Chamberlain & Parker v. Dorrance

BKLCKELL, C: J. The present bill, filed by the appellees, creditors of the appellant, Parker, seeks to compel the appellant, Chamberlain, to discover and account for goods, merchandise and choses in action, it is averred, were sold and transferred to him by Parker, with the intent to delay, hinder and defraud his creditors. A mere general charge of fraud — a mere general averment that the sale and transfer were made with covinous intent is not sufficient. Fraud is a conclusion of law from facts stated and proved; and when it is pleaded at law or in equity, the facts from which it is supposed to arise must be clearly stated, that the court may determine whether they constitute fraud. — Flewellen v. Crane, 58 Ala. 627; Clay v. Dennis, 3 Ala. 375. There are several facts and circumstances stated in this bill, to support the general charge of fraud. The first is, that the debt in payment of which the sale and transfer were made, exceeded in amount twice the value of the goods and choses in action. The validity of the debt is not controverted. There is no averment that it was not fair and just in all respects. On [46] the contrary, the averment is, that its consideration was trust funds belonging to minors, which Chamberlain, as trustee, had loaned to Parker. Assuming the charge to be true, as it is admitted by the demurrer, we can not perceive of what injury the fact is to the creditors of Parker. If he had sold for an inadequate consideration — for less than the real value of the property, of the inadequacy of the consideration, if it was gross, they could have justly complained. But that the debtor obtains more than the value of his property — more, as it is averred, than a prudent man would have paid for it, when the purpose is to pay a just debt, it is plain, can not be of injury to them. It may prove rather of benefit, for it removes the debt, and leaves the future acquisitions of the debtor open to their demands, to its exclusion. Or, the payment in money of a price exceeding the value of the property, which the debtor cpuld more easily conceal than the property, thereby hindering and delaying his creditors, might be a circumstance of suspicion exciting a jealous scrutiny of the transaction. But when the property is taken in payment of a debt, that, from motives of generosity, or to procure a preference from a failing debtor, the creditor relinquishes largely more of his debt than the value of the property, can not be matter of which other creditors can complain. If Chamberlain had taken ten thousand dollars in money for his debt of twenty-five thousand dollars from Parker, the appellees would scarcely have supposed they had any cause of complaint. There is no difference, that instead of money he has taken property; there is no more cause for complaint in the one case than in the other. The preference of Chamberlain, by an unconditional sale to him, was a legal right Parker could exercise. And if it be exercised, the purpose being the payment of a just debt, without the reservation to himself of any right or interest in and to the property sold, or in the proceeds of its sale — if the sale is absolute, and from it neither he nor any personal object of his bounty, is to derive benefit, other than the benefit he derived from the payment of the debt, there can be of it no well-founded legal complaint. By a sale to a stranger, he could have converted the property into money, and have paid it to Chamberlain, compounding or discounting the debt on such terms as they deemed proper. Because of the disproportion between the .amount of the debt relinquished and the value of the goods and dioses in action, there can be no presumption that there was a secret trust, an undisclosed reservation for the benefit of Parker. Of such trust or reservation there is no positive averment in the bill. It is deduced as matter of inference only, because of the disparity in the price paid and the value of the goods; because of the excess of the price paid in the debt of an insolvent man, and the value of the goods, computing each in dollars. [47] Fraud can not be imputed from facts and circumstances which may consist with pure intentions; and it would be rather a strained inference, to infer it from an injudicious settlement a creditor may make with a failing and insolvent debtor. — Steele v. Kinkle, 3 Ala. 352. "Whether Chamberlain as trustee had authority to compound the debt by taking the property at an excessive value, and whether the cestuis que trust have the right to repudiate the transaction, can not be important inquiries in this controversy. There is no fact averred from which the want of authority can be inferred. All trustees having authority to loan, or to invest trust funds, have a corresponding authority to collect them, and in the collection may exercise the same powers of compounding and discharging they could exercise', if they were clothed with the beneficial interest as well as the legal title. Waring v. Lewis, 53 Ala. 615; Foscue v. Lyon, 55 Ala. 440; Baldwin v. Hatchett, 56 Ala. 461. If the dealing between him and the debtor, within the line of his authority, is free from all intent and purpose, common to both, to defraud the cestuis que trust, in consequence of his injudiciousness it can not be disturbed.— Waring v. Lewis, supra. Or, if it were shown the original loan of trust funds to Parker was a devastmit, the right of Chamberlain to retain them would not be affected, and rightfully he could compound or discharge the debt, thereby indemnifying himself on such terms as he deemed proper, in view of the failing condition of the debtor. — Tomkies v. Reynolds, 17 Ala. 109. But of what interest it can be to other creditors of Parker, whether the cestuis que tnost could repudiate the transaction, it is difficult to perceive. At most, the transaction is voidable only, hot void. — Charles v. Dubose, 29 Ala. 367. Until the cestuis que trust manifest an election to avoid it, for all purposes it is'valid according to the intention of the parties. The right of election is personal to the cestuis que trust, and can not be exercised for them by the appellees for the purpose of appropriating to themselves all the property of the debtor to the exclusion of the debt in which the cestuis que t/rust have the beneficial interest. The facts attending the transaction — the fact that Chamberlain made but a casual examination of the goods and dioses in action; that no inventory of them was taken until after the sale and the change of possession, or that receipts or releases were not given Parker, must all yield as circumstances of suspicion, in the presence of the admitted fact, that for a full price there was an absolute, unconditional sale of the property in payment of a just debt. They indicate only the anxiety, and, it may be impatience, of a diligent, vigilant creditor to obtain all [48] that he could from the wrecked fortunes of a failing debtor^ which was a legal and moral right. When property is taken by a creditor at its full value in payment of a just debt, taken absolutely and unconditionally, there can not be fraud or collusion, nor can there be legal wrong or injury to the other creditors of the debtor. — Bump on Fraud. Con. 221; Clemens v. Davis, 7 Penn. St. 263; Crawford v. Cresswell, 55 Ala. 497. There being no liens on the property, the debtor has the right to sell, and the creditor has the right to purchase. The price is matter of agreement between them; if it be not inadequate, and the debtor divests himself of the property absolutely and unconditionally, he can exact all of his debt the creditor may covenant to surrender. The facts specially stated in support of the general averment of fraud, do not, in contemplation of law, constitute fraud, and do not support the averment. The demurrer ought to have-been sustained; and a decree will be here rendered, reversing the decree of the chancellor, sustaining the demurrer and remanding the cause, that the bill may be dismissed, unless by proper amendment a case of equitable cognizance is presented.