Smith v. Young

55 So. 425, 173 Ala. 190, 1911 Ala. LEXIS 256
CourtSupreme Court of Alabama
DecidedMay 11, 1911
StatusPublished
Cited by20 cases

This text of 55 So. 425 (Smith v. Young) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Young, 55 So. 425, 173 Ala. 190, 1911 Ala. LEXIS 256 (Ala. 1911).

Opinion

MAYFIELD, J.

This appeal presents two questions only for the decision of this court — one, a question of chancery pleading. The one of law is this: Is a conveyance hy a debtor of substantially all his property to his surety, in consideration that the surety will pay the debt owing to one creditor for which the guarantee is surety, a general assignment within the meaning and operation of section 1295 of the Code of 1907? T'he question of pleading is this: Is a bill of equity multifarious which seeks in the alternativé to declare a given conveyance a general assignment for the benefit of all the grantor’s creditors; and, if not, then to declare it fraudulent as to such creditors? Under our existing statutes we are constrained to answer both of these questions as did the chancellor — that is, the first, in the affirmative; the latter, in the negative.

Section 1295 of the Code, which, is most material to the first question, is as follows: “Every general assignment made by a debtor, ‘or a conveyance by a debtor, of substantially all of his property subject to execution in payment of a prior debt; by which a preference or priority of payment is given to one or more creditors, over the remaining creditors of the grantor, shall be and inure to the benefit of all the creditors of the grantor equally.’ * * A general assignment within the meaning of this section shall include, in addition to the [193]*193conveyances now defined as sncb by law, every judgment confessed, attachment procured by a debtor, or other disposition of property by which a debtor conveys all or substantially all of his property subject to execution, in payment of, or as the security for a prior debt, or charges such property with the payment of such debt.” This statute first appeared as section 1556 of the Code of 1852. It there read like the first sentence, with the omission of that part above indicated by single quotation marks. It has reappeared in all subsequent Codes, each time with amendments added to it by acts of the Legislature, code commissioners, or code committees. It has been three times, if not oftener, amended by special acts of the Legislature — that of February 23,1883 (page 189), February 21, 1893 (page 1046), and February 16, 1897 (page 1089). Each amendment has evidently been for the purpose, with the effect, to extend the scope and provisions of the act, to include additional conveyances and transactions not heretofore included. This statute in all its stages of evolution has 'been many times construed, and these constructions are uniform from the first, that of Holt et al. v. Bancroft} et al., 30 Ala. 193, to this, the last, to the effect that the statute was to prohibit all dis-' criminaion by a debtor, if he made a general assignment of all his property. “It does not aim to deny, and does not deny, to a debtor the power of securing a creditor’s debt by a conveyance of a part of his property. The right of preferring creditors by partial assignments is untouched by the section of the Code quoted. It is not the preference of itself, but the preference as a feature of a general assignment, which the statute condemns.” “Neither an evasion nor a direct violation of the statute prohibiting preference in general assignments can render absolutely void the deed or deeds by [194]*194which the preference is attempted to he given, because the statute itself prescribes the effect of its violation. The assignment ‘shall he and inure to the benefit of all the creditors of the grantor equally.’ Visiting, therefore, the act of evading the statute with the consequences of a direct violation, we can only annul the preference, and place the beneficiary of the first deed on a footing with the other creditors.”

In this first case the statute was held to apply to a conveyance of á part only of the debtor’s property, on the ground that he contemplated a general assignment at the time he conveyed, and did subsequently make the general assignment, and that the first was only a part of the general assignment. This court has uniformly held that a surety is a creditor of. his principal from the inception of the contingent liability; that he is a creditor in such sense that he may maintain a creditor’s bill against his principal as to fraudulent conveyances of the principal’s property with intent to defraud creditors, one of whom is the surety. — Smith v. Pitts, 167 Ala. 461, 52 South. 403; Keel v. Larkin, 72 Ala. 493, 500. If the surety can file a creditor’s bill against the principai and other creditors to set aside a. conveyance made by his principal either as fraudulent or as a general assignment, ' while his liability is only contingent, we can see no reason why other creditors cannot file such a hill against him, when he is the grantee of the fraudulent conveyance, or when it is a general assignment, as in this case, and the one to be held as a trustee. In fact, a number of such bills have been filed, and in each case was held to have been properly filed. Such were the causes of Watts v. Eufaula Bank, 76 Ala. 474, and Crawford v. Kirksey, 50 Ala. 590. In the case of Smith v. McCadden, 138 Ala. 284, 36 South. 376, the transaction assailed was removed one degree further from the [195]*195letter of the statute, in that the conveyance by the debt- or in that case was made to a third party, in consideration that he would mortgage or convey it to the surety for the purpose of paying the debt for which the principal debtor and surety were both liable; whereas, in this case, there is only one conveyance, and that is directly to the surety by the principal in consideration that the surety would pay the debt for which both were liable — the one as principal and the other as surety. The transaction in neither case — that of Smith v. McCadden, and the one at bar — would have been different in effect or in a court of equity if the conveyance had been made directly by the principal debtor to the preferred creditor. The third party and the surety are only made conduits through and by which the debt- or passes all of his property to one preferred creditor ; and it is this and this only that the statute was intended to prevent. It is true that the writer of the opinion in the case of Smith v. McCadden did not concur in the conclusion reached by the majority of the court, and he wrote a very strong argument to the proposition that a surety was not a creditor within the meaning of the statute noAV under consideration, and counsel for the appellant here makes a strong and persuasive argument to the same effect; hut this does not convince us that it is unansAverable, and more especially in view of the fact that the statute has been so often re-enacted with a construction upon it different from that contended for. It is argued that as the surety could not, at the time the conveyance was made, sue the principal in assumpsit on the contingent .liability, and could not have pleaded it as a set-off if sued by the principal, and that as the principal could not have been garnisheed as to such liability, and that, if. a general assignment had been made by the principal, he would not have shared in the [196]*196distribution of the trust fund, that these facts are conclusive to the effect that the surety is not a creditor of his principal within the meaning of the statute, and that the conveyance to him in question was not within the statute as to general assignments. The answer to this contention is that the -words, “creditor” and “debt- or” each has a general and specific definition — a broad and a narrow7 signification.

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Bluebook (online)
55 So. 425, 173 Ala. 190, 1911 Ala. LEXIS 256, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-young-ala-1911.