Court Opinion

ID: 6502145
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:14:52.058126+00
Date Added: 2024-06-11T15:54:38.452530
License: Public Domain

ORMOND, J.
The counsel for the plaintiff in error, insists that the mortgage by which the property sought to be reached by this bill, is conveyed to the defendant Day, is fraudulent and void, as to creditors, upon its face.
The conveyance bears date 28th April, 1840, by which, for the consideration as expressed in the deed Ticknor conveys to Day certain real and. personal property, among the latter being a «stock of groceries, chandlery, goods, wares and merchandise,” upon condition that, whereas, the grantor was indebted to Day “in sundry large sums of money due on book account, and for goods, wares and merchandise sold, and sundry large amounts on bonds, bills and notes and other contracts,” and also for debts upon which Day was bound as his surety; but if the debts were discharged, and Day saved harmless from his suretyship, on or before the 1st December, 1841, then the deed to be void; othei’-wise, Day was empowered to enter and sell at public or private sale, on thirty days notice, the mortgaged property. The deed also contains a covenant, that the grantor shall retain in his possession, and use the goods, wares and merchandise, and the other property conveyed, and sell and dispose of the goods, wares, &e. and from the nett proceeds thereof, pay and satisfy the above indebtedness, rendering an account thereof to Day. The deed was executed by Ticknor only.
It is certainly a suspicious circumstance, that no schedule accompanies the deed, from which the value of the property conveyed, could be ascertained, or the amount of the debt it was made to secure, as was held by this court in the case of Cummings & Cooper v. McCullough, adm’rx, [5 Ala. 324.] It is not the usual and ordinary mode in which fair transactions are conducted, by which a debtor withdraws his property from the payment of all his debts, and confines it to the payment of one or more; and although it would not of itself be evidence of fraud, *184the omission would, unless explained, add weight to any other objection that might exist to tiie deed.
The provision in the deed, that the grantor shall have the possession and the right to sell and dispose of the goods, wares and merchandise, and other personal property conveyed by the deed, raises a question of much graver import.
In Ravisies v. Alston, trustee, [5 Ala. 297,] a deed of trust, conveyed among other things, com, fodder and bacon, and gave to the trustee the power to manage the plantation during the current year, and devoted the proceeds thereof to the payment of the debts, to secure which the deed was made. The court sustained the deed upon the ground that the perishable articles, corn, fodder and bacon, which would be destroyed in the use, would be re-produced upon the plantation, and sold by the trustee at the end of the year. But the court added, “we do not doubt that a stipulation in a deed of trust, reserving property for the use of the grantor, which must be exhausted in such use, is fraudulent and void. This is the doctrine of the supreme court of Tennessee, as held in 3 Yerger, 502; 4 id. 341, 8 id. 419, and Richmond v. Crudup, Meig’s R. 581.
So, in Cunningham v. Freeborn, [11 Wendell, 255,] an assignment by a debtor was supported, which permitted the trustee to sell the manufactured articles of a foundry establishment, and to work up the unmanufactured, and sell them for the benefit of the preferred creditors, on the ground that the property conveyed could not readily be converted into money, in any other way, without a great sacrifice.
