Howell v. Carden

WALKER, J. An execution upon a judgment rendered by a justice of the peace in favor of the appellant and — 107 — against J. "W. Bowman, was levied upon personal property wliicli was in the possession of Bowman. A claim to the property levied on was interposed by H. W. Carden, as trustee, under a deed of trust by which Bowman had undertaken to. convey certain property, including that levied on, to secure the payment of his promissory note to B. T. Ewing. The contest was upon the claim so interposed. Exceptions were reserved to rulings of the Circuit Court in the admission of evidence, and in giving and refusing charges. 1. The objections to the introduction in evidence of the deed of trust to the claimant, and of the note which it purported to secure, were properly overruled. The subsequent introduction of independent evidence of the existence of a valuable consideration to support those instruments removed the principal ground of the objections. The validity of the deed of trust being assailed by the plaintiff as a creditor, whose debt was in existence at the time of its execution, its recitals of a consideration were not evidence against him. The onus was on the claimant to prove the existence of the alleged debt to Ewing, and the statements in the note and in the deed of trust could not help him in this regard. Bolling v. Jones, 67 Ala. 508. The plaintiff was entitled to have the jury instructed to this effect. But the rule that the recitals of consideration are not evidence against an attacking creditor would not justify the entire exclusion of the instruments. They were admissible to prove the fact of their existence, so as to show that, as between Bowman and the claimant, there had been an effectual transfer of title to the property in question. It was necessary for the claimant to go further, and prove the additional fact, necessary to the support of his claim as against the plaintiff, that the mortgage was supported by a valuable and sufficient consideration. The instruments were admissible in connection with the evidence, afterwards adduced, tending to show such a consideration. 2. It was competent for the witness Ewing to speak of one of the former notes he had held against Bowman without producing it. The fact of the existence of such note was a collateral matter, and the rule requiring the production of the note itself did not apply.—Wollner v. Lehman, 85 Ala. 274; 4 South. Rep. 643; 3 Brick. Dig., p. 439, § 486. A valid debt against a person may as well be created by paying off his debts to others, at his instance and request, as by advancing money directly to him. There was no error in permitting the witness Ewing to state that he had paid debts for Bowman, and that the money so used' constituted — 108 — part of the consideration for the note and deed of trust. The older deeds of trust on the land were admissible upon the question of the value of the property covered by the deed of trust to the claimant. The existence of prior incumbrances lessened the value of the property taken as security. The inquiry as to the value of the property conveyed as security was material upon the question of the good faith of the transaction. 8. One of the memoranda, which the witness Ewing was permitted to use for the purpose of refreshing his recollection, was made in the fall of the year preceding the trial, and long after the date of the transaction to which it referred. It is not permissible for a witness, against the objection of the adverse party, to use a memorandum to revive his memory, unless it was made at the time of the transaction concerning which he is questioned, or so recently thereafter that it may be inferred that the matter was then fresh in in his mind.—Calloway v. Varner, 77 Ala. 541; Jaques v. Horton 76 Ala. 238; 7 Amer. & Eng. Encyc. of Law, 111. It is plain that a contemporaneous record of a transaction as it was originally impressed upon the mind, must be much more trustworthy than a memorandum made so long thereafter as to be itself but the result of an effort of the memory. The former leads the mind of the witness directly to the matter sought to be recalled, while the latter does not go beyond a former recollection, which may not have been distinct. The authenticity of a memorandum, to which a witness may look for a revival of his memory, should be vouched for by the fact that it was made so near to the date of the transaction to which it refers, that the original impression thereof could not have grown dim in the mind of the person who made it. A witness exposes himself to the hazard of being misled when he relies on a ■ memorandum made at a time when his memory may already have become uncertain or indistinct. The witness should not have been permitted to refer to the memorandum mentioned above. 4. The owner of personal property has the right to mortgage it to secure the payment of his debts. To protect creditors and purchasers without notice, the statutes provide for the record of such conveyances. — Code, 188 •, §§ 1806-1814. These statutory provisions impliedly recognize the right of the mortgagor to stipulate in the instrument for his retention of possession of the mortgaged property, or to retain such possession with the consent of the mortgagee. The courts can not pronounce a recorded mortgage of personal property void, as against unsecured creditors, merely — 109 — because the mortgagor is left in possession ; for the law permits that to be clone, the recording being regarded as a substitute for a change of possession-Jones, Chat. Mort., (3d Ed), §§ 329-380; Benedict v. Renfro, 75 Ala. 121. It is plain that this power of incumbering personal property, the possession of which is retained by the owner, may be readily perverted to the unlawful purpose of securing an unauthorized benefit to the grantor, or of hindering, delaying, or defrauding his creditors. But the law sanctions the bona fide use of this form of security, even though the debtor may be embarrassed or insolvent. The legitimate scope of such an instrument, as against the grantor’s creditors, is the bona fide appropriation of property to secure a debt honestly due. If any part of the purpose of the parties thereto is that it shall avail, or be used for the ease or favor of the grantor, it is void as to his creditors.