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NIBLACK, J. On the twenty-third day of June, 1884, Jacob Lew was, and for some time previously had been, engaged in the tin, stove, and hardware business, at the town of Markle, in Huntington county. He was at that time indebted to Gideon W. Seavey in a sum of money ranging somewhere between $700 and $1,000, and to the firm of Morgan & Beach in about the sum of $440. Being unable to pay these sums of money, and otherwise in a pecuniarily embarrassed condition, Lew agreed to sell and transfer to the said Seavey and the said Morgan & Beach all his goods on hand, including his tools, stock in trade, notes, accounts, and a wagon and team, in consideration of the sum of $1,000 to be applied pro rata on the indebtedness above described, and on the day named executed a memorandum in writing in the similitude of a bill of sale, purporting to sell and transfer to the said Seavey and the said Morgan & Beach the property in question. But this instrument in writing was not recorded. It was further agreed, but not in writing, that Lew should continue in possession of the property, and carry on the business in which he had been so engaged as formerly, and account to the said Seavey and to the said Morgan & Beach for the money which he might collect on the notes and accounts, or otherwise realize from the business. There was evidence tending to show that for these services Lew was to receive a commission of 10 per cent. on sales and collections. Lew continued in possession of the property and business until the twenty-eighth day of August, 1884, when he executed a chattel mortgage on the property remaining in his possession to Leonard S. Walker, Henry J. Ash, Mrs. Murray, and the firm of Rinesmith & Simonton to secure the payment of debts severally due them, and which, with a slight exception, had been contracted prior to June 23, 1884. On the fourth day of September, 1884, Walker and his co-mortgagees commenced this suit against Seavey and Lew to foreclose the chattel mortgage executed as above, and to enjoin them from interfering or intermeddling with the mortgaged property. The circuit court, after hearing the evidence, found for the plaintiff, and, in addition to rendering personal judgment against Lew for the several debts described in the complaint, decreed a foreclosure of the mortgage, and an injunction, as prayed for, against the defendants.
Complaint is only made of the refusal of the circuit court to grant a new trial; and, in support of that complaint, it is insisted that the finding was not sustained by sufficient evidence. The controlling question made at the trial was upon the nature, good faith, and validity of the alleged sale and transfer of the mortgaged property to Seavey and Morgan & Beach. During the entire transaction, including the defense of this suit, Seavey acted as the representative of Morgan & Beach as well as in his own behalf.
Section 4911, Rev. St. 1881, enacts that "every sale made by a vendor of goods in his possession, or under his control, unless the same be accompanied by immediate delivery, and be followed by an actual change of the possession of the things sold, shall be presumed to be fraudulent and void, as against the creditors of the vendor or subsequent purchasers in good faith, unless it shall be made to appear that the same was made in good faith, and without any intent to defraud such creditors or purchasers." It was therefore incumbent on Seavey, in this case, to remove the presumption of fraud which resulted from Lew's continuance in possession of the property in controversy after its sale and transfer as already stated. On that branch of the case the evidence was conflicting. Seavey proved the existence and validity of his debt against Lew; also the same as to the debt held by Morgan & Beach. There was also evidence tending to prove that, at the time he (Seavey) purchased the property, he did not know that Lew owed any other debts, and that, when Walker and his co-mortgagees took the chattel mortgage, they had full notice of Seavey's and his associates' claim of title under their purchase from Lew. On the other hand, there was evidence tending to show that the circumstances connected with the alleged purchase by Seavey and his asso
ciates were unusual in such transactions; that no invoice of the property was taken, or itemized estimate of its value made; that the property was really worth more than $2,000; that the agreed amount of the purchase money was never entered as a credit on the debts due Seavey and his associates, respectively, but these parties continued to hold these debts as an unsatisfied indebtedness against Lew; that Seavey and his associates, as well as Lew, from the first, had treated the alleged purchase of the property as a mere security for the payment of such indebtedness, and hence not as an absolute sale, within the proper meaning of that phrase. Pierce, Mortg. §§ 77-79. Other facts and circumstances having some bearing upon the question in issue were, respectively, put in evidence.
