Mobile Savings Bank v. McDonnell

89 Ala. 434

• Court: Supreme Court of Alabama
• Decided: November 15, 1889
• Status: Published

Opinion

McOLELLAN, J.

This is an action of ejectment prosecuted by tbe Mobile Savings Bank against Kate McDonnell et al., who claimed through James McDonnell, deceased. The bank was a creditor of John O’Donnell on July 30, 1885, at which date he conveyed the land in controversy to said James McDonnell, upon a consideration which, according to the leading recital of the deed, was $1,644.50 in money paid; but this recital was qualified by a subsequent clause of the instrument, which is in the following language: “This conveyance is made in payment of a debt due by said John O’Donnell to said James McDonnell for the sum of $1,644.50.” Subsequent to the execution of this conveyance, the claims of the bank against O’Donnell were prosecuted to judgment, and at a sale under execution isssued on the judgment the bank became the purchaser, and received the sheriff’s deed to the property. It appeared in evidence, that O’Donnell continued in possession of the land, exercising acts of ownership over it, up to the time of the sheriff’s sale; but, on the other hand, evidence was introduced which tended to explain this fact, and to show that O'Donnell’s continued possession was as the agent of McDonnell.

The facts above outlined, as also the deeds of the sheriff to the bank, and of O’Donnell to McDonnell, were adduced in evidence by the plaintiff on the trial below.; and, on the assumption that the consideration of the deed from O’Donnell to McDonnell was the payment of an antecedent debt, a prima facie case was thus made out entitling the plaintiff to a verdict without further proof, unless the defendants showed that the consideration which passed from McDonnell to O’Donnell was both valuable and adequate. — Hodges v. Coleman, 76 Ala. 103; Pollak v. Searcy, 84 Ala. 259; Roswald v. Hobbie, 85 Ala. 73; Morrison v. Morris, 85 Ala. 196.

In discharging the onus thus cast upon them, the defendants introduced evidence which, tended to show, that the consideration consisted of the extinguishment of the grantor’s-liability on two certain notes. One of these notes was made by the grantor, indorsed by the grantee, and payable to one Kapahn. The other appears to have been a note executed by Peter Burke, indorsed by the grantor, and payable to the grantee. The Kapahn note was for $1,644.50. The agreement between O’Donnell and McDonnell, which the evidence tends to establish with respect to this note, was, that the former should reduce the amount by payment to $1,000, and that the latter should assume the payment of that balance. There was no evidence that this balance had ever been paid, or that the payee ever released O’Donnell -from liability for it; but, on the contrary, it appears that the note for the reduced amount was renewed subsequent to the conveyance of July 30, 1885, by O’Donnell, and the renewed paper indorsed by McDonnell, as had been the original. It will have to be considered, therefore, t^at the tendency of the evidence, with respect to this liability of O’Donnell, goes no further than to afford a basis for the inference that, as between him and his indorser, McDonnell, the debt was to be solely that of the latter, but that they both remained bound to Kapahn; and that the consideration of the conveyance, so far as it resulted from that transaction, was the obligation of the grantee to pay this debt, which the grantor, primarily, and himself as surety, owed to Kapahn. The rulings of the trial court, on instructions given and refused, raise the inquiry whether this was a valuable consideration for the conveyance. In our opinion, it was.

It has been several times ruled by this court, that a conveyance made in consideration of the. grantee’s discharging a debt due from the grantor to a third- person, should be upheld, when assailed for fraud on the alleged infirmity of a lack of a valuable consideration. — Eskridge v. Abraham, 61 Ala. 134; Rankin v. Vandiver, 78 Ala. 562. It is equally well settled, that the fact that the purchase-money of property sold by an insolvent debtor has not been paid, but, on the contrary, time is agreed oh in which it should be paid, and notes executed for its payment at such time, do not subject the transaction to an imputation of fraud, or in'validate it as against creditors of the vendor. — Shealy v. Edwards, 75 Ala. 411; s. c., 78 Ala. 176; Caldwell v. King, 86 Ala. 149. It would seem to logically result from these two established propositions, that a sale of property by a debtor in failing circumstances will be sustained, so far as the character of the consideration is concerned, against the attacks of creditors, when it appears that the grantee has legally obligated himself to pay a debt due by the grantor to a third person; and, on principle, it would further appear to be immaterial whether such third person had assented to the substitution or not, since, in any event, the grantor would have the purchaser’s obligation to pay the sum agreed on.

But the conclusion need not be rested on deduction from other adjudged propositions. The question itself has been the subject of judicial inquiry and determination. Thus, in Indiana, under statutory provisions similar to those in Alabama, it has been held that, “where a surety assumes the debt of his principal, and mortgages his real estate to secure it, and, in consideration of these acts, personal property is conveyed to him by the principal, the transaction rests upon a valuable consideration; and the conveyance can not be set aside, unless it be made to appear that both buyer and seller were guilty of fraud.” — Powell v. Stickney, 88 Ind. 310.

