Penney v. McCulloch, 134 Ala. 580

134 Ala. 580 | Ala. | 1901

Lead Opinion

TYSON, J.

The bill in this case was filed by the complainants as creditors of .Miller and Palmatier against them and Penney to have declared fraudulent and void a mortgage -executed by them to Penney upon certain personal propérty conveyed by it and to require him to account for the. value of the property appropriated or converted to his own use; and prayed a personal decree for such value; a condemnation to sale for the satisfaction of the complainant’s debts and-costs, the property not used, converted or appropriated by him, and for general relief.

The allegation's of facts upon which the complainants based the relief thus prayed for, were in substance, that each of the complainants were prior to the 29th day of November, 1895, -existing creditors of Miller and Palmatier who had for some months prior to that date been engaged as partners under the name of the “Oo-operative Furniture'Company,” sometimes called the “Co-operative Furniture Factory” in the manufacture of various kinds of furniture for sale; that on the 29th day of November, 1895, they executed to Penney the mortgage assail-ell to secure a recited and alleged indebtedness of $525.94 upon certain articles of their partnership property which they then owned or was held in trust for them, a part of which property conveyed by the mortgage was. stock in trade, a part was raw material in process of manufacture into furniture and a part was machinery and bools. That the partnership was badly embarrassed financially and there was no consideration for the mortgage; and since the execution of the mortgage Penney had taken possession of the property described in it, a portion, of wliicji he converted and disposed of, a portion ho allowed others to convert, and dispose of, and the remainder he still holds in undisputed possession. Just. Avliat portion Avas disposed of by him or lie alhnved others to dispose of or Avliat portion he had in his possession at the filing of the bill, complainants did not hnoAV and were unable to state.

The respondent Penney answered the bill, iucorpo- . rating in his ansAver four grounds of demurrer, aaLícIi Avas OA’erruled by the chancellor. This demurrer is so manifestly untenable Ave aaí.11 not consider it. The an-SAver contains nothing but a mere general denial of the allegations of fa.ct charged in the bill and Avas utterly insufficient, to relieve the respondent of the prima facie case made against him and upon Avliom 'rested the burden of overcoming not only by clear proof the presumption of unfairness and mala fides, but by a clear and distinct response to each averment of the hill. — Moog v. Barrow, 101 Ala. 209; Robinson v. Moseley, 93 Ala. 70; Wood v. Pebbles & Co., 121 Ala. 100.

But-aside from this, under the aArerments of the bill Avhen the complainants established the existence of them respective debts, it then, devolved upon the respondent to prove that the notes evidencing the debt claimed by him against Millar and Palmatier Avere given for a bona fide debt, due to him, in the sums recited in them, and that the mortgage Avas to secure this bona ficle debt, untainted Avith any fraud.

