Burke v. New England National Bank

• Decision Date: 14 January 1918
• Docket Number: 97,189
• Citation: 200 S.W. 1018,132 Ark. 268
• Parties: BURKE v. NEW ENGLAND NATIONAL BANK
• Court: Arkansas Supreme Court

200 S.W. 1018

132 Ark. 268

BURKE v. NEW ENGLAND NATIONAL BANK

No. 97, 189

Supreme Court of Arkansas

January 14, 1918

Appeal from Sebastian Chancery Court, Fort Smith District; W. A Falconer, Chancellor; reversed in part; affirmed in part.

Decree affirmed in part, reversed in part and cause remanded. Motion for rehearing overruled.

Hill Fitzhugh & Brizzolara and John H. Vaughan, for appellants.

1. M C. Burke was not insolvent at the time of the alleged transfer and there is no evidence of fraud, actual or constructive.

2. All the property transferred to the Union Realty Company, as well as other property held to be fraudulently conveyed was bought with the funds of Burke Bros.

3. Lot 3, block 45 Fitzgerald's Addition did not belong to M. C Burke. But he was solvent at the time of the conveyance. It was bought with funds of Burke Bros. and really belonged to J. A. Burke. Burke Bros. were indebted to Mary Burke. There was no fraud on creditors. Lots 7 and 8, block 9, S. Fort Smith were worth little. They were also bought with funds of Burke Bros and the transfer to Helene Burke could not be fraudulent as to one half of the property. Burke was solvent at the time and there was no fraud nor intent to defraud creditors.

4. The assignment and transfer of the corporate stock was legal. There was a valuable consideration and no fraud. Burke was not insolvent, even if embarrassed. The transfers were pledges to secure valid debts.

5. Both the stock and land cannot be taken. The law as applied to the facts is stated in 73 Ark. 174; 86 Id. 225; 91 Id. 394; 108 Id. 164. Burke was solvent. An insolvent husband may prefer his wife's debt. 76 Ark. 254; 119 Id. 492. Mere inadequacy of price does not indicate fraud. 118 Id. 229. But here the consideration was adequate. Each pledge was for the actual amount of money advanced. There was no withdrawal of property from creditors, the money was used to pay creditors. 50 Ark. 314; 107 Id. 588. See also, 96 Ark. 531; 101 Id. 573.

Kimpel & Daily, for appellees.

1. The evidence supports the findings of the chancellor. All the facts and circumstances point to and show that the conveyances and transfers were voluntary and fraudulent as to creditors. 68 Ark. 167; 73 Id. 174; 86 Id. 225; 106 Id. 252; 179 S.W. 329; 116 Ark. 686; 107 Id. 537; 110 Id. 335 and others. Burke was insolvent before any of these conveyances and transfers were made and the considerations were not valid.

2. The conveyance to his daughter Helene was voluntary and fraudulent. There is no evidence that J. A. Burke was interested in the lots or that it was purchased with funds of Burke Bros. Nor did Helene pay anything for the property.

3. The deed to Mary Burke was also void. She paid no consideration for the lot. It was a pure gift from an insolvent and void as to creditors.

4. The conveyance of the old opera house property and the transfer of 349 shares of stock by M. C. Burke to his wife and sister were void. No consideration was paid and the transfers fraudulent.

5. The conveyance of the opera house property to Union Realty Company was fraudulent and void. There was no consideration. The chancellor's findings are supported by the evidence.

6. The pledge of Burke's stock to members of his family and his various corporations were fraudulent and void. No satisfactory explanation of any of these transfers was made by Burke. All the facts and circumstances point to and indicate fraud. 110 Ark. 347.

OPINION

HUMPHREYS, J.

Appellees, judgment creditors of M. C. Burke, filed suit in the chancery court in the Ft. Smith district of Sebastian County, against appellants, to cancel as voluntary and fraudulent various conveyances of real estate and many assignments and pledges of stocks made by M. C. Burke to his co-appellants.

All the appellants answered denying that the conveyances of real estate and assignments and pledges of stocks were voluntary and fraudulent.

The causes were consolidated and heard upon the pleadings, oral and record evidence, and a decree rendered canceling as voluntary and fraudulent the assignment of 349 shares of the corporate stock in the Union Trust & Realty Company to Alice and Mary Burke; the pledges of 50 shares of said stock to each of the following parties: Alice Burke, Mary Burke, A. J. Burke, Burke Brick Company and Union Trust & Realty Company; and the following conveyances of real estate: An undivided one-half interest in the west 67 feet of lot 4, south side of Garrison Avenue, and lot 10 in block 505 in the Reserve Addition, known as the Opera House property, to Union Trust & Realty Company; lot 3, block 45, in Fitzgerald's Addition to the city of Ft. Smith, to Mary Burke; and lots 7 and 8 in block 9, in South Ft. Smith, to Helene Burke.