As the case is thus presented we are not permitted to disturb the finding made by the circuit court. In the enforcement of equitable rights, it is well settled by a long line of decisions that parol evidence may be given to show that a deed to real estate, absolute in form, was only intended to be, and was in fact, only a mortgage to secure the payment of a debt. Crane v. Buchanan, 29 Ind. 570; Beatty v. Brummett, 94 Ind. 76; Cox y. Ratcliffe, 105 Ind. 374; S. C. 5 N. E. Rep. 5. The same rule applies to bills of sale of personal property absolute upon their face. Jones, Chat. Mortg. §§ 14, 15, 21, 22, et seq.; Herm. Chat. Mortg. 46, §§ 20, 21. If the bill of sale in evidence was in legal effect only a mortgage, as the circuit court may have concluded it was, then it was void for not having been recorded within 10 days after its execution. Rev. St. 1881, § 4913.
While Seavey was on the stand as a witness in his own behalf, it was proposed to prove by him that, before the execution of the chattel mortgage, he had taken the goods and chattels in suit out of the possession of Lew, and had placed them in the possession and under the control of a man who was then, and for several months, at least, had been, in the employment of Lew in the management of his business; but the proposed evidence was excluded. That ruling of the circuit court was not materially erroneous for two. reasons: First. Because no question was either asked, or proposed to be asked, of the witness, leading up to, or laying a foundation for, the offered proof. Higham v. Vanosdol, 101 Ind. 160. Secondly. Because, in the state of the evidence as it then existed, the proposed proof would have been immaterial. It had already been fully established that there had been no visible change of the possession of the goods and chattels following their alleged purchase by Seavey and his associates; that Lew, with the assistance of his employe in question, had continued in actual possession until after the execution of the chattel mortgage to Walker and his associates. Under such circumstances an authority conferred on the employe to take possession and control of the goods and chattels could not have amounted to more than a constructive change of possession, which was not a sufficient compliance with the statute hereinabove set out.
The following authorities have some bearing on the questions involved in this appeal: Bump, Fraud. Conv. 139; Nutter v. Harris, 9 Ind. 88; Kane v. Drake, 27 Ind. 29; Adams v. Cosby, 48 Ind. 153; Robinson Machine-works v. Chandler, 56 Ind. 575; Rose v. Colter, 76 Ind. 590; Dessar v. Field, 99 Ind. 548; Curme v. Rauh, 100 Ind. 247
The judgment is affirmed, with costs.
For a full discussion of the question of fraudulent conveyances, see Zoeller v. Riley, (N. Y.) 2 N. E. Rep. 392, and note; Abbott v. Shepard, (Mass.) 6 N. E. Rep. 826; Popfinger v. Tuttle, (N. Y.) 6 N. E. Rep. 259; Hurd v. Ascherman, (Ill.) 6 N. È. Rep. 160; Geisendorff v. Eagles, (Ind.) 5 N. E. Rep. 743; Fuller Electrical Co. v. Lewis, (N. Y.) 5 N. E. Rep. 437; Clark v. Watson, (Mass.) 5 N. E. Rep. 298; White's Bank of Buffalo v. Farthing, (N. Y.) 4 N. E. Rep. 734; Billings v. Sawyer, (N. Y.) 4 N. E. Rep. 531; Denman v. McGuire, (N. Y.) 4 N. E. Rep. 278; Young v. Walsh, (Ill.)3 N. E. Rep. 512; Knight
