Henderson v. J. B. Brown Co.

125 Ala. 566

• Court: Supreme Court of Alabama
• Decided: November 15, 1899
• Status: Published

Opinion

TYSON, J.

The bill in this case was filed by J. B. Brown Company, a corporation under the laws of Maryland, in behalf of itself and all other creditors of McKenzie who may come in and share in the expense of the litigation, against the respondents Henderson and McKenzie, for the purpose of having a certain attachment proceeding instituted bjr Henderson against McKenzie declared fraudulent and void. The averments of the -bill show that the complainant was an existing creditor at and prior to the suing out of the attachment. It is averred in the bill that for several years prior to the 25th day of November, 1896, McKenzie had been engaged in the grocery business in the city of Montgomery, Ala., under the name of J. C. McKenzie & Company, and on said last named date had on hand a large stock of goods, wares and merchandise. That while the credit of McKenzie or “J. C. McKenzie & Company” was reputed to be good, this reputation was induced by the concealment of said McKenzie of his true financial status; said concealment being 'with the view to bolster his- credit and enable him to purchase goods on time with a view of consummating a scheme which was consummated or attempted to be consummated by the levy of an attachment in favor of his brother-in-law, J. M. Henderson, as hereinafter stated, and that Henderson was aware of said concealment and of the purposes thereof. That on the 25th day of NoAmmber, 1896, McKenzie Avas insolvent; that being insolvent, he'conceived the design of preferring his brother-in-law by having him levy an attachment on said stock of goods, AATares and merchandise, and thus prefer him over other creditors. That pursuant to said design into which said Henderson fully entered, an 'attachment was sued out by Henderson on the 25th day of November, 1896, against the said McKenzie, returnable to. the city court of Montgomery, for the sum of seventeen thousand and forty-sis and 72-100 dollars, besides attorney’s fees, which attachment AAras forthwith, on the day of its issue, levied on the entire stock in trade of the said McKenzie. That said attachment Avas sued out by collusion between McKenzie and Henderson. It is also averred that, the ground upon Avhich said attachment issued as shoAvn upon its face, to-wit, that said McKenzie “has money, property or effects, liable to satisfy his debts which he fraudulently withholds,” Avas not true, and that no other ground of attachment existed so far as said Henderson Avas concerned. The bill further overs that the said alleged debt for which said Henderson attached AAras in large part, to-wit, to the extent of ten thousand dollars, simulated.

We have set out the averments of the bill with particularity for the purpose of pointing out the turn theories upon which the complainant predicates its right to the relief sought. The first theory is based upon the collusion and fraudulent use attempted to be made of the process of attachment issued out of the city court, without reference to the bona fieles of the debt claimed by Henderson against McKenzie. Under this theory of the case as made by the bill, it is utterly immaterial whether there was a bona fide debt clue Henderson or not. If Henderson and McKenzie colluded together for the purpose of transferring the property by means of the attachment to the former, the effort to resort to such judicial machinery, may be characterized as an “attempt” to make such- fraudulent transfer. “It- is the collusive and fraudulent use that is attempted to be made of the processes of the court in such cases, so opposed to the whole spirit and policy of the statutes which the law abhors and denounces.” — First National Bank of Montgomery v. Acme White-Lead & Color Co., 123 Ala. 344; Comer v. Heidelbach, 109 Ala. 220.

The other theory proceeds upon the proposition that the alleged debt of Henderson, which he was attempting to enforce by his attachment against- McKenzie was simulated. If it be true as averred in the bill that it was simulated to the extent of ten thousand dollars, we are unable to see upon what principle the attachment can be upheld as a valid conveyance to Henderson of the property levied upon under it. The debt for which the attachment writ was sued out to enforce must be a bona fide one to- support the -attachment as against existing creditors as much so as the consideration must be bona fiele to support the validity of an instrument made by a debtor conveying his property. The result, so far as the party receiving the benefit of the transaction and the creditors of the insolvent debtor are concerned, is the same. The plaintiff in attachment, if it is allowed to stand, is the beneficiary to the extent of receiving the money, proceeds, arising from a sale of the property levied upon to the exclusion of the creditors; while the grantee named in the conveyance, if it is held valid, is the beneficiary of the property itself.

The statute makes no distinction between the two classes of cases. This is made manifest by the reading of it which is in this language: “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 the 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.”

