Builders & Painters Supply Co. v. First National Bank

26 So. 311, 123 Ala. 203

• Court: Supreme Court of Alabama
• Decided: November 15, 1898
• Status: Published

Opinion

DOWDELL, J.

The epitomized statement contained in the brief of appellee’s counsel, of the contents of the bill and other pleading as shown by the record, and which we adopt as sufficiently presenting the facts,, is as follows: '

The hill in this case as originally filed by the appellee, the First National Bank of Montgomery, averred that the Builders & Painters Supply Company was. indebted to it in the sum of $18,000, evidenced by the notes, of the debtor company. That' on the 2d day of November, 1897, suit was instituted by said bank upon said indebtedness in the circuit court of Montgomery. That subsequently on the 9th day of November, 1897, appellants, creditors of said Builders & Painters Supply Company, caused attachments to be issued out of the said circuit court against said Supply Company which were levied upon certain portions of the stock of merchandise of said Supply Company the identity of which was unknown to appellee. “That before the issuing of said writs of attachments the respective plaintiffs, respectively by themselves or by their attorneys" made or caused to be made an affidavit of the amount of the ah leged debts due to them respectively and also that the defendant therein had money, propérty or other effects liable to satisfy its debts which it fraudulently withholds, and lodged such affidavits with the clerk of the court issuing said writs, and said writs were issued upon that ground and no other. That orator is..informed and believes and upon such information and belief avers and states that such allegation in said affidavits that said defendant had money or effects liable to satisfy its debts which it fraudulently withheld, was and is false and untrue and that there was and is no ground for the issuance of said attachments, and that said several parties suing out said several writs of attachment had no probable cause for believing that the ground upon which the same were sued out or any other ground for suing out attachments existed. That the suing out of said writs was an abuse of the process of the court, and was done by said several plaintiffs for the purpose and with the intent of procuring an unlawful and illegal preference in the payment of the several claims held by them against said Builder’s & Painters Supply Company, when no ground for attaching the property of said company existed and when said several parties suing out the same had no probable cause for believing that any such ground existed, and recklessly and in defiance of the rights of orator and the other creditors of said company and with the intent of hindering, delaying or defrauding orator and the other creditors of their just claims and demands; and that said attachments so sued out are suits commenced with the intent to hinder, delay or defraud orator and such other creditors of said company.”

The said attaching creditors, the said debtor company and the sheriff were made parties defendant to the bill. The prayer for relief was that said several writs of attachment should be declared fraudulent and void as against appellee, and for general relief.

On the 20th day of November, 1897, an amendment was filed to the bill in which it Avas averred that subsequent to the original levy of said attachments the sheriff changed the levy of the same, and each was levied upon all the stock of merchandise of the defendant company, that subsequently the defendant company executed a replevy bond and the property levied upon was returned to the defendant. That the property levied upon was greatly in excess of the amount of said attachments.

To the bill as thus amended the appellants filed demurrers and motion to dismiss for want of equity.

On the 18th of February, 1898, a decree Avas rendered overruling demurrers and motion to dismiss.

On the 24th day of March, 1898, the appellants filed answers to said bill as amended containing purely categorical denials of the averments of paragraph three of the bill above quoted, and setting up affirmative and new matter of defense.

On the 16th day of May, 1898, the bill was amended by adding prayer for injunction.

On the 21st of September, 1898, the bill was again amended by averring that since the filing of the bill the appellant attaching creditors had obtained judgment in the attachment suits; and prayed that they might be enjoined from proceeding to obtain satisfaction of the same.

On the same day appellee made a motion for an injunction, restraining appellant creditors from proceeding further to obtain satisfaction of their respective judgments against the Supply Company until the further order of the court.

On the 22d day of September, 1898, a decree was rendered granting the injunction prayed for. The decree recited that the motion had been theretofore made, and that the said defendants had had “due notice of said motion.”

On the 29th day of September, 1898, appellants without leave of the court filed an amendment to their answer “filed in said cause on the 28th day of March, 1898,” averring additional new matter adopting .the de murrers overruled by the court and containing grounds of demurrer to the bill as amended the same as those theretofore filed.

The answer filed .March 28th, 1898, was not verified. The amendment to the answer filed September 29th, 1898, contained the following verification: “Before me, Leon Weil, in person appeared M. Cody, Jr., who, being duly sworn, deposes and says that he was at the date of the filing of the answer in the above entitled cause a member of the firm of Kennedy & Cody and is still a member of said firm, both members to which are made defendants to the bill filed in said cause. That the statements of facts contained in the answer to said bill, filed on the 24th day of March, 1898, and as amended by the answer to which this affidavit is attached, said ansAver being the joint and separate answer of all the defendants to said bill except the Builders & Painters Supply Co. and C. E. Parks and Ira Virgin, are true except as to statements which, appear therein to he ma'de upon information and belief, and that as to the statements made as upon information and belief he verily believes the same to be true. That all the defendants who, with the members of affiant’s firm have answered as aforesaid, are non-residents of the State of Alabama except affiant and his co-partner, J. M. Kennedy,’ and Virgin and Parks.”

