Opinion
No. 27192.
June 11, 1928.
1. PLEADING. Allegations of fraud must be taken as true for purpose of decision, in absence of answer or denial in answer filed therein.
Allegations of fraud in bill of complaint must be taken as true for purpose of decision, in absence of answer thereto or denial of such allegations in answer filed therein.
2. BILLS AND NOTES. Indorsee of check is presumed prima facie to be privy to indorser's fraud in obtaining it.
Indorsee of check which had been fraudulently obtained by payee is presumed prima facie to be privy to indorser's fraud.
3. FRAUDULENT CONVEYANCES. Complainant, seeking to set aside alleged fraudulent conveyance, and alleging fraudulent indorsement of check, held entitled to injunction restraining payment.
Where complainant in bill seeking to set aside alleged fraudulent conveyances specifically charged that certain defendants receiving check indorsed it fraudulently to bank to collect for them, and that bank was not a bona-fide purchaser for value of such check, but had procured possession thereof through fraud and trickery, complainant was entitled to injunction restraining bank on which check was drawn from paying funds to payee by reason of such fraudulent indorsement.
4. INJUNCTION. Amended and supplemental bill held properly taken into consideration on hearing motion to dissolve.
Amended and supplemental bill, filed by complainants after motion to dissolve or modify injunction, held properly taken into consideration on hearing of such motion.
APPEAL from chancery court of Coahoma county, Second district; HON. HARVEY McGEHEE, Chancellor.
Shands, Elmore Causey and Maynard, Fitzgerald Venable, for appellant.
The court it seems erred and very plainly erred in so construing and modifying the writ of injunction as to permit the Bank of Clarksdale to pay out the money to the Planters' National Bank on the said cashier's check. The motion was tried on the pleadings and process and nothing else. No word was heard from any witness. The bill was filed to set aside fraudulent transfers and conveyances and overflowed with detailed charges of the fraudulent practices on the part of the defendants other than the Bank of Clarksdale in order to defraud complainants. The bill expressly charged that the passing of this property involved in the other litigation through the Bank of Clarksdale for division among the defendants was but another step in the fraudulent transfer of the property of Earl Brewer and J.W. Cutrer; that by said compromise "the defendants in that suit (No. 3851) . . . will receive unlawfully and fraudulently large amounts of money and personal property, notes and evidences of indebtedness belonging to the said Earl Brewer in truth and in fact," etc. It was fully and completely charged that the transfers by Earl Brewer of the moneys and collaterals involved in that suit to his daughter and to his attorneys and by them to Mrs. Holland and Mrs. Cutrer, respectively, were all voluntary and with fraudulent intent and with full knowledge on the part of all parties to the transfers of said fraudulent intent as against complainant.
None of the above defendants have answered except the Bank of Clarksdale.
The Bank of Clarksdale denied no allegation of fraud and by not denying the allegations it admitted their truthfulness so far as it was concerned. By reason thereof the court correctly announced that for the purpose of the hearing on the motion the court would assume "that the allegations of the bill of complaint with reference to all transfers and assignments therein complained of are true and correct as alleged in the bill of complaint."
The answer further admitted that the cashier's check for eighteen thousand one hundred fifty-three dollars and forty cents was a part of the property held by the bank pursuant to the said compromise and adjustment of said suit No. 3851. By way of determining whether the court ought to have modified and construed said writ as it did, let us ask this question: Suppose "J.W. Cutrer, attorney for defendants" had presented said check and demanded payment and had then filed suit on the check against the Bank of Clarksdale, would the court in those circumstances have sustained the motion of the Bank of Clarksdale so to construe and modify the injunction as to permit it to pay the check to "J.W. Cutrer, attorney for defendants"? Certainly not. Opposing counsel will not so contend.
In legal effect on this record the Planters' National Bank stands with regard to the check in the very shoes of "J.W. Cutrer, attorney for defendants," with rights no more and no less than he had.
This results from the fact that the Planters' National Bank on the record here before the court is the holder of the check under a payee who obtained the same fraudulently, and the Planters-National Bank is presumed, as a matter of law, also, to have taken the check fraudulently. When circumstances in evidence show that the payee from whom the holder claims came into possession of the note by fraud upon the maker, then the holder must show his good faith. The presumption is then that the holder is a fraudulent holder and the burden is on him to free himself from that presumption. Bank v. Bank, 106 Miss. 471; Griffith's Miss. Chan. Prac., par. 571; Hentz v. Delta Bank, 76 Miss. 429.
