Simmons v. Shelton

HARALSON, J. 1. The principle underlying the question as to whether the sale from Peace & Son to I. G. Wyatt was fraudulent, has been well settled by our former adjudications, and is, that a sale or conveyance upon a new consideration, though valuable, made by a debtor who is insolvent, or in failing circumstances, will be set aside at the instance of his creditors, if the purchaser or grantee participated in it or knew that the purpose of the debtor was to place his property beyond the reach of his creditors, or had such information as charges him with notice of that purpose. The burden of making this proof is on the attacking creditor. — Florence Sewing Machine Co. v. Zeigler, 58 Ala. 221; Cromelin v. McCauley, 67 Ala. 548; Smith v. Collins, 94 Ala. 394. But if the purchase be made without such knowledge, and without such information as reasonably to put the purchaser on inquiry, he acquires a good title, no matter how fraudulent the intent of the seller. If the purchaser, before full payment, is chargeable with knowledge of the fraudulent intent of the seller, he is not permitted to make further payments, but must hold the same for the paramount claims of the creditors of the seller. — Crawford v. Kirksey, 55 Ala. 282; Lehman v. Kelly, 68 Ala. 202; Smith v. Collins, 94 Ala. 394. 2. The contention here, it maybe well to state, is not as to a debt by the Wyatts to complainants, but in respect to a debt alleged to be owing by Péace & Son to complainants. The fraud alleged is as to the sale by Peace & Son to W. P. Wyatt for his wife, I. G. Wyatt, in which the latter is averred to have participated, so as to hinder, delay and defraud the complainants in the collection of their debt against Peace & Son. If Wyatt procured the conveyance of the goods from Peace & Son to his wife, as is alleged, to hinder and delay his creditors, that fact, if established, is of no consequence here, — 292 — since Wyatt was not a debtor of complainant, and the rights of no creditor of his are involved in the litigation. It may be admitted, since it reasonably enough so appears, that at the time of the alleged fraudulent sale by Peace & Son to Wyatt, Peace & Son were the debtors of complainant, by open account, in the sum of $447.30. For the purpose of showing that the sale of Peace & Son to Wyatt was fraudulent, the complainants examined said W. P. Wyatt as a witness. His evidence tends to show, without conflict, that the price his wife agreed to pay for the goods and fixtures, and for which their notes, which it is averred in the bill were negotiable, were given, was full and adequate. The notes were for about $1,550. He testified, that the goods and the store fixtures which he bought, were not in fact worth more than from $850 to $900. He was asked the question, if at the time of this purchase he knew that Peace & Son owed anything, and he answered, he did not and had no knowledge of it. He was also asked, if he knew whether Peace & Son’s creditors were pressing them at the time, and he replied he did not know anything about it. This statement was made on his first examination. Afterwards he was recalled by complainants, and examined a second time, and he was again asked, if when the goods were purchased by him for his wife, he knew that Peace & Son owed any debts, and he again responded, he did not. He was also asked to state any facts tending to show why he did not, and he replied, that he had no idea in the world of buying out Peace & Son, until one of them, W. H. Peace, came to-his place, as he supposed, to see him, and called his attention to it; that that conversation lasted only about twenty minutes, and the next morning, he went over to Peace & Son’s place of business to see about the proposed sale, that they agreed as to the kind of trade they would make, and the day following, they took an account of the stock, and that, before the sale, no facts or circumstances came to his knowledge to cause him to suspect or know that Peace & Son owed any debts. He also swore, that he had known D. W. Peace about ten years, but not intimately; that he knew him in Crawford, Miss., where they both resided before removing to Birmingham ; that Peace was a religious man and he, Wyatt, was in the saloon busi — 293 — ness, next door to Mm, and they both were burned out there, when the whole town was burned up ; and before this sale, he had not seen Peace & Son for six months, and knew nothing of their being pressed by their creditors. The complainant offered other proof tending to show that Peace & Son owed other debts besides the one to them ; that some of their creditors were pressing them, and that their commercial credit was not good. On the other side, the proof tended to show, that they had been extended and enjoyed good credit in the town, and had been in the habit of paying their bills every week. Wyatt, who was in the same business, had just been burned out, and his stock was insured. It was natural to suppose that he would desire again to start his business, and to buy a stock of goods, if he could, on such terms as would enable him to do so. There was no secrecy about the transaction, and no proof that the Wyatts knew at the time that Peace & Son were insolvent or embarassed, or were attempting a transaction to defraud their creditors. Peace & Son transferred the purchase money notes for the goods to H. V. Peace, in part payment of a debt they owed him. Their accounts and claims, amounting to from $1,500 to $1,700, they did not sell or dispose of, but proceeded to collect, applying the collections, amounting to about $1,000 or $1,200, to the payment of their creditors, including the complainants. They were enjoined in this case from collecting the others. The next day after the sale to Mrs. Wyatt, they went to the complainants and told them of the sale to Wyatt, and asked for the amount of their own account, promising to pay the same, and afterwards, before this bill was filed, had paid them over $200. Without further reviewing the evidence, of which there is a great mass, it is sufficient to add, that on the evidence, we must agree with the chancellor, that the sale does