Carter Bros. & Co. v. Coleman

CLOPTON, J. — The appeal is taken from a decree sustaining a demurrer to the bill, which is a creditors’ bill, brought by appellants to subject to the payment of Coleman’s debts the proceeds of a stock of goods, alleged to have been fraudulently sold by him to his co-defendant, Lawson. The grounds of demurrer as assigned are, that complainants have an adequate, complete, and exclusive remedy at law, and that the ■ participation of Lawson in the .fraudulent intent of Coleman is nc?t sufficiently charged. The bill alleges that some of the complainants, after the sale, obtained judgment against Coleman, and a return of execution “No property found ;” that the others are creditors at large; and that Lawson sold the goods within a few days after the purchase. A court of equity has original jurisdiction to assist a creditor having a lien, in carrying it into effect, by removing fraudulent transfers or conveyances of property on which the lien' operates ; and also to reach assets not subject to execution at law, when legal remedies have been exhausted by a return of execution “No property found.” The statute confers an additional and enlarged jurisdiction, and now, by express, statutory authority, a creditor without a lien may file a bill in chancery, to subject to the payment of his debt any property which has been fraudulently transferred, or attempted to be fraudulently conveyed by his debtor. The statute abrogates the rule requiring a lien in the one class of cases, and an exhaustion of legal remedies in the other, and operates to extend the jurisdiction to all cases of transfers or conveyances which offend the rights of creditors, whether with or without a lien, and though legal remedies may not have been exhausted. The right of every creditor to invoke the aid of the court to avoid fraudulent transfers or conveyances of property, has been too long and well established to require further consideration. The jurisdiction is not ousted by the existence of a legal remedy ; and the creditor will not be prevented to pursue and subject property fraudulently transferred, though the debtor may own other [182] property sufficient to pay Ms debts. — Lekman v. Meyer, 67 Ala. 396; Matthews v. Mo. Mut. Ins. Co., 75 Ala. 85; Evans v. Welch, 63 Ala. 250; Code, 1876, § 3886. 2. A creditor may purchase property of his debtor, though insolvent, or in failing circumstances, in payment of an existing debt, honestly due, if the consideration paid is fair and adequate, and no benefit is reserved to the debtor. In such case, a lawful right of preference is exercised, of which the other creditors can not complain ; and the fraudulent intent of the debtor, though known to the purchasing creditor, will not invalidate the transaction. But the creditor will not be permitted to transgress the legitimate end of having paid or secured his bona fide demand ; and can not offend the rights of other creditors, by placing it in the power of the debtor to conceal, or put beyond their reach a part of the proceeds, with notice of a fraudulent intent on the part of the debtor. When a creditor purchases property from his debtor, of value in excess of his debt, a part of the consideration being the payment of an antecedent debt, and a part money paid, the rules applicable are those on which the bona fides of a purchase on a new consideration is determined ; the antecedent debt and its payment being circumstances to be considered, in connection with the other evidence, in ascertaining the character of the transaction.- — Levy v. Williams, 79 Ala. 171. 3. The bill alleges facts, which, if proved, are sufficient to show on the part of Coleman an intent to hinder, delay, or defraud his creditors ; that the consideration was paid by Lawson, partly by the payment of an antecedent debt, and partly in money ; and that he had notice, at the time of the sale, of the fraudulent intent of Coleman. A vendee who purchases property from-an insolvent or failing debtor, and pays him money, with knowledge of the fraudulent intent of the seller, or of facts and circumstances of a suspicious nature, having reference to the transaction, sufficient to induce inquiry, which, if pursued, would lead to the discovery of such fraudulent intent, renders aid in consummating the purpose of the debtor, sufficient to invalidate his purchase. —Lehman v. Kelly, 68 Ala. 192. But the bill not only charges notice in terms; it alleges facts and circumstances, which, if true, show more than acquiescence, or a reckless disregard of the perpetration of the contemplated fraud. The proposed sale of the goods to Hafner, at a price considerably less than cost; the occupation in taking an inventory during the day, and until midnight; the refusal of Lawson to become, on request of some of the complainants, surety on a bond to procure process of garnishment [183] against Hafner, in connection with his communication to Coleman and Hafner of what he had heard; his urging them to finish the inventory as soon as possible, and his offer, if sent for, to come and let Hafner have the money to pay for the goods; the commencement, immediately after Hafner refused to purchase the goods, of negotiation for a sale to Lawson, at an unusual and unseasonable hour; the haste with which the sale was consummated and the purchase-money paid, and the relationship between the parties, are facts and circumstances, admitted to be true by the demurrer, which prima facie show active participation in the fraudulent intent of Coleman, enabling him to prevent the appropriation of the money paid to his debts, with notice of his intent not to so appropriate it. The bill sufficiently avers the participation of Lawson in the alleged fraudulent intent of Coleman; and the allegations, if proved, and not explained consistently with honesty of purpose, would entitle complainants to relief. Reversed and remanded.