The complainant filed an amended and supplemental bill in said cause and the said amended and supplemental bill made direct and specific charges as to the manipulations of the said cashier's check, and showed conclusively by matter of fact therein contained that the said Planters' National Bank was a fraudulent holder of the said cashier's check. Alcorn v. Alcorn, 25 So. 879; Belzoni Oil Co. v. Y. M.V.R.R. Co., 47 So. 468. On the hearing there was no sort of a denial of any allegation in the amended bill of complaint, which said amended bill of complaint showed not only fraud as against the complainant but showed that the said parties defendant and the said Planters' National Bank were conspiring and attempting a fraud upon the jurisdiction of the court.
Bearing in mind the nature of the proceeding under section 328 of Hemingway's Code of 1927, the complainant by filing its bill obtained a lien upon the property represented by this check, except as against bona-fide purchasers before the service of process upon the defendants in the bill. As for ourselves, we see no escape from the conclusion on the record before the court that the Planters' National Bank has no standing whatever as a bona-fide purchaser. The complainant therefore as against the Planters' National Bank obtained a lien on the property in the Bank of Clarksdale represented by the said cashier's check. On the record the Planters' National Bank of Clarksdale is a fraudulent assignee and endorsee of said check. The result therefore of this order construing and modifying said writ of injunction is to permit the Bank of Clarksdale to turn over property on which the complainant had a lien to the fraudulent transferree of a party to which party the Bank of Clarksdale was under writ of injunction not to pay. Such a proceeding we submit does not recommend itself to a court of equity.
Wilson, Gates Armstrong, for appellee.
It is said that the court erred in modifying the injunction. The reasons given for this are apparently that the bill claims that the transfer from Messrs. Brewer and Cutrer to the Planters' National Bank was fraudulent. And it is further said that the Planters' National Bank would have to show its good faith. We are not concerned with any of those things. The property is in the hands of the Planters' National Bank. It is not alleged to be insolvent and this bank hasn't the slightest objection to these parties litigating it out at will. The question here is: has this bank been enjoined from paying this money to the assignees of this check? Then, the question is: did the court below rightly construe the writ? The writ very plainly does not expressly prohibit any payment to an assignee of the persons named in the writ. It says: "You are hereby commanded and enjoined . . . from distributing or paying out to Earl Brewer or to Mrs. Earl Brewer (Mrs. Minnie Brewer), or to Mrs. Earline Brewer Shelton, or to Mrs. W.P. Holland (Mrs. Florence T. Holland), or to J.W. Cutrer, or to Mrs. J.W. Cutrer (Mrs. Blanche C. Cutrer), or to any or either of them," etc. So it's plain enough that the bank was not prohibited from paying it to the assignee, by any express prohibition. What reason is there then for adding to it by intendment. It needs no authority to prove that writs of injunction are strictly construed. It needs no authority to show that they go no further then they expressly say. It seems plain too that the fact that the pleader drawing the original bill should have or might well have included a prayer for injunction against the assignee in his pleadings, will not have the effect of having such a prayer construed into the pleadings, but would rather have the effect of disallowing such construction, because it was so easy to have prayed it in express words.
