Cribb & Co. v. Bagley & Rivers

Bleckley, Chief Justice. Cribb & Phillips, a partnership engaged in the turpentine business, being insolvent, conveyed by deed to 3D. T. Cribb & Co., another partnership, composed of the wife and the brother of the former Cbibb, in November, 1887, all their firm assets, both real and personal. The conveyance purported on it face to be for a valuable consideration paid. In the following February, Bagley & Fivers obtained a judgment in the county court for $67, principal, without interest, not against the partnership of Cribb & Phillips, but against both persons jointly who composed that partnership. After-wards a fi. fa. founded on this judgment was levied upon certain of the pérsonalty embraced in the conveyance, to which ID. T. Cribb & Co. interposed a claim. The jury found the property subject, the claimants moved for a new trial, which was refused, and thereupon they brought this writ of error. 1. It did not appear in evidence whether the debt for which the judgment was rendered in favor of Bagley & Fivers, was contracted before or after the conveyance. We treat it as if it were contracted before, though it might have been contracted after inasmuch as by section 284 of the code, where the filing of the suit is fifteen days and service thereof ten days before a monthly session o'f the county court, that court can render judgment at the first term. This being so, there is nothing whatever in the record to fix with certainty when the debt was contracted, save that it must have been at least fifteen days before the rendition of judgment. The conveyance antedates the judgment by some three months. As several badges of fraud were present (see the official report), we might have had no disposition to reverse the judgment refusing a new trial, had the court left all the facts to the jury and allowed them to determine the question of actual fraud. This the court did [112] not do, but charged, among other things, that if at the time of the sale to the claimants, and as a part of that transaction, S. B. Cribb (one of the firm of Cribb & Phillips) was to be employed by claimants at a salary or for wages, to manage and control the business, and such employment of him was a part of the consifieration or an inducement to the making of the deed, then as against the plaintiffs and the creditors of Cribb & Phillips the transaction was fraudulent and the deed void. We think that, assuming the debt to have existed when the contract was made, there was evidence upon which to found a charge on this subject, S. E. Cribb, a witness for the claimants, having testified that at the time Cribb & Phillips sold.out to D. T. Cribb & Co., it was understood and agreed that the witness was to be employed to run the business for them, and he was so employed by them at the time for the salary stated ($50 per month), and continued such employment up to the time of trial. While the witness did not expressly state that these terms constituted a.part of the transaction of sale, or any part of the consideration, the jury, upon his evidence and all other facts and circumstances before them,. might or might not have drawn .that inference. That they were at liberty to consider the agreement testified to by S. E. Cribb in connection with all the other evidence as tending to show fraud in fact, we have no doubt. But such an agreement in and of itself did not constitute fraud in law. If the sale was made in good faith and with no design to hinder, delay or defraud any creditor, and if the consideration, apart from this agreement, was full and adequate, the superadding of the agreement as an additional element of the consideration would not render the transaction void. If, however, the sale was for less than the full value of the property, and this agreement. represented a part of [113] that value, then the agreement would be in the nature of a reservation for the benefit of one member of the debtor firm, and the sale would be void as against existing creditors. It will be noticed that there was no stip-. ulation for payment of the nionthly wages out of the corpus or of the income of the property sold. The wages contemplated were not made a charge upon that property in any manner whatsoever, but when earned would constitute a debt by the employers to the employé. Hence the creation of such a debt could operate in no way to the prejudice of any creditor of Cribb & Phillips. Indeed it might be to their advantage for Cribb to earn and receive an income for his services, since in some way it might be applied in whole or in part to the outstanding debts of the firm to which he belonged. It would certainly seem that it would be better for the creditors of an insolvent debtor that the debtor should have an income from his labor than that he should have none. It is laid down in the authorities, or some of them, that in the case of assignments made by insolvent debtors for the benefit of their creditors, a provision in the deed to the effect that the debtor is to be employed at the ex'pense of the assigned estate, will vitiate the assignment, such stipulation being in the nature of a benefit reserved. Burrill on Assignments, §198; Bump on Fraud. Conv. 3 ed. 402; 1 Am. Lead. Cas. 69, 70. The most generally recognized case on the subject seems to be McClurg v. Lecky, 3 Penrose & W. 83, s. c. 23 Am. Dec. 64, in which the reservation in behalf of the debtor was an interest in the annual profits of the business and the land conveyed. Compare Young v. Booe, 11 Ired. (Law), 247; Janney v. Barnes, 11 Leigh, 100; Rindskoff v. Guggenheim, 3 Cold. 284; Frank v. Robinson (N. C.), 1 S. E. Rep. 781. From these cases it will be seen that there is some difference of opinion, even in cases of assignment, as to whether the deed is rendered [114] void, per se by reason of embracing a provision for the employment of the debtor, and for the payment of his compensation out of the assigned estate. But here the transaction was a straight-out sale, and the purchasers were not creditors of the sellers in any sum whatever. The property conveyed, supposing the sale to be free from fraud, neither remained the property of the debtors nor became the property of the creditors, nor was it or its proceeds burdened with the payment of the agreed compensation. As we have already said, we are unable to see how the creditors were prejudiced, provided the property brought its full value independent of the agreement. A benefit to the .debtor which costs - the creditors nothing, and cannot possibly cost them anything, is not fraudulent per se. 2. As to the complaint that the court gave in charge to the jury section 1952, parag. 1, of the code, we will merely say that the case falls more. directly under the second paragraph of the section. Nevertheless, any trust or benefit prejudicial to the creditors which would, when matter of direct stipulation, render the conveyance vicious under one paragraph, would probably have the same effect under the other, where the fact of insolvency is present as in this case. Lukins v. Aird, 6 Wall. 78. One section may therefore be very well given in charge the jury as illustrative of the spirit of the other. Under the facts of this case, we would not consider it reversible error either to charge both paragraphs or to charge the one only which is directly applicable. There must be a new trial for the error discussed under the first head of this opinion. Judgment reversed.