Riley v. Vaughan

• Citation: 22 S.W. 707,116 Mo. 169
• Parties: Riley v. Vaughan, et al., Appellants
• Decision Date: 22 May 1893
• Court: United States State Supreme Court of Missouri

22 S.W. 707

116 Mo. 169

Riley v. Vaughan, et al., Appellants

Supreme Court of Missouri, First Division

May 22, 1893

Appeal from Clinton Circuit Court -- Hon. J. M. Sandusky, Judge.

Affirmed.

William Henry and Porter & Woodson for appellant.

(1) The husband may prefer his wife as a creditor and dispose of his property to her in satisfaction of a bona fide debt. Bartlett v. Umfried, 94 Mo. 530; Frost v Steele, 48 N.W. 413; Hart v. Leete, 104 Mo 317; Bank v. Croco, 26 Pacific Rep. 942; Laird v. Davidson, 25 N.E. 7. (2) The wife's claim to property received from her husband in satisfaction of a bona fide debt is not affected by a fraudulent intention of her husband if she receives the property in good faith as payment; nor is it fraudulent on the part of the husband merely because the transfer has the effect to delay other creditors; and the wife is entitled to the property so conveyed to her, notwithstanding her husband's insolvency, or her knowledge of such insolv-vency. Bump on Fraudulent Conveyances [3 Ed.], p. 183; Dice v Irvin, 11 N. E. (Ind.) 488; Holmes v. Braidwood, 82 Mo. 610; Sexton v. Anderson, 95 Mo. 379; Albert v. Besel, 88 Mo. 150; Shelly v. Boothe, 73 Mo. 74; Frederick v. Allgaier, 88 Mo. 598. (3) It is not necessary to the validity of a debt of the husband to the wife that the debt should be evidenced by writing. Myer v. Houck, 52 N.W. 235; Brown v. Mitchell, 9 S.E. (N. C.) 705; George v. High, 85 N.C. 99; Dula v. Young, 70 N.C. 450. (4) While courts will scrutinize closely claims of the wife against her husband in controversies between the wife and creditors of the husband, when the fact that the husband received the wife's money is established by proof, that fact establishes a liability against the husband and the wife is not required to show that the transaction was not a gift, or that the husband's liability has not been extinguished. Hill v. Bowman, 35 Mich. 191; Dice v. Irwin, supra, p. 491; Cole v. Lees, 45 N.J.Eq. 779; Jordan v. White, 38 Mich. 253; Patton v. Patton, 75 Ill. 446. In Brooks v. Fowler, 9 S.E. (Ga.) 1089, Jenkins J. says: "While a wife may legally give her property to her husband, a gift will never be presumed. The evidence to support it must be clear and unequivocal and the intention of the parties free from doubt." (5) The fact that the debt is old and would, as against other creditors, be barred by the statute of limitations, or that interest is allowed by the husband in computing the amount of the debt, are not objections which creditors can avail themselves of in this action. Bank v. Iron Works, 50 N.W. 505; Dice v. Irwin, supra; Frost v. Steele, 48 N.W. 413. Under the statutes of Illinois the land of Mrs. Vaughan and the proceeds thereof were her separate property and she had a right to deal with them in the same manner that the husband could property belonging to him. Statute of Illinois; Whitford, et al. v. Daggett, 84 Ill. 144; Patton v. Patton, supra.

Riley & Hall, John A. Cross and James P. Thomas for respondents.

