Opinion
6 Div. 488.
May 25, 1939. Rehearing Denied June 8, 1939. Rehearing Granted October 12, 1939. Further Rehearing Denied November 2, 1939.
Appeal from Circuit Court, Blount County; W. M. Rayburn, Judge.
Johnson Busby, of Oneonta, and Griffith Entrekin, of Cullman, for appellants.
Complainants each had a judgment lien on the cotton seed, the subject-matter of the suit, on the filing of their certificates of judgment in the office of the probate judge. The property was in the possession of defendant and the title was in him. Code 1923, § 7875. Liens on real or personal property may be enforced by a bill in equity. Code, § 8935. A bill in equity may be maintained to enforce a judgment as provided by Code, § 7875 against defendant in judgment on all the property owned by defendant in judgment, subject to levy and sale, and may be maintained also against all other parties claiming or reputed to claim any interest therein. The statutory method for enforcing liens acquired by registration of judgment certificates is cumulative, not exclusive. Tierce v. Knox, 207 Ala. 121, 92 So. 263; Gurley v. Robertson, 178 Ala. 326, 59 So. 643.
A voluntary transfer or conveyance of property is void as to existing creditors, without regard to solvency or insolvency of the debtor making such conveyance or transfer, and the good intent of the debtor does not save the transaction from being fraudulent and void as to such creditors. Martin v. McDaniel, 170 Ala. 270, 53 So. 790; Wood v. Potts, 140 Ala. 425, 37 So. 253; Moore v. Altom, 192 Ala. 261, 68 So. 326; McCrory v. Donald, 192 Ala. 312, 68 So. 306; Seals v. Robinson, 75 Ala. 363.
The legal title was in defendant Spears, but if not he had an equitable title. Hurst v. Bell, 72 Ala. 336; Abraham v. Carter, 53 Ala. 8; Booker v. Jones, 55 Ala. 266.
An equitable title of a debtor, transferred in fraud of his creditors, may be reached and subjected to payment of debts in an equitable action. Code 1923, § 8038; Stevenson v. Bird, 168 Ala. 422, 425, 53 So. 93.
On filing of the bill and service of process on respondents, complainants acquired a lien on whatever interest, legal or equitable, Spears had in the property at the time of the alleged fraudulent transfer to United Cotton Communities of America; and the court is clothed with power to enforce same even though complainants had no lien prior to filing of the bill. North Birmingham American Bank v. Realty Mtg. Co., 223 Ala. 30, 134 So. 796; First Nat. Bank v. Powell, 229 Ala. 178, 155 So. 624; Bishop v. McPherson, 232 Ala. 594, 168 So. 675; Barnes v. Bell, 231 Ala. 84, 163 So. 616.
All transfers or assignments, verbal or written, of goods, chattels or things in action, made in trust for the use of the person making the same, are void against creditors, existing or subsequent, of such person. Code, § 8052; Gray Dudley Hardware Co. v. Guthrie, 200 Ala. 6, 75 So. 318; Birmingham D. G. Co. v. Kelso, 110 Ala. 511, 18 So. 135, 55 Am.St.Rep. 35.
The resolution of claimant, United Cotton Communities of America, purporting to be evidence of the delivery and passing of title from Spears to the claimant, containing the provision that the title was passed as long as the Association meets the approval of Spears, should be construed as a reservation by the grantor for his own benefit, or an absolute power of revocation, and Spears is, therefore, still the owner of the cotton seed as to the rights of appellants, existing creditors of Spears, and the purported passing of title should be treated in equity as if it never existed. Code, § 6927; Blackwell v. Harbin, 186 Ala. 531, 65 So. 35; Love v. First Nat. Bank, 228 Ala. 258, 153 So. 189; Howell v. Howell, 210 Ala. 429, 98 So. 630.
When fraud is charged in equity and facts are averred which show fraud, and the answer fails to deny the fraud charged, this is an admission of the averments of fraud in the bill, and no proof of fraud is necessary. Moog v. Barrow, 101 Ala. 209, 13 So. 665; Noble v. Gilliam, 136 Ala. 618, 33 So. 861.
