Ashley's Adm'r v. Robinson

WALKER, J. Prior reasonable notice, specifying in writing the fraud or concealment, for which a bankrupt's certificate of discharge is assailed, is expressly required by the act of congress. — 5 U. S. Statutes at large, 444. A creditor, therefore, cannot be permitted to contest such certificate upon any ground not stated in the written notice previously given. — Stewart & Fontaine v. Hargrove, 23 Ala. 429 ; Petty v. Walker, 10 Ala. 319. The notice, initiating the contest of the appellee’s bankruptcy, charged as the grounds of the contest a willful and fraudulent omission to insert in his schedule of his property certain specifically described judgments, demands, notes, accounts, and real estate, two negroes, Esther and Rhoda, and a large sum of money, “ together with other claims, demands, notes, accounts, receipts, &c., set forth” in a certain deed of assignment. The plaintiff proved the declarations of the defendant, made a few weeks after filing his petition in bankruptcy, that the purpose for which he wanted a horse, at that time purchased by him, was “ to send to North Carolina for four or five negroes he had hid out there.” Those declarations were properly excluded by the court, because the fact which they tended to prove was not within the issues presented by the prior written notice. They conduced to establish as af ct, that the defendant had, [122] at the time of commencing bis proceedings in bankruptcy, four or five negroes in North Carolina. The notice did not inform him that the omission from his schedule of those negroes would be relied upon as a ground for contesting the discharge in bankruptcy. It cannot be assumed that Esther 'and Rlioda were two of the negroes which he had had in North 'Carolina, and that therefore the declarations tended to sustain like specification in reference to those two negroes. The declarations were, prima facie, irrelevant to that specification; analif there existed facts which would show their relevancy, it was -incumbent on the plaintiff to have shown, or offered to show Vose facts. — Bilberry v. Mobley, 21 Ala. 277. Undér-.a specification of a judgment for $132 81, a judgment for $122 81 could not be given in evidence. Thejudgment described in the notice, and that offered in evidence, are not the same. There is the same reason for requiring a substantial conformity between the notice upon which the bankrupt’s certificate of discharge is contested and the proof, as between the allegations and proof in pleading. Under the rules of pleading, the variance between the judgment described in the notice, and that offered in evidence, would be fatal ; and it must have the same effect here. It follows that the court below did not .err in refusing to admit in evidence thejudgment for $122 81, when offered alone. The same judgment was afterwards offered in evidence, in connection with proof that the defendant had collécted it, for the purpose of sustaining the charge that the defendant had money at the time of his application for the benefit of the bankrupt law. In making the offer to introduce thejudgment in connection with the other proof, it is not indicated at what time the collection of the judgment by the defendant was made, or whether- it was' before or after his filing his petition in bankruptcy. It is clear that, if the judgment was paid off to the defendant after the institution of the proceedings in bankruptcy, the evidence would be totally irrelevant to the question whether he had money at that time. If thejudgment was paid off to the defendant about the time of filing his petition, or before that time, and the circumstances were such .as to show that he had not parted with the money at that time, the evidence would be admissible, as affecting the ques [123] tion whether he had money at the time he filed the petition. The notice was amendable ; but the refusal of the court to allow the amendment, after the case had gone to the jury, is not revisable. — Stewart & Fontaine v. Hargrove, supra ; Goldsmith, Forcheimer & Co. v. Picard, 27 Ala. 149. The defendant gave in evidence a deed of trust, made by him in 1838, to secure a number of creditors. The plaintiff offered to prove that the deed of trust was made with the intent to hinder and delay creditors of the grantor j, that the creditors never assented to the deed ; that the gratítor retained possession of the property after making the deed, sold the goods conveyed, and collected the money therefor, and collected many other debts described in the deed, and had in his possession at the time he filed his petition the negroes and land, and uncollected notes and accounts described in the deed ; that the trustees never took possession or control of the property conveyed in the deed ; and that the defendant had in his possession much of the property from the time of filing his petition until after his discharge in bankruptcy. The above stated facts were collectively offered, and objected to ; and the objection was sustained. The tendency of all the facts offered was, to show that the deed of trust, or assignment, was fraudulent; and their admissibility in evidence depends upon the question, whether, after the'defendant had given the deed in evidence as an excuse for his omission to surrender as a bankrupt all or any part of the property conveyed by it, it was competent for the plaintiff to show that the deed was made with the intent to defraud the grantor’s creditors. The deed devotes the property, conveyed unqualifiedly to the payment of pre-existing debts specified in it, and does not provide for any postponement or delay in the appropriation of it, through the agency of the trustees, to the payment of the debts. It is a voluntary assignment, in the ordinary form, discriminating in the order of payment among the creditors. It is executed by the grantor and the trustees, but not by any of the beneficiaries ; and there is no evidence of any assent in fact by any of the creditors to the deed. Under numerous decisions of this court, it must be regarded as the law, that such an instrument is a mere power, and does not have effect [124] as a conveyance of title until it has been assented to, either expressly or by implication, on the part of the beneficiaries.