Opinion ID: 1752313
Heading Depth: 1
Heading Rank: 1

Heading: Tract One.

Text: Appellant concedes that the consideration for the conveyance of Tract One to her was furnished by the corporation, but insists that the corporation cannot set aside that conveyance or enforce a trust in Tract One because the purpose of the conveyance was to hinder, delay, or defraud the creditors of the corporation. Appellant's argument is based on the rule that when one purchases property and procures a conveyance thereof to be made to another for the purpose of defrauding creditors of the person furnishing the consideration, then the one procuring such conveyance will be denied relief in equity. The appellee corporation insists that the rule has no application in this case. We think it does. It is well established that a deed made to defraud creditors, which is fully executed by delivery, though void as to existing creditors of the grantor at the time of execution is valid as between the parties, and the grantor and those claiming merely in succession to him are estopped from denying its validity. Henslee v. Henslee, 263 Ala. 287, 82 So.2d 222, and authorities cited there and in Ala. Digest, Fraudulent Conveyances, Key No. 172. The conveyance of land for a simulated consideration, no part of which has ever been paid, is voluntary and void as to existing creditors, without regard to the solvency of the grantor or to the intent entertained by the parties to the conveyance at the time. Moore v. Altom, 192 Ala. 261, 68 So. 326; McClintock v. McEachin, 246 Ala. 412, 20 So.2d 711. As against existing creditors, a voluntary conveyance is per se fraudulent. Cook v. Clark, Davis & Co., 212 Ala. 257, 102 So. 213. Where the purchase price is paid by one person and title taken in the name of another for the purpose of defrauding the creditors of the person furnishing the consideration, the conveyance to such other person is fraudulent as to such creditors. The following cases support this rule. In Elliott v. Horn, 10 Ala. 348, a father furnished consideration for land and caused the conveyance to be made to his minor son. This court held the conveyance to the son void as against a creditor of the father. In Stoutz v. Huger, 107 Ala. 248, 18 So. 126, a husband furnished the consideration for real estate conveyed to his wife. This court held the conveyance to the wife void as to creditors of the husband. In Kelley v. Connell, 110 Ala. 543, 18 So. 9, where the husband paid for land conveyed to the wife, this court said the creditors of the husband were entitled to have the conveyance to the wife set aside and subjected to payment of the husband's debt except for the claim of homestead which, if proved, entitled him to the land as against his creditors. In Washington v. Arnold, 167 Ala. 448, 52 So. 463, where the husband furnished the consideration for a deed to the wife, this court held the deed fraudulent as to a creditor of the husband. In Birmingham Trust and Savings Company v. Shelton, 231 Ala. 62, 163 So. 593, in holding demurrer properly overruled to that aspect of a bill seeking to set aside conveyances allegedly fraudulent, this court said: It may be stated as authoritatively settled by the adjudications of this court, as well as elsewhere, that neither the forms of the transactions, nor the means employed, by which property, liable to the satisfaction of the demands of creditors, is fraudulently sought to be placed beyond their reach, are material. Courts will look beyond mere form to the substance of the transaction. (Citations omitted.) [231 Ala. 62, 67] We are of opinion that as to fraudulent conveyances, the rules which apply to natural persons apply also to corporations. A text writer states the rule as follows: Furthermore, the general principles of law and the statutes governing fraudulent conveyances apply to corporations to the same extent as natural persons, and if a corporation conveys or transfers its property, with intent to hinder, delay or defraud creditors, or without consideration, existing creditors may sue to set the conveyance or transfer aside, and to subject the property to the satisfaction of their claims, or to hold the grantee or transferee liable for its value, for the reason that `corporations cannot, any more than individuals, relieve their property from the payment of debts, except by a sale or transfer in good faith and for a full consideration.' Fletcher on Private Corporations, Vol. 15A, § 4707, pages 122, 123, 124. See: Berney Nat. Bank v. Guyon, 111 Ala. 491, 20 So. 520; Metcalf v. Arnold, 110 Ala. 180, 20 So. 301, 55 Am.St.Rep. 24; Fort Payne Bank v. Alabama Sanitarium, 103 Ala. 358, 15 So. 618; Corey v. Wadsworth, 99 Ala. 68, 11 So. 350, 23 L.R.A. 618, 42 Am.St.Rep. 29; Montgomery & West Point Railroad Co. v. Branch, Sons & Co., 59 Ala. 139. Applying the stated principles to the facts shown in the instant case, we are of opinion that the conveyance of Tract One to respondent was a conveyance with intent to hinder, delay, or defraud the creditors of the corporation; and, while the conveyance might be set aside in a suit brought by a creditor of the corporation, or by a stockholder in a proper case, Northwestern Land Association v. Grady, 137 Ala. 219, 33 So. 874, the instant suit was brought by the corporation itself. No creditor or stockholder is a party. The corporation furnished the consideration for the conveyance which was made at the direction of Hewett acting as president of the corporation. The vice-president, Hughey, approved the conveyance to respondent. As a witness for complainant, on direct examination, with reference to that conveyance Hughey testified as follows: Q. That was the first time you really had knowledge that registered that the deed was in the name of Evelyn Hewett? A. That's right. Q. And did you say anything about that to Mr. Hewett? A. Yes, sir, I did. Q. What did you say to him? A. I inquired as to why it was made out to Mrs. Hewett rather than to he and I doing business as Continental Supply, Incorporated or to the corporation and he made this statement: that he thought that it was best to do that in the event that anything should happen that the company should go bankrupt at any time we wouldn't lose everything we had, and so I said, `Well, let it go as it is for the time being.' Hewett and Hughey together owned 99% of the corporate stock. They were the managing officers of the corporation and were clothed with authority to act for it. The conveyance was to respondent who owned ½ of 1% of the stock. The remaining ½ of 1% was owned by Mrs. Hughey. It might be that Mrs. Hughey could have complained before she parted with her stock, but as to that we do not decide because she is not a party to this suit. The conveyance was procured by the corporation, was without consideration, and, as we view the evidence, was made to defraud creditors. Because the corporation occupies the status of a fraudulent grantor, it is not entitled to have its own fraudulent act set aside. With respect to the contention that it was represented to Sida that the property was part of the assets of the corporation, it appears from the testimony of Sida above set out, that on March 9, 1957, before he purchased the stock, he was fully advised that the lots in suit were in the name of respondent and that she claimed to own them. A similar situation was presented in Piggs v. Casper Co., Inc., 196 F. 177, 116 C.C.A. 9. In that case a corporation sued to set aside a conveyance of real estate made by the corporation to one Angle without consideration in fraud of its creditors. Angle conveyed the real estate to the respondent, Pigg, as trustee for Pigg's wife to secure a fictitious debt to her. Subsequent to the conveyance to Pigg, the stock of the corporation passed into the hands of stockholders other than those who held the stock at the time of the conveyance. The new stockholders did not acquire their rights by operation of law, but acquired by purchase. The new stockholders caused suit to be brought in the corporate name to set aside both conveyances. The district court granted relief. The Circuit Court of Appeals reversed and held that the fact that the stock had passed into new hands did not authorize maintenance of the bill because the present stockholders became such with full knowledge that the conveyance had been made. So in the instant case, Sida became stockholder with full knowledge of respondent's position, and the fact that he acquired the stock after the conveyance cannot aid the corporation. We are of opinion that the court erred in setting aside the conveyance of Tract One to respondent.