Opinion
1 Div. 421.
March 24, 1927. Rehearing Denied April 21, 1927.
Appeal from Circuit Court, Mobile County; Saffold Berney, Judge.
Lyons, Chamberlain Courtney, of Mobile, for appellant.
Where an insolvent debtor executes a conveyance to his children for a grossly inadequate consideration, and the children are in possession of facts to put them on notice of his position and acts, a prior creditor may maintain a bill to have the conveyance set aside. Tyson v. Southern C. O. Co., 181 Ala. 256, 61 So. 278; Burnwell Coal Co. v. Setzer, 203 Ala. 395, 83 So. 139; Dothan Nat. Bank v. Moore-Handley Hdw. Co., 200 Ala. 401, 76 So. 317; Waddle v. Great Southern Phosphate Co., 184 Ala. 346, 63 So. 462; London v. Anderson Brass Works, 197 Ala. 16, 72 So. 359. Such a conveyance is void, regardless of inadequacy of consideration, where the grantee knows of fraudulent intent. Carter v. O'Bryan, 105 Ala. 305, 16 So. 894; Boutwell v. Spurlin Mer. Co., 203 Ala. 482, 83 So. 481; Hoyt v. Turner, 84 Ala. 523, 4 So. 658; Pickett v. Pipkin, 64 Ala. 520. Where the conveyance is made to hinder, delay, and defraud creditors, and a part of the consideration is payment of an antecedent debt and part of present consideration, it is void if the fraudulent intent is participated in by the grantee. Levy Co. v. Williams, 79 Ala. 171; Carter v. Coleman, 82 Ala. 177, 2 So. 354; Owens v. Hobbie, 82 Ala. 468, 3 So. 145.
Hogan Mitchell, of Mobile, for appellees.
The debt of Cawthon to decedent was a proper set-off against the distributive share of the debtor. Code 1923, § 5960. A conveyance by a debtor of his property will be upheld, where the creditors could not have subjected said property to payment of their debts. Manchuria S. S. Co. v. Donald, 200 Ala. 638, 77 So. 12; Southern, etc., Co. v. Hammond, 11 Ala. App. 491, 66 So. 941; B. P. Supp. Co. v. First Nat. Bank, 123 Ala. 203, 26 So. 311; Adkins v. Bynum, 109 Ala. 281, 19 So. 400; Fellows v. Lewis, 65 Ala. 343, 39 Am. Rep. 1. In absence of actual fraud, an assignment is void only as to the excess over and above what is required to pay what is due the assignee. Amer. T. S. Bank v. O'Barr, 12 Ala. App. 546, 67 So. 794.
Notwithstanding the presence of several suspicious circumstances tending to impeach the bona fides of J. L. Cawthon's indebtedness to his deceased wife, their weight is not sufficient to overcome his testimony that he was so indebted in the sum of $1,250, supported as it is by the exhibition of the canceled checks drawn by him on her bank account, and of the note executed by him to her in evidence of the debt.
Her estate consisted solely of money on deposit, $2,337.05, and this debt due from her husband, $1,250. Its total amount, therefore, was $3,587.05, and the gross distributive share of J. L. Cawthon, as surviving husband, was $1,793.52. But, under the statute (section 5960, Code 1923), his debt to the estate was a set-off against his share, and independent of the statute, the administrator's duty was to apply his interest pro tanto to the payment of the debt (24 Corp. Jur. 487, § 1317, and cases cited in note 34); so that the actual net amount of his share was $543.52, subject of course to deductions for the expenses of administration, and for the payment of the intestate's debts, if any there are. It is of course not to be presumed that there are any debts to be paid by the administrator, and, no evidence being offered to show their existence, they will be disregarded as a factor affecting the value of the estate.
Therefore when, on December 18, 1924 (four days after the intestate's death). J. L. Cawthon notified the Merchants' Bank (where her money was deposited) that it had been selected by the distributees of her estate for appointment as administrator thereof, and that he wished to convey his interest in the estate to his three children (joint owners of the other half of the estate), and directed the said bank to pay over his interest to them, this operated, when accepted by the bank, as an assignment to them of his net interest amounting, as stated, to $543.52.
Construing this waiver and assignment along with the other document of the same date (the order to the administrator, signed by all of the distributees, to pay to J. L. Cawthon $300, and to charge it as an advancement against the distributive interests of the three children) as a single transaction, and looking through its form to its substance, it all amounted simply to this: J. L. Cawthon, knowing that his creditors would otherwise get his interest in his wife's estate, said to his children: "Give me $300 immediately in cash, and I'll renounce my right to administer, and you can have whatever is coming to me as distributee." This $300 was in fact paid to Cawthon by the administrator out of the funds of the estate. It was, in legal effect, an advancement to him, made by the consent, and upon the request of, the distributees.
When an administrator voluntarily pays to a distributee the whole or a part of his share in advance of final settlement, the administrator will be liable to creditors of the intestate who are prejudiced by such payment. 24 Corp. Jur. 481, § 1304; Id. 500, § 1341. But there is no liability in such a case to creditors of the distributee, unless by some appropriate process payment to the distributee has been seasonably intercepted.
It results that the net amount of Cawthon's distributive interest in his wife's estate, when this bill was filed, was $243.52. For the release and assignment of this balance, whatever it may amount to when costs of administration and other charges, if any, have been deducted on final settlement, there was obviously no consideration paid by the other distributees, parties respondent here. The assignment was therefore void as to creditors of J. L. Cawthon.
The decree of the circuit court dismissing the bill of complaint will be reversed, and a decree will be here rendered annulling and canceling the assignment in question, and ordering and decreeing that J. L. Cawthon's distributive share in the estate of Cora Sidney Cawthon, as ascertained on final settlement, shall be paid by the said administrator to the complainant, as trustee in bankruptcy of the said Cawthon.
Reversed and rendered.
ANDERSON, C. J., and THOMAS and BROWN, JJ., concur.
On Rehearing.
The suggestion is made on behalf of appellant that, conceding the power of an administrator to make advances to distributees as against their creditors, which will be confirmed on final settlement, such acts on the part of an administrator, before his appointment and qualification as such, are not entitled to the same confirmation and protection. The argument is that in the case of advancements before appointment, a creditor, not knowing who would become administrator, would be powerless to protect his claim against a distributee by any sort of intervention before any advancement could be made. Theoretically, this argument is not without merit. But, practically, it will not often happen that the creditor will be unable to locate the custodian or assets belonging to the decedent; and only a custodian of the assets would be protected by the relation back of his appointment as administrator, when he has dealt with them as if he were already clothed with that authority.
But, however inconvenient the results of the rule may be, it is a rule of practically universal recognition that:
"When letters testamentary or of administration are issued, they relate back so as to vest the property in the representative as of the time of death and validate the acts of the representative done in the interim; but such validation or ratification applies only to acts which might properly have been done by a personal representative, and the estate ought not to be prejudiced by wrongful or injurious acts performed before one's appointment." 23 Corp. Jur. 1180, § 400.
Our own decisions are in accord. Ward v. Bevill, 10 Ala. 197, 200, 44 Am. Dec. 478; Nance v. Gray, 143 Ala. 234, 241, 38 So. 916, 5 Ann. Cas. 55.
This being the law, it was not material that the evidence showed, if it did, that the advancement was made by the respondent bank, as custodian of money belonging to the decedent's estate, before it actually qualified as administrator.
The application for rehearing will be overruled.