—Reynolds v. Crook, 31 Ala. 634. Whenever such purpose, or a trust for the use of the grantor, appears upon the face of the instrument, the court, without looking further, pronounces it void as against the grantor’s creditors. Thus, a mortgage of merchandise, which expressly or impliedly leaves the mortgagor in possession, and free to make sales from the mortgaged property for his own benefit, in its very nature involves such a reservation of a benefit to the mortgagor as invalidates the instrument, and the court will pronounce it invalid as a conclusion of law.—Benedict v. Renfro, 75 Ala. 121; Owens v. Hobbie, 82 Ala. 466; 3 South. Rep. 145. If, however, the mortgage of such property provides for the sale thereof by the mortgagor for and on account of the mortgagee, and that the proceeds of such sales be applied to the mortgage debt, then such mortgage is not fraudulent on its face.—Murray v. McNealy, 86 Ala. 234; 5 South. Rep. 565. A mortgage of personal property can not be pronounced fraudulent without evidence aliwide to this effect, unless it appears from an inspection thereof that the purpose of the parties embraces the reservation of a benefit to the mortgagor, or that there was an intent to have the transaction go beyond the legitimate object of securing a debt, and to operate, in part at least, to hinder, delay or defraud the mortgagor’s other creditors. Unless such infirmity is disclosed upon the face of the instrument, the question of its validity as against the grantor’s other creditors is one of fact, to be determined on the evidence as to the situation of the parties and the circumstances attending the transaction. In Wiley v. Knight, 27 Ala. 336, the facts were that a creditor, who had implied notice that the debtors were insolvent, took from them a mortgage of substan — 110 — tially all their property, the value of which greatly exceeded the amount of the debt to be secured. The law-day of the mortgage was postponed nearly six years ; the possession, in the mean time, remaining in the mortgagors. The transaction was held to be fraudulent, because its necessary effect was to tie up more of the debtor’s property than was reasonably necessary to secure the debt, and because of the unauthorized benefit reserved to the grantors. If the question as to whether there was fraud in the transaction is triable by the court, and it appears from the evidence that a creditor, knowing that there are other creditors who may be delayed or hindered in the collection of their debts, or having knowledge of some fact calculated to put him on inquiry, and thus charge him with notice, yet takes a mortgage whereby he ties up greatly more of the debtor’s property than is reasonably sufficient to secure his debt, and in the mean time permits the debtor to remain so long in the possession and enjoyment of the property that the necessary consequence of the transaction is to favor the debtor, and to help him to baffle his other creditors, then such mortgage will be declared fraudulent in fact as against such other creditors.—Reynolds v. Welch, 47 Ala. 200. The same result follows whether the unauthorized operation of the instrument is disclosed by the terms thereof, or by evidence of the circumstances connected with its execution. In the present case, there is nothing in the impeached deed of trust, as it is described, without being copied, in the bill of exceptions, to authorize the court to pronounce it- fraudulent on its face. The question, then, as to the validity of the transaction, was one of fact to be submitted to the jury. "When the instrument shows upon its face that it was made in trust for the use of the mortgagor, or with the intent to hinder, delay, or defraud his creditors, the court must pronounce the legal conclusion that it is invalid as to such creditors. When such infirmity is not disclosed upon an inspection of the instrument, and it is attacked as fraudulent as against the mortgagor’s creditors, unless both the law and the facts are submitted for decision by the court, it is for the jury to ascertain from the evidence as to the circumstances attending its execution whether, as matter of fact, it was made in trust for the use of the mortgagor, or with the intent, participated in by the mortgagee, to hinder, delay, or defraud the mortgagor’s creditors. When the attacking creditor proves the existence of his debt at the time the mortgage was executed, the onus is then cast on the mortgagee to show that the debt which the mort — 111 — gage purports to secure was justly due at the time of its execution. If this proof is made, and the evidence stops here, the attack upon the mortgage is not sustained.. But the assailing party may go lurther, and prove that the mortgage was made with intent to hinder, delay, or defraud the creditors of the mortgagor. In this inquiry as to the intent, the burden of pro'of is shifted upon the complaining creditor. Moog v. Farley, 79 Ala. 246; Gordon v. Tweedy, 71 Ala. 202. The charge of the court on this subject was correct. Charges 11 and 17 requested by the plaintiff were properly refused, because each of them asserts, in effect, that when the plaintiff made out a prima facie case the burden was then cast upon the claimant, not only to prove that the secured debt was justly due, but also to negative the existence of a fraudulent purpose or intent in the making of the mortgage.. The mere retention of possession by the mortgagor, or a provision in the mortgage to that effect, is not such a reservation of a benefit to him as invalidates the instrument against his existing or subsequent creditors. Such a reservation of possession until default is authorized by the law, if the debt which the instrument purports' to secure was justly due, and the mortgagee was not a party to any intent to