Echols v. Peurrung Bros. & Co.

HEAD/J. We are of opinion that the demurrer to the bill was properly overruled. It has been the law of this State announced in our decisions since early in the State’s history that a voluntary conveyance made by the donor with actual intent to binder, delay or defraud creditors, existing at the time, or those whose demands may thereafter accrue, is void as against his creditors, existing or subsequent. This principle is conceded by respondent’s counsel, but it is contended that the rule does not apply in favor of the subsequent creditor if when he extended the credit to the donor, he had actual or constructive notice of the existence of the conveyance. The bill alleges the want of such actual notice on the /Dart of complainants, but alleges that the deeds sought to be avoided by them as fraudulent, were recorded prior to the extension of the credit. It will thus be noticed that the proposition 'of the respondent narrows itself to this, that the constructive notice, which the statute accords to registration, of the mere existence of the deed is sufficient to deprive the subsequent creditor of the right to assail the deed as fraudulent, excluding all necessity for notice on the part of the creditor, when the debt was contracted, that the deed was executed with the actual intent to defraud creditors. In other words, the propo [665] sition is, either that the world must take notice, from the moment of registration, not only that such a deed has been executed, but that it was infected with an actual intent to defraud creditors ; or that, to entitle a subsequent creditor to set aside a conveyance as fraudulent, it must appear that the debt was contracted solely in faith and reliance upon the property which the debtor then owned and held the title to; whereby, if he, the creditor, had notice that the legal title, as between the debtor and his donee, to a particular property had been convoyed to the donee, he, the creditor, cannot be said to have extended credit in reliance upon that property; wherefore, he has no rights in respect of that property, although, in point of fact it may be, that he did not learn of the fraudulent character of the conveyance until after the credit was extended. We think these contentions are opposed to the law as it is understood in this State. A fraudulent conveyance is totally void, except as between the grantor and grantee. It is the same as if it had never been made. It may be set aside either at law or in equity, and this, upon the principle that, except as to the grantee, the fraud so vitiates it that the title does not pass. As to all who deal with the grantor either as creditors or purchasers the title is in the grantor, and the property subject, in the same way, as if this title was not clouded by the conveyance. If the creditor’s demand was contracted without notice of the fraud, it would seem, upon clear principles, he should not be precluded from subjecting the property, upon subsequent discovery of the fraud. If he actually knew of the fraudulent character of the conveyance, he thereby knew of its utter invalidity, and the liability of the property to the payment of all debts of the grantor, existing or subsequent ; he knew that the property was held in trust by the donee, for any and all creditors of the grantor, and the'donee would not, therefore, be heard to say that the debt of the subsequent creditor was not created in reliance upon the property. The case of Gilliland v. Fenn, 90 Ala. 230, which places creditors and purchasers in the same category, under the statute of frauds, is authority in point, for the principle that notice of the conveyance, on the part of the creditor or purchaser, at the time of the creation of the debt, or of the purchase, is immaterial to affect the rights of the creditor or purchaser, [666] and we are of opinion the principle is a sound one. The case of Kirksey v. Snedecor, 60 Ala. 192, cited by counsel, is not an authority to the contrary. What was said there as to Kirksey & Carpenter’s claim having been contracted after the execution of the deeds, was said in the discussion of the question whether the facts were sufficient to establish the alleged fraud; and it was referred to as a circumstance going to show the deeds were not made with a fraudulent intent. This and nothing more. It is demurred that the bill fails to allege sufficiently the facts constituting the fraud relied on to defeat the deed. The averments are, that, at and before the execution of the deeds, the donor, A. Ewing Echols, was a member of the mercantile partnership of Echols & Sheffey engaged in the retail grocery business in the city of Huntsville, Ala.; that said firm then was indebted to a named creditor in the sum of $173.40, for merchandise sold to the firm, which sum they had been owing for more than 'sixty days prior to the execution of said deeds; that the said deeds were executed by the donor voluntarily and without consideration, and for the purpose of hindering, delaying and defrauding the creditors of said firm of Echols & Sheffey, and that said donor then contemplated and intended that said firm should make the purchases, and incur the indebtedness which they made of, and now owe to, the complainants, and many other debts and liabilties not described, and intended to make default, and refuse to pay the same. We are unable to see how the case can be made by more specific averment of facts.- The facts which constitute the fraud available to the creditor are, first, that the deeds were voluntary, and, second, that they were executed with the intent to hinder, delay or defraud creditors. These facts are alleged. The bill also shows that the donor was engaged in the mercantile business and during the summer and fall following the execution of the deeds in June and July, 1893, his firm contracted the several debts now due to the five complainants and many other debts which they had not paid at the filing of the bill on Dec. 9, 1893 ; and that at that- time, neither firm nor either member thereof owned any property subject to execution ; and that the property which Echols had conveyed to his wife in June and July preceding was worth [667] at least $20,000. Wo hold the averments of the bill sufficient. Echols v. Orr, Scroggins & Co., in MSS. (17 So. Rep. 677). Affirmed.