v. Kidder, (Me.) 1 Atl. Rep. 142, and note; Stratton v. Putney, (N. H.) 4 Atl. Rep. 876; Graves v. Winans, (N. J.) 4 Atl. Rep. 645; Keyser v. Engle, (N. J.) 4 Atl. Rep. 641; Guggenheimer's Appeal, (Pa.) 4 Atl. Rep. 47; Cubberly v. Yager, (N. J.) 2 Atl. Rep. 814; Tierney v. Claflin, (R. I.) 2 Atl. Rep. 762; Milholland v. Tiffany, (Md.) 2 Atl. Rep. 831; Earnshaw v. Stewart, (Md.) 2 Atl. Rep. 736; Budlong v. Kent, 28 Fed. Rep. 13; Platt v. Schreyer, 25 Fed. Rep. 83, and note; The Holladay Case, 27 Fed. Rep. 830; Claflin v. Lisso, Id. 424; State v. Wallace, (Iowa,) 24 N. W. Rep. 609; Lewis v. Rice, (Mich.) 27 N. W. Rep. 867: Citizens' Bank v. Rhutasel, (Iowa,) 27 N. W. Rep. 774; Nugent v. Goldsmith, (Mich.) 26 N. W. Rep. 780; Grimes v. Farrington, (Neb.) 26 N. W. Rep. 618; Shores v. Doherty, (Wis.) 26 N. W. Rep. 577; Hooser v. Hunt, (Wis.) 26 N. W. Rep. 442; Farmers' Nat. Bank v. Warner, (Iowa,) 26 N. W. Rep. 47; Carson v. Byers, (Iowa,) 25 N. W. Rep. 826, Lewin v. Hopping, (Cal.) 8 Pac. Rep. 73; Rochester v. Sullivan, (Ariz.) 11 Pac. Rep. 61; Ross v. Sedgwick, (Cal.) 10 Pac. Rep. 400; Burr v. Clement, (Colo.) 9 Pac. Rep. 633. See, also, Faurote v. Carr, infra.
(108 Ind. 123)
FAUROTE v. CARR and others.
(Supreme Court of Indiana. October 29, 1886.)
1. FRAUDULENT CONVEYANCES-PROPERTY EXEMPT GIVEN AWAY BY INSOLVENT. As a general rule, a voluntary conveyance made by an insolvent debtor who has not sufficient other property subject to execution to pay his debts, is constructively fraudulent, as against existing creditors; but this is true only where the property so disposed of was not at the time exempt from execution, but such as the creditor might have reached in the hands of the debtor.1
2. EXECUTION-EXEMPTIONS-PROPERTY PURCHASED WITH PENSION MONEY.
Pension money from the United States stands upon the same footing, after it is received by the pensioner, as other money; and property purchased therewith is liable to sale on execution as any other property.2
Appeal from circuit court, Steuben county.
Under sections 2974, 2975, Rev. St. 1881, the conveyance sought to be set aside in this case was presumptively fraudulent; and, even independent of the statute, the facts found show a fraudulent conveyance, as against the creditors of William M. Carr. Williams v. Osborne, 95 Ind. 347; Bump, Fraud. Conv 276, 279-281. It makes no difference that the conveyance was not made directly from Carr to his co-appellees. It is enough that he paid for it and procured it to be done. Spaulding v. Fisher, 57 Me. 411; Alston v. Rowles, 13 Fla. 117. The element of pension money is not controlling. Denny & Elliott, also of counsel for appellant.
The conveyance in controversy was constructively fraudulent.
ive fraud may exist without any actual evil intent. Coleman v. Burr, 93 N. Y. 18; Cavanaugh v. Smith, 84 Ind. 380. "A man cannot make gifts of his property, and thus take it from his creditors." McCole v. Loehr, 79 Ind. 430, 432; Wait, Fraud. Conv. §§ 8, 197. It is only where a grantee has paid a valuable consideration that he must be shown to have had notice. Sherman v. Hogland, 73 Ind. 473; Spaulding v. Blythe, Id. 93; Newman v. Cordell, 43 Barb. 448. The facts found make, not only a case of constructive fraud, but also a prima facie case of actual fraud. Alston v. Rowles, 13 Fla. 117. See, also, Seitz v. Mitchell, 94 U. S. 580. Pension money is not protected by section 4747, Rev. St. U. S., after it is received; especially if it has been turned into real estate. Jardain v. Fairton, etc., Ass'n, 44 N. J. Law, 376; Cranz v. White, 27 Kan. 319; Spelman v. Aldrich, 126 Mass. 113; Cavanaugh v. Smith, 84 Ind. 380.
