Hoyt & Bros. v. Turner & Oates

SOMERYILLE, J. The action is one of trover brought against the sub-purchasers from an alleged fraudulent vendee, founded on the sale of certain machinery by one Lyles to the defendants, Turner & Oates, which is claimed by the plaintiff. The first charge given at the request of defendants, to which exception is taken, instructed the jury to find for the defendants if they believed from the evidence the defendants were “innocent purchasers” of the property, and that they purchased for a valuable consideration. We need not decide whether the words “innocent purchaser” are as comprehensive in meaning as the phrase “bona fide purchaser without notice,” which is one of settled signification and clear meaning, belonging, as it does, to the current coinage of approved legal phraseology. It is sufficient to say that the charge was erroneous in excluding from the jury the qualifying principle that no purchaser, although bona fide, for value; and without notice, can ordinarily claim protection until the payment by him of the purchase-money. If the purchase involves the duty to pay money, and the purchaser receives notice of the alleged fraud before such payment, although after the purchase he is not protected. The agreement between the defendants and Lyles in one phase of the testimony, was to pay the value of the machinery upon debts due by him to third persons, no promise being made to such creditors. The defendants were already liable on the notes, as indorsers, and incurred no further obligation to the holders by their agreement to pay some of these notes without specifying any particular ones. If, therefore, the defendants [527] received information sufficient to charge them with notice of the alleged fraudulent nature of Lyles’ purchase, and afterwards paid or assumed such debts by incurring an obligation to pay them by renewal, or otherwise, they did so in their own wrong. The second charge, assigned for error, given at the defendant’s request, was erroneous in asserting, by necessary implication, that a sub-purchaser from a fraudulent vendee at a fair price will be protected if he pays the purchase-money before the original vendor elects to rescind the sale, although at the time of the payment he had notice of the fraudulent nature of the first sale to his immediate vendor. The proposition is manifestly incorrect. The third charge is in violation of the rule declared in Kyle v. Ward, 81 Ala. 120, 122, as to burden of proof in cases of this kind. If the purchase made by Lyles from the plaintiff was fraudulent, a recovery could be had against any sub-purchaser from him unless he was a bona fide purchaser for value. A mere volunteer would not be protected. The law would impide to him conclusive notice of the fraudulent nature of the transaction. It is only after proof made by the sub-purchaser that he paid value, that the burden is shifted on the plaintiff to prove notice on the part of such sub-purchaser.— Spira v. Hornthall, 77 Ala. 137. It was suffic ant for the plaintiffs to prove notice of the alleged fraud on the part of the defendants sufficient to charge their conscience. The fourth charge was erroneous in reqxiiring that they should prove knowledge of such fraud before the plaintiff could be entitled to recover. We need add nothing on this point to what is said in Cleveland Woolen Mills v. Sibert, 81 Ala. 140, where knowledge and notice are distinguished as not being synonymous or equivalent terms, and a charge like the one under consideration was held to be erroneous. The evidence tended to show a series of prior transactions on the part of Lyles xvith various persons, which the evidence tended to prove were fraudulent, especially when taken into connection xvith each other. The unpaid judgments recovered against him by creditors in these cases, and other purchases made for which he was unable to pay, tended to prove not only the fact of his insolvency, but also his fraudulent intent. To establish a fraudulent transfer or conveyance txvo things are requisite ; (1) a fraudulent intent on the part of the grantor; and (2) a knoxvledge, or such notice of [528] it, on tlie part of the grantee as to authorize the conclusion of a participation in such fraud by him. The two propositions are separate and distinct, and it is competent to prove each separately. To prove the fraud of the grantor his declarations and conduct, prior to the transfer or conveyance, as throwing light upon his intention, are relevant evidence. Participation by the grantee may be proved by any circumstances sufficient to charge his conscience with knowledge or notice of the fraudulent designs of the grantor. But no amount of fraudulent intent on the part of the grantor will vitiate the transaction in the absence of participation in such intent by the grantee. — Shealy v. Edwards, 75 Ala. 411; Moses v. Dunham, 71 Ala. 173; New York, &c. Co, v. Bernheim, 81 Ala. 138; Foster v. Hall, 22 Amer. Dec. 400. The sixth charge improperly assumed as a proved fact that Hanchett was the agent of the plaintiff corporation. There could, moreover, be no ratification by it of the sale made by the plaintiff to Lyles in the absence of a knowledge of facts sufficient to charge its authorized agents with notice of the fraudulent character of the sale. Knowledge of mere insolvency alone would not necessarily answer this end. LeGrand v. Eufaula, Nat. Bank, 81 Ala. 123. The charge covered by the eighth assignment of error is misleading, if not erroneous, and was properly refused. It is susceptible of being construed to assert that a mere doubt on defendant’s part, however vague or unreasonable, that Lyles had paid the plaintiff for the machinery, and had no permission to sell it, would be sufficient to put defendants on inquiry as to the alleged fraud in the purchase. This carried the rule of notice too far. The record fails to raise any question involving the right of appellants to rescind the sale without returning the notes of the defendant, or .showing excuse for failure to - do so. Jones v. Anderson, 82 Ala. 302. We can hot know that the court did not charge the jury correctly and favorably to the defendants on this point, and must so assume. The doctrine of error without injury has no application to such a case. The other exceptions are not well taken. Reversed and remanded.