Sims v. Gaines

BEICKELL, C. J. We shall not enter on the inquiry, whether, in the transaction impeached by the bill, the parties had an actual intent to defraud the creditors of Gaines. Such an intent would, of course, vitiate the transaction, and would constitute actual, as distinguished from constructive fraud — fraud in fact, and not merely fraud in law. There is not, for any practical purpose, so far as the validity of the particular transaction may be concerned, any difference between fraud in fact and fraud in law: between a fraud proved by direct evidence, and a fraud inferred by law from facts which are consistent with the absence of an actual intent to defraud. Whenever the effect oí a particular transaction with a debtor is to hinder, delay, or defraud creditors, the law infers the intent, though there may be no evidence of a corrupt or dishonorable' motive. The law interposes, and declares that “ every man is presumed to intend the natural [397] and necessary consequences of his acts; and the courts must presume the intention to exist, when the consequences must necessarily follow, and will not listen to an argument against it.” — Pope v. Wilson, 7 Ala. 694; Wiley v. Knight, 27 Ala. 336. The law is settled in this State, that an absolute conveyance of lands, intended as a security for a debt — in other w'ords, a mortgage — is fraudulent and void as to existing creditors. The parties may not intend fraud — there may be no actual intent to hinder, delay, or defraud creditors; yet, because such is its inevitable consequence, the law condemns it. Bryant v. Young, 21 Ala. 264; Hartshorn v. Williams, 31 Ala. 149. _ The assignment by Gaines of the certificate of purchase of the lands to Bragg, and the cotemporaneous instrument executed by Bragg to Gaines, must be treated as a single instrument, and be construed together. It is a familiar principle, that when several instruments are executed at the same time, between the same parties, and having reference to the same subject-matter, they will be regarded as one instrument,, and be construed together. If the instrument executed by Bragg to Gaines had been incorporated into the assignment of the certificate of purchase, every essential element and characteristic of a mortgage would have been in terms expressed. The recital that the consideration of the assignment was a debt due from Gaines to Bragg, the extinguishment or satisfaction of which is not declared, followed by the declaration of Bragg that, when Gaines paid the debt, he would convey title to him, indicates very clearly that it was security for the debt which was intended, and not the transfer of the ownership of the lands, Gaines reserving only a right to repurchase. Independent of any and all questions of the adequacy of consideration, and of the intention of the parties, any secret trust whatever, any secret reservation of a benefit for an embarrassed debtor, renders an absolute conveyance void as to existing creditors. The ground upon which they are condemned is because of their tendency and effect to hinder, delay, and defraud creditors. The fraudulent intent is deduced from the act, and the parties are not heard to gainsay the presumption. An equity of redemption is property — is a valuable right, capable of being subjected to the payment of debts, in courts of law and of equity; and a transaction, by which an embarrassed debtor conceals its existence from his creditors, must hinder and delay them. There is still another feature of the transaction, which must be considered. It was one of the considerations moving Gaines to the assignment, that he should use and occupy [398] the lands, during the year 1874, free from rent. It can not be supposed that, under any circumstances, the law will permit a failing' debtor to sell or convey his lands, unconditionally, absolutely, so far as is apparent on the face of the instruments to which creditors can have access, and yet reserve to himself the right to the use and occupation thereof for a period of time which may be a source of profit to him. — Lukins v. Aird, 6 Wallace, 78. All such secret arrangements, by which a debtor obtains valuable rights, to the prejudice of his creditors, are fraudulent. Conveyances or transfers of property, not liable to the payment of debts, can not, as is argued by the counsel for the appellees, operate to defraud creditors, and will not at their instance be avoided. But, it is quite a mistake to suppose that, when Gaines made to Bragg the assignment of the certificate of purchase, he had not an estate in the lands which his creditors could reach. The purchase-money not having been fully paid, that estate was not subject to execution at law. It was an equity, attended with the right to the possession of the lands, until by some appropriate proceeding they were subjected to the payment of the purchase-money; and. a right, on paying the purchase-money, to the legal estate. The exemptions by statute and by the constitution being allowed, no man can have a legal or equitable right in or to property, real or personal, which is not subject to the payment of his debts, and which may not be reached, either at law, or in equity. Sims, having obtained judgment at law, if the true character of the transaction had been revealed in the writings — if the two had been united in one instrument, and spread upon record, as it must have been to prevail against him — could have levied on and sold the equity of redemption ; or, if there were obstacles to the levy of the execution at law, the aid of a court of equity could have been invoked. These are substantial, valuable rights of the creditor, not placed at the mercy of the debtor; and it is as obnoxious to the statute of frauds to hinder and delay them, as would be an alienation of visible property, which could lie reached directly and only by an execution at law. It can make no difference that, because of the depression in the value of the lands when this transaction occurred, the equity of redemption, and the use and occupation of the lands, were of but little value. A real, substantial interest was secretly reserved to the debtor, which might, when the causes then depressing the market value of real estate were removed, become more valuable than the amount of the debt of Sims. The law must condemn the transaction, and can not enter into nice calculations of the value of the benefit the debtor has reserved. [399] The decree of the chancellor is reversed, and the cause is remanded, with instructions to enter a decree setting aside the conveyance and assignment to Bragg as fraudulent, and subjecting the lands to the satisfaction of the complainant’s judgment.