— Nelson & Hatch v. Dunn, 15 Ala. 519. As a general rule, the assent of the beneficiaries will be implied, where the instrument is beneficial to them ; but the law will not imply th'e^assent of the beneficiaries, where the assignment has been macíe with the intent to defraud the grantor’s other creditors. The l'aijy is clearly so settled in the cases of Benning v. Nelson, 23 Ala. 804, and Townsend v. Harwell, 18 Ala. 301. It must, however, be observed, that such an instrument as the deed of assignment in this case will become operative as a conveyance in favor of any one or more of the creditors who may assent to it, and the assent of all the beneficiaries is not necessary to make it operative as a conveyance. — Smith v. Leavitts, 10 Ala. 92. If the assent of the beneficiaries in a fraudulent assignment could’ be presumed, the rule which makes the participation in the fraud of the beneficiary necessary to vitiate an assignment, would preclude the possibility of successfully assailing it for fraud, where it has been made without the knowledge of the beneficiaries, and in their absence. If the assignment in this case was fraudulent, the assent of the beneficiaries could not be implied ; and it would be a mere power, subject, like other powers, to revocation. Bankruptcy would be a revocation of the power. — Parsons on Contracts, 60, note l. It follows that, if the deed of assignment made by the defendant was fraudulent, and if his creditors did not expressly assent to it, it was but a power, which was revoked by the bankruptcy. The court erred, therefore, in the rejection of proof that the deed of assignment was fraudulent. In opposition to our conclusion, it is contended that, although the law will not presume the acceptance of a fraudulent deed by the beneficiaries, as against the creditors of the grantor, it must presume such acceptance as against the grantor, because the grantor cannot set up his own fraud. We do not either deny or assent to that proposition, because we do not consider its decision necessary in this case. The deduction from that proposition, that the assignee cannot assert that the conveyance was made with fraudulent intent, because he takes only the rights of the bankrupt, is not, in125 our opiniou, maintainable. The third section of the bankrupt law vests the assignee with all the rights, titles, powers, and authorities, to sell, manage, and dispose of the property and rights of property of the bankrupt, and to sue for and defend the same, as fully as if the same were vested in, or might be exercised by the bankrupt. While this clause confers upon the assignee all the rights of the bankrupt, it does not in terms exclude him from the exercise of rights which the bankrupt could not have exercised. The same section expressly provides, that all the property and rights of property of the bankrupt, “ of every name and nature,” with certain exceptions not necessary to be noticed here, shall, by operation of law, vest in the assignee. Although property which has beenl fraudulently conveyed ceases to belong to the grantor, so far] as any claim which he himself can set up is concerned ; yet] the law regards property which has been fraudulently con-1 veyed, as still the property of the grantor, so far as creditors! are concerned. There is, therefore, a sense in which property' fraudulently conveyed belongs to the grantor, in the estimation of the law ; and we conclude that such property will go. to the assignee, under the words which vest in him the rights of the bankrupt of every “ name and nature.” ' Aside from this view of the subject, the assignee is an officer created for the benefit of creditors, and, it would seem, should be permitted to regard property fraudulently conveyed in the same way in which creditors are permitted to regard it. The conclusion we have attained, is opposed to the case of Porter v. Douglass, 21 Miss. 319 ; but then it is well sustained by other authorities. — State v. Bethune, 8 Iredell’s Law Reports, 139 ; Carr v. Gale, 3 Woodbury & Minott, 38 ; Williams v. Vermeule, 4 Sandford’s Ch. R. 388 ; Gore v. Lawrence, 6 Poster, 434. If the assignee is not permitted to assort the invalidity of the fraudulent conveyance of a bankrupt, it cannot be asserted at all after the bankrupt’s discharge ; for the creditors could institute no proceedings for that purpose, after their debts were discharged by the decree in bankruptcy. A fraudulent conveyance, not coming within the purview of the second section of the bankrupt law, cannot bo reached at all, if the assignee is denied the power of asserting the bankrupt’s fraud. [126] We do not intend to assert, that it is the duty of the bankrupt in every case to render in his schedule all property which He may have fraudulently conveyed at any previous time ; but if he has conveyed his property fraudulently by a deed of thust, and none of the beneficiaries have accepted its provisions,^- assented to it, and if he retains the property in his possesion up to the time of his application for the benefit of the íñ\,, and has it in his possession at that time, it is his duty to surrender it; because it is plainly assets of the bankruptcy, and, as against the assignee in bankruptcy, the title has never passed out of him ; and as to the assignee. I the property is the bankrupt’s estate in possession. While it would be the duty of the bankrupt to surrender the property thus situated, his omission to do so would not necessarily prove a fraud, or willful concealment, under the fourth section of the bankrupt law. But the proof offered by the party 'contesting the bankruptcy was evidence conducing to show such fraud and willful concealment, and ought, therefore, to have been admitted in evidence to the jury. It is clear that the mere fact that a bankrupt has made a fraudulent conveyance, which does not come within the provisions of the second section of the bankrupt law, does'not, of itself, affect the validity of the discharge. — Pearsall v. McCartney, 28 Ala. 110; Gore v. Lawrence, 6 Foster, 484. That principle we do not mean to controvert. Confining ourselves to the precise question before us, we mean to assert, that the evidence offered, of the fraud in the deed of assignment, its non-acceptance, and the continued possession of a part of the property up to the time of the commencement of the proceedings in bankruptcy, was admissible, as affecting the question of a fraudulent or willful concealment of the bankrupt’s property. The party assailing the bankruptcy would not be required to negative the assent of the beneficiaries to the deed, as he proposed to do ; but if the other facts offered should be proved, the onus of showing the assent would devolve on the bankrupt. The judgment of the court below is reversed, and the cause remanded. Rioe, C. J., having been of counsel, not sitting.