Chastain v. Arkansas Bank & Trust Company

• Decision Date: 12 February 1923
• Docket Number: 151
• Parties: CHASTAIN v. ARKANSAS BANK & TRUST COMPANY
• Court: Arkansas Supreme Court

249 S.W. 1

157 Ark. 423

CHASTAIN v. ARKANSAS BANK & TRUST COMPANY

No. 151

Supreme Court of Arkansas

February 12, 1923

Appeal from Jackson Chancery Court; Lyman F. Reeder, Chancellor affirmed.

Decree affirmed.

M E. Vinson, for appellants.

1. The chancery court has no jurisdiction. Allegations as to debts owing by the defendants to plaintiffs did not confer jurisdiction, nor allegations showing their marriage and claim of the property as a homestead. Partition of the property by the defendants so that it might be claimed as a homestead was not a sufficient allegation showing fraud and that the partition deeds were fraudulent conveyances. As to homesteads there are no creditors, and a creditor cannot complain of a voluntary conveyance thereof by a debtor. 96 Ark. 579; 103 Ark. 145. Conveyance of a homestead is never fraudulent as to creditors. 75 Ark. 205; Id. 591; 109 Ark. 493; 33 Ark. 762; Id. 454; 44 Ark. 180; 43 Ark. 429; 52 Ark. 101; 99 Ark. 45. The lack of jurisdiction was raised in the lower court by the motion to discharge the attachments, by the several controverting affidavits filed by the defendant, and the motions to stay the proceedings; but aside from that, the objection to jurisdiction may be raised on appeal for the first time. 98 Ark. 595.

2. Even if the court had jurisdiction, the attachment would not lie in this case. C. & M. Digest, § 554.

3. There is no conclusive proof that the property involved was ever partnership property. 37 L. R. A. 895, and cases cited.

Mere use by a partnership of real estate raises no presumption that it is partnership property. 81 Ark. 68.

4. Almost any kind of an estate will support the homestead claim. Lands held by tenants in common may be partitioned and homestead set aside out of it. 63 Ark. 289, 299; 70 Ark. 129; 42 Ark. 504, 514; 35 Ark. 49; 39 Ark. 301-4-5; 54 Ark. 9; 99 Ark. 45 et seq.; 111 Ark. 15. Tenancy by curtesy will support the claim. 66 Ark. 382. Homestead may be claimed in lands owned jointly or as tenants by entirety. 83 Ark. 196. See also 70 Ark. 317; 123 Ark. 607; 56 Ark. 589; 74 Ark. 593 et seq.; 134 Ark. 521, 525, and cases cited; 146 Ark. 51.

5. If partnership property, the partners had the right to partition it and establish homesteads thereon. The purchase by a partner of partnership property is not per se fraudulent. 60 Ark. 18. See also 103 Ark. 105; 54 Ark. 449 et seq.; 91 Ark. 324, 327; 114 Ark. 14; Id. 384.

Stayton & Stayton and Boyce & Mack, for appellees.

1. The pleadings in which a debtor asserts a homestead right must set forth facts establishing the right, and not a mere general allegation that the right exists. And evidence must be introduced to establish the allegations or the claim will fail. 21 Cyc. 635; 34 Ark. 55; 78 Ark. 479; 76 Ark. 575; 69 Ark. 596; 57 Ark. 179.

2. It is not material in whose name the title to partnership property stands, whether in the name of one of the partners or all of them, or whether, on the face of the deed, they appear as tenants in common or whether it was conveyed to them expressly as partners. It is the fact that property was bought with partnership money, and that it is used in the partnership business, that impresses on the property the character of partnership real estate. 20 R. C. L. 857; 80 Am. Dec. 450, 451; 56 Ark. 167; 93 Ark. 61; 28 Ark. 259; 67 Am. Dec. 527, 538; 37 L. R. A. (N. S.) 889, at pp. 909, 910; 27 L. R. A. 449, note beginning at p. 550.

3. Partnership realty is not subject to partition until after the payment of partnership debts. 20 R. C. L. 755; Id. 870; 118 A. S. R. 568-572; 68 Am. Dec. 604, and note, p. 606; 22 Am. Eng. Encyc. of Law, 99. Transfers of partnership assets by an insolvent firm which operate to hinder and delay creditors in the collection of their claims are held invalid in most courts. 30 Cyc. 543. And agreements between partners converting firm property into separate property, etc., are, in effect, conveyances of such property, and subject to the rule pertaining to fraudulent conveyances. 22 Am. & Eng. Encyc. of Law, 2d. ed., p. 109. Sales, interchanges and adjustments of partnership property between the partners are clearly alienations within the statute against fraudulent conveyances. Bigelow on Fraudulent Conveyances, 136. See also 48 Am. St. Rep. 596; 63 Id. 524; 1 Id. 589; 17 Id. 865; 20 Am. Rep. 762; 60 Am. St. Rep. 677.