So then we may eliminate from consideration the first theory upon 'which the complainant predicates its right ■to relief and confine our discussion of the case, as made by the pleadings, to the complainant’s right to have the attachment suit declared fraudulent and void. For it cannot be said with any show of reason that there was error in the rendition of the decree granting the relief sought if it can be sustained upon this phase of the case.

A number of grounds of demurrer were assigned to the bill. The second and third grounds were cured by an amendment. The fourth in effect goes to the ownership by the complainant of the note, the foundation of the suit. Its ownership can only be denied by sworn plea. — Code, § 1801; Smith v. Hiles-Carver Co., 107 Ala. 272.

The bill does not show a doing of business in this State by the complainant such as to require it to file a statement designating a known place of business and an authorized agent within this State. Indeed it might be said that it does not show the doing of any business in this State at all.. The first ground of demurrer is, therefore, without merit.

The sixth ground raises the objection that the bill fails to aver that no ground provided by the statute for the issuance of the attachment existed at the time of the suing out of it by Henderson. It is of no consequence, whether any ground for the suing out of the attachment existed or not, if the debt for which if was sued out to enforce was simulated. If there had existed every ground provided by the statute for the issuance of the attachment, Henderson would have been guilty of a fraudulent act, if he had attempted to get possession of McKenzie’s property :by means of the attachment, if he had no debt against McKenzie. The law would stamp his act as fraudulent and he must be held to the natural and logical consequences flowing from it. The result of such an act is to hinder, delay or defraud the other creditors of McKenzie, the defendant in attachment. And this would be true if the debt he attempted to enforce was simulated or fictitious in part. — Cartwright v. Bamberger, 90 Ala. 405.

What we have just said disposes of the fifth and last ground of demurrer. This brings us to a consideration of the answers filed by respondent Henderson to the bill. We will only advert to those portions of each Which bear upon the phase of the case under consideration. Henderson denies that he knew of the insolvency of McKenzie and further sayis “lie was of the impression and is so now, that he was solvent during the time from the commencement of his (present) business to its close.” He admits the suing out of the attachment for $17,046.72 and its levy upon goods of the value of $12,000. All that is averred by him in his original answer upon the subject of his debts against McKenzie is in the f ollowing language : “All of the debts that this defendant took out his 'attachment upon are genuine and bona fide.” In his amended answer he avers “that the debts upon which said attachment was sued out were for money and exchange loaned by this respondent to said J. C. McKenzie on or about the dates set forth in the notes described in the attachment proceedings and the complaint filed therein, and for the amounts expressed in said notes less interest, except one note for $5,000 which was for the indemnity of a certain acceptance made by the defendant to the Farley National Bank for said amount, all of which debts were genuine and bona fide at the time said attachment was issued and levied.”

The evidence shows that the complainant was a creditor of McKenzie prior to the suing out of the attachment by Henderson, and the proof is abundant that McKenzie was insolvent when it was sued out. Indeed he does not deny it in his answer, and Henderson’s answer can hardly be construed as a denial of it. It is utterly immaterial 'whether or not Henderson knew of McKenzie’s ■insolvency. For if his debts were not bona fide, his attachment must be declared fraudulent without reference to his knowledge on that subject. If his debts for which he sued out the attachment to collect, were not simulated or fictitious to any extent, and the attachment proceeding not collusive, then the attachment is valid notwithstanding he may have known him to be insolvent.

Pretermitting all inquiry as to the sufficiency of the answers of Henderson in affirming the facts relied upon as constituting the consideration of the notes which he alleges were the foundation of the attachment suit, it is very certain that the burden of proof was upon him to clearly and fully prove that McKenzie was indebted to him in the amounts expressed in said notes. In other words, he must overcome by full and clear proof, the presumption of unfairness and mala fides. — Wood v. Pebbles, 121 Ala. 100, and authorities therein cited; Halsey v. Connell Greene & Co., 111 Ala. 221.