Counsel asks the question as to whether the court would have modified the writ so as to permit a payment to J.W. Cutrer, attorney, for the defendants, if J.W. Cutrer had presented the writ and sued the Bank of Clarksdale and counsel very properly answer that in such event the court would not have construed the writ so as to permit a payment to J.W. Cutrer. Of course it might have modified it on some other ground, but it would not have construed it so as to permit a payment to J.W. Cutrer, attorney for defendants, for the very simple reason that that is the exact thing that the writ prohibited. Counsel then says that in legal effect a payment to the Planters' National Bank stands in the same attitude. With that conclusion we are bound to disagree. It isn't a question of the rights of the assignee rising higher than the rights of his assignor, although that may happen too in the case of negotiable instruments. It is a question of whether or not an express injunction against paying to an assignor will be extended and liberalized in the strict writ of injunction so as to include his assignee, and this, we think, should be answered in the negative for the very illustration made by appellant. The very fact that the court would not construe the injunction so as to permit a payment to J.W. Cutrer furnishes the reason why it should construe it so as to permit a payment to the Planters' National Bank deriving title through J.W. Cutrer, because the payment to the Planters' National Bank was impliedly permitted because it was not interdicted. Again, we decline to enter into a discussion as to who is or is not a bona-fide holder of a bank check. That is not our concern. The Planters' National Bank is a holder so far as we are concerned, and if they are not bona-fide holders in due course, in a proper case they will be held to respond, but our bank is only in because it is enjoined. It is stated that there was no proof taken. We have already shown that their own amended bill and our answer agree in the fact that the Planters' National Bank holds the paper. The check, which is an exhibit, shows the endorsements on it, and the declaration, which is an exhibit to the answer, shows that demand was being made and suit had been brought on it. We will have to let the Planters' National Bank answer as to whether it is a bona-fide holder. The only thing we are concerned with is whether we are enjoined from paying to the Planters' National Bank, and we insist that we are not. It was stated that the Bank of Clarksdale could have paid the money into the chancery court and required the Planters' National Bank to propound its claim therein under section 569 of Hemingway's Code. Assuming that this is true, we know of no reason why the court should not decide this injunction matter properly. If, however, the statement was made in order to explain the delay and indifference of the complainant in having disposition made of this injunction, it does not explain it. There was a suit in the circuit court and a suit in the chancery court and the solicitor representing the Bank of Clarksdale takes the responsibility for advising that bank that it would be an exceedingly difficult and dangerous matter to pay the money into one court while being sued in another, and that the plainer, safer and better plan was to have the court issuing the injunction pass upon the extent, scope and validity of its own injunction. The answer rather lies the other way. The Planters' National Bank is suing the Bank of Clarksdale, and if the creditor, the Mississippi Valley Trust Company, desires to stop the payment of that check it should have enjoined the prosecution of the suit against the Bank of Clarksdale and impounded the fund.
Argued orally by H.F. Causey and Gerald Fitzgerald, for appellant, and Julian C. Wilson, for appellee.
The appellant, the Mississippi Valley Trust Company, filed its bill of complaint in the chancery court of Coahoma county against Earl Brewer, Mrs. Earl Brewer, Mrs. Earline Brewer Shelton, Mrs. W.P. Holland, J.W. Cutrer, Mrs. J.W. Cutrer, and the Bank of Clarksdale, seeking to set aside alleged fraudulent conveyances therein particularly set forth, and to enjoin the Bank of Clarksdale from paying out and distributing to the defendants funds and property of certain of the defendants then in its possession. A temporary injunction was issued as prayed for, and thereafter, on motion of the Bank of Clarksdale, which was heard on the pleadings and process, the court so construed and modified the writ of injunction as to permit the Bank of Clarksdale to pay eighteen thousand one hundred fifty-three dollars and forty cents of said funds to the Planters' National Bank, which was alleged to be the owner, holder, and indorsee of a certain cashier's check for said sum, issued by the said Bank of Clarksdale to J.W. Cutrer as attorney for certain of the defendants. From the decree so construing and modifying the injunction, this appeal was prosecuted.
The original bill of complaint alleged, in substance, that the defendants Earl Brewer and J.W. Cutrer, jointly and severally, were indebted to the appellant in the sum of three hundred thirty-eight thousand seven hundred forty-five dollars and seventy-five cents, and set forth in great detail the transactions and dealings between these parties by which this indebtedness was incurred; that, in contemplation of their liability to the appellant for this sum, the defendants Earl Brewer and J.W. Cutrer, from time to time, fraudulently conveyed to others all of the property which either of them possessed in an effort to defeat the appellant and others out of the amounts so due them, so that the said Brewer and Cutrer were then wholly insolvent; that the said Earl Brewer made a conveyance to Mrs. Earl Brewer, Mrs. Earline Brewer Shelton, and J.W. Cutrer and E.W. Smith, as attorneys of all of his property, the said conveyances being particularly set forth and described, and being alleged to have been made without consideration, and to be fraudulent and void, and made for the express purpose of defrauding the appellant and other creditors; that the said J.W. Cutrer, being insolvent, and in an effort to place his property beyond the reach of his creditors, fraudulently, and without consideration, transferred to his wife, Mrs. B.C. Cutrer, large holdings of valuable property therein particularly described; that, in furtherance of the alleged fraudulent schemes of the said Earl Brewer and J.W. Cutrer, the said Mrs. Earline Brewer Shelton executed certain alleged fraudulent transfers and assignments of property to Mrs. Florence T. Holland; the many alleged fraudulent transfers and assignments between these several parties being set forth and described in detail and at great length.
