Court Opinion

ID: 6504998
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:17:19.695659+00
Date Added: 2024-06-11T15:54:42.655061
License: Public Domain

GOLDTH WAITE, J.
The only question made in the case is, as to the validity of the assignment executed by Fleming.
The parts of the deed relied on by the plaintiff in error, in support of the position that it is fraudulent upon its face, are:
1. The statement or recitals which it contains, in relation to a portion of the creditors being disposed to sell the property of the assignor, at a time when there was but little money in circulation, and that his property was more than sufficient to pay his debts, if sold at a more favorable period, and if thus sold, a considerable surplus would be left.
2. That the assignment conferred unlimited discretion upon the trustees as to the time at which, and the terms on which, they should sell the property conveyed.
3. The stipulation allowing the assignor to retain possession of the dwelling-house and slaves, until they should think proper to sell the property.
4. That the assignment contains no schedule of property, no list of creditors, or amounts due either to them or the assignor, and no provision for notice to creditors, or for their becoming parties to the deed.
As to the statements in the assignment, in relation to the disposition of creditors to sell the property of the assignor, at a time when it would not bring its full value, and that a considerable surplus would be left, after the payment of all his debts, if sold at a more favorable period: we regard them as amounting to no -more than a statement of the reasons which operated upon the assignor, in making such a disposition of his property as would, in his opinion, do equal justice to all of his creditors; and if the disposition made by him was sanctioned by law' — -if it was a devotion of all his effects to the payment of his debts, without any reservation of interest beneficial to himself, or prejudicial to his creditors, *244it would not, under the decisions of this court, be considered as fraudulent upon its face.
The authority giving to the trustees a just and reasonable discretion as to selling at private or public sale, or for cash or upon time, was expressly decided by this court, in the case of Abercrombie v. Bradford, 16 Ala. 560, to be equivalent in its legal effect, to a provision authorizing the trustee to sell for such prices, and on such terms, as he might deem expedient; which reservation, as it invested the trustee with a discretion which, properly exercised, might be beneficial to the creditors, was for that reason sustained. See also, 9 Porter 566.
In relation to the clause which reserves to the assignor the right to retain possession of the dwelling-house and slaves, until the trustees should think proper to sell this property, my own opinion is, that as, by the terms of the assignment, the trustees were bound to exercise a sound discretion as to the time at which the property conveyed should be sold, it was equally their duty in the meantime, to manage such property for the interest of those for whose benefit the assignment was intended; and that a stipulation reserving to the debtor the right, during this period, to the use of valuable and productive property, was not only a reservation for his own benefit, but in direct opposition to the proposed objects of the conveyance, as it enabled him to exercise a control over the property which was inconsistent with the rights of creditors, by taking from them their right to the rents and profits during the time the trustees might think it advisable to hold it up from sale. The tendency of courts of late years has not been in favor of conveyances of this character; and the ease with which frauds are perpetrated under cover of deeds of this description, renders it necessary that they should be subjected to a close and severe scrutiny. I am unable to perceive any valid reason why the assignor might not stipulate for the possession of fifty, as well as nine slaves, and other property, as well as a dwelling-house. The fact that the duration of the possession was uncertain, does not deprive the stipulation of its beneficial character; nor is it any answer to the argument, to say that the law would permit the trustees to allow the retention of this property by the debtor. *245The law, as I conceive, would not allow this disposition to be made, unless required by, or at least not prejudicial to the interest of the creditors; and would hold the trustees responsible for the rents and profits of the property, from the conveyance to the sale. A debtor may make an assignment for the benefit of his creditors, but the law in such case requires the faithful and honest devotion of his whole estate to the payment of his debts; and in this court a provision the exercise of which may enure to his benefit, or result to the prejudice of the creditor, by authorizing the trustee to compound debts, is held sufficient to render the assignment void upon its face; not, as we apprehend, for the reason that this power will necessarily be employed to the benefit of the one or the prejudice of the other, but because it confers upon the assignee a power so inconsistent with the professed objects of the deed, as to afford conclusive evidence that the intention of the assignor was fraudulent. So here, when the debtor having the full title, conveys his property to trustees, that it may be sold for the payment of his debts, reserving to himself as a right, a possession which the trustees would not be permitted to allow, except in the exercise of a sound discretion, and to promote the objects of the trust, I can regard it in no other light than a conveyance, to that extent, in trust for himself; and the conclusion which the law invariably draws in such cases is, that the grantor, by the insertion of a clause of this character, intended the reservation to operate for his own benefit, without regard to the rights of creditors; and this intention it denounces as fraudulent, without regard to the amount of beneficial interest reserved. I am aware, that these views are in conflict with the decision in the case of Abercrombie v. Bradford, 16 Ala. 560, holding that a provision in a deed of assignment, authorizing the assignor to remain in the possession of the property conveyed until a favorable opportunity offered for the sale, did not render the instrument void upon its face; but' the reasoning on which the decision rests is, to my mind, in opposition to well established legal principles; and believing that its tendencies will be to the encouragement of fraud, and to invasions of the just rights of the creditor, I do not think this decision should be adhered to. The other members of the court, however, *246regard, tbe case referred to as a correct exposition of tbe law, and taken as sucb, it is decisive upon tbe point under consideration.
