Ruse v. Bromberg

Nov 15, 1889

Reporters:
Before:: Clopton

CLOPTON, J.

[1.] Appellants complain that the chancellor refused to allow an amendment of the answer to the amended bill, and on this ground ask a reversal of the decree. The amendment, though not formal, may be regarded in the nature of a demurrer, and will be so treated. Under the statute authorizing the incorporation of a demurrer in the answer, and the liberal construction placed upon the statute of amendments, a defendant has the right to amend his answer at any time before final decree by incorporating a demurrer therein.—Shaw v. Lindsay, 60 Ala. 344. But a denial of the right will not reverse the decree, if it appears that defendants were not prejudiced thereby.

[ 2. ] The bill is filed by appellee in the capacity of assignee of two distinct and insolvent corporations — the Alabama Insurance Company, and the Citizens’ Insurance Company— and assails for fraud certain conveyances of a lot of land in Mobile. Appellee was appointed by separate assignments. The. first question raised by the proposed amendment relates *626to the right of complainant to unite distinct claims,-assigned separately by the companies, in a bill attacking for fraud a conveyance of his property by a common debtor, without having first obtained judgments at law, on which executions have issued and been returned ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍“no property.” The contention is, that the statute which authorizes a creditor without a lien to file a bill in chancery to subject to the payment of his debt property fraudulently conveyed by his debtor, does not extend to such creditors the general rule, which permits separate judgment creditors to join as complainants in a bill having such object. The statute has been in operation nearly thirty years. From the time of its enactment, it has been the common practice to unite in such bills two or more creditors without a lien, seeking to enforce separate and distinct demands. Many cases have been reviewed in this court, without the propriety of the practice being questioned. The statute has been generally considered as operating to place simple-contract and judgment creditors, as to the remedy, on the same footing. Were it difficult to .perceive any sound principle of equity pleading on which to justify it, we would long hesitate to disturb a practice so general and continuous, especially, as its tendency and effect are to promote convenience, and to prevent multiplicity of suits.

In Montgomery & Florida Railway Co. v. McKenzie, 85 Ala. 546, the bill was for discovery, and was filed under section 3545 of Code, 1886. The section was construed as creating a right in’ both judgment and simple-contract creditors, and in connection with the succeeding section, 3546, as providing the remedy for the enforcement of the right. The latter section provides, that any number of judgment creditors, upon whose judgments executions have been issued and returned “no property found,” may join as complainants in such bill. On this express and limited provision, and the omission therefrom of creditors without a lien, it was held, that the statute does not allow the latter class of creditors to become common suitors. Section 3544, under which the present bill is filed, does not create, but only extends to simple-contract creditors, without restriction or qualification, express or implied, a right and remedy which judgment creditors possessed independent of statutory provisions.

[3.] But, whether separate creditors without a lien may join in such bill, is not the precise question presented by the amendment. The claims of both companies are assigned and unite in complainant, by which he acquires a common inter*627est in them. They are of the same standing and dignity. The purpose of the bill is to subject to their payment a common estate, and all the defendants are interested in the subject-matter of the suit. By joining the claims in one bill, expense is diminished, unnecessary and ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍multiplied litigation avoided, and the defendants are not prejudiced. We can see no difficulty that can arise from allowing complainant to assert in one bill his title as assignee to- a common relief in respect to the several claims. On the coming in of the report of the register, the decree may be so moulded as to properly adjust the rights and equities of the respective parties.

[4.] The amendment further controverts the right of complainant to proceed to subject property alienated by the debtor, to the payment of notes given for the unpaid capital stock subscribed for, or purchased by him, until by proper proceedings against all the shareholders the amount of the outstanding liabilities of the corporation is ascertained, the pro rata proportion of each assessed, and a call therefor made. When the liability is upon a subscription to the capital stock, and the charter or contract of subscription provides that the shares shall be paid in as required by the board of directors, the general rule is, that the stockholder’s liability does not mature, and he can not be sued by the company, until a call is made. If the charter and contract of subscription are silent as to the time of payment, a call or assessment is an implied condition precedent to a matured liability. The rule is otherwise, when by the provisions of the charter, or of the contract, the subscription is payable at specified times, and in specified amounts. In such case, the liability matures, and the subscriber is bound to pay, in all events, on the day stated; a call is not requisite. — 1 Morawetz on Corp. § 144; Cook on Stock. § 106. The grantor in two of the conveyances attacked gave notes for the unpaid capital stock of the companies, payable on demand. Without regard to a call or assessment upon all the shareholders, the company could have instituted, at any time after the dates of the respective notes, a suit at law upon the notes, or have filed a bill to subject to their payment property fraudulently conveyed by the debtor; such suit being a sufficient demand. Complainant, as assignee appointed by the board of directors, is clothed with all the rights and powers of the board essential to make the corporate assets available, and for this purpose may maintain any suit, at law or inequity, which the corporation could *628have brought.—Chamberlain v. Bromberg, 85 Ala. 579; Wooldridge v. Holmes, 78 Ala. 568.

The disallowance of the proposed amendment does not affect the propriety of the decree, so far ■ ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍as the questions raised thereby are concerned.