In discussing a like question, Rice, C. J., in Reynolds v. Cook, 31 Ala. 637, says; “We do not doubt that a valid conveyance of personal property, to provide indemnity for the sureties on a guardian’s bond, may be made.” But, under our statutes, “it is essential to the validity of such a conveyance, that, at least, its whole purpose should be the devotion of the property, bona fide, to the indemnification of the sureties. If a part of its purpose is that it shall avail or be used for the ease or favor of the grantor, it is void as to creditors.” And in that case, the conveyance was held void, because of the reservation of a benefit; while the doctrine, that the assumption of liability by the surety for the debt of the grantor constituted a valuable consideration, was fully recognized. That, it would seem, is the principle involved here, and it is further and more directly supported by later adjudications of this court. — Coleman v. Hatcher, 78 Ala. 217.

This agreement with respect to the Kapahn note, in our opinion, therefore, was a valuable consideration for the conveyance. Whether it was such a consideration as could be relied on, in view of the recitals in. the deed of a different consideration, is a question which the assignments of error require us to determine. The rule appears to be well settled, that a consideration, differing in kind from that recited in the deed — as where the recital is of a good consideration, and it is proposed to show a valuable consideration — can not be proved. — Houston v. Blackman, 66 Ala. 559; Potter v. Gracie, 58 Ala. 307. But it is equally well settled that, under a deed reciting a money consideration, or a consideration resting in the payment of a debt, or any other valuable equivalent, it is competent to support the conveyance by parol proof of any consideration, however differing from the recital, which is valuable as distinguished from a merely good consideration, since thereby the effect and operation of the instrument is not changed, and the rule against varying or altering writings by parol testimony is not offended. Wait’s Fraud. Con. § 221; Hubbard v. Allen, 59 Ala. 297; Stringfellow v. Ivie, 73 Ala. 209; M. & M. Railway Co. v. Wilkinson, 72 Ala. 286; Manning v. Pippen, 86 Ala. 357; McKinster v. Babcock, 26 N. Y. 378.

So much for the Kapahn indebtedness. As to the other debt which is relied on as constituting in part the consideration of the deed, it must be confessed that the evidence is exceedingly meagre. Yet we are unable to concur with appellant’s counsel, that there was no testimony from which the jury could have inferred that such a liability existed, and that it was discharged by the conveyance to McDonnell. O’Donnell swears: “I owed the Kapahn note, and was to reduce the Kapahn note to under a thousand dollars, and the balance was paid for a note which he (McDonnell) held of Peter Burke.” This note is referred to in the examination as the note of Burke to McDonnell, and the latter further testified that he paid “on the indorsed note the balance of $600.” The jury had a right to consider this testimony, and to reconcile it with what appears further on in the examination to have been contradictory of it; or, failing in that, to elect which part of this evidence they would believe. The sum thus paid, together with the balance of the Kapahn note assumed by McDonnell, amounted to about the recited consideration; and there was some evidence that this gross sum was a fair equivalent for the property.

Without reviewing the action of the court below in giving the charge requested by the defendants, and refusing charges numbered 2, 3, 4, 14, 15, and 16 requested by the plaintiff, in detail, it will suffice to say that its ruling in each particular is justified under the view we have taken of the tendencies of the testimony, and the law applicable thereto. The exception in each instance proceeds on some theory of fact which the record does not support, or of law which we have endeavored to demonstrate is unsound; as, for example, that there was no proof of a valuable consideration; or that the agreement of the grantee to pay the debt of the grantor, was not such a consideration; or that there was no evidence of the grantor’s liability to the grantee as indorser for Burke; or that it was necessary for defendants to show that the property had been paid for in money, according to the first recital of the deed; or that a debt due from the grantor io the grantee had been paid, according to the qualifying recital of the deed; or, generally, that the defense failed, if there was a variance between the recited consideration and that which the evidence tended to establish, and this though each was a valuable consideration.

Charges 13 and 14 requested by. the plaintiff were properly refused. They undertook to call the attention and invite the consideration of the jury to sundry facts and circumstances developed in evidence, tending to cast suspicion on the transaction, and which were supposed to be persuasive of fraud. Charges of this character have been, time and again, condemned by. this court, as mere arguments proper to be made by counsel, but not proper to be given to the. jury by the court, whose office is to instruct the triers of facts as to the law applicable to the facts, but not as to deductions and inferences to be drawn from them. — Hussey v. State, 86 Ala. 34; Snider v. Burks, 84 Ala. 59; Birmingham Brick Works v. Allen, 86 Ala. 185.

