Miller v. Hughes

The opinion of the court was délivered by Mr. Justice McGowan. This case has been in this court before (see Miller v. Hughes, 33 S. C., 542, where the character of the action and the allegations of the plaintiffs are fully stated). It seems that the defendant L. F. Hughes was in the mercantile business in Hampton County of this State, and contracted debts on time for a large stock of goods; that soon after the goods arrived at his store in Hampton, he sold or transferred them in bulk to one L. F. Brunson, who had been his former partner, for $4,500 in cash, who at once mortgaged the said stock of goods to Z. Daniels & Co., of Augusta, Georgia. This action was commenced by the plaintiffs as one of the creditors of Hughes, to set aside the alleged sale of the goods by Hughes to Brunson, and the mortgage of the same by Brunson to Daniels & Co., as fraudulent and void, as intended by all the parties to defeat, delay, and hinder the plaintiffs and all other creditors of the said Hughes. It seems that the plaintiffs had not established their debt against Hughes by judgment, and obtained a return of nulla bonce thereon, and upon that ground the Circuit Judge dismissed the complaint because it did not state facts sufficient to constitute a cause of action: The plaintiffs appealed, and this court reversed the judgment, holding, that “in an action by a creditor to set aside transactions alleged to have been made by the debtor for the express purpose of defrauding his creditors, it is not necessary to allege that the plaintiff has recovered judgment upon his demand and obtained a return of mella bona;” and, therefore, the demurrer should have been overruled, and the defendants allowed proper time to answer. The case went back to the Circuit, the defendants were al [517] lowed to answer, the testimony was taken by a special referee, which is printed in the record, and the cause was heard on its merits by Judge Witherspoon. Another oral demurrer was interposed, on the ground that the complaint did not state facts sufficient to constitute a cause of action, which was overruled. The judge then proceeded to render his decree upon the pleadings and evidence. He stated, among other things, that neither the plaintiffs nor any of the creditors of Hughes had taken judgment for their demands, or established them before the referee; that the testimony was conflicting as to the alleged insolvency of the debtor Hughes at the time of the sale or transfer of the stock of goods to Brunson, and found as follows: • As matters of fact, “I. That the evidence fails to sustain the allegations of the complaint, that the defendant L. F. Brunson, in purchasing the stock of goods from the defendant L. F. Hughes, intended to hinder, delay, or defraud the creditors of defendant L. F. Hughes. II. That the evidence also fails to sustain the allegations of the complaint, that the defendants Z. Daniels & Co. advanced money to defendant L. F. Brunson and took a mortgage of the stock of goods, with intent to hinder, delay, or defraud the creditors of the defendant L. F. Hughes. I conclude, as matter of law, that the plaintiffs are not entitled to the relief demanded in the complaint. It is, therefore, ordered and adjudged, that the plaintiffs’ complaint be dismissed,” &c. From this decree the plaintiffs appeal upon the following grounds: I. That his honor erred in holding that this is an action solely to set aside the sale of Hughes to Brunson, and the mortgage from Brunson to Daniels & Co., thus ignoring the indebtedness of Hughes to plaintiffs, which is admitted in Hughes’ answer. II. That his honor erred in holding that there is no evidence to impeach the transaction between Hughes and Brunson. III. That his honor erred in holding that Brunson and Daniels & Co. must have had knowledge, or reasonable ground to believe, that Hughes intended fraud, thereby excluding from consideration “circumstances sufficient to put a party on inquiry.” IY. That his honor overlooked the fact, that Brunson, by reason of his position, shown by the evidence, was [518] enabled to consummate this bargain clearly for the benefit of Hughes as well as himself. Y. That his honor erred in holding, that Daniels & Co. had no knowledge, or reasonable ground to believe, intended fraud of Hughes, and ignoring the doctrine of “circumstances sufficient to put them on an inquiry.” VI. That his honor erred in holding throughout his decree, in tenor and effect, that plaintiffs must prove complicity, indirectness, and fraud by positive evidence. VII. That his findings of fact are contrary to the manifest weight of the evidence. VIII. That his honor erred in- failing to give consideration to the admissions and inconsistencies in the answers. IX. That his honor erred in holding, that the old stock of Hughes & Brunson was the property of Brunson that he could mortgage. X. That his honor erred in dismissing plaintiffs’ complaint, and thereby debarring plaintiffs of the right of submitting, on the law side of the court, the question of the indebtedness of Hughes to plaintiffs. 1 It will be observed that all the grounds of appeal, except the first and the last, complain of error in the findings of facts. The Circuit Judge found that the evidence did not sustain the allegation that Brunson had any fraudulent intent in purchasing the stock of goods from Hughes, or that Daniels & Co. had any such intent, in lending the money to Brunson to enable him to make the purchase, and to take a mortgage of the same to secure themselves. We have read the testimony carefully, and while the circumstances might raise a suspicion as to the purpose of Hughes, in purchasing goods on time, and immediately thereafter selling them in bulk for cash, we can not say that the findings of the judge were against the weight of the evidence. 2 The first and last exceptions complain that the judge committed error in holding substantially, that the only purpose of the action was to set aside the sale of Hughes to Brunson, and the mortgage of Brunson to Daniels & Co.; and in dismissing the complaint as to all the defendants, including Hughes, the alleged debtor. It seems that the plaintiffs did not establish their claim as creditors, either before the master or recover judgment thereon; and we do not clearly see [519] how they could ask the relief of equity, until they had shown that they were, in fact, creditors, and the alleged fraudulent sale impaired or destroyed their rights as such. As was said by the Chief Justice in the first opinion in this ease before referred to (33 S. C., page 511): “Of course, the mere fact that his debtor has perpetrated a fraud, even of the grossest character, gives him no cause of action; but when he alleges other facts tending to show that his rights are injuriously affected' by such fraud, then he states a complete cause of action, which, if established, ivill entitle him to relief,” &c. It appears that only the claim for equitable relief was considered, leaving untouched the demand for judgment on the law side of the court against Hughes as debtor of the plaintiffs. The judgment of this court is, that the judgment of the Circuit Court be reversed, in so far as it dismissed the complaint as to the alleged debtor, L. F. Hughes; and that in all other respects it be affirmed.