The bill of complaint also alleged that, after Earl Brewer had made the alleged fraudulent conveyances to his daughter, Mrs. Earline Brewer Shelton, and to his attorneys, Cutrer Smith, the Canal Bank Trust Company of New Orleans, and other creditors, filed a creditor's bill in the chancery court of Coahoma county, attacking both conveyances as being fraudulent and void; that, after taking proof therein, a compromise and adjustment was reached by some of the creditors therein, to-wit, the Canal Bank Trust Company and several others unknown to the appellant, whereby the Canal Bank Trust Company paid a large sum of money, or gave a division of the property alleged to have been fraudulently transferred; that the appellant had intervened in said suit, but, because of the fact that creditors first filing their bill to set aside the fraudulent conveyances have the first lien on the property, the appellant was compelled to withdraw its intervention therein, and to take a nonsuit without prejudice to its right to file another suit against the defendants Earl Brewer and J.W. Cutrer.
It was further alleged that the said compromise agreement between the Canal Bank Trust Company and the said Brewer and Cutrer was also fraudulent, and made in an effort to further hinder and delay their creditors; that by said agreement it was provided that all or some of said property and the conveyances thereof should be lodged with the Bank of Clarksdale, to be by it distributed; that the said Bank of Clarksdale then held and had in its possession for the defendants, or some of them, certain moneys, notes, collateral, deeds, transfers, and assignments, which, unless it was restrained by injunction, it would deliver to the defendants, or some or all of them, and which would be by the defendants transferred or assigned to other persons; that the interested defendants were all insolvent, and by said transfers the appellant would lose all chance of recovering any part of the same, as it would be dissipated and disposed of, or placed beyond the reach of the appellant or any other creditors of the interested defendants.
The bill prayed for a personal judgment against Earl Brewer and J.W. Cutrer; that these various alleged fraudulent conveyances, transfers, and assignments be set aside and canceled, and that the property thereby conveyed be subjected to the payment of said indebtedness of Brewer and Cutrer to the appellant; and also that the Bank of Clarksdale, or any other person interested, be enjoined and restrained from distributing or paying out any money, collateral, notes, or deeds to the defendants, or any of them, until the further order of the court.
The preliminary injunction prayed for was issued and served on the Bank of Clarksdale, enjoining and restraining it from distributing and paying out to Earl Brewer, Mrs. Earline Brewer Shelton, Mrs. W.P. Holland, J.W. Cutrer, or Mrs. J.W. Cutrer, or to any or either of them, any money, collateral, notes, securities, deeds, or deeds of trust, paid or delivered to it, or held by it pursuant to a contract of settlement dated on or about December 14, 1927, made between complainant and the defendants, or some of them, in the case of Canal Bank Trust Company v. Earl Brewer, No. 3851, in the chancery court of the Second judicial district of Coahoma county. But this writ did not in express terms include the assignees or indorsees of the defendants.
The Bank of Clarksdale filed an answer to the bill of complaint in which it specifically disclaimed any information as to, or interest in, the various allegations of the bill against the other defendants, and asserted that it was only concerned with the injunction issued and served against it restraining it from distributing or paying out to any of the parties named any money, collateral, notes, securities, deeds, or deeds of trust paid or delivered to it, or held by it, pursuant to the contract of settlement referred to in the bill. As to these matters, the answer averred that, at the time of the service of the writ of injunction, it had no money, notes, securities, or property which had been paid or delivered to it in pursuance of said agreement, but that it had made full distribution thereof, and paid over and delivered the same to the proper parties, except the sum of eighteen thousand one hundred fifty-three dollars and forty cents.
