Best v. Fuller & Fuller Co.

Per Curiam: In deciding this case, the Appellate Court, after making a full statement of the facts and evidence, delivered the following opinion, (the appellant here being the appellee in the Appellate Court, and the appellee here being the appellant in that court): “There is no evidence that Best assumed to pay any part of the back rent as part of the consideration of the sale to him. ‘A conveyance of property which is abso-. lute on its face, but which is really intended as a mortgage or security, is well enough as between the parties,, but the settled doctrine is that such a transfer of property is fraudulent and void as to creditors.’ (Beidler v. Crane, 135 Ill. 92, 98.) The reason given for the doctrine is, that in such case there is necessarily a secret trust for the benefit of the vendor, and that the natural and necessary effect of the instrument, in not disclosing the trust, is to mislead, deceive and defraud creditors. (Ibid.) “That Gaul executed the bill of sale as security is proved by his own testimony. He testified: ‘There wasn’t anything left for me to do but to sell him the store to secure my indebtedness to him.’ What Best wanted was his .money or security, and Best’s statements to Pierce, which were not denied, show conclusively that he regarded a bill of sale as merely a security,—else how could he say to Pierce that he was an honest man, and all he wanted was the $2300; that Gaul told him the store was worth $8000; that he thought it worth $6000, and that, if. he could sell it for that amount, he wanted to pay all creditors? And why did he state to Lane that he had no disposition to beat any one, and that he believed that if the store should be held until summer and then sold, all Gaul’s creditors would be paid? This language would be appropriate coming from one who held the property in trust for creditors, but would be not only inappropriate, but absurd, if used by a purchaser of the property absolutely and in good faith. “We are of opinion, from the evidence, that the actual intention of the parties was to hinder and delay creditors other than Best, and that the bill of sale was made for that purpose and to secure Gaul’s indebtedness to Best. The evidence shows clearly that Best knew that Gaul had other creditors; that the property in the store was all Gaul had; that he was in a ‘bad fix.’ He also believed; as he himself says, that the property was worth $6000, and he as well as Gaul must have known, on the hypothesis that they were moderately endowed with common sense, that for Best to take an absolute deed of the property merely as security, and continue the business with Gaul as manager, would necessarily'hinder and delay Gaul’s other creditors. Gaul testified that at the time of the execution.of the bill of sale he knew that it would delay appellant in the collection of its debt. The consideration for the alleged purchase was grossly inadequate, if the bill of sale is to be regarded as absolute in fact and not merely as a security. Best only claims that Gaul owed him $2300. The evidence is overwhelming that the property, when the bill of sale was executed, was worth, net, between $5000 and $6000. Gaul, the only witness for appellees as to value, testified that it was worth only $1730, but we do not think his evidence entitled to much credit.' Gaul testified that he told Best, before the transfer, that under favorable circumstances the store might bring $5000, and Best told Pierce that Gaul told him it was worth $8000, and his testimony in other particulars is inconsistent with his statement that the property was worth only $1730. “ ‘A vendee who purchases property of an insolvent debtor for less than its value, thereby deprives the creditors of the difference and defeats their just expectations.’ (Bump on Fraudulent Conveyances,-—3d ed.—p. 44. See, also, Dodson v. Cooper, 50 Kan. 680, and Mobile Savings Bank v. McDonnell, 89 Ala. 434.) “ ‘Insolvency means a general inability to answer, in the course of business, the liabilities existing and-capable of being enforced. ’ (Brouwer v. Harbeck, 9 N. Y. 589, 593, and cases cited.) That such inability existed in Gaul’s case was fully proven. “But in addition to the sale having been made as security to-Best and to hinder and delay creditors, the evidence tends strongly to show that another object was to secure a benefit or advantage to Gaul. Best testified that he wanted to secure himself and give Gaul some employment so long as he had the store; that Gaul had no income except what he had from' the store. The only objection that Best made when Pierce, appellant’s representative, suggested to him to turn over the store to appellant, and that he should first be paid from the proceeds of the business, was, that it would throw Gaul out of employment; that if Gaul could not stay there and run the store he would be on his, Best’s, hands, with his family, and he would have to take care of him. Best also stated to Pierce and Lane that at the time of the transfer it was understood that Gaul should continue as manager of the store. Gaul was retained in the store as manager, and was paid, or rather paid himself, $75 per month for what he could do before business hours in the morning and after five, six or