On the 1st day of October, 1898, appellant creditors made a motion to dismiss the bill for want of equity and to. dissolve and discharge the injunction.

,()n the’4th day of October’, 1898, appellee amended i(s bill by averring that subsequent to the replevy of the stock of goods by the Supply Company a receiver, appointed by decree of the city court of Montgomery, in Equity, had taken the stock of goods replevied from its possession] that the Supply Company had appealed frofn the decree appointing said receiver and superseded the same, and that said appeal was pending and undetermined. That the said stock of goods was largely in excess of the amount of said attachments, and that the suit in which said receiver was appointed was made by the averments of the bill therein subordinate to the lien of said attachments. That the replevy bonds had been returned forfeited by the sheriff -and executions issued upon attachments of appellants against said Supply Company and its sureties upon replevy bonds. That said Supply Company was insolvent, and had no property subject to execution except said stock of goods taken by said receiver which had been levied upon under said attachments. Appellants objected to the allowance of this amendment.

Appellee made motion to strike amendment to answer filed September 29th, 1898, upon ground that same had been made without leave of court.

The case was submitted upon motion to allow amendment to bill, motion to dismiss bill for want of equity, motion to dissolve and to discharge injunction, and motion to strike answer from the file.

On the 8th day of October, 1898, a decree was rendered allowing amendment to bill filed October 4th, .1898; overruling motion to dismiss bill for Avant of' equity, motions to dissolve and to discharge injunction and demurrers of appellants, and allowed amendment to answer. •

From this decree appellants, the attaching creditors, appeal and assign as error therein the overruling of their said demurrers and said motions.

It Avill be observed that there is no averment' or charge of fraud on the part of the common debtor, The Builders & Painters Supply Co., nor of collusion between the attaching creditors and the said debtor. The equity of the bill is predicated solely upon the allega-tion that- there existed no ground for the suing out of the attachment; that the ground stated in the affidavit forattaehmentAvas false,and that the same Avas sued out with the intent to hinder, delay, or defraud the other cieditors of the common debtor, Builders & Painters' Supply Co., and this allegation is based upon information and belief. The bona fides of indebtedness of the Supply Company to the respective attaching creditors, is not questioned. Reduced to its last analysis, the proposition presented by complainant’s bill is, therefore, that whenever a creditor resorts to an attachment Avithout the existence of a ground of attachment, and without probable cause for believing that a ground exists, another creditor of that debtor, may enjoin the attachment suit, and condemn the property levied on to liis own debt. In the present case, the complainant and the attaching creditors respondents, are alike, simple contract creditors of the defendant debtor, Supply Co. In respect to the nature and character of their debts or demands, they stand- upon an equal footing. It is clear that whatever right, if any, the complainant may have to seek relief in a court of equity, is dependent upon the statute, for without the statute a simple contract creditor could not maintain his bill in equity against his debtor on account of a fraudulent disposition by the debtor of his property, but must first reduce his demand to judgment. The statute which authorizes the filing of a bill in chancery by a creditor without a lien (§818, Code of 1896), is as follows: “A creditor without a lien may file a bill in chancery to discover or to subject to tlie payment of his debt any property which has been fraudulently transferred or conveyed, or attempted to be fraudulently transferred or conveyed by his debtor.” Section 2156 of the same Code, simply declares certain instances or cases which will support a bill filed under the authority of section 818 supra Section 2156 reads as follows: “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 the like intent, against the persons who are or may be so hindered, delayed or defrauded, their heirs, personal representatives and assigns, are void.”

In Lehman v. Meyer, 67 Ala. 403, this court, having under consideration section 818 supra, said: “The real purpose of the statute is to dispense with, and abrogate wholly, the pre-existing law, which required that there should be a judgment at law, or if a judgment and the assets transferred fraudulently, were not subject to execution, that there should be an exhaustion of legal remedies, before the court would intervene to avoid fraudulent transfers and conveyances. That rule is blotted out, and any creditor niay now, and has an equity of right to, invoke the assistance of the court to avoid such transfers or conveyances.” Construing the same statute, in the case of Evans v. Welch, 63 Ala. 256, it was said: “The statutes have enlarged the jurisdiction of the court (chancery), and equitable assets may now be reached by a simple contract creditor, whenever the creditor is entitled to an attachment at law (Code of 1876y §§ 3846-3856) ; and “a creditor without a lien may file a bill in chancery to subject to the payment of his debt any property which has been fraudulently transferred or attempted to be fraudulently conveyed by Ms debtor. — Code, 1876, § 3886.” “The purpose of this statute, its meaning and operation, cannot be misapprehended, and there is but little room for construction of it. As to property the debtor has -fraudulently conveyed, or attempted to fraudulently convey'"ike simple contract creditor is elotlied with the same .right to resort to a court of equity, entitled to the same remedy and relief, to which he or any other creditor having a lien was entitled before the statute. In other words, the necessity for a specific right, or a lien, .to charge the property fraudulently conveyed, or attempted to be fraudulently conveyed, is dispensed with as a condition on which the jurisdiction of the court depends. Though prior to, and. at the time of 'the filing of the bill, the creditor has no lien; yet when the bill is filed, and process served, a lien is acquired on the property conveyed, which will prevail over any subsequent alienation by the debtor or his grantee, and over the claims of subsequent judgment creditors, or of an assignee in bankruptcy.”