As to this sum, it was alleged that, in the distribution and delivery of all said properties, it executed and delivered as a part thereof to J.W. Cutrer, attorney for the defendants, its cashier's check on itself for eighteen thousand one hundred fifty-three dollars and forty cents; that said cashier's check was issued and delivered to the said J.W. Cutrer before the writ of injunction was served on it, and before it had any knowledge or information thereof; that, by delivering said check, it obligated itself to pay J.W. Cutrer, attorney for the defendants, or to his assignees or indorsees, upon proper indorsement, said sum of money; and that it stood ready, willing, and desirous so to do. It was further averred that, before said cashier's check was presented to it for payment, the writ of injunction was served upon it, and thereafter the Planters' National Bank presented said check to it as indorsee, holder, and owner thereof, and demanded payment thereof; that, owing to the injunction served on it, it declined to make said payment, and thereupon said cashier's check was protested for nonpayment and dishonor; that thereafter the Planters' National Bank brought suit in the circuit court against the said Bank of Clarksdale for the said sum of eighteen thousand one hundred fifty-three dollars and forty cents and interest, and that the said Bank of Clarksdale is only failing and refusing to pay said sum on account of the possibility of violating the said injunction; that the said defendant Bank of Clarksdale is willing and anxious to pay the said check and honor its obligation, and finds it very embarrassing to refuse to pay its cashier's check and to have the same dishonored and protested, and to be sued for its acknowledged obligation; that the circuit court in which the suit was pending would soon convene, at which time the suit would be triable; that it could not deny that it owed the obligation; that it was anxious that it be permitted to honor and pay the said check, and for the suit against it to be dismissed, but that it was afraid to do so without the permission of the court. It asked that the injunction against it be dissolved or modified so as to permit it to pay and honor its cashier's check to the Planters' National Bank, and relieve itself of the suit against it.
Upon the filing of its answer, the Bank of Clarksdale filed a motion to dissolve the injunction against it, and to specially dissolve it so as to permit it to pay and honor the cashier's check issued to J.W. Cutrer, attorney, then held and sued on by the Planters' National Bank; and that the court dissolve the said injunction so as to relieve it in all respects from refraining from honoring its said cashier's check to the holder or holders and the indorsee or indorsees thereof; said motion being made upon bill of complaint, the fiat, and writ therein, and the answer of the defendant the Bank of Clarksdale.
Thereafter, and before the hearing of this motion to dissolve or modify the injunction, the appellant filed an amended and supplemental bill of complaint in which, among other things, it was alleged that, a few minutes before the president of the Bank of Clarksdale was personally notified of the issuance of the writ of injunction, all of the said bonds, money, property, and papers had been transferred out of its possession and the possession of the said president of the bank, except the sum of eighteen thousand one hundred fifty-three dollars and forty cents, for which the cashier's check was issued to J.W. Cutrer, as attorney for the defendant; that, at the time of the issuance of the injunction, the said cashier's check was in the hands of the said J.W. Cutrer, attorney for the defendants; that, at the time J.W. Cutrer received notice of the injunction and the filing of the original suit, the said cashier's check was in his hands unindorsed; that, in order to circumvent the order of the court and the injunction which had already issued, the said J.W. Cutrer indorsed said check, "J.W. Cutrer, attorney for the defendants," and delivered the same to his law partner, E.W. Smith; that, through error, oversight, or mistake in drawing the original bill, the name of E.W. Smith was left out in praying for process and summons, but that the original bill throughout named E.W. Smith as a party, and a necessary party, to the said bill of complaint; that, in addition, interrogatories propounded to the said E.W. Smith were attached to the original bill, and he well knew that he was a proper and necessary party to said bill; that if, by any chance, he discovered that an error had been made in the original bill as filed, he knew as an attorney at law, and as an individual, that the same was an error and mistake, and that he was, in truth and in fact, a necessary party thereto; that the said E.W. Smith, as the partner of the said J.W. Cutrer and a member of the firm of Cutrer Smith, knew of the filing of the said suit and the issuance of said injunction and the service of said writ, and was bound by such knowledge.
The bill then alleged that:
"Complainant alleges that the said J.W. Cutrer and E.W. Smith willfully and knowingly, and in utter contempt and disregard of the filing of said suit and the issuance of said injunction, in order to circumvent the orders of the court aforesaid, and to prevent the complainant from having an opportunity to try the original bill herein, and to prove the true ownership and title to the said eighteen thousand one hundred fifty-three dollars and forty cents, agreed among themselves, the said J.W. Cutrer and E.W. Smith, to so transfer, and dispose of said cashier's check as to prevent the court in the original cause herein from having jurisdiction thereof, or any control of the said money, and therefore complainant alleges, on information and belief, that, after the said J.W. Cutrer had indorsed and transferred the said cashier's check to said E.W. Smith, both the indorsement and transfer of said check, and the delivery thereof, being with the full knowledge of both the parties of the facts above stated, then combined and confederated and caused the said E.W. Smith to, by chicanery and trickery, turn the said cashier's check over to the Planters' National Bank of Clarksdale, Miss., to collect for them, the said J.W. Cutrer and E.W. Smith, or others of the defendants interested, and thereupon complainant alleges that the said Planters' National Bank of Clarksdale, Miss., who is not in any manner a bona-fide purchaser for value of said cashier's check, took the same into its possession, and now claims to be a bona-fide purchaser for value thereof, and claims to be the owner thereof, but complainant alleges that the true facts are that the said Planters' National Bank of Clarksdale, Miss., is not a bona-fide purchaser for value of said cashier's check, but, on the contrary, it has procured possession of the same through fraud, chicanery, and trickery, and that it has not paid value for the same, and, if it appears that it has paid value for the same, some other secret arrangement has been made between the said E.W. Smith, J.W. Cutrer, and/or some other of the defendants herein, with the said Planters' National Bank, that they shall be and stand responsible to the said Planters' National Bank for the payment of the said cashier's check, and that the true facts are that the said Planters' National Bank does not own the said check and has no interest therein."
