Hall & Farley, Trustees v. Alabama Terminal & Improvement Co.

143 Ala. 464 | Ala. | 1904

McCLELLAN, C. J.

The statute of 13 Elizabeth, entitled “An Act against Fraudulent Deeds, Gifts, Alienations, etc.,” was, in a sense, the progenitor, and is the prototype of our statute on the same subject, which is now embodied in section 2156 of the Code.

By that statute — 13 Elizabeth — it was “Declared, ordained and enacted * * * * * that all and every feoffment, gift, grant, alienation, bargain and conveyance of lands, tenements, hereditaments, goods and chattels, or any of them, or of any lease, reht, common or other profit rr charge out of the same lands, tenements, hereditaments, goods and chattels, or any of them, or of any lease, rent, common or other profit or charge out of the same lands, tenements, hereditaments, goods and chattels, or any of them, by writing or otherwise, and all and every bond, suit, judgment and execution at any time had or made sithence the beginning of the Queen’s Majesty’s Reign that now is, or at any time hereafter to be had or made, to or for any intent or purpose to hinder, delay or defraud creditors and others of their just and lawful actions, suits, debts, accounts, damages, penalties, forfeitures, heriots, mortuaries and reliefs, shall be from henceforth deemed and taken (only as against that person or persons, his or their heirs, successors, executors, administrators and assigns and every of them, whose actions, suits, debts, accounts, damages, penalties, forfeitures, heriots, mortuaries and reliefs, by such guileful, covinous or fraudulent devices and practices, as is aforesaid, are, shall, or might be, in any ways disturbed, hindered, delayed or defrauded) to be clearly and utterly void, frustrate and of none effect; any pretence, colour, feigned consideration, expressing of use, or any other matter or thing to the contrary notwithstanding.”

At the time of this enactment — 1570,—and for more than two centuries afterwards, choses in action were not leviable by execution or other process under English law. Nor was that species of property strictly within the letter of the statute. Upon these considerations, and mainly upon the first, the act being intended to aid creditors to the subjection only of fraudulently conveyed or transferred property which could have been levied upon in the hands of the debtor, it was uniformly held, so long as there was no right or remedy given the creditor against the choses in action of the debtor, that such property was not within this statute, and, of consequence, that transfers of choses in action were in no wise affected by it.

It was while this state of law obtained, and with reference to this immunity of choses in action from process for the payment of debts, that Lord Thurlow, declining to annul as fraudulent the transfer of a chose in action, used the expression quoted in the opinion of the chancellor in this cause: “It would be preposterous and absurd to set- aside an agreement which, if set aside, leaves the stock (indebtedness) in the name of the person where you could not touch it.” The justness of this declaration is obvious in view of the then non-liability to the debt of the choses in action, even in the hands and name of the debtor. That was the consideration which constrained the Lord Chancellor to refuse to set aside the transfer, and, in doing so, he acted in consonance with the settled doctrine of the English courts in the premises.

So the law stood in England, till the reign of Victoria. But, by the “Judgment Act” of 1 & 2 Victoria, choses in action of the debtor were made liable for his debts, and provision was made to reach and subject such property by a special sort of levy and return, and “A charging order” of the court thereon. Since this enactment it has, with like uniformity, been held that choses in action are to be considered as “Goods and chattels” under the act- of 13 Elizabeth, and that covinous transfers of them are “Void, frustrate and of none effect” against creditors of the transferror. hThis- conclusion was reached and has been steadily adhered to-, notwithstanding such property is neiiher “Goods” nor “Chattels” strictly speaking, upon the consideration that the broad purpose of the act of 13 Elizabeth was beneficent to the supprestion of fraud, and the conservation of the rights of creditors against- all property subject to execution in the hands of the debtor by giving them a remedy to pursue and subject all such property which shall be fraudulently conveyed or transferred by the debtor, and that to- these ends the statute should be liberally construed so as to extend its operation to any species- of property not leviable at the time of its enactment, but made so by subsequent acts of Parliament. Thus, it has been said of this act- — 13 Elizabeth — that “Its simplicity and — if the expression may be allowed — -its expansiveness have enabled the judges to bring within its scope, and extend its operation to, almost every kind of transaction resorted to by debtors to the prejudice of their creditors,” and that it “Cannot receive too liberal a construction, or be too much extended in suppression of fraud.” So, in Tvyne’s caso, it was r( solved that “Because fraud and deceit abound in these days more than in former times, all statutes made against fraud should be liberally and beneficently expounded to suppress fraud.” And the doctrine of the extension of the statute has been thus concretely stated: “The principle is, that to convey away any property, against which execution can issue, is a fraud on creditors, but not a conveyance of that which they could not (but for the conveyance) have touched; so that, by successive statutes giving creditors poAver over different kinds of property, the operation of the statute of 13 Elizabeth c. 5, has been gradually extended.”

