Foster v. Haglin

Riddick, J., (after stating the facts.) This is a controversy concerning the title to a stock of merchandise and other personal property attached by the appellants as the property of Alva Haglin. The appellee, Edward Haglin, claims to have purchased the property from his brother Alva in settlement of indebtedness due from Alva to him. The only question necessary to consider is whether, under the facts of this case, the promissory notes executed by Alva to Edward, and read in evidence, were, as against the appellants, prima fade evidence of indebtedness from Alva to Edward. The appellants, shortly after the sale to Edward, had caused the property to be seized under their writ of attachment, and contended that the notes read in evidence were based not on a real but upon a fictitious indebtedness, and that the sale of this property to Edward was fraudulent. In support of this contention, they introduced evidence tending to show that Alva, in making the sale, designed to cheat, hinder and delay his creditors. At the time of the sale he was indebted to a number of mercantile firms. He paid none of these debts, and by this sale and the transfer of his notes and accounts to his brother he divested himself of all visible property. Before the sale, he continued to purchase goods on credit and to increase his stock of merchandise up to the very day of the sale; indeed, some of these goods were placed in his store only an hour or two before the transfer to his brother was made. As to those goods purchased shortly before the sale, the evidence tends to show that they were bought with the deliberate intention not to pay for them, and for the purpose of transferring them to his brother Edward. Edward denied that he knew of these purchases at the time of the sale to him, or that he consented to or approved of the conduct of his brother in buying goods under such circumstances. But he admitted that, shortly after the sale, he did know that goods bought on credit the day before had been placed in the store that morning, only an hour or two before he purchased. He says that he disapproved of this, and censured Alva for it, and told him that he must pay for those goods. But Alva did not pay for the goods, nor did Edward pay for them or return them. Despite his protestations of honesty, his conduct in this regard seems to us calculated to arouse the suspicion that if he did not approve of this conduct of his brother, he was yet not unwilling to reap the fruits thereof. But, apart from the question as to whether Edward participated in or consented to the acts of Alva, we have seen, from the evidence introduced, that the jury may well have found that Alva intended by this sale to defraud his creditors. If they did so find, then the sale could only be upheld in favor of Edward by a showing that he paid an adequate consideration. And the proof of the consideration must go beyond a mere paper acknowledgement of it by one of the parties to the alleged fraud. The promissory note of such a party would be prima facie evidence of indebtedness against him, but, as to his creditors in such a case, the rule would be different. When the creditor has established a fraudulent intent on the part of the vendor, sufficient to avoid the sale or conveyance as to him, the burden is then shifted to the vendee, and to uphold the sale he must show an adequate consideration. To do this, he must do more than produce the note or receipt in which the dishonest vendor has acknowledged an indebtedness, and must show by other evidence that such note or receipt is based upon actual and honest debt. Valley Distilling Co. v. Atkins, 50 Ark. 289; Chipman v. Glennon, 98 Ala. 263; Smith v. Collins, 94 Ala. 394; Bump, Fraudulent Conveyances (4 Ed), § 66, and eases cited. The reasons for this rule are very apparent; for, it being once established that the vendor is engaged in a scheme to defraud his creditor, it would be very unreasonable to allow a note or receipt executed by him to make a prima facie case against the creditor, and in support of his own fraudulent act. To do so would in some cases make effectual the dishonest conveyance, though based on nothing but' a simulated debt, .and render powerless the efforts of the creditors to overthrow the same. The law in such a case wisely imposes the burden upon the vendee to show, by other evidence than the note or receipt of the vendor, an actual and adequate consideration. There is no hardship in this rule, for, if a sufficient consideration has been paid, no one should know the fact and the circomstances connected therewith better than the vendee, the person who paid it. Such matters are peculiarly within his knowledge, and he should produce the proof. If he fails to do so, and proof of the consideration is not made, the conveyance must be treated as one made by the vendor to defraud his creditors, and without consideration, and therefore void as to creditors. Our conclusion is that, under the facts of this case, it cannot be said, as a matter of law, that the notes read in evidence were “prima facie evidence of indebtedness of Alva Haglin to Edward Haglin,” or that the burden of proof was “on defendants to show that they do not represent an actual indebtedness.” The instruction to that effect, given at request of appellee, was therefore, in our opinion, erroneous. The appellee further contends that the judgment should in any event be affirmed, for the reason that the evidence outside of the notes introduced in evidence clearly shows that such notes were based upon an actual and honest debt. But we are of the opinion that appellants have the right to submit that question to a jury upon proper instructions. The judgment is therefore reversed, and a new trial ordered.