Appellees failed to deny the averments of fraud in the bill, this being an admission, and they cannot be permitted to prove in bar of the relief sought by the bill a fact which appellees failed to put in issue in their answer. Morrison v. Federal Land Bank, 232 Ala. 138, 167 So. 288; Grady v. Robinson, 28 Ala. 289; Smilie v. Siler, 35 Ala. 88.
The membership agreement appears in the record only as an exhibit to the answers to interrogatories propounded by complainant under the discovery feature of the bill, which was stricken from the bill by amendment; and not appearing in the note of testimony should not be considered on appeal. Calvert v. Calvert, 180 Ala. 105, 60 So. 261; Chancery Rule 75; Shannon v. Lunsford, 215 Ala. 465, 111 So. 22; Rice v. Tobias, 83 Ala. 348, 3 So. 670; Tatum v. Yahn, 130 Ala. 575, 29 So. 201; Reese v. Barker, 85 Ala. 474, 5 So. 305; Harris v. Hall, 234 Ala. 115, 173 So. 849.
An answer cannot be considered as evidence in the case unless it is noted as required by Chancery Rule 75. Goodloe v. Dean, 81 Ala. 479, 8 So. 197; Mahone v. Williams, 39 Ala. 202; Conner v. State, 212 Ala. 360, 102 So. 809; Coleman v. Birmingham Fert. Co., 208 Ala. 160, 93 So. 904; Sellers v. Farmer, 147 Ala. 446, 41 So. 291; Griffith v. First Nat. Bank, 224 Ala. 296, 140 So. 359; Harris v. Hall, 234 Ala. 115, 173 So. 849.
R. G. Kelton, of Oneonta, for appellees.
Fraud is never presumed, but must be proved. Central of Georgia R. Co. v. Holmes, 223 Ala. 188, 134 So. 875. The only lien complainants had was upon the personal property of Spears, subject to levy and sale, on and after the date of recording their judgments. Code, §§ 7806, 7805. If Spears was the party taking possession under the agreement with the growers of the seed sought to be sold, he would be the mere vendee under a conditional sale, and whatever interest he may have under such conditional sale is not subject to levy and sale. Manning v. Wells, 104 Ala. 383, 16 So. 23.
No sufficient allegations of fraud are made in the bill. Hyman v. Langston, 210 Ala. 509, 98 So. 564; Patton v. Tidwell, 17 Ala. App. 663, 87 So. 624; Kiser v. Gamble, 75 Ala. 386; Anderson v. Hooks, 9 Ala. 704.
Spears had no such title as would support a levy and sale under execution in the property the subject-matter of the suit, being no more nor less than an agent for the parties holding possession of the property as bailee thereof, not having paid the entire purchase money. Washington v. Bogart, 119 Ala. 377, 24 So. 245.
After amendment of the bill respondents refiled their original answer, including the exhibit. Chancery Rule 75 does not require that the pleadings be noted in order that they may be considered. Coleman v. Birmingham Fert. Co., 208 Ala. 160, 93 So. 904; Sellers v. Farmer, 147 Ala. 446, 41 So. 291; Lunsford v. Shannon, 208 Ala. 409, 94 So. 571.
Without reference to exhibit B, there appears a complete and harmonious contract between the growers and the United Cotton Communities of America, which places title to the seed in the association for the purposes therein specified. The intention of the parties is clear with respect to such contract, and should be given effect. Russell v. Garrett, 208 Ala. 92, 93 So. 711; City of Albany v. Spragins, 208 Ala. 122, 93 So. 803; Echols v. Snider, 19 Ala. App. 35, 94 So. 189.
Spears had never owned the seed, and the contract does not speak of the seed he owns, but of the seed he produces. Where language of a contract is doubtful, it should be construed to uphold rather than defeat the plain intention of the parties thereto. B. F. Kay Son v. Alabama Cotton Grain Co., 211 Ala. 454, 100 So. 863; Echols v. Snider, supra. It is clear the parties to the contracts construed them to mean that the title to the seed produced by the growers, such as these seed were, should pass to the association upon delivery for purposes expressed in the contract; and this construction controls the meaning of the contract. Montgomery Enterprises v. Empire Theater Co., 204 Ala. 566, 86 So. 880, 19 A.L.R. 987; Brooks v. Bank of Wetumpka, 210 Ala. 689, 98 So. 907. Creditors are not entitled to avoid a conveyance by their debtor of property to which he had no title, or such title as they could have subjected to their claims. Dearman v. Dearman, 5 Ala. 202; 20 Cyc. 370.
