Daggs v. McDermott, 29011.

Citation34 S.W.2d 46
Decision Date05 January 1931
Docket NumberNo. 29011.,29011.
PartiesT.J. DAGGS, Administrator of Estate of W.H. WELLS, v. J.W. McDERMOTT and EMMA McDERMOTT, Appellants.
CourtUnited States State Supreme Court of Missouri

Appeal from Clark Circuit Court. Hon. Walter A. Higbee, Judge.

REVERSED AND REMANDED (with directions).

George M. Callihan and T.L. Montgomery for appellants.

(1) The appellate court is not bound by findings of facts or conclusions of law by trial court in equitable proceedings. It makes its own findings. Kidd v. Brewer, 317 Mo. 1047, 297 S.W. 960; Davis v. Yorkshire Ins. Co., 221 Mo. App. 798, 288 S.W. 80; Fitzpatrick v. Weber, 168 Mo. 562. (2) The court erred in its findings of fact and conclusions of law under the statute. Sec. 1402, R.S. 1919. (a) The rule in equity cases lies in a narrow compass, and is such that "if the findings of fact support the judgment, it will be affirmed; if not, the judgment will be reversed. Monmouth College v. Dockery, 241 Mo. 560; Nicols v. Carter, 49 Mo. App. 401. (b) In equity cases findings of fact by the chancellor are not conclusive, but are advisory only. Patterson v. Patterson, 200 Mo. 335; Walther v. Null, 233 Mo. 104. (3) The petition does not state facts sufficient to constitute a cause of action or justify the relief prayed for or any relief. Nor does the evidence show that the plaintiff was anything more than a creditor at large. Before the plaintiff can maintain a bill in equity to set aside and cancel a deed because of fraud upon creditors he must do one of three things. (a) Reduce his claim to judgment; (b) attach the property or obtain some kind of valid lien upon it, or (c) allege and show to the court that the defendant is wholly insolvent, and that on that account it would be useless to proceed at law. It does not state that he had no adequate remedy at law. In this case respondent has done neither of the three. Plaintiff must allege and show insolvency even though he has reduced his claim to judgment. He must do this in order to convert the petition into a bill in equity as distinguished from an action at law. The allegations of the petition must not only be such as to make it a bill in equity but it must go further and show a good substantial excuse for not complying with one of the three propositions above mentioned. The evidence introduced does not support the judgment rendered. Neither the petition nor the evidence shows that the plaintiff was anything more than a creditor at large. Hume v. Wright, 274 S.W. (Mo. Sup.) 744; Cantwell v. Lead Co., 199 Mo. 42; Bank v. Ankrum, 191 Mo. App. 251. The husband had a right and authority to convey the lots to his wife in payment of the undisputed debt he owed her. Hume v. Wright, supra; Bank v. Lillibridge (Mo. App.), 262 S.W. 436; Baker v. Harvey, 133 Mo. 653; Gust v. Hoppe, 201 Mo. 203; Schroeder v. Babbitt, 108 Mo. 289; Wall v. Beedy, 161 Mo. 625; Meyer Bros. v. White, 165 Mo. 136. The court had no authority to base its findings and judgment upon any evidence unless offered on the trial of the cause. Fitzmaurice v. Turney, 214 Mo. 629; Adler v. Lang, 26 Mo. App. 226; Baker v. Independence, 106 Mo. App. 507; Hadley v. Bernero, 97 Mo. App. 314; Banks v. Buram, 61 Mo. 76. The petition does not allege and the evidence does not show that the plaintiff has any adequate remedy at law and there is no equity in the purported bill, and the judgment should be reversed. Humphreys v. Milling Co., 98 Mo. 542; Bank v. Packing Co., 138 Mo. 93; Hume v. Wright, 274 S.W. 744; Cole v. Parker-Washington Co., 276 Mo. 266. (4) The money coming to the wife as beneficiary in the insurance policy of her deceased son, is her separate personal property and could not be converted to the use of the husband without the written consent of the wife. The husband became her trustee in equity as to her money. She became his creditor and the husband had a right to prefer her, which was done by conveying the property to her, and her debt constituted a valuable consideration for the conveyance. The deeds were not voluntary but made to pass the title to the wife. Sec. 7328, R.S. 1919; Hurt v. Cook, 151 Mo. 416; McGuire v. Allen, 108 Mo. 403; Northrup v. Burge, 255 Mo. 441; Broughton v. Brand, 94 Mo. 169; Foley v. Harrison, 233 Mo. 518; Gilliland v. Gilliland, 96 Mo. 522; First National Bank of Jefferson City v. Link, 275 S.W. 939; Rodgers v. Bank, 69 Mo. 563; Hart v. Leete, 104 Mo. 315. An indorsement of the wife's name on the back of the note does not constitute assent in writing required by the statute. McGuire v. Allen, supra; Moeckel v. Heim, 46 Mo. App. 340; James v. Groff, 157 Mo. 402. (5) The husband may convey property to his wife to pay a debt to her in preference to his other creditors, if done in good faith in payment of a bona-fide debt. 12 R.C.L. 589, sec. 105; Riley v. Vaughn, 116 Mo. 169; DeBerry v. Wheeler, 128 Mo. 84. (6) The indebtedness of the wife arose at and after the date of the death of the son in December, 1918, before the date of the notes, and was and is such an indebtedness as the law recognizes as a valid indebtedness and in point of time antedates the notes, and the burden of showing fraud shifts and is placed upon the plaintiff and in this case none was shown to exist. Crump v. Walkup, 246 Mo. 266; Phipps v. Markin, 208 S.W. 106. (7) Even if bad faith of the husband was shown, if unknown to the wife, this will not be sufficient to invalidate the conveyance. Riley v. Vaughn, 116 Mo. 169; DeBerry v. Wheeler, 128 Mo. 84. (8) The evidence clearly shows that the consideration for the conveyance was for the purpose of settling a valid existing debt and not for the purpose of defrauding creditors of J.W. McDermott. Sec. 7328, R.S. 1919; Bank v. Winn, 132 Mo. 80; Jones v. Elkins, 143 Mo. 647; Orr v. Trust Co., 291 Mo. 383, 236 S.W. 649; Winn v. Riley, 151 Mo. 61, 74 Am. St. 517; Alkin Gro. Co. v. Ballinger, 137 Mo. 369. (9) Where the evidence shows that the consideration for the indebtedness arose out of and by reason of the wife's separate estate, the burden of showing fraud shifts to the attacking creditors. Phipps v. Martin, 208 S.W. (Mo. App.) 106; Crump v. Walkup, 246 Mo. 266. (10) The property conveyed by the debtor to the wife as his creditor was at a fair valuation for the payment of an honest debt, and the transaction does not fall within the prohibition of the statute as to fraudulent conveyances. Therefore a conveyance which is a preference, otherwise bona-fide, is not invalid as a fraudulent conveyance. Cogin v. Herman, 202 S.W. 552; Bangs Milling Co. v. Burns, 152 Mo. 350; Cole v. Cole, 231 Mo. 260; Pew v. Price, 250 Mo. 614; Ellis v. Clippard, 264 S.W. 819. (11) Upon the record the judgment of the lower court should have been for the defendants, instead of the plaintiff. We therefore ask that the judgment and decree for plaintiff be reversed, and the plaintiff's petition dismissed.

