Gay, Hardie & Co. v. Strickland

BRICKELL, C. J. The case was before the court at a former term. — Strickland v. Gay, 104 Ala. 375. Since, the bill has been amended, curing the insufficiencies then pointed out, and by the addition of allegations of facts which impart to it equity, according to the opinion then rendered. The statute, (Code of 1886, § 1737), as amended by the act approved February 21, 1893, reads: “Every general assignment, or a conveyance by a debtor of substantially all of his property in payment of a prior debt, by which a preference or priority of payment is given to one or more creditors, over the remaining creditors of the grantor, shall be and inure to the benefit of all the creditors of the grantor equally, but this section shall not apply to or embrace mortgages given to secure a debt contracted contemporaneously with the execution of the mortgage, and for the security of which the mortgage was given.” — Pamph. Acts, 1892-93, p. 1046. The original of the statute is found in the Code of 1852, (§ 1556), which read : “Every general assignment, made by a debtor, by which a preference, or priority of payment is given to one or more creditors, over the remaining creditors of the grantor, shall be, and inure, to the benefit of all the creditors equally;” and in this form’ without any change or varying of its words, was carried into the Revised Code of 1867, (R. C., § 1867), and into the Code of 1876, § 2126. This court having decided in Shirley v. Teal, 67 Ala. 449, and in Danner v. Brewer, 69 Ala. 191, that mortgages to secure the payment of debts contemporaneously contracted, were within the influence of the statute, by an act approved February 23, 1883, (Pamph. Acts, 1882-83, p. 189), the statute was amended, excepting such mortgages from its operation; and as amended, the statute was carried into the Code of 1886. — Code of 1886, § 1737. An absolute sale, unconditional, free from all reservation, in payment or satisfaction of antecedent debts, it was uniformly decided was not within the operation of the statute. — 3 Brick. Dig. 50, § 29 ; Ellison v. Moses, 95 Ala. 221. In Danner v. Brewer, 69 Ala. 200, it is said: “Though sales are often denominated assignments, yet between them and the transactions to which the statute refers there is a broad and manifest distinction. By a sale the vendor strips himself irrevocably and absolutely — 572 — of all right, title and interest, present or future, in the subject-matter of the sale. There is no right of redemption remaining in him — no trust resulting to him in any event. An assignment, whatever may be its form, has these incidents and qualities. It is subject to the uses and trusts declared in it, and which must be distinctly declared, or it will be void as to creditors. The satisfaction or extinguishment of these uses and trusts results in a divestiture of the title the assignment creates; or results in a trust of the residue of the property or its proceeds, unappropriated after the satisfaction of the uses and trusts. The sale operates an immediate satisfaction of the debts taken in payment — the assignment does not of itself pay or satisfy debts ; it simply provides for, or secures payment.” The purpose and policy of the statute in its origin was, to withdraw from the debtor, making a transfer of substantially all of his property as a security for the payment of debts the power he had at common law to discriminate or create preferences among and between his creditors. Such transfers are but seldom, if ever made, except in the presence of actual or apprehended insolvency; and in such an event, the law favors equality among creditors. Experience demonstrated that absolute sales in payment of debts were often resorted to, in evasion of the policy and purposes of the statute ; and generally, in favor of confidential creditors, as they were termed; creditors who had furnished the failing debtor with means of obtaining credit to which he was not entitled, involving in loss the unsuspecting and fair dealing creditor. The purpose of the amendment of the statute, is to draw, all such sales, all conveyances of substantially all of the property of a debtor, in payment of a pre-existing or prior debt, within its operation. Placing such sales or conveyances upon the same footing with instruments of assignment, or of other form of security for the payment of debts ; engrafting upon each the same trusts— ■ trusts for the equal benefit of all creditors. The sale or conveyance is not annulled; nor is it regarded as fraudulet. It is preserved, as the assignment or other form of security for the payment of debts is preserved. At the election of other creditors, it inures to their benefit— the vendee becomes a trustee, holds the title passing by the sale or conveyance, but holds it for the equal benefit — 573 — of all creditors, as if such had been the expressed purposes and objects of the sale or conveyance. The same construction of the statute in reference to these sales or conveyances, must be adopted, which prevailed in reference to assignments, of other instruments of security for the payment of debts. The statute was amended, drawing the sale or conveyance within its operation, with the knowledge of the lawmaker of the prevailing construction, and the presumption must be, with the intention to adopt that construction. As to assignments, or other forms of security having the qualities of an assignment, they were read and construed, as if the priorities or preferences they created were blotted out, as if the statute were incorporated, and instead of the priorities or preferences, a security for the benefit of all creditors equally, was expressed. — Price v. Mazange, 31 Ala. 701; Rapier v. Gulf City Paper Co., 64 Ala. 330 ; Danner v. Brewer, 69 Ala. 200, supra. The rights of creditors attached at the time of the execution of the assignment, and were incapable of diminution or destruction by any subsequent act of the assignor or assigneee, had and done without notice to them, and without their assent. It is a trust, a trust pure and simple, the statute creates, cognizable only in courts of equity ; and hence, creditors not having exhausted remedies at law, may resort to equity for its enforcement. The trust is in the nature of alien, the enforcement of which is deemed to lie within the peculiar province of a court of equity. — Holt v. Bancroft, 30 Ala. 193 ; Danner v. Brewer, supra. At law, there is and can be no remedy for its enforcement; there the assignment, or sale, must stand or fall as