Clindinin v. Graham

• Decision Date: 26 October 1937
• Docket Number: 44023.
• Citation: 275 N.W. 475,224 Iowa 142
• Parties: CLINDININ v. GRAHAM et al.
• Court: Iowa Supreme Court

275 N.W. 475

224 Iowa 142

CLINDININ v. GRAHAM et al.

No. 44023.

Supreme Court of Iowa.

October 26, 1937

Appeal from District Court, Poweshiek County; J. G. Patterson Judge.

Action by the trustee of the bankrupt estate of Brownlie Graham, one of the defendants herein, to set aside a deed, by which Brownlie Graham conveyed to his wife, Dora Graham, his undivided one-half interest in a 160-acre farm owned jointly by himself and his wife. The lower court held against plaintiff and dismissed his action. Plaintiff appeals.

Affirmed.

J. G Shifflett, of Grinnell, for appellant.

Talbott & Talbott, of Brooklyn, for appellees.

KINTZINGER, Justice.

Plaintiff commenced this action as a trustee in bankruptcy of the estate of the defendant Brownlie Graham to set aside a deed executed by Brownlie Graham to Dora Graham, his wife, conveying his one-half interest in 160 acres of land belonging jointly to the defendants, Brownlie Graham and Dora Graham, because it was given in fraud of creditors and without consideration. The defendant Dora Graham alleges that on February 27, 1928, the defendant Brownlie Graham was personally indebted to various parties in the sum of $10,000, and arranged to and did borrow said sum from the Grinnell State Bank, and, to secure said loan, she, without any consideration, joined in the note to the Grinnell State Bank, secured by a mortgage on the entire 160 acres involved in this action, one-half of which was owned by each. She further alleges that Brownlie Graham borrowed this money to pay his own debts, and, as between the defendants, Brownlie Graham was the principal debtor, and this defendant, Dora Graham, was liable only as surety. She further alleges that said note and mortgage were assigned to a third party, and the same have been foreclosed and the property sold under special execution for the sum of $10,684.28, and that the period for redemption from said execution sale would expire March 7, 1937. Defendant Dora Graham alleges that the real estate involved is worth not to exceed $100 per acre, and the value of Brownlie Graham's interest therein is not worth to exceed $8,000. She further alleges that, as between the defendant Dora Graham and the defendant Brownlie Graham, this defendant, Dora Graham, is only a surety for the payment of the principal's debt, and that the property should first be applied to the satisfaction of his debt; that the value of his one-half interest in said property is less than the mortgage. Therefore, neither said Brownlie Graham nor any of his creditors had any interest, claim, or rights in the premises in suit, or any part thereof, paramount to the appellee's equitable right to have her husband's interest in said premises first exhausted towards the payment of the mortgage debt; that because of these facts no interest or benefit can accrue to the estate of Brownlie Graham, bankrupt, if the conveyance was set aside, and the defendant Dora Graham therefore asks a dismissal of the action.

The lower court found in favor of defendant Dora Graham, and plaintiff appeals.

Mr. and Mrs. Graham acquired the 160 acres involved in this action, each taking title to an undivided one-half interest therein, and no question is raised as to the validity of their title thereto. Mr. Graham operated this 160-acre farm for himself and wife, and he personally received all the income therefrom.

In 1925 Mr. Graham owned 40 shares, Mrs. Graham owned 8 shares, and their daughter 2 shares, of stock in the First National Bank of Brooklyn. This bank became involved financially, and stock assessments were made against its stockholders. The assessments against the Graham family were all paid voluntarily by Mr. Graham, without any agreement on his wife's part to repay him therefor. In similar manner he also paid certain taxes levied against Mrs. Graham's property. The amounts paid for such stock assessments and taxes amounted to about $1,800. These amounts were all paid by Mr. Graham in March, 1925, from proceeds of money he borrowed from a Mrs. Breniman on his personal note of $6,500. Mrs. Graham received none of the proceeds therefrom. The balance of the $6,500 not used in the payment of the foregoing amounts was all used by Mr. Graham in the payment of other personal obligations. He paid these assessments and taxes partly out of the income of the 160-acre farm and partly out of funds borrowed by himself personally on his own personal notes.

In 1928 Mr. Graham obtained the mortgage loan of $10,000 on the entire 160 acres in question from the Grinnell State Bank. The record shows that Mrs. Graham had nothing to do with the negotiations for this loan, but at the request of her husband signed the note and mortgage therefor. The proceeds of this $10,000 loan were used by Mr. Graham to pay off the Breniman note of $6,500 and other personal obligations he owed to the Grinnell State Bank. All of the debts so paid were the personal obligations of Mr. Graham, none of which had been assumed by Mrs. Graham.