It will be observed in the foregoing construction put by this court upon the statute, it is the fraudulent trans ■ fer or conveyance by the debtor that is referred to. We think it manifest from the language employed in these statutes, sections 818 and 2156, as well as from every case adjudicated by this court, in which reference has been made to the same, that it is the fraudulent conduct of the debtor, which, however, may be participated in by another, that the statutes are aimed at, and which confers the right upon the common creditor to seek relief in a court of chancery.

The contention 'bv appellee that the attachments sued out by respondents against the Supply Co., the common debtor, is a “suit commenced,” within the provisions of section 2156, and gives the complainant the right to file its bill, we think is an interpretation too narrow and strained to be given that statute.

We assent to the proposition that the fraud condemned by the statute, is not limited to a formal transfer by the debtor of his property, but the transfer may be /informal, indirect, through the agency of judicial proceedings, or otherwise; but in any event, there must be a participation by the debtor, whether active or passive it is immaterial, provided, however, he participates in the fraud; otherwise the complaining creditor has no right under the provisions of the statute to come into a court of equity.

It cannot by any fair and just construction of the first clause in section 2156, be contended that any one, other, than the owner, of the “estate or interest in the real or personal property,” who is necessarily the debtor, could convey .or assign, or create any■ charge upon the same with intent to hinder, delay or defraud, etc. And likewise as to the second clause — “every bond or other evidence of debt given, suit commenced, decree or judgment suffered, with like intent,” etc. ' “Bond or other evidence of debt given,” given by whom other than the debtor? “Decree or judgment suffered,” suffered by Avhom other than the debtor? .Or “suit commenced” “with like intent,” commenced' through the debtor’s in-lent to hinder, delay or defraud, whether by himself or by another in collusion with him. Or in other words, the “suit commenced” intended by the statute, is a collusive one. Every act condemned by the statute, except that of “suit commenced,” is one, by necessary implication under a reasonable construction, done by the debtor. The statute, as we have said,- is aimed at the fraudulent conduct and acts of the debtor, and it would be unreasonable to give it a construction based upon a single expression contained therein, which though standing alone, might warrant the conclusion contended for by appellee’s counsel, tliat would convert the remedy afforded by it to the creditor against the fraudulent debtor, into a possible means of oppression to the honest, innocent, unoffending debtor. If the language or expression “suit commenced” be eliminated from the statute, there would be -nothing left in the statute to give the slightest support to a construction that would extend its provisions to a case, where the debtor himself was innocent of, and in nowise participating in, the act.or acts denounced by the statute. The employment, therefore, of the expression “suit commenced” in the body of the act, we think was done with the object and purpose to cover and reach a phase of fraudulent action and conduct by a debtor not covered by the other pro-, visions in the statute. We have been cited no case decided by this court that can be considered an authority supporting the views contended for by appellee. In each of the cases of Cartwright v. Bamberger, 90 Ala. ; Bank v. Laucheimer, 102 Ala. 454; Rice v. Less, 105 Ala. 298; Comer v. Heidelbach, 109 Ala. 220; Collier v. Wertheimer-Schwarz Shoe Co., 122 Ala. 320, which were common creditors’ bills, there were averments of fraud and collusion by and between the debtor and the plaintiff in the “suit commenced,” and which was assailed by the bill. In Cawthorn v. Jones, 73 Ala. 74, it was held that a bill by a simple contract-creditor was without equity where there was no conveyance or transfer by the debtor. In Comer v. Heidelbach, supra, p. 223, Haralson, J., speaking for the court, says: “It is the collusive and fraudulent use that is attempted to be made of the process of the court in such- cases, so opposed to the. whole spirit and policy of the statute, which the law abhors and denounces.” It is obvious and manifest that to constitute collusion more than one mind must be involved. Collusion is defined, a secret agreement and cooperation for a fraudulent purpose. Collusion between the plaintiff and defendant in the suit, is necessary to constitute it collusive as against other creditors. It follows, that in dealing with, the term “suit commenced” as found in the statute, in bill by creditors to set aside such suits as fraudulent and collusive, the same principles obtain and govern, as in the case of an actual transfer or conveyance fraudulently made; the “suit commenced” if collusive, being the inception of that which is intended to eventuate in a transfer of the debtor’s property, or in other words, being an attempt to fraudulently convey.