From the decree canceling assignments and pledges of stocks and conveyances of real estate aforesaid, an appeal has been lodged in this court.

The record is so voluminous the court is impelled to confine itself to a general statement of the facts in substance only.

M. C. Burke was a wealthy business man and during his years of prosperity gave his wife and other relatives quite a little property. In the year 1905 he and his brother, A. J. Burke, conveyed real estate in the town of Cotter, Arkansas, to Alice, his wife, and Mary, their sister, of the value of $ 5,000. Prior to any financial trouble, he erected buildings on that portion of the Cotter property conveyed to his wife, which enhanced its value from $ 2,500 to $ 12,500. Through such gifts, and judicious investments thereof, Alice Burke acquired a considerable separate estate of money, stocks and real estate, prior to the acquisition of the property subjected to the payment of her husband's debts by the decree in this case.

M. C. Burke was a man of large affairs, and, for the purpose of carrying on his business, incorporated the Burke Brick Company, Burke-Andrus Sand Company, Union Trust & Realty Company, and organized the partnership of Burke Bros., Burke & Josephs, Burke & McNerney and Burke Construction Company. The corporations engaged in business indicated by their respective names and the partnerships in the construction of municipal improvements, railroads and other contract work of like nature. While operating these corporations and firms, M. C. Burke and A. J. Burke acquired real estate of considerable value, which was paid for chiefly with partnership and joint corporate funds. The Union Trust & Realty Company was organized in the year 1910 initially as a holding corporation for the real estate of the Burke family, with an authorized capital stock of $ 200,000, but only $ 100,000 was treated as paid-up and subject to issue. The $ 100,000 of stock was apportioned, 599 shares to M. C. Burke, 400 shares to A. J. Burke, and 1 share to their attorney, John Vaughan, for incorporation purposes. The stock was not actually issued and delivered, but was treated as apportioned and issued in the manner aforesaid until January, 1913. At the time the corporation was organized, it was understood that stock would be issued at a future date to each according to the value of the real estate conveyed to the corporation by each. The Burke family conveyed real estate to it when first organized as a basis for the stock issued for the expressed value in the deeds of about $ 60,000. Some of it was more valuable than the expressed consideration; for example, Alice Burke conveyed lots in Cotter of the value of $ 12,500 for an expressed consideration of only $ 2,400. M. C. Burke and John Vaughan both testified that it was the intention of M. C. Burke and A. J. Burke to convey the opera house property to the Union Trust & Realty Company as a basis for the $ 100,000 stock issue, but the minutes of the corporation show that the corporation refused to accept the property, and the reports of the officers, from time to time, prior to January, 1913, corroborate the books. Other property in addition to the opera house, owned by the Burkes, was not conveyed to the corporation.

Prior to the year 1912, M. C. Burke inaugurated the policy of borrowing from one corporation or firm to assist some other corporation or firm in which he was interested. It became necessary to assist the firms of Burke & Josephs and Burke & McNerny, so M. C. Burke, without the knowledge or consent of his brother, withdrew $ 65,000 from the firm of Burke Bros, for that purpose. On September 3, 1912, in order to indemnify his brother against loss on account of the withdrawal of funds from Burke Bros. in the past and future, he assigned his brother 600 shares of Burke Brick Company stock, 83 shares of Burke-Andrus Sand Company stock, and an undivided one-half interest in Burke-Andrus Sand Company, purchased from W. P. Andrus; an undivided one-half interest in all moneys and open accounts due Burke Bros., and all retained percentage on contract with Improvement District No. 5, City of Ft. Smith, and all moneys that might become due on final completion of their paving contract with the City of Ft. Smith; and his undivided one-half interest in machinery, the constructions, moneys, etc., in Burke-Cochran Construction Company of Lincoln, Nebraska, and in the Burke & McNerny contracts and outfits.

On January 1, 1913, the financial condition of M. C. Burke was about as follows: He owned 800 or 900 shares of Burke Brick Company stock, pledged to the Central National Bank of St. Louis and his brother for large amounts. This stock was later sold for a trifle. 123 shares of the stock of Burke-Andrus Sand Company, pledged to his brother to secure a large amount; 150 shares in a Texas land company, pledged to H. P. Hilliard of the Central National Bank; cash in banks, $ 1,100; open accounts, $ 1,200; an undivided one-half interest in the...