Opinion
7 Div. 512.
October 5, 1939.
Appeal from Circuit Court, DeKalb County; A. E. Hawkins, Judge.
Warren S. Reese, Jr., and Carmichael Crenshaw, all of Montgomery, for appellant.
It is error for trial court to set aside submission of a cause without notice to the other party and to permit the introduction of additional testimony not included in any note of testimony at the time of original submission. Kelley v. Chandler, 200 Ala. 215, 75 So. 973; Darling v. Hanlon, 197 Ala. 455, 73 So. 20. When the grantee clearly shows that the conveyance was based upon a consideration paid out of the grantee's separate estate, the burden of showing fraud shifts to the attacking creditors. London v. G. L. Anderson Brass Works, 197 Ala. 16, 72 So. 359; Federal Land Bank v. Rowe, 222 Ala. 383, 133 So. 50; Puckett v. Russell, 234 Ala. 564, 176 So. 194; Pippin v. Tapia, 148 Ala. 353, 42 So. 545; Adoue v. Spencer, 62 N.J. Eq. 782, 49 A. 10, 56 L.R.A. 817, 90 Am.St.Rep. 484; Eddleman v. Lentz, 158 N.C. 65, 72 S.E. 1011; Brown v. Mitchell, 102 N.C. 347, 9 S.E. 702, 11 Am.St.Rep. 748; 27 C.J. 794. If transfer is for valuable consideration creditor must prove that grantor had actual intent to defraud existing creditors and that grantee had either actual notice of such intent or notice of a fact or facts sufficient to put him on inquiry which would lead to discovery of such intent to defraud creditors, or participated in the fraud. Montgomery-Moore Mfg. Co. v. Leith, 162 Ala. 246, 50 So. 210; Allen v. Riddle, 141 Ala. 621, 37 So. 680; Kellar v. Taylor, 90 Ala. 289, 7 So. 907; Boutwell v. Spurlin Merc. Co., 203 Ala. 482, 83 So. 481; London v. Anderson Brass Works, supra; Martin v. McDaniel, 170 Ala. 270, 53 So. 790; Jordan v. Collins, 107 Ala. 572, 18 So. 137. The purchaser is ordinarily under no duty to see to it that the proceeds of the sale are applied to payment of the debts of the seller, even though he knows that the seller is financially embarrassed or even insolvent. Hodges v. Coleman, 76 Ala. 103; Thompson v. Reed, 9 Cir., 202 F. 870, 121 C.C.A. 228; Gist v. Barrow, 42 Ark. 521; Tillman v. Heller, 78 Tex. 597, 14 S.W. 700, 11 L.R.A. 628, 22 Am. St.Rep. 77. Knowledge of indebtedness or even the insolvency of the transferor standing alone, does not put the transferee on inquiry. 22 C.J. 515, § 187; Simmons v. Shelton, 112 Ala. 284, 21 So. 309, 57 Am.St.Rep. 39; Buford v. Shannon, 95 Ala. 205, 10 So. 263; Crawford v. Kirksey, 55 Ala. 282, 28 Am.Rep. 704; Dubose v. Young, 14 Ala. 139.
Scott Dawson and C. A. Wolfes, all of Fort Payne, for appellees.
A court has authority to set aside submission for the purpose of amendment or for taking further testimony. Darling v. Hanlon, 197 Ala. 455, 73 So. 20; Code 1923, § 6645. Uncontradicted evidence contrary to all reasonable probabilities need not be accepted as proof of fact. Williams v. Mahone, 236 Ala. 94, 182 So. 464.