If Spears took any title to the seed that were pooled with the association, such title was taken by him as the breeder for the association. As to this there was no fraud. Citizens' Mut. Ins. Co. v. Foster, 64 Miss. 288, 1 So. 238; Gallman v. Perrie, 47 Miss. 131.
Pleadings are a part of the record and need not be noted. Exhibit B to respondents' answer is a part of the pleading. Sellers v. Farmer, supra; Chancery Rule 16, 4 Code 1923, p. 912; Conoly v. Harrell, 182 Ala. 243, 62 So. 511; Hogan v. Scott, 186 Ala. 310, 65 So. 209.
This is a bill filed by the appellants as judgment creditors of the appellee, C. L. Spears, to enforce their judgment lien on cotton-seed and other property, alleged to be the property of the said judgment debtor. The appellee the United Cotton Communities of America, and others, were brought in as claimants of some interest in the property.
The cause went to final decree on pleading and proof, denying complainants relief and dismissing the bill. Upon the original consideration of the cause the decree was affirmed. Now upon further consideration of the cause on the application for rehearing we are persuaded that the bill was erroneously dismissed.
On first consideration much force was given to the alleged "membership agreement" made exhibit B to the defendants' answers to the discovery feature of the bill, which alleged agreement was not noted as evidence by the complainants and could not be offered by the defendants under well settled principles of equity law. Goodloe v. Dean, 81 Ala. 479, 8 So. 197; Reese v. Barker, 85 Ala. 474, 5 So. 305; Griffith et al. v. First Nat. Bank of Guntersville, 224 Ala. 296, 140 So. 359; The Branch Bank at Montgomery v. Parker, 5 Ala. 731; Saltmarsh v. Bower Co. 22 Ala. 211; Southern Railway Co. v. Hayes et al., 183 Ala. 465, 62 So. 874; Daughdrill v. Lockhart, 181 Ala. 338, 61 So. 802.
The observation in Goodloe v. Dean, supra, 81 Ala. 480, 8 So. 197 speaking of the Rule of Chancery Practice 77 (now 75), is pertinent to the first phase of the stated question: "Under this rule not even the answer of a defendant can be regarded as legal testimony, or considered, unless it was offered in evidence before the court, and noted by the register. Mahone v. Williams, 39 Ala. 202."
On the second phase of the stated question the following observations taken from the opinion of the court in The Branch Bank at Montgomery v. Parker, 5 Ala. 731, pages 735, 736, are enlightening:
"The learned annotators upon Phillips on Evidence, consider that the answer to a bill of discovery, is not evidence, at the instance of the party making it, merely because it has been called for by his adversary, and assimilate it in this respect to a notice to produce papers. The complainant may use the defendant's answer or not, as he pleases; so the party who has given notice to produce, may, if he think proper, waive the production and make out his case independently. See Withers v. Gillespy, 7 Serg. R. [Pa. 10] 14; Blight v. Ashley, 1 Pet.C.C. 15, 22 (Fed.Cas. [No.] 1,541); Willings v. Consequa, 1 Pet.C.C. [301], 302, 311 (Fed.Cas. [No.] 17,767); Hylton's lessee v. Brown, 1 Wn.C.C. 343 (Fed.Cas. No. 6,982); 3 Phil. Ev. C. H's notes 1206. An answer in chancery, it is said, is not evidence for the party making it, in any respect, unless his antagonist choose to use it, even though it was called out on a bill of discovery for the purpose of the very suit at law in which it was offered. It is therefore entirely in the election of the party calling for it, whether he will use it or not. 3 Phil. Ev. C. H's notes 926.
