Court Opinion

ID: 6543825
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:17:58.098637+00
Date Added: 2024-06-11T15:55:54.632523
License: Public Domain

Riddick, J., (after stating the facts.) This is a controversy concerning the ownership of a stock of goods. The goods were owned by W. L. Page & Co., who sold them to the appellant, the Carl & Tobey Company. The appellee, the Beal & Fletcher Grocer Company, afterwards attached the goods to satisfy a debt held by them against said W. L. Page & Co., and said appellee contends that the sale to the appellant was fraudulent and void. The question to be determined is whether the evidence is sufficient to support the finding of the circuit court to the effect that the sale was made by Page & Co. with the intent to hinder and delay their creditors, and.that the appellant company had notice of such fact at the time it purchased. On the first point, we are of the opinion that the evidence was amply sufficient to sustain the finding that the object of Page & Company in making this sale was to place their assets beyond the reach of their other mercantile creditors. Page, who was the business manager of the firm, received from the appellant company, over and above its debt, about $1,100 in cash as purchase price for the goods. In addition to this, the firm had in bank $186, which Page withdrew immediately after the sale of his stock of goods; being, as he said, afraid that the Oliver-"Finnie Grocer Co., a firm creditor, “would garnishee the banlc.” Of these sums of money, amounting to about $1,300, which he had belonging to the firm, he paid to Mrs. Chapman, a sister-in-law, $557 for money which he claimed to have borrowed from her. He paid $150 to Mrs. Baldwin, also a sister-in-law, and his co-partner in the business of W. L. Page & Co. $500 he paid to his wife, and the remainder he used for family expenses of himself and Baldwin. An attorney for one of the firm’s creditors went to Page' soon after the sale was consummated, and asked him to pay his client’s debt out of the money he had received for the stock of goods. But he replied that he could not do it, that “the money was in his pocket, and was going 1o stay there.” It is true that Page testified that he paid the $500 to his wife for services rendered by her as book-keeper of the firm, but the statement that the firm owed his wife is, we think, open to grave suspicion. Baldwin, the husband of a member of the firm of W. L. Page & Co., and who managed his wife’s interest in the firm, testified that never, until the day of the trial, had he heard that Mrs. Page was to be paid for keeping-books. These and other facts not necessary to discuss convince us that the judgment of the circuit court sustaining the attachment was in accordance with the evidence. Did the appellant company have notice of this fraudulent intent on the part of Page & Co.? or, what would amount to the same thing, did their attorney and agent have notice of such intent, or of facts sufficient to put him upon inquiry? On that point the evidence is more doubtful. But the attorney of appellant had held this claim against Page & Co. for some weeks, and he knew that they were refusing to pay unless he would purchase the entire stock of goods, and pay the balance above his' client’s claim in cash. He knew, also, that another creditor had commenced suit against the firm. These facts would indicate that, this firm was in an embarrassed financial condition. It is plain that the attorney knew this; for, after having made several propositions to the defendant firm looking to a settlement of his client’s debt, among which was an offer to purchase from Page & Co. enough goods to settle the debt of his client, and after all of his propositions had been rejected, he wrote to his client that the only way .to collect their debt was to purchase the stock of goods from Page & Co. upon the terms proposed by them. “He reported to us,” says Mr. Tobey, “that the only thing that could be done to get our money was to buy defendants’ stock.” This report of the attorney, and the action of the appellant in purchasing a stock of goods that they did not want, indicate that it and its attorney knew that Page & Co. had little, if any, property besides this stock of goods, and that when that was gone there would be nothing further from which creditors could realize their debts. It is said that the attorney had no notice that there were other debts. But he had actual notice of' one other debt, and knew that an action had been commenced to collect the same. Besides, the defendants were merchants, and it is rare that a merchant becomes embarrassed without having more (than two creditors. This is a matter of such common notoriety that we must presume that appellant and its attorney had notice of it. The facts and circumstances, we think, were sufficient to put appellant and its attorney -upon inquiry. Here was a firm, having no visible assets except a stock of goods, unable or ■unwilling to pay a past-due debt to appellant. Another creditor commenced suit, and then the firm proposed to pay appellant’s debt of $547, but only on condition that appellant will buy the entire stock, and pay the balance of the purchase price, amounting to over a thousand dollars, in cash, thus'placing all the firm’s property beyond the reach of creditors. The circumstances, we think, were sufficient to have awakened the suspicion of a man of ordinary prudence, and to have caused an inquiry. But the