it may be written or made. The parties, assignor and assignee, or vendor and vendee, are bound by it, according to the terms of their agreement, and as between them, the' statute does not intervene. The trusts it creates are extended only to creditors, and creditors who are not parties to the assignment, or sale, and who were not intended to be benefitted by the one or the other. — Sampson v. Jackson, 103 Ala. 550. The case of Bray v. Ely, 105 Ala. 553, to which we are referred, has no bearing upon any question now presented. It was a trial of the right of property at law, in which the sale was assailed as fraudulent in fact; and in which the equities or rights of creditors at large were not involved ; and in which, of course, there — 574 — was not, and could not liave been a consideration of the statute which causes the sale to inure to the benefit of all creditors. In the former opinion in this case (Strickland v. Gay, 104 Ala. 378), it was said: “If the bill shall be so amended as to allege that the conveyance to Mrs. Strickland was in payment of prior indebtedness owing by her husband to her, and the averment that there was other property belonging to the grantor, D. D. Strickland, shall be stricken but, the bill will contain equity, and upon the bill as amended being verified, the appointment of a receiver will be proper, unless a countervailing showing against it is made by the respondents. In order to take the property levied on under attachments from the custody of the sheriff, if a receiver shall be hereafter appointed, there should be a prayer in the bill for injunction of the further prosecution of the attachment suits by the plaintiffs therein, and such prosecution'actually enjoined by .the order of the chancellor, and the giving by complainants of the proper bond.’' The bill having been amended in conformity to the opinion, it was doubtless in obedience to it, that the chancellor awarded a temporary injunction, and appointed a receiver to take possession of the goods. It is difficult to understand upon what theory or principle, subsequently, a motion to dismiss the bill for want of equity, and demurrers addressed to its equity, were sustained. The equity of the bill as amended had been adjudged by this court; the adjudication that the grant of an injunction and the appointment of a receiver would be proper, necessarily involved a determination that the bill contained equity, for an injunction or the appointment of a receiver can be obtained only on bills disclosing cases of equitable cognizance. The argument of counsel in support of the decree is that as the goods in controversy had been levied on by attachments issuing out of a court of law, and the purchaser had given bonds for a trial of the right of property, the goods were in the custody of the court of law, and a court of equity may not disturb that custody ; may not draw them, and the parties asserting claim to them, within its jurisdiction. We have decisions maintaining the doctrine, that when legal process, an attachment or execution, is levied on personal property claimed by a — 575 — person not a party to the process, who gives bond and takes the necessary steps for a trial of the right of property under the statute, the property is. in the custody of the court from which the process issues, and is not open to the levy of other legal process, not having a prior or paramount lien. — Rives v. Wilborne, 6 Ala. 45 ; Langdon v. Brumby, 7 Ala. 53 ; Kemp v. Porter, Ib. 138 ; Dollins v. Lindsey, 89 Ala. 217 ; Williams v. Dismukes, 106 Ala. 402. There is a broad, marked distinction and difference between those cases and the case under consideration,rendering wholly inapplicable the doctrine they assert. They involved only legal rights, while the rights of the complainants are strictly equitable, and cognizable only in a court of equity, as we have already said. The principle underlying those cases, so far as it has relation to the jurisdiction of a court of equity, is the well defined principle, that when the primary right or interest is legal, and courts of law and of equity have concurrent jurisdiction, the court which,first takes jurisdiction of a particular controversy, ordinarily, acquires exclusive jurisdiction, with -which no other court of mere concurrent jurisdiction will interfere. — 1 Pomeroy Eq., § 179. This principle is, however, subordinate to that which may be termed a well defined exception. If there are equities involved, of which a court of law can not take cognizance, and of which cognizance must be taken, if complete justice is done between the parties, a court of equity will intervene, though the jurisdiction of the court of law has attached and is in exercise — Ware v. Russell, 70 Ala. 174; 1 Story Eq., §§ 26-30. The principle now more immediately involved is, that the complainants are seeking to enforce trusts, purely and strictly of equitable cognizance ; of which courts of law can not take notice or cognizance, and can not draw* before them all parties who have rights or interests involved; and in all such cases the jurisdiction of a court of equity is exclusive — .1 Pomeroy Eq., § 137 ; 1 Story Eq., §§ 26430. The attaching creditors may be enjoined from prosecuting at law the attachment suits and the trials of the right of property. The injunction operates only on the creditors and the claimant of the property; it does not act upon the court of law itself; nor is it an exercise of supervising power over the court, or of its proceedings. As there are trusts to be enforced, — 576 — of which the court of equity has exclusive jurisdiction, and the more perfect means of doing complete justice, it draws before it, all parties having rights or interests to be affected by its decree ; and enjoins such of these parties as may be pursuing legal remedies from pursuing them further, without interfering with the jurisdiction of the court at law. — 2 Story Eq., § 1574. As amended the bill is properly constituted as to parties. The attaching creditors, the claimant in the trials of the right of property, and the sureties on the claim' bonds, are parties defendant. Having before it all necessary parties, the court will adjust its orders and decrees so as to meet all their real and substantial rights. Without pursuing further the discussion of the case, it is only necessary to say, the decree of the' chancellor must be reversed, a decree entered overruling the motion to dismiss for want of equity and the demurrers, and the cause remanded. Reversed, rendered and remanded.