MITCHELL, J. The question involved in this case, which was a suit to set aside a conveyance alleged to have been made in fraud of the rights of cred
1See note at end of case.
'See Skinner v. Chadwell, (Ky.) 1 S. W. Rep. 437, and note.
itors, arises on a special finding of facts made by the court below at the appellant's request. The facts found are that on the twenty-fifth day of February, 1885, William M. Carr was a resident householder of Steuben county, in this state, and that he was indebted to the plaintiff to the amount of $88.32, which sum, with the interest and attorney's fees, aggregating $103.14 at the date of the finding, remained unpaid. The total value of all property then owned by him, including wearing apparel, amounted to $109. The court found, further, that Carr was, at the date of the purchase hereinafter mentioned, indebted to other persons in various sums; amounting in all, including the sum due the plaintiff, to about $400. Having previously served in the army, on the twenty-sixth of February, 1885, Carr received from the United States government $1,374.75 pension money. He loaned out of this sum $150 to persons who were insolvent and worthless, and $224.75 was expended in various ways for the benefit of himself and family, so that on the second day of March following he had on deposit, for his use, in the Angola Bank, $1,000. On the second day of March he purchased the real estate described in the complaint, and paid for it, out of the money mentioned, $330, that being the full purchase price. He also paid all the debts owing by him, except that due the plaintiff. By Carr's direction, the land purchased was conveyed to his, wife and minor children, who are parties defendant, and who paid nothing. The court found that at the time Carr purchased the land, and caused it to be conveyed to his wife and children, and from thence to the date of the trial, he was the owner of a less amount of property than would have been allowed him under the exemption laws of the state.
Upon the facts found, the substance of which we have stated, the court stated conclusions of law to the effect that the plaintiff was not entitled to have the conveyance set aside. The question for decision involves the propriety of the conclusions of law stated by the court. In favor of reversal, it is argued with much force and plausibility that, however commendable the motive of the debtor may have been, in causing the conveyance in question to be made as it was, since the effect of the transaction was to deprive the plaintiff of the right to subject the property conveyed to the payment of her debt, the law raises an inevitable inference of fraud, regardless of the purpose of the debtor, or whether the grantees, they having paid nothing, had notice of the facts, or participated in any improper design, or not. The general proposition that a voluntary conveyance, made by an insolvent debtor who has at the time not sufficient other property subject to execution to pay all his debts, is constructively fraudulent as against existing creditors, is well sustained by the argument, and fully supported by the authorities cited. The principle which rules this and other similar cases lies back of the proposition which counsel have maintained. The court having found that the debtor, at the time he caused the conveyance in question to be made, was not the owner of an amount of property above that which in law he held as exempt from execution, can it be said that an inference of fraud arises because he donated money or property, which the appellant could not have subjected to the payment of her debt, to his wife and children?
The exemption laws of the state, having been enacted in pursuance of a constitutional mandate, are to be liberally construed, in favor of the debtor. We are unable to see how the rights of a creditor are in any way impaired, in case his debtor in good faith either sells or gives away property which is exempt, and beyond the reach of any process which might be invoked for its subjection, even in the hands of the debtor. It is only where the debtor voluntarily disposes of property which the creditor might have subjected to the payment of his debt that the law raises an inference of fraud. Where property is unavailable to creditors, and beyond their reach, by reason of its being exempt from execution while the title remains in the debtor, the fact that he makes a bona fide sale or gift of it, while in that situation, does not
put it more effectually beyond their reach than it was before. Hence creditors sustain no injury; and unless the transaction is merely colorable, and tainted with actual fraud, the law does not denounce it as fraudulent. McLean v. Hess, 106 Ind. 555; S. C. 7 N. E. Rep. 567.