[ 5. ] Complainant seeks by the bill to set aside for fraud two conveyances made by Euse and his wife to Herman W. Leinkauf, — one on September 22, 1886, and the other on March 20, 1887. The first may be disregarded, as it was superseded by the second, which recites that it was executed to express the true consideration of the first. The deeds are absolute in form, but the answers admit that they were a security for- the re-payment of the amount expressed as the consideration, and were intended to operate as mortgages. It is well settled, that such conveyances are. fraudulent and void as to existing creditors, because they operate a reservation of a secret benefit to the grantor. Neither the bona fides of the debt, nor the absence of fraudulent intent, nor ignorance of the legal consequence, will relieve the infirmity. Their condemnation rests on the inevitable tendency and effect to hinder, delay and defraud creditors.—Sims v. Gaines, 64 Ala. 392; Hill v. Rutledge, 83 Ala. 162.

[ 6. ] The premises in question were purchased by Euse from W. G-. Little, who conveyed them March 20, 1885, to him and his wife. Mrs. Euse has not paid, nor was it intended that she should pay, with her own means, one-half, or any part of the purchase-money. By an unbroken line of decisions, it is the settled law in this State, that a voluntary conveyance is fraudulent as to the existing creditors of the grantor, without reference to the intent of the parties, the financial condition of the donor, or the kind and value of the property donated. —Seals v. Robinson, 75 Ala. 363. Euse having purchased the property, and having caused a half interest to be conveyed to Mrs. Euse as a gift, the conveyance, so far as respects the liability of that interest to his existing debts, is the same in its nature and consequence as a \. voluntary conveyance by him to his wife, and the property ^may be subjected by his existing creditors, unless Leinkauf is a bona fide purchaser without notice, which he can not be when claiming under a deed ‘denounced fraudulent by the law.

[7.] It appears, however, that Euse paid only a small part of the purchase-money in cash, and for the deferred payments two notes for $1,250,00 each were given, signed *629by himself and wife. Leinkauf, by the deed to him, and as part of its consideration, assumed to pay these notes. At law, a deed constructively fraudulent is absolutely void, but in equity the rule ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍is more tolerant. There is a clearly defined distinction between the consequences of a conveyance fraudulent in fact, and of one only constructively fraudulent. A deed tainted with actual fraud, conceived and executed with intent to hinder, delay or defraud creditors, will not be permitted to stand for the purpose of reimbursing the grantee any advances he may have made in consequence of it; he will not be allowed to receive benefit from his iniquitous act. The rule is otherwise when the deed is only fraudulent by operation of law, or the circumstances attending its execution are merely suspicious. A conveyance partly voluntary because of the inadequacy of its consideration, if not made with fraudulent intent, may stand as security for the consideration actually paid; and when only constructively fraudulent, it will be upheld, for the purpose of re-paying the grantee any advances made by him in removing incumbrances from the property, as subservient to the equity of the case.—Potter v. Gracie, 58 Ala. 303; Gordon v. Tweedy, 71 Ala. 202; Caldwell v. King, 76 Ala. 149; Gilkey v. Pollak, 82 Ala. 503; Campbell v. Davis, 85 Ala. 56.

“Whether or not Ruse procured the conveyance of one half interest to his wife, or withheld it from record, with a fraudulent intent, is immaterial. If - conceded, the equities of Leinkauf are not affected thereby. He had no connection with its execution, no notice of such intent, and did not participate therein. His right to reimbursment depends on the character of the deed made by Ruse and wife to him. The debt, as security for which it was executed, is shown to be bona fide. A deed was taken instead of a mortgage, as a matter of convenience, and was suggested by a third party as the proper mode, on the erroneous idea, that though a married woman had no capacity to make a mortgage, she might make an absolute conveyance of her statutory separate estate, to secure or pay the debts of her husband. Fraud must be proved, not presumed. Some of the surrounding circumstances seem suspicious, but are not sufficient, the onus of proof being on complainant, to justify the conclusion of actual fraud. The inference, that a deed absolute in form was taken in order to obtain a conveyance supposed to be valid as to Mrs. Ruse, and not with intent to defraud credi*630tors, is more reasonable and consistent with honesty of purpose. The notes for the unpaid purchase-money constituted a vendor’s lien, subordinate to which was complainant’s right to subject the premises to the debts of Ruse. To make ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍his title effectual, Leinkauf assumed to pay the purchase-money notes to the vendor. Gomplainant obtains full equity when he subjects the prémises in the same condition in which they were when alienated by Ruse. He does not render equity, if allowed to avail himself of their freedom from the incumbrance effected by the grantee. Leinkauf’s equity is to be substituted to the rights of Ruse’s vendor. This can now be accomplished only by permitting his deed to stand for the purpose of reimbursing the amount paid or advanced by him to free the premises from the superior incumbrance, in consideration of either or both of the deeds made by Ruse and wife to Leinkauf. Whether any and what portion of the purchase-money due by Ruse to Little, his vendor, was paid or advanced, can be ascertained by a reference to the register.

The decree declares that complainant is entitled to have the property sold to satisfy his claims, and omits to provide for the reimbursment of the grantee. In this respect, it is erroneous. As the chancellor reserved the power to modify the decree on the final hearing, the other questions presented by counsel can be more properly and satisfactorily determined after the register’s report shall come in.

Reversed and remanded.