use the instrument to hinder, delay, or defraud the mortgagor’s creditors. It is the existence of such actual or necessarily imputed evil intent which will justify the impeachment of the instrument as a fraud upon creditors. It is not permissible for one creditor to use liis claim for the purpose of shielding the debtor’s property from his other creditors. Though one of the objects of such creditor is to secure the payment of his own debt, yet, if the arrangement by which this is done involves the intent on his part to aid the debtor in holding his property against his other creditors, then such arrangement is fraudulent and void as to creditors participating therein. To be valid, the arrangement must be “without any intent to lock up the property from creditors for the use of the debtor.” When the creditor taking the security knows that there are other creditors who may be delayed or hindered in the collection of their debts, or has knowledge of facts or circumstances calculated to put him on inquiry, and thus charge him with notice, the arrangement which he makes must not go beyond the permissible purpose of securing his own demand; and if, with such knowledge or notice, he participates in a purpose of the debtor to thwart his other creditors, and with such intent takes a mortgage which ties up greatly more of the debtor’s property than is reasonably sufficient to secure his debt, — 112 — and in the meantime permits the debtor to hold and use the property for his own benefit, so that the necessary result is to favor the debtor, and to help him to baffle his other creditors, then the transaction is fraudulent and void as against other creditors. If it is any part of the purpose of the mortgagee, in taking the mortgage under such circumstances, to secure thereby a benefit to the mortgagor, which involves the hindering, delaying, or defrauding of any other creditors, the instrument can not stand against the attack of such other creditors.—Benedict v. Renfro, 75 Ala. 121; Constantine v. Twelves, 29 Ala. 667; Price v. Mazange, 31 Ala. 701; Reynolds v. Welch, 47 Ala. 200; Price v. Masterson, 35 Ala. 483; Seaman v. Nolen, 68 Ala. 463; Hayes v. Westcott, 91 Ala. 150; 8 So. Rep. 337. Though the natural effect of the transaction was to hinder, delay, or defraud the grantor’s creditors, and though he executed the instrument with that purpose, yet, if the grantee did not participate in such intent, but accepted the conveyance for the sole purpose of securing a bona fide debt of the amount named in the instrument, then the security could not be pronounced invalid, because of its effect upon the rights of other creditors, or because of the fraudulent purpose of the grantor. Shealy v. Edwards, 75 Ala. 411. Whether the mortgagee participated with the debtor in an intention to have the mortgage serve the purpose of putting the property included therein in such a position as to secure an unauthorized benefit to the mortgagor, or to hinder, delay or defraud other creditors, is generally a matter of inference or deduction from the circumstances attending the transaction. Such transactions may be presented in various aspects, and it is not for the court to suggest what facts may warrant unfavorable inferences. On the inquiry as to whether the mortgage was given in good faith, and solely for the security of a just debt, or was vitiated by a purpose to benefit the mortgagor at the expense of his other creditors, it is competent to show that the preferred creditor, having notice that there were other creditors, took a mortgage covering substantially all of the debtor’s property, and greatly more than enough to afford him ample security; or that by the arrangement he unreasonably postponed the collection of his demand, and in the meantime allowed the mortgagor to retain and use the property ; or that the whole or a material part of the mortgaged property which was retained and used by the mortgagor was perishable, or of such a character as to be profitable in its use. It is for the jury to draw the deductions or inferences from the facts — 113 — proved. The impeached instrument can not be pronounced invalid unless they find from the evidence that it was made in trust for the use of the grantor, or with an intent, participated in by the grantee, to hinder, delay, or defraud the grantor’s creditors. It is unnecessary to review in detail the numerous charges given and refused. The propositions contained in most of them may be readily tested by the rules above stated. Defects in the several charges requested by the plaintiff will be briefly noted. Charges 1, 2, 4, 5, 6, and 20, which were refused, were faulty in failing to predicate the existence of an intent on the part of the mortgagee to benefit the mortgagor, or to hinder, delay or defraud, his creditors. Charges 9 and 23, requested by plaintiff, make the effect of the instrument upon tile rights of other creditors the test of its validity, without regard to the real intent of the grantee therein. If the debt to Ewing was based upon his payment in good faith of claims against Bowman, at Bowman’s request, such payment was a valuable consideration moving from Ewing, which was not vitiated by the fact that the claims so paid off in good faith were not themselves supported by valuable considerations. Charge 3 of the plaintiff’s series was incorrect in asserting the contrary of this proposition. Plaintiff’s charge 14, was properly refused because there were several deeds of trust in evidence, and the charge did not refer specifically to the one which was the matter of contest. Charge 22 assumes that the deed of trust in question covered all of Bowman’s property. There was evidence tending to show that some of his property was not included. Charge 24 was argumentative. Unless the usury in the debt to Ewing was allowed and received for the purpose of fraudulently swelling the debt, it would not have effect to avoid the deed of trust.—Harris v. Russell, 93 Ala. 59; 9 So. Rep. 541. Charge f, on this subject, was properly refused. Beversed and remanded.