This intangible property — choses in action — being thus brought within the act of 13 Elizabeth through the leviable quality attached to it by the act'of 1 & 2 Victoria, the remedy of the judgment creditor upon the fraudulent transfer of such property Avas and is in the law of England the same remedy that he had and has to the subjection of tangible property — goods and chattels, strictly so called — fraudulently transferred by the debt- or, namely, by bill in chancery, — upon the return of an execution “No property,” — to set aside the transfer and subiect such dioses in action to the satisfaction of the judgment. Nor was it ever supposed, but the ruling has been to, the contrary, that the existence of a remedy, by special statutory proceeding at law for the subjection of such property, operated to exclude the remedy in equity for its application to the judgment.

It is also' the settled law in England that, under the Statute of 13 Elizabeth, since choses in action were made leviable by the act of 1 & 2 Victoria, “The forgiveness by a debtor of a debt due to him,” that is, the covinous cancellation and surrender as paid of a bond or' note, for example, by the judgment debtor to his debtor, involving as between them the.discharge of the latter from the obligation, is a fraudulent transfer which the judgment creditor may have set aside in equity, and thereupon hold his debtor’s debtor to account for the amount of said debt. .Each of the foregoing propositions is supported by the text .and citations of Worthington on Fraudulent Conveyances and Statutes of Elizabeth, pp. 1, 2, 4, 5, 6, 17, 18, 20, 21, 22-3-4, 33, 555.

It is of no importance to us whether the statute of 13 Elizabeth was the ordination of original law, or merely declaratory of existing common law in England. Whatever may be the solution of that somewhat mooted question, that enactment, antedating as it did the first English settlement in the territory now constituting the United States, and “Being applicable to our situation and not inconsistent with our institutions and government,” became a part of the common law of this country and of the Mississippi Territory, then composed in part of the territory subsequently erected into the Alabama Territory and now embraced in the State of Alabama. So far from its ever having been repealed, it was in substance and almost literally re-enacted by the legislature of Mississippi Territory in 1803, was the statute law of ■that Territory when Alabama Territory was carved out of it, became thereupon the statute law of Alabama Territory, formed a part of the statute law of the State of Alabama on its admission to the Union, and has continued so to be, being now, as we have seen, embodied in section 2156 of the Code. Being a re-enactment of an English statute which was a part of the common law of this country, it has justly been held to be hut declaratory of existing common law. — Anderson v. Hooks, 9 Ala. 704, 709.