(1) The evidence fails to show an unconditional agreement on the part of Vaughan to pay back to his wife the money borrowed from her. (2) Where a wife loans money to her husband without security therefor or written evidence thereof, with only a vague, indefinite understanding as to when, how, and under what circumstances or conditions she is to be paid, and such money is for a number of years, with her knowledge and consent, used by the husband in business as his own, he obtaining credit and contracting debts on the faith of owning the capital invested and holding himself out as the owner thereof, equity will not uphold a conveyance by the husband, after becoming insolvent, to the wife in payment thereof, as against creditors of the husband. Besson v. Eveland, 26 N.J.Eq. 468; Luers v. Brunges, 34 N.J.Eq. 19; Bank v. Hamilton, 34 N.J.Eq. 162; Humes v. Scruggs, 94 U.S. 22. (3) The married woman's act, Revised Statutes, 1889, sec. 6869, is intended as a shield for the wife and should never be so construed as to be the means by which a fraud is perpetrated upon creditors by the husband and wife. (4) The statute of Illinois, also the statute of Kansas, where the transaction occurred, leave the wife absolutely free to give her money or personal property to her husband or assent to his reduction of the same to possession, by parol or acquiescing for a number of years in his use of the same as his own. (5) If the conveyance was made in payment of a debt, partly bona fide and partly fictitious, it is fraudulent as a whole. Holt v. Creamer, 34 N.J.Eq. 181; Humes v. Scruggs, 94 U.S. 28; Cordes v. Straszer, 8 Mo.App. 61; Potter v. McDowell, 31 Mo. 62. (6) If the value of the property conveyed exceeded the amount of the debt due Mrs. Vaughan, and she took it in payment thereof with knowledge of her husband's insolvency and of a purpose on his part to place the excess beyond the reach of his creditors, the conveyance is fraudulent. Holt v. Creamer, 34 N.J.Eq. 181; Humes v. Scruggs, 94 U.S. 28; McVeagh v. Baxter, 82 Mo. 518; Potter v. McDowell, 31 Mo. 62. (7) The conveyance by an insolvent husband of all his property to his wife will be closely scrutinized by courts of equity. The payment of a valuable consideration by the wife must be made out by proof of the most unquestionable character, clear, positive, and free from any suspicion of a fraudulent combination for the concealment of her husband's property from his creditors. Bump on Fraudlent Conveyance [3 Ed.], p. 306; Benne v. Schnecko, 100 Mo. 250; Holthaus v. Hornbostle, 60 Mo. 439; Frank v. King, 121 Ill. 250. (8) The evidence in this case is insufficient to establish an indebtedness on the part of Vaughan to his wife. (9) As the judge who tried this case in the court below had the advantage of seeing and hearing the witnesses as they testified, with the opportunity to observe their intelligence and their demeanor and appearance while testifying, and the incidents and circumstances attending the trial, this court will, to a great extent, defer to his findings and conclusions. Berry v. Hartzell, 91 Mo. 132; Cole County v. Madden, 91 Mo. 613; Mathias v. O'Neill, 94 Mo. 520; Jamison v. Bagot, 106 Mo. 267.

Macfarlane J. Barclay, J., is absent.

OPINION

Macfarlane, J.

-- This is a suit in equity in the nature of a creditor's bill, brought by plaintiff as trustees for the creditors of Josiah Vaughan, to set aside certain conveyances of real estate made to defendant Mary E. Vaughan, by third persons, on the ground that the consideration was paid by the husband, and the deeds made to the wife, for the purpose of hindering, delaying and defrauding said creditors.

The petition charges defendant, Josiah Vaughan, being indebted to divers persons, naming them, and the respective amounts due them, which aggregate $ 4,041.25, and being then also the owner of a large stock of merchandise, in the city of Plattsburg, Mo., did, about the day of August, 1889, with intent to hinder, delay and defraud said creditors, transfer and deliver the same to Bohart and Goff in exchange for certain real estate (which is described), consisting of a residence, business house, and some lots in the town of Lathrop, and with like fraudulent intent, caused the same to be conveyed to his wife, defendant Mary E. Vaughan. That said creditors had obtained judgments against said Vaughan and caused said land to be sold, under executions issued thereon which was purchased by plaintiff, and is now held, by him, under deeds from the sheriff, in trust for said creditors. A decree setting aside said conveyances, and vesting the legal title of the land in plaintiff, was prayed. The answer was a general denial.

The undisputed facts are, in substance, as follows Defendants were married in the state of Illinois in 1875. The wife, at the time, was the owner, by inheritance, of seventy acres of land in that state. The husband was then a farmer and owned two horses given to him by his father. In the fall of 1876 the husband borrowed five or six hundred dollars and bought a small stock of groceries. The borrowed money was paid by sale of the horses, and from proceeds of wheat and corn raised on his wife's land. He sold out this business in 1878, and "came out about even." During the following year he had no regular business, lived in town, and "worked round at one thing and another." About the end of the year he commenced business in another town on a capital of five or six hundred dollars. Continued in this business until the winter of 1880, and in 1881 sold out. Had lost money. Had possibly $ 300 left after paying debts. In 1881 the land of the wife was mortgaged for $ 1,000. This money the husband received. In 1884 a mortgage for $ 2,100 was put upon the land, and the prior mortgage was paid and the husband received the remainder. At this time they moved to Kansas and the husband invested the money in the purchase of real estate in his own name. In 1887 the wife's land was sold for $ 3,500, and the proceeds, after paying the $ 2,100 mortgage was paid to the husband. The husband remained in Kansas, part of the time dealing in real estate, a short time merchandising, from 1884 to 1888. In November, 1888, he traded a tract of land, held in his own name, for a stock of merchandise in Plattsburg, valued at about $ 6,500, giving notes for the difference, $ 2,000. August 1, 1889, he had become indebted to wholesale merchants for goods to the amount of $ 4,041.25 Finding himself in failing circumstances at this time he traded the stock of goods to Bohart and Goff for the residence, business house and some lots in Lathrop, a tract of eighty acres of farm land and $ 1,500 cash. The business house was valued at $ 2,400, the residence at $ 1,200, the equity in the farm land at...