This amended and supplemental bill reiterated all of the allegations of the original bill, and prayed that the Planters' National Bank of Clarksdale be made a party defendant; and prayed for the issuance of an additional injunction enjoining all the parties to the original bill, including especially E.W. Smith, from selling, assigning, or disposing of any part or portion of either the said cashier's check of eighteen thousand one hundred fifty-three dollars and forty cents, or any of the bonds described in said amended bill, or the proceeds from either said check or bonds. It also prayed that the Planters' National Bank be enjoined from paying out to the said E.W. Smith, or any other person, any part or parcel of any money it then had in its possession or under its control, or which might thereafter be paid to it by any person, firm, or corporation as a result of, or as the proceeds of, said cashier's check. These injunctions were issued and served.
Before the hearing of the motion to dissolve the injunction, the appellant suggested, in writing, that the presiding chancellor was disqualified to hear said cause, and this suggestion was by the court overruled. The motion to dissolve then came on for hearing upon the original bill, the amended and supplemental bill, the process, and the answer of the Bank of Clarksdale, and, in response to the motion, the court so construed and modified the injunction as to permit the Bank of Clarksdale to pay the said cashier's check to the Planters' National Bank. Before the decree was signed, the appellant asked leave to amend the original bill and the writ of injunction so as to make the injunction apply against the Bank of Clarksdale paying out any of the funds to any of the parties named in the writ, or to their assignees, transferees, or indorsees. The court permitted the amendment to the bill, but denied the proposed amendment to the writ, and, from the decree entered modifying the injunction, this appeal was prosecuted.
For a reversal of the decree of the court below, the appellant assigns two grounds, but our views on the second assignment of error will render it unnecessary to consider the first. The assignments of error are: First, the court erred in holding that he was qualified to sit in said cause; and, second, the court erred in so construing and modifying the writ of injunction as to permit the Bank of Clarksdale to pay said check to the Planters' National Bank.
The original bill was filed to set aside alleged fraudulent conveyances, and it set forth detailed charges of fraudulent practices on the part of the several defendants other than the Bank of Clarksdale, to hinder, delay, and defraud the appellant in the collection of the indebtedness due it by Earl Brewer and J.W. Cutrer. The bill expressly charged that the placing of the money and collaterals involved in the litigation with the Canal Bank Trust Company, in the Bank of Clarksdale for division, was a part of the scheme to effect the fraudulent transfer of the property of Earl Brewer and J.W. Cutrer; and, unless the said Bank of Clarksdale was restrained by injunction from paying out said funds the defendants in said prior suit would by said compromise receive unlawfully and fraudulently large amounts of money, notes, and evidences of indebtedness, which, in truth and in fact, belong to the said Earl Brewer, and which would be dissipated and disposed of, or placed beyond the reach of the appellant or any other creditor of the interested defendants. It was specifically charged that the transfers by Earl Brewer of the money and collateral involved in said suit to his daughter, Mrs. Earline Brewer Shelton, and to his attorneys, J.W. Cutrer and E.W. Smith, and by them to Mrs. Holland and Mrs. Cutrer, respectively, were all voluntary, and made with fraudulent intent and with full knowledge on the part of all parties to the transfers of said fraudulent intent as against the appellant.
None of the defendants to the original bill have filed an answer thereto except the Bank of Clarksdale; and in its answer none of the allegations of fraud on the part of the other defendants were denied, and, for the purpose of this decision, they must, therefore, be taken as true. The answer of the Bank of Clarksdale admits that the cashier's check in controversy was a part of the property held by it pursuant to the alleged fraudulent compromise and adjustment of the said prior litigation, and part of the property involved in the alleged fraudulent conveyances and transfers, and there is no averment that the Planters' National Bank was a bona-fide purchaser or holder of the check.