The “Judgment Act” of 1 & 2 Victoria, whereby choses in action were made leviable and thereby brought within the act of 13 Elizabeth, not being the law of England at the time of the first English settlement in this country— 1670 — was not part of our common law heritage and did not become the law of this State. But we have, and for many years have had, a statute of our own providing for the subjection of choses in action of the debtor to the satisfaction of his debts, by process of garnishment. All the considerations upon which the English courts proceeded in holding that the statute of 1 & 2 Victoria, by making choses in action leviable in a special way, operated to bring them within the act of 13 Elizabeth against fraudulent transfers, etc., are equally potent to the conclusion that, since the enactment of our statute making choses in action leviable in a special way, that species of property may be the subject of fraudulent transfers under the common law as it came to us from England.; and so, of course, those considerations drive with equal force and certainty to the conclusion that choses in action are Avithin our statute — Code, § 2156 — against fraudulent conveyances and transfers considered in connection with our statutes — Code §§ 2171 et seq. — providing for the subjection of such property to the payment of debts, and this whether section 2156 of the Code be taken as merely declaratory of the common law, or as the original ordination of law. This conclusion, indeed, is plainer and more obvious in respect to our statutes, than it was in respect to the statutes of 13 Elizabeth and 1. & 2 Victoria, since, in order to extend- the statute of Elizabeth to choses in action after that species of property had been made liable for debts by the act of Victoria, it Avas necessary to do some apparent violence to the letter of the older statute by holding that its words “Goods and chattels” 'embraced choses in action, which in strictness thev do not; while not even this apparent violence is necessary to bring choses in action within the corresponding words of our statute, “Personal property,” for they are personal property as essentially as goods and chattels are personal property in the ordinary acceptation of the word.

The foregoing considerations without more would' suffice to enforce the conclusion that choses in action are within our statute against fraudulent conveyances and transfers; but there are more; Section 2 of the Code, so far as pertinent here, is as follows: “The following words have in this Code the signification attached to them in this section, unless otherwise apparent from the context: 1. The word 'property’ includes property, real and personal. 2. The words 'personal property’ include money, goods, chattels, things in action and evidences of debt, deeds and conveyances.” Section 2156 of the Code declares: “All conveyances or assignments in writing, or otherwise, of any estate or interest in real or personal property, and every charge upon the same made with intent to hinder, delay or defraud creditors, purchasers, or other persons, of their lawful suits, damages, forfeitures, debts or demands; and every bond, or other evidence of debt given, suit commenced, decree or judgment suffered, with like intent, against the persons who are or may be so hindered, delayed, or defrauded, their heirs, personal representatives and assigns, are void.” And section 818 of the Code relating to the creditor’s remedy for the subjection of fraudulently conveyed property, employs only the words “Any property” to cover the subject-matters of such conveyances and transfers. Surely there is nothing in the context of section 2156 to exclude choses in action from the words “personal property” there employed, nor anything in the context of section 818, which, of course, relates to the same property dealt with by section 2156, to exclude personal property, or choses in action as a species of personal property, from the words “Any property” employed in that section. The terms, history and construction of the statute of 13 Elizabeth, taken in connection with the act of 1 & 2 Victoria, to all of which we have adverted, demonstrate the absence of all reason to exclude chores in action from sections 818 and 2156 of the Code. The makers of the Code have certainly in one instance, and possibly in many, outside of section 2, given a very clear indication that they conceived the words “Personal property” to embrace dioses in action, foi they deemed it necessary to expressly except “Things in action” from those words where they declared that executions may be levied “On personal property of the defendant.” — Code, § 1890.

It has been several times held that dioses in action are “Personal property” under the exemption statutes of the Code. — Kennedy v. Smith, 99 Ala. 88; and that they are personal property within our statute against fraudulent conveyances and transfers has been affirmatively and repeatedly recognized, if not decided, from the case of Simpson & Gordon v. Tippin, 5 St. & P. 208, down to che recent case of Hall & Farley v. Henderson, 126 Ala. 449, and the more recent case of Oder, Sons & Co. v. Phillips Bultorff Mfg. Co., not yet reported.

As we have seen, it is the settled ruling of the English courts, since the Judgment Act of 1. & 2 Victoria brought dioses in action within the statute of 13 Elizabeth, that the creditor may come into chancery to reach and subject that species of property, Avhen it has been fraudulently assigned by the debtor; and this though the act of Victoria,-Avhich declared the liability of dioses in action to debts, provided a special proceeding for their subjection, quite analogous to our garnishment proceeding. The English ruling is authority for the same conclusion under like conditions here, that a creditor, notAvithstanding the garnishment statutes provide a special process to leach the debtor’s dioses in action, may come into equity to that end, Avhen such choses have been fraudulently transferred by the debtor. Our oavu decisions are to the same effect. The doctrine was expressly declared by this Court more than fifty years ago in Sheppard, et al v. Iverson, 12 Ala. 97, and recognized in Henderson v. McVay, 32 Ala. 471, and again in Hall & Fairley v. Henderson, supra.