The $10,000 note and mortgage executed to the Grinnell State Bank were by that bank sold to a third party, who, in default of payment when due, commenced foreclosure proceedings thereon, and the land was sold thereunder at sheriff's sale for $10,684.28. It was stipulated by the parties that the 160 acres of land foreclosed were worth $16,000.

After executing the $10,000 note and mortgage, Mr. Graham again became indebted to the Grinnell State Bank on his own personal account in the sum of $5,400, which was reduced to judgment in 1935.

In September, 1934, he became seriously ill and transferred his undivided one-half interest in the 160 acres in question to Dora Graham, his wife, defendant herein. In December, 1935, Mr. Graham was adjudged a bankrupt, and plaintiff was appointed trustee of his estate. The record shows that his estate was insolvent, and this action was commenced to set aside the conveyance to Mrs. Graham as being made to defraud his creditors.

The principal defense relied upon by Dora Graham, the defendant, is that her liability upon the $10,000 note and mortgage executed to the Grinnell State Bank was only that of a surety for the payment of the principal's debt, and that under such liability the property of her husband should first be applied to the satisfaction of said debt; she alleged that the amount of his indebtedness as principal upon the mortgage exceeded the entire value of his interest in the land, which was shown to be only $8,000; and that, as this amount is less than the amount of his mortgage indebtedness, all of his interest in the 160-acre farm was exhausted by the foreclosure proceedings; that the creditors of Mr. Graham's estate, therefore, have no right or equity in the land over and above the obligation of Mr. Graham as principal on the $10,000 mortgage; that, as all of his interest has been exhausted by the foreclosure proceedings, he has no interest in the land which could in any manner accrue to the bankrupt estate of Brownlie Graham.

I.

Appellee contends that, under the doctrine of suretyship, where a married woman mortgages her own separate property to secure the separate debt of her husband, and no consideration is given to her therefor, the husband is considered the principal and the wife a surety on such indebtedness. Such a rule is recognized by the greater weight of authorities. Bockholt v. Kraft, 78 Iowa 661, 43 N.W. 539; Bankers' Surety Co. v. Linder, 156 Iowa 486, 137 N.W. 496; Lingenfelter Bros. v. Bowman, 156 Iowa 649, 137 N.W. 946; Mockler v. Lohman, 185 Iowa 448, 170 N.W. 744; First Nat. Bank v. Ten Napel, 198 Iowa 816, loc. cit. 817 and 818, 200 N.W. 405; Dibble v. Richardson, 171 N.Y. 131, 63 N.E. 829; Field v. Campbell, 164 Ind. 389, 72 N.E. 260, 108 Am.St.Rep. 301; First Nat. Bank v. Bertoli, 87 Vt. 297, 89 A. 359, Ann.Cas.1917B, 590; Bull v. Coe. 77 Cal. 54, 18 P. 808, 11 Am.St.Rep. 235; Seibert v. Quesnel, 65 Minn. 107, 67 N.W. 803, 60 Am.St.Rep. 441; Jenkins v. Daniel, 125 N.C. 161, 34 S.E. 239, 74 Am.St.Rep. 632; Fleming v. Barden, 126 N.C. 450, 36 S.E. 17, 53 L.R.A. 316, 78 Am.St.Rep. 671; Fitcher v. Griffiths, 216 Mass. 174, 103 N.E. 471; Hall v. Hyer, 48 W.Va. 353, 37 S.E. 594; Shew v. Call, 119 N.C. 450, 26 S.E. 33, 56 Am.St.Rep. 678; 30 Corpus Juris 909, § 608; 30 Corpus Juris 895, § 589; 21 R.C.L. 957.

In Lingenfelter Bros. v. Bowman, 156 Iowa 649, loc.cit. 652, 137 N.W. 946, this court says: " When she (the wife) executed the mortgage on the homestead * * *, she simply pledged her interest therein as additional security to the bank for the notes that her husband had given to Lingenfelter Bros. and which they had deposited with the bank as collateral security for their loan. Mrs. Bowman was therefore a surety merely, * * * because she derived no advantage from any of the transactions."

In Seibert v. Quesnel, 65 Minn. 107, 67 N.W. 803, loc.cit 804, 60 Am.St.Rep. 441, the court said: " Mrs. Langevin joined in all of the covenants contained in the...