Groetter, Weil & Co. v. Norman Bros.

BBICKELL, C. J.

The purpose of the original bill filed by the appellants, creditors of a partnership, known as Norman Brothers, is to vacate because of alleged fraud, a sale and conveyance of property real and personal, the debtors had made to their mother, the appellee, Elizabeth A. Norman. The conveyance purports to have been made in payment of a debt due from the grantors to the grantee.

The principles of law by which the validity of the transaction is governed, have been the subject of such frequent discussion and consideration, that the mere statement of them is all that is now necessary or proper. A debtor in failing circumstances, or actually insolvent, his property not being subject to liens or encumbrances, may by a sale añade in good faith, devote his entire property, or any part thereof to the payment of one or more creditors to the exclusion of all others. Failing, or insolvent debtors, have the power and the right to prefer the payment of one creditor to another. If they had not, as has been often said, they could make no payments at all, for whoever was paid would receive a preference. The real motive and intent being the payment of a just debt, the amount of the debt being the reasonable equivalent of the value of the property taken in payment, the transaction is unaffected by the statute of frauds, though its known effect -may be the delay or disappointment of other creditors equally meritorious, or may prevent them from receiving any payment whatever. The statute of frauds is directed against intentional fraud of legal injury to creditors. The payment of a just debt is not a fraud, and cannot be of legal injury to a creditor who is not paid — it is but the satisfaction of a legal obligation, and the discharge of a moral-duty. The principle proceeds on the hypothesis that there is a just debt, and the real intent is its payment; the two must coexist — of course, if there is a secret trust, or a reservation of a benefit to the debtor, the element of good faith is wanting, and an unlawful intent intervenes which vitiates the transaction, however just may be the debt, and however it may approximate the value of the property.

The controversy in this case resolves itself into the inquiry, whether the debt in j>ayment of which the sale and conveyance was made, was a real and subsisting-debt, or was it feigned and simulated to give color to the sale and conveyance, for there is no room for doubt that the debt if real, exceeded the value of the property conveyed ; nor is there room'for the just and- reasonable imputation that there was a secret trust, or the reservation of a benefit to the debtors, attending the transaction. The inquiry involves largely only matter of fact. The city court after a consideration of the testimony, reached the conclusion that the debt was real and supported the sale and conveyance. We have examined and considered the evidence, and we are not satisfied to disturb that conclusion.

A discussion of the testimony would serve no useful purpose. Each case of this character depends upon its own particular facts — numerous as are the cases, it can scarcely be said that any two are twin brothers. Upon questions of fact never exactly alike, it is but seldom that precedents are of practical value ; and they are often overworked in the effort to apply.them to other cases of varying facts, circumstances and conditions. It is enough to say, we must pronounce a volume of testimony proceeding from grantors, the' grantee, and others corroborating them, having full opportunity to know the facts to which they testify, as absolutely untrustworthy, or we must affirm the conclusions and decree of the city court.

The relationship of the grantors and the grantee, and the’fact that they lived together under the same roof, prove nothing unless connected with other facts and circumstances having a just tendency to prove fraud. — Troy Fertilizer Co. v. Norman, 18 So. Rep. 201: Teague, Barnett & Co. v. Lindsay, 17 So. Rep. 538. The law does not prohibit persons who are sui:juris, standing in the nearest relations of consanguinity or affinity, or the most intimate of business relations, from dealing with each other — from lending and borrowing, from buying or selling, or from entering into any contract or engagement into which they could enter if they wrere strangers. If they stand in confidential relations, as between themselves, courts of equity will not permit an advantage to be derived from a breach of the confidence of the relation. But as to others, there is no limitation or prohibition of contracting between themselves. As the law permits a failing or insolvent debtor to prefer creditors, it is difficult to assign any real, substantial reason,’for regarding with suspicion a preference given to a relation. It was well observed in Micou v. National Bank, 104 U. S. 543, as the law confers upon an insolvent debtor the right of choice among his creditors, it does,not require that in the exercise of the right, he should “discriminate against his own flesh and blood.” In Coley v. Coley, 14 N. J. Eq. 352, it was observed by Ch. Green : “A debtor in failing circumstances has an undoubted right to prefer any creditor, as well a parent or other near relative as a stranger, and if the debt were bona fide clue-, the strongest considerations of duty may prompt a son to give preference to the claims of a widowed mother, who had given credit upon the faith of the son’s integrity over the claims of mere strangers.” In Schultz v. Hoagland, 85 N. Y. 468, it was said: “The relation of assignor and assignee, and their intimacy and friendship, and the preference given to the latter as a creditor prove nothing by themselves. They are consistent with honesty and innocence, and become only important when other circumstances, indicative of fraud, invest them with a new character and purpose, and transform them from ambiguous and equivocal facts into positive badges of fraud.” In the cases of Hubbard v. Allen, 59 Ala. 283, and Harrell v. Mitchell, 61 Ala. 270, which are supposed to assert a contrary proposition, the relationship was accompanied, by positive indicia or badges of fraud, which it was declared ought to be neutralized or removed by clear and convincing evidence; by a higher degi*ee of evidence of the consideration, than would be exacted if the relationship had not ex-; isted. The proposition must be accepted in connection with the particular facts of the cases, and when so accepted, we do not doubt its correctness. And it maybe observed, Harrell v. Mitchell was not a sale and conveyance in .payment of debts; but a sale and conveyance for money paid, and was not controlled by the principles which govern sales and conveyances to pay debts. When a preexisting debt is established — when it i's shown that in payment of it, property Hot more in its fair and reasonable value than an equivalént for the debt has been taken, all badges of fraud are neutralized. Falsehood and fraud are not to be lightly imputed ; they must be proved, not presumed. It is but seldom they are the matter of direct, positive testimony. Most often, they are the matter of deduction or inference from tangible facts and circumstances, naturally and logically indicating their existence. “Such facts, nevertheless, must be of a character to warrant the inference. It is not enough that they are ambiguous, and just as consistent with innocence as guilt. That would substitute suspicion as the equivalent of proof. They must not be when aggregated, when interlinked and put ill proper relation to each other, consistent with an honest intent. If they are, the proof of fraud is wanting.” Shultz v. Hoagland, 85 N. Y. 467. The mode of dealing the grantee and grantors pursued, from which the circumstances of suspicion are principally deduced, may not have been that which would have been pursued, if men familiar with, and engaged in like transactions had been the actors. But it' corresponded to their condition in life, their relations, and the circumstances attending them. If from these there had been a departure the departure would have been a circumstance generating stronger suspicion.