It has been the Iuav all along in England, and in this State, that tangible personal property — goods and chattels? — could be levied' on at law in the hands of a fraudulent transferee, and that a sale thereof under the execution would convey a perfect title to the purchaser. The fact of the debtor’s fraudulent sale of such property, therefore, not only does not stand in the way of the levy of an execution upon it, but does not even cloud the creditor’s right to sell it under execution so as to tend to prevent its bringing its full value. Moreover, the garnishment statute is just as efficacious to reach and subject a chattel,- — a horse for instance — which has been fraudulently transferred by the debtor, as it is. to reach a chose in action. — Code, §§ 2171, 2192.

If the existence of an adequate remedy at law would iu any case operate to deny the creditor’s right to come' into chancery under section 2156, it would seem that it should have that effect in respect of goods and chattels which have been fraudulently disposed of by the debtor; yet, throughout the years, relief has been granted to creditors in respect of such property by the chancery courts. —2 Mayfield’s Digest, p. 992, § 126, and cases there cited. So it is laid down by Mr. Freeman as the general doctrine in the premises: He says: “The property, which by a creditor’s- bill, or by a bill in aid of execution, may be reached and forced to contribute to the satisfaction of a judgment, no doubt embraces everything which can be the subject of levy and sale at law. Generally, in the case of personal property fraudulently transferred, the remedy by direct levy and sale is more speedy and efficient than by creditor’s suit, but there is no doubt- that such a suit may be maintained to- reach personal property as well as real.” — 3 Freeman on Executions, § 425.

Even under our present garnishment statutes, with their provisions for bringing before the law court the alleged fraudulent assignee of a chose in action, it cannor be said that the remedy they afford, for the subjection of a fraudulently assigned chose in action, is more adequate than the remedy by levy and sale under execution, in respect of chattels. Indeed, since it cannot be affirmed of the- remedy by garnishment to subject fraudulently assigned choses in action, as it is justly affirmed of the remedy by execution to subject fraudulently transferred chattels, that generally it is “More speedy and efficient than by creditor’s suits,” it may well be said that garnishment as to the one class of property is less adequate to the creditor’s ends than execution as to the other. And in addition to the “Generally more speedy and efficient” remedy at law by levy and sale, the creditor has also, as to chattels, the same legal remedy by garnishment which he has as to choses in action. Certainly, to say the least, the remedy by bill in chancery cannot be allowed as to tangible personality and denied as to intangible personalty with any show of reason, or, indeed, without manifest inconsistency. We have shown that it has been allowed by this Court in many instances as to chattels, notwithstanding the supposed adequacy of the legal remedy. We ¡are now to show that it has also been allowed by this Court as'to choses in action, expressly against the objection that the remedy by garnishment was adequate, and precluded resort to equity. In the case to which we refer, the creditor filed his bill to set aside the fraudulent assignment of a chose in action by his debtor and to subject the debt to the satisfaction of his judgment. Relief was granted by the chancery court, and its decree was affirmed in this Court. The opinion on the point was by Justice Goldti-iwaite, and is as follows: “At first, we were inclined to think that, under the case made by the bill, the complainant had an adequate remedy at law, by garnishee process, but further reflection has convinced us, that, even if this remedy could be effectively pursued, it does not follow1' he may not also proceed in equity to set aside the fraudulent assignment, and thus reach assets which in reality belong to his debtor. Fraud is one of the original grounds upon which courts of equity have always considered themselves as entitled to entertain jurisdiction. (Daniel’s Chan. Prac. 611; Story’s Eq. § 184.) We conclude therefore that it is not objection to this bill, that the party might have redressed himself by pursuing his legal remedy.” — Sheppard, et al v. Iverson, 12 Ala. 99.

