McCabe v. Guido

Stevens, J., delivered the opinion of the court. Appellant prosecutes this appeal from a decree sustaining a general demurrer to the bill of complaint filed by appellant as trustee in bankruptcy for the estate of Louise Guido against appellee, the husband of the bankrupt. The bill charges that Louise Guido filed a voluntary petition in bankruptcy and was adjudged a bankrupt; that appellant was elected and qualified as trustee; and that as trustee the complainant has a right to bring this suit in the interest of the creditors of the bankrupt. It is averred in the bill that for many years the defendant, Frank Guido, owned and operated a mercantile business on the Hall’s Ferry Eoad in the suburbs of the city of Vicksburg; that this store, referred to as the Hall’s Ferry Eoad store, was operated in the name of the defendant until May, 1914, at which time it was turned over to the bankrupt Louise Guido, the wife of the defendant, as her separate property. The bill charges that in 1914 the bankrupt and her husband procured a loan in the sum of one thousand five hundred dollars for Mrs. Guido and secured the loan by the separate real estate of the wife; that this loan was procured for the purpose of enabling the wife to open a store on Washington street in the city of Vicksburg; that accordingly the store was opened on Washington street with the proceeds of the said loan, and store fixtures and merchandise purchased with the money derived from the loan; that Frank Guido, Jr., the minor son of the defendant, was put in charge of the said store ; that the son continued to operate the business for about six weeks, when it became apparent that he was incompetent to manage and operate the business; that thereupon the defendant and his said wife agreed to take the business operated on Washington street away from Frank Guido, Jr., and that the defendant should take charge of the same Washington’ street store as his — 869 — separate property, and that the Hall’s Ferry Eoad store should he and become the property of the wife, it being verbally agreed and understood that the defendant would barter or swap the Hall’s Ferry Eoad store to his wife for the Washington street store. The agreement between the husband and wife was a verbal agreement, and no writing whatever passed between them. It is charged in the bill that, at the time of this attempted "transfer, the Hall’s Ferry Eoad store was indebted to creditors in approximately the sum of one thousand dollars, and that this indebtedness equaled the value of the goods, wares, and merchandise on hand in that store; that the defendant about that time abandoned his wife and his home and ceased to support and maintain his family ; that the wife supported herself from the Hall’s Ferry Eoad store and the proceeds from sales at that store for a period of thirty-two. months, and the bill seeks to recover for the wife’s estate all moneys expended by her in the support and maintenance of herself and children during this period. It is further charged in the bill that all of the one thousand five hundred dollars which was borrowed upon the joint and several note or obligation of the husband and wife was not expended in stocking the Washington street store, but that a portion of the proceeds of the said loan, the exact amount of which is unknown to the complainant, was left in the hands of the defendant and constitutes moneys in his hands belonging to the wife. The bill shows on its face that the defendant, Frank Guido, after assuming' ownership of the Washington street store, proceeded to make new purchases of goods, wares, and merchandise, and replenished from time to time his stock, and was operating the said store at the time this suit was filed. It is charged that the verbal transfer or exchange of property between the husband and wife was void because iiot in writing in accordance with the statute, and that, so far as the credi — 870 — tors of the wife are concerned, the Washington street store remains the property of the bankrupt and should be brought into the estate and administered by the bankrupt court for the benefit of creditors. There is a.further charge that the bankrupt, after she assumed charge of the Hall’s Ferry Road store, paid the merchandise indebtedness against that store, and the prayer of the bill is that an accounting be had between the husband and wife, that the defendant be given credit for the value of the merchandise in the Hall’s Ferry Road store at the time his wife took charge of the same, and that he be charged with all such indebtedness paid by the wife for him on account of the first store; that a commissioner be appointed to take and state an account; that a receiver be appointed to take charge of the Washington street store; that a decree be rendered against the defendant for such sum of money as may be found, to be due by him to his said wife; that the attempted sale or transfer be set aside and the Washington street store turned over to the trustee in bankruptcy; and for ■general relief. The grounds of the demurrer are numerous, but the principal grounds are: First, that there is no equity on the face of the bill; secondly, that the complainant has complete remedy at law; third, that this is no case for a discovery; fourth, that the allegations of the bill are vague and indefinite, and that the bill is a “fishing” bill. For the purpose of denying any fraud and to enable the defendant to demur, an answer was filed. This answer does more than deny any imputation of fraud, and in fact controverts all the material averments of the bill. In testing the sufficiency of the bill on demurrer, we