not appear to have been an invalid one. 3. As to the subsequent sale by Wyatt to Shelton & Co., there appear no reasons for questioning its validity. The existence and bona fides of the antecedent debt, due by I. G. Wyatt to these parties, constituting the consideration of the sale, are fully and satisfactorily established, without conflict in the evidence; and the price — 294 — paid was adequate and fair. An attempt was made to show, that a benefit was reserved to Mrs. Wyatt, in that Shelton & Co., after their purchese, employed her husband as a clerk, but the evidence of Wyatt and Shelton leaves no room for the charge. Wyatt swore that he and his wife had no interest whatever in the goods and that he was employed after the sale. Shelton swore, that at the time of the agreement for the sale, there was not a word said about employing Wyatt as a clerk ; he did not know that he would be employed, and he was not employed until the day afterwards. Shelton & Co. needed a clerk to sell the goods, and Wyatt, acquainted with the stock and the customers of the store, it would seem, if not the best, was, at least, a very fit person to be employed for the purposes. Shelton & Go., according to the evidence, had no intimation or knowledge that complainants regarded the.,sale from Peace & Son to Wyatt as fraudulent, or that they or anybody else questioned its fairness or intended to call it in' controversy. Three months had elapsed since that sale, and Wyatt had been conducting his business as before, buying most of his goods from Shelton & Co. They certainly had the right to buy, to save their debt, if that was their purpose. Wyatt had a right to prefer them, if that was her purpose and that of her husband, and the sale, for these reasons, could not be disturbed. The proof established that this purchase was made and the goods' delivered before this bill was filed and a receiver appointed. The only evidence tending to show that Wyatt, after the sale, acquired knowledge of the fact that Peace & Son were indebted at the time of the sale, was that furnished by himself on his examination by complainants. He stated that he suspected, within two or three days after the sale, that they owed money ; that parties came in and said that they owed them, and they did not deny it. But this was not, without more, sufficient to charge him with knowledge of Peace & Son's alleged fraud, such as would reasonably put him on inquiry concerning it. They might have owed debts without having any intention to delay or defraud their creditors. It was not calculated, under the circumstances of this Case, to arouse suspicions of their insolvency. The complainants make the further point, that Peace — 295 — & Son were sued by these complainants in the city court of Birmingham on the 16th day of September, 1891, and said W. P. Wyatt was garnished therein as debtor to the defendants; that, on the 22d September, 1891, Collins & Co. sued said defendants in said court and garnished Mrs. I. G. Wyatt and H. Y. Peace, and that these facts gave said Wyatt notice, that said Peaces were insolvent or in failing circumstances, and he is liable, therefore, for any money he may have paid on the Peace & Son notes, after such notice. It is shown by Wyatt, that he paid on these notes about $600 ; from $200 or $800 in money, and the balance in an account he held against one McPolland, which W- H. Peace agreed to be liable for. When it was that the cash payments were made is not shown, but it does appear that the McPolland debt existed before the notes were made. We are not authorized under this evidence, to draw the inference, that these payments were made after the institution of said suits against Peace & Son, in which said Wyatt was garnished, and the proof fails to show that Wyatt made any payments after the notice of the alleged insolvency or failing condition of Peace & Son, of which, it is contended, such proceedings gave notice to Wyatt. No personal judgment or decree can be rendered against Wyatt on this evidence. 6. No'personal decree is prayed against H. V. Peace, except for any payments that may have been made to him by Mrs. Wyatt on the notes transferred to him within the amount of complainants’ debt. It is not shown that he ever received a dollar on the notes. The prayer as to these notes is, that “said notes to I. G. Wyatt be decreed to be void and for nothing held.” 7. It may be added, that the proofs submitted do not show that Peace & Son were insolvent at the date of the filing of the bill, nor when they sold out to Mrs. Wyatt. They sold, as has been seen, for between $850 and $900, making no sale of their book accounts and choses in action, amounting to between $1,500 and $1,700. It is tiue the complainants offered in evidence several judgments which were recovered against them in 1892. It was agreed between the parties, in respect to the transcript of judgments offered in evidence, that they did not show they were valid or subsisting judgments or causes of action against the defendants, or — 296 — that such judgments had been paid in whole or in part. A judgment is conclusive evidence of the existence of a debt at the date- of its rendition, but is not evidence against strangers that it existed at any time anterior thereto. — Lawson v. Ala. Warehouse Co.,73 Ala. 289; Yeend v. Weeks, 104 Ala. 331; Troy v. Smith, 33 Ala. 471. Outside of these judgments, the proofs do not satisfactorily establish the insolvency of said Peace & Son. 8. There was a receiver appointed in the case, and the decree dismisses the bill without requiring him to report and settle his account. The bill should not have been dismissed without requiring him to settle. The dismissal will be set aside, and the decree corrected to the extent of requiring the receiver to file his written report in the court below, within ten days after being notified of this order, showing what property or money he has received, in order that his receivership may be finally settled, and as thus corrected, the decree of the court below is affirmed. The clerk will cause a copy of this order to be served on the receiver. Corrected, affirmed in part, and remanded in part.