This case has never ben overruled. We do not understand that its soundness has ever been questioned. It was cited approvingly by Sommerville, Justice, in his opinion in the much- mooted case of Smith’s Executor v. Cockrell, 66 Ala. 64, in which he maintained that fraud was always a ground of equity jurisdiction. That broad proposition was not established in that case, nor has. it since been established in our jurisprudence. Judge Stone also delivered an opinion in the case to. the general effect that fraud, in and of itself, could not be the basis of equitable jurisdiction, but he expressly recognized the jurisdiction of equity to set aside fraudulent conveyances of property, saying in the course of his opinion: “It is not our intention, in what we have said, to bring in question the large remedial powers of equity in oases of fraud. It can convert a perfect equity into a legal title ; can remove legal encumbrances for the preservation of a paramount equity; can, in a proper case, marshal and adjust conflicting claims;, can subject to debts property conveyed in fraud thereof ,” etc., etc. (Italics ours.)

Fraud was not involved in that part of the case of Allen, et al v. Montgomery Railroad Co., 11 Ala. 437, the decision of which was cited on the former appeal in this case to the proposition “That a bill seeking to subject dioses in action, which could be reached by garnishment, Avas without equity.” By the aspect of the bill in that case, the equity of Avhich was denied, it was sought to collect from the subscribers their subscriptions to the stock of the corporation debtor, Avhich were then due to the company. There had been no assignment of these claims by the debtor; no fraud as to them had been committed by the corporation defendant in judgment. Had they been fraudulently assigned, there is no room , to doubt that the Court, composed of the same judges who sat in Sheppard, et al v. Iverson, supra, and speaking by the same justice who delivered the opinion in that case, Avould have held, as in that case, that the bill to subject them had equity.

There is another consideration — peculiar, perhaps, in its underlying facts, to our jurisprudence, and entirely independent of any to Avhich we have adverted — -which, to our minds, takes the equity of bills to reach and subject choses in action, fraudulently assigned by judgment debtors, out of the field of disputation. Our statute of garnishment was enacted in the year 1818. From thence on, creditors had the legal right to subject the choses in action of their debtors to the satisfaction of their debts. This legal right existed as well in respect of choses in action which had been fraudulently assigned, as against those held by and in the name of the debtors. But there was at first no remedy under the garnishment statute whereby choses in action, which had been fraudulently assigned by a debtor, could be reached and applied to the debt. That statute made no provision for a suggestion by the garnishee that a third party claimed the debt, or that the defendant’s claim against him had been assigned to a third party, nor for the bringing before the court of such assignee for the purpose of a trial of the right of property in the choses in action as between the defendant in judgment and his assignee. It is true the garnishee might answer that the defendant had assigned the claim -against him, but this was not with the view to bringing the assignee in, and nothing of that sort ensued upon such answer; and, upon such answer, or even suggestion of notice of assignment, no judgment could go against the garnishee. It is true, too, that in some cases the plaintiff was allowed to contest the factum of the'assignment, and to have judgment against the garnishee upon a finding that no- assignment had been made; but it was never allowed that the bona fides of an assignment in fact made could be inquired into; and it is impossible to conceive that the bare fact of assignment could be so negatived in such a trial as to preclude the suggested .assignee from afterwards establishing it against the garnishee, and thus subjecting him to double recoveries, the assignee not being before the court. However that majr be, it xvas expressly ruled under the original garnishment statute that, though the creditor had a legal right to subject choses in action which his debtor had fraudulently .assigned, he had no legal remedy to that end by process of garnishment. The case was this: Simpson & Gordon sued Dennis Tippin and summoned Cantrell in garnishment. He answered that he had executed a note to the defendant, Dennis Tippin, which was outstanding and unpaid, but this note had been assigned by said Dennis to Philip Tippin. The plaintiffs contested this answer, and, in support of their contest, proposed to prove that the transfer by Dennis to Philip Tippin was fraudulently made, to elude the just demands of his creditors, and without any consideration. The circuit court’s rejection of this evidence was sustained by this Court, on grounds stated in the following excerpt from the opinion: “It cannot be controverted, that the establishment of those facts results in the legal consequence, that the proceeds of this bond remain liable, notwithstanding such pretended assignment, to the satisfaction of the debts of the defendant. The only question is, whether, through the medium of the legal proceeding here adopted, it is. competent to make such appropriation of the bond. As between the two Tipping and Cautrell, the garnishee, both at law and in equity, the debt is due to and recoverable by the assignee from Cautrell, though fraudulently made, as alleged, and proposed to be proven.”