B.L. Gridley for respondent.

(1) "The law, which places the wife on an equality with other creditors of her husband, also imposes on her the same obligation to act honestly and in good faith in taking preferences as is required of any other creditors and a participation by her in a fraudulent attempt on the part of her husband to conceal or cover up his property for the purpose of putting it beyond the reach of other creditors, although an honest and valid debt is thereby secured or paid, will render the whole transaction fraudulent as to both." Columbia Savings Bank v. Winn. 132 Mo. 80; Needles v. Ford, 167 Mo. 495; Welsh v. Mann, 193 Mo. 304; Cole v. Cole, 231 Mo. 236; First Nat'l Bank v. Fry, 216 Mo. 24; (2) A transaction between husband and wife is constructively fraudulent as against creditors of husband. East St. Louis Ice & Coal Co. v. Kuhlmann, 238 Mo. 685; Zehnder v. Stark, 248 Mo. 39. (3) Transactions between husband and wife should be closely scrutinized when they come in conflict with the rights of creditors, with reference to their inherent fairness and justice. Regal Realty & Investment Co. v. Gallagher, 188 S.W. 151; Baumann v. Horn, 204 S.W. 53; Riley v. Vaughn, 116 Mo. 176; Saxton v. Anderson, 95 Mo. 379.

FERGUSON, C.

This is a suit in equity by an administrator as plaintiff against J.W. McDermott and Emma S. McDermott, husband and wife, defendants, seeking to set aside an alleged fraudulent conveyance of real estate.

The petition alleges that plaintiff is the administrator of the estate of W.H. Wells, deceased, and that on the 20th day of October, 1922, the defendant J.W. McDermott "was and still is indebted to W.H. Wells and his estate on three certain promissory notes in the principal sum of $6,566.90 and accrued interest, amounting in the aggregate to the sum of $7,590.90 on September 7, 1925, with attorneys' $150 and cost of suit, for which amount the plaintiff obtained a judgment against said J.W. McDermott on the 7th day of September, 1925, in the Circuit Court of Clark County, Missouri.

"That said suit was instituted by the plaintiff on the 13th day of July, 1925, against the defendant, J.W. McDermott, that on the 3rd day of August, 1925, the said J.W. McDermott and his wife, Emma S. McDermott, he, the said J.W. McDermott being largely indebted to the plaintiff as aforesaid and other persons in excess of his ability to pay, with the intent to hinder, delay and defraud his creditors including this plaintiff and to prevent the collection of his indebtedness aforesaid to plaintiff, and without any consideration therefor fraudulently conveyed or attempted to convey, his homestead in Kahoka, Missouri, which plaintiff agrees is of the reasonable value of $8,000 to-wit: (here the real estate involved is described) to his wife, Emma S. McDermott."

Continuing, the petition alleges that the defendant Emma S. McDermott was a voluntary grantee, and prays for a decree of the court setting aside and declaring said conveyance to be null and void for the reason that same was made for the purpose of hindering, delaying and...

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