Court Opinion

ID: 6502814
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:15:25.362143+00
Date Added: 2024-06-11T15:54:34.480924
License: Public Domain

GOLDTH WAITE, J.
1. When this cause was here at a former term, the only matter determined was, that the answers were insufficient to dissolve an injunction previously awarded. [See 6 Ala. Rep. 178.] It was not then material to notice the difference of the stipulations of the mortgage with regard to the real and personal estate. What was there said, refers itself exclusively to the question then before the court. We discussed the case no further than was sufficient to show, that the acts of the parties, with relation to the personal estate, were such as to make that liable to an execution creditor of the mortgagor. The cause is now before us as on the final decree, subjecting both real and personal estate to the creditor; it is therefore necessary to consider the entire case made by the answers and exhibits — it having been heard alone upon these and the bill, without any aid from extrinsic evidence.
In doing this we shall purposely refrain, as we did on the former occasion, from the discussion, whether the reservation of a power to sell the mortgaged estate will necessarily prevent the deed from operating as a conveyance, either as to *309the specific thing as to which this power is reserved, or as to others contained in the same conveyance, but controlled by a similar reservation. Since this cause was here, we have decided several cases in which deeds of conveyance, apparently intended as securities, contained provisions by which the use of perishable chattels were reserved to the mortgagor until the expiration of the law day ; and in some of which the actual consumption of a portion'of the chattels was a necessary consequence of the use. [Dubose v. Dubose, 7 Ala. R. 235; Elmes v. Sutherland, Ib. 262; Pope v. Wilson, Ib. 690; Graham v. Lockhart, 8 Ib. 9.] In most of these decisions we steadily kept in view the distinction which might be drawn, if the mortgage or other security was made by a debtor in contemplation of insolvency, and accepted by the creditor with a knowledge of this fact; but we have never decided what legal consequences would flow from these circumstances. It becomes necessary to do so in the present-case, and to this point we shall chiefly direct our examination.
It is difficult to conceive, why a debtor, upon the eve, or in contemplation of insolvency, should provide for the reservation of a power to sell, or to use the mortgaged estate, unless some benefit to himself was intended; and it seems equally so, to imagine how a creditor, .with a knowledge of this circumstance, can assent to roceive such a security without lending himself to carry out the debtors intention. If an insolvent debtor, in contemplation of admitted insolvency can, stipulate with a creditor to protect an estate for his. own enjoyment, use, or benefit, it is impossible to foresee the multitude of frauds which must be sanctioned by admitting the ' validity of the transaction. In a neighboring State, it has been held that deeds executed as securities, but reserving the use of articles which must be consumed in the use, are fraudulent as against creditors. [Darwin v. Handley, 3 Yerg. 502; Somerville v. Horton, 5 Ib. 541.] But an examination of these cases seems to indicate, the fraud was inferred from the peculiar circumstances attending each transaction. In Massachusetts a somewhat different rule prevails, and more- in accordance with the decisions of our own court, to which reference has been previously made. There are conveyances *310with reservations similar to that contained in this mortgage, which have been sustained as prima facie good, though liable to be defeated as fraudulent, if made by the debtor, and taken by the creditor under suspicious circumstances. [Briggs v. Parkman, 2 Metc. 258; Jones v. Huggeford, 3 Ib. 515; see also Robbins v. Parker, Ib. 117.] In Jones v. Huggeford it is said, “ the party who alledges the transfer to be fraudulent, and merely colorable, may submit to the jury all the supposed badges of fraud arising from the form of the conveyance, and the stipulations of the vendor, which tend to raise the presumption of fraud. But they will be open to explanation, and may be shown to be consistent with honesty of purpose and good faith, in the parties to the contract.” We have before suggested, the difficulty there is in conceiving any reason for such a reservation by a debtor, when on the eve of admitted insolvency, and we think it rests with the creditor taking the conveyance, with such reservations, under such circumstances, to show that the transaction is explained by other facts and circumstances, so as to rebut the suspicion of fraud. Such was the decision made by us, in Marriott v. Givens, 8 Ala. R.
Such being the rule of law governing the conveyance it is only necessary to ascertain if the admissions of the answers make out, to a reasonable certainty, that Ticknor was in failing circumstances, or rather on the eve of notorious insolvency. This, we think, abundantly appears from the whole case. The charge is, that the deed was made immediately prior to large judgments being entered, and with reference to this charge; it is conceded that there are outstanding judgments older than that of the complainant, entirely unsatisfied. This matter is charged as a badge of fraud, and is not denied by Day, nor does he assert his ignorance of the fact. We must, then, conclude the mortgage was taken with, a full knowledge of the attending circumstances, and there being no evidence, or even allegation, in explanation of the transaction, we consider it as exhibiting the intention to provide a means for Ticknor to carry on his business unmolested by other creditors. Thus creating a secret trust for his benefit, which, in law, is a fraud upon his creditors.
*3112. It is urged, however, if the conveyance is inoperative for this reason, as to the personal estate, it should, notwithstanding, be sustained as to the real estate. The rule in this respect is, that a deed void for being colorable and fraudulent as to part, is void as to the whole of the property conveyed by it. [Somerville v. Horton, 4 Yerg. 641; Darwin v. Handley, 3 Ib. 502; Hyslop v. Clark, 14 John. 458; Austin v. Ball, 20 John. 442; Mackee v. Carnes, 5 Cowen, 547.] If it was otherwise, the statute would be but a sorry attempt at prevention, and the fraudulent debtor, in many cases, would attain his object.
Another point strongly insisted on is, that the antecedent incumbrance on the St. Francis street store, which Day has paid subsequently to the execution of the conveyance to him by Ticknor, are not avoided by that; and that as to those payments, he is entitled to charge that property. Independent of the question which is suggested, as arising out of the supposed consent that the cause should be heard on the bill and answer, which we deem it unnecessary now to decide, there is a view which is entirely conclusive.
The answers assert that these incumbrances were assumed by Day, as a part of the consideration upon which the mortgage was executed, and it is in this view alone, that the allegations respecting them are entitled to be considered as responsive to the bill, in reply to the call to disclose what was the consideration. As it thus enters into the deed, which has been shown to contain stipulations, the intent of which must be presumed to be. to hinder creditors, it seems clear, that Day cannot set them up against the creditor, [Borland v. Walker, 7 Ala. Rep. 269.]
The result of this examination is, the affirmance of the decree.