The failure to annex a schedule of tbe debts due to, and owing by the assignor, or to provide any mode for giving notice to tbe creditors, or to make them parties to tbe deed, is not sufficient to render tbe deed void upon its face. Cummings & Cowper v. McCullough. Tbe failure to annex tbe schedules may be a suspicious circumstance; but tbe weight of it in that respect was properly referable to tbe jury, and as by the terms of tbe deed no preferences were given, but tbe simple duty of tbe trustees was, to sell tbe property, collect the debts, and appropriate the same to tbe payment of tbe debts of tbe assignor, without distinction or preference, we do not see that it was necessary they should be made parties to tbe deed, or that any notice was required to be given them.
It results from these views, that there was no error in tbe proceedings of tbe court below, and the judgment is affirmed.
CHILTON, 0. J.
The argument contained in the opinion delivered by my brother Groldthwaite, in opposition to the conclusion arrived at by a majority of tbe court, is certainly very plausible; and if the premise upon which it is predicated be correct, it is clearly unanswerable. It is too clear to admit of any controversy, that an insolvent debtor, in the general assignment which he makes for tbe payment of his debts, must fairly and honestly devote the property to the purpose contemplated, and that he cannot place his effects beyond the reach of bis creditors, in trust for bis own benefit, by any stipulation in tbe deed. If a reservation be made in the deed, tbe necessary effect of which is to benefit himself, to the delay, postponement or prejudice of his creditors, sucb provision would render tbe assignment fraudulent and void. We do not differ upon the general doctrine as to what will render a deed void on its face, but in the application of the doctrine. The argument in the opinion assumes, that the stipulation in tbe deed allowing Fleming to retain possession of the dwelling-house and slaves until $ie trustees should, in *247their discretion, take possession for the purpose of disposing of them, either at private or public sale, was a stipulation prejudicial to the creditors. If, as I have said, the fact be as assumed, then the conclusion would follow. Rut can any court pronounce, as a matter of law, that the provision allowing the grantor to retain the possession as provided for in this deed was prejudicial to the creditors, or beneficial to the assignor ? The property must be kept by some one until a sale could be effected; and as it was not known but that it might be required the next day after the deed was executed, there would seem to be no valid ground to infer that the provision was prejudicial to the creditors. It may have been, and most probably was, beneficial to them. It may have been the very worst economy, for the trustees to have placed the family residence and servants in the possession of such tenant as would likely have rented the property, upon condition of surrendering it up at any time when a profitable sale could have been effected. Again, the property may have been in such condition as to require the attention of its former owner, who was as much interested as the creditors in preventing a deterioration in its value: The most, however, that can be predicated of the reservation, if such it may be called, which allowed the grantor to retain possession of the property until the trustees should take it for purposes of a sale, is, that it might or might not be prejudicial to the creditors, as the circumstances attending the property might show that it was proper or impolitic to rent it, or to retain Fleming, the grantor, as its custodian. This being the case, and the provision being beneficial or prejudicial according as the facts and circumstances exist outside of the deed, it is not for the court, in its desire to suppress or discourage such assignments, to place the most unfavorable construction upon it, and to determine the fact that it does operate to the prejudice of creditors, and upon this determination of the question of fact, to predicate the conclusion of fraud in law.
"When an instrument admits of two constructions, the one rendering it fraudulent and void, the other honest and valid, the latter should always be indulged, ut res magis valeat quctrn pereat; and also, upon the recognized doctrine, as frequently asserted by this court, that we should never indulge a pre*248sumption of fraud, when tbe facts may consist with purity of intention. That there are many cases in which the court may pronounce the deed fraudulent and void on its face from the nature of the reservation, all will readily admit; but these are cases where the rights of creditors are invaded, and something valuable reserved to the insolvent and withdrawn from the creditors; cases in which the intent is apparent from the face of the instrument itself, to benefit the assignor, at the expense or to the prejudice of the rights of his creditors, or to delay, hinder or defraud them by some other onerous provision. When, however, the presumption of fraud, as arising upon the face of the deed, cannot be conclusively drawn from the dubious nature of the provision on which it is attempted to predicate it, it becomes a disputable presumption, one capable of being explained and repelled by proof. In such case, the deed should not be declared void upon its face, and excluded from the jury; but it may be read to them, and it is for them, under the direction of the court, to determine, upon the effect of the whole proof, whether a fraudulent intent did in fact exist. Such was, in effect, the decision of a majority of this court in the case of Abercrombie v. Bradford, 16 Ala. Rep. 560; and although the reasoning employed by the Chief Justice, in delivering the opinion in that case, may be a little faulty, a majority of the court, as at present organized, deem the conclusion arrived at as altogether correct.
The consequences which my brother Goldthwaite thinks may follow from this decision, can never result, so long as we may repose confidence in the correctness of the finding of juries.
In these views a majority of the court oonour.