4. Partnership property is not subject to homestead or other exemptions, nor is a widow entitled to dower therein. 65 Ark. 550; 46 Ark. 43; 39 Am. St. Rep. 58; 28 L. R. A. 89, and note on p. 105; 76 Ill. 109; 21 Cyc. 506; 48 Ark. 557; 66 Ark. 251; 19 C. J. 473.

5. The chancery court had jurisdiction. C. & M. Digest, § 494; 33 Ark. 550; 38 Ark. 397; 20 R. C. L. 1043; 2 Rowley on Partnership, par. 820; 6 C. J. 205; Pomeroy's Eq. Jur. , 4th ed., §§ 112, 171; Id. vol. 2, § 968; 67 Ark. 330, 332; 81 Ark. 78; C. & M. Digest, § 4880; 140 Ark. 558.

6. The property involved here is not of a nature or of such character as could be impressed with the homestead right, so as to place it beyond the reach of creditors. 31 Ark. 468; 134 Ark. 525; 14 Fed. Cas. 1048, 1049; 13 R. C. L. 594.

OPINION

MCCULLOCH, C. J.

Appellants, T. B. Chastain and C. H. Chastain, were copartners in the operation of a retail merchandise business at Newport, Arkansas, and in the year 1914 they purchased a lot with a two-story brick building thereon for occupancy in the operation of their business. The lot in question is 50 x 150 feet in size, and the building is 50 x 90 feet, covering the full width of the lot. There is only one room on the ground floor, and the second floor is divided into numerous rooms. After the purchase of the building, appellants continued to occupy it as a place of business.

Appellants were both single men, and roomed elsewhere than in the building, but about two years before the present litigation began the proof shows that they established a dining-room in one of the upstairs rooms of this building.

Appellants increased their business to a considerable extent, and extended it to farming operations, and in the year 1920 became largely in debt, and finally became insolvent.

In May, 1921, appellants made a division of the property in question by one taking the north half of the building and the other taking the south half, and they executed conveyances to each other to carry out this division. Each of them had married a short time before this division, and it is claimed that each of them established his residence in the upstairs of this building. Within a few weeks thereafter the appellees instituted separate actions in the chancery court of Jackson County against appellants, charging that the property was purchased with partnership funds and for partnership purposes, and that the partition conveyances executed between them was for fraudulent purposes to prevent creditors from collecting their debts. Each of the appellees sued out a writ of attachment, which was levied on the property in question.

Appellants filed answers, denying the charges of fraud, and claiming the respective parts of the property which had been allotted to each in the division as a homestead.

The proof of the marriage of appellants shortly before the commencement of these actions and their occupancy of the property in controversy as a homestead is very meagre, but the case was tried by all the parties upon the theory that appellants had become married men, and that there had been, to some extent, occupancy of the rooms in the second floor.

We fail to discover any direct proof as to the present value of the building, but it appears from the proof that the price paid for it by appellants in the year 1914 was $ 16,000, and that it has been carried in the list of assets at the value of $ 25,000.

The chancery court refused to allow the claims of homestead, and rendered decrees in favor of appellees, sustaining the attachments and declaring liens on the building.

The cases instituted by each of the plaintiffs were tried on the same testimony, and have been consolidated here for convenience, as they involve the same issue and the same proof.

It is undoubtedly true, as shown by the evidence, that the property in controversy was purchased with partnership funds and was used, until divided, for partnership purposes.

Pretermitting the discussion of other questions and conceding that, after division of the real estate purchased by copartners for partnership purposes and before the acquisition of specific liens by creditors, the property may, by the individual partners, be impressed with the character of a homestead so that it may be lawfully claimed as such ( Richardson v. Adler, 46 Ark. 43), we go to the question whether or not there is evidence sufficient to show that this property was actually occupied in good faith as a home so as to impress it with the character of a homestead.

There can be no such thing as the fraudulent acquisition of a homestead, for the law permits it, regardless of the rights of creditors. Ferguson v. Little Rock Trust Co., 99 Ark. 45, 137 S.W. 555. It is quite another thing, however, to say that a given tract or lot of real estate must be occupied in good faith as a home before it becomes impressed with the character of a homestead under the law. This court has steadily adhered to the rule that actual occupancy in good faith is essential to the impressment of the homestead...