A sale and -conveyance of partnership property, the partnership being insolvent, or in failing circumstances, in payment of the separate debt of one of the partners to whom the partnership is not indebted, is a fraud upon partnership, creditors. If such payment forms part of the consideration of the sale and conveyance of partnership property in payment of partnership debts, it has been declared the reservation of a benefit to the partner whose debt is paid, which vitiates the transaction. — Pritchett v. Pollock, 82 Ala. 169. The debt contracted with the grantee by one of the partners in the purchase' and improvement of the storehouse, which was used and occupied by the partnership, near the whole-period of its existence, without the payment of rent, or. a demand for its payment, it would be a matter of some difficulty to treat as. a separate debt, falling within the influence of the doctrine of the case to which we have referred. However this may be, the real indebteclness of the partnership, exceeded the fair value of the property, and the inclusion of this debt will not vitiate the sale and conveyance. — Troy Fertilizer Co. v. Norman, supra; Hayes v. Wesfcott, 91 Ala. 143; Fargason v. Hall, 99 Ala. 209.

It is strenuously insisted," the money which passed into the possession of the grantee on the death, of her husband, the father of the grantors, and which formed a part of the money loaned, was not her money, but money to a part of which, as distributees of their deceased father, the grantox-s were entitled. The father died intestate, and of consequence, by operation of law, whatever of real estate he liad descended to his heirs, and after the payment of debts, whatever of pex’sonal liroperty he may have had, was subject to distribution according to the statute of distributioxxs. His verbal expression or wish, however solemnly and deliberately declared, that his wife should take and hold, or should control and dispose of his estate, could not iixtercept or break the course of descent axxd distribution the law prescribes. The expression was not without moral fox’ce, and if in a spirit of filial reverence the children who were sul juris, having knowledge of all the facts yielded assent to it, the coxxrts mxist be reluctant to displace it, or to permit the assent wlxe-ix giveix to be retracted. The assent may be ixnplied without an express writing, from a long course of dealings coxxsistent only with its existence.— Williams v. Williams, 2 Dr. & Sm. 376 ; 2 L. & R. Ch. App. 294. At the death of the father, he had five childx’en, sons, his heirs and next of kin, thx'ee of whom including the vendors then were of full age, aixd two were in minority. With full knowledge of all the facts, the adult children immediately yielded assent to the verbal disposition the father had made, and the assent had been contiixxxous for a period of eight years or more pi'ior to this transaction, with the iixdication of no purpose to depart froxn it, if retraction had been their right. The sons in mixxority, as they became of age, it is but just to presume influenced by the assent of their elder brothers, assented axid acquiesced, and their condxxct has been in accordance with it. The mother relying xxpon the declared will and wish of her husband, to which her children yielded willing assent, retained possession of the lands and money, commingling the moneys with her own, and employing them as her own. The children have borrowed, and some have repaid. She has made voluntary conveyances of parts of the lands, and of one parcel, a sale to one of the sons The assent of the grantors was yielded, near or quite eight years before the debts of complainants were contracted, when they were free from debt, and were not contemplating the creation of debts. Upon well settled principles, if either of the sons were now seeking to dispute the title of the mother, no court could hesitate to declare that he was estopped. In 2 Story Eq. (13th ed. § 154). quoting from a decision of the House of Lords, the doctrine of estoppel is thus expressed : ‘ ‘It is a general law that if a man, either by words or conduct, has intimated that he assents to an act which has been done, and that he will not offer opposition to it, although it could not have been lawfully done'without his consent, and he thereby induces another to do that from which they otherwise might have abstained, he cannot question the legality of the act he had so sanctioned, to the prejudice of those who have so given faith to .his words, or to the fair inference to be drawn from his conduct.” And again, “If a party has an interest to prevent an act being done, and acquiesces in it, so as to induce a reasonable belief that he consents to it, and the position of others is altered by their giving credit to his sincerity, he has no more right to challenge the act to their prejudice, than he would have, had it been by his previous license.” The estoppel resting upon the grantors, being free from all fraud, binds their creditors. One claiming under or through another who is bound by an estoppel, is affected and bound by it. — Lindsay v. Cooper, 94 Ala. 170.

The decree of the Oity Court is affirmed-.'

Case Details

Case Name: Groetter, Weil & Co. v. Norman Bros.

Court Name: Supreme Court of Alabama

Date Published: Nov 15, 1894

Citation: 107 Ala. 585

Court Abbreviation: Ala.