Porter & Co. v. Ullman

COLEMAN, J. The appellees, simple contract creditors of appellants, filed the present bill to reach and subject to the payment of their respective claims, an indebtedness which had accrued against the Georgia Home Insurance Company upon a policy issued in favor of A. L. Porter & Co., the debtors, to secure their stock of goods against fire and which has become payable. Complainants’ contention is, that the averments of the bill are sufficient to bring their case within the provisions of section 3544 of the Code, which provides that “a creditor without a lien may file a bill in chancery to discover or to subject to the payment of his debt any property which has been fraudulently transferred or conveyed, or attempted to be fraudulently transferred or conveyed by his debtor.” No discovery is sought, and if the bill is maintainable, the facts averred must show a fraudulent transfer or conveyance of the policy or an attempt to fraudulently transfer or convey it. No conclusion of the pleader, that certain stated facts which entered into a transaction was a fraud, or that certain acts done to complete a transaction were done with a fraudulent intent, can impart or inject fraud into the transaction. The law infers the fraud from the facts, and not from the averment of fraud independent of the facts Unless the facts show fraud, the conclusion of the pleader, that they were fraudulent, is without force. Partners are jointly and separately liable to the creditors of the partnership. We have never held, and do not know that it has been so held anywhere, that a dissolution of a partnership and a division of the assets among the partners by which each became the individual owner, with exclusive dominion, control and right of disposition by each partner of such of the assets as was respectively and severally allotted to him, was a fraud per se upon existing creditors, nor would the principle be less applicable, if, at the time of such dissolution and division, there was an agreement between the parties, that a policy of insurance then in force for the benefit of the partnership should continue for their individual benefit and protection, each in case of loss by fire to be paid according to their separate and respective losses, the arrangement having been assented to by the insurance company. ’■ ■ The^ case made by complainants’ bill is hardly so [628] favorable to them as that stated. A. L. Porter & Co., a firm composed of A. L. Porter and Warren F. Smith, procured a policy of insurance • against fire upon their stock of goods. During the latter part of the year 1898, the partnership became indebted to complainants by simple contract. On the first of February, 1894, A. L. Porter and Warren F. Smith dissolved the partnership, Warren F. Smith selling his interest on a credit for $750 to the new firm of A. L. Porter & Co., composed of A. L. Porter and C. B. Porter, the new firm assuming to pay all the debts of the old firm of A. L. Porter & Co. It was agreed between the parties, to which the insurance company assented, that the policy should continue in force, and that in the event of loss by fire, a proportionate share of the insurance money, should be paid to Warren F. Smith upon his debt due from the new firm • of A. L. Potter & Co. for the purchase of his interest in the goods, &c. Warren F. Smith became a contract creditor himself of the new firm, and took from the business' no part of the stock nor any portion of the money. His sale did not relieve him from liability to the creditors of the old firm of A. L. Porter & Co. It is not pretended that the debt of $750 agreed to be paid him was “simulated,” or that the price agreed to be-paid him was in excess of the value of his interest in the business, or that the partnership of which he was a member, or that either member of the firm, at the time of the dissolution and sale was insolvent or embarrassed. The essence of the bill is, that the agreement between the parties, that the policy of insurance, in the event there was a loss of the goods by fire, should be paid to Warren F. Smith on his debt in proportion to his interest, without regard to the financial condition of the partnership or the members which compose it, was in law per se a fraudulent conveyance of or an attempt to fraudulently convey the policy, as to existing creditors, and which gave the creditors the right to come into a court of equity. Partners may dissolve the partnership, either by ceasing to do business, and dividing the assets of the business, or by one partner selling to his co-partner or a thii’d person, or by the partnership selling out the entire business to third persons. It can not be said as matter of law, that a dissolution of a partnership is a'fraud on [629] existing creditors, nor will any amount of averment, that such a dissolution was made to hinder and defraud creditors, stamp the transaction as fraudulent, without some averment of facts which authorized the conclusion of fraud.—Reese v. Bradford, 13 Ala. 847; Mayer v. Clark, 40 Ala. 270; Coffin v. McCullough, 30 Ala. 107; Hart v. Clark, 54 Ala. 493; Brown v. Burnum, 99 Ala. 114; Aiken v. Steiner & Lobman, 98 Ala. 355; 17 Amer. & Eng. Encyc. Law, 1336. The dissolution of the partnership not being fraudulent, the lien which each partner had, to have the partnership property applied to the payment of the partnership debts, was destroyed, and the rights of creditors to be subrogated to the partnership lien fell with it. Authorities supra. The bill is not filed on this theory. The agreement that the insurance should be paid to Warren F. Smith on account of his debt did not create a lien, available to the creditors of the partnership of A. L. Porter & Co. We see no reason, from an examination of the record, why a suit at law against the members who constituted the original firm of A. L. Porter & Co. with the aid of the process of garnishment, does not furnish to complainants an adequate remedy at law. We lay no stress on the averment of the bill, that when filed, the respondent debtors were insolvent. The insolvency may have been the result of the fire, or causes subsequent to and disconnected from the facts which led to the dissolution. A loss caused by the destruction by fire of the goods, months after the dissolution, can not relate back, and vitiate a transaction which was fair and bona fide when made. The demurrer was directed against the equity of the bill, and should have been sustained. Reversed and remanded.