“If an action was brought against Cautrell, by said assignee, he would not .be heard, to impugn the assignment by such evidence.”

“Upon the principle of the decision made by this Court, in the case of Drake v. McCausland, it would be rejected as ‘res inter alios acta.’ The evidence, then, Avhick was rejected in this case, Avas clearly irrelevant to the only issue at bar, which was whether the garnishee Avas indebted to defendant in attachment.”

“The remedy, by attachment and summons, avIu ch was pursued in this case, is not so extended, and guarded by necessary provisions, as to embrace, in its present condition, this, any more than many other of the various devices of fraudulent debtors, which it is the peculiar proA’ince and power of a court of chancery, to detect and countervail.” — Simpson & Gordon v. Tippin, 5 St. & P. 208, 211.

The soundness of this decision has never been doubted. To the contrary, its doctrine was expressly approved in Foster, Nostrand & Co. v. Walker, 2 Ala. 177; and the case was approvingly cited in Flourney & Epping v. Owen, 74 Ala. 446, and in Hodges Brothers v. Coleman & Carroll, 76 Ala. 103.

Thus it directly determined, after the statute of 1818 gave to the creditor the legal right to subject choses in action of his debtor, that his remedy to the effectuation of that right, in respect of choses in action fraudulently assigned by the debtor, was exclusively in equity. More than twenty years after this legal right had been conferred on the creditor, that is in the year 1840, the legislature amended the garnishment statute by incorporating therein the provision now found in it for bringing in the assignee of a defendant’s chose in action disclosed by the answer, and for a trial both as to the fact and the bona fides of the alleged assignment; but it is thoroughly well settled that the creation by statute of a legal remedy never ousts pre-existing equity jurisdiction. — 3 May-field’s Dig. p. 198, § 436.

We have considered the right of a creditor to file a bill in equity to reach and subject fraudulently assigned choses in action of his debtor, without reference, in the main, to section 818 of the Code. That section is as follows : “A creditor without a lien may file a bill in chancery to discover or to subject to the payment of his debt any property which has been fraudulently transferred or conveyed, or attempted to be fraudulently transferred or conveyed by his debtor.” This section has been held to put all creditors on the same footing in respect of the right to invoke the jurisdiction of equity. — Lehman, et al v. Meyer, et al, 67 Ala. 403. As it gives this remedy to the creditor without a lien as to. “Any property” fraudulently transferred or conveyed, it must be intended, either that it gives the remedy also to the creditor with a lien, or that he already had it in respect to “Any property” which had been fraudulently transferred or conveyed. We have seen that choses in action are within the statute of 13 Elizabeth; that they are personal property within section 2156, and within the words “Any property” of section 818 of the Code, and therefore, of course, may be the subject of fraudulent transfers under each of those statutes. In view of all which, section 818 must be, taken as an express legislative provision that a creditor may file a bill in chancery to subject to his debt choses in action, which have been fraudulently transferred by his debtor. The whole conclusion, as to the existence of that remedy for the subjection of that species of property, might well be rested upon section 818 alone.

Upon the several considerations which we have set forth, we have no hesitation in holding that a creditor may proceed in equity to set aside a fraudulent transfer of dieses in action by his debtor, and to subject them to the payment of his debt.