The motion to dissolve or modify the injunction was heard upon the pleadings, in which it stands admitted, for the purpose of the hearing of the motion, that the said Planters' National Bank is the holder of the check as indorsee of a payee who obtained it fraudulently; and, this being true, the indorsee is presumed, prima facie, to be privy to its indorser's fraud. This doctrine was announced in the case of Richards v. Vaccaro, 67 Miss. 516, 7 So. 506, 19 Am. St. Rep. 322, in which the court said:
"We concur in the views announced by these courts which hold that proof of fraud on the part of the grantor is sufficient to entitle his creditors to subject the property fraudulently assigned, in the absence of evidence showing the claimant to be a purchaser for value and in good faith. We fail to perceive why, in cases of this character, the party assailing the conveyance shall be required to assume the burden of showing participation in the fraud by the purchaser, and the nonpayment of value for the property fraudulently conveyed.
"The decisions holding it to be the duty of the creditor to establish not only the fraud of the seller, but that of the purchaser, seem to rest upon an undue extension of the rule that fraud is never to be presumed but must always be proved by the party alleging it to exist. This rule is so well established as to have become one of the maxims of the law; but it is not true that, where a transaction has been shown to be fraudulent on the part of one of the actors, it is incumbent upon a party claiming or defending against it to show the fraud of the other actor claiming under it. Good faith and legality are presumed to exist in reference to the ordinary business transactions of life, and the burden is upon him who asserts the contrary; but it is otherwise when the transaction is itself unfair, or is prima facie shown to be illegal."
In further discussing the basis for this doctrine, the court quotes, with approval, from Bigelow on the Law of Fraud, pp. 131, 132, the following statement:
"But it may still be thought necessary to inquire whether the plaintiff himself has really sustained the burden of proof, so as to require the defendant to come to the support of his defense by merely showing fraud. It may be asked if the plaintiff ought not to go further, and, though he has made a case of fraud in the grantor, offer some definite evidence of notice, or what, for the present purpose, is the same thing — that the conveyance to the defendant was voluntary. The answer of the authorities, though not without here and there a discordant note, is that evidence of the fraud is enough, and this whether the case be one of fraud on creditors or fraud on a vendor. Such is the better answer in those states in which, in cases of fraud upon creditors, notice to the purchaser is sufficient to defeat his title."
In the case of Merchants' Farmers' Bank v. Bank of Winona, 106 Miss. 471, 64 So. 210, it was held that one in possession of negotiable paper is presumed to be a bona-fide holder for a valuable consideration; but, when circumstances in evidence show that the payee from whom the holder claims came into possession of the paper by fraud upon the maker, then the holder must show that he is a bona-fide holder for value. Applying this doctrine to the case as made by the record now before us, in which the fraud of the payee of the said check is undenied, the Planters' National Bank, the holder of the check, is presumed to be privy to the fraud of the payee, through whom it claims as indorsee.
The decision of the question here involved need not, however, be rested upon the presumption which arises from the fraud of the indorsers of the check. The appellant filed an amended and supplemental bill in which it was specifically charged that the indorsers thereof fraudulently combined and confederated to turn the said check over to the Planters' National Bank to collect for the said indorsers, or others of the defendants interested, and that the said Planters' National Bank is not a bona-fide purchaser for value of said check, but, on the contrary, it procured possession of the same through fraud, chicanery, and trickery, and that it has not paid value for the same, and does not own the said check, and has no interest therein. This amended and supplemental bill was properly taken into consideration on the motion to dissolve; and, since none of the allegations thereof are denied, they must be taken as true as against the appellee. Under these facts, the Planters' National Bank has no greater right to demand or receive payment of this check than its fraudulent indorsers have, and the force and effect of the injunction restraining the Bank of Clarksdale from paying out these funds to the payee of the check cannot be defeated by a fraudulent indorsement of the check to the indorsees who both presumptively and actually participated in the fraud.
On the record, as it stands, we think it is clear that the original injunction operated to effectually restrain the Bank of Clarksdale from paying the check to the said Planters' National Bank, and that the court erred in so dissolving, modifying, or construing the injunction as to permit such payment; and therefore the decree of the court below will be reversed, the injunction fully reinstated, and the cause remanded.
Reversed and remanded.