"In Nourse v. Gregory, 3 Litt. [Ky.] 378, the question was, whether a party calling for a discovery to be used on a trial at law, was bound by the answer, or could he adduce other evidence contradictory of it. The court said, 'we are aware of no principle of law which either compels the plaintiff, after having obtained an answer to such a bill, to use it on the trial of the action at law, or if he should use it, that precludes him from controverting the correctness of its statements by other evidence. An answer to a bill of discovery is entitled to no higher consideration than an answer to any other description of bill, when given in evidence on the trial of an issue at law.' And in Kenny v. Clarkson, 1 Johns. [N.Y.] 385 (3 Am.Dec. [336]) where the question was, whether if the party giving notice to produce a paper, decline to read it as evidence, it may be used by his adversary. The court said the notice to produce, and calling for the inspection ought to be considered as analogous to a bill for discovery, 'where most certainly the answer is not evidence for the adverse party. In Phillips v. Thompson, 1 Johns. Ch. [N.Y., 131] 141, a cross bill was filed by the defendant for a discovery by the complainant, to be used on the hearing. The chancellor held, that the complainant could not use his answer to the bill of discovery in the cross suit, unless the defendant choose first to produce it in evidence. That the complainant could not testify for himself, unless at the instance, and on the call of the defendants; and it was for the defendant to determine whether the answer should be evidence in the cause. The law on this point rests upon a principle so familiar, and so universally acknowledged that we deem it unnecessary to add any thing to the citations already made."
Another fatal infirmity inhering in said exhibit B, the alleged "membership agreement," which destroys its evidentiary force, is that it is a mere skeleton or blank, and there is no proof of its existence as a contract except the statement of the defendant in its answer. We quote from the answer to the discovery feature of the bill, "(h) We are attaching hereto a blank copy of 'Participating Membership Seed Certificate', marked Exhibit 'A', a blank copy of the 'Membership Agreement', and marked Exhibit 'B', and a blank copy of the 'First Year General Seed Contract,' marked Exhibit 'C', and a blank copy of 'Contract and Agreement', marked Exhibit 'D' to this answer." (Italics supplied.)
The court sustained a demurrer, incorporated in the answer, to the bill on the ground, among others, that the bill was not verified, and to meet that ruling the interrogatories calling for said answer were stricken from the bill by amendment.
For the reasons hereinabove stated the alleged "membership agreement" must be disregarded as evidence.
The bill avers:
"That the said C. L. Spears, at the time of the rendition of the said judgments and at the time of the filing of said certificates of judgment hereinabove set out, as shown by exhibits A and B [to the bill], the said C. L. Spears was the owner and in the possession of the following described property, personal property which is located in Blount County, Alabama, and is subject to the lien of the said P. H. Horton and the said Virgil B. Fowler, viz.:
"979 sacks of Cotton seed now located in the N.C. Prickett Store located on 1st Ave. in the Town of Oneonta, Alabama, each sack weighing 100 pounds; 564 sacks cotton seed each weighing 100 pounds located in Blount Warehouse Company's warehouse; 80 sacks of cull cotton seed weighing on an average of 75 pounds each located in. Blount Warehouse Company's warehouse in Oneonta, Alabama; also one 1937 Chevrolet Delux Coupe automobile, Motor #946135, serial #8GA07-13310."
At the time the bill was filed the property so described was in the custody of the sheriff, the executions issued on said judgments in favor of complainants having been levied on the same as the property of said judgment defendant.
The defendant, "The United Cotton Communities of America, a Corporation," was made a party as claimant, and in its answer to the bill, asserts title thereto as follows, and not otherwise:
"Answering Paragraph 4th of said Bill of Complaint, this respondent saith that at no time has C. L. Spears been in the possession of and holding the title or the owner of said cotton seed described in said paragraph, but avers that this respondent has ever since the purchase of said seed from the growers, or the pooling of said seed by the growers with this respondent, been in the possession of and holding the title to and the owner of said cotton seed; this respondent saith that in so far as it is advised the said C. L. Spears may have owned or been in the possession of the described automobile coupe described in said paragraph, but avers that it is informed that said coupe belonged to Melvin Spears at the time alleged in said paragraph of the filing of said certificates.
"Answering Paragraph 5th of said Bill of Complaint this respondent admits and avers that this respondent claims to own the legal title to the said cotton-seed, and hereby propounds it's claim thereto, and shows in support thereof, 'Exhibits A, B, C and D, to the answers to the interrogatories propounded to it.' "
Under the issue thus formed the burden of proof was cast on complainants to reasonably sustain the averments of the bill as to Spears' ownership of the property, for "the burden of proving a disputed fact rests, in all cases, upon the party affirming its existence, and claiming to derive right and benefit from it." Lehman Brothers v. McQueen, 65 Ala. 570, 572.