Henderson relies exclusively upon his own testimony to substantiate the bona fides of the various transactions by which McKenzie became his debtor as shown by the notes executed -bv McKenzie to him. It appears from his testimony, that the $17,046.72 which he claims was due to him, was made up of various items. $5,000 of this sum was evidenced by a note given by McKenzie to him as an indemnity for his acceptance in that amount to the Farley National Bank. $8,500 he says was borrowed by him at various times from the Farmers’ Bank at Troy, Alabama, and loaned by him to McKenzie. The remainder 'was his own money directly loaned by him. He kept no record of the time he made these various loans to McKenzie; he is uncertain as to the place where he made some of them. He is indefinite in his statements as to whether he gave McKenzie a New York check or the cash in making some of the loans to him. He does not know what amount of the $12,000 was furnished by him to McKenzie in cash and what amount in New York exchange: He admits to have had correspondence with McKenzie in the negotiation of some of these loans, hut does not produce the letters received by him. I-Ie claims to have given his notes to the bank at Troy for the $8,500 at various times and to have paid these notes, but he fails to produce them. He says in his testimony that the officials of the bank knew of the borrowing of the money by him, yet they are not examined for the purpose of corroborating him. The evidence show-?, that when the first loan he claims to have made McKenzie, McKenzie had a partner in business with him, and yet the partner knew nothing of the transaction. Borne of the New York exchange which he claims lie delivered to McKenzie as constituting part of the consideration of McKenzie’s notes to him 'appear not to have been indorsed by McKenzie. The circumstance to which lie testifies, that the large amount of cash which McKenzie received from him, was handed to McKenzie in the city of Montgomery, taken from his pocket-book, without knowing before he left home that he was to make the loan, not only smacks of improbability, but contravenes the known conduct of ordinarily prudent business men. His failure to examine McKenzie as a witness, who is shown to have been his friend from the commencement of their dealings through the entire course of litigation, notwithstanding his attachment of McKenzie’s property upon a mere rumor that some one else was going to attach him, is a circumstance entitled to some consideration. If it be true that McKenzie borrowed the money from him as claimed, certainly McKenzie’s books would have shown the transaction, and furthermore, would have shown in some degree what McKenzie did with the money so received by him. His resort to attachment against his brother-in-law, in whom lie1 claims to have reposed sufficient confidence to have loaned and become his security to the extent of $17,000, nearly one-half of the value of Henderson’s entire estate, without indemnity from, him, and without any intimation that McKenzie was attempting to defraud him in any way, is another circumstance tending to impeach his testimony; and this circumstance becomes more potent in this respect when we take into consideration, that notwithstanding the affidavit upon which his writ of 'attach-meat was predicated charged McKenzie with actual fraud, McKenzie Continued to be his friend and actually-rendered assistance in the prosecution of the attachment .suit by furnishing his books of account to the attorney of Henderson, in order that writs of garnishment might be served upon those who were indebted to' him. There are many other 'circumstances shown in the evidence unnecessary to enumerate, tending strongly to impair the weight of Henderson's testimony. He is contradicted by other witnesses who are disinterested in the result of the cause upon material matters. We are of the opinion that he has not sustained the burden put upon him of showing by clear and satisfactory evidence that his debts were bona fide.

It appears from the record that quite a number of creditors accepted the invitation extended to them in the bill by filing their petitions to be made parties to the cause for the purpose of collecting their debts. The point is made that unless all the complainants can recover none can. This rule of law has no application to this class of cases. It can be invoked where all the complainants assert a joint right or title in the same cause of action. — Doherty v. Holliday, 137 Ind. 285; Long v. Bank, 85 N. C. 354; Taber v. Royal Ins. Co., 124 Ala. 681; Hill Bros. v. Moone, 104 Ala. 235; Steiner & Lobman v. Parker, 108 Ala. 357.

Appellant complains that the chancellor in the decree required Mm to pay into coux^t the amount of money received by him froxn the proceeds of the goods under his attachment proceedings within a specified time, and in default thereof an exeexxtion was directed to issue against him. His complaint is based upon the proposition that the complainant’s debt is small — less than ,$100 — and that the amount received by him was about $12,000. The utter fallacy of this contention is shown -when we call to mind that this is a general ox’editox’’s bill and that the respondent, appellant, as to the money in his hands, is a trustee for all the creditor’s of McKenzie. The chancellor recognizing this and for the purpose of administering the trust fund and distributing it to whom it properly (belonged, provided in the decx’ee, for the taking and stating of an account by the register of the amount due to the complainant and to other creditors who have been admitted as complainants. He also ordered the register to malee publication in some newspaper once a week for two weeks, notifying the creditors of McKenzie to prove their debts within thirty 'days after the making of the said publication; and further provided that all creditors who have not already proved their claims shall have the right to do so before the register. The decree also orders the register to report the amount of all claims which may be presented and 'allowed by him. This decree was manifestly proper. — 2 Daniel Chan. PI. & Pr., 1770, and cases cited in note.

There is no error in the record, and the decree is affirmed.