The purchase by a corporation of shares of its oivn capital stock is a fraud upon its creditors. Such shares neither import nor represent any right or claim in or to, or to subject to their payment the assets of the corporation as against the rights of creditors. Shares purchased by the corporation have no value as assets for the payment of corporate debts. Obviously, therefore, the transaction involves, on the one hand, the diversion of corporate assets to persons — shareholders—who have no debt against the company nor the shadow of claim to or against its assets so far as creditors are concerned, and on the other, the acquisition by the company, in the stead of assets thus diverted, of a mere right to re-issue certain shares, or shares to a certain amount in its capital, which right is of no value as assets for creditors. Such a diversion of corporate property is, in respect of creditors, essentially a gift 'to the shareholders whose shares are purchased by the company, a purely voluntary transfer of corporate assets in fraud of corporate creditors, fraudulent and void as to creditors, and this regardless of the intention actuating the company and the selling shareholders. — 2 Morawetz on Corporations, §§ 789, 790, 793, 794; 2 Thompson on Corporations, § § 2054 et seq.; Hall & Farley Trustees v. Henderson, 126 Ala. 449, 480-2, and authorities there cited.

Money is leviable property (Bennett v. Bass, et al. 10 Ala. 951; 1 Freeman on Executions, § 111), and money paid by a debtor corporation for shares of its own stock is property fraudulently transferred, which may be reached and subjected by the creditor on bill in chancery.

Investment bonds of one corporation owned by a debtor corporation are choses in action leviable by process of garnishment. Their transfer in payment for shares of stock of its owp capital by the debtor corporation is a fraud on creditors of the corporation, and a creditor may proceed by bill in equity to set aside such transfer and subject them to his debt.

Promissory notes, and other forms of obligation of the subscriber to the capital stock of a corporation for the amount of his subscription, which must be also for the face amount of the stock subscribed for and unpaid, are choses in action which, under the garnishment statutes, are subjectable to the debts of the corporation. The forgiveness of them, that is, the surrender of them, cancelled as paid, to' the maker, when they have not been paid, is, as to creditors, a fraudulent transfer of them, upon which the creditors may come into equity by bill against the maker to coerce their payment upon the complainant’s debts. So too, of course, where the obligor makes only colorable payment, as by the satisfaction of an undoubtedly illegal claim he assumes to hold against the company, or of a claim he has against a. third person or another corporation, for which the obligee corporation is not liable. And where the solvent maker actually pays in part and is forgiven as to the residue, or, as to the residue, is allowed credit by the satisfaction of such illegal claim or claim against another corporation or person, he may in like manner be required to pay such residue to creditors of the corporation. ■

An arrangement, whereby a debtor corporation, for the parpose of releasing and acquitting a solvent subscriber to its stock from his obligation to pay for the same, accepts in lieu the obligation of a known insolvent person, io whom the solvent subscriber transfers his stock, and hereupon releases the solvent subscriber from his obligation and surrenders his promise in writing to pay the amount of his subscription a.s paid and cancelled, is in legal effect the transfer of property by the corporation to the solvent subscriber without consideration, Avhich is fraudulent and void as to the creditor, and the latter may come into chancery to enforce the original obliga I ion resting on the subscriber to the satisfaction of his debt.

The general title to a chose in action, which has been assigned by a debtor to his creditor as collateral security t- the debt, remains in the assigning debtor. The creditor has a lien on the chose which he may, upon default of his debtor, effectuate by reducing it to possession; that is, collecting the money due on it, and applying it to his debt. If tlie creditor be dispossessed of tbe cbose in action by tbe fraudulent deceit of his debtor, be may still assert and effectuate bis lien upon it; but he is not bound to. He may, of course, collect bis debt from bis debtor without reference or recourse to this collateral security ; and, in proceeding to collect it, be may acquiesce in tbe debtor’s fraudulent act of dispossession, waive bis lien on tbe cbose under its assignment to him as collateral, treat it as tbe unencumbered property of bis debtor, and as such pursue it into tbe bands of a fraudulent transferree or assignee of bis debtor.