As to the Chevrolet Coupe, the evidence is without dispute that it was in the possession and daily use of the judgment defendant at the time it was levied on by the sheriff, and while said judgment defendant in his answer to the bill, to quote from said answer, "denies that the 1937 Chevrolet Delux Coupe Automobile, Motor #946135, serial #8GA07-13310 is subject to the lien of the said Virgil B. Fowler and Horton;" he did not testify in respect to the ownership of the automobile, and the testimony brought out in respect to its ownership other than by Spears, was the barest of hearsay.
During the examination of Morton, the president of the claimant corporation, defendant counsel Mr. Kelton stated: "We admit in our answer that Mr. Spears, Mr. Morton and Mr. Byrum owes Mr. Horton the amount of that judgment as it was filed and recorded as alleged in the Bill of Complaint and further admit that in so far as Mr. Spears's personal property is concerned that he is entitled to levy and entitled to the execution of that property for the satisfaction of that judgment if the judgment is figured correctly." The deposition in which this admission was a part was duly noted as evidence.
The admission could refer to nothing but the automobile as to which there was no claim by any one, other than Spears, and in respect to the ownership of which there was no serious controversy.
Clearly under the well settled law the complainants met and carried the burden of proof as to the automobile. Ross v. Lawson, 105 Ala. 351, 353, 16 So. 890; Shahan v. Herzberg, 73 Ala. 59, 62; Jackson v. Bain, 74 Ala. 328, 330; Loeb Brothers v. Manasses, 78 Ala. 555.
It is not permissible for a claimant to show title in a stranger unless he connects himself with such title. Wollner Lowenstein v. Lehman, Durr Co., 85 Ala. 274, 4 So. 643.
The evidence is without dispute that the cotton-seed in controversy were sacked and branded or labeled "C. L. Spears Upland Cotton Seed;" that they were produced in the season of 1937; that they came into possession and control of said judgment defendant; that he stored them in the warehouse in Oneonta in his own name and that the warehouse company issued warehouse receipts to him as owner. That in the latter part of August or early in September, 1937, Spears procured from the complainant Fowler, as agent of an insurance company, a policy of insurance, insuring said cotton-seed as the property of Spears; that Spears gave his note to Fowler in October, 1937, having failed to pay the premium, that Fowler's company required him, Fowler, to pay same, and the indebtedness thus created was merged into the judgment obtained by Fowler against Spears. That said Spears — from time to time — used said warehouse receipts in procuring personal loans and represented to Horton and to Fowler, and to the public generally, that he was the sole owner of said seed. That the cotton-seed were in the warehouse in the name of Spears when they were levied by the sheriff.
That the indebtedness due to complainant, Horton as alleged in the bill and admitted to be due by the defendants, was contracted on the 26th of April, 1937, and consisted of a loan to Spears, and at the time he procured the loan he represented to Horton that the cotton-seed, which was then being produced by the growers, from seed leased to them by Spears, under the arrangement with the growers, was the property of said Spears.
The contracts between Spears as party of the first part and the growers as party of the second part expressly stipulated: "Party of the second part understands and agrees that the title to the said leased seed and the title to all seed produced from the said leased seed is and shall remain the property of party of the first part, and party of the second part shall have no right to sell, lease, trade or give away or to allow to be sold, leased, traded, given away or otherwise disposed of any of the said leased seed or any of the seed produced from said leased seed."
This evidence made a prima facie case for the complainants, as to the cottonseed, and shifted the burden to the sole claimant "United Cotton Growers of America, Incorporated," of going forward with the evidence to rebut the prima facie case of showing title in itself. Ross v. Lawson, supra.
The bill as last amended alleges that the said sole claimant claims to have obtained the legal title to the seed from said Spears by an alleged transfer, and challenges said transfer as being voluntary, fraudulent and void against the complainants as creditors of said Spears.
As before shown the said claimant admits that Spears was indebted to complainants as alleged in the bill — Horton's claim accruing April 26, 1937 — for money loaned, and the evidence is without dispute that the sole claimant, of the cotton-seed, United Cotton Communities of America, was not incorporated until the 18th day of September, 1937. The evidence offered by it, considered in its lights most favorable to its claim, shows that the legal title and equitable ownership to the cotton-seed was in the judgment defendant, Spears, up until the 20th of September, 1937, when by a resolution of the board of directors of the corporation presided over and participated in by said Spears; the corporation undertook to take over the title to said cotton-seed, to quote from said resolution: "Under and by Contract, known as the general pure seed contract, which passes full title to the association, now and as long as the association meets the approval of the Breeder C. L. Spears." (Italics supplied.)
