Buhl State Bank v. Glander

Decision Date23 March 1936
Docket Number6236
PartiesBUHL STATE BANK, a Corporation, Respondent, v. W. WALLACE GLANDER and ARTHUR E. GLANDER, Appellants, and JOHN H. GLANDER and MARY ELLA GLANDER, Husband and Wife, Defendants
CourtIdaho Supreme Court

FRAUDULENT CONVEYANCES-TRANSFER IN FRAUD OF CREDITORS-KNOWLEDGE OF GRANTEE-CONSIDERATION-EXTRINSIC EVIDENCE-SUBSEQUENT STATEMENTS OF GRANTOR-INSOLVENCY OF GRANTOR-EVIDENCE-TRANSFER FROM PARENT TO CHILD-JUDGMENT.

1. Statements and declarations of grantor made after execution of conveyance could not invalidate conveyance unless grantee was shown to be party to or cognizant of fraudulent acts or purposes of grantor (I. C. A., sec. 54-906).

2. In action to set aside fraudulent conveyances, evidence of conversation with grantor subsequent to conveyances as to his purpose and intent in making transfers held admissible to negative validity of transfers, where evidence supported finding that grantees participated in fraud (I. C. A., sec 54-906).

3. Admission of incompetent evidence in trial to court without jury is not ground for nonsuit, where there is sufficient evidence outside of such incompetent testimony to make prima facie case (I. C. A., secs. 7-705, 54-906).

4. Knowledge and participation of grantees is not required to render transfer void, where there is gross inadequacy of consideration for transfer (I. C. A., sec. 54-906).

5. Conveyance from parent to child for consideration which is grossly inadequate and attended by other circumstances indicative of fraud will be set aside (I. C. A., sec 54-906).

6. In action to set aside fraudulent conveyances, evidence that execution on plaintiff's judgment was returned unsatisfied held admissible to show financial condition of grantors at time of conveyance, in absence of evidence of material change therein between time of conveyance and time of return of execution other than asserted fraudulent transfers and disposition of limited amount of personal property (I. C. A., sec. 54-906).

7. In suit to set aside conveyances by husband and wife as fraudulent, testimony of husband would constitute prima facie statement of financial condition of husband and wife at time of conveyances under statute providing that husband is managing head of community property, in absence of evidence that any of property belonged separately to wife (I. C. A., secs. 31-913, 54-906).

8. On motion for nonsuit, evidence is to be considered in light most favorable to plaintiff, and all reasonable inferences are to be indulged in favor of court's action in denying motion for nonsuit (I. C. A., sec. 7-705).

9. Transfers from father and mother to sons are subject to court's scrutiny (I. C. A., sec. 54-906).

10. In action to set aside conveyances from parents to sons as fraudulent, denial of motion for nonsuit held not error where evidence showed that at time of conveyance of property worth $42,000 for $4,000 subject to $10,000 mortgage grantors owned other property worth $1,927 and owed deficiency judgments totaling $7,185.59 (I. C. A., secs. 7-705, 54-906).

11. Proof that husband and wife considered wife's participation in or contribution to purchase of land resulted in debt to be repaid husband or wife from community held insufficient to sustain burden of proof that subsequent conveyance of property to son was not fraudulent (I. C. A., sec. 54-906).

12. Wife who knew at all times that property for purchase of which she had contributed separate funds stood in name of husband but failed to object, although husband borrowed money from bank on security thereof, held estopped to assert claim of interest in property to defeat claim of bank, in action to set aside conveyances of property as fraudulent. (I. C. A., sec. 54-906.)

13. Evidence held to support judgment setting aside conveyance from husband and wife to sons on ground that transfer was without consideration and that sons participated in fraud (I. C. A., sec. 54-906).

14. In action by holder of deficiency judgment to set aside conveyances from judgment debtors to sons, judgment setting aside conveyances should provide that conveyances were set aside only as to holder of deficiency judgment, and subject only to satisfaction of deficiency judgment against judgment debtors (I. C. A., sec. 54-906).

APPEAL from the District Court of the Eleventh Judicial District, for Twin Falls County. Hon. William A. Babcock, Judge.

Action to set aside two alleged fraudulent conveyances. Judgment for plaintiff. Modified and affirmed.

Judgment affirmed in part. Costs to respondent.

J. W. Porter and E. L. Rayborn, for Appellants.

A creditor holding security at the time of debtor's alleged fraudulent transfer of property must prove:

(a) Actual fraud, as distinguished from constructive fraud, by clear and convincing proof.

(b) That debtor was insolvent at time of transfer.

(c) That he has exhausted other property of vendor.

(Secs. 54-906, 54-908, I. C. A.; Nelsen v. Hudgel, 23 Idaho 327, 130 P. 85; Kerns v. Washington Water Power Co., 24 Idaho 525, 135 P. 70; Rogers v. Boise Association of Credit Men, 33 Idaho 513, 196 P. 213, 23 A. L. R. 195; Moody v. Beggs, 33 Idaho 535, 196 P. 306; Feltham v. Blunck, 34 Idaho 1, 198 P. 763; McMillan v. McMillan, 42 Idaho 270, 245 P. 98.)