seven o’clock in the evening,—which is certainly a very suspicions circumstance. A secret understanding or agreement between the parties to a sale for a benefit to accrue or to be reserved to the vendor, the conveyance being absolute in terms, is a fraud as to creditors of the vendor. (Moore v. Wood, 100 Ill. 451, and cases cited.) “Appellant’s counsel contends that there was no such change in the possession of the property as the law requires, and we are inclined to that view. In Martin v. Duncan, 156 Ill. 274, certain property was attached as the property of the defendant in error, George W. Duncan. The goods were claimed by Robert Duncan, a brother of George. The attachment was levied May 28, 1891, and on the 16th of that month George had executed to his brother, Robert, a bill of sale of the goods. The court thus states the case: ‘George W. Duncan, against whom the suit was brought, lived in Dixon and had two stores, —one in Dixon and one in Ottawa. His brother, Robert Duncan, the defendant in error, lived in Ottawa, and managed the store in the latter place from September, 1888, to May 16,1891, when the transfer hereinafter mentioned is alleged to have been made. The defendant in error, in the management of the Ottawa store for his brother, George, sold goods, handled the money, made deposits, paid for goods, paid bills by checks, took out insurance, had no clerk, kept such books as were kept, and had an agreement that he was to receive for his services $25 per month and his board. George Duncan came to Ottawa only occasionally, although the store was run in his name and advertised as his, and the stock levied upon is conceded to have been his until May 16, 1891. Up to that date Robert Duncan was merely the agent and representative of his brother, George, and his possession was, until.then, the possession of George.’ The court say: ‘Up to May 16 defendant iñ error had been in possession as agent of his brother, and if on May 28 he was in possession for himself, the change in the character of the possession should have been indicated by such outward, open, actual and visible signs as could be seen and known to the public or persons dealing with the goods. (Claflin v. Rosenberg, 42 Mo. 439.) * * * When the known and previously recognized agent of an alleged vendor remains in possession, the appearance to the world is the same as though the vendor himself remained in possession, unless there are substantial and visible signs of change of title.’ “In the present case, Gaul, who prior to the execution of the bill of sale was the owner, continued in possession and managed and controlled the business as he had done prior to the alleged sale, sold goods to customers labeled fAdolph Gaul,’ and made out bills to customers headed ‘In account with Adolph Gaul.’ He kept his accounts in the books formerly used by him. He retained in his employ Hessler, his former drug clerk, until April 30, 1898,—-nearly five months after the alleged sale,—and told Hessler that Best had nothing to do with it; that he, Hessler, was working for him, and finally sold the goods en masse without any intervention on the part of Best, except that the latter signed the bill of sale. Best says that he left the whole matter of the sale to Johnson, including agreement as to consideration, to Gaul. The formal signing of the bill of sale to Johnson was substantially the sole act of Best in relation to the property, after the alleged sale from Gaul to him. Concisely, stated, Gaul acted in all respects as if he were the sole owner of the store, and Best as if he had no pecuniary interest in it. Gaul testified that Best had no key to the store and was ignorant of the combination of the safe. ‘[Counsel for appellees relies on the signs as indicating a change of ownership. It may be true that the card sign over the cash register, the one in the perfumery case, and the small one on the front door with the words ‘Henry Best, Successor to’ on it, placed over the former sign of Adolph Gaul, might indicate to one observing them that there had been a change in the business, but we think the effect of such signs more than counterbalanced by the manner in which the business was conducted^ Besides, the primary question is, was there in fact a change of possession from Gaul to Best?—because if there was not the signs were as deceptive as was the bill of sale. “There is no evidence that Johnson, at the time he purchased the property, had any knowledge of the circumstances under which the alleged sale to Best was made or that his purchase was not in good faith. This being true, and appellee Best having received the proceeds of the sale of property worth between $5000 and $6000, appellant is entitled to a personal decree against Best. (Coale v. Moline Plow Co. 134 Ill. 350, 358.) “The judgment will be reversed and the cause remanded, with directions to enter a personal decree in favor of appellant, the Fuller & Fuller Company, and against appellee Henry Best, for the sum of $1440.51, with interest at the rate of five per cent per annum from January 5, 1898, until the date of the decree.” We concur in the foregoing views and in the conclusion above announced. Accordingly, the judgment of the Appellate Court is affirmed. r , , „ , Judgment affirmed.