In Adkins v. Bynum, 109 Ala. 284, it was said by this court: “It is laid down in the books as a general proposition that the concurrence of three elements is essential in the constitution of a fraudulent conveyance; that is to say before a conveyance can be declared fraudulent it must be made to appear that there' is (1) a creditor to be defrauded, (2) a debtor intending to defraud, and (3) a conveyance of property out of which the creditor could have realized his claim or some portion thereof.” See also, Waite on Fraudulent Conveyances and Creditors’ Bills, §§11 and 15. In the case at bar there is an absence of the second element above stated —“a debtor intending to defraud.’1’ There is no averment in the bill of any fraud, on the part of the common debtor, indeed, no pretence of anything other than innocence and honesty, and entire freedom from fraud and collusion with the attaching creditors.

There is another view, which confirms us in the construction we have given to these statutes. As is well said in argument by counsel for appellants, and we here quote from counsel’s brief: “If there were ncstrong’er argument against the contention of the complainant, it would seem that from the mere contemplation of the results, no court would adopt such a conclusion, unless driven to it by irrefutable logic or by such a weight of binding adjudications as could not be escaped. Here it is not denied that the plaintiffs in attachment had valid debts against the Supply Company, but the complaint is, the debtor had committed no act that justified the suing out of the attachment and seizure of its property. In such cases, ordinarily pursued, either by action at law upon the bond which (by statute) may be commenced without awaiting the termination of the suit; or (after the termination of the suit) by an action on the case against the plaintiff in attachment, a recovery might be had for expenses incurred in defending the attachment suit; for the value of the attached goods (if they had not been replevied), and in addition, punitive damages if the process was sued out maliciously and in tiie absence of probable cause. In such case, whether any ground existed for punitive damages, or whether the plaintiff was confined by the circumstances to damages for the mere wrongful resort to the process, he would, if he had levied upon .property and realized from its sale, have had indemnity at least to the extent of the value of the property. Here, if the contention of complainant be sustained, another creditor may also recover the value of the property, and yet leave the attaching creditors liable on their bonds minus the indemnity. For it will be readily-seen that no such privity exists between the complainant in this bill and the Supply Company as will enable the respondents, attaching creditors, to plead, in a suit on the bond, that the damages have already been recovered in this suit. Moreover, where an attaching creditor buys in the attached property, or receives the proceeds, it is a credit on. the defendant’s indebtedness, regardless of whether the attachment was rightfully or wrongfully sued out. In such event, if the proposition of the bill be sound, the attaching creditor would lose first his debt; next, the value of the goods to the defendant in-attachment, third, the Aralue of the same goods, to any creditor of the defendant in attachment, Avho might file a bill alleging the attachment to have wrongfully been sued out — three recoveries' for the same wrong.

“Under the construction Avliich we have given, namely, that a creditor has no standing in a court of equity, Avithout alleging some act done by the debtor, no such unjust results could folloAV. For if the attachment was collusively sued out; if — in the language of the decisions — the defendant in attachment was a ‘consenting’ debtor, he could never sue on the bond, nor could he maintain an action on the case for the Avrongful suing out of the process. The creditor in equity could then recover Avhat the debtor, in the absence of collusion, might have recovered; the value of the goods attached, and a double satisfaction (Avliich it is said the law abhors) be averted.”

To adopt the contention of the complainant would result in the announcement of another peculiar proposition, namely, that the mere fact that one person (a creditor) has wronged a debtor, Avho has himself been guilty of no wrong, arms another creditor with the right to take away the debtor’s property from both the wrong-doer and the sufferer and condemn it to his own debt. Diminution of the debtor’s estate by the Avrongful act of the attaching creditor, and his consequent inability to satisfy the debts of other creditors, furnishes no just reason or argument to such, creditors to-resort to a court of equity. If such reasoning were sound, then diminution of the debtor’s estate, by theft, would authorize the creditor to file his bill in equity and. condemn the stolen goods to his debt, if the same could be found. Even if the statutes Avere of doubtful interpretation a court of equity would refuse to adopt a construction that would lead to results so unjust.

We, therefore, conclude that the bill as amended is without equity, and. the court below erred in not dissolving the injunction and dismissing the bill; and a decree 'must here be rendered reversing the decree of the city court and dissolving the injunction and dismissing the bill for want of equity.

Reversed and rendered.