But if tbe creditor, after be has been induced by tbe misrepresentations of tbe debtor to surrender such collateral elects, upon coming to a knowledge of tbe fraud, to insist upon his rights under tbe assignment to him, and to enforce the chose in action as bis property and in bis own right against the maker of tbe obligation, bis remedy is not by bill in chancery, as upon a fraudulent transfer by bis debtor, but by an action at law on tbe obligation against the obligor. Such a case is not within § 2156 or § 818 of tbe Code. Tbe fraud practiced to his dispossession of the chose in action is not a fraudulent transfer under those statutes; and apart from them it is not such fraud as creates any impediment to bis recovery in an action at law.

We will not further extend this regrettably long opinion by, making tlie application in detail of the foregoing principles to tbe varying status of fact laid against tbe several respondents by the amended bill. Upon those principles, ii may be that tbe bill is without equity, in so far as it seeks to recover on tbe written promises, assigned by tlie Alabama Terminal Improvement Company to tbe complainants as collateral security counting upon assignments, and that ii should be dismissed as to tbe obligors in those undertakings, Wiley and Clarence Murphree, upon their proper and separate motion; but it has equity, under sections 2156 and 818 of the Code, against eacli of tbe other individuals and co-partnership .respondents. It follows therefore that, in our opinion, the chancellor erred in sustaining the motion to that end, and dismissing tbe bill.

It will not. be a matter of practical difficulty for the chancery court, upon proof of the bill, to measure relief against each of the respondents;, so that each shall account for the assets of the debtor corporation which he has received in fraud of the complainants, without subjecting any of them to double recovery or payment.

The complainant, H. M. Hall, has an interest in this appeal, and in the reversal of the decree dismissing the bill for want of equity, as the legal holder of the judgment recovered by him against the Alabama Terminal Improvement Company, which is the basis of this suit, and it by no means stands in the way of a reversal, that errors are assigned jointly by all the complainants.

One of the counsel for appellants seeks to have us retract the ruling made on the former appeal that the chancery court, in the absence of a fraudulent transfer, and in the absence of such other fraud as would positively impede an action at law and proceding in garnishment, has no jurisdiction to subject the choses in action of the debtor to the payment of his debts. We decline to do it. We i. ere thoroughly satisfied of the correctness of that ruling, and that upon the fullest investigation and consideration, when it ivas made on the former appeal and reaffirmed on the application for rehearing. Nothing against it is now suggested that was not then fully considered. On the other hand, the side lights, so to speak, which have been thrown on the question by our consideration and investigation of the statute of 13 Elizabeth, and its judicial construction, and of our own statute, now constituting section 2156 of the Code, serve of themselves to demonstrate the soundness of our conclusion and leave us, as we have been since the case was finally disposed of on the former appeal, without any doubt of its soundness.

Seme expressions, employed in the opinion on rehearing when the case was here before, to the general effect that chancery would not intervene to subject choses in action of the debtor, unless fraud or other circumstances presented an effectual impediment to their subjection by process of garnishment, and which seem to have influenced the chancellor on the last hearing, were indulged in without proper reference to our statutes in relation to fraudulent conveyances and transfers; and, when considered with reference to those statutes, they are inaccurate and misleading.

It is insisted for appellees that the decree on the motion to suppress depositions, and on the plea of Wiley and others, should not have been made below, inasmuch as the bill ivas dismissed. This may be so. We need not decide that; nor indeed definitively and absolutely whether those decrees were correct. It is likely, however, that the decree on the motion to suppress was right; and that the decree on the sufficiency of said plea: — wherein the chancellor followed the opinion of this Court on the former appeal, which seems now to have proceeded on the mistaken motion that there was a contest of the an-SAvers in garnishment alleged'in the plea — was erroneous.

That the whole case may stand in the chancery court, where and as it did just before the last submission, the decree will be reAersed in toto, and the cause will be remanded.

Reversed and remanded.

Tyson, Doavdell and Denson, J.J., concurring.