attorney of appellant made no inquiry. Had he sought for information, he could doubtless have learned that the firm of Page & Company owed other debts, and in fact was insolvent, and that their object in refusing to sell a portion of the goods in payment of appellant’s debt was to force appellant to purchase the whole stock, so that they could place the balance of the purchase price beyond the reach of creditors. A consideration of the evidence convinces us that the finding of the circuit court that appellant had notice of the fraudulent intent of Page & Company has evidence to support it. After having such notice, did the appellant company have the right to purchase a stock of goods three times the value of it own debt, and pay the balance in cash? Insolvency does not, of itself, prevent the debtor from controlling and selling his property; and it is undoubtedly true that a creditor may purchase property of his insolvent debtor in satisfaction of his debt, if the price paid be fair and adequate, and no benefit is reserved to the debtor. But he cannot go further, and, under pretense of collecting his own debt, aid the debtor in his effort to hinder and delay his other creditors. If, having notice of his debtor’s dishonest purpose, he purchases property largely in excess of his own demand, paying therefor in cash, when the nature of the property does not make it necessary that he should purchase more than the amount of his own claim, the law will not uphold the transaction. To do so would be to furnish dishonest debtors with an easy method of placing their property beyond the reach of creditors. Under pretense of paying one creditor, they could convert their assets into cash, and place themselves in a position to perpetrate a fraud upon all other creditors. Wood v. Keith, 60 Ark. 425; Levy v. Williams, 79 Ala. 171; Carter v. Coleman, 82 Ala. 177; Harris v. Russell, 93 Ala. 67; Oppenheimer v. Halff, 68 Tex. 409; Hart v. Sandy, 39 W. Va. 644. There is no pretense here that there was anything in the nature and character of this property which made it necessary to sell the whole to avoid injury. On the contrary, the only reason given' for the purchase of the entire stock of goods is that the debtor desired to convert the whole stock into cash, and refused to sell less than the whole stock. This persistency of the debtor, without a legitimate reason, in a refusal to sell unless the creditor would take all his goods, and pay the excess in cash, did not justify the creditor in purchasing, but should have convinced him that the purpose of the debtor was dishonest; that, under pretense of paying one creditor, he intended to put his assets beyond the reach of all other creditors. We think counsel for appellant have misapprehended the meaning of the opinion delivered by this court in the case of Fly v. Screeton, ante, p. 184. The judgment of reversal in that case was clearly right, for the reason that the presiding judge instructed the jury, as a matter of law, that a purchase of goods from an insolvent debtor at fifty cents on the dollar of the invoice price was “conclusive of fraud,” whereas, by reason of the damaged condition of the goods, or change in the market price, the actual value of such goods may have been even less than the price named. It being necessary to remand the case for a new trial, the court laid down the rule that a creditor, having notice of the fraudulent intent of the debtor, may nevertheless, when acting in good faith, purchase more property than sufficient to satisfy his own debt, and pay the balance to the debtor, when, on account of the nature of the property, it is necessary to do so, as when the sale of a lesser quantity to pay the debt could not be made without material injury to the portion remaining unsold. It will be noticed that the court did not decide that the sale of more goods than sufficient to satisfy the debt was necessary in that case, but remanded the ease in order that the matter should be determined as a question of fact. But in this case the circuit court has already determined that the purchase of such excess above the appellant’s debt was unnecessary, and the finding is supported by the evidence. We do not therefore think that Fly v. Screeton is in conflict with our decision here. We do not find, and it is not necessary to find, that either the appellant company, or its attorney, did anything more than they deemed necessary to protect their own debt. They doubtless felt that they were dealing with an unprincipled man, and that if they refused to accede to his demands, there would be great risk of losing the debt. But a necessity arising solely from the unscrupulous character of the debtor is not sufficient in law to justify the creditor in aiding him to convert his property into money, to the injury of the other creditors. Levy v. Williams, 79 Ala. 171. The circuit court admitted evidence of certain acts of Page, occurring after the sale of the goods, which tended to show a fraudulent intent on his part in making such sale. It is contended that it was error to admit such evidence against appellant, but, while this might be true had the issue upon the inter-plea been tried separately from the attachment issue, yet the point is not well taken here, for both issues were, by consent, tried together. As the evidence was competent against the defendant firm to sustain the attachment, it was not error to admit it. On the whole case, finding no error, the judgment is affirmed.