The consideration which this question received in the recent case of Burdge v. Bolin, 106 Ind. 175, S. C. 6 N. E. Rep. 140, and the authorities there cited, renders it unnecessary that we should elaborate further. The case of Williams v. Osborne, 95 Ind. 347, rightly understood upon its facts, is not opposed to the conclusion here arrived at.
It is scarcely necessary to add that the fact that the money which was paid for the land came from the government as a pension cuts no figure in the case. After the money was received by the pensioner, it stood at the same level with any other money which he may have had. Cavanaugh v. Smith, 84 Ind. 380.
The judgment is affirmed, with costs.
ELLIOTT, J., did not participate in the decision of this cause.
FRAUDULENT CONVEYANCE-EXEMPT PROPERTY. Creditors cannot complain of any dealing with exempt property. Burdge v. Bolin, (Ind.) 6 N. E. Rep. 140; Freehling v. Bresnahan, (Mich.) 28 N. W. Rep. 531; Riggs v. Sterling, (Mich.) 27 N. W. Rep. 705; Gillespie v. Brown, (Neb.) 20 N. W. Rep. 632; Buckley v. Wheeler, (Mich.) 17 N. W. Rep. 216; Robb v. Brewer, (Iowa,) 15 N. W. Rep. 420; Boggs v. Thompson, (Neb.) 14 Ñ. W. Rep. 393; Pulte v. Geller, (Mich.) 11 Ñ. W. Rep. 385; Baldwin v. O'Laughlin, (Minn.) 11 N. W. Rep. 77; Furman v. Furnian, (Minn.) 9 N. W. Rep. 172; Griffin v. Sheley, (Iowa,) 8 N. W. Rep. 343; Lewin v. Hopping, (Cal.) 8 Pac. Rep. 82, and note.
(109 Ind. 567)
FLEETWOOD v. BROWN,1
(Supreme Court of Indiana. November 20, 1886.)
PROMISSORY NOTES-ACTION ON-PLEADING-CONSIDERATION-FAILURE OF TITLE-MUTUAL MISTAKE.
The answer of the maker of a promissory note, in an action to enforce payment, alleged that the note was executed in part payment for certain real estate for which plaintiff had given him a quitclaim deed, and that said purchase was made, and said note executed, under mutual mistake of fact, in this: that the father of the plaintiff, by whose death plaintiff would have obtained title to the real estate conveyed, had long before abandoned his family, and was supposed by all parties to be dead; that he was not dead, as supposed, but had returned, taken possession of the real estate, and sold it. Held, good on demurrer.
Appeal from circuit court, Jackson county.
W. K. Marshall and Jason B. Brown, for appellant. Burrell, Applewhite & Applewhite, for appellee.
ZOLLARS, J. This action is by appellee upon a promissory note, executed by appellant. The first alleged error argued by appellant is the sustaining of a demurrer to the second paragraph of his answer. That paragraph may be summarized as follows: In 1879, Jesse Fleetwood, the father of the parties hereto, was the owner of 240 acres of land in Jackson county, and was a resident of that county, where also his wife and children, including the parties, resided, and where these parties have still resided. In that year, Jesse Fleetwood abandoned his family and property, and left the state, and his whereabouts was unknown to the parties hereto, and to the other members of his family, until he returned, in June, 1885. Upon his return he took possession of his lands, excluding others therefrom, and afterwards sold the lands. In September, 1884, at the time the note in suit was executed, for a long time prior thereto, and afterwards, until his return in June, 1885, the parties hereto and the balance of the family supposed and believed that he was dead 1Rehearing denied, 11 N. E. 779.