Said contract which appears on pp. 97 to 99 of the record, was a contract between Spears and the claimant, executed on the 20th of September, 1938, or 1937. As written, the date was 1938, and thereafter the figure '7' was made over the "8."
For this alleged transfer of ownership and title, the evidence is without dispute that the claimant paid Spears nothing. Horton, the president of the corporation, after much quibbling, on cross-examination testified:
"Q. Since that time [the organization of the corporation] has the United Cotton Communities of America paid Mr. C. L. Spears anything for these seed? A. I don't think they have.
"Q. Been nothing paid to the farmers by United Cotton Communities or C. L. Spears either? A. No sir.
* * *
"Q. The United Cotton Communities of America has never paid Mr. Spears anything? A. Have not."
This testimony is corroborated by Robertson, another director.
The only stipulation in the alleged "pure seed contract", referred to in the resolution, touching the question of title is as follows: "That C. L. Spears, as breeder of cotton and other plants in cooperation with the United States Department of Agriculture, agrees to (a) Supply the Member Units of the United Cotton Communities of America, annually, (so long as such Unit operates as a cooperative Unit in maintaining the purity of said seed stock) on a profit-sharing basis, to the full capacity of his production of such seed, all such pure seed that he may produce at a price which shall be agreed upon from time to time between the contracting parties. (b) He further agrees that as his production of such seed may increase to give said Units and their members the advantage of all such increase in production." (Italics supplied.)
The stipulation is clearly consistent with Spears' ownership of said cotton-seed, and the resolution itself shows that he retained and reserved to himself the right to revoke and nullify the alleged transfer.
As before stated, the indebtedness to both complainants from Spears is admitted, and the evidence is without dispute that said debts antedated the alleged transfer of the seed by Spears to the complainant. The burden was therefore on the claimant, to quote from Robinson v. Moseley, 93 Ala. 70, 9 So. 372, "to show by appropriate averment, supported by strong and convincing evidence, — the more strong and convincing in view of the * * * relation existing between grantor and grantee, — that she [it] paid an adequate and valuable consideration for the conveyance. To the lifting of such burden, affirmative averment of the facts relied on as constituting the consideration is as essential as convincing proof of their existence. The laboring oar was upon the defendant, not simply to deny the negative averment that there was no consideration * * * but to state the affirmative fact that there was such consideration, in what it consisted, and how it was paid, and to support these averments by evidence." Robinson v. Moseley, 93 Ala. 70, 71, 72, 9 So. 372; Robinett et ux v. Murray, 219 Ala. 176, 121 So. 535.
The evidence being without dispute that the said sole claimant paid nothing for the alleged transfer of title, the transfer as to existing creditors is fraudulent and void, without regard to the question of benefits reserved. Crawford et al. v. Kirksey et al., 55 Ala. 282, 28 Am.Rep. 704; Robinett et ux v. Murray, supra; Naff v. Fairfield-American Nat. Bank, 231 Ala. 388, 165 So. 224; Harrison et al. v. American Agricultural Chemical Co., 220 Ala. 695, 127 So. 513; Drain v. F. S. Royster Guano Co., 231 Ala. 422, 165 So. 239.
The reservation of benefit shown by the resolution of the acceptance of the alleged transfer is sufficient to avoid the transfer. Morton Hardware Co. v. Barranco et al., 233 Ala. 346, 172 So. 109.
We are, therefore, after mature consideration of the case, of the opinion that the complainants are entitled to relief, and a decree will be here entered granting complainants relief, cancelling and annulling the alleged transfer of title of the cottonseed of Spears to the appellees, United Cotton Communities of America, and ordering the sheriff of Blount County to proceed with a sale of the property under said executions. The cause is remanded to the Circuit Court for further appropriate orders, not inconsistent herewith, to enforce the decree. Let the appellees pay the costs of the appeal.
Reversed, rendered and remanded.
ANDERSON, C. J., and GARDNER and THOMAS, JJ., concur.