In De Forest v. Bacon, [2 Conn. 633,] the court sustained an assignment similar to the one just commented on, the jury having found the transaction to be bona fide, but asserted that such a provision from its tendency to delay and hinder creditors, was a badge of fraud. But in the two last cases, as well as in the case cited from 5 Ala. it must be observed that the conveyance was to a trustee, whilst here, the possession is retained by the grantor, with the right to use and convert the personal property into money, subject only to an account with the mortgagee, as often as he may be reasonably requested. Whatever may have been the intention, the tendency of such a conveyance cannot be doubted, nor its hostility to the rule which must govern in such cases, as laid down by this court in the case of Gazzam v. Poyntz, [4 Ala. *185382; that “an assignment by a debtor, can only bo sustained where the property conveyed by the deed is, by its terms, fairly and bona fide devoted to the payment of creditors, without stipulating for any benefit to the debtor, and where the equitable interests of the creditors are fixed and determined by the assignment itself”
This point, however, does not appear to have been raised in the court below, where the motion decided by the chancellor was' made upon the bill and answer, and we will now' proceed to consider the case in that aspect;
When a deed, conveying property for the payment of debts!,' stipulates for the possession by the grantor for a certain time, such possession being consistent with the terms of the grant, is not fraudulent, as against creditors; but if possession is retained after default, and when, by the terms of the deed, the right to it is gone, it becomes a badge of fraud. This is the well established doctrine of this court. [See Magee v. Carpenter, 4 Ala. 469, and preceding and subsequent cases.] Being a circumstance from ■which fraud may be inferred, it is open to explanation — how is it explained in this case? The right to possession under the deed, ceased on the 1st December, 1841; the bill was filed on the 7th February, 1843, at which time, and up to the coming in of the answers, Ticknor was in possession of all the property, doing business in his own name, selling the goods and merchandise, and keeping, his books in his own name. That the stock of goods have been replaced continually by him, under the direction of Day. Indeed, it does not appear that any change whatever has taken place in his business; or the mode of carrying it on since the execution of the deed. Like other mercantile men, he sells his goods and re-invests the proceeds in other goods, which arc again- sold out-, and again re-invested, and it-seems that other personal property, the slaves, horses and carriage, have been sold, and the proceeds carried into the stock in trade.
In all this there is nothing which relieves the transaction from the imputation of fraud, arising from the possession after default. It would certainly be a singular anomaly, if a debtor could, by a’ mortgage or other, conveyance, place his property beyond the' reach of his creditors, and still use it as a capital upon which to' trade in his own name, and this not only during the existence of the mortgage, but for a long period after, by default, he had. *186ceased to be entitled to the possession. To this Day admits, in his answer, he was privy and consenting, and if the arrangement was not a contrivance to delay and hinder creditors of their just demands, such is its inevitable tendency; and it is, therefore, as against creditors, in law, fraudulent and void.
It is true, it is stated in the answers, that the goods are the property of Day, and that the store is carried on at his risk, and for his benefit. This is probably a mere conclusion of the defendants, from the facts admitted by them, but if considered as a substantive averment of a fact, it is inconsistent with the mortgage, under which he claims, and the other admitted facts. By the mortgage he stipulated, that Ticknor should be entitled to the use and possession, and have the right to sell and dispose of the property, until default made in the paymentof the mortgage debt, and until he entered for the default, and sold the property according to the provisions of the deed, he has no title to it. Nor is it pretended in the answers, that the stock of goods which has been from time to timo replaced, was purchased by Day,, and paid for with his own means — on the contrary, it is admitted,- “that the stock of groceries, &c. have been sold and replaced, constantly, by this respondent, (Ticknor.) who carries on the business for said Day, at his risk, and for his benefit.” In addition, it is stated, that from the proceeds of the sales, more than $10,000 lias been paid to Day, and yet the original indebtedness is not at all reduced; which could only happen by a re-investment of the amount so ■paid in other goods.
Some stress appears to have been laid upon the general denial in the answer, of the possession of any'effects subject to the plaintiff’s demand, and upon the denial of fraud, but these are rather conclusions of the parties than facts, and at all events, are countervailed by the admitted facts which stamp the transaction, as one made to hinder and delay creditors of their just demands, and therefore, fraudulent and void.
It results from the view here taken, that the decree of his hon- or the chancellor, dissolving the injunction, must be reversed.— His refusal to appoint a receiver, was pi’obably the result of -the decision he came to, upon the motion to dissolve, but whether such be the case or not, it cannot be reviewed in this court, being amere interlocutory order, not affecting, finally, the merits of the *187case, which could alone give this court jurisdiction. [Kennedy v. Kennedy, 3 Ala. Rep. 434.]
But, as a refusal to appoint a receiver, in a proper case, might operate great injustice, the party aggrieved could doubtless have redress by mandamus, or in some other mode, by application to this court.
Let the cause be remanded for further proceedings.