The evidence establishes beyond disputation that the complainants Avere creditors of the. Cooperative Furniture Oompanv for material sold to be used in the manufacturing of furniture and that practically all of it Avas used and constituted a, portion of the manufactured articles which AA'ent into the possession of Penney under bills of sale, made to him by Miller and Palmatier some time prior to tire 'execution of this mortgage. It is also practically undisputable from the evidence, that the debt secured by the mortgage Avas the same debt., at least the greater portion of it, which Avas secured hy bills of sale to the same property made by Millar and Palmatier to Penney. In fact Penney himself testifies to having two bills of sale upon this property and shows conclusively that they were intended as mere mortgages. He says, the first one. was for $292.92; the second for $75 a.nd the invariably speaks of them as having'been given these to secure debts due him. According to his testimony the-', consideration of the mortgage of $525.94 was made up of these two items and an item of $1.00 which was secured by a bill of sale upon a portion of the property hold by Mrs. Miller, wife of respondent Miller, and the item of fifty odd dollars for rent of store and personal services rendered by him in and about the sale of the furniture1, which should, under a fair aril legal status', have: belonged to him. He also shows in his testimony that some of the items included in the $525.94, were individual debts which he claimed Miller and Palmatier owed to him or to other persons which he paid at the request of either Miller or Palma.tier.. These individual items as found in his account against the Cooperative Furniture Company (Furniture account) attached to his deposition are as' follows: Nov. 19, 1895. Cash to W. A. Bibb for the rent, of the bouse occupied by Miller and' bis family $40. On the same date there appears a- charge of $23 amount of rent due him by one Campbell who had long before retired from the firm, also of the same; date, a chairge of $44 for rent due him by Palmatier. Of date Dec. 28 this concern is charged with the amount of a note1 ($25) given by Palmatier for a cow and transferred to him. There is also an item in Penney’s account of $50 for rent of a storehouse for one month., the rental value of which according to all the evidence, was $10 or $15 per month. He explains that .the balance of the $50 was charged for services to be rendered by him in looking-after the furniture to prevent its being purloined by ’Miller,and. Palmatier, notwithstanding tire key to this store-room was in his possession. He further explains why the charges for personal liabilities, of Miller and ’ Palmatier entered info the consideration of the bill of sales and mortgage by saying that they a.s partners agreed to assume to pay them. When this agreemnt was made, we are not informed, whether when tíre mortgage Avavs made -or aaíioii the first bill of sale Avas executed AA'e are not told. The other items included in the $525.94, Avere $75 AAdiich he said Avas paid to Lovin, $49.02 paid German Looking Glass and P. Oo., $10 paid Miller for Hudna.il, $75 paid hy order on J. L. Brock account labor. These items, make a total of $209.02. The $75 AAdiich he saj^s1 lie paid to Lovin Aims not shoAvn to have been a subsisting legal demand, in that the correctness of the account AAdiich Avas composed of items aggregating this sum Avas not shoAvn. Furthermore it appears that there Avere items of merchandise charged upon this account for AAdiich the partnership' as such aauis not liable. They were purchases made hy the individual members of the partnership for their personal use. The $10 paid hy him to Miller for Hudna,ll Avas not shoAvn to have been received by him or if received that the partnership justly OAved it. The order of $75 to Block aau.s for groceries, but AAdietlwn lie furnished them, Penney did not know.

It is useless to pursue any further the investigation into the facts as disclosed hy the evidence relied upon hy Penney to establish the bona fhles of the transaction. Nearly every item composing' the account making up the recited consideration in subject to some infirmity going to ite integrity us a just demand effecting the validity of the, mortgage as against the complainants. Indeed, upon Peainey’sf oaati testimony the conclusion cannot he escaped that the. whole transaction had its inception in fa and of the creditors of Miller and Palmatier. The first act consummated hy the. parties Avas to bring into •existence a fraudulent conveyance, confessedly fraudulent by the recei Auction of a benefit to Miller and Pa,1 matter — a bill of sale, absolute upon its face for the security of a debt; and this top to secure in the main their individual, indebtedness to him. By tifie acceptance of it and dealing Avith the property as Avas shown by the evidence in this canse, Penney became a. trustee for these complainants not. only for the proceeds of a.ll property sold by him, but for the value of all property AAdiich he suffered Mill-er or Palmatier to dispose: of. — Dickinson v. National Bank of the Republic, 98 Ala. 546; Birmingham Shoe Co. v. Torrey, Curtis & Tirrell et al., 121 Ala. 89. After their rights attached, which they did while he held tire property under the hills of sale, he could not defeat those rights or discharge himself of the liability incurred as trustees by the taking of the mortgage to secure the larger part of this same indebtedness secured to him by the two bills of sale ánd an additional amount which lie claimed they owed him, even if there had been no infirmity as to the items making up the recited consideration of the mortgage. The decree adjudging him liable was correct, but the amount of his liability as there ascertained was too small. The evidence shows that the value of the goods sold by Miller after they went into Penney’s possession and the amounts admitted by Penney to have been collected by bin? from the proceeds of good werei more than enough to pay the entire debts, of complainants and interest thereion. It follows that the respondent Penney takes nothing by his appeal. And that the complainants by their cross-appeal aire entitled to decree .for the full amount of their debts and interest.

The decree of the court must be reversed and a decree here rendered in accordance with the views here expressed.

Reversed and rendered.

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Rehearing

On application for rehearing.

On application for rehearing a majority of the court hold, that the: decree of this court reversing the decree of the lower court on cross-appeal was error, and that tire decree of the chancellor should be affirmed; Justice Tyson not concurring in these views, but holding to the views expressed by him in his opinion.