Subsequent acts and statements of vendor in alleged fraudulent conveyance are not admissible as against vendee. (Nichols' Applied Evidence, vol. 3, p. 2350; Meyer v. Munro, 9 Idaho 46, 71 P. 969; Cooke v. Wilbanks, 223 Ala. 312, 135 So. 435, 83 A. L. R. 1441, and annotations, p. 1468.)

James R. Bothwell and Harry Povey, for Respondent.

When a prima facie showing of fraud is made and the transfer is between relatives the transferees must assume the burden of showing a transaction that will bear the most searching inquiry. (Kantola v. Hendrickson, 52 Idaho 217, 221, 12 P.2d 866, and cases cited; 12 Cal. Jur. 1070; Cioli v. Kenourgios, 59 Cal.App. 690, 211 P. 838, 841; Wimberly v. Winstock, 46 Okla. 645, 149 P. 238, 240.)

A conveyance from parent to child for a grossly inadequate consideration, attended by other circumstances indicative of fraud, will be set aside. (27 C. J. 569, sec. 282; Hyde v. Wolf, 31 A.D. 125, 52 N.Y.S. 764; Weber v. Rothchild, 15 Ore. 385, 15 P. 650, 3 Am. St. 162; Hall v. Feeney, 22 S.D. 541, 118 N.W. 1038, 21 L. R. A., N. S., 513.)

Actual knowledge of any fact putting appellants on inquiry as to their father's intent to defraud respondent deprives them of their position as a bona fide purchaser. (Kansas Moline Plow Co. v. Sherman, 3 Okla. 204, 41 P. 623, 32 L. R. A. 33; 12 Cal. Jur. 988.)

Inadequacy of consideration was sufficient to put appellants on notice. (Annotation, 32 L. R. A. 52.)

Relationship between grantors and grantees raises inference that sons knew father's financial condition. (Butler v. Thompson, 45 W.Va. 660, 31 S.E. 960, 72 Am. St. 838, 846; Philbrick v. O'Connor, 15 Ore. 15, 13 P. 612, 614, 3 Am. St. 139.)

Subsequent declarations of grantor are admissible against grantee where grantor remained in possession of property transferred, or where collusion is shown between grantor and grantee. (Annotation, 83 A. L. R. 1476, 1478, 1480, 1484, 1488; Nichols' Applied Evidence, vol. 3, p. 2350, secs. 64, 65; Gallick v. Bordeau, 22 Mont. 470, 56 P. 961.)

GIVENS, C. J. Budge, Morgan, Holden and Ailshie, JJ., concur.

OPINION

GIVENS, C. J.

November 12, 1929, John H. Glander gave respondent a chattel mortgage on certain sheep and hay to secure a $ 10,000 promissory note, and on the same day he and his wife, Mary Ella Glander, gave respondent a real estate mortgage covering 40 acres of land (not the real estate involved herein) and certain water stock, appurtenant thereto, to secure a promissory note of $ 8,000. October 31, 1931, John H. Glander and his wife transferred 160 acres of land subject to a mortgage thereon for $ 10,000 given July, 1930, to C. M. Merrick, to their son Arthur E. Glander, and likewise on October 31, 1931, transferred 120 acres of land to their son W. Wallace Glander. April 15, 1932, respondent foreclosed its real estate mortgage, and after the execution sale a deficiency judgment of $ 4,992.05 was entered May 14, 1932. On the 15th of April, 1932, respondent secured a judgment foreclosing its chattel mortgage, and after the sale of the property covered thereby, docketed, April 21, 1932, a $ 2,193.54 deficiency judgment. To realize on the deficiency judgment arising from foreclosure of the chattel mortgage, execution was issued July 5, 1932, and returned by the sheriff wholly unsatisfied July 22d, whereupon, November 27, 1933, this action was commenced to set aside the conveyances by John H. Glander and his wife to appellants, as in fraud of creditors, under I. C. A., sec. 54-906, resulting in a judgment in favor of respondent, holding void and of no force and effect the two deeds above referred to, and canceling and setting them aside, ordering and directing appropriate entries in the recorder's office showing the cancellation and setting aside of said deeds.

In plaintiff's case in chief, Julius H. Schlake and Herman F. DuJardin, and J. H. Barker related conversations with John H. Glander as to his purpose and intent in making the transfers, for the purpose of negativing the validity of the transfers. Objection was made and overruled that these conversations had after the transfers were not binding upon appellants, because it was not shown they knew of or participated in any fraud. The rule with regard to such statements laid down in Meyer v. Munro, 9 Idaho 46, 71 P. 969, an action involving an issue similar to the one herein, supported by subsequent decisions in other jurisdictions, is that:

"Statements and declarations of the mortgagor (grantor) made after the...

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