299.
    Knox & Bowie, contra,
    
    cited, Hodges v. Coleman, 76 Ala. 103 ; Meyer v. Sulzbacher, 76 Ala. 120; McDowell v. Steele, 87 Ala. 493, 6 So. Rep. 288.
   STONE, O. J.

In November, 1891, Olmstead made a transfer in writing to the First National Bank of Anniston, purporting to be an absolute sale of the merchandise and stock in trade of the former, in payment of an admitted past-due indebtedness to the latter. The business had been conducted in the name of. Olmstead & Scheuing, as partners ; but claiming that the latter was only-a salaried clerk or salesman, he released all his interest to Olmstead. Thereupon he, Olmstead, executed a bill of sale or conveyance of the entire stock' to the bank. F. Curran & Co. were antecedent creditors of Olmstead & Scheuing, and they filed the bill in the present case against Olmstead & Scheuing and the bank, for the purpose of enforcing the collection of their claim out of the assets so conveyed by Olmstead. The bill assails the bona fides and validity of the said conveyance to the bank.-

The principles of law which must control this case— made as it was in November, 189 L — have been too often declared to need elaboration. They permitted a failing or insolvent debtor to pay one or more of his creditors in full, even though the known effect of such payment would be to leave the debtor without means to pay his other liabilities. The conditions were, that the debt must be absolute,-and if paid in property, it must be received at its reasonably fair market value ; and no benefit must be secured to the debtor beyond a release from the debt. And when the transaction is assailed by an antecedent creditor, the burden rests on the creditor who has been preferred to prove the existence, amount and justness of his claim ; and when paid in property, he must also prove that the property was taken at a price not materially below its fair market value. These are the general rules ; but there are exceptional cases, arising out of the relations of the parties, which sometimes impose additional burdens. There are not shown to be any exceptional features in. this case. — Lehman, Durr & Co. v. Kelly, 68 Ala. 192; Hodges v. Coleman, 76 Ala. 103; Meyer v. Sulzbacher, Ib. 120; Pritchett v. Pollock, 82 Ala. 169, 2 So. Rep. 735; McDowell v. Steele, 87 Ala. 493, 6 So. Rep. 288; Chipman v. Stern, 89 Ala. 207, 7 So. Rep. 409; Dollins v. Pollock, Ib. 351, 7 So. Rep. 904; Rochester v. Armour, 92 Ala. 432, 8 So. Rep. 780; Beachman v. Koch, Ib. 452, 8 So. Rep. 707; Robinson v. Moseley, 93 Ala. 70, 9 So. Rep. 372; First National Bank v. Smith, Ib. 97, 9 So. Rep. 548; Pollak v. Scarcy, 84 Ala. 259, 4 So. Rep. 137; Calhoun v. Hannan, 87 Ala. 277, 6 So. Rep .291.

The statute allowing failing debtors to give preferences in the payment of their debts has been materially changed since this sale was made. — Acts of 1892-3, p. 1046.

The proof in the present record is very full that Olmstead & Scheuing, the failing debtors, were indebted to the First National Bank in the sum of seven thousand, seven hundred dollars. The goods were sold and bought at the price of five thousand, one hundred dollars. We have read the testimony with care, aud our conclusion is, that it shows the market value of the merchandise did not exceed the price agreed on, and for -which amount the bank cancelled the indebtedness of Olmstead & Scheuing. In this estimate we have not computed the landlord’s rent-charge, which had a lien on the goods. Talcing that into the estimate, they were taken at a price greatly in excess of their available value. Nor is there any testimony that Olmstead, or Olmstead & Scheuing secured any benefit to themselves in the transaction.

The gravamen of the bill is that the conveyance from Olmstead to the bank was fraudulent. The charge is made in the disjunctive; that is, that the conveyance Avas either one thing, or another — executed Avith one intent, or another. When this form of pleading is resorted to, eaclx alternative averment must, for obvioixs x'easons, express a sufficient cause of action. — 3 Brick. Dig., 378, §§ 168, 169. The language employed by the pleader in this case is, ‘ ‘that said bill of sale axxd transfer by said Percy Olmstead to said First National Bank was voluntary, and the consideration of $5,100 is simulated in Avhole, or ixx a large measure; or, if your orators are mistaken as to said consideration being simulated, then your orators allege that said bill of sale xvas made by said Percy Olmstead to said First National Bank for the purpose of hindering, delaying and defrauding his creditors, and the creditors of said Olmstead & Scheuing, and the said First National Bank of Anniston participated with said Percy Olmstead in said intention of hindering, delaying and defraudixxg said creditors. ” The second of these alternative averments is manifestly insufficient. To be sufficient, the facts which constitute the fraud must be stated ; bxxt it is not necessary to state the evidence which goes to prove those facts.' The first and fourth grounds of demurrer should have beexx sustained. We base our conclusion, however, on the merits of the case as disclosed ixx the testixnony.

Affirmed.