Where grantee claims under a conveyance which is actually fraudulent, and has actually participated in the fraud, such grantee has no equity to claim retention of property as security for reimbursement or indemnity. Rogers v. Conaway, 226 Ala. 334, 147 So. 152. Transactions of this character between husband and wife are to be jealously watched and subjected to closer scrutiny than would be required of transactions between strangers. Williams v. Ellington, 233 Ala. 638, 172 So. 903. If at the time of or before making the conveyance the grantee had notice of such facts and circumstances as would arouse the suspicion of an ordinarily prudent man and cause him to make inquiry as to the purpose for which said conveyance was being made, which would disclose the fraudulent intent of the grantor, it is not necessary to show the grantee had actual notice of, or participated in, the fraud of the grantor. Circumstantial evidence is sufficient and is often a necessity. Burnwell Coal Co. v. Setzer, 203 Ala. 395, 83 So. 139; 27 C.J. 822, § 771.
Bill by judgment creditor to set aside an alleged fraudulent conveyance of lands by the debtor, and subject the property to payment of his debts.
A Court of Equity has full power to set aside a submission for final decree, and permit the taking of further testimony by both parties. This is a matter of discretion, much as continuances and the like. Such discretion is to be exercised as in the judgment of the Judge the ends of justice require. This rule is now recognized by statute. Code of 1923, § 6645.
This is quite different from allowing an amendment to a note of testimony by one party after submission without notice to the other, as in Darling et al. v. Hanlon, 197 Ala. 455, 73 So. 20; or setting aside the submission, allowing such amendment, then resubmitting, all without notice to the other party, as in Kelley et al. v. Chandler, 200 Ala. 215, 75 So. 973.
The grantor was heavily indebted, in much for materials furnished to erect buildings on the property; was being pressed by his creditors. He was stalling them off.
The conveyance covered substantially all his property, his sole resource for the payment of his debts.
The deed was made in contemplation of marriage to the grantee, which was consummated upon the grantor's obtaining a divorce from his former wife.
The grantor's intent to hinder, delay or defraud his creditors is manifest. One must be held to intend the known and inevitable effects of his deeds.
Did the grantee participate in the fraud?
On a careful consideration of the legal evidence in the record we are of opinion she was an active participant in the fraudulent intent to hinder, delay or defraud the creditors of the grantor.
With greater assurance, it can be said, the grantee, a woman of much intelligence, had knowledge of facts sufficient to provoke inquiry, and, in equity, charge her with notice of the fraudulent intent of the grantor.
The deed recited a consideration of $4,000. Whether this was an adequate consideration is in dispute. This question need not be decided, since equities arising from bona fide payment of a valuable consideration, though inadequate, do not, in our opinion arise.
The grantee had the means to make payment, and the transaction was clothed with all the indicia of payment.
Thus, a check of $85, and an automobile were passed to the grantor a week before the execution of the deed. Registry of the automobile in his name was promptly made. Whether a value was put on the, automobile at the time, or these advances were intended at the time as payments on the purchase price of the lands, is subject to question. In any event, the automobile, for purposes of the transaction was valued at $415, and with the $85 check, treated as $500 advance payment on the lands.
On the consummation of the marriage in Florida, five days after the date of the deed, the wife gave the husband a check for $3,500, from monies acquired as alimony from her former husband. This check was deposited in the husband's name in a bank in a city, not of the residence of either party. Less than 10% of it ever found its way to the creditors of the husband. None of it to these complainants.
Avoiding a prolonged discussion of the evidence, we are of opinion there was a common purpose to hold this money for their common uses, and the same was devoted to the purposes of high living, as per the tastes and habits of the parties, in disregard of the claims of the husband's creditors.
In view of the picture presented by this record, we think it well to announce, by way of application of the law of fraudulent conveyances, that where the husband, greatly embarrassed by debt, conveys his properties, his sole resource for payment of his debts, to his wife, having notice of these conditions, for a cash consideration, but with the common purpose to retain the money and devote it to their common uses, the transaction is fraudulent and void as to such creditors. In essence, such a devise means holding both the land and the money for the use of the grantee, or both, while creditors go unpaid.
When relations between the parties, their way of life, their resources, and the circumstances generally, point to such conclusion, the burden is on the grantee to overcome the indicia of fraud. This burden has not been met.
Affirmed.
ANDERSON, C. J., and GARDNER and FOSTER, JJ., concur.