assume that the lengthy denials of the answer have no direct bearing upon the present issue. The appeal here is from a decree sustaining the demurrer. As we construe the bill, its primary purpose is to set aside or have the court • declare invalid the verbal — 871 — transfer of tlie Washington street store from the wife to the husband, and to recover the stock of goods at the Washington street store as the property of the wife and for the benefit of the wife’s creditors. On this theory and upon .this ground, we think the bill states a cause of action. Unquestionably, the trustee in bankruptcy has the right to sue in the interest of the bankrupt’s creditors. -The suit here is not in the interest of the wife, but for the benefit of the wife’s creditors. In many respects the allegations of the bill are not specific. It is -not shown how much of the original fixtures and stock of goods on hand at the Washington street store at the time of the verbal transfer still remains in the hands of the defendant. The Statute, section 2522, Code of 1906, plainly renders invalid this alleged transfer of the Washington street, store “as against any third person.” The creditors here of the wife have a right to attack this transfer whether they be antecedent or subsequent creditors, for, as said by our court in Gregory v. Dodds, 60 Miss. 549: “Wherever the rights of any third person intervene, whether he be creditor or purchaser, and whether his rights accrued before or after the alleged transfer, no proof made in any other method than in that pointed out by the statute shall be received.” But the utmost effect of the statute is simply to render invalid the alleged transfer or conveyance. It is obvious, then, that the statute did not forbid the husband from making new purchases, from contracting in his own name, and from conducting and operating'the Washington street store in his own name. The store fixtures and property on hand constituting the subject of the alleged invalid conveyance may be recovered by the wife’s creditors, and in this ease by the trustee. The bill, however, is subject to criticism in asking for more than the complainant is entitled to receive. — 872 — There is a strained effort to recover for the wife’s estate moneys which she expended for the support and maintenance of herself and children during the period in which it is alleged the husband abandoned his family and his home. It is manifest that this is not a suit by the creditors supplying the wife with the necessities of life on the credit of the husband. The trustee is here presumably suing for those creditors who have sold and delivered to the wife goods, wares, and merchandise to be placed in her store on the Hall’s Ferry Road — the mercantile creditors of the wife. Any equities of the creditors of the defendant Gruido, those creditors who have sold and delivered to him goods, wares, and merchandise for the Washington street store after the defendant took charge and was operating the same in his own name and under a sign indicating his separate and complete ownership, are not here presented. The right to sue in equity should be upheld under section 553, Code of 1906, and under well-recognized equitable jurisdiction. The present controversy and the rights of the parties can best be inquired into and taken care of in the chancery court. From the allegations of Jhe bill it is manifest that the new stock purchased by the defendant has been commingled with the property that was on hand at the time the invalid transfer was made. The doctrine of wrongful commingling of goods would not apply in this case. There has been an attempt to transfer property in violation of the statute, and we see no reason why the chancery court should not have jurisdiction to cancel fraudulent conveyancs between husband and wife, agreements which in Kennington v. Hemingway, 101 Miss. 259, 57 So. 809, 39 L. R. A. (N. S.) 541, Ann. Cas. 1914B, 392, are classed as “pretended transfers of property between husband and wife.” .It should be remembered thaJ under the allegations of the bill the Washing — 873 — ton street store was the separate property of the wife; that this property, by an unlawful agreement, was turned over to the husband; that a portion of the property yet remains in the hands of the husband, who in the operation of his business has commingled the old stock with the new; and that the rights of third par des are involved. It is manifest that the remedy ai law would be more difficult than adequate, and that a court of chancery by a receiver or otherwise can adequately protect the rights of both husband and wife as well as the creditors of either. No injustice should be done the defendant in his ownership of any goods, wares, and merchandise purchased by him for the Washington street store in his own name and on his own account, and certainly no injustice should be done the creditors of the defendant selling the goods on the faith of his separate ownership of that business. There is no merit in the contention of appellant that the defendant is liable for the indebtedness paid by the wife for and on account of the Hall’s Ferry Eoad Store. The barter of the two stores as between the husband and wife was good. The only right of the creditors is to levy upon or take charge of the property in existence at the time of and constituting the subject-matter of the invalid transfer. The decree of the learned chancery court will be reversed, the demurrer overruled, and the cause remanded, with leave to the defendant to answer within thirty days after receipt of the mandate by the ■ clerk of the court below. Reversed and remanded.