This disposes of all assignments of error predicated on charges given and refused, except that which relates to charge No. 12, requested by the plaintiff. That ought, in our opinion, to have been given. The case made by the recitals of the deed, and the case’ relied on by the defendants, and which alone their testimony tended to establish, was that of a conveyance made in consideration of the payment of an antecedent debt. The plaintiff, as we have seen, made out a prima facie case, and was entitled to a verdict on that showing, unless the defendants should prove certain facts. The onus thus cast on the defendants involved, as we have also seen, and as is settled by the authorities cited, proof to the satisfaction of the jury of two things with respect to the consideration; first, that it was valuable-, and, second, that it was adequate. If they failed in either particular, they failed to rebut the prima facie case made by the plaintiff, and to defeat its right to a verdict. This conclusion is a necessary resultant, not only from the language of this court in formulating the rule as to the burden of proof, but also from its well established and many times repeated doctrine, that while a creditor of a failing debtor may save himself by taking property in payment of his debt, and this regardless of the actual intent as to other creditors which may characterize the transaction, he will, in no case, be allowed to take more than is reasonably sufficient to his indemnification, and if he transcends this limitation, and takes property of the debtor worth more than the amount of his claim, he puts himself as to the entire transaction beyond the pale of the law’s protection from the just demands of other creditors. — Pritchett v. Pollock, 82 Ala. 168; Levy v. Williams, 79 Ala. 171; Knowles v. Street, 87 Ala. 357; Hodges v. Coleman, 76 Ala. 103; Leinkauff v. Frenkle, 80 Ala. 136; Greenhut v. Greenhut, at present term.

The effect of the rule fixing the burden of proof as to adequacy of consideration upon the defendant in this class of cases, and prescribing the boundaries beyond which the creditor of an insolvent debtor can not go in taking property in payment of his debt, is to raise up, for all practical purposes, a presumption of the malafides of the sale which purports to be in discharge of the debt; and to meet this presumption, and impress the transaction with the attributes of fair dealing and good faith, as against attacking creditors, a valuable and, at least, measurably adequate consideration, must be shown. — Moog v. Farley, 79 Ala. 252; Calhoun v. Hannan, 87 Ala. 277. If this is shown, all inquiry, as had been many times ruled by this court, into the actual intent of the parties, is foreclosed. If it is not shown, bad intent is presumed, and the question as to what purpose really actuated the parties becomes immaterial. So that it seems to be a necessary resultant from our decisions, that the inquiry into the good or bad faith of the parties as a matter of fact, and disassociated from presumptions of law, is, for all practical purposes, wholly eliminated in cases like this. Badges of fraud may doubtless be looked to, when they tend to impeach the consideration, but not as establishing a covinous intent having no connection with the character or sufficiency of the price paid.

The conclusion, to which the authorities referred to thus lead us, is, we think, supported by the logic of the situation, so to speak. If the debt thus sought to be paid is in point of fact unjust, I apprehend that the utmost good faith, the most implicit belief in its correctness, on tbe part of both buyer and seller, would not validate the transaction. On the other hand, if the debt is just, but in amount only one-half or one-third the value of the property, should the purchasing creditor be allowed to thus pay himself twice or thrice over, merely because it is shown, ever so clearly, that he acted in good faith, and, owing, it may be, to some particular opinion of his as to the value of property, or of the particular property, or ignorance of its value, honestly believed he was paying an adequate price for it? In all reason, it would seem that other creditors are entitled to some protection against the ignorance or intellectual idiosyncracies of such a purchaser, and that this protection should be found in the judgment of the jury, as to whether the buyer has received greatly more than he has paid for by the satisfaction of his debt, or, what is the same thing, has satisfied a debt grossly less in amount than the value of the thing he has received. And while “ the law will not weigh considerations in diamond scales,” nor so closely balance the property against the price as to leave no room for the ordinary differences of opinion as to values; yet, when the jury can see that the disparity amounts to a gross inadequacy, their verdict should be against the transaction. The charge under consideration, when referred, as it must be, to the evidence, properly submitted this inquiry to the jury. It was not abstract. Tbe disparity between the whole price and the whole property, which a part of the evidence tended to show, was as sixteen hundred is to twenty-five hundred dollars; or, if the price paid for the whole property, including that in controversy with other parcels, be apportioned to the property sued for, the difference, according to plaintiff’s testimony, is as $1,300 is to $2,000. We are not prepared to affirm that this disparity is not gross, as hypothesized in the charge.

We are fully aware that the view we have taken is something of a departure from the generally received doctrine in other courts, as well as former dicta of this court, which are to the effect in general terms, that mere inadequacy of price, short of a disparity so gross as to shock the conscience of mankind, is only a badge of fraud, and, of itself, is not to be taken as establishing the existence of evil intent; but, in our jurisprudence, that doctrine, if any weight is to be given to our repeated enunciations on the subject, or to the reasons upon which our decisions are based, is and must be confined to sales other than in the payment of antecedent debts by insolvent debtors drawn in question by other creditors. It would be a contradiction in terms, to say that the requirement of our adjudged cases, that the defendant claiming under such a sale must, as against a bona fide creditor, prove an adequate consideration, is met and fulfilled by proof of a grossly inadequate consideration, and it were palpable stultification to so hold.

We do not think the court below erred in admitting the declarations of O’Donnell, while in possession of the land sued for after the conveyance, explanatory of his possession, and to the effect that he held for another. — Perry v. Graham, 18 Ala. 822; Johnson v. Boyles, 26 Ala. 576; Humes v. O’Brien, 74 Ala. 79.

For the error pointed out above, the judgment of the Circuit Court must be reversed, and the cause remanded.